THE VALUE OF WATER, PART 8--INVALUABLE

Is attempting to value water a valueless exercise? Clearly, water has value. We understand that humans, and all life upon which we depend, cannot exist or thrive without sufficient water. When deprived of adequate water resources, we suffer. When too much water floods our land, we also suffer. Accordingly, water is a paradox. It is necessary for life, but at the same time, it can suppress life. How, then, can its value be measured?

We can see water, we can feel water, we can drink water, we can use water in many ways. However, we cannot measure its worth with a dollar price. We can only arbitrarily assume a price when we suffer an economic loss due to insufficient water or even excessive water.

The old cliche is that one never misses water until the well goes dry. Obviously, the value of water becomes subjective for ever user who depends upon, and is affected, by water. When there is not enough water available to satisfy demand, we likely highly value it. When rain events or rivers flood our land with too much water, our valuation likely diminishes. This result is only human.

Direct, quantitative calculation of the value of water is impossible. Indirect measurement using a surrogate, such as the cost of crops due to drought, provides a speculative economic impact that may have resulted from influences in addition to lack of water. Further, calculating the dollar value of a water source, such as an aquifer, necessarily must be based upon assumptions, not hard evidence. For example, the extent of ground water below the Earth's surface is not fully known and is affected by the rates of rain events and withdrawals.

Clearly, ratemaking for water service cannot be predicated upon the subjective valuation of water by each user. More importantly, rates do not compensate for the price of water. They compensate for the price of water service received by each user.

So, it is possible to conclude that water has infinite value, which cannot be measured and is incapable of price. In other words, it is invaluable and priceless. This infinite value of water, however, should be acknowledged. For example, we know that fresh water on earth does have some finite amount, so its value must be recognized by conservation and wise use.

THE VALUE OF WATER, PART 6--NEGATIVE VALUES

The assumed negative values of water can be illustrated by at least five examples.

First, water in excess, in the form of flooding, can have a substantial negative impact upon life and property. Indeed, during flood events, water can destroy life instead of sustain life. The measure of such negative value of water may equate to the often difficult and arbitrary value of lost life and the replacement cost of lost property, including economic losses.

Second, absence of water, in the form of drought, obviously can have a substantial negative economic impact, ranging from loss of crops to displacement of people. The Dust Bowl in the United States in the 1930s illustrates this effect. Further, the negative values of crop, home and income losses can include collateral impacts due to health, social and educational challenges.

Third, certain contaminates carried in water can have serious adverse health consequences if such contaminates are not removed by treatment before water is used. The costs incurred to heal illnesses or to suffer destruction of crops contaminated by polluted water can be measures of negative value.

A fourth example of negative value of water may be illustrated when sources of water become depleted. A recent Yale led research study sought to measure the value of natural capital assets such as water. The study demonstrated pricing of natural capital by focusing on the Kansas High Plains groundwater aquifer, which supports the region's agriculture-based economy. The study found that groundwater extraction and changes in aquifer management policies reduced the state's total wealth held in groundwater by a total of $1.1 billion in the period 1996-2005. (See Yale News, March 14, 2016, "What's Nature Worth. Study Puts a Price on Ground Water and Other Natural Capital.")

Finally, public perception of tap water appears to imply a negative valuation regardless of compliance with all applicable regulatory standards. It appears that people in the United States are willing to pay significantly more for bottle water than for tap water. A 2013 American Water Works Association study found that tap water costs only $0.004 per gallon, or 1/300 of the average price of a 16.9 oz bottle of water. Another survey found that the public was willing to spend from 250 to 10,000 times more for bottled water, although USEPA estimates 40% of bottle water actually is more highly treated tap water.* Does the greater cost and use of bottle water indicate a negative value for tap water? Should it?

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*Bui,"No Sacred Cows:Getting To The Crux
Of The Matter," Journal AWWA,June 2016,
p. 12

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