a huge waste of money forced on us by the federal government. it will more then DOUBLE the cost of water for some rural users.
Few water companies seek loans
Mary Jo Pitzl The Arizona Republic Dec. 10, 2005 12:00 AM
One quarter of Arizona's water systems do not meet a new health standard for arsenic, adding up to millions of dollars in costs to comply, an Arizona Republic analysis has found.
And even with the deadline looming next month, only a fraction of the 260 affected systems appears to be making the investments needed to bring their drinking water in line with the new federal standard.
At stake are the quality of drinking water across Arizona, and ultimately, the ability of these systems to keep operating. The arsenic problems are found primarily in rural areas served by small water companies and in pockets of the urban fringe around Phoenix and Tucson.
Although the stricter arsenic standard was announced in 2001, few companies have applied for low-cost loans from the state, and fewer still have sought approval from state regulators to raise their rates to cover the cost of compliance.
State officials say they don't know why, and they worry there could be problems from smaller water systems when the standard is enforced. Under federal law, companies that don't comply will not be allowed to keep operating. Bob Prince has his own explanation for the apparent inaction of many of his fellow water-system operators: Fear and denial.
"There's a lot sitting out there, saying this (the new standard) is absurd," said Prince, president of Valley Utilities Water Co., which serves more than 1,300 accounts in a county island near Litchfield Park.
"They're in the fetal position, sucking their thumbs. I think a lot of keys will land on state agency desks and the owners will say, 'Here, you run it.' "
Drinking water is required to have no more than 10 parts per billion of arsenic as of Jan. 23, although the Arizona Department of Environmental Quality has created an enforcement plan that will push off the day of reckoning until December 2007 for some companies.
The new standard is five times stricter than the current limit of 50 ppb. It's been vexing to many Western water providers because arsenic occurs naturally in the ground, and the West is home to generally higher arsenic deposits than other places in the United States.
But the U.S. Environmental Protection Agency argues that a tighter standard is needed to protect health. The new level was proposed by the Clinton administration and upheld by the Bush administration, relying on studies from the National Academy of Sciences that found that prolonged exposure to arsenic in drinking water can cause bladder and lung cancer.
For Prince, the cost of toeing the new line adds up to $1.9 million. He's building two treatment plants to treat the groundwater that he pumps from his West Valley wells.
"This is a heavy load, not only to us, but to our customers," he said.
Adding to the bill
Customers could pay as much as $28 more a month on their water bills to cover the improvements, depending on the size of their water meter and their water usage, Prince said.
The financial bite is eased somewhat by growth: The company counts upward of 1,300 accounts today, but the expanding West Valley will add to the customer base, spreading out the ongoing costs of operating and maintaining the system.
The firm is adding an arsenic impact fee on each new water meter it installs. Prices vary with the size of the meter, from $1,100 for a five-eighths-inch meter, up to $44,000 for an industrial-size 6-inch meter.
Arsenic removal is proving to be costly and complicated.
For Arizona American Water Co., five of the water districts it operates in the state serve up water that does not meet the new health standard.
"In each of those districts we are building one or more facilities to treat the water," said Tom Broderick, manager of rates and regulatory affairs for Arizona American. "Multimillion-dollar facilities," he added.
For example, it's costing $20 million to build a treatment facility for the Paradise Valley Water Co. There, the water tested just 1 part per billion above the new standard, state water-quality records show.
Water rates for a typical customer could rise by $63 a month, from the current average of $25, according to the company's rate request before the Arizona Corporation Commission.
The firm's Havasu water district, which serves an unincorporated area outside of Lake Havasu City, has arsenic levels between 17 ppb and 24 ppb, state records show. It will cost $2 million to bring those levels below the new standard, Broderick said. Customers typically will pay an extra $18 a month in a two-phase rate hike.
"The cost to the individual customer is greater in the smaller communities, and that's what's disturbing to us," Broderick said.
Arizona American has received approval from the Corporation Commission to raise rates at three of the five districts to cover the costs of arsenic compliance. It's still working on plans for its two other districts.
Slow to make changes
Arizona American is one of a handful of companies that has come before the regulatory board for a rate hike. And that has officials nervous, wondering where the 260 companies are in their quest to reduce arsenic levels.
"It's been a mystery to us at WIFA," said Steve Owens, chairman of the Water Infrastructure Finance Authority and ADEQ director.
The authority issues low-cost loans to help water systems pay for capital improvements. So far, the agency's data show, only five systems have received arsenic-related loans, and one of those was for a project seven years ago, long before the new standard was contemplated.
Another five projects are awaiting an OK for financing or a loan closing, and 16 have applications pending.
But out of 260 companies with arsenic issues, that's merely 10 percent, far fewer than agency officials were bracing for.
"I've been saying that for two years: 'We're getting ready for a rush, we're getting ready for a rush,' " said Jay Spector, WIFA's executive director. "But the applications are not there."
Because it offers below-market rates, WIFA is viewed as the lender of choice, often the only lender, for water companies, especially the smaller ones.
Owens said the larger water companies, and the ones run by city governments, are in good shape to meet the 10 ppb standard.
"They have the rate base available to them to make the infrastructure adjustments," he said.
But that's not the case with many of the state's smaller water systems, where the customers may add up to only a few hundred accounts, or perhaps just several dozen.
To help keep costs down, the Arsenic Remediation Coalition is fine-tuning a proposal to get vendors to treat water for several dozen companies through a group purchase.
This would give the small companies the benefits of economy of scale, said Doug Nelson, manager of the coalition. The group represents several dozen water systems.
When that happens, and if the bid is attractive, Nelson predicts that many of the 260 systems will start moving toward compliance.
Even the most creative solutions might not be enough to help small firms such as the Wilhoit Water Co. in Yavapai County, where arsenic levels run from 170 ppb to 230 ppb, state data show. Company officials were not available to talk about how they are going to deal with the issue.
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