EPA Administrator Lisa Jackson has agreed to review its regulations that would require New York City to install a 90-acre cover over one of its reservoirs at a cost of $1.6 billion. Mayor Bloomberg complained about the unfunded mandate and Jackson promptly responded by sending a letter to Senator Charles Schumer saying she agreed that “we should and can find cost-effective ways of achieving these public health protections.” (Wall Street Journal reporting). The Mayor notes that the City is already keeping its water clean by all EPA standards and the proposed reservoir cover is unnecessary. Since 2002, water rates in NYC have increased 134% in part because of $15 billion in costs to meet regulatory mandates, the reservoir cover being just the latest.
With all of its political power, it’s easy to see why NYC gets the instant attention of the EPA administrator if not the President himself. Smaller communities probably wouldn’t fare so well, however. Costs for meeting regulatory requirements are part of being in the water and wastewater business. Many regulations have been beneficial in the past as their implementation and enforcement resulted in cleaner waterways and had direct impacts on improving public health. As regulatory activity continues, however, many mayors of many cities and towns complain that newer regulations come at high costs with little or no proven or provable health benefits.
There is a time when regulations reach a point of diminishing returns where each dollar invested in meeting the new regulation results in fewer and fewer benefits. The cost implementing newer regulations is also increasing due to the technology and energy needs to provide treatment for substances that are only now being measured (because our technology was unable to so in the past) in concentrations of parts per billion. So, in many cases, the costs of implementing regulations is going up while the proven and provable benefits decrease.
No wonder then that regulatory compliance is one of the major cost drivers for all water and wastewater utilities in the US. Meeting regulatory mandates usually means, as it did for NYC, the addition of some expensive new asset – in their case a $1.6 billion reservoir cover. Large capital costs like this require financing, that means borrowing more money, and increasing customer’s rates to make the loan payments. The US government does not generally provide grants (anymore) to pay for the cost of meeting new regulations. Therefore, regulatory mandates have a direct impact on everyone by way of their water and sewer bills, whether you live in New York City, or not.