The 21st Century Utility: Securing a Sustainable Water Supply

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Batker, David; Salish Sea Ecosystem Conference (2014 : Seattle, Wash.)
Digital content made available by University Archives, Heritage Resources, Western Libraries, Western Washington University.
Terrestrial and Aquatic Ecology
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All water utilities and private wells rely on natural assets to provide water. These assets include watersheds, open space, rivers, lakes, groundwater, and aquifers. Natural and built (man-made) capital assets provide and filter clean water for every sector of the economy including agriculture, industry, businesses and households. Healthy watersheds reliably provision and filter water, saving ratepayers billions of dollars compared to filtration plants. These same watersheds provide a suite of other benefits including biodiversity, habitat, recreation, flood protection, aesthetic and cultural value.Many utilities want to invest more in their watersheds. Some own, manage or hold easements on parts or all of their watersheds. But there’s a problem: These watersheds are only valued (on the balance sheets) for the bare land and timber value. The most important element of these lands – water provisioning and filtration of water – count for zero value. In contrast, more expensive, less resilient, and relatively short-lived built capital options including filtration plants, pipes, or desalinization plants have clear asset value. This leaves the natural capital assets of watersheds underfunded for acquisition, restoration, easements, and maintenance. Today’s accounting rules for utilities, local and state government were created a century ago to accommodate the construction of built water utility infrastructure. The rules for state and local government are set by the Government Accounting Standards Board (GASB). With their focus on built capital, these rules present a major barrier to securing watershed health and water supply: only built capital counts on the balance sheets of utilities, biasing funding mechanisms towards built solutions that are often more costly and less efficient than natural systems.Earth Economics and several major water utilities in the United States are leading a national effort to explore the implications of a change in national accounting standards. Following a recent workshop, the working group was formed to propose and justify changes to GASB rules for natural capital, look at rate structures, review asset management plans, and to identify funding mechanisms for watershed management activities. A change in national accounting rules would apply to government assets at all levels and shift needed investment towards green infrastructure. The case of water utilities presents a clear and definitive case of the need for better natural capital accounting.