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Water Infrastructure

Why It Matters

Reliable water and wastewater is critically dependent on adequate infrastructure as the backbone of a utility’s operating strategy. While the service life of water infrastructure can span many decades (in many cases more than a century), many water and wastewater systems across the United States have been underfunded for decades and fallen into a general state of disrepair.

The American Society of Civil Engineers (ASCE) U.S. water infrastructure report card, published every four years, underscores the need to renew infrastructure across the country. ASCE’s report card assesses the country’s water infrastructure and provides projected reinvestment levels required to maintain the vast network of aging treatment plants, pumping stations, storage facilities and pipelines in need of replacement or repair. The most recent ASCE report in 2017 graded the United States’ water infrastructure a D+ and wastewater infrastructure a D, an assessment which remains unchanged from the last report card in 2013. We recognize the urgent need for a well-planned and executed asset renewal and upgrade plan to drive modernization, improve efficiency and increase reliability and resiliency.

With our installed asset base of more than $23 billion in book value, and annual capital investments of more than $1.5 billion per year toward renewing and improving these assets, we make infrastructure investments with a long-term perspective. The challenge of renewing aging infrastructure is formidable, but this investment provides many opportunities to increase our climate resilience by implementing mitigation and adaption strategies. As climate models and forecasts continue to improve, we are constantly evaluating risks to our operations and implementing new design standards into our engineering processes to make assets more resilient.

Our commitment to providing safe and reliable water and wastewater services to the communities we serve includes incorporating established best practices in our operations and implementing an investment strategy that balances infrastructure needs with affordability for our customers. Our demonstrated ability to service and maintain distribution and treatment infrastructure and operating processes—maintaining compliance, fixing leaks, improving water quality, ensuring water at hydrants, etc.—can help communities remain strong and attractive to residents and businesses. Our reputation as a solutions provider has enabled us to acquire many municipal and privately owned systems and, through investment, bring them into compliance with regulatory standards and improve them.

Our demonstrated ability to service and maintain distribution and treatment infrastructure and operating processes—maintaining compliance, fixing leaks, improving water quality, ensuring water at hydrants, etc.—can help communities remain strong and attractive to residents and businesses.

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Our Approach

We focus investment dollars where they will most efficiently provide the greatest benefit to customers and mitigate the most significant risks. Over the past 10 years, we have significantly increased our infrastructure investment budget to address the growing need for pipe replacement and other important needs to serve customers, totaling over $10 billion of regulated investment. We anticipate the need for significant investment will continue to rise as infrastructure ages, more intense and frequent storms require greater system resiliency, new regulations are promulgated and American Water’s footprint continues to grow.

We use a long-term planning process to evaluate our water and wastewater systems for capacity, condition and performance today and into the future. Our comprehensive planning study (CPS) process assesses a 15-year or longer time horizon to develop a system roadmap. The CPS process includes:

  • An evaluation of supply availability against projected growth of customer usage;
  • Water treatment performance versus projected changes to water quality standards and research information on emerging contaminants of importance; and
  • Asset condition and performance versus efficiency, safety and obsolescence.

We examine service levels related to pressure, flow, leakage and water quality in piping networks for drinking water systems. We also assess wastewater collection systems for capacity, inflow and infiltration rates, manhole and pipe condition and overflow events. We conduct numerous CPS studies each year, with systems evaluated on a rotating basis based on priority. These studies provide a prioritized improvement plan for each system.

Over the 2019–2023 period, we expect to invest approximately $8.0–$8.6 billion in our regulated footprint. Approximately $7.3 billion or 84% is dedicated to regulated investments. This is critical, as we continue to improve our current infrastructure and remain the leading water and wastewater utility in the nation.

This reinvestment will enable us to continue improving our infrastructure, which provides essential services to the customers and communities we serve. To assure prudent investment, we plan and prioritize projects based on the need or level of risk to our system capacity, reliability, safety, security or quality of service.

Economic Impact

The resources we invest in capital infrastructure and ongoing operations generate significant economic benefits to the local and regional economies. This includes the direct effects of our initial spending, as well as the broader, indirect economic effects that result from our infrastructure reinvestments. Because our operations and capital expenditures are ongoing every year, we generate these economic impacts on an annual basis.

We pay close attention to jobs created as a result of our capital expenditures. In 2011, New Jersey American Water (NJAW) commissioned a report to determine the overall economic impact of NJAW’s operating and capital expenditures in New Jersey in 2009. The report concluded that the $480.4 million in expenditures resulted in 3,352 direct and indirectly generated jobs. Based on the report commissioned by NJAW, we estimate that our total capital plan of $8.0–$8.6 billion of investment from 2019–2023 could generate more than 55,000 direct and indirect jobs.

Worker in office

Responsibility

Each regulated state utility company develops an annual, bottom-up capital business plan based on the infrastructure needs that the state’s engineering teams identify in their operational footprint. These plans are approved by the subsidiary regulated utility companies’ Boards of Directors, and are then rolled up to the enterprise level for approval by American Water’s Board of Directors each December. Upon approval, the state engineering teams carry out these plans, and the individual state and American Water Capital Program Management Committees (CPMC) oversee execution. Each of these committees meets on a monthly basis.

Our regulated utility CPMC Committees include the state President and leads for engineering, operations and finance, while the CPMC Committee comprises American Water’s Chief Operating Officer, Chief Financial Officer, Vice President of Engineering and Director Engineering-Enterprise Capital Program.

Policies & Practices

The Capital Program Management Policy includes three supporting practices:

  • Capital Program Management Practice: as the primary governance document, this practice encompasses governance, budgeting and reporting.
  • Asset Planning Practice: provides guidance on assessing all water systems and prioritizing them according to the planning necessary to determine investment needs in line with the 10- to 15-year outlook that informs our capital plan.
  • Capital Project Delivery Practice: governs the actual implementation of projects, design, bidding and construction efforts.

Several accounting policies support the Capital Program Management Policy. Our Capitalization Policy provides guidance on which assets should be capitalized and how to do so, while our Asset Maintenance Management Practice addresses maintenance, rather than replacement of assets.

Assessing Infrastructure Risks

Using Technology

Technology enables us to efficiently assess our infrastructure condition and monitor performance. For example, for pipeline condition assessments, we use various sensor technologies, both in-pipe and externally, to examine infrastructure integrity, condition and remaining service life. We also have developed hydraulic models of our pipeline networks to facilitate scenario planning to identify and address system problems and optimize performance. In addition, we utilize various technologies, including acoustic monitoring equipment, to identify and locate leaks in our pipelines before they become potentially catastrophic main breaks. At our treatment plants, we have deployed thousands of sensors and instruments to monitor equipment condition and performance, which can trigger the need for targeted maintenance, rehabilitation or replacement. We also work to leverage available data from both our operations and external sources, and are evaluating the potential of machine learning and artificial intelligence to better understand and assess risk to our assets and operations.

Assessing Infrastructure Risks

Our goal is to replace pipes and other assets before they stop providing a safe and reliable level of service or once it is no longer economically prudent to continue to maintain and repair them. We use various prioritization tools to make informed decisions about which infrastructure investments to pursue based on several factors. These factors include ongoing operating and maintenance costs, the likelihood of an asset failure, the potential consequence of the assets failing relative to compliance requirements, health and safety of our employees and the public, customer service, financial losses and other issues. Our above ground and buried infrastructure require different risk evaluation approaches, but we generally assess our infrastructure based on capacity, condition, performance and the consequence of failure. For pipelines, we also consider factors such as age of pipe, distribution system pressure, soil conditions and water quality.

Our risk-based prioritization models organize infrastructure investments by category. For example, projects designed to address current compliance issues receive the highest priority of all projects, while projects that may help American Water meet future regulations come second. When health and safety are concerned, we prioritize imminent issues or potential failures due to infrastructure condition. With the passage of America’s Water Infrastructure Act of 2018, we will undertake additional risk and resiliency assessments of the majority of our systems over the next two years which will further inform our infrastructure investment prioritization process.

Connecting with Customers

Although our infrastructure investment projects are focused on long-term improvement to system reliability and the quality of services for our customers, replacing or updating infrastructure can have significant temporary impacts on the communities where we operate. Work on our buried infrastructure generally has the most impact to a community as they affect road conditions and traffic patterns. To minimize disruption, we evaluate and grade every segment of pipe within our distribution system and package pipeline replacement into logical projects. Whenever feasible, we coordinate with municipalities to coincide with the timing of their street paving programs, and with other utilities to align with their replacement and renewal projects. Depending on the impacts to a neighborhood or street and as needed, we conduct proactive stakeholder meetings or provide communications such as door hangers and letters to provide residents with relevant project information.

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Our Performance

Per SASB expectations, we actively track our water main replacement rate as well as the number of unplanned service disruptions and affected customers. By consistently monitoring these factors, we can adjust operational practices to increase O&M efficiency through project prioritization. Our performance informs decisions on future pipe replacement needs and pursue regulatory mechanisms such as Distribution System Investment Charges.

Despite increasing frequency of record-breaking climate events, the number of unplanned service disruptions and main breaks per mile has remained relatively constant. American Water’s main breaks per mile are in line with industry expectations and we continue to show a decline in main breaks over the past 10 years.

Since 2014, pipe renewal rate has averaged approximately a 150-year replacement cycle. Our long term goal is to achieve a 100-year pipe replacement cycle, compared to an industry average of approximately a 250-year replacement rate.

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