The Economic Importance of Your Utility — What Customers Need to Know

Water and wastewater utilities provide infrastructure and services so fundamental that modern cities could not exist without them. Truly rural communities can thrive without centralized water and sewer services, but the human densities required for modern civilization are not sustainable, or even attainable, in their absence. Life changing at a global scale, and fundamental to economic prosperity throughout the globe, yet the water industry is not commonly recognized as providing this level of value, or even this kind of value. We are in serious need of an image makeover! Part of the problem is that we just don't talk about the importance of our industry to the public. And part of that problem is that most utilities don't have a very good idea of how to express the economic value they create, even in water industry settings. This two-part presentation will introduce non-economists to economic modeling techniques and provide guidance and encouragement to utility professionals seeking to communicate the economic importance of their utilities to the business community and public. In part one, we will discuss regional economic analyses and share a little bit about different approaches to economic modeling. We will start with Input-Output models as they are the most commonly used approach for regional economic impact analyses. While I-O models are commonly used for assessing the economic impacts of new activity on a regional economy, there are certain limitations to these models, and the multipliers used. The outputs can be helpful, but they also can suffer from: - Generic labor demand functions, - An inability to adjust to reflect the dynamics of large and long-term projects, - A failure to recognize changes in markets, particularly labor markets, such that cannibalization of existing industry production and employment is often ignored, and - The multipliers can be limited by the degree of aggregation in the base economic data and fail to recognize local dynamics. We will explain these limitations, as well as the appropriate role for I-O models, and outline conditions under which a utility might seek to use a Computational General Equilibrium model. General Equilibrium models allow the creation of equations to model supply and demand dynamics and equilibriums throughout the economy that can respond in a more nuanced way to exogenous shocks, such as a typical 'new project'. These models do a better job of recognizing market clearing processes, and as a result, provide much more customized estimates of the economic impacts of a project or development scenario. These models are designed to capture substitution possibilities between production, consumption and trade; interactions between economic sectors; and interactions between a policy shock and pre-existing distortions, such as taxes. The point is not that utilities necessarily need to employ staff economists or do economic modeling. But it is important for utilities in some circumstances know that they have options beyond the simple models routinely used in economic development conversations, and that these options could result in more informed and more nuanced understanding of their economic role and importance. Part two provides a chance for the audience to explore communication approaches and venues chosen to help reach multiple touch points in the community, and to see examples of different communication techniques relevant to this topic. Part of the reason that the business community so often appears indifferent to the water industry is that we don't work terribly hard to share our story with them. The exceptions generally relate to pretreatment professionals who often have strong contacts within the relevant industrial sectors, but most broader, business-oriented gatherings occur without the involvement of the water industry. We suggest taking a page from the electric utility industry's playbook from years ago, and making it our responsibility to share our message in venues where businesspeople are already gathering. Similarly, if we want water utilities to be better understood, we need to communicate in ways that non-water professionals can understand. - The water industry's impact on direct job creation through construction projects is a compelling story; - our role in supporting water-intensive industries may be obvious to us, but it is not likely to be obvious to people working in other sectors; - the necessity of our industry for the maintenance of public health may be recognized by medical professionals, but concept of valuing that service economically is essentially unheard-of; and - the economic value of environmental protection is known in academia, but it is likely a new idea to your customers, and a potentially exciting and motivating idea to schoolchildren. Our industry has a compelling story, we just need to share it more actively, and quite often with more enthusiasm. We will provide examples of these types of communication and discuss the role of this type of information in a broader information management campaign.