2018 State of the Water Industry Report reveals long-term trends
March 28, 2018


This marks the 15th year AWWA has produced the annual State of the Water Industry Report, a deep dive into the issues facing the sector and a roadmap for water professionals as they navigate the challenges of the future.

Since the report began in 2004, more than 25,000 responses have illuminated the trends and concerns that impact the sector. The results of the 2018 survey are in and they reveal some surprises as well as familiar anxieties.

This year’s report shows we’re still having many of the same conversations as in 2004, particularly about aging infrastructure, financing for capital improvements, and long-term water supply availability . But it also takes a closer look at topics such as resource management, planning, data management, innovation, and – in an unprecedented year of hurricanes, floods, and fires -- emergency preparedness.

Among the highlights of the report, which will be available soon on AWWA's website:

  • Renewal and replacement of infrastructure and financing for capital improvements top the list of water industry concerns for the fourth year running. Rounding out the top five are long-term water supply availability, public understanding of the value of water systems and services, and public understanding of the value of water resources. In a similar vein, business factors – which includes financing for capital improvements -- as well as source water supply and water storage/distribution were among the top five concerns in 2004 .
  • Slightly more than 25 percent of respondents report their utilities are struggling to cover the full cost of providing services, an improvement over the 30 percent who reported difficulties last year. However, when looking five years into the future, 31 percent of respondents anticipate struggles.
  • The most dramatic year-to-year shift in concerns was in cybersecurity, which jumped from 26th in the rankings last year to 13th this year.
  • The perception of the current health of the industry has shown a small, but steady decline over the past 15 years. On a scale of 1 to 7 -- with 1 being not at all sound and 7 being very sound -- this year’s respondents reported that the water industry was “more sound than not” with a rating of 4.5, compared to 4.9 during the survey’s first year. Still, this year’s water professionals are an optimistic lot. The perceived soundness of the industry this year compared to last year ticked up slightly.
  • Water professionals are not as worried about their ability to comply with current and future regulations as many other issues. Even so, nonpoint source pollution is the top regulatory concern identified in 2018, followed by disinfection byproducts. The significant concern about nonpoint source pollution comes as Congress works on reauthorization of the Farm Bill, which provides funding for conservation practices on farmland in an effort to curb nutrient runoff, a form of nonpoint source pollution. AWWA has been working to include language in the bill that specifically encourages funding and partnerships for the protection of drinking water supplies.
  • 54 percent of responding utilities have emergency preparedness plans, and 47 percent have completed a vulnerability assessment in the last five years. Utility respondents are evenly divided on the inclusion of climate variability in risk management planning.

“So many catastrophic weather events occurred this past year, and I was incredibly encouraged to see how many utilities had emergency preparedness plans and had kept their vulnerability assessments updated,” said Dawn Flancher, author of the report and AWWA’s senior manager for technical & research.

Methodology 

In September 2017, email messages were sent to a wide range of water industry professionals, with a focus on AWWA members, inviting them to participate in the SOTWI survey. The survey coincided with the Atlantic hurricane seasons that saw widespread destruction throughout the Gulf Coast that resulted in activation of the Water/Wastewater Agency Response Network (WARN) in several states.

Despite all that, as well as ongoing wildfires in the west, 967 respondents from the United States, Canada, and Mexico took the time to respond to the survey. The largest respondent group by far was utility employees, followed by individual members and service providers.

Concerns and analysis

It’s all about the issues. Respondents ranked 30 challenges facing the water sector, with the top five remaining the same since 2014.

The report, which will be available soon on AWWA's website, also includes a detailed chart of the top 10 concerns facing water professionals over each of the past five years. This year, the sixth concern is watershed/source water protection, followed by aging workforce/anticipated retirements, public acceptance of future water and wastewater rate increases, emergency preparedness, and governing board acceptance of future water and wastewater rate increases. 

Back in 2004, just as this year, workforce issues and source water concerns also made the top 10.

Time has shown that some of the sector’s most pressing concerns are not so easily solved.

“The conversation is way bigger and more complicated than it used to be,” Flancher said. “So, we say, ‘Infrastructure is a problem.’ ‘Ok, buy a new one.’ ‘Well, we can’t afford it.’ ‘Okay, ask the government for the money.’ ‘Oh, the government doesn’t have money.’ Government says. ‘You have a rate structure, get it from your people.’ ‘Oh, well I used to have 2 million people in my city, but now I have far fewer because businesses shut down.’ ”

In 2004, while key concerns included business factors and source water supply, the top two issues were regulatory factors -- primarily compliance with the number of regulations -- and security. The latter focused on general security and terrorism, perhaps not surprising since the survey was taken less than three years after the 911 terrorist attacks.

Respondents back then said aging infrastructure was increasingly problematic. They indicated that while regulatory factors and security issues were most urgent, those issues were being adequately addressed and would decline in concern in the future.

As today's water professionals continue to grapple with the same nagging financing issues, there's a related positive note,

This year, 52 percent of respondents indicate their utility’s access to capital is as good or better that at any time in the last five years, compared to just 49 percent reporting the same optimism last year. Also, while financing for capital improvements ranks second among concerns again this year, 55 percent of respondents say it is critically important, compared to 59 percent last year.

Kurt Vause, chair of AWWA’s Water Utility Council, noted last year that the 2017 survey was conducted before Congress funded the Water Infrastructure Finance and Innovation Act -- WIFIA – which finances 49 percent of the costs of large water infrastructure projects. He speculated then that this year’s respondents might express less concern about access to capital.

“One year does not make a trend,” Vause said recently. “But these two results suggest we're moving in the right direction. The more evident opportunities like WIFIA become, utilities will understand they have more options. Combined with effective capital planning approaches leveraging good asset management practice, concerns about financing capital improvements should lessen.”

The issue that shows the greatest increase in concern from last year to this year is cybersecurity, as 40 percent rated it as "important" and 27 percent rated it "critically important." It rose from 26th in concern last year to 13th this year, likely due to the water sector's efforts to spread the word about the risks and train water professionals to manage them, said Kevin Morley, AWWA federal relations manager.

AWWA resources -- including the Process Control System Security Guidance for the Water Sector and the supporting Use-Case Tool -- have been recognized by the Water Sector Coordinating Council and the U.S. Environmental Protection Agency as the foundation of a voluntary, sector-specific approach for adopting the National Institute of Standards and Technology Cybersecurity Framework.

"We're talking about cybersecurity more," Morley said. "These survey results indicate a clear recognition of the risks -- and that is a good news story."

Another dramatic year-to-year shift was in water conservation/efficiencies, which dropped from a top 10 concern last year to number 22 this year. 

AWWA President Brenda Lennox said the steep decline in conservation concerns doesn’t indicate indifference. Rather, she said, it probably means respondents are more troubled by other issues, such as the aging workforce bubble and talent attraction and retention, which moved higher in the rankings this past year.

"Workforce planning issues are getting more and more apparent as people retire,” said Lennox, pictured at right. “There’s more of an awareness now that we are in the middle of it.”

Other environmental concerns show a dip in year-to-year rankings. Drought fell from 18th to 20th in concern, and groundwater management and overuse fell from 11th to 16th.

Business and innovation

Respondents also weighed in on the business of water. Results showed water professionals are not greatly concerned about current and/or future regulations and have made significant strides in offering bill pay assistance to low-income customers.

In addition, they “recognize the usefulness of plans and programs, are all-in with SCADA, but remain unconvinced about the long-term promises of information technology and big data,” according to the report.

Regarding assistance to low-income customers, 48 percent of respondents indicate their utilities provide some form of bill assistance to low-income customers. This is up from 39 percent last year.

Among large and very large utilities, 60 percent have low-income programs.

Innovation is this year’s snapshot, revealing that to be innovative requires not only a supportive culture but also adequate funding. The survey asked, “In your opinion, what are the barriers to innovation at your utility?”

More than 60 percent name economics as the biggest barrier, followed by regulatory constraints at 37 percent and risk concerns at 36 percent. Also cited were limited performance data, lack of interest by utilities, and the need for more research.

“Need more openness to new ideas from new employees and other agencies,” wrote one utility employee to the open-ended question about innovation barriers.

“Innovation is not actively encouraged,” wrote another. 

Tom Ferguson, vice president of programming at Imagine H20, said innovation is an enormous opportunity across the board for all water agencies – whether it is technological, organizational, or economic issues that need to be solved.

“Every organization needs to treat challenges as opportunities to improve and we see hundreds of companies a year helping agencies to do exactly that,” Ferguson said. 

He added that communication is at the heart of transformation.

“Internally and externally, if you are clear about the goal as well as the process, agencies will be amazed at the receptivity not only of ratepayers, but of their own employees.”

Other issues

For several years running, two of the top five issues include public understanding of the value of water systems and services, and public understanding of the value of water resources.

Respondents believe the water industry is above average in communicating with regulators and ratepayers – but has done a poor job communicating the difference between cost of service and rates.

“The ‘poor’ job of communicating in this area should tell us that customers need more education and information about cost of service, value of safe water, and how rate structures support and sustain our future supply of safe water,” Lennox said. 

As noted previously, water professionals are not as worried about regulations as many other issues. Even so, the importance of current and future regulatory compliance is rated slightly higher in the 2018 SOTWI survey than in 2017.

While talent attraction moved up slightly in concern – from 14th last year to 11th this year – respondents indicated in an open-ended question that it is not being adequately addressed.

“Preparing qualified candidates and partnering with educational institutions for candidate development ... takes multiple years,” one respondent wrote.

“Operator pay rates need to be increased,” wrote another.

Regarding technology implementation and data management, 79 percent of respondents say their utilities have fully implemented SCADA, and 64 percent have implemented GIS. At the other end of the spectrum, just 17 percent have implemented cloud-based applications.

The survey also asked about the potential impacts of several large-scale phenomena on the water industry. Pollution, terrorism/war, extreme weather events, and political instability are expected to have the largest negative impacts. 

Looking ahead

The 2018 State of the Water Industry Report is intended to serve as a resource for the water sector in identifying key issues and resolving challenges both locally and at a broader level.

This year, AWWA will continue to confront some of the top concerns highlighted in the report, serving as a link between water professionals and researchers and policy makers. The Association is addressing aging infrastructure concerns by providing asset management tools and advocating for federal low-interest loans. It’s fighting nonpoint source pollution by encouraging smart upstream collaborations and protecting public health by providing input to EPA’s revisions to the Lead and Copper Rule.

AWWA continues to address the aging workforce bubble and talent retention concerns through several initiatives, including a guided effort with its 43 Sections to connect veterans and transitioning services members to jobs in the water sector.

The Association also offers many resources on its website to its 51,000 members and robust network of 10,000 volunteers, from training manuals for operators to white papers, resource communities, conferences, courses, and more. It continues to inform public opinion about the myriad of issues facing today’s water professionals as they safeguard public health.

“AWWA’s strength to address the matters before us lies in the expertise of our members,” Lennox said. “We are forward thinking, value partnerships, and influence change to make a difference.”

Do you have a comment or story idea for Connections? Please contact Ann Espinola at aespinola@awwa.org.


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