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Demand depends on commercial and residential water needs, which are related to population growth and to the level of economic activity. The profitability of individual companies depends on efficiency of operations, because prices are fixed by public utility commissions (PUCs). Large companies have economies of scale in operations and the ability to raise capital for infrastructure improvements. Small companies can compete successfully through superior engineering or by serving desirable local markets. The US industry is concentrated: the 50 largest companies account for about 75% of industry revenue.

High barriers to entry, such as capital investments, make the industry somewhat resistant to competition; many companies operate as de facto monopolies.

Revenue by Service - US Census Bureau

Water services account for about 70% of industry revenue, sewer services for about 15%. Steam supply, irrigation and other services account for the rest.

The operations of small or large water and sewer systems and commercial or municipal utilities are similar. Water and sewer operations are local monopolies, mainly because of the large infrastructure of reservoirs, pipes, and treatment facilities needed. Competition exists only in determining who operates a system. Commercial companies may own a local system, or operate a system on behalf of a local government ("contract operations"), or may own parts of a system, such as water wells or a reservoir.

A water system consists of a water source, a system of storage reservoirs and pumping stations, a water treatment facility, and a pipe distribution system. The water source may be surface (lakes or rivers) or ground water (springs and wells). Washington, DC, for example, uses more than 100 million gallons of water per day from the Potomac River. While water from lakes or rivers is sometimes free, companies must often pay wholesale fees for water owned by private owners or local or regional public water authorities.

To ensure that water is available during periods of peak use (which often coincide with periods of low accumulation, like the summer months), utilities may operate various types of reservoirs, including tanks, artificial lakes, and covered ground reservoirs. Water treatment consists of various steps to remove contaminants. A coagulant like alum (aluminum sulfate) may be added to the water to attract and clump suspended particles, which settle to the bottom or top of sedimentation or flotation basins. Water is then filtered through sand and gravel beds, and disinfected with chlorine to kill bacteria and viruses. Fluoride is usually added (as hydrofluorosilicic acid) to help prevent tooth decay, and lime (calcium hydroxide) is added to adjust the water's acidity and prevent corrosion of distribution pipes. Treated water runs through meters before flowing through distribution pipes to final customers. Water is periodically tested for quality at various stages in the system.

A sewer system works much the same as a water system, but in reverse. Wastewater is collected through a system of pipes from residential and industrial customers and rain sewers, and is processed in a treatment plant before being discharged. Primary treatment consists of filtering and settling out solids from the waste stream and separating the sludge from the water. In secondary treatment, oxygen is added to encourage the growth of bacteria that consume much of the rest of the waste. The remaining water is then disinfected and discharged into rivers, lakes, or the ocean. Sludge is treated with heat to kill bacteria and may be dried for use as fertilizer or placed in landfills.

The operation of both water and sewer systems is highly automated and requires mainly monitoring. The average local water or sewer utility has fewer than a dozen employees. Maintenance and capital costs are often higher than operating costs, because of the large network of pipes, valves, pumps, reservoirs, and treatment facilities that make up a complete system. Pipe maintenance or replacement is especially expensive, as pipes are usually located under roadways.

Computer systems have become important to some water or sewer systems to monitor flow and quality at many points of the large networks of pipes and valves. Many older systems operate with only rudimentary monitoring. Some companies invest in updating antiquated technology to improve efficiency and customer service. Wireless meter reading systems allow consumers to monitor daily use and utilities to detect leaks and cut manual meter reading costs. New plant technologies use biological processes (instead of costly chemicals) to remove contaminants.

After September 11, 2001, the US government required companies to assess their vulnerability to a terrorist attack on water supplies. Companies have had to adopt and update technology to comply with those requirements. Changes in environmental regulations can also trigger system upgrades, and new federal standards for cybersecurity are also under discussion.

Customers are individuals, businesses, and municipalities. Large commercial customers pay lower rates than residential customers, but residential customers provide stable and predictable income. Residential customers make up the majority of customers for commercial utilities. Rates are set by state public utility commissions (PUCs). The rate setting mechanism of most PUCs is complicated and slow, sometimes stretching out for years. Consequently, the managers of utilities are constantly involved in rate-setting procedures.

The cash flow of water or sewer companies can be highly seasonal, as water demand may be higher in the summer but water availability lower. Accounts receivable for the industry in the US average about 50 days' sales. Companies typically keep an allowance for uncollectible customer accounts.

Many companies make large annual capital investments to maintain or expand their systems. Transmission and distribution infrastructure accounts for the majority of capital expenditures, other investments include treatment, storage, and water source rights.

Rates charged by water and sewer companies typically are set by state public utility commissions (PUCs). Rates are generally set to allow a utility to earn a reasonable return on investment. The EPA monitors state compliance with the Safe Drinking Water Act (SDWA) and sets regulations concerning contaminants in drinking water. All water system operators are required to post "consumer confidence reports" about the contaminants in their water. The EPA also regulates the types of contaminants that may be discharged into public waters from sewage systems.

The size of the global water utility market is estimated to be $185 billion, according to S-Network Global Water Indexes. Private-sector operators make up about 20% of that market.

Though public utilities dominate, competition among private water management companies takes place in major markets in Europe, Asia, Australia, and North America. Worldwide, more than 60 countries have private participation in the water and sewerage market, and private-sector water project investments total about $4 billion annually, according to the World Bank. Major companies based outside the US include France-based global giants SUEZ Environnement and Veolia Environnement, Brazil's SABESP, and the UK's Severn Trent.

The world's population is expected to reach 9 billion by 2050, and water use is growing at twice the rate of the global population. Agriculture accounts for about 70% of freshwater withdrawals worldwide. The United Nations and other organizations work to ensure safe drinking water and sanitation. Access to water resources can be a source of contention between countries, and treaties often govern resources shared by more than one nation.

Water scarcity impacts about 1.2 billion people in more than 40 countries, or about one-fifth of the world's population, and the UN estimates that between 3 billion and 4 billion people lack access to safe and reliable tap water. Some 2.6 billion global residents do not have access to improved sanitation.

Developing nations suffer from issues such as inefficient water use, pollution, bureaucratic policies, and overuse by agricultural and industrial businesses. In China and India, industrial, agricultural, and energy needs outpace clean water supply, and water treatment and conservation demands are increasing. In China, the food supply is threatened by the lack of clean water for agricultural use, which has led to contamination of grains and produce. In India, free electricity and water provided to farms have led to overproduction of grains and unsustainable use of resources.

Despite water scarcity due to desertification in some areas, rates in the US are among the lowest of developed nations, as water and wastewater bills make up about 1% of annual household budgets. Other developed nations with low water utility charges include Italy and Poland, while Germany and Denmark have among the highest water bills, according to an analysis of major cities from the International Water Association.

In the US, availability of water resources varies by region. Areas such as the West and the Southwest are marked by water scarcity and frequent droughts. Water is more plentiful and available in the northern and eastern parts of the US. Pricing for water is influenced not only by availability, but also by demand, infrastructure, regional planning, state and local government subsidies, and other factors.

Water is cheapest in the Great Lakes region of the US, but that is not true for other water-rich areas, according to the Pacific Institute's research organization Circle of Blue. In Boston, a family of four using 100 gallons per day will pay about $78 per month. In desert Phoenix, a family of four pays around $39 per month. Similarly, Las Vegas residents pay about $42 per month; Atlanta residents, $92 monthly. Atlanta has about 10 times the annual rainfall of Las Vegas.

Water may come from rivers, aquifers, reservoirs, or natural lakes, depending upon the region. Companies are restricted by legislation to how they can access, treat, and deliver water to their customers. Local weather conditions, such as floods, hurricanes, or tornadoes, can impact water availability or cause contamination.

Some employees of commercial water and sewer utilities have special technical or engineering skills that command above-average earnings. Overall, the average hourly industry wage in the US is slightly higher than the national average. Commercial companies generally have to pay about the same wages as their public sector counterparts. The industry injury rate in the US is moderately lower than the national average.

Industry Employment Growth Bureau of Labor Statistics

Average Hourly Earnings & Annual Wage Increase Bureau of Labor Statistics