June 15, 2009

Pipeline Safety &

Efficiency

Pipeline Safety & Efficiency

Our aging infrastructure not only poses significant safety hazards, but can impact public health. What strategies and best

practices can be used to improve our infrastructure?

Current operationsCurrent operations

Operating Locations

U.S. Water Industry Today

Highly fragmented; few providers of scale

No substitute exists

Only utility that is ingested

Infrastructure concerns – EPA Needs Survey - $335 billion over the next

20 years

Water is subject to multiple state regulatory jurisdictions (environmental & economic)

Aging Infrastructure

Ongoing Problem: high plant rehabilitation and pipe replacement costs– Municipalities are deferring costs– Private companies face regulatory lag

(disincentive to invest)

$335 Billion Needed Over the 2007-2027 period up from $277 from 2003 Report to Ensure Compliance with Existing and Future Water Regulations

Treatment, $75.1

Storage, $36.9

Transmission and

Distribution, $200.8

Source, $19.8 Other, $2.3

EPA’s Estimate of the National Need for Water Infrastructure Investment

Source: 2008 EPA Needs Survey

U.S. Water Industry: The Most Capital Intensive Industry

EPA rules require large investment in filtration plants

Immense investment needed for distribution system and road repair

More capital per revenue than all other utilities

$0.00

$1.00

$2.00

$3.00

$4.00

Capital Invested per $1 of Revenue

$0.94 $1.11 $1.61 $3.45

Gas-Dist Telephone Electric Water

Source: 2005 AUS Utility Reports

Pipe Cleaning and LiningBefore After

Candidate for pipe replacement

Infrastructure Surcharges

Connecticut –WICA

Delaware - DSIC

Illinois - QIP

Indiana - DSIC

Missouri – DSIC

New York - SIC

Ohio - SIC

Pennsylvania - DSIC

Potential Benefits of a DSIC Program

– Address aging infrastructure that presents water quality problems

– Proactively addresses main breaks (boil water notices)

– New mains installation to eliminate dead ends (facilitates looping projects)

– Reduce unaccounted for water – Replace fire hydrants and larger pipe for fire

flows– Provides economic reliability in the community– Allows coordination with DOTs and local

government

Potential Benefits of a DSIC Program

Mitigates rate shock Reduces rate case expense Promotes the acquisition of small and non-

viable water systems Allows for pro-active planning Positive impact on capital attraction and

cost of capital Accelerates the replacement of aging

infrastructure Rate payer protections

Proactive Service

Summary

Prepare and plan for the future now

Infrastructure surcharges target environmental, operational and public safety concerns

Encourage economic development