What does it take to acquire and upgrade a water system?

 

Let’s be frank: Operating and maintaining water systems is not an easy task, especially when they need tons of infrastructural improvements.  

Earlier in our Aquastructure blog series, we shed a bit of light on the state of our nation’s water infrastructureand pointed out that most of the pipelines we depend on each and every day were built at the start of the 20thcentury. In the present day, all of that infrastructure is near the end of its life, which means that upkeep and updates are a pressing need. 

Considering those challenges, how does a company like Aqua continue to provide efficient and affordable service? It all comes down to the water systems Aqua acquires, along with regular updates to existing infrastructure.

Craig Blanchette, president of Aqua Illinois, checked in to give us some insight into Aqua’s acquisition and upgrade processes. 


Blanchette (third from right in sunglasses) with fellow Aqua Illinois employees during a local volunteer project.

More water, less problems

Since 1995, Aqua has acquired more than 300 water systems, most of which are from municipalities (which own 85 percent of the nation’s water systems). However, sometimes those systems come from other sources, such as smaller regulated utilities, homeowners associations, water and sewer districts, and developer-owned systems. 

As the number of water systems in Aqua’s network grows, the efficiency and affordability of its services grow, too. The theory at play here is “economies of scale,” which is the economic principle that the more goods or services can be produced at a larger scale, the higher the savings in costs.

“By adding customers, Aqua is able to spread these fixed costs over a larger customer base, alleviating much of the burden from our new and existing customers,” Blanchette explains. 

What happens if Aqua wants to acquire a new system?

When Aqua is preparing to acquire a new system, typically Aqua and the other party—whether it’s a municipality or some other organization—begin by sitting down and talking shop (think inspections and negotiations). This can take anywhere from a couple of months to a couple of years. The goal is to create a partnership which benefits the community.

After that, an asset purchase agreement is created, which outlines all the details of the transaction, such as pricing and inclusion of assets. The APA must then be approved by the state public utility commission, which takes about six months to a year. During the PUC approval process, an administrative law judge takes on the case, and expert witnesses, like engineers, accountants and financial advisors, must evaluate and vouch for the legitimacy and benefits of the proposed acquisition. 

Once the agreement is reviewed, modified and approved by the administrative law judge it is then forwarded to the PUC for its final approval. Once this is complete, Aqua can sit down with the seller and officially take ownership.  

And then it’s smooth sailing?

With the right due diligence, yes! A lot of these existing water systems must be assessed to ensure everything is up to speed. In most cases, many of the system’s assets are underground and cannot be easily inspected.

“In these cases, we rely heavily on the maintenance records of the municipality in determining where future replacements are needed,” Blanchette notes. 

The most common upgrade is water main replacements, which are predominantly located underground and are often left out of a municipality’s investment plan. Blanchette adds that water service lines, main line valves and fire hydrants are also among the areas of a water system that may need more attention. 

“These assets are incredibly important because they are the backbone of any community,” Blanchette says. “Reliability of a water system is important in providing Earth’s most essential resource.” 

Whenever Aqua acquires a new system, they prepare a new capital investment plan to help determine where and when adjustments and updates are needed in each system’s infrastructure. Aqua then reevaluates that plan to determine future improvement needs. From that point forward, investment in the existing infrastructure is constant. 

It seems to be a team effort.

Very much so! Aqua works closely with the communities it serves andregularly meets with community members to coordinate all these infrastructure improvement projects. 

For example, if Aqua wants to do a water main or sewer replacement, they’ll first run it by the local road authority to plan resources accordingly. 

 

“If a road authority is planning to resurface a roadway where Aqua is also looking to replace a water or sewer main, it saves our customers the cost of restoring the roadway,” Blanchette explains.  

Now that is what we call synergy. 

Thanks for tuning in, water and sewer connoisseurs! We’ll see you next month! 

 

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Shedding light on the state of U.S. water infrastructure

 

From filling up the bathtub to boiling a pot of water to watering the plants, we rely on a ton of water for our daily needs and activities. 

And because water utilities like Aqua work so hard behind the scenes to make it seamless, it can be easy to take Earth’s most essential resource for granted. However, there’s a lot more that goes into our steady and reliable water supply than meets the eye. In fact, sometimes you have to go hundreds of feet underground to see it. 

The intricacies of water infrastructure tend to be out of sight and out of mind for many of us, and we wanted to shed a bit of light on the state of all those systems. So, we talked with Aqua Chairman and CEO Chris Franklin to get the scoop on the state of water infrastructure systems across the United States. 


Aqua Chairman and CEO Chris Franklin (left), employees and board members tour an Aqua facility in Illinois.

You mentioned water infrastructure. What does that look like?

First, let’s go back in time to the beginning of the 20thcentury, which is when the U.S. started laying miles and miles of pipelines deep within the Earth (one million miles, to be exact). These are the pipes that collect water from the ground and surface sources and transport it all the way to your tap. 

The good news is that underground water pipes last up to 100 years, so this infrastructure has provided us with reliable drinking water throughout the past century. The bad news, though, is that a lot of time has passed and those pipes desperately need to be replaced. 

How desperately? 

Well, every four years the American Society of Civil Engineers issues a report card on the current status of water and wastewater infrastructure across the nation. Let’s just say it wasn’t a report card you’d want to bring home to mom and dad. (Spoiler alert: the United States got a D). 

Here’s the thing: we are facing a very serious water quality challenge in the U.S. due to aging water systems, stringent drinking water and wastewater regulations, and budgetary constraints. The time to take action is now.

Tell me more about this dilemma…

According to Franklin, many aging water systems are falling behind because it’s simply too pricey for communities to upgrade or replace all those old, deteriorating pipelines. And we’re talking big bucks: according to the American Water Works Association, we need about $1 trillion over the next 20 years to get water infrastructure to where it should be. 

Most of the country’s water systems are municipally managed, and the truth of the matter is that municipalities having competing priorities for funds to improve and replace the pipes. They have to prioritize water projects with other needs like schools, police and fire departments, roadways, and bridges, which can be rather tricky. However, prolonging investment in water infrastructure improvements can have serious consequences on the safety and quality of our drinking water over time. 

“Although the challenge to the U.S. water infrastructure is less visible than other infrastructure concerns, it’s no less important,” Franklin reminds us.  


Pipes, pipes, and more pipes: Looks like infrastructure! 

What about Aqua’s water? 

“Since Aqua’s only focus is on water, Aqua customers can feel confident that we are actively updating and upgrading infrastructure to meet the needs of their families and communities,” Franklin says. 

This means new pipes, efficient treatments from the source through the plant, and sturdy storage tanks for all. Additionally, Franklin assures us that because investment in water infrastructure is a key pillar of Aqua’s business strategy, Aqua customers can continue to expect clean, safe, and reliable drinking water and wastewater services

Back to the infrastructure dilemma. There has to be a solution, right?

Thankfully, yes, and that’s where Aqua comes into play. Over the past several decades, Aqua has teamed up with and acquired many municipal and private water companies that are struggling to keep up with their water and wastewater systems and injected some much-needed capital into their aging water systems. 

Plus, when Aqua makes these infrastructure improvements, cost-effectiveness is always kept in mind. That means that we take measures like purchasing pipes in bulk and using scientific approaches to tracking main break history, pipe age and more to ensure that rate increases are kept to a minimum for the benefit of our customers.  

 Our board looks forward to any opportunity to learn more about Aqua’s infrastructure systems.

In just 2017 alone, Aqua invested a ton of money (as in more than $450 million) in water and wastewater infrastructure, and since 2007, Aqua has acquired (and drastically improved) 174 water and wastewater systems. Looking forward, you can expect Aqua to play a leading role in fixing up many of these deteriorating water systems. 

“Aqua is committed to renewing and improving water and wastewater infrastructure through thoughtful and continuous capital investment,” Franklin adds.

 The next time you take a sip of water or wash your hands in the sink, try to remember all the hard-working Aqua team members that are dedicated every day to bring you clean and safe water. See you back here next month, where we’ll reveal the best kept secret to safe, reliable drinking water.  

 

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Why Water Mains Break

One of the biggest concerns for water utilities during extremely hot or cold weather is water main breaks. Water mains are expected to last a long time – as long as 100 years in many cases. But with many miles of pipe buried underground, it’s reasonable to expect a particular section of pipe will fail or break at some point. The challenge for water utilities is to work proactively to minimize the number of breaks and to respond effectively when a main does break.

While the oldest water mains were made of wood, by the late 1800s, a variety of iron pipe was being used to construct water distribution systems. Common iron varieties included cast and galvanized in the early part of the 20th Century, with galvanized used primarily for smaller diameter pipe. Cast iron pipe was used until the late 1950s when stronger, more flexible ductile iron pipe became common. Plastic pipe, including Polyvinyl Chloride (PVC) and High Density Polyethylene (HDPE) became common in the 1970s. The primary difference between these two plastic pipes is that PVC is stiffer than HDPE, which is more flexible. Even though pipe is expected to last for decades, that doesn’t mean it won’t break at some point. While it is impossible to predict specific pipe breaks, we know that environmental conditions are a major factor in water main breaks.

In the northern and northeast areas of the country where winters are more extreme, cold soils and cold water combine to add stress to pipes, which can—and often do—result in breaks. Iron, like all metals, contracts as temperatures drop. This problem is more common when the source water is surface water (rivers and lakes). These waters are significantly affected by air temperature and can drop to near freezing in the winter. A temperature difference of just 10 degrees in water or air temperatures can cause pipes to contract or expand. Additional stress inside and outside the pipe occurs as temperatures near the freezing point, making the pipe vulnerable to breakage. Water temperature changes more slowly than air temperature changes so the impact of cold water on pipes can cause breakage to take place as many as a couple days after temperatures freeze. Water systems with groundwater sources (wells) have more stable water temperatures because the water is not affected by air temperatures, and therefore, not as significantly impacted. 

Just as pipes are adversely affected by cold weather conditions, they are also affected by severe heat. In some groundwater systems in the southern and southwestern states, the soils are like sponges and hold lots of water. However, during extended periods of hot temperature when high demands for water increases water withdrawal from the aquifers, the soil becomes very dry. In these conditions, the soil contracts and subsides, pulling away from the pipe and diminishing support for the water main. The absence of support for the main can cause it to break. This particular problem led the City of Houston, Texas to begin to convert its groundwater supply to surface water.

Although older mains are generally more susceptible to breaks, breaks can occur on newer mains. This is most likely the result of improper installation or a manufacturing issue with that particular section of pipe. By examining trends in water main breaks over time, a utility is better able to identify categories of pipe that are more prone to breaks, and thus proactively target that pipe for replacement. Aqua employs such tactics in determining which mains to replace. By the end of 2013, Aqua expects to have spent $170 million of its $325 million capital improvement program on water main replacement and associated work.

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