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.

What is ISRS?
ISRS is a program that enhances Missouri American Water’s ability to perform water main replacement & relocation projects in St. Louis County. Customers in St. Louis County will see a small surcharge, based on water usage, included on their regular periodic bill.

Why is ISRS needed?
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. After ISRS became law in 2003, the rate of replacement accelerated to an average of about 30 miles of water mains per year.

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 4,500 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 is the ISRS calculated?
The ISRS is calculated based on the level of eligible capital investment made Missouri American Water and expenses such as depreciation and property taxes. These costs are divided among St. Louis County customers based on the amount water each customer uses.

How much does ISRS add to my bill?
Currently there is no ISRS included on customer bills. New customer rates went into effect on May 28, 2018, and the ISRS rate was reset to zero at that time. ISRS will not be collected again until approved by the Missouri Public Service Commission.

What are the ISRS rates?
MOAW Infrastructure System Replacement Surcharge table

Do other states use ISRS?
At least 10 other states use a program such as ISRS. Most of these states are in the Midwest and Northeast, where systems are older and in greater need of replacement. Other states often refer to the mechanism as DSIC, or Distribution System Investment Charge.

Can 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. The ISRS program allows Missouri American Water to begin recovering main replacement costs in St. Louis County sooner 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.

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 may 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.

Prior to ISRS, the company’s annual investment in main replacement was less than $10 million. Since ISRS became law, Missouri American Water has been investing between $50 million and $80 million annually to replace water mains.

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.

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.
  • Unlike main breaks, replacements can be scheduled to minimize disruption to schools, businesses and residents.