MODELING WATER UTILITY FINANCIAL PERFORMANCE1

ABSTRACT: The purpose of this paper is to present a theory and model for assessing the financial health of public water systems. Using financial information from 25 water utilities in Georgia, the paper seeks to identify the causal relationships between the financial performance of a water utility and its fiscal position. The need for a theoretical understanding of water utility financial health is the result of the increasingly stringent performance requirements under the Safe Drinking Water Act (SDWA). The issue has become particularly important for small water systems that will be exposed to significant financial demands. A set of financial ratios were developed and tested in a model that was based on liquid asset theory. The model contained five variables designed to account for the size of liquid assets, current debt, cash-flow, and the level of expenses. The variables fit the need of water utilities: to provide an adequate level of operation and maintenance to meet current and future system needs as well as SDWA standards.     

The influence of the operational environment on the efficiency of water utilities

Adjusting for the operational environment in studies of performance measurement is very important, otherwise the analysis may lead to unrealistic scores, especially when its influence on costs is high, such as in the water utilities. In this paper, we study the influence of exogenous variables on the water utilities performance by applying conditional efficiency measures based on the order-m method and its probabilistic formulation. We use a sample of 66 water utilities operating between 2002 and 2008, representing about 70% of the Portuguese population. Our research suggests that inefficiency of Portuguese water utilities is substantial for some utilities: several exogenous variables might influence it considerably. For example, regulation has a positive influence on efficiency but when drinking water supply and wastewater services are provided by the same utility or when the wholesale and retail activities are provided together, the performance is lower. The effect of ownership is inconclusive and the variables residential customers, water source, peak factor, and density of customers have a mixed influence on performance which varies according to their scores.     

Universal access to water and sanitation: Why the private sector must participate

Against the background of the current state of provision of drinking water and sanitation in the world — with one billion lacking safe water, and 2.2 billion not having adequate sanitation — this article argues that private participation is necessary. The most important issues for the management of water utilities in the 21^st century are identified as mobilizing investment for the highly capital intensive operation of water supply and sanitation infrastructure, and achieving efficiency in the delivery of services. The article highlights the issues that need to be raised if private investment is to be seriously considered as an alternative. Case studies, especially from Latin America (Argentina, Chile, Peru, Bolivia), illustrate different modes of private participation, and possible reasons for successes and failures are discussed. The article stresses that regardless of the modality of private sector involvement, on‐going government regulatory responsibility in the water sector is crucial. It suggests that regulatory policy must go beyond just setting tariffs, to develop standards for drinking water quality and waste treatment, as well as other standards. In conclusion, the article recognizes that numerous and increasingly difficult challenges face utilities in fulfilling their responsibility to deliver drinking water of adequate quality, in sufficient quantity, and at affordable prices, as well as safe and sustainable disposal of wastewaters for members of urban and rural communities.     

System dynamics modeling for municipal water demand estimation in an urban region under uncertain economic impacts

Accurate prediction of municipal water demand is critically important to water utilities in fast-growing urban regions for drinking water system planning, design, and water utility asset management. Achieving the desired prediction accuracy is challenging, however, because the forecasting model must simultaneously consider a variety of factors associated with climate changes, economic development, population growth and migration, and even consumer behavioral patterns. Traditional forecasting models such as multivariate regression and time series analysis, as well as advanced modeling techniques (e.g., expert systems and artificial neural networks), are often applied for either short- or long-term water demand projections, yet few can adequately manage the dynamics of a water supply system because of the limitations in modeling structures. Potential challenges also arise from a lack of long and continuous historical records of water demand and its dependent variables. The objectives of this study were to (1) thoroughly review water demand forecasting models over the past five decades, and (2) propose a new system dynamics model to reflect the intrinsic relationship between water demand and macroeconomic environment using out-of-sample estimation for long-term municipal water demand forecasts in a fast-growing urban region. This system dynamics model is based on a coupled modeling structure that takes into account the interactions among economic and social dimensions, offering a realistic platform for practical use. Practical implementation of this water demand forecasting tool was assessed by using a case study under the most recent alternate fluctuations of economic boom and downturn environments.     

CONFLICT AND COOPERATION OVER INTERNATIONAL FRESHWATER RESOURCES: INDICATORS OF BASINS AT RISR1

ABSTRACT: In this paper we seek to identify historical indicators of international freshwater conflict and cooperation and to create a framework to identify and evaluate international river basins at potential risk for future conflict. We derived biophysical, socioeco‐nomic, and geopolitical variables at multiple spatial and temporal scales from GIS datasets of international basins and associated countries, and we tested these variables against a database of historical incidents of international water related cooperation and conflict from 1948 to 1999. International relations over freshwater resources were overwhelmingly cooperative and covered a wide range of issues, including water quantity, water quality, joint management, and hydropower. Conflictive relations tended to center on quantity and infrastructure. No single indicator—including climate, water stress, government type, and dependence on water for agriculture or energy—explained conflict/cooperation over water. Even indicators showing a significant correlation with water conflict, such as high population density, low per capita GDP, and overall unfriendly international relations, explained only a small percentage of data variability. The most promising sets of indicators for water conflict were those associated with rapid or extreme physical or institutional change within a basin (e.g., large dams or internationalization of a basin) and the key role of institutional mechanisms, such as freshwater treaties, in mitigating such conflict.     

Does performance evaluation help public managers? A Balanced Scorecard approach in urban waste services

The urban waste market has evolved significantly in the past decades, which among other changes, has led to the creation of new utilities and new business models. However, very few things have changed for the users. Urban waste collection remains mainly under the responsibility of local authorities and the charges paid by the users in most countries are very low compared to the provision costs. This situation forces the injection of public money into the system, encouraging the ‘quiet-life’ within the utilities and, therefore, inefficiency. The present study intends to analyze the potential for the application of the Balanced Scorecard (BSc) methodology into the waste utilities. After a comprehensive revision of the urban waste sector in Portugal, the methodology of BSc and its application in local public services is described and discussed. Focusing on implementation rather than on strategy, a set of performance indicators is proposed to be utilized in the different management models of waste utilities in Portugal: the municipalities, semi-autonomous utilities, municipal companies and mixed companies. This implementation is then exemplified through four case studies, one for each type of utility. This paper provides a flexible framework proposal to be applied to waste utilities operating both in Portugal and abroad.     

Establishment of an economic evaluation model for urban recycled water

This study aimed at establishing an economic evaluation model to encourage continuing improvement in performance analysis and applying for any infrastructure system of urban recycled water. A thorough study towards characterization and economic performance assessment of urban water reuse scheme were carried out. An integrated evaluation technique was developed by synthesizing the quantitative and qualitative performance indicators related to the water recycled technology and urban water cycle system. Specific performance indicators and indexes were aggregated into an economic analytical modelling for effective evaluation of the water reuse scheme and technology using uniform economic performance standards. Detailed economic analyses were successfully applied to enable determination of economic lifetime of the technology and the whole water reuse scheme. This research confirmed that productivity, efficiency and reliability measurements and factors could be successfully deployed for determining the scheme performance during various life cycle stages (e.g. design development, operational and functional verification, or comparison with other reuse projects). The economic assessment model was applied to improve uniformity of analytical process and performance measure. This article demonstrates benefits associated with the application of a standardized methodology for performing economic assessment and by maintaining strong correlation between multi-parameter approach and adopted performance criteria in terms of productivity, efficiency and reliability. However, to ensure effectiveness of this assessment, the process would require systematic and perpetual inventory of the scheme performance data, consideration of variable factors such as capital and recurrent costs.     

Public Versus Private: Does It Matter for Water Conservation? Insights from California

This article asks three connected questions: First, does the public view private and public utilities differently, and if so, does this affect attitudes to conservation? Second, do public and private utilities differ in their approaches to conservation? Finally, do differences in the approaches of the utilities, if any, relate to differences in public attitudes? We survey public attitudes in California toward (hypothetical but plausible) voluntary and mandated water conservation, as well as to price increases, during a recent period of shortage. We do this by interviewing households in three pairs of adjacent public and private utilities. We also survey managers of public and private urban water utilities to see if they differ in their approaches to conservation and to their customers. On the user side we do not find pronounced differences, though a minority of customers in all private companies would be more willing to conserve or pay higher prices under a public operator. No respondent in public utility said the reverse. Negative attitudes toward private operators were most pronounced in the pair marked by a controversial recent privatization and a price hike. Nonetheless, we find that California’s history of recurrent droughts and the visible role of the state in water supply and drought management undermine the distinction between public and private. Private utilities themselves work to underplay the distinction by stressing the collective ownership of the water source and the collective value of conservation. Overall, California’s public utilities appear more proactive and target-oriented in asking their customers to conserve than their private counterparts and the state continues to be important in legitimating and guiding conservation behavior, whether the utility is in public hands or private.     

Influence of alkalinity, hardness and dissolved solids on drinking water taste: A case study of consumer satisfaction

Two surveys of consumer satisfaction with drinking water conducted by Taiwan Water Supply Corp. are presented in this study. The study results show that although a lot of money was invested to modify traditional treatment processes, over 60% of local residents still avoided drinking tap water. Over half of the respondents felt that sample TT (from the traditional treatment process) was not a good drinking water, whether in the first or second survey, whereas almost 60% of respondents felt that samples PA, PB, CCL and CT (from advanced treatment processes) were good to drink. For all drinking water samples, respondent satisfaction with a sample primarily depended on it having no unpleasant flavors. Taiwan Environmental Protection Administration plans to revise the drinking water quality standards for TH and TDS in the near future. The new standards require a lower TH concentration (from currently 400mg/L (as CaCO(3)) to 150mg/L (as CaCO(3))), and a lower TDS maximum admissible concentration from the current guideline of 600 to 250mg/L. Therefore, this study also evaluated the impacts on drinking water tastes caused by variations in TH and TDS concentrations, and assessed the need to issue more strict drinking water quality standards for TH and TDS. The research results showed that most respondents could not tell the difference in water taste among water samples with different TDS, TH and alkalinity. Furthermore, hardness was found to be inversely associated with cardiovascular diseases and cancers, and complying with more strict standards would lead most water facilities to invest billions of dollars to upgrade their treatment processes. Consequently, in terms of drinking water tastes alone, this study suggested that Taiwan Environmental Protection Administration should conduct more thorough reviews of the scientific literature that provides the rationale for setting standards and reconsider if it is necessary to revise drinking water quality standards for TH and TDS.     

COST ANALYSIS OF WATER AND WASTE WATER TREATMENT PROCESSES IN DEVELOPING COUNTRIES1

ABSTRACT: Mathematical modeling techniques are used to develop predictive equations for cost of water and waste water treatment processes in developing countries utilizing socioeconomic, environmental, and technological indicators. Predictive equations are developed for each of the three regions (Africa, Asia, and Latin America) for construction, operation, and maintenance costs of slow sand filter, rapid sand filter, stabilization lagoon, aerated lagoon, activated sludge, and trickling filter. Data analysis indicated that cost of water treatment processes is a function of technological indicator (percentage of imported materials), population, and the design capacity. The variables which gave the best correlation for waste water treatment cost were population, design flow, and the percentage of imported waste water disposal materials.     

Past and future sustainability of water policies in Europe

The article contributes to a discussion on two global issues on water: water resources management, and water supply and sanitation. Focusing on Europe, it traces the legal roots of current systems in history: as a resource, water is considered as a common property, rather than a market good; while as a public service it is usually a commodity. Public water supply and sanitation technologies and engineering have developed under three main paradigms: quantitative and civil engineering; qualitative and chemical/sanitary engineering (both on the supply side); and the most recent one, environmental engineering and integrated management (on the demand side). The cost of public drinking water is due to rise sharply in view of the two‐fold financial challenge of replacing an ageing infrastructure and keeping up with ever‐rising environmental and sanitary quality standards. Who will pay? Government subsidies, or water users? The author suggests that apparent successes with privatisation may have relied heavily on hidden government subsidies and/or the healthy state of previously installed water infrastructure: past government subsidies are still felt for as long as the lifetime of the infrastructure. The article stresses the importance of public participation and decentralized local management of water and sanitation services. Informing and involving users in water management decisions is seen as an integral part of the ‘ethics’ side of the crucial three E's (economics, environment, ethics). The article strongly argues for municipal provision of water services, and hopes that lessons learnt and solutions found in the European experience may serve water services management efforts in other regions of the world.     

Gauging the Vulnerability of Local Water Systems to Extreme Events

Water utilities that rely on surface water may be vulnerable to future droughts and floods, a vulnerability that may be magnified by climate perturbations as well as shorter-term and, in some cases, ongoing changes in the political and regulatory environment in which utilities operate. Unfortunately, day-to-day responsibilities currently occupy most utility operators, leaving little time to plan for inherently uncertain effects. The record of actual responses to past droughts and floods can be illuminating, however, particularly when placed in the context of plausible hydrologic disruption and pressures such as population growth, floodplain development and new regulatory demands. This paper draws on interviews with water utility operators in the northwestern USA to highlight opportunities and constraints that water utilities may face vis-à-vis such disruptions. Key considerations affecting vulnerabilities include water rights, institutional barriers to efficient utility operations, hazard management policy and the fiscal status of utilities.     

Perception of drinking water in the Quebec City region (Canada): the influence of water quality and consumer location in the distribution system

The purpose of every water utility is to provide consumers with drinking water that is aesthetically acceptable and presents no risk to public health. Several studies have been carried out to analyze people's perception and attitude about the drinking water coming from their water distribution systems. The goal of the present study is to investigate the influence of water quality and the geographic location of consumers within a distribution system on consumer perception of tap water. The study is based on the data obtained from two surveys carried out in municipalities of the Quebec City area (Canada). Three perception variables were used to study consumer perception: general satisfaction, taste satisfaction and risk perception. Data analysis based on logistic regression indicates that water quality variations and geographic location in the distribution system have a significant impact on the consumer perception. This impact appears to be strongly associated with residual chlorine levels. The study also confirms the importance of socio-economic characteristics of consumers on their perception of drinking water quality.     

The electric utility business case for investigating EMS: ISO 14000 and beyond

This article will focus on how a systems approach can be used as a strategic tool for environmental improvement that makes sense from a perspective of bottom-line financial performance. The author will discuss some real-world experience concerning how electric utilities are attempting to align environmental management more closely with business management theory and practice. The ISO 14000 standards have been proposed and, in many instances, finalized as global voluntary standards. How important will they be to the U.S. electric utility sector? ISO 14001, the EMS standard, has been promoted as a necessary “certificate” for those who sell products and/or services overseas. In fact, to be of value to most organizations, the standard must show that it can make a positive financial contribution, whether the service or product is marketed globally, nationally, or locally. © 1998 John Wiley & Sons, Inc.     

THE POLITICAL INFLUENCE OF RESIDENTIAL CONSUMERS ON WATER RATES1

ABSTRACT: The regulatory process such as that for water rates can be viewed as a bargaining process between regulators, utility management, and consumers. This bargaining process involves both political and economic influences. In an attempt to empirically verify that utility rates are a product of both economic and political factors, a sample of publicly-owned water utilities was subjected to regression analysis. As expected, cost and cost-related factors were positive and significant determinants of residential water rates. Using an admittedly imperfect measure of residential user political influence, there was evidence that increased political activity results in lower water rates. Furthermore, the political influence and water rate linkage is more evident in small water utilities than in larger suppliers.     

ACCOMMODATING CHANGE OF BACTERIAL INDICATORS IN LONG TERM WATER QUALITY DATASETS1

ABSTRACT: In 1996, the State of Oregon adopted a water quality standard based on Escherichia coli (E. coli), recognizing E. coli as an indicator of pathogenic potential. The Oregon Department of Environmental Quality (DEQ) began analysis for E. coli that same year. The Oregon DEQ continued collection and analysis of fecal coliform (a prior indicator organism) for data input to bacterial loading models and the Oregon Water Quality Index (OWQI). The OWQI is a primary indicator of general water quality for the Oregon DEQ and the Oregon Progress Board. The objective of this study was to develop a regression relationship between fecal coliform and E. coli. This relationship would fill data gaps and extend water quality models and indicators. Water quality policy is better informed by the ability of these extended water quality models to determine whether water quality meets present or would have met past bacterial standards. Monitoring resources spent on dual bacterial analyses could be conserved. This study also showed that changes to OWQI values (as a result of changing bacterial indicators) were minimal, and corresponded to improved characterization of water quality with respect to pathogenic potential.     

AN ASSESSMENT OF WATER UTILITY INFORMATION SYSTEMS AND THEIR USE OF COMPUTERS1

To provide an overview of water utility information systems and the extent of computer use, a direct mail survey of all water utilities serving populations of 2,000 or more in the tri-state area - Ohio, Indiana, and Kentucky - was conducted. The following was determined: 1) utility profile information, e.g., public/private ownership, age, number of accounts, etc.; 2) an assessment of the degree of computerization presently in place to perform various functions; and 3) an assessment of any plans that the utilities may have for future computerization. To analyze the data, an index of computerization was defined as the number of departments or major activity areas of each utility that presently have some computerization. The relationship between the degree of computerization (measured by this index) and a utility's profile in terms of population served, annual revenue generated, and the number of customer accounts is discussed for each state in the survey. Discriminant analysis revealed strong significant differences between utilities that plan to use computers and those that do not. The differences were identified by the authors. Survey results revealed a rather limited use of computers in the tri-state area. Enormous potential exists in small and medium sized utilities for computerization to improve operational efficiency.     

PRELIMINARY OBSERVATIONS ON WATER QUALITY OF STORM RUNOFF FROM FOUR SELECTED RESIDENTIAL ROOFS1

ABSTRACT: Storm runoff from four characteristic types of residential roofs and incident rainwater were monitored for 47 storm events over a six-month period at Nacogdoches, Texas, to study water quality conditions for 20 element and four chemical variables. The total element concentration in storm runoff from each roof type was greater than that of rainwater in the open. Differences in element concentrations in storm runoff among the four roof types were statistically significant (α≤ 0.05) with the differences for the wood shingle roof being the greatest and that for terra cotta clay roof being the least. The median concentrations of four element variables exceeded the Texas surface water quality standards, while 12 variables exceeded the standards at least one time in all samples collected. Zinc concentrations violated the Standard ranging from 85.7 percent of the samples for the wood shingle roof to 66.0 percent for the composite shingle, the greatest exceedances of all 24 variables studied. Storm characteristics and gutter maintenance level had some effects on these water quality conditions. The study suggested that roof types can be important to water pollution management programs. More detailed studies on roof water quality in major municipalities are required.     

Smart meters for enhanced water supply network modelling and infrastructure planning

To design water distribution network infrastructure, water utilities formulate daily demand profiles and peaking factors. However, traditional methods of developing such profiles and peaking factors, necessary to carry out water distribution network modelling, are often founded on a number of assumptions on how top-down bulk water consumption is attributed to customer connections and outdated demand information that does not reflect present consumption trends; meaning infrastructure is often unnecessarily overdesigned. The recent advent of high resolution smart water meters allows for a new novel methodology for using the continuous ‘big data’ generated by these meter fleets to create evidence-based water demand curves suitable for use in network models. To demonstrate the application of the developed method, high resolution water consumption data from households fitted with smart water meters were collected from the South East Queensland and Hervey Bay regions in Australia. Average day (AD), peak day (PD) and mean day maximum month (MDMM) demand curves, often used in water supply network modelling, were developed from the herein created methodology using both individual end-use level and hourly demand patterns from the smart meters. The resulting modelled water demand patterns for AD, PD and MDMM had morning and evening peaks occurring earlier and lower main peaks (AD: 12%; PD: 20%; MDMM: 33%) than the currently used demand profiles of the regions’ water utility. The paper concludes with a discussion on the implications of widespread smart water metering systems for enhanced water distribution infrastructure planning and management as well as the benefits to customers.