Protecting Drinking Water: The Safe Drinking Water Act Chapter 16

1. Overview of Policy _________________________(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; listed 83 contaminants SDWA Amendments of 1996 –Adds risk assessment and benefit-cost analysis to standard-setting; establishes a Drinking Water State Revolving Fund (DWSRF); promotes prevention 2

Bottled Water Not directly regulated under SDWA Controlled by ____________________________ (FDA), not EPA – FDA must adopt EPA’s standards for drinking water – FDA has own standards for aesthetics and health 3

2. Setting Standards: 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 4

3. Economic Analysis: Standard-Setting MCLGs are __________________ – 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 _____________________ 5

Benefit-based MCL (at A B ) $ A TSC TSB 0 AeAe ABAB Maximum TSB overregulation 6

Total social benefits (TSB) are maximized at the abatement level where MSB = 0 Net social benefits (= TSB - TSC) are maximized at the abatement level where MSB = MSC MSB = the slope of TSB = the first derivative of TSB = d(TSB)/dA MSC = the slope of TSC = the first derivative of TSC = d(TSC)/dA 7

4. Pricing Water Does Price Matter? Some evidence suggests that consumption of water is sensitive to ________ Comparing domestic with international data – US water consumption is relatively _______ – US water prices are relatively _______ Suggests that pricing water can influence conservation 8

Local Pricing Practices Survey Data ___________________: (29.3%) – price is independent of use; marginal price = 0 – efficient only if MC = 0 ______________________: (50.6%) – charge increases with higher use at constant rate – efficient only if MC were constant at same rate ____________________: (30.6%) – declining block and increasing block 9 Source: U.S. EPA, Office of Water (December 2002), p. 29. a 200 survey of community water systems

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 10 Price $ Q of water use

Increasing Block Price rises as Q rises Provides incentive for conservation Efficient since it considers rising MC along with MB of consumption 11 Price $ Q of water use