Report: Annual OPEX for water and wastewater utilities nearing $100 billion

aerial view of water plant

According to a recent 2018-2027 forecast by Bluefield Research, operating expenditures (OPEX) for water and wastewater utilities continue to climb at a steady clip. Over the last 10 years, utilities’ OPEX has risen 15 percent, reaching the $79 billion mark in 2017. At this current pace, Bluefield Research forecasts the 10-year total to surpass $872 billion from 2018 to 2027, topping $93.8 billion by 2027.

Bluefield Research’s newly released report, U.S. Municipal Utility Operating Expenditure Forecast, 2018-2027, analyzes operating budgets of more than 70 water and wastewater utilities in all 50 states, over a three-year period.

“In a vacuum, these operating expenditures might be managed, but when accounting for rising capital expenditures, insufficient network replacement rates, and knowledge loss via staff turnover and retirement, water utilities’ operating costs are primed for more significant increases,” says Bluefield President Reese Tisdale. “While the annual growth in our reference case is 1.52 percent, we are seeing swings upward as high as 6.4 percent.”

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Utilities in the United States, Canada, Australia and Europe (representing 31 countries) currently manage $2.9 trillion (USD) in water, wastewater and stormwater assets, which provide critical infrastructure services to over 822 million people, globally. Bluefield’s forecasts indicate that advanced asset management solutions will save these utilities US$1.2 billion in annual CAPEX savings in 2018 and scale to $7.3 billion in annual savings by 2027.

Figure 1 – Exhibit: Operating Expenditure Forecast by Segment, 1990-2027.

Key takeaways from the OPEX forecasts:

Utilities spend approximately $296 annually per customer on water & wastewater system operations. The Western region’s average annual OPEX over the last three years was $328 per customer, the only region above the national average. Detroit spends the most on a per customer basis for wastewater operating expenses at $339 annually. On average, the utilities surveyed spent more on wastewater operations than water operations per customer.

Over the next decade, OPEX for water systems represent approximately 58 percent of total costs. Total OPEX for wastewater systems is expected to be 42 percent, or $368 billion over the period.

Labor costs and depreciation combined make up over half of water utility operating expenses. Labor costs make up 28 percent of total operating expenses, while power costs- softened by low U.S. energy prices, make up 6 percent of total operating expenses. The largest piece of OPEX originates from third-party services and materials that are not broken out in utility budgets.

Low unemployment and an aging workforce within the utility sector, as a whole, are expected to increasingly squeeze utilities without adjustments. Rising OPEX across water and wastewater sectors reflects the need for utilities to embrace new technologies – such as digital water technologies and alternative business models, including those that promote resource recovery and related revenue generation.

“The divergence between OPEX and CAPEX trends are not sustainable,” explains Bluefield Research Director Erin Bonney Casey. “Without increased investment in utility infrastructure, ongoing operating costs to maintain will begin outpacing historic trends, placing additional burden on ratepayers.”

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