Water Supply Costs in the United States

Transcription

1 Water Supply Costs in the United States TWCA/TRWA Water Law Seminar Austin, Texas January 23, 2015 Wes Strickland (512)

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3 Background of Water Pricing Who sets prices? Government-owned utilities Investor-owned utilities with oversight Member-owned utilities Ratesetting rules Just and reasonable rates No discrimination Cost of service Consumer water prices are determined by: Capital costs Expenses Water supply costs Rate design 3

4 Water Supply Costs Most utilities own and control their water rights and supply infrastructure, other than: Federal reclamation projects California State Water Project Central Arizona Project Texas river authorities Private water developments, e.g., Vista Ridge Project Ratesetting value of water = zero Add permitting, defense and acquisition costs Internalize environmental costs Account for scarcity 4

5 Trends in Water Supply Costs Existing water sources Developed supplies are tapped or shrinking New water quality and environmental regulations New water sources are relatively expensive Technology: treatment, membranes, energy use Distance: pipelines, pumping Competition: utilities, industry, environment Labor and materials Marginal cost of new supplies may be spread Costs may be controlled via project delivery methods There is no cost like running out of water 5

6 New Water Supplies in Texas 6

7 Water Markets There are few economic markets in the US Markets tend to be within a basin or project Water markets are highly influenced by demands: real estate, industry, agriculture Prices generally increase, but do decrease Lack of water conveyance infrastructure limits development of markets 7

8 Market Activity 8

9 Water Rights Price Index (WRPIx) 9

10 California Spot Market 10

11 Sources of Capital Federal subsidies Grants Clean Water State Revolving Fund Drinking Water State Revolving Fund Water Infrastructure Finance and Innovation Authority (WIFIA) USDA Rural Development Texas subsidies State Water Implementation Fund for Texas (SWIFT) Rural Water Assistance Fund State Participation Program Texas Water Development Fund Regional Facility Planning Grant Program Tax-exempt municipal debt General obligation bonds Revenue bonds Assessment bonds Taxable municipal debt Build America Bonds Commercial loans Private finance Private equity Infrastructure funds Private activity bonds 11

12 $MM Federal SRF Appropriations ( ) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 DWSRF CWSRF 1,

13 Project Delivery Methods 13

14 A Brief History of Retail Rate Design Flat fee Uniform rate Decreasing block rates Increasing block rates Retreat from conservation Water budget rates Income-based rates Other creative solutions 14

15 Income-Based Rates Bases water budget for each customer on ability to pay Disconnects cost of service and rates Fee for service converted to general tax Used to discount agricultural water rates in CVP Questions Would income-based rates violate principle of nondiscrimination? How would utilities determine and verify income at inception and on continuing basis? How would utilities protect confidentiality of income data? How would rates work for utilities that cover lower-income areas? 15

16 Cloudy Thoughts Sustainable financing is critical Water costs and rates are increasing nationwide and in Texas Transfers from utility enterprises to general fund likely to reverse Full cost pricing helpful, but not welcome by public Industry needs to better communicate value, but many won t care Conservation may reduce supply costs, but will not prevent increased rates Industry will be asked to pay more, but will demand greater security Environment will ask for more water, but won t be willing to pay Markets and conveyance needed to create flexibility in system Regionalism must be defeated State participation will be as important as low-cost financing Consolidation of water systems may help, with regional or statewide rates 16