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Prepared By:
Association of State Drinking Water Administrators
1911 North Fort Myer Drive
Arlington, Virginia 22209
Under Grant # X-814294-01 From:
Environmental Protection Agency
Office of Drinking Water
401 M Street, SW
Washington, DC 20460
Copyright © 1990
by
Association of State Drinking Water Administrators
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What is the Value of Safe Drinking Water ?
"How is it that water, which is so very useful
that life is impossible without it, has such a low price
— while diamonds, which are quite unnecessary,
have such a high price?" This question was posed
by Adam Smith, the famous 18th century econo-
/ mist, in his classic work, The Wealth of Nations.
This is indeed a paradox of value. Humans
cannot live without safe, potable drinking
water, yet the cost of drinking water is rela-
tively low. On the other hand, diamonds are a
commodity that people can easily live without, yet
their price is extremely high.
Water has traditionally been undervalued be-
cause of its abundance. Water covers nearly three
quarters of the earth's surface and is abundant in
underground aquifers and springs. Water is es-
sential to every form of life on earth, but is taken
for granted by consumers. Adam Smith may not
have figured out the answer to the above ques-
tion, but he did conclude that the value of a
product — its total contribution to economic
welfare — does not always correspond with its
monetary value.
The era of inexpensive water, however, is now
coming to an end. The public, concerned by news
accounts about toxic waste sites, organic chemicals in
municipal water supplies, and towns being shut down
because of contaminated soils, has demanded addi-
tional regulation of drinking water. Additional regu-
lation, whereas it will likely result in safer water and
"peace of mind," will also be costly. Consumers will
ultimately pay for this "insurance" in the form of
substantially higher water rates.
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Why was Water Inexpensive in the Past?
Deferred
Expenditures
Limited
Treatment
The proper value has never been placed on water,
in part because water rates have been con-
strained by the political and social forces that
developed when water was truly inexpensive to
produce. One of the ways rates have been kept low
has been to defer expenditures needed for mainte-
nance and replacement of water treatment facilities
and distribution networks. Consequently, high
leakage rates have occurred in recent years in many
water distribution systems due to aging infrastruc-
tures. Few actions were taken to resolve these
problems because the per-gallon cost of producing
water was low.
In some municipally owned water systems
where the finances are co-mingled with the
finances of the local government, maintenance
problems have often been made worse because
water revenues are "siphoned off' to pay for
other municipal programs. In the local
political environment, the pressure to address
deficiencies in areas of high public visibility such as
solid waste disposal, fire and police protection, and
social services, are frequently greater than the
pressure to repair water pipes buried under the
street. Since the per-gallon cost of producing water
has remained low, the problems resulting from
deferred maintenance and replacement have been
largely unaddressed. Similar problems of deferred
maintenance and replacement also exist in many
small private and publicly owned water systems.
The cost of water in the past was low because
the public believed that almost all drinking water
was pristine and safe and therefore did not require
additional expenditures for treatment. With in-
creased population densities, urbanization, and
pollution from industries and waste facilities, the
public is becoming more aware of potential threats to
drinking water and the need for additional water
treatment.
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Why will Water Cost More in fhe Future?
New
Regulations
Improved
Contaminant
Detection
Congress enacted the Safe Drinking Water Act
(SDWA) in 1974 with the goal of providing safe
drinking water to all persons served by public
water supplies (water systems serving 25 or more
persons on a regular basis or a system with 15 or
more service connections). This Act gave the U.S.
Environmental Protection Agency (EPA) authority to
develop a uniform national drinking water protection
program and establish national standards (accept-
able or "safe" levels) for known or suspected drink-
ing water contaminants.
Partly in response to the new awareness by
consumers for the safety of drinking water,
Congress amended the SDWA in 1986 and
required EPA to establish standards for ap-
proximately 83 contaminants by 1990. EPA is also
required to regulate at least 25 additional contami-
nants every three years beginning in 1991.
Many of these standards will control chemical
contaminants to below the levels that were measur-
able when the SDWA was first passed in 1974. As
the ability to monitor has grown more sophisticated,
we have documented more subtle types of health
effects such as certain forms of cancer which can
result from long term exposure to very low levels of
chemical contamination.
In similar fashion, the understanding of micro-
biological contamination of drinking water has also
grown. In the early 1900's drinking water treatment
was revolutionized through the widespread introduc-
tion of disinfection. This resulted in dramatic reduc-
tions in the incidence of waterborne diseases such as
typhoid, cholera, dysentery, and hepatitis. With the
removal of these very visible health threats, there
was a perception that the problem of assuring safety
in drinking water had been solved.
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Giardia
Improved
Treatment
There may still, however, be large numbers of
cases of waterborne diseases. Characterized by
common symptoms of diarrhea, nausea, and abdomi-
nal distress, they may not always be identified as
being of waterborne origin and therefore go unre-
ported. Though non-fatal, these diseases may be
quite debilitating for periods of time and result in
discomfort and economic losses due to lost work and
medical expenses. Assuring the elimination of these
more subtle disease agents will require a re-examina-
tion of the effectiveness of filtration and disinfection
practices and upgrading of many treatment facilities.
New regulations under the SDWA Amendments
will also require utilities using surface waters to
install filtration and disinfection treatment to remove
viruses, cysts, bacteria, and other microorganisms.
Although many surface supplies have been consid-
ered safe in the past, increasing population densities
and the resultant pollution of watershed lands has
rendered many of these systems incapable of produc-
ing safe reliable water on a continual basis. Ground-
water systems will also be required to provide disin-
fection.
Upgrading water treatment to remove chemical
contaminants to low levels and provide greater assur-
ance of the inactivation of disease-causing microor-
ganisms will be expensive. Safe, reliable drinking
wrater, however, is an integral part of the nation's
"infrastructure" — the mechanical foundation —
on which our society depends. Wherever we go,
we want to be able to turn the tap without any
doubts or second thoughts; knowing the water
will be there and that it will be safe for drinking
and other uses. These expectations regarding the
reliability and safety of public drinking water
supplies are no different from what we expect of
other categories of physical infrastructure such
as roads, bridges, and buildings.
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Limited
Wdter
Low water rates have encouraged the consump-
tion of water and discouraged conservation. Recent
droughts, affecting even humid areas of the country,
have provided a timely reminder that water re-
sources are not as abundant as they once were. The
High Water number of regions with water shortages is increas-
ing. Conservation incentives have already begun
to be incorporated into regional and interstate ne-
gotiations on the allocation of scarce supplies.
Wherever water is in short supply, those water
systems that have conservation-oriented rates in
place will fare the best. The customers of water
systems that ignore the need for conservation-
oriented rates will pay more for both quantity and
quality.
Low Water
How Much will it Cost?
Water Bill
All of this activity is going to cost money
money that the consumer will be asked to
pay in exchange for the assurance that they
are receiving safe, potable drinking water. Some
people have referred to these costs as being equiva-
lent to purchasing "insurance."
Costs for drinking water are gener-
ally borne directly by households through
the payment of water rates to local water
systems. The full cost of assuring that the
water one drinks is safe, however, has not
typically been included in these water
________ rates. In the future the increased costs of
safe drinking water will have to be paid by
the consumer. Water rates will probably increase
from current levels of an average of $100-$250/year/
household to as much as $500-$600/year/household.
Because water has been so inexpensive in the past,
consumers will likely suffer from "rate shock" in the
future.
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What are the Benefits Associated with Paying the
Real Value of Water?
The benefits of new treatment techniques will
result in a decreased numbers of cancer cases
and other diseases related to drinking water.
Benefits may not, however, be readily apparent to
many consumers since many of these benefits will be
spread over several generations. The health benefits
are nonetheless real and are no different than the
invisible and intangible benefit derived from know-
ing that the risk of a bridge collapsing is negligibly
small. The benefits of knowing that the water that
flows from the tap is safe and reliable are an im-
portant "insurance policy" that all consumers
should be willing to pay.
What Does all this Mean?
It means times are changing. Water can no longer
be used frivolously, but must be conserved. It
means that water rates will go up — reflecting
more accurately the true value of safe drinking
water.
The new regulations being developed under the
SDWA Amendments are intended to protect the
public health of all Americans. These regulations
also have been designed to give the consumer "peace
of mind" regarding the water consumed from the tap.
To ensure that "peace of mind," water rates must
rise. Higher prices, however, are a small price to pay
to ensure the certainty that when you turn on the
tap, safe water will flow from it.
What is the value of water? The answer is it
is as valuable as life itself. Thus, we should all will-
ingly pay for the benefits to be derived from enhanced
water quality. And we should conserve water as
much as possible since safe, potable water is such a
precious and scarce resource. As citizens and con-
sumers, we all need to realize that the real cost of
water must be paid to ensure a safe, potable water
supply for ourselves and for future generations.
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