Protecting Drinking Water The Safe Drinking Water Act

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Protecting Drinking WaterThe Safe Drinking Water
Act

• Chapter 16

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Overview of Policy

• Safe Drinking Water Act (SDWA) of 1974
• Authorized EPA to set standards (shifted
  responsibility from the Public Health Service)
• All contaminants were addressed, not just
  bacteria
• SDWA Amendments of 1986
• Accelerated standard-setting imposed lead ban
  improved protection of groundwater
• SDWA Amendments of 1996
• Adds risk assessment and benefit-cost analysis to
  standard-setting establishes a Drinking Water
  State Revolving Fund (DWSRF) promotes prevention

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Pollutants Controlled Under SDWA

• 83 contaminants listed in 1986 SDWA
• New contaminants are added from a list of
  priority contaminants
• Changes in 1996 Amendments
• Benefit-cost analysis and risk assessment govern
  which contaminants to control and standard
  setting
• Establishes National Contaminant Occurrence
  Database (NCOD) to identify contaminants

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National Primary Drinking Water Regulations
(NPDWR)

• Aimed at protecting human health
• Uniformly applied to all public water systems
• Each NPDWR has three parts
• Maximum contaminant level goal (MCLG)
• level at which no known or expected adverse
  health effects occur with margin of safety not
  enforceable
• Maximum contaminant level (MCL)
• highest level permitted as close to MCLG as
  feasible enforceable
• Best available technology (BAT)
• treatment technology that makes MCL achievable

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National Secondary Drinking Water Regulations

• Guidelines to protect public welfare
• Called secondary maximum contaminant levels
  (SMCLs)
• Not enforceable by the federal government
• Not uniform

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Bottled Water

• Not directly regulated under SDWA
• Controlled by the FDA, not EPA
• FDA must adopt EPAs standards for drinking water
• FDA has own standards for aesthetics and health

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Economic Analysis
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Standard-SettingFederal Role

• MCLGs are benefit-based
• Before 1996 SDWA, MCLs also were benefit-based,
  since MCLs link to MCLGs
• 1996 SWDA amendments requires EPA to conduct an
  Economic Analysis (EA) for any proposed NPDWR
• Must determine whether benefits of a new MCL
  justify costs
• Important because ignoring costs means MCLs could
  be set to maximize benefits, causing
  overregulation

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Benefit-based MCL (at AB)

TSC
Maximum TSB
TSB
0
A
AB
Ae
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Economic Analysis (EA) for the New Arsenic
Standard (Annualized values in 2003)

• Incremental Benefits
• Estimated value of avoided illness and premature
  death
• 154.2218.4 million per year
• Incremental Costs
• Treatment, monitoring, administrative expense
• 227.1 million per year
• Net Benefits
• 72.9 million to 8.7 million per year
• Since numerous potential benefits were not
  monetized in the EA, EPA argued that the true
  incremental benefits would justify the
  incremental costs, and announced the new standard
  in 2001

Source U.S. EPA, Office of Water, Office of
Ground Water and Drinking Water (December 2000).
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Pricing Water
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Does Price Matter?

• Some evidence to suggest that consumption of
  water (Qd) is sensitive to price (P)
• Comparing domestic with international data
• US water consumption is relatively high
• US water prices are relatively low
• Suggests that pricing water can influence
  conservation

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Local Pricing PracticesSurvey Data

• Flat fee pricing (29.3)
• price independent of use marginal P 0
• efficient only if MC 0
• Flat rate pricing (50.6)
• price increases with higher use at constant rate
• efficient only if MC were constant at same rate
• Variable rate pricing (30.6)
• declining block and increasing block

Source U.S. EPA, Office of Water (December
2002), p. 29.
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Declining Block

• Price falls as Q rises
• Intent is to encourage consumption so that scale
  economies can be achieved
• Inefficient because it uses average cost pricing
  vs. marginal cost pricing

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Increasing Block

• Price rises as Q rises
• Provides incentive for conservation
• Efficient since it considers rising MC along with
  MB of consumption