Recently, Water & Wastes Digest discussed future and current industry-related events with Andy Richardson, a principal at Greeley & Hansen and vice president, American Water Works Association, as well as a recent addition to the WWD Editorial Advisory Board.
WWD: Where is the water/wastewater industry headed?
Andy Richardson: A while ago, the American Water Works Association (AWWA) in collaboration with the AWWA Research Foundation conducted a study to determine what are the trends in the water industry. That study concluded there are eight major trends that participants in the industry need to be aware of and will have to respond to as the 21st century unfolds. Those eight trends involve:
* Infrastructure management, which will be a critical issue resulting in an increased capital investment with an impact on ratepayers in the future. It has been stated we are at the dawn of the “Replacement Era,” and based on demographics and the age of our infrastructure, critical funding shortfalls will need to be addressed for appropriate infrastructure management.
* Environmental regulations will become more stringent for water and wastewater in general with major regulations that will impact smaller utilities the hardest in the future. Examples of this are the amendments to both the Safe Drinking Water Act and the Clean Water Act. Utilities will need to monitor these amendments and determine their financial impact.
* Utilities will continue to reorganize and look at what are the best management practices available to be as efficient as they can, particularly in light of the need to fill the impending funding gap and provide more with less. In addition, there is an expectation that there will be some consolidation. Larger utilities may be looking to offer assistance and perhaps even running smaller utilities as consolidation continues to occur across the North American water industry.
* Good customer relations will be the key to success when dealing with the impending funding shortfall that is perceived to meet future regulations, as well as the rehabilitation of older systems. As consumers, utility customers are looking for value. The challenges for utilities will be to craft “value-added” messages so customers understand the connection between their quality of life and the infrastructure investments made by the utility in their behalf.
* The overall work environment within the water industry, as it is in other industries, will continue to change with diversity, age, gender and ethnicity being an important aspect of the new work force. Because of the “baby boomers” affect, with people retiring you have several utilities losing their institutional knowledge and focusing on succession planning. In addition, technology will have the impact of requiring entities to provide two to three more times training than was necessary in the past.
* Management, training, strategic and financial planning will be key to future water utilities survival. Understanding of rates, asset management and creating innovative financing in the future will minimize rate impacts to consumers.
* Total quality management will be critical to doing more with less and looking at trends on how existing utilities can provide the same service to customers at less cost.
* Total water resources management is the key to the future, looking at the impacts of watershed management and source water protection, in addition to building a partnership with the agricultural community and its impacts on TMDL development.
The eight trends present some opportunities and challenges to the water industry. It is how the participants in industry respond that will shape the future.
WWD: How would you compare and contrast the industry’s funding issues and solutions?
Richardson: Numerous reports have been published by the EPA and others that say the biggest challenge is going to be determining what is the funding “gap” between what local water utilities can afford to pay to meet regulatory requirements and infrastructure needs and other sources of funding. If you look at the Congressional Budget Office estimates, they said that by 2019 the average annual expenditures (capital and O&M) will be between $71-$98 billion for drinking water and wastewater utilities. The real debate is the other sources of funding.
Should there be a grant or loan program? Should the states take a larger active role or should it be a federal role? Regardless of what happens, there are those that are suggesting that the biggest issue is how the utilities become self-sufficient by increasing rates.
WWD: Should there be an “investment philosophy” that could be used as a benchmark for financial decisions?
Richardson: Financial decisions should be aligned with long-term community goals. The challenge will be to get consensus on what are the long-term community goals. Reliability of water supply and quality is a major economic driver. Regardless of what source we use for the funding gap, the consumers are going to have to pay one way or another. So you have to think about what is it that utilities managers need to do to get to their constituency and to get to their elected officials to smooth the way for the appropriate rate increase.
One concept is to educate the public and the elected officials that water and wastewater services are not really commodities, they are value-added services to maintain a certain quality of life. Community goals and rate increases should be in alignment. So, what people are paying for is the value of those services.
One solution could be to move the industry towards an “Investment Philosophy,” as the generation before us did. We should be looking to provide for the future generations to come. One of the challenges will be if you have a federally subsidized program or state subsidized program, does this continue to perpetuate not having the consumers pay for the true cost of the service.
WWD: Utility managers obviously play an important role in the water industry. What can be done to make sure these managers have developed the necessary skills to make informed decisions?
Richardson: The response of the utility manager and their staff to those trends I spoke of earlier will shape the future of the water industry.
Accordingly, they will need to be prepared to take advantage of the opportunities and successfully navigate through the challenges. In today’s heady times, a key skill that all industries are requiring of those at the top is leadership. In recent years, regardless of the industry, it has been leadership skills that have helped managers succeed. In the water industry, leadership skills will be critical to negotiate with elected officials and non-technical decision-makers of the importance of taking certain actions to maintain a viable utility.
In regards to making informed decisions, utility managers and their staff should participate to the fullest extent possible in AWWA. AWWA, through its great network of participants, helps all in the industry turn information into knowledge, which in turn supports informed decision making.
WWD: In regards to security, where is the water industry in a realistic sense?
Richardson: The first thing that consumers ask: Is my water safe? Safe meaning is it secure from someone doing some nefarious activity? Or is it safe when I get my water from the tap?
That is a question that has a double meaning. The answer, unequivocally, is yes to both meanings. In regards to your tap water, utilities now deliver and develop what are called Consumer Confidence Reports. Any consumer can ask their water utility for their Consumer Confidence Report.
In regards to security as a whole, there is a lot that was being done before September 11, and there is so much more that has been done since then, particularly with the vulnerability assessments required to be submitted. I would say that the water utilities themselves feel as they have a very good handle on being safe and secure.
