If water costs 65 cents a month, why is your AWWU bill over $90?

Sean DooganAlaska Dispatch News

Unlike many places in the Lower 48, water is plentiful in Alaska's largest city. It comes from Eklutna Lake -- an 8-mile-long, 200-foot-deep reservoir nestled in the Chugach Mountains, about 32 miles northwest of Anchorage. The lake is fed by a glacier and should provide enough water for the city for hundreds of years to come. And as a bonus, it's tasty: Anchorage has been honored for having the best tasting water in the USA City Water Taste Test by the U.S. Conference of Mayors.

Eklutna water is also used by several Southcentral utilities to generate power at the Eklutna Lake Hydroelectric station. The Anchorage Water and Wastewater Utility pays Anchorage electric utility Municipal Light and Power for the amount of electricity the water would have made if it hadn't been diverted to AWWU. According to the Environmental Protection Agency, the average family of four in the U.S. uses about 400 gallons of water per day. But in Anchorage, water is so plentiful that the actual average cost of the water used by a local household is just 65 cents a month. Even though both utilities are owned by the Municipality of Anchorage, they must pay each other for services to keep the books straight.

CAPITAL IMPROVEMENTS

If water is so cheap in Anchorage, why do most AWWU customers pay a flat rate of $50.98 per month for water and $41.54 for wastewater services, regardless of whether they live in a two-room condo or a 15-bedroom mansion?

The simple answer -- and very little is actually simple when it comes to water and wastewater rates -- is that Anchorage is an expensive place to install, repair and replace the infrastructure needed to make water flow from the tap when you turn it on. Most of what residents pay goes toward capital improvements. The reason AWWU does not meter individual homes, as many U.S. metropolitan markets do, is because the cost of the water is almost nothing when compared to the cost of maintaining the water system. In Anchorage, that system, should it have to be completely replaced, is worth about $8 billion, according to AWWU General Manager Brett Jokela. Of course, the utility does not replace every water and sewer line each year, instead fixing old lines and replacing outdated or malfunctioning equipment. That cost varies year to year but averages about $60 million-$80 million per year, and that's where the bulk of your monthly payment goes.

"So whether you use one gallon, 50 gallons, or 100 gallons per day, the cost to provide the water doesn't change very much," Jokela said. "In fact, it's almost no change."

That's why AWWU charges the same flat rate for a large home as it does for a small one. It costs the utility about the same to hook either residence into the water system. The utility has looked into what it would cost to install meters on every home it serves, with an estimated price tag of about $50 million. AWWU said that is an unacceptable expense -- especially considering that the cost of water used adds up to less than 1 percent of the average bill. So AWWU continues to charge a flat rate for residences. There's a different fee structure for businesses.

Because Anchorage is a northern city, water and sewer lines must be buried deep, usually about 10 feet down. That increases the cost of installation and repair when compared to the Lower 48. But when compared to the average annual income of its customers, AWWU's rates are actually lower than other comparable U.S. cities'. The total charge for AWWU customers for water and wastewater services is about 1.2 percent of the average income for a household in Anchorage. In the Interior community of Fairbanks -- 180 air miles north of Anchorage -- the cost is 3.4 percent of the average household's annual income. The EPA has set a suggested maximum charge for water and wastewater of about 4 percent of a household's median income in the area.

BILLS SOAR

At least one Anchorage homeowner said he's noticed his AWWU bill has soared by 50 percent since 2008. As a business owner, Brian Shoemaker said he can understand that costs increase but wondered why his water and wastewater billing rates doubled the rate of inflation over that period. Shoemaker said he doesn't believe the utility is gouging its customers but he wants AWWU to be more proactive about explaining its annual rate increases.

"I would encourage them to do a little bit of outreach to inform ratepayers of the reasons for the increase," Shoemaker said.

AWWU said its grants -- money it once received from a variety of local, state and federal sources -- have dried up, falling from about $12 million per year to zero by 2008. That, combined with the ongoing costs of keeping the system running, accounts for the rate increases, Jokela said.

Anchorage Assembly member Pete Petersen investigated AWWU's rate increase while a member of the Alaska Legislature in 2010. Once he saw the numbers, Petersen realized the rate increases were necessary. Petersen said many of the pipes and much of the equipment installed in Anchorage during the late 1970s and 1980s are past their service life and need replacement.

"Once we saw the information on the rate increases, we thought that we were fortunate that they (AWWU) were not raising the rates higher or faster," Petersen said.

Those rate increases are likely to continue. Jokela said that he expects AWWU customers to see an annual rate increase of between 4.5 percent and 6.5 percent. Two-thirds of the cost for capital improvements to the AWWU system are paid for by bonds and loans secured by the utility for the work.

The remaining third comes from the utility's net profit, which comes to an average of about $13 per household per month. Along with loans, that money is used to repair and replace equipment.

AWWU said it is sensitive to the continued price increases, and has slimmed its operating costs, and is working with new technology to avoid problems. That includes video monitoring of pipes and electromagnetic testing of their thickness.

"We are working hard to ensure that we are getting the biggest bang for the buck," Jokela said.

Contact Sean Doogan at sean@alaskadispatch.com.

 


By SEAN DOOGAN
Alaska Dispatch