The document discusses how water is underpriced relative to its value and importance. It provides statistics showing that the average US family pays around $20 per month for water, which is much less than many other essential and non-essential products. While water prices need to rise to address infrastructure and other needs, there is political resistance to higher rates. Overall water is presented as one of the great bargains and is ridiculously cheap compared to its lifesustaining value.
The document discusses how water is underpriced relative to its value and importance. It provides statistics showing that the average US family pays around $20 per month for water, which is much less than many other essential and non-essential products. While water prices need to rise to address infrastructure and other needs, there is political resistance to higher rates. Overall water is presented as one of the great bargains and is ridiculously cheap compared to its lifesustaining value.
The document discusses how water is underpriced relative to its value and importance. It provides statistics showing that the average US family pays around $20 per month for water, which is much less than many other essential and non-essential products. While water prices need to rise to address infrastructure and other needs, there is political resistance to higher rates. Overall water is presented as one of the great bargains and is ridiculously cheap compared to its lifesustaining value.
The document discusses how water is underpriced relative to its value and importance. It provides statistics showing that the average US family pays around $20 per month for water, which is much less than many other essential and non-essential products. While water prices need to rise to address infrastructure and other needs, there is political resistance to higher rates. Overall water is presented as one of the great bargains and is ridiculously cheap compared to its lifesustaining value.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online from Scribd
Download as pdf or txt
You are on page 1of 0
38 JUNE 2005 | JOURNAL AWWA
ater quality and water availability are
huge challenges that will face the United Statesand the rest of the worldover the coming decades. Everywhere you look today, there are stories about water shortages, water pollution, political wrangling over water rights ownership, and the huge capital expendi- tures that will be required to maintain our water infrastructure. The ultimate conclusion to many of these issues is that in one way or another we will all inevitably pay more for water. As a society, we simply have to spend more of our dollars to correct the water pollution problems that we have created, to ensure that everyone has access to this basic human right as the planets population continues to expand, and to finance the vast treatment and dis- tribution infrastructure that we need. At the same time, however, there is growing politi- cal resistance and social concern about water prices rising over the long termrate shock. Although water is still very cheap relative to its real value (as outlined later), water rates and user fees are still political hot potatoes in many cities and towns throughout North America. Some city councils and mayors live in fear of taxpayer revolts and are often afraid to raise water rates, even though water bills are still a tiny part of an average familys monthly expenses. In other cities, battles are raging between municipal officials and private contractors who have tried to force rate increases, and controversies over water issues are increasingly resulting in the expul- sion of elected officials. But are all of these political battles, financial concerns, and instances of public hand-wringing really justified? This article discusses the real value of water versus the average price of water relative to the other necessities and various luxuries of life. (see The Value of Water: What It Means, Why Its Important, and How Water Utility Managers Can Use It by Bob Raucher in the April 2005 issue of JOURNAL AWWA, page 90). Water is vital to each and every one of us, and without it, life cannot exist. Relative to its true value and significance, water isnt expensiveit is ridicu- lously cheap! In fact, public drinking water availabil- ity in the United States is one of the great economic bargains of all time. Youd have to look far and wide to find another product whose real value to the con- sumer is so high relative to its priceand to find a commodity whose price is typically so unrelated to its actual cost. A look at the facts and some interest- ing anecdotes quickly confirms this. WHAT DO AMERICANS PAY FOR WATER? First, lets look at what we actually pay for our drinking water in the United States. Clearly, the sit- uation in terms of water supply and delivered costs varies significantly across the country, as might be expected given the range of climates, weather pat- terns, and conditions of water infrastructure in dif- ferent regions of the United States. Although what we pay for water varies widely, the average price is about $2.50 per 1,000 gal (3,785 L) or approxi- mately $20 per month for the average US family. The 2004 Report on Water and Wastewater Rates, authored by AWWA and Raftelis Financial Consultants Inc., found that the average cost of MAKING SOME KEY COMPARISONS REGARDING WATER MIGHT HELP US REALIZE THAT THE DRINKING WATER WE TAKE FOR GRANTED IS WORTH FAR MORE THAN WHAT WE CURRENTLY PAY FOR IT. Water Is CheapRidiculously Cheap! market outlook market outlook B Y S T E V E M A X W E L L W Some city councils and mayors live in fear of taxpayer revolts and are often afraid to raise water rates, even though a water bill is still a tiny part of an average familys monthly expenses. 2005 American Water Works Association water to the US consumer was $19.11/1,000 cu ft (28.32 m 3 ), or $0.0026/gallon. (To convert costs per gallon given in this article to cost per litre, divide the dollar amount by 3.785.) Rates vary widely, though they tend to be higher in the northeastern part of the country, andcontrary to intuitionlower in the South and West. According to the 2004 Water Pricing Survey published in the September 2004 issue of Global Water Intelligence, Boston, Mass., residents pay $0.004/gallon of water, whereas residents of Denver, Colo., pay $0.0018 cents/gallonand residents of Las Vegas, Nev., that shining oasis in the desert, pay just $0.002/gallon. AWWAs detailed analyses of regional water rates have clearly demonstrated that water pricing is often political rather than economic. WHAT DO OTHER COUNTRIES PAY FOR WATER? How do water rates in the United States compare with those of other countries? As shown in Table 1, a recent report summarized average water prices in various devel- oped countries. This report estimated the average price in the United States to be $0.0023/gallon, which is fairly close to the figure cited previously. The evidence here is pretty clearAmericans generally pay less for their water than do most people in other developed countries. Germans pay almost a penny a gallon, whereas only the Canadianswith their relatively small population and vast water resourcespay less than Americans do. Of course, this kind of analysis is only applicable to the more devel- oped countries of the worldthe vast majority of people in less-developed countries dont even have the option of buy- ing clean drinking water. THE RELATIVE COST OF WATER It is instructive (and perhaps a bit amusing) to look at the price of water compared with the prices of other key prod- ucts that many of us buy and use every day. A look at Table 2 helps us realize just how cheap tap water really is. There is not much doubt as to which of these substances is the most critical to humanswe cant live for more than seven or eight days without water. But water remains hun- dreds or even thousands of times cheaper than the other liq- uid commodities or extravagances that we frequently buy. Perhaps of particular interest here is the price of bottled water, which is between a thousand times and ten thousand times the cost of average tap water but is (in most cases) barely distinguishable from tap water. The US Food and Drug Administration loosely regulates the bottled water market outlook JOURNAL AWWA | JUNE 2005 39 Average Price Country US$/gal (US$/L) Germany 0.0084 (0.0022) Denmark 0.0083 (0.0022) United Kingdom 0.0057 (0.0015) Holland 0.0054 (0.0014) France 0.0053 (0.0014) Belgium 0.0047 (0.0012) Italy 0.0036 (0.0010) Spain 0.0033 (0.0009) South Africa 0.0032 (0.0008) Finland 0.0030 (0.0008) United States 0.0023 (0.0006) Canada 0.0020 (0.0005) Source: NUS Consulting 2003/2004 International Water Report and Cost Survey (as quoted in Global Water Intelligence, September 2004) TABLE 1 Average price of water by country Average Price Product $/gal ($/L) Tap water* 0.0026 (0.0007) Gasoline 2.20 (0.58) Coca-Cola 2.64 (0.70) Organic milk 4.25 (1.12) Tide liquid detergent 8.39 (2.22) Imported beer 12.00 (3.17) Evian bottled water 21.19 (5.60) Peaberry Coffee mocha drink 22.28 (5.89) Pepto-Bismol 58.52 (15.46) Vicks Formula 44D cough syrup 96.67 (25.54) American whiskey 150.00 (39.63) Visine eye drops 741.12 (195.80) Revlon nail enamel 983.04 (259.72) Good French wine 1,000.00 (264.20) Chanel No. 5 perfume 45,056.00 (11,903.83) *AWWA and Raftelis Financial Consultants Inc. TechKNOWLEDGEy Strategic Group AWWA TABLE 2 Price comparison of water versus other widely used consumer goods 2005 American Water Works Association 40 JUNE 2005 | JOURNAL AWWA industry. However, in a publication titled The Worlds Water 20042005: The Biennial Report on Freshwater Resources, the Pacific Institute (an independent water think tank) said that bottled water standards vary from place to place, testing is irregular and inconsistent, and contaminat- ed source water may lead to contaminated products. Although most of the US population seems to be highly resistant to (or even shocked at) the notion of rising water rates, for most Americans, a 20% increase would be rough- ly equivalent to buying a couple of containers of bottled water a month! In that same publication, the Pacific Institute estimated that on a worldwide basis the total annual consumer ex- penditures for bottled water approach $100 billion annual- lya vast sum that both indicates consumers are willing to pay for convenient and reliable drinking water and that society has the resources to make comparable expenditures to provide far greater quantities of water for far less money by investing in reliable domestic supplies (italics added). In other words, if we were to spend this money on building public systems instead of buying bottled water, we could easily provide a much greater share of the worlds popula- tion with clean, safe drinking water. THE MONTHLY COST OF WATER VERSUS OTHER BASIC SERVICES Another way to look at the relative cost of water is to review how much we typically pay for other basic services each month. The AWWA/Raftelis study cited previously suggests that the average US family pays about $20 a month for water. This compares with somewhere around $30 a month for Internet service, about $40 dollars a month for basic cable television service, $75 a month for tele- phone service, and $80 a month for elec- tricity. Again, we pay much less for the service thatif push ever comes to shove we clearly need the most. A few additional examples serve to reemphasize and bring home the relative inexpensiveness of water. A quick check at your local nursery shows that chicken manure typically costs around $15 per ton, and potting soil (fancy dirt!) can cost as much as $2,500 per ton. By compari- son, tap water goes for about $0.60 a ton. US SPENDING ON WATER VERSUS OTHER PRODUCTS Lets look at the cost of our water in another wayin terms of how much we as a society spend on water versus what we spend in other areas of life. What do we really spend on water? The data are not exactly comprehensive, but according to AWWA, every day our public water utilities process approximately 38 bil gal (140 GL) of water, and the US Census Bureau estimates that the United States currently has a popula- tion of about 296 million people. That works out to about 128 gal (484 L) of water per person per day. (Total water use, including untreated or less-treated water for agricultural irrigation and thermal power gen- eration multiplies that per-capita figure by about a fac- tor of 10.) If the average cost of water is $0.0026/gallon and if we each use about 128 gal (484 L) of treated water a day, it works out to a per capita cost of about $121 a year. If there are almost 300 million Americans, that works out to a total annual water cost of around $35 billion per year. According to a 2005 report from Environmental Business International and TechKNOWLEDGEy Strategic Group, the total annual revenues to water utilities in the United States are esti- mated at $33.8 billion. To help put this in context, Table 3 lists what the United States as a country spends on various other products, consumables, and activities. market outlook Annual Expenditure Comparison With Amount Product/Activity $ billions Spent on Water Viagra 2 6% Prozac 3 9% Cosmetic surgery 12 34% Pornography 14 40% Water 35 Tobacco products 40 114% Legalized gambling 68 194% Alcoholic beverages 140 4 times Military defense spending 558 16 times Sources: American Society of Plastic Surgeons, CitizenLink, Forbes Magazine, the Pharmaceutical Research and Manufacturers of America, Reuters, the Statistical Abstract of the United States, and various company websites TABLE 3 Total US spending on water versus other products and activities 2005 American Water Works Association WATER WASTAGE Because water is so cheap, we tend to waste a lot of it. It is difficult to measure exactly how much water we wastebecause this is obviously a somewhat subjective value judgment. Is watering a yard in Phoenix, Ariz., a waste of water? Is a 15-minute shower a waste of water? Is it a waste to wash your car once a week, and so on? However, one recent and comprehensive review pinpoint- ed the United States as the most wasteful nation on earth in terms of water use. In a study by the Center for Ecology and Hydrology in the United Kingdom, the United States ranked last out of 147 countries in terms of efficient water use. OUR IGNORANCE ABOUT WATER Despite this veritable mountain of data (which basical- ly show that water is still absurdly cheap relative to its true value), huge political controversies are often generat- ed by municipal attempts to raise water rates by 10 or 20%. Town councils or mayors are regularly removed from office for raising, or threatening to raise, water ratesdespite all of this evidence, staring us in the face, that water is obviously worth much more than what we pay for it. For most of us, even a large percentage increase in our water rates would be equivalent to no more than $10 or $15 a month. This is probably less than what many of us are already spending on bottled water (even though we have good, clean tap water avail- able at one one-thousandth of the cost). According to the previously cited study by the Pacific Institute, if we took the dollars we currently spend on bottled water and used them instead to address those oft-cited infrastructure requirements, the infamous spending gapthe amount between the current levels of infrastructure investment and the levels that the US Environmental Protection Agency estimates are required to maintain our infrastruc- turewould almost disappear. The United States is blessed with a wealth of water resources in most regions of the country, and we clearly have the innovative spirit and the technological where- withal to figure out how to treat and transport water to those regions of the country with less water. Unfortunately, as a society we also tend to be characterized by an igno- rant and careless attitude about water resources and water utilization in general. We would all do well to regularly remind ourselves how valuable water really is. Think about those times your local utility has had to turn off your connection to do repairs and how difficult it was to get through the day without any water. Think about the last time you went hiking or camping and ran out of drinking water. Consider the fact that in many parts of Africa, women and children spend a good part of every day hauling water for the basic human needs of drinking, preparing food, and cleaning. Surely its about time we realized that our water is worth a lot more to us than the price we cur- rently pay for it. Yes, water frequently falls from the sky. Yes, two thirds of the planet is covered by water. Yes, freshwater is abun- dant in many parts of the globe. But its not always clean, its not always located where we need it, and it costs the world hundreds of billions of dollars a year to collect, treat, store, and distribute that water. Sooner or later, we are all going to have to get used to reasonable and across- the-board water rate increasesespecially those of us in the United States. Steve Maxwell is managing director of TechKNOWLEDGEy Strategic Group, a Boulder, Colo.based management consultancy specializing in merger and acquisition advisory services, strategic plan- ning, and market research for water and broader environ- mental industries. Maxwell is also the editor and founder of The Environmental Benchmarker and Strategist, the environmental industrys most comprehensive source of competitive and financial data. He can be reached in Boulder at (303) 442-4800 or via e-mail at maxwell@tech-strategy.com. JOURNAL AWWA | JUNE 2005 41 market outlook 2005 American Water Works Association
Where can buy (Ebook) Unbottled : the fight against plastic water and for water justice by Daniel Jaffee ISBN 9780520306622, 9780520306615, 9780520973718, 0520306627, 0520306619, 0520973712 ebook with cheap price