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The Water Crisis in Jackson, Mississippi Should be a Wake-Up Call About America’s Water Utility Industry

People around the country and the world are aghast that residents in Jackson, Mississippi, an American state capital, are without water or sewer service and the consequently the whole community is suffering. It’s a terrible tragedy. The problem stems from years of deferred maintenance on the City’s water system. The City’s Mayor says that the City may need as much as 2 billion dollars to fix the system. That’s a lot of money, but the truth is that Jackson is not alone in needing a massive investment for infrastructure repairs due to deferred maintenance. In 2021, the American Society of Civil Engineers released its Report Card for America’s Infrastructure in which the nation’s water infrastructure was given a “C-“ and wastewater infrastructure was given a “D+” grade. Today, it’s not news that water and sewer systems are crumbling all over America. The estimated price tag for fixing the nation’s water and wastewater infrastructure is staggering; for example, in 2010 the U.S. Conference of Mayors projected that, over the next 20 years the country needed to spend $3.8 trillion to fix the nation’s water and wastewater systems. We have not come close to spending that amount of money and as a result, in many places water and wastewater systems have continued to deteriorate from deferred maintenance.

If the nation (i.e., taxpayers and ratepayers) are being asked to invest almost $4 trillion to fix our water and wastewater systems, then we should expect the water and wastewater utility industry to be efficient and doing everything possible to reduce costs.

However, what most people do not know is that the American water and wastewater industry is inherently inefficient which results in potentially billions of dollars being wasted every year. The main reason for this is the fact that the industry is extremely fragmented: there are over 68,000 water and wastewater systems in America. Each one is independent and operates in isolation. On the plus side, it gives local residents control over their water systems. On the negative side, it has created an industry where work is duplicated, knowledge is siloed, valuable infrastructure materials are wasted as surplus, and technology adoption is extremely slow. Here are a few examples:

Utilities have strict specifications for parts and equipment because they have to last for decades (often underground) once installed. Some utilities spend as much as $50,000 on engineering consultants’ fees to have a new product tested and specifications written. Today, that information is not shared between utilities, so each utility is forced to spend money on consultants to perform the same work on new products. That is an unnecessary duplication of expenses. Today, with the Internet, that information can be shared immediately industry-wide with other utilities once one utility spends the money and has the work done.

Utilities buy parts and materials today and they do not share experiences with products. Again, with the Internet, utilities should be sharing their experiences with products in real time with each other. Keeping information siloed can have real financial consequences for utilities and their consumers. For example, a large city’s utility purchased and installed defective meters throughout the city (at a cost of several million dollars). The meters caused significant increases in residents’ water bills. When residents complained, the city first blamed the residents for increasing their water usage. However, after performing an investigation, they discovered that the water meters were defective and giving incorrect readings. By this time, the community was in an uproar, the city had to figure out how to deal with lots of overcharges, and unfortunately several water officials ended up losing their jobs. There were many water utilities that had previously purchased the defective meters and could have been a source for due diligence for any utility that was considering purchasing the same defective meters. Yet, there was no way for a utility to see which utility had previously purchased the meters and therefore no way to learn from the negative experience of others. The irony is that one of the utilities that had previously purchased the defective meters was in the same county as the utility that was referenced above. There was just no way for that information to be discovered and shared among the utilities.

There are thousands of “surplus” materials sitting around at utilities that can be used by other utilities. Yet there is no industry-wide means to share information about the availability of surplus materials. As a result, parts and equipment is sitting around that could be used by another utility. In many instances, the surplus material can be donated or sold at a low price to another utility – reducing the seller’s storage costs (and potentially generating revenue) and reducing the buyer’s procurement costs. Also, sharing information about available surplus materials could help utilities recover faster when the system is down and there is an emergency need for parts (e.g., like what’s needed in the City of Jackson). Imagine if utilities were linked in a database where Jackson could see if other utilities have the parts that they need in surplus and be able to get them without having to wait for a supplier or manufacturer to deliver them. I should also note that supply chain issues are creating longer delivery times for ordered parts. Today, it is not uncommon to see 90-day delivery times. This can seem like forever when your water system is down.

With 68,000 utilities it is expensive and time consuming to try to introduce any new technologies to the water/wastewater utility industry. Just imagine trying to visit thousands of utilities. Again, utilities could be connected where they could share information about their use of new technologies. This would make the adoption of new technologies faster and easier. Today software is helping make industries more efficient. Yet, software is very difficult to introduce in the water utility industry. Much of the infrastructure costs are paid for with money from federal loans (called the “Revolving Loan Programs”) that is given to the states and loaned to local utilities by state agencies. However, the federal revolving loan monies cannot be used for software (except for recent allowances for cyber security software). In today’s information age, this is ludicrous.

Our collective hearts are going out to the residents in Jackson, Mississippi. I hope that they find the 2 billion dollars needed to fix their water system and permanently resolve the crisis. I also hope that we will see that the deferred maintenance that gave rise to Jackson’s crisis is a nationwide problem and at some point we will be asked to pony up potentially trillions of dollars to fix our nation’s decaying water and wastewater systems. However, before that time, we should take steps to make the industry more efficient so that the nation gets more for the investment and creates an industry where utilities work together to save money for taxpayers and provide the best service to ratepayers.

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