SIC 4941 Water Supply


SIC 4941

This category includes establishments primarily engaged in distributing water for sale for residential, commercial, and industrial uses. The industry is dominated by government-controlled establishments such as municipal service districts and public utilities. However, private companies are active in the construction and improvement of water supply facilities and infrastructure. Water distributed for irrigation purposes is classified in SIC 4971: Irrigation Systems.



Water Supply and Irrigation Systems


The oceans, land, and atmosphere that make up and surround the earth hold the equivalent of nearly 1.4 billion cubic kilometers of water. Of that total, approximately 96.5 percent is contained in oceans, 2 percent is in the form of ice, and a small amount exists as vapor in the atmosphere. Fresh water that is available for human use is just 1 percent of the total water supply, and that supply is dwindling as supply cannot keep pace with demand. According to the World Future Society, by 2050 two-thirds of the world's population will be chronically short of water.

In the mid-2000s, more than 80 percent of U.S. water companies were controlled by governmental entities. However, an increasing number of smaller utilities were being acquired by larger systems. There also was an increase in privatization—private companies that contract to operate or to purchase the public utilities. Moreover, many larger systems were investing in new testing and treatment methods. The entire industry was bolstered in the 1990s by federal amendments to the 1996 Safe Drinking Water Act (SDWA) and the 1998 Clean Water Action Plan.

In 2004 there were about 160,00 total public drinking water systems in the United States. Most people received their drinking water from a community water system. Although there were 54,000 community water systems in place, less than 3,800 (7 percent) served over 80 percent of consumers. The U.S. water supply distribution systems comprises over 600,000 miles of pipes. Community water systems process about 34 billion gallons of water each day, and a typical single-family home uses an average of 90 gallons of water per day.

In the mid-2000s the United States was dealing with serious issue of long-term shortage of water supply, as was the rest of the world. The Western states in particular were affected by increasing populations with decreasing water supply sources. Other issues affecting the industry were decreases in federal funding, an aging infrastructure, and environmental safety concerns.


The water supply industry is highly fragmented and consists mainly of municipal utilities or regional entities that operate the nation's 54,000 community water systems, which serve people year-round. The largest system serves 16 million while the smallest serves 25 people. There are an approximate 19,000 other nontransient, noncommunity water systems, which provide water to people for more than six months, but less than a year (e.g., a school with its own water supply), and 89,000 transient noncommunity water systems, which serve the public, but not the same individuals for more than six months out of the year (e.g., campgrounds, rest areas). Also, 42 million Americans obtain their water supply from private wells.

A water utility or company is responsible for providing its community with water that is free of objectionable tastes and odors and does not contain significant color or turbidity. The water also must meet strict federal, state, and local health and safety regulations. It is the utility's job to build and maintain a distribution system that is capable of providing an adequate and uninterrupted supply of water for residential, commercial, industrial, and institutional customers. In addition, the water supplier must maintain adequate water pressure for the community's firefighting needs.

Although most water supply entities are owned or controlled by local or regional governing bodies, a variety of organizational structures are represented in the industry. In addition, water and wastewater management systems are often integrated, resulting in an organization that also operates a sewerage system and waste treatment facilities. The two primary categories of water suppliers are local and regional.

Local organizations include utilities arranged under various management structures. A utility commission, for example, is governed by a policy-making body such as an appointed or elected commission or board of directors. This utility structure offers the advantage of removing the policy-making body from direct political influence. Furthermore, the revenues required by the utility are generated by the commission specifically for water supply purposes with no competition from general city funds. A utility controlled by elected council, in contrast, often is subject to political forces from other city departments and divisions with which the council members also are associated. Planning decisions can become complex and are sometimes bogged down by political infighting. The advantage of a utility that is controlled by a common governing body, as opposed to a separate utility commission, is that the goals of the water utility can be more easily coordinated with the aims of other city departments and agencies.

Regional water authorities provide service directly to customers or through smaller government entities, such as cities and townships. Regional authorities provide many economies of scale that increase water quality and reduce costs. They also offer the advantage of a coordinated large-scale water system that would be impossible to achieve with scattered independent local utilities. However, regional systems must transport water over greater distances, which can reduce efficiency.

An increasing number of for-profit entities supplied water needs in the mid-2000s, often in partnership with municipal organizations. According to the National Association of Water Companies, in 2005 there were 2,400 public-private partnership in water service. These companies either operated or maintained some portion or all of the water utility's operation. Also, there were a few instances of outright sale of a utility to a private company. An estimated 15 percent of all water suppliers' for-profit operations owned by private companies or investors in the mid-2000s.

Source and Price

Water companies extract water mainly from natural and man-made reservoirs, underground aquifers, and waterways. In addition, some water is reclaimed through wastewater treatment, and a small amount of water is derived through desalinization. The water typically is pumped to a treatment center where impurities are filtered out. Before distribution, the water is purified with chemicals such as chlorine and aluminum sulfate.

Along with natural impurities and sediment, a variety of manmade contaminants and sources must be countered by water treatment managers. Sources of pollutants include septic tanks, landfills, surface impoundments, pesticides and fertilizer used on millions of acres of farmland, highway salt, and thousands of industrial chemicals that enter the environment every day.

Revenues for water companies and utilities are generated through taxes and securities issues. Much of their income, however, is derived from water usage fees. A traditional rate structure...

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