June 12, 2012 / 4:17 AM / 5 years ago

As water bills rise, utilities struggle for funds

WASHINGTON (Reuters) - With water bills on the rise even as consumers are being urged to use less, more than 70 percent of water companies either lack the funds to maintain aging infrastructure or have just enough to meet requirements, a new industry survey reports.

Much of the financial pressure on water utilities comes from the price of energy, which accounts for as much as 30 percent of their operating costs, according to the survey released on Tuesday by Black & Veatch, a $2.6 billion global engineering business that designs water systems.

One big concern is infrastructure, such as pipes, treatment plants, pumps and equipment, said Ralph Eberts, the company's executive vice president for global water.

"We get to situations where you have infrastructure that's breaking, it creates chaos for our cities," Eberts said in a telephone interview. " ... We've got to get investments in place to get those problems fixed.

"It probably boils down to, the price of water's going to have to go up, and the public needs to understand why that is."

These financial and public relations pressures come as population growth increases demand for water globally, especially in the developing world where usage is expected to rise by 50 percent between 2007 and 2025, according to the World Resources Institute.

The problem is that some U.S. water utilities cannot afford to completely replace old pipe as they might have done in the past, because their budgets are tighter now and they cannot raise money easily by issuing government bonds, Eberts said.

Repairing, Not Replacing

Most U.S. water companies are reluctant to raise rates, so there has been a surge in so-called asset management, which means doing more with current resources -- for example, re-lining pipes or parts of pipes instead of completely replacing them. Increasing energy efficiency is another opportunity to manage water utilities' assets.

The survey found 34 percent of U.S. utility leaders said they lacked sufficient funds to take on capital infrastructure projects, and another 29.6 percent said their funding would just meet requirements.

About 85 percent of respondents said average water consumers had little to no understanding of the gap between what they pay and how much it costs to provide water and wastewater services.

In the developed world -- the United States, Europe, Australia and parts of Asia -- educating consumers about how much it costs to deliver water is harder than in the developing world, Eberts said.

"We've kind of gotten so used to it, it's kind of routine, people forget the costs associated with it," he said.

But in developing countries, where clean, readily available water may be relatively new, there is a greater appreciation of its cost, he said.

"We all collectively need to stop taking water for granted and start seeing it as a core part of a sustainable future," said Betsy Otto of the World Resources Institute, commenting on the survey's results. Otto is director of Aqueduct, an online tool that maps water risk.

In Europe and Australia, public-private partnerships have helped with financing water infrastructure projects, but this is rare in the United States and a possible area for future investment, Eberts said.

Reporting By Deborah Zabarenko, Environment Correspondent; Editing by Lisa Von Ahn

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