Water Utilities Are Getting Ready To Raise Costs, But You Can Profit From These Changes

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The government appears to be coming after “forever chemicals.” The Environmental Protection Agency (EPA) is getting ready to finalize a new rule for water standards across the country. It’s aimed at a group of chemicals called “PFAS” (per- and polyfluoroalkyl substances). They’re also commonly known as “forever chemicals” because they don’t break down easily and stay in the environment for a long time.

Scientists say PFAS can cause health problems such as increasing cholesterol, weakening the immune system, and increasing the risk of cancer. There are thousands of types of PFAS and only a few have been studied. So it’s probably a good idea to keep these chemicals out of our bodies.

According to the EPA, drinking water represents 20% of our exposure to PFAS. The chemicals are also in air pollution, our food supply, and many common everyday products such as nonstick cookware, carpets, and shampoo. The EPA has known about the potential toxic effects of PFAS since 1998. And now, it’s finally doing something about them.

We’re focused on finding the safest income investments on the market. When the government comes up with new rules that could have a big impact, we pay attention and look for ways to profit.

Today, I’ll explain how the EPA’s new rule will affect our water systems. And I’ll show you one way to profit while collecting a reliable income.


Utilities Need to Get Ready

Imagine finding one drop of water out of five Olympic-sized swimming pools. That’s the lowest amount of PFAS laboratory equipment can reliably measure – 4 parts per trillion. It’s also the new limit the EPA is setting for several common PFAS chemicals. For the first time, there will be a nationwide standard for PFAS in our drinking water.

Currently, about half of U.S. states have no regulations on the amount of PFAS allowed in water. And the EPA’s limit of 4 parts per trillion will be lower than the limits in all states except for one – Illinois.

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While there’s plenty of debate surrounding the effectiveness of implementing these limits at this point, one thing is clear. This means big changes for water utilities across the country. And not only for those in states with high limits, but also for those states that currently have no regulations involving limits.

They’ll all need to spend a lot of money testing for PFAS, drilling new wells for clean water, and building new treatment facilities to filter out the chemicals. According to a report from the American Water Works Association, water utilities will have to spend more than $50 billion over the next 20 years to follow the new rule.

They won’t have to shoulder that alone, though. The federal government is using $9 billion from the 2021 Bipartisan Infrastructure Law to help. And lawsuits against PFAS manufacturers like 3M and Dupont have secured over $11 billion in settlements to clean up PFAS.

But that’s still not enough. And customers like you and me will end up paying the cost through higher water bills.


One Way to Soften the Blow of Rising Bills

While there’s nothing we can do to prevent utilities from charging us more, there is a way to align our interests with theirs and collect growing income. And that’s by investing in water utilities.

They’ll have to invest billions of dollars to upgrade their water systems to follow the EPA’s rules. So they may take a hit in the short-term. But utility company earnings are regulated based on the amount of infrastructure they own. So the money they spend on removing PFAS from water will increase their profits -- And that means more dividends for shareholders.

One water utility company that’s recently been trading at a discount is Essential Utilities (WTRG). It provides water service to customers in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, and Virginia. It also owns a gas utility in Pennsylvania and Kentucky.

Essential Utilities estimates it will have to spend $450 million to meet the EPA’s new PFAS standards in the areas it serves. That’s money that will help grow its earnings in the years to come.

Essential Utilities is a reliable dividend payer that has increased its payout 31 years in a row. It yields 3.4% and trades at 18x earnings. The company’s stock has historically traded at an average of 26x earnings. Which means it’s trading at a 30% discount.

As government regulations crack down on PFAS, we can use this opportunity to boost our income stream and fight back against rising bills.


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Brad Thomas is the Editor of the Forbes Real Estate Investor.

Disclaimer: This article is intended to provide information to interested parties. ...

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