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Funding Recycled Water in the Silicon Valley

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In an era when alternative energy, renewable resources and sustainable development are at the forefront of political and economic conversations, recycled water programs are gaining attention from an increasing number of communities. The discharge of untreated or lower-level treated wastewater can have significant impacts on the ecology of receiving waters, disrupting the natural environmental balance and putting numerous species in danger. In addition, heavy development and population growth in the arid American Southwest and other areas have lead to demand that could eventually outstrip existing water supplies. Recycled water is a safe, reliable and renewable resource that benefits both water and wastewater utilities.

Since recycled water systems benefit both water and wastewater utilities, various methods of cost recovery have been employed by different utilities. Often times, the capital cost of a recycled water system are shared between wastewater and water utilities while operating costs are recovered from customers consuming recycled water. Due to statutory restrictions in California, the price of recycled water cannot exceed the price of charged for potable water. In other states, the price of recycled water is limited due to perceptions. That is to say that while the cost of producing recycled water might actually exceed the cost of supplying customers with potable water, the price of recycled water is capped at the price of alternative potable water. The benefits of recycled water systems, both as a means of wastewater effluent disposal and as a water resource should be fully accounted for when developing recycled water pricing and cost recovery mechanisms.

The City of San Jose has recently undertaken a connection and capacity fee study for its wastewater collection system, treatment system and recycled water program. San Jose operates the San Jose/Santa Clara Water Pollution Control Plant (WPCP), and is a primary member organization of South Bay Water Recycling (SBWR). SBWR's founding mission is to reduce effluent disposal into the San Francisco Bay by encouraging use of recycled water for outside irrigation, industrial and some commercial applications. Funding for SBWR capital projects have historically come from a mixed source, including wastewater rates, recycled water sales, state and federal grants and developer funded assets.

As part of the recent WPCP connection fee study, the recycled water costs are proposed to be recovered through the wastewater treatment connection fee. These recycled water assets, include tertiary treatment components, as well as the recycled water pump station and pipeline network. Under this approach, recycled water is considered a means of effluent disposal. It is common practice for utilities to offer developers connection fee credits for system improvements and expansions that they undertake as part of a development project. Since most recycled water systems do not have a dedicated connection or capacity fee, developers improving or expanding an existing recycled water system generally negotiate the value and compensation of their donations. As a part of the study, the City of San Jose has identified the capital value of the existing and future recycled water system, developing a recycled water specific component to the wastewater treatment connection fee. This allows San Jose to identify and properly credit developers' donations and construction of recycled water assets, serving as a model for other recycled water utilities to further encourage developers to consider recycled water capabilities in large commercial and residential developments.

Keywords: Capital Funding Mechanism; Connection Fee; Developer's Credits; Effluent Disposal; Reclaimed Water; Recycled Water; Wastewater Treatment

Document Type: Research Article


Publication date: 2010-01-01

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