Recently enacted regulations in Canada and elsewhere require water utilities to be financially self-sustaining over the long term. This implies full cost recovery for providing water and wastewater services to users.

This study by R. Rehan et al. at the University of Waterloo in Canada proposes a new approach to help water utilities plan to meet the requirements of the new regulations. A causal loop diagram is developed for a financially self-sustaining water utility, which frames water and wastewater network management as a complex system with multiple interconnections and feedback loops.

The novel System Dynamics approach is used to develop a demonstration model for water and wastewater network management. The network simulated is that of a typical Canadian water utility that has under-invested in maintenance.

The model results show that with no proactive rehabilitation strategy, the utility will need to substantially increase its user fees to achieve financial sustainability. This increase is further exacerbated when price elasticity of water demand is considered. However, when the utility pursues proactive rehabilitation, financial sustainability is achieved with lower user fees.

Water Research, Volume 45, Issue 16, 15 October 2011, Pages 4737–4750.