The Future of Utility Governance

Abstract

Governance is not an easy topic to talk about in the water utility world. The mere mention of the word governance evokes strong reactions related to the best and worst aspects of utilities and the regulatory systems that oversee them. America's approximately 50,000 community water systems are regulated under the Safe Drinking Water Act (SDWA), providing a common framework for many aspects of treatment and water quality—this is despite differences pertaining to system type and state primacy agency discretion. These rules apply to systems that serve the public, regardless of ownership model or governance structure. However, the commonalities largely end there. Numerous ownership types exist, broadly divided into publicly and privately owned, but with considerable variation and nuance in both categories. Many are functions of local governments; others are publicly owned by independent authorities or organized as a form of nonprofit organization. There are also investor-owned utilities that are either privately held or that have publicly traded parent companies; yet others are a part of homeowners associations, military bases, trailer parks, and several other ownership models. One study found 26 ownership types in California alone. Generally, although with exceptions, privately owned water utilities answer to an economic regulator (such as a public utility commission) for issues such as rate-setting, whereas publicly owned utilities answer to their local governments (city council, utility board, etc.). The present governance structure is complex and varied, so what is the vision for the future of water utility governance? This is a seemingly simple question that generates many more complex questions. First, is having 50,000 community water systems viable over the long term? The entirety of the United Kingdom (albeit much smaller than the United States) has only a handful of systems. Does this highly decentralized management create resilience and sustainability, or are they impeded without an economy of scale? If smaller systems end up being consolidated, how do we ensure all are involved to form a just and appropriate arrangement? And how do we ensure that customers receive comparable quality of service while paying rates that will allow utilities to meet future challenges? Second, will one or a few of the governance models eventually emerge above the rest? There are valid pros and cons for every type of governance. A successful future utility is one that will plan for the long term while also meeting present needs. This means investing in today's maintenance as well as necessary infrastructure upgrades, and identifying local funding sources for both to ensure long-term sustainability. At the same time, this investment must not leave low-income customers with unmanageable bills. There is no question utility leaders have a difficult challenge ahead, no matter what governance model is chosen. Third, is our regulatory system working? Despite the incredible advances in public health through the SDWA's history, our national regulatory system has made strong strides in recent years (see the existing primary standards in the United States), and we continue to look for new opportunities for additional risk reduction (e.g., unregulated contaminant monitoring). At the same time, a great deal of time, effort, and money have been spent scrutinizing chemical contaminants with less health-risk certainty, with some efforts abandoned while others have unclear futures (as examples, the former push for carcinogenic volatile organic compounds regulations and perchlorate). Are we really focusing on the largest threats to public health and safety in the water community? Or should we be more focused on, as an example, identifying and remedying systems that are at risk of failure from technical, managerial, and financial deficiencies? I will be the first to admit I do not have the answers to these questions, and more than likely there is no single “right” answer. However, as a sector we need to be thinking about these and other hard questions so we can work toward viable answers. AWWA is already working with experts across the water community and in adjacent sectors to develop a long-term vision of what water might look like in the future, including the future of utility governance. I encourage everyone to participate in AWWA's Water 2050 process, which has already begun, with a goal to unveil a vision at ACE 2023. But this is just the beginning, and it will take many years to achieve the appropriate solutions resulting from these difficult questions. The future of water is in our hands! Adam T. Carpenter is the manager of energy and environmental policy at the AWWA Government Affairs Office in Washington, D.C. He can be reached at acarpenter@awwa.org.