Today, private water companies directly or through public-private partnerships provide the essential water and wastewater services to nearly 73 million people in the United States, one fourth of our nation’s population. It is undeniable that the U.S. water industry provides a vital public service, which is to maintain the highest standards of water quality set under federal and state laws. Over the next quarter century, the U.S. water industry faces a set of critical infrastructure investment needs that is expected to total between $335 billion to $1 trillion. This is to replace aging infrastructure and make needed investment to maintain water quality. In addition, the EPA estimates that after years of drought, up to 70% of the states face some form of water shortage and this will increase costs of water and perhaps require separate investments to insure long term reliable water supply.

This report provides a comprehensive review of policies that state regulators across the U.S. have developed to meet these challenges by improving traditional cost of service ratemaking in the electric, natural gas distribution and water industries. The report shows that the electric and natural gas delivery industries have in place a larger number and a greater variety of alternative regulation policies compared to the private water industry. The water industry has made recent progress in innovative ways to recover capital investments in their distribution systems.

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