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Impact of Climate Change on the Water Industry and Water Regulation. David K. Baker, President Indiana American Water Michigan American Water MARC - Traverse City, MI June 2009. Presentation Overview. Interrelationship between Water & Energy Water Industry Greenhouse Gas Profile

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Impact of Climate Change on theWater Industry and Water Regulation

David K. Baker, President

Indiana American Water

Michigan American Water

MARC - Traverse City, MI

June 2009

Presentation Overview

  • Interrelationship between Water & Energy

  • Water Industry Greenhouse Gas Profile

  • Impacts of Climate Change on the Water Industry

  • Required Water Utility RE-actions to the impact of Climate Change

  • Midwestern Burden? Cap and Trade impacts on Water Industry

  • Regulatory actions to support consumers and investors

  • Climate Change – Exacerbating the Global Water Crisis


Every day we operate and manage:

45,000 miles of distribution and collection mains

And more than:

80 surface water treatment plants

600 groundwater treatment plants

1,000 groundwater wells

40 wastewater treatment plants

Utility Only

O&M Only


Where We AreWe manage more than 350 individual water systems across the country


American Water Subsidiaries


Interrelationships Between Water and Energy

Source: US Department of Energy, Dec 2006


Greenhouse Gas Profile – Water Utilities AW Inventory of GHG Emissions


Costs of Water Production and Distribution Contributing to Greenhouse Gases

  • Energy costs (primarily Electricity) can range from 20% to 60% of a water utility’s operating budget

  • At INAW/MAW, this translates to over 50% of total

    production costs per year

  • Most energy is consumed in pumping water

  • According to Scientific American:

    • Lake or River Source .37kWh/m3 (cubic meter)

    • Groundwater .48

    • Wastewater treatment .75

    • Wastewater reuse1.75

    • Seawater5.54


Climate Change – Water Related Impacts:

  • Rising Temperatures: 11 of the 12 warmest of the past 150 years have occurred since 1995, with an increase of approx. .6 degrees C

  • Increasing Evaporation and corresponding precipitation – regional increases and decreases

  • Melting of polar ice caps - rising sea levels range from .2 - .6 m*

  • Increased extreme events: intensified hydrogeologic cycle which increases floods, droughts and tropical storms

  • Anecdotal evidence abounds recently in Midwest with flooding and droughts

*Intergovernmental Panel on Climate Change, Fourth Assessment Report, 2007


Impacts on the Water Utility Industry

  • Water Quantity Impacts: reduced in-stream flows, earlier and more intense seasonal snowmelt, reduced aquifer recharge

    • Major increases in demand with peaks coinciding with periods of restricted supply

  • Water Quality Impacts: increased run-off leads to increased sedimentation and pathogen loading, urban storm water runoff, combined sewer overflows, increased algal blooms

  • Unique Coastal Impacts: rising sea levels may lead to salt water intrusion of groundwater

  • Infrastructure Impacts: increased main breaks due to soil shrinkage and settling, reservoir management due to runoff timing and intensity

    • flood control and water supply considerations


Appropriate Water Industry Actions in Response to Climate Change

  • Collaborate, understand, predict: Climate Leaders, a voluntary EPA partnership with US Companies to develop long term, comprehensive strategies

  • Reduce energy consumption:

    • increased pump efficiencies – VFD’s, testing

    • SCADA optimization

    • Storage and pumping management

    • Conduct energy audits

  • Developing Alternative Water Supplies:

    • Desalinization - more than 50% of the US population lives within 50 miles of seawater

    • Making Desalinization more efficient


Appropriate Water Industry Actions – continued

  • Reduce Non-Revenue Water:

    • enhanced pressure management

    • leak surveys, cost benefit analysis

    • enhanced leak detection activities, acoustic technologies

  • Maximize Reuse Opportunities:

    • reuse of gray water and wastewater for sanitary and irrigation needs

    • continued research and special projects (Sullair Building, Gillette Stadium)

  • Water Conservation:

    • customer education, in-home water saving devices

    • Indiana’s first state-wide comprehensive wise water use plan

    • promote low-use appliances


Appropriate Water Industry Actions – continued

  • Construction of facilities with enhanced Sustainability:

    • lower energy use design

    • reduced waste disposal

    • efficient, regional approaches

    • maximization of existing infrastructure

  • Energy Efficiency “Starts at Home”:

    • Increase efficiency/decrease use of mobile combustion – vehicles

    • Fugitive Emissions: Refrigeration and Air Conditioning

    • Stationary Combustion: Water Heaters, on-site generators, pumps


Results of Previous Energy Audits (2003-2006)


The “Midwestern Burden?”

  • The controversy is “on” in the Hoosier State – Cap and Trade legislation

  • Production of Midwestern energy is carbon based: 94% of Indiana’s energy is coal produced

  • Impact on electricity rates may be as much as 40%

  • Dependent upon purchase of emissions allowances – dramatic impact on water utility costs


Regulatory support of Climate Change related Utility Actions and Investments

  • Economic support of research and climate change planning

  • Support of NRW reduction studies and leak detection capital

  • Collaboration and support of long-term sustainable infrastructure

  • Expansion of Infrastructure Surcharge Recovery programs to include necessary replacement capital to support response programs

  • Continued and enhanced support of industry consolidation and related efficiencies


Regulatory support of Climate Change related Utility Actions and Investments

  • Support of Conservation Programs

    • Appropriate Cost recovery for program investments

    • Customer rate restructuring to curb demand (inclining blocks, irrigation rates)

  • Revenue levelization to deal with flood/drought cycles

  • Appropriate surcharges/trackers for energy cost recovery between rate cases

  • Long range comprehensive planning rate treatment

  • Establish appropriate rates of return on equity to support new infrastructure investment


Source: AUS Utility Reports

The Water Industry is the most Capital Intensive of All Utility types


Levelization of RatesEssential to attraction of appropriate investment

Fixed Cost vs. Fixed Revenue – The Quest for Balance




Climate Change will exacerbate the Global Water Crisis

  • Water is the basic key to life – human and economic sustainability

  • Water resources are the foundation of economics – arid countries battle for the water resource

  • Our Nation’s Security is directly linked to water

  • Worldwide, 1.1 Billion people lack access to safe drinking water

  • 2.6 Billion people lack access to proper sanitation

  • Water related illnesses kill over 2 million people per year, most of them children


Impact of Climate Change on the Water Industry and Water Regulation



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