Drinking Water Treatment Costs and Source Water Quality: A Cost Function Analysis of Municipal Water Systems in Wisconsin
Citation:
James, P. AND Matthew Heberling. Drinking Water Treatment Costs and Source Water Quality: A Cost Function Analysis of Municipal Water Systems in Wisconsin. Annual Meeting of the Wisconsin Section of the American Water Resources Association, Wisconsin Dells, WI, March 16 - 17, 2023.
Impact/Purpose:
Decision-makers considering source water and wellhead protection often lack quantitative estimates of its benefits. The presentation will help explain the role economics has in estimating avoided treatment costs and determining whether source water and wellhead protection is cost-effective.
Description:
With growing concerns about groundwater contamination, it is becoming increasingly important to understand the costs and benefits associated with protecting source water quality. For municipal drinking water systems, lower quality groundwater requires more treatment to meet potable water standards and performance objectives. It follows that the costs associated with this additional treatment reflect the value of safeguarding source water from contamination. This study estimates cost functions for municipal groundwater systems in Wisconsin; these cost functions relate treatment cost to production volume, factor input prices, capital stock, and various source water quality measures. Instrumental variable (IV) techniques are used to address multiple sources of endogeneity, which can, when ignored, lead to biased model estimates. Given the limited number of groundwater system studies, the results fill an important gap in the literature and offer insight into the potential benefits of source water protection.
