Water rates set to go up, but infrastructure investment falling behind

Lack of water infrastructure investment in the Kanawha Valley is a serious problem (see recent news articles here, here and here).

In the past couple decades, WV American Water has made some questionable decisions about its infrastructure investment. WV American Water made a business decision in the 1980s to focus on expanding its system, buying out smaller PSDs and centralizing its Kanawha Valley holdings onto one water treatment plant. According to annual reports submitted by WV American Water to the Public Service Commission, the dollar value of the infrastrucutre on WV American Water’s books quadrupled from 1991 to 2000. Meanwhile, its customer base went up only 30%. This meant that rates had to go up to pay for the expanded infrastructure. In short, the strategy of expanding a water system in a rural area with declining population has not worked out very well.

And it has meant that the company has not invested enough in maintaining the existing infrastructure. This graph from WV American Water’s testimony in its current rate case shows how far behind the company really is:

main_replacement (2)

At the current rate, it would take nearly 400 years to replace all of the company’s pipes. This is hardly sustainable.

WV American Water says that an additional $12.3 million a year – not included in their proposed rate hike – would be needed to get its existing infrastructure down to a 100-year replacement cycle. Clearly, despite the proposed 30% rate hike, the infrastructure replacement problem doesn’t seem to be getting any better.

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