Infrastructure System Replacement Surcharge (ISRS)
The Infrastructure System Replacement Surcharge (ISRS) is an important program that benefits customers by funding the efficient replacement of aging water pipes.
For more details, see our Q-and-A below:
What is ISRS?
The Infrastructure System Replacement Surcharge (ISRS) is a program that increases Missouri American Water’s ability to perform water main replacement projects in St. Louis County. It is a small monthly fee paid by customers in the County that funds water main replacement projects in that area.
In the late 1990s, Missouri American Water was replacing an average of about 11 miles of aging water mains in St. Louis County each year and filing rate cases annually to recover those costs.Each rate case costs customers more than $1 million.After ISRS became law, the rate of replacement accelerated to an average of about 30 miles of water mains per year, with ISRS filing costs averaging about $10,000.
The industry’s suggested replacement rate for water mains is 1 percent (based on a 100-year lifespan), which means that every 100 years, all mains would be replaced.Most water systems in the country are averaging a replacement rate of 225 years, which is insufficient to cover the expected lifespan of the typical water main.In St. Louis County, the ISRS program has allowed Missouri American Water to accelerate its replacement rate among the county’s 4,200 miles of water main to 125 years. This is still short of our 100-year goal, but is a step in the right direction.
How much does ISRS add to my bill?
ISRS currently totals about $1.08 per month for a typical residential customer in St. Louis County.
How is the ISRS charge calculated?
The ISRS fee is calculated based on the cost of work performed by Missouri American Water that qualifies as ISRS-related (main replacement work), divided among St. Louis County customers. Work that is not related to main replacement projects is not covered by ISRS, but is instead collected via the traditional rate-setting process.
Can’t Missouri American Water pay for main replacement without a separate fee?
American Water, the parent company of Missouri American Water, provides capital to each of its state subsidiaries for infrastructure projects.One of the factors that is considered when distributing capital is the ability to earn a timely return on investment.ISRS allows Missouri American Water to recover its St. Louis County main replacement costs every 6 months, which makes the projects more attractive than those that can only be recovered after a rate case, which could be several years after a project is complete.i
Without ISRS, Missouri American Water would still replace the oldest and most troublesome mains in our system, but the work would be done at a much lower frequency because it would be more difficult for Missouri to attract capital. What this means is that many mains that are due for replacement would not be replaced in a timely fashion, and as a result, main breaks could increase in frequency.
Missouri American Water has invested more than $600 million to replace 8.8 percent of its water main system in St. Louis County since ISRS began in 2003.
The company went from investing $7-$9 million a year for pipe replacement pre-ISRS to investing $50-$80 million in recent years with ISRS.
How old are our water pipes and why do they need to be replaced?
Some of the pipes in Missouri American Water’s distribution system are more than 120 years old!These pipes wear over time based on the pipe material, soil characteristics and temperatures, becoming susceptible to corrosion, leaks, and breaks. It is estimated that 2 trillion gallons of water is lost each year in the U.S. due mostly to aging, leaky pipes and water main breaks. This amounts to 14-18 percent of all treated water. In St. Louis County, about 24 percent of treated water is lost, or 50 percent more than the national average.
Replacing old pipe before it breaks again is important for several reasons:
- Leaks and breaks are a potential source of water contamination, so we need to maintain our system to keep our customers safe.
- It is 10 times more expensive to fix an emergency water main break than to perform ongoing upgrades.
- Leaks waste a lot of water. As noted above, in St. Louis County, about 24 percent of treated water is lost, or 50 percent more than the national average.
- Unlike main breaks, replacements can be scheduled to minimize disruption to schools, businesses and residents.
Do other states use ISRS?
At least 10 other states use an ISRS program.Most of these states are in the mid-west and northeast, where systems are older and in greater need of replacement (MO, IL, IN, OH, PA, NY, DE, NJ, CT, NH, CA).Most states refer to the mechanism as DSIC, or Distribution System Investment Charge.