BEECHER - NAWC

Water ComparedIndustries ComparedElectric Utility Plant in Service (1996)Total productionplant ($309.8bil.)54%Intangible plantand other ($3.4bil)1%fluctuate by region and water availability.supplies.Totaldistributionplant ($163.3bil)29%Totaltransmissionplant ($65.5 bil.)12%Total generalplant ($25.0 bil)4%Water utilities demonstrate avery different pattern in termsof the relative investment inproduction versus distribution.Based on data for the systemsof the American Water W arksService Company, Inc.,production (source-of-supply)facilities account for onlyabout 5 percent of total plant;another 24 percent is neededfor treatment and pumping.Transmission and distributionaccount for the largest share(about 46 percent). Theseproportions, however,Source costs are higher in areas with limited waterThe trend in electric plant additions appears to indicate a decline in investments in productionfacilities, while additions to transmission and distribution facilities appear to be holdingsteady. In fact, a central issue to restructuring in the electricity industry, and to an extent intelecommunications as well, is stranded investment that no longer is economic in arestructured environment. 6Investment trends in thenatural gas sector reflecta restructured gasindustry, in whichutilities (namely, localgas distributioncompanies) are lessinvo I ved in theproduction and pipelinefunctions. Most waterindustries, by contrast,remain verticallyintegrated, withresponsibility for theentire delivery systemfromproduction throughdistribution.Water Utility Plant in Service:American Water Works Company, Inc. (1997)Transmissionand distribution($2,016 mil)46%Source ofsupply ($215mil)5%Treatment andpumping($1,053 mil.)24%Services,meters, and.- -hydrants ($758mil)structures andequipment($282 mil)7%18%6It is noteworthy that stranded investment is an after-the-fact restructuring issue in the telecommunicationsindustry, and clearly a before-the-fact restructuring issue in the electricity industry.NAWC 15 September 1998