Sunday, February 7, 2016

CONSOLIDATION AND REGIONALIZATION

It is no secret that drinking water infrastructure in the United States has aged and needs substantial repair and replacement. It also is no secret that the estimated cost of such repair and replacement is huge and will require substantial financial resources. For example, in a 2012 report, the American Water Works Association estimated that the cost to restore water infrastructure will be one trillion dollars over the next 25 years.

Water systems in the United States tend to be "individualized" --that is, stand alone water supply and distribution systems within, and generally owned by, each city. Indeed, there are some 54,000 community water systems in the country. Accordingly, the financial burden, and the responsibility, for repair of water infrastructure likely will be borne by ratepayers served by each system.

One possible alternative for dealing with infrastructure obligations is for individual water systems to consolidate with other systems in some manner--as complete systems, or functionally such as to source of supply, or treatment to produce finished water. Such joint action or regionalization can offer several potential advantages, such as economies of scale, management and operational expertise, and most importantly, additional financial resources and opportunities.

Across the country, there already exist examples of regional water authorities, such as water districts, commissions, joint agencies, partnerships and even cities extending service beyond borders. In addition, investor-owned water utilities also are achieving similar results through ownership of local utilities, public-private partnerships and the like. For example, American Water Works Company, Inc. serves 15 million people in 45 states; Aqua America serves 3 million people in 8 states; and California Water Service Group serves 2 million people in 4 states.

A recent example of consolidation on a local level is a proposed agreement in Illinois between the Village of Bartlett and the City of Elgin. Currently, Bartlett receives half is water from wells and half from Elgin, whose source is a local river. Bartlett faces the need to perform costly repairs or replacements of its wells. As an alternative to such infrastructure work, it analyzed other possible sources of supply. According to a published report, Bartlett determined to obtain all its water supply requirements from Elgin, as a more economic solution. It is said to offer stability in costs and supply, which are important given financial uncertainty that local governments are experiencing.

The Elgin city manager is quoted as saying, "By leveraging our significant capacity, we are able to pass along significant savings to our residents and businesses, while Bartlett residents are able to increase their use of a highly reliable , predictable and affordable commodity."*

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*Ferrarin,"Water Plan For Elgin,
Bartlett", Daily Herald, January 21,
2016, p.1

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