Estimation of drinking water production total costs : the Quebec City case study
Canadians are among the greatest water consumers in the world with a mean commercial and domestic consumption of 444 litres per person per day (L/p/d). As a comparison, the mean urban consumption in France is 210/p/d. Since water sources are abundant and apparently cheap in Canada, most people don’t make any effort to reduce their water consumption. However, even though raw water is a free public good, potable water production and distribution as well as wastewater collection and treatment require important operating and investment costs. Major investments will also be required during the coming years in many Canadian municipalities in order to restore water and sewer pipes and to update or, in some cases, build new treatment plants. Potable water delivered by municipalities thus has a cost, and this cost is estimated for Quebec City, Canada, in this paper. The scientific literature only gives a few assessment examples of the real cost of potable water delivered by municipalities. Some authors present general methodologies to estimate the cost of each cubic meter produced, based on the definition of fixed and variable costs (e.g., CABRERA et al., 2003; MCNEIL and TATE, 1991), but application results for these methodologies cannot be found. In 2001, the American Water Works Association (AWWA) compiled revenue and financial data linked to drinking water for 647 American and 24 Canadian municipalities (AMERICAN WATER WORKS ASSOCIATION, 2001). However, this database does not include sanitation costs (wastewater collection and treatment). In November 2002, PricewaterhouseCoopers determined that the total costs for potable water and wastewater in Montreal were $0.54/m3 in 2000 and would reach $0.83/m3 in 2022 (PRICEWATERHOUSECOOPERS, 2002). But this estimate did not include assets that were already paid, and thus underestimated the real cost of potable water. Since many North American municipal water infrastructures are aging and will need to be replaced and/or rehabilitated soon, it is essential to include the cost of all infrastructure (water pipes and sewer networks, drinking water and wastewater treatment plants) when estimating the cost of water. In the province of Quebec, water services are, in most cases, under the responsibility of the municipalities. Depending on the city, the water services are financed directly from the property tax or from a specific pricing method (flat rate or volume-based). The total cost associated with drinking water is the sum of investment, operation, maintenance and repair costs for potable water production and distribution, as well as for wastewater collection and treatment. The first step for the calculation of this cost was to estimate the construction costs of the equipment needed to perform all of these functions. As a case study, we computed the financial resources required to reconstruct Quebec City’s equipment and networks, as they existed in 2002. This reconstruction cost was annualized according to the life expectancy of each piece of equipment. As a second step, the annualized reconstruction cost was added to the annual operation, maintenance and repair costs. The total annual cost was then divided by the mean annual water production in the Quebec City region, to obtain the total potable water volumetric cost. All costs presented in this paper are in 2002 Canadian dollars, using the seasonally adjusted Statistics Canada Consumer Price Index (CPI). To take into account the uncertainty associated with the parameters used to compute the water cost, normal distributions were assigned to these parameters and the total water cost was assessed from 50,000 Monte Carlo simulations. A variance analysis was also performed to determine the impact of each parameter on the computed cost for water. The case study selected to compute the total water cost is the new city of Quebec, as incorporated on January 1st, 2002. The municipalities of Saint-Augustin and l’Ancienne-Lorette were also taken into consideration in the calculation, since these two cities use Quebec City equipment for potable water supply and wastewater treatment. In 2001, the total population of this region was 508,000 inhabitants and the total drinking water production was estimated at 287,882 m3/day (Table 2). The total length of drinking water pipes in this case study is 2,453 km and the sewer total length is 4,133 km (Table 3). In 2002, there were two wastewater treatment plants and three drinking water treatment plants in the region of this case study; the city plans to entirely renovate one of the drinking water treatment plants and to build one new plant next year. The costs and construction years of Quebec’s stations are presented in Table 4. The statistical distributions of all the parameters used to compute the water cost are summarized in Table 1. The 50,000 Monte Carlo simulations led to a mean total cost of $2.85/m3 for water in Quebec City, with a standard deviation of $0.47/m3. This means that the total cost of water has a 95% chance to lie between $1.91/m3 and $3.80/m3 in Quebec. On average, the investment cost represents $2.15/m3 and the maintenance, operation and repair cost is $0.70/m3. The distribution of the total estimated cost is illustrated in Figure 1. Table 5 summarizes the statistical characteristics obtained for the components of the total water cost. The computed cost is much higher than the average price paid by Canadians and Quebecers for their potable water, which was respectively $1.00/m3 and $0.49/m3 in 1999. However, the calculated cost is close to the average price charged for potable water in France in 2000 (about $4.24/m3 including taxes, which means $3.33/m3 without taxes), a country where all costs related to drinking water and wastewater are included in the water bill. Proper maintenance and renewal of municipal water infrastructures would be ensured if cities were to recover $2.85 for each m3 of water produced, in one way or another. Moreover, it should be noted that water meter installation, especially for industrial and commercial users, would become economically beneficial if the exact water cost were to be charged to consumers.