Category Archives: Utilities

Law & Water — A Deep Dive Into Current US Water Utility Rate Case Issues

Source: David T. McGimpsey, Journal – American Water Works Association, Volume 109 Number 4, April 2017
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From the abstract:
Welcome to my first Law & Water column for Journal AWWA. This column addresses legal issues affecting water utilities. I live and work in the United States and rely on sources at or in working with regulatory commissions in the United States for their insights on novel issues and emerging trends. For matters outside the United States, I will tap into experts in those countries where pertinent developments are occurring.

The Water Infrastructure Finance and Innovation Act of 2014: Structure and Effects

Source: Sridhar Vedachalam, R. Richard Geddes, Journal – American Water Works Association, Volume 109 Number 4, April 2017

From the abstract:
Many US municipalities confront serious challenges due to aging water and wastewater infrastructure. Many systems require immediate repairs, upgrades, and replacement, but available funding is scarce. Readily available low-interest financing is of great help to such municipalities. The Water Infrastructure Finance and Innovation Act (WIFIA) approved by Congress in 2014 was a step in that direction. WIFIA is a five-year pilot program focused on supporting large-scale projects that may be under-served by existing state revolving funds (SRFs). The authors examine the structure and implementation of WIFIA and its impact on existing financing mechanisms. The cost of debt service in four representative communities in New York was compared under WIFIA, SRFs, and tax-exempt municipal bonds. Although WIFIA financing offered the lowest debt service cost, savings from WIFIA depended on the spread between US Treasury rates and borrowing rates of the SRF-administering agency.

Crisis in Flint Underscores a National Drinking Water Quality Problem

Source: Pam Hunter McFarland and Mike Anderson, Engineering News Record, Vol. 277 no. 11, October 12, 2016

….In many ways, the situation in Flint is unique. A state-appointed emergency manager in 2014 made a unilateral decision to switch the city’s drinking-water supply from Lake Huron, which provides Detroit’s water supply, to the polluted Flint River; then the city failed to ensure that proper corrosion controls were applied to prevent lead from leaching into the water. A few months later, citizens began complaining of vomiting, rashes and hair loss. A U.S. Justice Dept. probe is underway, and criminal charges have been filed against multiple parties, including the city’s former water supervisor.

In other ways, Flint is emblematic of a larger problem: Many cities across the country, particularly Rust Belt cities with older networks of drinking-water pipes and service lines, could be facing similar scenarios with not only lead but also other organic contaminants, such as perchlorate—a component of rocket fuel—and Legionella bacteria…..

Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues

Source: Mary Tiemann, Congressional Research Service (CRS), CRS Report, RS22037, November 8, 2016

The Safe Drinking Water Act (SDWA) is the federal authority for regulating contaminants in public water supplies. It includes the Drinking Water State Revolving Fund (DWSRF) program, established in 1996 to help public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to meet the SDWA’s health objectives. Under this program, states receive annual capitalization grants to provide financial assistance (primarily subsidized loans) to public water systems for drinking water projects and other specified activities. Between FY1997 and FY2015, Congress had appropriated approximately $20 billion, and more than 12,400 projects had received assistance through the program.

The latest Environmental Protection Agency (EPA) survey of capital improvement needs indicates that public water systems need to invest $384.2 billion on infrastructure improvements over 20 years to ensure the provision of safe tap water. EPA reports that, although all of the identified projects promote the public health objectives of the SDWA, just $42.0 billion (10.9%) of reported needs are attributable to SDWA compliance. A study by the American Water Works Association projects that restoring aging infrastructure and expanding water systems to keep up with population growth would require a nationwide investment of at least $1 trillion through 2035……

Water and Taxes

Source: Dave Owen, University of California – Hastings College of the Law, UC Hastings Research Paper No. 214, September 2, 2016

From the abstract:
This article considers how water consumption in the United States is taxed, and how it should be taxed. It reviews the few federal and state tax code provisions that directly target water use and the somewhat larger number of provisions with indirect implications for water policy. It also draws upon existing literature on tax policy, water law, and water economics to evaluate whether taxation of water consumption makes sense.

That analysis leads to two key conclusions. First, although provisions of tax law affect water use, and although some provisions undercut key policy goals of water law, they do so only to a modest extent. The intersections between the two fields are limited and largely inadvertent. Second, the interconnections between the fields should be stronger; water use should be taxed. The reasons are similar to commonly-cited justifications for carbon taxes and other so-called Pigouvian taxes: taxation would encourage more efficient water consumption, decreasing the negative environmental and energy consequences of water overuse and alleviating conflict among competing users. Taxation also would raise revenue, which could fund badly-needed water infrastructure and governance or reduce the need to tax more socially desirable activities.

Let Justice Roll Down: A Case Study of the Infrastructure for Water Equality and Affordability

Source: Martha F. Davis, Georgetown Journal on Poverty Law & Policy, Vol. 23 no. 3, 2016

From the abstract:     
In the absence of a fundamental right to a basic level of drinking water and sanitation in the United States, this article examines the ways in which federal and local civil rights laws provide an alternative legal infrastructure to ensure baseline water and sanitation equality. The article focuses on a particular jurisdiction, Washington, D.C. However, the framework analyzed has direct relevance to other subnational settings, since many anti-discrimination laws are federal and all share common themes across jurisdictions. Part I sets out background information on the delivery and affordability of residential water in Washington, D.C., describing a set of laws, regulations, and challenges that are similar to other localities around the country. Part II sets out the relevant civil rights laws – including federal constitutional law, federal statutory, and local legal theories – and how they might apply to a hypothetical instance of water inequality in Washington, D.C. arising from water unaffordability. Special attention is paid to the issue of discriminatory intent, a prerequisite to many civil rights claims. Part III summarizes the potential strengths and shortcomings of current antidiscrimination law as it applies to water and sanitation inequality, and identifies promising avenues for legal action. This section also describes several domestic initiatives to create a broader set of rights to augment and strengthen the existing legal infrastructure protecting water and sanitation access

Utilities Pay Up

Source: Sarah Anderson, Janet Redman, and Scott Klinger, Institute for Policy Studies (IPS), July 2016

From the summary:
How ending tax dodging by America’s electric utilities can help fund a job-creating, clean energy transition. … As this report documents, our nation’s utilities companies have become expert tax dodgers at the federal and state levels. Meanwhile, utilities collect taxes at the full rate from customers. This means customers are paying twice — once as ratepayers through the taxes in their monthly utilities bills and a second time as taxpayers when they have to make up for public service funding gaps because utilities are not paying their fair share of taxes. While the Clean Power Plan remains tied up in the courts, climate threats compel us to find ways to reduce carbon emissions quickly. One strategy policymakers should consider is denying utilities costly and ineffective tax breaks, with revenue invested in demand-side energy efficiency programs that create good jobs and reduce energy bills for low-income families. This report calculates how much additional revenue would be available for investment in energy efficiency if utilities paid their fair share of taxes….

Key Findings:
Utilities Are Even Better at Tax-Dodging than Multinationals
– The utilities industry pays the lowest effective federal tax rate of any business sector — more than half of profitable publicly held utilities companies paid no federal income taxes in 2015.
– Southern Company, a fierce Clean Power Plan opponent, is one of the worst offenders, reaping in $210 million in federal and state tax refunds in 2015.
– Special tax rules allow utilities to write off the cost of their investments faster than the wear out, giving them billions in benefits.
Potential Revenue if Utilities Were Taxed Fairly
– If the 40 profitable utilities in 2015 paid the average rate of taxes that retailers paid at the federal and state levels, there would have been more than $14 billion in additional revenue.
Energy Efficiency Costs That Could Be Covered By Fairly Taxing Utilities
– The $14 billion in extra revenue that could have been generated through fair taxation is nearly double the amount state governments and utilities spent on energy efficiency in 2015  — enough to create more than 88,000 energy efficiency jobs, or weatherize homes for up to 3 million low-income families.

A National Water Crisis

Source: Henry Cisneros, U.S. News and World Report, June 29, 2016

Fixing the water infrastructure is one of the greatest challenges of our time. ….

….As Flint has taught us, neglecting our water infrastructure can present real and immediate danger. According to the American Water Works Association, there are 6 million lead lines in American water systems today. Approximately 7 percent of homes connected to community water systems have a lead service line and up to 22 million Americans are served by lead lines.

There are three broad questions that ought to be addressed:
– What is the extent of the danger associated with water systems in terms of linear miles?
– What is the cost of fixing them to ameliorate the immediate danger?
– What are the options for solutions?….