Much of Canada’s water and wastewater infrastructure has passed its “best before” date. The Canadian Infrastructure Report Card states that it will cost Canadians $141 billion to replace water and wastewater assets that are currently in fair to poor condition. To raise that sum, municipalities must balance infrastructure needs against customers’ ability to pay, because the water and wastewater utilities collect 80% of their revenues from users, according to the just-released “Balancing the Books: Financial Sustainability for Canadian Water Systems” from the Canadian Water Network.
In September 2017, Canada’s Ecofiscal Commission came down hard in favour of user fees as the best mechanism to address the funding gap (“Water, water everywhere: But can we afford to keep it flowing?”). But the Canadian Water Network argues that even though local utilities all face fundamentally the same problems, there is no cookie-cutter solution. Each utility is unique. In its report, the Canadian Water Network instead presents a varied menu of solutions for local utilities.
On pricing, for instance, it offers seven potential approaches, including a marriage of fixed and volumetric pricing, automatic rate adjustments tied to budget forecasts or the Consumer Price Index, or pass-through charges that adjust rates according to the actual cost of system operation.
On managing risk, particularly climate risk, solutions could include favouring risk-reducing investments such as green infrastructure, issuing green bonds, or setting targets for operating and contingency reserves.
On energy use, utilities might consider increasing energy efficiency or implementing resource recovery through the reuse or sale of recovered resources.
One of the challenges all utilities face when proposing change is public resistance. The report says the public is largely unaware of the complexity of water and wastewater infrastructure, let alone its precarious condition. That lack of knowledge leads to opposition when calls emerge for more investment and higher charges.
Local utilities are also guilty, according to the report, of lacking in understanding of system performance, asset management planning, and the value of the ecosystem and socio-economic services provided by rivers, wetlands and aquifers. Addressing these knowledge gaps will be an important step toward addressing future financing needs.