The Virtuous Cycle: Internal Energy Revolving Funds for Small Water Systems

How can small (and large) water systems pay for energy efficiency and renewable energy, helping cut energy costs? As energy is often the largest variable expense in a water system’s operating budget, this is a recurring question for the ongoing Smart Management for Small Water Systems project. There are many answers on how to pay for energy improvements, such as in my previous blog post on energy savings performance contracting, and throughout the Environmental Finance Center’s clean energy finance work. One such financing mechanism which water systems could employ is the Internal Energy Revolving Fund. How do these funds work?

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Key Financial Benchmarks for Water Systems: Conservation Signal

At our workshops and through our discussions with water systems during technical assistance work, many water systems, in particular small systems, ask what seems like a simple question: “Are our rates right?”

I suspect our initial answer is somewhat unsatisfying: “It depends.”

Even when rates are sufficient to generate the revenues needed for the utility, whether or not rates are “right” depends on what a particular water system hopes to accomplish with its rate structure. Hopefully, that is more than simply having the lowest rates of any of its neighboring systems. We encourage water systems to articulate a broad range of rate-setting objectives and to rank them from most to least important.

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Who is Supplying Water in Puerto Rico?

About 96% of the population in Puerto Rico receives water from the Puerto Rico Aqueduct and Sewer Authority (PRASA). But the other 4% of the population is supplied by about 240 very small water systems. In teaching workshops this year in Oklahoma, Kansas, Georgia and Colorado, it’s obvious that despite their similarities, each state’s small water systems believe that they face unique management challenges. Puerto Rico systems, however, may have a bona fide claim on uniqueness.

Puerto Rico Workshop1

Workshop in Arecibo, PR. Hosted by Universidad de Puerto Rico en Arecibo

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The Challenge of Extending Water Service to the Underserved

This blog was prepared by Andrea Sospenzo, a sophomore at the University of North Carolina. Andrea is the Outreach Assistant for the Environmental Finance Center.

Much of the dialogue around the nation’s water and wastewater infrastructure needs focuses on the enormous estimates associated with repairing and rehabilitating existing systems. But for some families, the challenge hits much closer to home. For them, the obstacle has less to do with the billion-dollar cost of fixing our nation’s existing water systems, and much more to do with the cost of running water lines from existing systems to their neighborhoods.

Extending water lines to rural areas and small neighborhoods that are adjacent to areas currently served by a local water utility can be surprisingly challenging, particularly when the utility is a municipal water system and the unserved area is outside of the city’s boundaries. These underserved communities are home to people who would like to receive water service from the local utility, but have been unable to convince the utility to extend water lines to their neighborhoods. In some cases, homes are served by private wells with contaminated groundwater, endangering the health of the residents and increasing the urgency of finding a solution.

As with any environmental issue, the challenges associated with bringing water service to underserved communities are diverse. In some cases, the major obstacle is technical or policy driven (for example, some cities refuse to provide services to areas unless they agree to become part of the city). But as we often find in our work, in many cases the main obstacle is figuring out who should pay for the costs of the extension.

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A Win-Win-Win: Regulation, Use, and Pricing of Reclaimed Water in Arizona

By Cole Wilhelmi and David Tucker

Ongoing severe drought conditions in the American Southwest offer the powerful reminder that our water resources should not be taken for granted. With increasing environmental pressure comes greater demand for policies and technologies that prioritize conservation and efficiency in water systems. The EFC examined these and other questions about water pricing, conservation, affordability, cost recovery, and regulation in a recent project to study water and wastewater rates and finances in the state of Arizona, in partnership with the Water Infrastructure Finance Authority of Arizona.

One promising method to help communities achieve water supply sustainability goals is through the use of reclaimed water. Reclaimed water is treated wastewater that is reused in a variety of agricultural, commercial, and landscaping applications, instead of being discharged into dry washes, rivers, or lakes. The EFC’s aforementioned study on water and wastewater rates included our first survey of reclaimed water rates in Arizona, which is one of the few states in the union making extensive use of reclaimed water. In central Arizona, 95% of the wastewater generated is reclaimed to serve beneficial uses. And 82% of current water reuse in the U.S. overall occurs in Arizona, Texas, California, and Florida. Let’s now take a closer look at the regulations, advantages, and pricing for Arizona’s reclaimed water.

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