The real costs (and false rhetoric) of water system leaks

In an effort to prove public necessity and justify taking over Missoula’s water system from Mountain Water Company, city officials have recently set their sights on water main leakage, saying that it’s a major problem for our customers. They cite a report we filed with the Montana Public Service Commission in 2010, in which we estimated that 40 percent of the water that enters our pipes never reaches your tap.

The city says that it would do more than we do to fix leaks faster.

In so doing, the city seems to be ignoring the very report it cites. Fact is, the 2010 PSC report details a deliberate and fiscally responsible plan to address leakage over time. Sure, we could fix all of our system leaks in one big flurry of repairs, but the cost would more than double your water bill and still not eliminate water leakage in Missoula.

Here’s why.

About that 40% figure
When we pump water out of Missoula’s aquifer, it enters a system of pipes that serve homes and businesses in the city and some nearby parts of the county. There are about 650 miles of water pipe in the system, including mains and service lines.

Of that, Mountain Water only owns the water mains that run down the middle of the streets. The rest of the system consists of service lines that connect buildings to Mountain Water’s mains. Service lines are owned by and the responsibility of our customers.

At the time of our report to the PSC, Mountain Water owned 315.4 miles of transmission and distribution mains. The rest of the 650-mile system consists of service lines.

Why is that important? Our mains represent slightly less than half of Missoula’s total water system.

From our data and experience, we know that the average age of customer-owned service lines and Mountain Water’s mains are similar. We also know that water pressure systemwide is typically 60-80 pounds per square inch. So while it may seem counterintuitive at first, it’s a physical fact that a small hole in a small-diameter service line leaks the same amount of water as the same-size hole in a large-diameter main.

So yes: Not all the water that enters our system reaches customers’ taps. But even if we replaced every water main in Missoula — the portion of the system we own — with brand new pipe, it would only address half the leakage. In effect, Mountain Water’s share of overall leakage is probably closer to 20 percent than 40 percent.

We’ve implemented new technologies for leak detection. As a result, we’ve reduced overall system leakage by 19 percent since 2007.

Mountain Water’s experience that service lines account for a major portion of its leakage is not unique. In fact, according to the American Water Works Association, “worldwide, the majority of leakage events and the majority of leakage volume losses occur on customer service connection piping, not on the water main piping” (AWWA M36 Manual, “Water Audits and Water Loss Control Programs”, 3rd Edition, 2009).

In any event, water system experts will tell you that the city is focusing on the wrong issue in the first place. A much better indicator of system condition is the rate of minor failures that require repair. When compared to industry standards, our rate is low and remains steady.

Moreover, unique factors in Missoula make system leakage significantly less of a problem than it might appear.

Why leaks happen — and why you rarely see them
Time isn’t kind to old metallic pipe, especially galvanized service pipes. Electrolytic reactions that occur between the pipes and the surrounding soils cause the loss of metal ions from the pipe and eventually reduce the thickness of the pipe wall. Eventually, the pressurized water can create a hole in the pipe wall and cause a leak. These processes usually take at least half a century and stay fairly localized to certain parts of a pipe, as opposed to causing a whole pipe to fail. Although not all old pipe is affected the same, Mountain Water does have certain types of steel mains that have more leaks than others of the same age.

In many parts of the United States, water main leaks are easy to find: Just look for a big puddle on the ground. The leak will be underneath.

Mountain Water is investing like never before in system improvements, maximizing repairs and replacements without significantly impacting your water bill.

That rarely happens in Missoula. Unlike the dense soils found in most parts of the country, our valley floor soils are generally very coarse-grained sands and gravels with very little silt or clay. Our unique soil composition is what remains from the times when Glacial Lake Missoula ruptured its ice dam and rushed downstream, scouring the lake bed in the process.

So when a water main in Missoula begins to leak, the water usually trickles down right back into the aquifer where it came from. Water leaked in that way is perfectly safe for the aquifer, and does not deplete it in any way. The downside of leakage is that we have to pay for the electricity to pump that lost water.

The cost of leaks, and the cost of fixing them
As we calculated in our report to the PSC, the costs associated with the water that’s ultimately lost to leakage from mains amounts to about $366,000 per year.

The impact on your water bill: less than 1/100th of a penny for every gallon of water you use. Those costs are passed through directly to the customer with no markup, so Mountain Water does not have an incentive to keep those costs up.

We take that cost seriously, just as you do. Trouble is, it has long been difficult to find leaks in the system because they don’t typically rise to the surface. Mountain Water uses the best available technology in the industry to quantify and pinpoint its leakage. We have also developed innovative techniques such as temporary district metered areas (DMAs) to measure leakage in typically older areas of town that are suspected to have leaks. We then follow up with acoustic “correlators” that can very accurately pinpoint the location of leaks on mains and service lines.

As a result we have been much more effective in pinpointing where a main is leaking. Once a leak is located, we perform a cost-benefit analysis to determine whether a repair is in the financial best interests of customers. Finally, we deploy contractors to repair the larger leaks or replace those mains where appropriate.

But here’s the thing to keep in mind: replacing leaking pipes is very expensive. These days, it costs more than $1 million per mile, on average, to dig up and replace old water mains. If we were to replace all of Missoula’s water mains that are 40 years old and older, the total cost would be more than $128 million.

The impact on your water bill: a 107 percent increase.

That isn’t the right solution for our customers.

Balancing costs and benefits
We have a responsible plan to address leakage. It’s explained in detail in our report to the PSC. We’re investing like never before in system improvements, averaging just under $4 million per year since 2011. Our five-year plan moving forward is to spend an average of $5.9 million/year, while still maintaining a low pace of rate increases consistent with recent practices. We’re maximizing the repairs and replacements that we can accomplish each year without radically impacting your water bill.

Mountain Water has no economic incentive to leak water. But we know that our customers want to avoid radical rate increases. So our plan calls for a long-term approach to system improvements.

We absolutely prioritize leaks that surface or that impact our ability to provide clean, safe reliable water service to our customers. Beyond that, we have a plan to systematically replace old mains over time, since that’s ultimately a more cost-effective approach than chasing individual leaks.

While the 2010 PSC report proved what we already knew — that cost savings from reducing leakage alone does not justify the cost of replacing mains — we do believe that we need to accelerate our investment in main replacement. We recently completed a statistical study of our mains and their expected useful lives, and concluded that we need to replace an average of 2.8 miles of main per year over the next 30 years. We are confident we can make that type of investment with rate increases that our customers can afford.

Liberty Utilities, which announced its intention to purchase Mountain Water in September 2014, agrees that our capital improvement plan strikes the right balance between costs and benefits to our customers. Liberty has both the intention and the resources to continue investing in system improvements. The Montana PSC’s oversight will ensure that these incremental investments will be prudent for the citizens of Missoula.

That’s not true for the city of Missoula. Government officials want you to believe that they can spend more money on system improvements than we can, thus accelerating leak reduction. In fact, the opposite is the case: Even under its best-case financial scenario, the city will never be able to match our current investment in system improvements — not without raising your rates substantially and placing an unacceptable debt burden on this community. And, like any owner of the system, the city can’t force you to identify and fix leaks in the service lines you own. Meaning the challenges that result from leaking service lines are the same regardless of who owns the water system.

In short, Missoula’s system is well maintained, reliable and safe. We have a clearly defined plan to address leaks and prevent service failures. And we have the financial backing to put that plan into action.

As you’ll see in our next article, the city has none of the above.