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Public Treatment Plants Should Stress Ability To Pay When Dealing With EPA, Speakers Say
ST. PETERSBURG, Fla.--Publicly owned treatment works should stress their ability to pay for reducing discharges from combined sewer overflows when negotiating with the Environmental Protection Agency, public treatment plant officials and others said Jan. 31.
A more aggressive stance on affordability is especially important when crafting consent decrees and long-term control plans for overflows from combined sewer systems that carry both wastewater and stormwater in the same pipes, the officials said at a conference sponsored by the National Association of Clean Water Agencies.
Costs are rising for a number of reasons, including heightened standards set by the federal government and neglected, aging systems, Jeff Rexhausen, associate director of research for the Economics Center for Education & Research at the University of Cincinnati, said.
Whatever the cause, spending by local officials to correct combined sewer problems bears the risk of compounding other environmental issues for local governments and could impair efforts to reduce pollution and protect public health, he said.
"Occasionally, it happens that regulations can obscure priorities, "Rexhausen told attendees at the conference.
Conference speakers noted that their discussion of the rising costs faced by publicly owned treatment works (POTWs) came as a House subcommittee approved three bills to boost funding for the clean water state revolving fund, provide grants to curb sewer overflows, and fund pilot alternative water supply projects (21 DEN A-2, 02/1/07 ).
Their remarks also came on the heels of a NACWA letter to Benjamin Grumbles, EPA's assistant administrator for water, calling for the agency to consider local community conditions in its financial capability assessments for repair or replacement of aging wastewater systems (10 DEN A-9, 01/17/07 ).
Conference speakers also noted that Grumbles has said EPA intends to use the advice of its financial advisory board in writing affordability guidance for implementing clean water rules (46 DEN A-15, 03/9/06 ).
Other Impacts
In a panel discussion, speakers at the NACWA conference noted both operating and compliance expenditures are determined by factors outside the control of the POTWs and EPA, such as rapidly rising costs of construction materials.
Regulatory compliance upgrades stipulated by EPA or the Department of Justice in consent decrees can increase those uncontrollable costs dramatically, the speakers said.
Compliance costs also siphon funds from other necessary environmental projects, they said.
Rexhausen said EPA's financial capability analysis should balance those competing demands.
"We're not just talking about water quality. There are other environmental concerns that communities have, and there are a whole host of other community goods, such as safety and education and economic development," Rexhausen told attendees. "We can't let schools crumble while we're fixing the sewers."
Higher costs that result in rate hikes also are an environmental justice issue because they especially affect poor households, he said. The "regressive" nature of utility spending ranks higher than other household costs for the poor, including health care, Rexhausen noted.
"On the residential side, when we're charging too much, what we get is delinquencies and shutoffs, and those result in more costs for our agencies and less revenue and may result in dislocation of households," he told attendees. "For households, the fundamental problem is ability to pay."
Large industrial users also feel the pinch of higher rates, he said, and respond by building their own wastewater treatment plants, changing their processes, or moving away.
"The results of those things are substantial loss of revenue and also loss of local jobs," he said.
Additional Factors
Eric Rothstein, vice president of utility management solutions for CH2M Hill, an international engineering, construction, and consulting firm, said a significant problem regarding cost consideration is that EPA's current methodology for financial capability assessment remains flawed.
For example, while EPA has said it considers a range of factors
in its enforcement decisions, there is no system to incorporate them, he said.
"One of the things that's particularly ironic is there is much call for
consideration of additional factors, but there really is no framework for that
consideration," Rothstein said.
"So, the default is sort of wave at it and talk about it. But
there is not really any way of incorporating it into the finding for an
enforcement action."
Additionally, a "myopic allegiance" to prescriptive formulas hamstrings efforts,
he said.
"You sort of walk through the workbook. You do the work and submit," he told attendees.
"So you have an enforcement agency saying, 'We want you to do x miles pipe a year. We want you to do these particular actions.' And there isn't necessarily a recognition of what the costs are, what the risk exposure is, particularly in this very high inflation environment."
EPA Looking for Answers
Michael Deane, EPA senior policy adviser for infrastructure finance, said the agency was looking at a number of ways to improve its cost assessments and to find new sources of revenue to upgrade systems.
A major problem, however, is a "global" trend toward greater
costs for construction materials, labor, fuel, chemicals, and energy, Deane
said.
"The global trends will have local consequences," Deane said. "The good news in
all this is that, just as global trends bring all these challenges, global
trends also bring new opportunities. Those include creative financing."
Among other things, EPA is examining incentives for greater private-sector participation by infrastructure investment funds, he added.
"Managers of these funds are looking at many types of infrastructure in all corners of the globe. But they are interested in investing in water in the U.S.," Deane said.
"Shame on us if we do not do everything we can to bring those dollars into our infrastructure and our communities to protect our environments and to build our economies."
Another agency focus is to educate water customers on the "value" of what they are receiving, Deane told BNA.
"The focus now is not on value. The bottom line is there's a difference between cost and value, and we need to focus on customer rates that reflect the full price of the service people are receiving," he said in an interview.
"No one likes to pay more for anything, especially if it's not transparent what they're receiving."
By Drew Douglas