Report: Water Prices Will Rise as Utilities Face Revenue Shortfall

Thursday, 19 Jun 2014 03:55 PM

By Dan Weil

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A whopping 66 percent of U.S. water utilities aren't taking in enough revenue to cover their costs, according to a new survey from water-engineering firm Black & Veatch.

And that means higher water prices for consumers, it says.

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"People will have to pay more for water to make up the falling revenues," Michael Orth, one of the report's authors and senior vice president at Black & Veatch, told CNBC. "And that's likely to be more than the rate of inflation."

Consumer prices rose 2.1 percent in the year through May, so Orth may be talking about a stiff rise in water rates.

The average water price for a family of four using 400 gallons per day has jumped 6.2 percent so far in 2014.

That's the smallest year-on-year change in the five-year history of Black & Veatch's survey. Still, prices have risen 33 percent since 2010.

The drought that has raged in the Southwest has helped depress revenue for water utilities, Orth said. The dryness has parched numerous water sources in the region, so water companies have to pay more for supply elsewhere.

Matt Sheldon, co-portfolio manager of the Calvert Global Water fund, explained to Barron's the virtue of investing in water.

"Water is incredibly diverse in terms of end markets," he said. "We're able to replicate a global portfolio that isn't in favor or out of favor, that can grow just a little bit better than the market. We have the offense of our cyclicals, the defense of our utilities and geographic dispersion."

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