The Water Business: Second Edition

In the last two decades, the environment in which water suppliers operate has changed dramatically. The Southwest endured the longest drought in centuries. São Paulo, Latin America’s largest city, almost ran out of water due to drought. A hurricane knocked out the water system in Asheville, NC. And, Thames Water, the largest water and wastewater utility in Great Britain, teetered on the brink of bankruptcy. Global climate change not only produces severe storms, droughts and deluges but also puts stress on water operators. The water and wastewater industry will have to overcome more severe challenges, some due to past industry inaction, but more due to natural and economic conditions over which it has no control. As Dorothy put it, “Toto, I’ve a feeling we’re not in Kansas anymore.” The book’s title tells it all: The Water Business, a business being (more or less) an organization (government or private) that produces a product or service which it sells to customers. It is a relatively short handbook or primer on how the industry is organized, how it acquires and treats and sells the product, the natural resources it uses, its customers, how it prices the product, how it raises money, social consequences of water policy and the new landscape that will make the business more exciting and challenging than it has been in two centuries. Details and Features: AUTHOR: LEONARD HYMAN ISBN: 979-8-3507-3059-3 7 x 10 inches Paperback 334 pages 2nd ed. (c) 2026 Table of Contents Preface xii PART ONE: THE BIG PICTURE 1 Chapter 1 The Big Picture 3 PART TWO: WATER BASICS 13 Chapter 2 Definitions 15 Chapter 3 Organization, Regulation and Finance 28 PART THREE: OPERATIONS 37 Chapter 4 Water Operations 39 Chapter 5 Wastewater Operations 51 Chapter 6 Supply, Demand and Suppliers 57 PART FOUR: DEVELOPMENT AND STRUCTURE 75 Chapter 7 The Old World 77 Chapter 8 The Eastern United States 83 Chapter 9 Western Water 98 Chapter 10 Private Water Companies 118 Chapter 11 Water and Health 127 Chapter 12 Federal Regulation 136 PART FIVE: REGULATION, PRICING AND ECONOMICS 147 Chapter 13 Public Utility Regulation 149 Chapter 14 The Ratemaking Process 154 Chapter 15 Rate of Return 167 Chapter 16 Water Economics and Tariffs 181 Chapter 17 Water Rights and WaterTrading 198 PART SIX: CORPORATE ORGANIZATION, FINANCING AND ACCOUNTING 209 Chapter 18 Basics of Organization and Finance 211 Chapter 19 Income Statement 224 Chapter 20 Balance Sheet 232 Chapter 21 Cash Flows 242 Chapter 22 Financial Analysis of Debt 252 Chapter 23 Financial Analysis of Common Stock 262 Chapter 24 Assessing Results 283 PART SEVEN: MOVING FORWARD 293 Chapter 25 Form Follows Function 295 Chapter 26 Challenges and Opportunities 311 Chapter 27 The Road Ahead 320 Index 326 List of Tables 1-1. Monthly expenditures for average family. 9 3-1. Revenue requirements example ($). 34 4-1. Water company price and cost comparisons (2020). 49 6-1. World water inventory (%) 57 6-2. World fresh water inventory (excluding ice) (km3 and %). 58 6-3. Estimated residential water use per day (gallons per capita). 61 6-4. Average daily water use in the United States (billions of gallons). 62 6-5. Average daily use of groundwater in the United States (billions of gallons). 63 6-6. Irrigated acreage and water use per acre. 64 6-7. Water use per capital (gallons per day). 65 6-8. Water usage and economic indicators (1900-2020). 67 6-9. Size and number of water systems. 68 6-10. Bottled water market in the U.S.A. 70 8-1. Water supply in Philadelphia. 90 10-1. Large private water companies (2020). 124 11-1. Water-related diseases. 133 11-2. Climate impact on water-related diseases. 134 14-1. Water utility assets at end of year. 156 14-2. Liabilities and capital at year end. 156 14-3. Revenues and expenses for year. 157 14-4. Cost of capital calculation (%). 158 14-5. Construction work in progress not in rate base. 162 14-6. Construction work in progress in rate base. 163 15-1. Similar companies with different finances. 168 15-2. Hypothetical returns. 170 15-3. Average return on rate base and equity allowed in rate cases and corporate bond yields (%) by five year periods. 177 16-1. Costs of production for competitive firm ($). 186 16-2. Cost of production for water supplier ($). 189 16-3. Selected unmetered water and wastewater tariffs in New York City. 195 16-4. Selected water billing rates in San Diego. 196 16-5. Sewer billing rates in San Diego. 197 17-1. Primary water trading regions in the West. 202 18-1. Universal Water in normal and recessionary conditions. 217 18-2. Cash flows for A and B ($). 221 19-1. Consolidated statement of income for investor-owned utility. 227 19-2. Statement of revenue and expense for government-owned utility. 230 20-1. Investor-owned water company balance sheet. 234 20-2. Government-owned water utility balance sheet. 238 21-1. Cash flow statement for investor-owned utility. 245 21-2. Government-owned utility cash flow statement. 248 22-1. Financial and operating data for debt analysis of hypothetical municipal and investor-owned water utilities ($ millions unless otherwise stated). 255 22-2. Replace old plant with new (current $). 259 22-3. Add new plant to old (current $). 260 23-1. Operational and financial data. 266 23-2. Operations analysis. 268 23-3. Sources of funds used in construction. 274 24-1. Monthly water and wastewater bills for 2023. 285 24-2. Municipal water and wastewater utilities (median values). 287 24-3. Yields, ratios and returns (1965-1999) (%). 288 24-4. Yields, ratios and returns (2000-2023) (%). 289 25-1. Breaking up the industry by service offerings. 298 26-1. Challenges to the water and wastewater industries. 312 26-2. Opportunities (as seen by Mueller Water Products and Xylem). 317 List of Figures 1-1. Capital spending for water and wastewater (millions of 1967 dollars) by five year periods (1916-1920 to 2016-20). 5 1-2. Projected precipitation patterns due to climate change. 6 1-3. Malware infections (millions). 8 1-4. Real water prices and family income in the USA (1985=100). 10 2-1. The hydrological cycle. 19 2-2. Aquifers in the United States. 20 2-3. The Ogallala Aquifer. 21 2-4. Watershed. 22 2-5. Watersheds of North America. 23 2-6. Wells. 25 3-1. Water and wastewater (sewage) systems. 29 4-1. Water treatment. 42 4-2. Water pressure. 44 4-3. Simple waters system. 46 4-5. Denver water system. 47 4-6. Annual annual water and wastewater bill for residential customers in 30 cities by quintile (2019) ($). 50 5-1. Wastewater (sewer) system. 53 5-2. Seven steps for sewage treatment. 54 5-3. Primary- Secondary-Tertiary. 55 6-1. World hydrological cycle (103 km3 per year). 59 6-2. Annual precipitation in the Continental United States (inches). 60 6-3. Water usage, consumptive use and real gross domestic product (1900=100). 66 8-1. New York City Water System. 85 9-1. The Hundredth Meridian. 99 9-2. Five weather regions in the Continental United States. 101 9-3. Southern California water. 108 10-1. Water industry consolidation. 126 15-1. Market risk vs actual market return (example). 174 15-2. Allowed returns vs interest rates (%). 176 15-3. Average allowed rates of return on rate base and equity and corporate bond yields by five year periods (%). 178 16-1. Supply and demand diagram. 183 16-2. Water supply and demand. 184 16-3. Fixed and variable costs ($). 187 16-4. Variable and marginal costs per unit produced ($). 187 16-5. Optimal production point. 188 16-6. Fixed and variable costs or hypothetical water supplier ($). 190 16-7. Water supplier average and marginal cost and price per unit ($). 191 16-8. Hourly water usage example (gallons). 192 16-9. Use of reservoir during off peak and on peak periods. 194 17-1. Most active water trading regions in West. 203 17-2. California water trade prices ($/acre foot). 204 18-1. Universal Water. 215 23-1. York Water 2022 Annual Report. 269 24-1. Water costs for households in USA (1965=100). 284 25-1. Estimated price of water by ownership of utility and population of service area (2023 $). 301 25-2. Price and operating costs for publicly owned water suppliers by size of population served (2023 $/ thousand gallons). 305