As water usage drops, the bills are increasing

PORTLAND, Maine - The grim economy is hitting some consumers in the wallet in yet another way: their water bills.

Many water utilities, including two large ones in the Philadelphia area, are raising rates because water use is down, in part because manufacturers have closed or are cutting back, tourism has fallen, and the real-estate market is in the doldrums. Cold and wet weather also has hurt.

Water sales for the Kennebunk, Kennebunkport & Wells Water District in Maine fell 11 percent last year, to 1995 levels. The No. 1 reason is the sour economy, said superintendent Norm Labbe.

One of its largest customers, a catalog printer, shut its doors last year, putting 374 people out of work. Tourism also has been down - meaning fewer tourists are taking showers and flushing toilets in the motels in the region's beachside communities.

"This is happening most everywhere. It's a regional thing, it's a national thing," Labbe said. "Many, many [water utilities] around the country are seeing decreases in revenues."

American Water Works Co. in Voorhees said its volume of water sold fell last year compared with 2008. It made up the shortfall through what it called "rate awards," or higher rates.

A recent study by the Water Research Foundation, a Denver nonprofit, on the recession's effect on water utilities found that home foreclosures and business contractions have reduced water demand in many areas. Cities with high unemployment also have seen reduced water consumption as people move away in search of jobs, said Rob Renner, the foundation's executive director.

Water companies for the most part get their money from customers. When water consumption goes up, revenue goes up - but when consumption falls, so does revenue.

Water companies often raise rates to pay for high-priced capital expenditures, such as new water lines or treatment plant expansions. But they also have to hike rates when water use goes down to bring in enough money to pay their basic operating costs.

Water consumption also can be influenced by the weather. In the Northeast, usage declined last summer in part because homeowners watered their lawns less with the rainy weather. The epic drought that gripped the Southeast in recent years also resulted in falling consumption as people were ordered to conserve water.

The economy is the latest factor.

Even after cutting costs 10 percent and laying off nine employees, the water utility in Mount Pleasant, S.C., recently raised rates 9 percent after its customer base and water sales tumbled. That amounts to about $50 a year for the average homeowner.

"We attribute our revenue decline to unoccupied homes due to foreclosures, and commercial businesses just going out of business," said Clay Duffie, Mount Pleasant Waterworks' general manager.

At the same time, impact fees the utility collects from developers have dried up, from as much as $6 million a few years ago to $500,000 this fiscal year, Duffie said.

In New Jersey, the Sayreville water department recently raised rates 13 percent. A big reason: The department's biggest customer, a steel mill, suspended operations for several months because of lower demand for its products.

As a result, the water department's revenue fell $350,000 to $400,000, said Jeff Bertrand, the town's business administrator.

"That was because of the economy," Bertrand said. "Nobody was buying the rebar because nobody was doing construction."

Two large local water utilities, while reporting higher revenue in their 2009 fourth-quarter results, also mentioned slack demand.

American Water Works Co. Inc., Voorhees: Water volume sold in the 2009 fourth quarter was down 6 percent from the 2008 quarter. The company cited "challenges from the weather and the economy." Higher rates offset the lower demand.

Aqua America Inc., Bryn Mawr: Higher rates and acquisition of 18 water systems in 2009 enabled the company to boost total revenue. But "organic growth continued to lag historical levels due to the housing slowdown," it said, referring to the systems it already owned. It also blamed the cold, wet weather.

SOURCE: The companies

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