The Q&A: Sharlene Leurig

With each issue, Trib+Water brings you an interview with experts on water-related issues. Here is this week's subject:

Sharlene Leurig directs the Sustainable Water Infrastructure Program at Ceres, a national nonprofit that helps investors bring sustainability into the market. She also recently chaired a task force to plan Austin’s long-term water strategy. Before coming to Ceres, she was a fellow in the MIT-USGS Science Impact Collaborative at the Massachusetts Institute of Technology, where she focused on the role of science in multi-stakeholder resource planning and dispute resolution. In her spare time, she writes about the springs of Texas on her blog Hell's Oasis, and serves on the board of directors of the Hill Country Alliance. 

Editor's note: This interview has been edited for length and clarity.

Trib+Water: Stepping close here to Austin, you recently helped make news. The Austin City Council voted to approve a plan to repurpose the Decker Lake to add to Austin’s water supply — something a task force you chaired recommended. As water becomes more scarce in Texas, do you think that is going to become more common?

Sharlene Leurig: Absolutely. We have a set of legacy infrastructure, like the Highland Lakes, that were designed for flood control, were designed for water use in a very kind of "once through" approach — meaning that water flows through the system, you use it once and then you dump it, and that’s that. That is already changing dramatically. … We are now in a position of having to figure out how do we invest in diversifying our water supplies — how do we do that in the near term in a drought that is not resolving? New water is not easy to bring online, and it is certainly not cheap. So we have very limited options in the near term for what we can do to just survive the drought that we are in right now.

Trib+Water: You recently released a report on financing green water infrastructure projects, and you spent a lot of time talking about developing business models for utilities. Given that water utilities make money off of people using water, if they advocate for conservation they are going to lose money. How do they balance both being a business that needs to make money off of services while pushing for conservation at the same time?

Leurig: Now most places, the more water you use the more you pay per gallon of water. So it’s sending a signal that you should use less water, because this is a scarce resource. This is both a problem and a solution — people actually are very pricing responsive. We’re seeing them be increasingly more pricing responsive, and reducing their water use, which leads to less revenue for utilities, right?

What has to happen is, a shift of more of revenue that utilities are taking in towards the fixed portion of the bill — how much are people being charged just to be connected to the system. And they need to shift it over there because as people reduce the amount of water that they are using — we want them to do that — but you still have to take in as much money as you were before because the cost of the debt that you sold to finance your infrastructure and all that stuff stays the same.

It is going to have to be a higher amount of money coming in a fixed portion, and it will probably end up inevitably resulting in people paying more per gallon of water that they use across the board. If you look at, let’s say Denmark, Denmark has some of the highest water rates in the world based on the price per gallon of water. But the typical person in Denmark pays about the same amount that the typical person in the United States pays for water every month.

The reason is because they use a lot less of it. Ultimately, if you can meaningfully reduce the amount of water that people use, they should not in the future be paying a higher amount per month for water, but they will probably be paying the same and using a lot less water. And I don’t think that’s avoidable — that’s just the reality.

Trib+Water: In this same report issued earlier this week, one of the things you mention in your executive summary is that many of the challenges faced by water utilities across the country cannot be solved by building new reservoirs, pipelines or treatment plants and communities need to find new forms of infrastructure. Given how costly that is, do you think that is a scary spot to be in right now?

Leurig: The distributed infrastructure report that we wrote was saying there are lots of other ways that we can provide reliable water services that aren’t those massive, very expensive per unit, big kind of facilities. The problem is we don’t use our traditional financing mechanisms to fund that stuff. And as a result, it means that utilities have very little money on hand to do anything with it.

So look at San Antonio or look at Austin. If you’re looking at the water efficiency side, anything that they’re doing around toilet rebates, or Austin is now paying people to take out their turf grass and put in more climate appropriate landscaping, all of that has to come out of their cash. Well they don’t have a whole lot of cash.

Trib+Water: One last question — as we go into this upcoming legislative session, what kinds of bills do you think need to pass to give utilities more leeway when it comes to leveraging their revenue?

Leurig: I don’t know about this legislative session, but I will say there is some really, really interesting stuff happening in the water utilities space nationally that hasn’t yet come to Texas, and that I think we have tremendous opportunity to do something about.

Sewage treatment plants now can create enough energy to actually be net energy positive. That’s great if you’re looking at providing new renewable energy sources, but it’s even better if you’re trying to figure out ways of creating a diversified revenue streams for water systems. Similarly, wastewater treatment plants can and are capturing what’s typically seen as pollutants like phosphorus and nitrogen and selling them on the market. That’s a revenue stream. They are reclaiming water and selling that water to other entities.

So that’s on the wastewater side, which we usually divorce from the water supply side, and I think that’s pretty well reflected in the state water plan where we have our water supply project and then we have everything else. But the walls between the water utility sector and the resource energy, those are crumbling. We have technologies that are radically upsetting the notion of what a water utility is.