1
February
24,
2006
MEMORANDUM
Subject:
Supporting
Analysis
for
the
Household
Costs
of
Water
Treatment
From:
Kira
Smith,
TAB
Thru:
Dan
Olson
Affordability
Team
Leader,
TAB
To:
Record
In
its
February
Federal
Register
notice,
Small
Drinking
Water
Systems
Variances
 
Revision
of
Existing
National­
Level
Affordability
Methodology
and
Methodology
to
Identify
Variance
Technologies
that
are
Protective
of
Public
Health,
EPA
requests
comment
on
a
number
of
questions
related
to
the
methodology
the
Agency
uses
to
evaluate
the
affordability
of
its
National
Primary
Drinking
Water
Rules.
The
three
key
issues
are
as
follows:
­
First,
EPA
is
requesting
comment
upon
the
size
of
the
system
the
Agency
should
consider
as
representative
of
each
the
system
size
categories
specified
under
SDWA.
This
question
is
critical
to
determining
the
cost
each
household
must
pay
for
the
treatment
to
comply
with
a
new
regulation.
Smaller
systems
have
fewer
households
over
which
the
fixed
costs
of
treatment
can
be
distributed
and
therefore
experience
higher
household
costs.
EPA
is
specifically
asking
if
the
median
(
or
middle
sized)
or
tenth
percentile
(
a
system
that
serves
fewer
people
than
90
percent
of
the
other
systems
in
the
category)
should
be
selected
as
the
representative
system
for
the
category.
­
Second,
EPA
is
requesting
comment
upon
the
affordability
threshold
(
the
maximum
cost
that
is
affordable
to
customers
served
by
small
systems).
EPA
is
proposing
to
calculate
the
affordability
threshold
by
taking
a
percentage
of
the
median
annual
household
income
(
MHI)
among
small
systems
which
as
of
September
2005
was
between
$
40,000
and
$
44,000.
EPA
is
requesting
comment
upon
three
different
alternative
thresholds
equal
to:
0.25%
MHI
($
100
to
$
110
under
Sept.
2005
income
estimates),
0.50%
MHI
($
200
to
$
220
under
Sept.
2005
income
estimates),
or
0.75%
MHI
($
310
to
$
330
under
Sept.
2005
income
estimates)
2
­
Third,
EPA
is
requesting
comment
upon
whether
or
not
EPA
should
evaluate
affordability
strictly
on
a
national
level,
or
to
use
a
two­
step
process
that
includes
both
a
national­
level
evaluation
of
affordability,
and
a
second
analysis
conducted
at
the
County
level.
EPA
would
perform
this
second
step
only
when
the
first
step
found
a
standard
to
be
affordable
at
the
national
level.
EPA
would
evaluate
economic
data
to
identify
economically
disadvantaged
Counties
in
the
U.
S.
that
cannot
afford
to
comply
regardless
of
the
outcome
of
the
national
determination.

This
memorandum
provides
supporting
analysis
for
the
first
question,
the
size
of
the
system
the
Agency
should
consider
as
representative
of
each
the
system
size
categories
specified
under
SDWA.
This
memorandum
describes
how
EPA
calculates
compliance
costs
at
the
system
and
household
level
and
for
different
size
systems.
Additionally,
it
discusses
treatment
cost
estimates
for
systems
of
varying
size
in
terms
of
potential
revisions
to
EPA's
affordability
methodology.

Key
factors
affecting
treatment
costs
The
Agency
has
observed
that
within
and
among
the
approximately
50,000
small
systems
in
the
U.
S.,
population
served
and
source
water
quality
are
the
two
most
significant
factors
that
drive
the
household
costs
associated
with
a
given
treatment
technology.
In
general,
larger
systems
have
more
customers
over
which
to
distribute
fixed
capital
costs
for
treatment
technologies
and
will
have
lower
production
costs
per
thousand
gallons
treated
due
to
economiesof
scale.
Therefore,
for
most
technologies,
household
costs
are
greater
for
small
systems
than
for
large
systems.
Thus,
one
of
the
Agency's
options
for
public
comment
includes
comparing
the
affordability
threshold
to
a
below­
median
measure
of
expected
treatment
costs,
i.
e.,
the
10thpercentile
system
size.
The
cost
of
treatment
a
system
must
install
is
affected
by
the
quality
of
the
source
water,
including
the
concentration
of
the
contaminant
to
be
removed
(
i.
e.,
degree
of
treatment),
pH,
and
the
presence
of
other
dissolved
or
suspended
solids.
To
account
for
this,
EPA
typically
determines
a
range
of
costs
for
expected
source
water
qualities
when
listing
Best
Available
Technologies
and
small
system
compliance
technologies
for
compliance
with
National
Primary
Drinking
Water
Rules.

Treatment
cost
models
EPA
relies
on
treatment
cost
models
and
model
systems
to
estimate
compliance
technology
costs
for
different
size
water
systems.
Compliance
technologies
for
recent
rules
include
both
central
treatment
and
point­
of­
use
(
POU)
options.
Under
the
central
treatment
options,
all
of
the
water
supplied
to
the
household
is
treated
to
meet
the
standard.
Under
the
POU
options,
only
the
water
at
one
tap
within
a
residence
is
treated.
The
water
accessed
from
other
taps
located
in
the
house
is
not
treated
to
reduce
contaminant
concentrations.
The
analyses
described
in
this
document
assume
that
the
POU
devices
are
installed
at
kitchen
taps.
For
central
treatment
options,
three
cost
models
have
typically
provided
treatment
cost
estimates
for
the
cost
curves
in
the
cost
and
technology
documents.
The
cost
models
have
different
ranges
of
applicability
based
on
system
design
flow.
The
design
flow
is
related
to
the
production
capacity
of
the
treatment
unit
and
is
larger
than
the
peak
daily
flow
for
the
system.
3
The
cost
models
use
design
flow
to
estimate
capital
costs
for
the
system
and
average
daily
flow
to
estimate
operations
and
maintenance
(
O&
M)
costs.
Thus,
production
capacity
determines
the
size
of
a
treatment
unit
and
the
total
volume
of
water
treated
for
distribution
determines
the
operating
costs.
The
first
cost
model
is
for
very
small
systems
with
a
design
flow
below
270,000
gallons
per
day.
The
document
entitled
Very
Small
Systems
Best
Available
Technology
Document
(
EPA,
1993)
provides
equations
for
estimating
capital
and
O&
M
costs
for
these
systems.
1
The
second
model
is
called
"
The
Water
Model"
and
consists
of
a
set
of
cost
curves
for
various
technologies
contained
in
the
document
entitled
Small
System
Water
Treatment
Costs
(
EPA,
1984).
2
The
third
model
is
the
WATERCO$
T
model
(
Computer
Software
for
Estimating
Water
and
Wastewater
Treatment
Costs,
Version
2.0,
1994).
This
is
a
computer
model
that
estimates
costs
for
systems
with
flows
larger
than
one
million
gallons
per
day.
The
costing
models
generate
discrete
cost
estimates
corresponding
to
specific
design
and
average
daily
flow
inputs.
Some
of
the
technologies
that
treat
drinking
water
contaminants
also
produce
byproduct
streams.
These
byproduct
streams
are
typically
associated
with
the
treatment
of
inorganic
contaminants.
Coagulation/
filtration
and
lime
softening
produce
sludges
that
require
disposal.
Membrane
technologies
produce
a
concentrate
stream.
Ion
exchange
and
activated
alumina
produce
brine
streams.
Two
additional
cost
models
were
used
to
estimate
the
costs
for
disposing
these
residual
byproduct
streams.
The
document,
Small
Water
Systems
Byproducts
Treatment
and
Disposal
Cost
Document
(
EPA,
1993a)
provides
equations
for
capital
and
O&
M
costs
for
technologies
to
dispose
of
residual
byproducts.
These
cost
equations
are
intended
for
systems
in
the
smaller
of
the
two
size
categories
(
serving
25
­
500
and
501
­
3,300
people).
The
equations
for
capital
and
O&
M
costs
for
systems
serving
3,301
­
10,000
people
came
from
the
document
entitled
Water
System
Byproducts
Treatment
and
Disposal
Cost
Document
(
EPA,
1993b).
For
the
POU
options,
the
1998
document,
Cost
Evaluation
of
Small
System
Compliance
Options:
Point­
of­
Use
and
Point­
of­
Entry
Treatment
Units
(
EPA,
1998)
provided
cost
equations.
This
document
contains
capital
and
O&
M
cost
equations
for
a
variety
of
POU
and
point­
of­
entry
(
POE)
options.
Once
design
flows
have
determined
capital
costs
and
average
daily
flows
have
determined
O&
M
costs,
the
capital
costs
are
amortized
over
20
years
at
an
interest
rate
of
7.0
percent.
Combining
the
annualized
capital
costs
with
the
annual
O&
M
costs
determines
the
total
production
costs.
The
units
for
the
total
production
cost
are
dollars
per
thousand
gallons
($/
kgal).
In
order
to
derive
capital
and
O&
M
costs
for
central
treatment
options
in
the
Variance
Technology
Findings
document
for
rules
developed
in
the
early
1990s
(
EPA
1998a),
design
and
average
flows
were
needed
for
a
typical
system
within
each
size
class.
Design
and
average
daily
flows
were
based
on
flows
calculated
for
average­
sized
systems
without
consideration
for
1
Although
this
is
the
most
current
document,
a
new
procedure
is
being
developed.
The
arsenic
rule
used
a
hybrid
of
this
new
procedure
and
the
older
approach
for
the
activated
alumina
and
anion
exchange
costs.

2
As
was
noted
earlier
for
another
source,
although
this
is
the
most
current
document,
a
new
procedure
is
being
developed.
A
hybrid
of
this
new
procedure
and
the
older
approach
was
used
for
the
activated
alumina
and
anion
exchange
costs
for
the
arsenic
rule.
4
differences
in
water
source
type
or
ownership
category.
Exhibit
1
lists
the
flow
values
derived
for
the
pre­
1996
regulations
across
the
five
CWSS
size
classes.
The
number
of
systems
within
each
size
class
provided
a
weighting
factor
to
determine
flows
for
the
consolidated
SDWA
small
system
size
classes
(
25­
500
and
501­
3,300)
that
follow
in
Exhibit
2.

Exhibit
1.
Design
and
Average
Daily
Flows
for
Pre­
1996
Regulations
System
Size
Class
(
population
served)
Design
Flow
(
kgpd)
Average
Daily
Flow
(
kgpd)

25
­
100
24
5.6
101
­
500
87
24
501
­
1,000
270
86
1,001
­
3,300
650
230
3,301
­
10,000
1,800
700
Exhibit
2.
Design
and
Average
Daily
Flows
Consolidated
Across
System
Size
System
Size
Class
(
population
served)
Design
Flow
(
kgpd)
Average
Daily
Flow
(
kgpd)

25
­
500
58
15
501
­
3,300
500
170
3,301
­
10,000
1,800
700
EPA
has
since
refined
its
approach
for
analyzing
system
source
type
and
ownership
impacts
on
design
average
daily
flow
and
has
incorporated
these
factors
into
updated
population/
flow
regression
equations,
as
shown
in
Exhibit
3.
These
equations
form
the
basis
of
the
method
EPA
uses
for
estimating
treatment
costs
as
part
of
making
affordability
determinations.
Exhibit
4
then
provides
the
design
and
average
daily
flows
used
in
treatment
cost
estimates
for
composite
public/
private
ground
water
systems
calculated
with
the
10th­
percentile
and
50th­
percentile
(
i.
e.,
median)
system
size
in
each
size
class.

Exhibit
3.
Population/
Flow
Equations
Used
in
Treatment
Cost
Estimation
CWS
Source/
Ownership
Category
Design
Flow
(
kgpd)
Average
Daily
Flow
(
kgpd)

Ground
(
Public)
Y
=
0.54992
*
(
X^
0.95538)
Y
=
0.08575
*
(
X^
1.05839)

Ground
(
Private)
Y
=
0.41682
*
(
X^
0.96078)
Y
=
0.06670
*
(
X^
1.06284)
5
Exhibit
3.
Population/
Flow
Equations
Used
in
Treatment
Cost
Estimation
CWS
Source/
Ownership
Category
Design
Flow
(
kgpd)
Average
Daily
Flow
(
kgpd)

Surface
(
Public)
Y
=
0.59028
*
(
X^
0.94573)
Y
=
0.14004
*
(
X^
0.99703)

Surface
(
Private)
Y
=
0.35674
*
(
X^
0.96188)
Y
=
0.09036
*
(
X^
1.03338)

Purchased
(
Public)
Ground
Y
=
0.3191
*
(
X^
0.9946)
Y
=
0.04692
*
(
X^
1.10189)

Purchased
(
Private)
Ground
Y
=
0.3215
*
(
X^
0.9794)
Y
=
0.05004
*
(
X^
1.08339)

Purchased
(
Public)
Surface
Y
=
0.2092
*
(
X^
1.0452)
Y
=
0.04692
*
(
X^
1.10189)

Purchased
(
Private)
Surface
Y
=
0.2058
*
(
X^
1.0084)
Y
=
0.05004
*
(
X^
1.08339)

Source:
U.
S.,
EPA,
Geometries
and
Characteristics
of
Public
Water
Systems,
December
2000
(
under
revision).
Note:
Y
=
flow
(
kgpd)
and
X
=
population
served
Exhibit
4.
Design
and
Average
Daily
Flows
Used
for
Treatment
Cost
Estimates
Under
Revised
Options
(
kgpd)
10th­
Percentile
System:
50th­
Percentile
System:
System
Size
Class
(
population
served)
Design
Average
Daily
Design
Average
Daily
25­
500
15
3.5
44
11
501­
3,300
230
70
440
140
3,301­
10,000
1,300
480
1,900
720
Notes:
1.
Representative
system
population
used
to
calculate
flow
values
within
each
size
class
for
10th
percentile
are
40,
600,
and
3,609;
for
50th
percentile,
the
figures
are
120,
1,195,
and
5,325
based
on
SDWISFED
December
2004
2.
Flows
are
based
on
a
weighted
average
for
public
and
private
non­
purchased
ground
water
systems
(
which
make
up
approximately
77
percent
of
systems
that
serve
25­
10,000
people)
and
are
adjusted
to
two
significant
figures.
These
values
fall
within
a
range
typical
for
residential
water
use.

The
1998
POU/
POE
report
compared
costs
for
POU
and
POE
options
against
central
treatment
costs.
The
costs
for
the
centrally­
managed
POU
options
had
to
be
converted
to
the
same
flow
basis
to
conduct
this
comparison
and
calculate
treatment
costs.
The
cost
estimates
for
the
centrally
managed
POU
treatment
options
are
presented
in
dollars
per
thousand
gallons
($/
kgal)
used
per
household.
This
is
different
than
the
cost
per
gallon
($/
gal)
based
on
the
volume
treated
by
the
POU
device.
By
converting
the
cost
per
gallon
treated
into
the
cost
per
thousand
gallons
consumed
by
a
household,
the
POU
costs
are
comparable
with
central
treatment
costs.
POU
option
cost
equations
use
the
number
of
households
as
the
dependent
variable.
Exhibit
5
below
shows
the
number
of
households
used
to
derive
POU
treatment
costs
for
the
two
system
size
approaches.
6
Exhibit
5.
Number
of
Households
by
Size
Category
for
POU
Options
Residential
Households
for
System
at:
System
Size
Class
(
population
served)
10th
Percentile
50th
Percentile
25­
500
16
47
501­
3,300
230
460
3,301­
10,000
1400
2100
Note:
Estimated
based
on
the
2004
U.
S.
Census
mean
of
2.57
persons
per
household.

Both
the
central
treatment
and
the
POU
treatment
costs
provided
the
rate
increase
associated
with
installing
a
specific
level
of
treatment.
The
treatment
cost
models
produce
rate
increases
measured
in
dollars
per
thousand
gallons
($/
kgal).
Exhibit
6
lists
the
median
annual
household
water
consumption
rate
(
kgal/
connection/
yr)
for
each
system
size
class
used
to
convert
treatment
technology
costs
into
an
increase
in
annual
household
water
bills.
These
consumption
rates
are
derived
from
the
1995
CWSS.

Exhibit
6.
Residential
Consumption
for
Small
Water
Systems
System
Size
Class
(
population
served)
Median
Annual
Household
Consumption
(
kgal/
connection/
yr)

25
­
500
72
501
­
3,300
74
3,301
­
10,000
77
The
water
consumption
estimates
in
Exhibit
6
were
multiplied
by
1.15
to
account
for
lost
water
due
to
leaks.
Since
the
water
lost
to
leaks
is
unbilled,
the
water
bills
for
the
actual
water
used
were
adjusted
for
the
subsequent
analyses
in
this
document
to
cover
this
lost
water
by
increasing
the
household
consumption.
Exhibit
7
below
presents
adjusted
median
annual
consumption
rates.
The
annual
cost
increase
per
household
($/
HH/
yr)
was
calculated
by
multiplying
the
adjusted
consumption
rates
by
the
rate
increase
imposed
by
treatment
($/
kgal).
The
option
for
below­
median
system
size
incorporates
these
adjusted
median
annual
consumption
rates
and
treatment
costs
based
on
10th­
percentile
system
size
to
calculate
annual
cost
increases
per
household.
7
Exhibit
7.
Adjusted
Residential
Consumption
for
Small
Water
Systems
System
Size
Class
(
Population
served)
Median
Annual
Consumption
(
kgal/
connection/
yr)

25
 
500
83
501
­
3,300
85
3,301
­
10,000
89
Treatment
cost
estimates
for
different
size
systems
As
noted
earlier,
treatment
costs
can
vary
significantly
for
systems
serving
different
population
sizes,
even
within
the
same
size
category.
Exhibit
8
plots
annual
per
household
costs
versus
system
population
size
for
installing
and
operating
a
central
treatment
anion
exchange
technology.
As
Exhibit
8
illustrates,
treatment
costs
decline
rapidly
as
system
population
increases
at
the
lower
end
of
the
range
of
system
sizes
per­
household.
After
that,
reductions
in
costs
are
more
gradual.
At
the
higher
end
of
the
range,
differences
in
per­
household
costs
across
system
sizes
are
fairly
minor
even
between
a
system
serving
600
people
and
one
serving
10,000.
Although
the
details
of
these
relationships
will
vary
across
different
rules
and
different
compliance
technologies,
the
general
declining
nature
of
per­
household
treatment
costs
relative
to
system
size
is
expected
to
hold
true.
8
$
0
$
100
$
200
$
300
$
400
$
500
$
600
0
1000
2000
3000
4000
5000
6000
System
Size
(
Population
Served)
Annual
Per­
Household
Treatment
Costs
(
Sep
2005
Dollars)
Exhibit
8.
Per­
Household
Treatment
Cost
Estimates
by
System
Size
Anion
Exchange
Note:
Costs
are
based
on
cost
curve
equations
for
anion
exchange
with
source
water
containing
less
than
20
mg/
L
sulfate
in
the
document
Technologies
and
Costs
for
Removal
of
Arsenic
from
Drinking
Water
(
EPA­
815­
R­
00­
0028).
System
sizes
are
determined
from
SDWISFED
January
2004.

Household
cost
options
As
a
key
input,
EPA's
current
national­
level
affordability
methodology
has
used
the
expected
per­
household
treatment
costs
for
the
system
whose
population
places
it
at
the
median
for
its
size
class.
The
Agency's
options
for
public
comment
include
either
retaining
this
focus
on
the
median
or
instead
using
the
treatment
costs
for
the
system
whose
population
places
it
at
the
10th
percentile
within
its
size
class.
In
general,
this
change
can
be
expected
to
increase
the
estimated
treatment
costs,
and
thereby
find
more
compliance
technologies
unaffordable.
The
precise
impact
will
vary
significantly
by
drinking
water
rule,
but
overall
small
systems
exhibit
higher
per­
household
treatment
costs
than
non­
small
systems
because
of
economies
of
scale.
Hence
the
smaller
the
system,
even
within
a
particular
class
of
small
systems,
the
higher
the
treatment
costs
will
be
on
average.
Exhibit
8
above
presents
treatment
cost
estimates
for
systems
of
different
sizes
for
a
central
anion
exchange
technology.
Exhibit
9
provides
an
example
of
household
costs
for
the
10thand
the
50th­
percentile
size
systems
within
each
of
the
small
system
size
categories.
This
example
demonstrates
that
the
greatest
difference
in
household
costs
are
typically
found
in
the
25­
500
size
category,
as
the
estimated
household
cost
for
the
10th­
percentile
size
system
is
more
than
double
9
that
for
the
50th­
percentile
(
median)
size
system.
It
is
this
smallest
system
size
category
where
there
is
most
likely
to
be
an
affordability
concern.

Exhibit
9.
Comparison
of
annual
per
household
costs
of
ion
exchange
treatment
(<
20
mg/
L
sulfate).
10th­
Percentile
Sized
System
50th­
Percentile
Sized
System
System
Size
Population
Size
Treatment
Costs
Population
Size
Treatment
Costs
25
 
500
40
$
540
120
$
200
501
 
3,300
600
$
72
1,195
$
54
3,301
 
10,000
3,609
$
40
5,325
$
35
Note:
Costs
are
based
on
cost
curve
equations
in
the
document
Technologies
and
Costs
for
Removal
of
Arsenic
from
Drinking
Water
(
EPA­
815­
R­
00­
028).
System
sizes
are
determined
from
SDWISFED
January
2004.

Treatment
cost
estimates
for
different
source
water
quality
conditions
Exhibits
8
and
9
present
costs
for
anion
exchange
treatment
when
the
water
being
treated
contains
less
than
20
milligrams
per
liter
(
mg/
L)
of
sulfate.
Ion
exchange
is
a
physical/
chemical
process
by
which
an
ion
on
the
solid
phase
is
exchange
for
an
ion
in
the
water
being
treated,
or
feed
water.
The
solid
phase
is
typically
a
synthetic
resin.
Once
the
resin
is
exhausted
(
i.
e.,
all
sites
available
for
ion
exchange
resin
filled
by
contaminant
ions),
it
must
be
regenerated.
Higher
sulfate
concentrations
in
source
water
may
affect
the
capacity
of
the
anion
exchange
unit
to
affectively
remove
other
contaminants.
Therefore,
if
there
are
more
sulfate
ions
in
the
source
water,
the
anion
exchange
resin
must
be
regenerated
more
frequently.
This
more
frequent
operation
and
maintenance
will
result
in
higher
costs
associated
with
implementing
the
technology.
Exhibit
10
shows
the
impact
on
household
costs
for
the
same
size
water
systems
in
Exhibit
9
that
have
sulfate
between
20
and
50
mg/
L
in
their
source
water.

Exhibit
10.
Comparison
of
annual
per
household
costs
of
ion
exchange
treatment
(
20­
50
mg/
L
sulfate).
10th­
Percentile
Sized
System
50th­
Percentile
Sized
System
System
Size
Population
Size
Treatment
Costs
Population
Size
Treatment
Costs
25
 
500
40
$
750
120
$
270
501
 
3,300
600
$
100
1,195
$
73
3,301
 
10,000
3,609
$
52
5,325
$
46
References
CWC
Engineering
Software,
1994.
W/
W
Costs
and
Design
Criteria
Guidelines
(
WATERCO$
T
Model)
User
Manual
for
Computer
Software
for
Estimating
Water
and
Wastewater
Treatment
Costs.
Version
2.0.

EPA,
1984.
Estimation
of
Small
System
Water
Treatment
Costs
(
Water
Model).
Cincinnati,
OH:
EPA
Office
of
Research
and
Development.
1984.

EPA.
1993.
Very
Small
Systems
Best
Available
Technology
Cost
Document.
Prepared
by
Malcolm
Pirnie,
Inc.
for
the
EPA.
April
1993.
10
EPA
1993a.
Small
Water
System
Byproducts
Treatment
and
Disposal
Cost
Document.
Draft
Final.
Prepared
by
DPRA
Inc.
for
the
EPA.
April
1993.

EPA,
1993b.
Water
System
Byproducts
Treatment
and
Disposal
Cost
Document.
Draft
Final.
Prepared
by
DPRA
Inc.
for
the
EPA.
April
1993.

EPA,
1998.
Cost
Evaluation
of
Small
System
Compliance
Options:
Point­
of­
Use
and
Point­
of­
Entry
Treatment
Units.
Prepared
by
The
Cadmus
Group,
Inc.
for
EPA.
September
1998.

EPA,
1998a.
Variance
Technology
Findings
for
Contaminants
Regulated
Before
1996.
EPA
815­
R­
98­
003.
September
1998.
