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National Cost Analysis for Drinking Water Regulations

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EPA has defined the cost of a regulatory action to include:

  • Estimates of the expenditures needed to comply with a new regulation (for example, of installing contaminant removal technologies)
  • Any negative health impacts associated with reducing the effectiveness of the treatment of other contaminants
  • Estimates of the market effects of these expenditures (for example, annual household water cost increases)

To make estimates of these regulatory costs at the national level, EPA considers the wide variety within the regulated drinking water community -- from the very smallest of non-community water systems (for example, gas stations, restaurants) to the largest urban water systems.

The general steps involved in the estimation of national costs for regulatory actions are summarized as:

  • Determining baseline conditions for:
    • contaminant occurrence
    • the effectiveness of treatment technologies already in use by some water systems
  • Estimating unit costs associated with:
    • treatment technologies
    • compliance monitoring
    • administrative requirements
  • Determining the systems that will be required to treat their water and what treatment technology they are expected to use
  • Estimating the total national cost and customer impact

Each of these steps is discussed below.

Defining the Baseline

To estimate the costs associated with any regulatory policy it is necessary to begin by assessing the geographical distribution and concentration levels of the contaminant(s) of concern. EPA refers to this information as occurrence data.

It is also necessary to account for any actions that drinking water systems are already doing that may mitigate the negative effects of the contaminant.

EPA uses a number of data sources when defining baseline conditions including the:

  • National Contaminant Occurrence Database (NCOD)
  • Federal Safe Drinking Water Information System (SDWIS/FED)
  • Community Water System Survey (CWSS)

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Estimation of Unit Costs

Estimation of unit costs includes:

  • Evaluating the expected cost of the installation of equipment
  • Operation and maintenance of treatment technologies
  • Compliance monitoring
  • Administrative requirements (for example, reporting, record keeping)
  • The financial cost of the necessary capital

EPA develops a number of potential unit costs for policy actions. For treatment technology based actions, EPA develops costs at the water treatment plant level for a number of available technologies with the necessary effectiveness to meet proposed standards, addressing:

  • engineering capital
  • operation and maintenance

EPA develops engineering unit costs using a bottom-up approach that may include the use of water treatment technology cost models. These models:

  • estimate system-level costs
  • provide EPA with comprehensive, flexible and transparent tools to represent the expected costs

• Read more about drinking water treatment technology unit cost models

EPA assesses monitoring unit costs for compliance monitoring policy scenarios by collecting pricing data from commercial laboratories.  EPA estimates labor hours for regulatory administrative tasks at the water system level and state/tribal agency level. These labor hours are then monetized using:

  • survey data
  • cost values from EPA labor costs data for national drinking water rules
  • other publicly available data

EPA collects water system financial data through the Community Water System Survey (CWSS). EPA supplements the CWSS data with additional publicly available data on bond ratings for private firms and municipal governments.

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Determining Regulatory Costing Scenarios

The baseline and unit cost data are used to determine what types of treatment technology would be required for different areas of the U.S. under potential regulatory scenarios for representative public water systems. These sample public water systems are representative of systems with differing baseline characteristics such as:

  • Population served
  • Average and peak flow rates
  • Geographic location
  • Source water type

System level costs are calculated for:

  • The representative systems based on the contaminant occurrence
  • Technology in place
  • The unit costs of necessary additional treatment techniques, monitoring, and administrative requirements

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Estimating National Costs

EPA uses the representative sample systems cost data to estimate total national cost values. EPA does this by assigning those representative costs to other systems across the country having similar characteristics.

In order to determine which systems are statistically similar for this costing exercise, EPA often uses system data from  the Safe Drinking Water Information System/Federal (SDWIS/FED) including:

  • Water system size (population served)
  • Geographic location
  • Type of ownership
  • Source water type

After system costs have been applied to all systems across the country, the total national cost is estimated by summing the system level data. Consumer costs of a new or revised regulation can be estimated by dividing the cost values by figures for the population served found in SDWIS/FED .

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