Drop of Knowledge

In America, every state and territory is home to a regulatory agency with oversight and administrative authority over public drinking water systems. These state agencies are held to standards set by the federal government and charged with enforcement through the United States Environmental Protection Agency (EPA).

Consumers see their water purveyors as a trusted authority and rely on their utility companies to provide reliable, affordable services. Unfortunately, utility providers are not always in sync with their customer base. In order to secure their consumer’s confidence, utility providers need to consider the specific needs of their communities, gauge challenges, and incorporate best practices to meet customer satisfaction.

According to the EPA, more than 97% of the nation’s over 148,000 public water systems are small systems, meaning they serve 10,000 or fewer people. A public water system (PWS) is a system that provides potable water for consumption to at least 25 people or 15 service connections for at least 60 days a year. These water systems include municipalities, special districts, homeowner associations, campgrounds , and other kinds of facilities. Access to clean and safe water does not always come easily or affordably. Infrastructure is an expensive investment. Small water systems face unique challenges including the need for economic capital to sustainably provide safe drinking water. This has become evident through a number of high-profile water crisis issues such as Flint, Michigan , and other cases where hydraulic fracking fluid is contaminating drinking water wells.

In order to guarantee that the drinking water being consumed is safe, the EPA developed a tool called the Consumer Confidence Report (CCR) Rule, 63 FR 44511. This report requires mandatory annual reporting to be completed by every public drinking water system and distributed to their customers by the first of July. The CCR also referred to as an annual water quality report, is an integral part of a purveyor’s delivery of information to the consumer.

A CCR will contain water system information including:

contact information for questions regarding the report,
the source of the drinking water,
definitions including perceptible contaminant levels, information on monitoring radon and other contaminants if detected, and
explanations of violations and corrective action steps. Exceptions and variances granted by the EPA will also be detailed.

The CCR Rule normally requires each water system to mail or directly deliver one copy of its CCR to each customer. In addition, the facility must try to reach customers not individually billed, for example, non-metered customers or apartment dwellers. A utility may also publish the CCR in a local newspaper. Much the same as mailing a copy of the CCR, electronic (e-mailed) delivery must furnish the CCR in a manner that bears the effort of being direct. The EPA translates this CCR Rule requirement to mean that water systems may use a billing statement with a prominently displayed banner and a website address (or URL) directed to the CCR, to meet the CCR delivery requirement. The water purveyor must also, annually, provide a contact name and phone number for a customer to request a paper copy of the CCR. For more information regarding the CCR requirements, please refer to the  EPA’s website.

Small water and wastewater utilities face many challenges in structuring user rates that are fair and equitable to the customer and provide sufficient revenue for the utilities’ operations and future needs. Government and quasi-government owned systems are particularly prone to setting rates based on political expediency rather than on the real cost of operation, often subsidizing a utility fund with the general fund, usually tax-derived dollars. Private systems, while not immune to these same pressures, are more apt to have a systematically designed rate structure because they don’t usually have a general fund to tap into and have no choice but to run the utility as a business enterprise.

Utility rates that are not designed to include adequate cost of present service will eventually threaten the system’s ability to sustain itself. Lack of sufficient revenue often prohibits sound management activities that are necessary to the utility’s long-term health and stability. Activities such as planned equipment maintenance or replacement, system improvements that could increase efficiency or treatment quality, and increases in staff compensation to stay competitive in the hiring market are some examples of sound utility management practices. Lack of ability to perform these activities can lead to equipment failure, process failure, treatment standards violations, and lack of continuity of operations due to staff turnover.

Utility rates that are not designed to include adequate costs of future service through sound planning and forecasting can also threaten a system’s ability to sustain itself. If new rate structures are imposed in order to pay for major repairs, it often means that present customers are paying for the cost of serving future customers. Conversely, the present customers may really be paying for the actual cost of having served past customers who were not paying rates sufficient to cover maintenance and/or replacement of the system’s components in the last few decades.

Small utilities, both public and private, seldom have the resources themselves to conduct a full-fledged, cost-of-service rate study. The cost of having an outside consultant perform such a study is usually prohibitive, so that detailed rate studies, if they are done at all by small systems, are only done every few years. Decision-makers are then left to set rates based on whatever they have been for the last several years or on what surrounding communities charge for the same type of service. The problem with both of these methods is that they do not reflect the true cost of providing service, and neither is based on data that is defensible or “saleable” to the consumer. Most people do not want to pay more for anything than they have to, especially not for public water supply. Rate setting procedures that include objective rate analysis methodologies prepare officials and staff to present rate proposals in an understandable fashion that can foster public understanding and improve acceptance of proposed changes.

Many utilities make the mistake of assuming what is budgeted reflects the total cost of operation. This can overlook reserves as a genuine cost of operating the system, since it is not a current year cash expense. Contributions to any reserve fund, whether it be for replacement, debt service, emergencies or capital improvement activities, should be reflected in the rate design. Current users should be covering at least a portion of the costs of the system’s wear and tear that their use is causing, and this cost should be considered in structuring rates.

All governing bodies must perform a balancing act with virtually every decision they make. That is never more evident than in system rate setting. All in all, system decision-makers need to remember that rate increases alone are no substitute for good overall financial management practices. Proper planning, adequate reserves, preventive maintenance, and strategic asset management can go a long way to ensure that a utility is sustainable over time. Costs of operation must be offset by adequate, equitable user fees that, along with non-rate revenue, fully recover the costs of operating the system now and in the future. RCAP TAPs in each region can perform this analysis and can help a governing body or board explain and defend their proposed rate structure to their utility customers and to the taxpaying public.

Editor’s note: McElmurry is a contributing author for Drop of Knowledge and leader of a collaborative research project exploring the intersection of drinking water and public health. RCAP is working with the researchers on this project to provide the rural perspective. RCAP has provided feedback on the researchers’ survey instrument.

Water systems and public health systems grew up together and are interdependent in complex, and not always clearly, visible ways.  A research program, Water, Health Infrastructure Resilience and Learning (WHIRL) funded by the National Science Foundation is exploring these interdependencies and will soon be distributing a survey to both water and public health professionals.

In 1914, the United States Public Health Service (PHS) adopted the first drinking water guidelines targeting microbial (coliform bacteria) and chemical (arsenic) contaminants (US Treasury, 1914). This led to the advent of centralized municipal drinking water systems that are credited with reducing nearly half of the total mortality, and three-quarters of the infant mortality, in major U.S. cities during the first half of the twentieth century (Cutler & Miller, 2005).  In the 100+ years since the development of drinking water guidelines, these interdependent systems have developed through separate federal regulatory agencies (i.e., Environmental Protection Agency, Department of Health and Human Services), management frameworks, and even different professional and educational disciplines. As a result, many drinking water and public health systems are now highly disconnected (Levitt & March, 1988).

Disconnects between water and health systems are confounded by practices put in place after September 11, 2001. Many post 9/11 practices were designed to isolate water systems and restrict the flow of information, with the goal of protecting systems and facilities from potential terrorist attacks. However, these restrictions had the unintended consequence of making it more difficult to share information with key stakeholders, such as public health officials and the public.  This may have contributed to a public that is largely not engaged, unaware and uninformed about how drinking water systems work and the importance of investing in their upkeep (Bipartisan Policy Center, 2017).

Both highly visible / public and “under the radar” events emphasize the growing need for a stronger connection between public health and drinking water. Day-to-day events (e.g., faulty, aging infrastructure that affects water quality) and disruptive weather (e.g., hurricanes, floods and droughts) that can lead to infectious disease outbreaks or human-induced disasters (e.g., chemical spills, contamination) are failures that can shut down drinking water services and have substantial adverse impacts on public health. Risks, hazards, and disruptions, even minor events that often go unnoticed, may illuminate interdependencies between drinking water and public health systems. If these interdependencies are critical, identifying these connections and strengthening them may enhance resilience.This is particularly true during periods immediately following events, when there are opportunities to learn, change and enhance system resilience (Sitkin, 1992; Turner 1976; May, 1992; Birkland, 2004).

In 2018, the National Science Foundation (NSF) funded a 4-year study to examine how drinking water and public health systems interact, with a focus on reducing risks of future disasters and enhancing the resilience of these two critical infrastructure systems. The project, entitled Water and Health Infrastructure Resilience and Learning (WHIRL), also aims to understand how these systems learn about and adapt to changes and how the public engages with these systems. The research is a collaboration between academics from Wayne State University, the University of Michigan, and Indiana University and the American Water Works Association, the Water Research Foundation, the Association of State Drinking Water Administrators, the Rural Community Assistance Partnership (RCAP), and the National Association of County and City Health Officials.

In collaboration with these partners, the WHIRL team has developed a survey questionnaire that will be distributed to water and health professionals over the coming weeks to collect information about how water systems and public health systems interact, both formally and informally. The survey includes questions about information exchange, communication, routine and non-routine interactions and the ways these groups learn from crises and disasters among other issues. The goal is to generate understanding about how drinking water-related hazards and disruptions unfold in ways that affect both drinking water and public health systems that can help in the construction of tools to detect undesirable events. In addition, the project will create new capacity to learn from the disruptions that will inevitably occur.

The WHIRL survey is available here.  Broad participation from the water community is necessary to insure representative and reliable results. Summaries of results from this survey will be reported at conferences and in future editions of the Drop of Knowledge.

References:

Bipartisan Policy Center (2017). Defeating Terrorists, Not Terrorism: Assessing U.S. Counterterrorism Policy from 9/11 to ISIS. Task force on terrorism and Ideology. Washington, D.C., Bipartisan Policy Center.
Birkland, T. A. (2004). Learning and policy improvement after disaster: The case of aviation security. American Behavioral Scientist, 48(3), 341-364.
Cutler, D., & Miller, G. (2005). The role of public health improvements in health advances: The twentieth-century United States. Demography, 42(1), 1-22. doi: 10.1353/dem.2005.0002
Levitt, B., & March, J. G. (1988). Organizational learning. Annual Review of Sociology, 14(1), 319-338.
Sitkin, S. B. (1992). Learning through failure: The strategy of small losses. Research in Organizational Behavior, 14, 231-266.
Turner, B. A. (1976). The organizational and inter-organizational development of disasters. Administrative Science Quarterly, 21(3), 378-397.
U.S. Treasury Department. (1914).
The bacteriological standard for drinking water. Public Health Rep. 29:2959-2966.