Chuck Bowen, the editor for Lawn and Landscape magazine emailed me a link to an article titled “Inside Portland’s rising utility rates: Less water consumption means higher prices” and posed two questions about water conservation efforts.
Landscape contractors and water managers have traditionally billed their water conservation services as a cost-saving measure: “Let us fix your irrigation system and you’ll save on your water bills!” If I’m reading this correctly, that might not be the case… Do you know if many other municipalities operate under this same funding system?
From an irrigation contractor’s perspective, what’s the best way to approach this change with customers?
The Business Side of Water Conservation
Every time an irrigation system runs, a faucet is turned on, a toilet flushed or dishes washed a business supplies a product. The function of supplying water and removing waste is a service usually supplied by a quasi-governmental controlled monopoly…oops, business. Water should be free….right? After all water is a fundamental component of people and plants. Why should anyone have to pay for a basic necessity of life? This is the one of the many roots of the problem when it comes to water rates. The other problem is water conservation.
Smart Irrigation (ET controllers, low flow heads, drip, etc.) and turf conversion programs combined with other successful water conservation programs such as improved water-saving fixtures and technology, and a number of other factors have resulted in decreasing water sales and water-related revenues on a national level. In other words, the water supply industry is trying to operate with a declining revenue stream, which is not a sustainable way to conduct business.
While revenues are declining, costs of treating the water and delivering it to the customer is increasing. Operating costs for water companies are dominated by labor, supplies, energy, chemicals, purchased water (where applicable) and debt servicing in the form of bond payments. New contamination threats, escalating chemical costs and new or recently enforced federal and state water quality regulations are driving overhead costs up. The only way to cover these increases is to raise the cost of the water.
Water utilities are both energy and capital intensive. The rising costs associated with energy infrastructure and climate response have significant impacts. Meanwhile the aging water infrastructure in some areas is in excess of 100 years which is near or beyond obsolescence. While water utilities struggle to replace the old pipes they must also plan for future growth in sprawling suburban areas where new distribution pipes have to be installed and increased population density in urban areas where water capacity is fixed with the existing infrastructure. In order to ensure we have ample, safe and reliable water in the future, the cost of the water must continue to increase.
The Rising Cost of Water
Do you know how much you pay for a gallon of irrigation water? Do you know how much the cost has increased in the past decade? Do you know how much the water rates will increase in the next 3 years? Metro Atlanta water rates have increased the most in the country. According to the USA Today, Atlanta’s rates have increased 233% since 2000. The most expensive tier for outdoor water in Metro Atlanta is $8.25 per unit. A unit is CCF or 749 gallons. In other words a gallon of drinkable water delivered to a home or business costs just over 1.1 cents when used for irrigation or other outdoor use.
Atlanta has completed its rate increases…at least until 2016, but the same cannot be said for the rest of the country. In 2009 The American Society of Civil Engineers’ issued the Infrastructure Report Card which gave America’s water infrastructure a D. The same report also noted that drinking water systems face an annual shortfall of at least $11 billion in funding needed to replace aging facilities to comply with existing and future federal water regulations. On the wastewater side, the U.S. Environmental Protection Agency estimates the nation must invest about $400 billion over the next 20 years to upgrade or replace existing systems and build new ones to meet increasing demand.
Water rates will continue to increase. While customers will benefit from long-term efficiency gains, they will need to pay higher rates along the way in order to cover fixed costs and maintain financially viable utilities.
Benefits of Increased Water Cost
Should customers continue to conserve? Absolutely, positively, yes! Water conservation will continue to be the cheapest source of water. Water saved is water that doesn’t have to be purchased, treated or delivered. With the water rates continuing to rise precipitously, water conservation helps offset future expenditures.
Rising water costs has a side benefit for landscape and irrigation contractors. As the cost of water rises, the ROI for landscape and irrigation improvement projects related to water conservation become more attractive for owners and managers. A project from last year that may have had a 24 – 36 month ROI may have seen a 10% reduction in time this year and another 10% reduction in time next year. In other words the increasing water rates may result in the customer seeing the benefit of water conservation 5 – 6 months sooner than previously expected.
Water conservation continues to be a viable discussion in the landscape and irrigation industry. So whether designing, installing, maintaining or managing an irrigation system be sure to follow the Best Management Practices outlined by the Irrigation Association.
What are your customers saying about their water conservation strategy and the rising water rates? Please let us know by adding a comment below.
A shorter, print version of this post was published in the May 2013 issue of Lawn & Landscape Magazine.