AWWA: Source water protection, financing now top sector priorities as rehab/replace dethroned

The American Water Works Association (AWWA) recently released its 2024 State of the Water Industry report, providing insights into the challenges and priorities facing the water sector. As part of the survey and report, AWWA regularly ranks the top challenges and priorities facing the sector.

This year, source water protection emerged atop the major issues, dethroning renewal/replacement of aging infrastructure, which for years has consistently ranked No. 1. Financing for capital improvements ranked second among the top priorities. Other sector issues highlighted and discussed in the report include PFAS, cybersecurity, climate change, workforce and more.

This year’s report was based on a survey of more than 2,400 water professionals conducted in late 2023. The largest group of respondents (68%) represented water utilities, followed by 20% of respondents providing goods and services to the water sector.

“Our industry is facing significant challenges and opportunities,” said AWWA President Pat Kerr. “On the one hand, there is a growing awareness of the criticality of clean and safe drinking water, driving increased scrutiny and demand for ever higher standards. On the other hand, aging infrastructure, water scarcity and emerging contaminants are putting pressure on water systems to innovate and adapt. Cyber threats are also an ever-evolving concern.”

With source water protection ranked as the new No. 1 priority, the report says the shift highlights a
growing recognition of the importance of safeguarding water at its source. The report states that several factors likely contributed, citing long-term concerns related to climate change and drought affecting the Colorado River Basin as having an impact.

According to the report, there are also growing concerns about emerging contaminants such as per- and polyfluoroalkyl substances (PFAS) that threaten water quality at the source. It also speculates that the Bipartisan Infrastructure Law (BIL) may have mitigated some concerns about funding for capital projects, thus easing anxiety about aging infrastructure.

Financing for Capital Projects

Nevertheless, financing for capital improvements is in the No. 2 spot of top sector priorities. According to the report, the problem is two-fold, with utilities across the United States struggling to invest in needed improvements and to comply with regulatory mandates, while also having to maintain affordable rates for customers.

According to the report, a significant portion of utilities, particularly smaller systems, expressed concerns about current and future ability to access capital. This trend has worsened in recent years, with 13% of utilities reporting their access to capital is as bad as or worse than any time in the past five years, primarily impacting medium and small utilities (16% and 14%, respectively).

These financial pressures are compounded by declining water sales in some regions, potentially making it more difficult to generate revenue. While 44% of utilities believe they can meet the full cost of providing services through rates and fees, over a quarter of those surveyed struggle to implement full-cost pricing models. This highlights an area where innovative pricing structures and targeted financial assistance programs could provide significant relief.

SOTWI survey results revealed that 73% of water and/or wastewater utilities are planning a rate increase in 2024. While rate increases remain the primary funding source, water utilities are increasingly seeking alternative financing methods.

“The financial challenges are reaching a tipping point for some utilities, threatening their long-term sustainability,” said AWWA CEO David LaFrance. “While federal assistance will certainly help ease this complexity, utilities will inevitably need to set rates that cover the full cost of providing water service and, at the same time, find ways to assist households with lower incomes.”

Source: AWWA

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