Financial Implications of Reclaimed Water

Implementation of reclaimed water systems has become increasingly popular over the past 20 years, especially in the Nation's southern rim, which has been challenged by growth, and in arid regions, with limited water supply. The environmental benefits of reclaimed water are also cited as a justification for the need for reclaimed water. However in many instances, the unique characteristics of reclaimed water make the financial and economic implications difficult for regulators and utilities to overcome.The presentation proposed herein will provide a demonstration of the use of interactive financial modeling incorporated with reclaimed water scenarios. The example will consider the addition of reclaimed water to two different utilities, provide a graphical representation of the operational effects, and provide an output of the financial implications resulting from operational changes. The presentation will include use of an interactive model such that different scenarios may be evaluated as part of the presentation.The considerations below provide a summary of the effect of reclaimed water on a utility system and will comprise the key considerations of this presentation:Reclaimed water is acceptable for irrigation but is not suitable as a substitute for other potable water uses. As such, the perceived value of reclaimed water is less than that of potable water, resulting in a ceiling for reclaimed water rates (reclaimed water rates must be less than potable water rates), regardless of costs.The costs of constructing a reclaimed transmission and distribution system often are greater than the cost of potable water systems on a per unit basis. This results from higher cost of construction today, versus historic cost of existing potable systems. The costs for reclaimed water on a per unit basis are greater as new reclaimed systems serve a smaller customer base than potable water.Reclaimed water is a substitute for using potable water for irrigation. The substitute of reclaimed water reduces demand for potable water, thereby reducing potable water revenue, while potable water costs (fixed in nature) remain stable.The use of reclaimed water reduces demand on potable water supply. The cost of reclaimed water can be offset by reducing the need for additional potable water capacity. In areas where source water is limited or treatment is expensive this cost reduction can be significant.Reclaimed water is a source of wastewater effluent disposal. The use of reclaimed water may offset the cost of implementing other methods of effluent disposal.