Abstract:
Passage of the Safe Drinking Water Act has intensified interest in problems related to water supply and water utility management. Analysis of the regulations to be promulgated under the act indicates that some water utilities, particularly small ones, may be adversely affected economically.1 An often-suggested option is that small systems combine with a larger system to form a regional water supply utility. It is assumed that the economies of scale associated with a regional water system would benefit the customers of small systems. A characteristic of many production and transportation problems is the trade-off between the cost of building and operating facilities to meet demands for a product and the cost of transportation.2 High transportation costs and low facility costs indicate decentralization; the reverse situation indicates a few large central facilities. These costs must be considered in planning, designing, constructing, and operating water supply systems. It is possible to separate the water supply system physically into two components: (1) the acquisition and treatment function, and (2) the delivery (transmission and distribution) system.3 Each of these components has a different cost function. The unit costs associated with treatment facilities are usually assumed to decrease as the quantity of service provided increases. The delivery system, however, is more directly affected by the characteristics of the area being served. The cost tradeoffs between the two components determine the cost of delivering water to any portion of the service area. Because few analytical instruments are available for study of the economics of water supply systems, the US Environmental Protection Agency's Drinking Water Supply Research Division initiated a program to develop techniques and methodologies to evaluate the economics of regional systems. This article describes the development of a simulation model designed to aid in such an evaluation. The model can also provide insights into other water-related economic issues, such as spatial pricing and costing, conservation policies, operating improvements versus increased capital expenditure, user class subsidization, and fire protection capacity. The model, called the Water Supply Simulation Model (WSSM), incorporates a series of submodels to describe the various economic, demographic, and hydraulic aspects of a water utility.
