Valuing groundwater quality: A cost function analysis of Wisconsin water utilities

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  • James Price, UW-Milwaukee

With growing concerns about groundwater contamination and its effects on drinking water supply, it is becoming increasingly important to understand the costs and benefits of protecting groundwater quality. Municipal water systems with access to high quality source water can avoid treatment costs that would otherwise be incurred if source water were of lower quality. These avoided costs represent the value of higher quality groundwater. This project proposes to quantify the relationship between treatment costs and source water quality at groundwater community water systems (GWCWSs) in Wisconsin; thus, estimating the value of protecting or remediating groundwater resources. A survey instrument will be developed that elicits key variables, as dictated by economic theory, from GWCWSs, including annual treatment costs, production volumes, wage rates, electricity rates, and treatment plant characteristics. The survey will be administered to all Wisconsin GWCWSs (n≈540). Information obtained from the survey will be coupled with groundwater quality data available from the Public Drinking Water System Database, maintained by the Wisconsin Department of Natural Resources, and analyzed using linear regression techniques. The effects of nitrate contamination on treatment costs are of primary interest, but other water quality measures will also be considered in these regression models. Results will help equip GWCWSs with information needed to determine whether source water protection is likely to be cost-effective relative to in-plant treatment options. When scaled-up, results will also equip regulators with a baseline estimate of the value of preventing groundwater contamination regionally or state-wide. These values can be used when assessing the merits of policies affecting groundwater quality. The proposed project thus offers an opportunity to benefit source water protection decisions and groundwater policy, as well as to address multiple knowledge gaps regarding treatment costs and source water quality.

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