CENTER FOR URBAN POLICY AND THE ENVIRONMENT - NAWC

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Indiana University + School of Public & Environmental AffairsCenter for Urban Policy & the Environment1996 NAWC WATER POLICY FORUMEXECUTIVE SUMMARYSeptember 22, 1996 (Sunday)Welcome and Introduction of the Forum ParticipantsMr. Ron DunganRemarks and OverviewMr. Ronald DunganCommissioner Diane KieslingMr. Paul ForanRoundtable Discussion (All Participants)September 23, 1996 (Monday)The first full day of the Water Policy Forum was devoted entirely to a relativelyunstructured and wide-ranging discussion of issues affecting the public utility industries ingeneral, the water industry in particular, and the future of economic regulation by the statepublic utility commissions. Forum participants were encouraged to explore any and all issuesof concern and express alternative viewpoints. The result was a lively and thoughtfuldiscussion that extended well beyond its scheduled timeframe.Discussion Points• The major characteristics and trends in the water industry, inCluding capital investmentlevels, operating costs, demand factors, revenues, and rates.• Unique characteristics of water service and the water industry compared to other utilityservices and industries.• Differences between publicly and privately owned water utilities.• The major characteristics of the water industry in Great Britain, including regionalizationand nationalization in 1973, privatization in 1989, and the implementation of price-capregulation.• The British approach to quality and performance issues.• Potential competition in the water industry with respect to common carriage (that is,"water wheeling"), acquisitions, contracts for operations, and contestable markets.• Trends in regulation and deregulation in the various states and possible implications for thewater industry.iii
Indiana University + School of Public & Environmental AffairsCenter for Urban Policy & the Environment• Trends in water demand and pricing, and implications of the rise in real water prices (thatis, increases that exceed the rate of inflation).• The specific cost pressures on the water utility industry.• Issues related to competition in the utility sectors, such as consumer choice and utilityincentives.• Incentives for water utilities to hold costs down and perform efficiently.• Whether the U.S. water industry could achieve significant economies of scale and scopethrough consolidation or regionalization (not necessarily with physical interconnection).• The continuing viability problems of isolated small water systems, and the role of largerutilities addressing these problems.• The limitations of mandatory or unfriendly takeovers of small water systems.• The need for and appropriateness of incentives for consolidation (such as acquisitionincentives, single-tariff pricing, and return-on-equity adjustments).• The role of public policy and regulatory policy with respect to structural change in thewater industry, including consolidation and privatization.• The value of water in comparison to other consumer goods and the importance ofeducating customers about water's value.• How cost allocation and rate design for water usually does not consider health and safetyissues (particularly, fire protection), even though these issues drive water utilityspecifications and costs more than water demand.• Reasons for customer frustration with water utilities and rate increases in light of thecommon view that water should be "free."• The impacts of structural and regulatory change on water customers.• Whether the regulatory compact for the water industry was adequate and whether a newmodel was needed.• The need for flexibility and experimentation in developing regulatory alternatives.iv
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CENTER FOR URBAN POLICY AND THE ENVIRONMENT - NAWC

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