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The Effect of Conservation on Water Rate Structures

The 2013 Report Card for America's Infrastructure awarded both the country's water and wastewater infrastructure with Ds that were based on physical condition and the needed investments for improvement. The report describes the status quo ‐ approximately 240,000 main breaks per year in the United States with a potential capital investment of almost $300 billion for wastewater and stormwater in the next 20 years, as well as estimates of more than $1 trillion to replace the nation's water infrastructure, which is nearing the end of its useful life. The majority of the financial burden associated with installing new infrastructure, repairing and replacing existing infrastructure, and meeting increasingly stringent regulatory requirements falls to water sector utilities, which need to be able to either absorb the additional costs internally (which is unlikely) or shift them to other stakeholders. As a result, utilities use a variety of financing solutions including fully cash‐funding smaller projects and using available (but limited) state and federal funding; in most cases, however, utilities are required to take advantage of the bond market and other types of loan programs.