Value of Avoiding the Morbidity Increment of a Fatal Case of Bladder Cancer The VSL represents the value of avoiding a premature death. This valuation, however, does not take into account the medical costs associated with the period of illness ( morbidity increment) leading up to death. In its review of the Arsenic Rule, the SAB suggested that the appropriate measure to use in valuing the avoidance of the morbidity increment is the medical cost attributable to a cancer case ( USEPA 10 Previous EPA analyses ( Stage 1 DBPR and Arsenic Rule) used the WTP value for avoiding a case of chronic bronchitis for benefits transfer calculations. The SAB review of the Arsenic benefits analysis identified the curable lymphoma WTP value as another metric that could be used in benefits valuation because "... the endpoint being valued more nearly corresponds to nonfatal bladder cancer..." ( USEPA 2001k). The SAB suggested, however, that calculations using the WTP for chronic bronchitis also be presented. Based on this recommendation, values derived using both the WTP for curable lymphoma and chronic bronchitis are presented throughout the analysis. Economic Analysis for the Stage 2 DBPR Proposal 5 66 July 2003 2001k). Based on available medical data, EPA estimates the medical costs for a fatal bladder cancer case to be $ 93,927 at 1996 price levels ( USEPA 1999a). This medical cost value ( updated to 2000 price levels) is applied as a point estimate to each fatal case of bladder cancer in the benefits model.

Value of Avoiding a Non fatal Case of Bladder Cancer For a case of non fatal bladder cancer, a Willingness to Pay ( WTP) measure is used to estimate what a person would be willing to pay to reduce the risk of developing a case of cancer. The reduced risk that the WTP represents accounts for the desire to avoid treatment costs, pain and discomfort, productivity losses, and any other adverse consequences related to contraction of a non fatal case of bladder cancer. As is the case with VSL valuation, the cumulative WTP for this risk reduction across an exposed population can be used to represent the statistical value of avoiding the illness itself. This WTP value is a more comprehensive measure of the total value that a person would place on avoiding a cancer case than the much simpler cost of illness ( COI) measure.

A review of the available literature did not reveal any studies that specifically measured the WTP to avoid risks of contracting non fatal cases of bladder cancer. Instead, two estimates of WTP to avoid non fatal bladder cancer are used: one based on avoiding a case of curable lymph cancer ( lymphoma) and the other based on avoiding a case of for chronic bronchitis10. Results using both WTP estimates are presented throughout the remainder of the analyses.

The WTP to avoid the risk of contracting curable lymphoma is derived from a survey by Magat et al. ( 1996) that evaluates the risk risk trade off between curable lymphoma and death using a reference lottery metric. A reference lottery metric is a methodology that educates survey respondents of the health consequences of a particular disease ( in this case curable lymphoma) and, based on this information, presents them with choices related to health outcomes. The choices in health outcomes made by the respondents can be further evaluated to derive quantitative measures of relative risk aversion. Based on the outcomes of the Magat et al. study, it was determined that the median risk risk trade off ( relative risk aversion) for contracting a curable case of lymphoma was equivalent to 58.3 percent of the risk attributed to reducing the chances of facing a sudden death ( i. e., the average person would pay 58.3 percent of what they would pay to reduce the risk of sudden death to achieve an equal risk reduction for contracting curable lymphoma). Based on the Magat et al. study results, EPA calculated a WTP distribution for nonfatal bladder cancer as a percentage of the VSL distribution, resulting in a mean WTP value of $ 2.8 million ($ 4.8 million * 58.3 percent) at 1990 price levels ( see Appendix F, section F. 1 for additional information on the derivation of this WTP estimate).

The distribution of WTP values for avoiding the risk of chronic bronchitis are consistent with those defined for the Stage 1 DBPR. This distribution is best represented by a lognormal distribution with a mean of $ 587,500, standard deviation of $ 264,826, and a maximum value of $ 1.5 million at 1998 price values ( USEPA 1998a; Viscusi et al. 1991).

Although the WTP to avoid curable lymphoma or chronic bronchitis is not a perfect substitute for the WTP to avoid a case of non fatal bladder cancer, it is a very reasonable value to use in a benefits transfer methodology. Non fatal internal cancers, regardless of type, generally present patients with very similar treatment, health, and long term quality of life implications, including surgery, radiation or Economic Analysis for the Stage 2 DBPR Proposal 5 67 July 2003 Mean Median Lower ( 5th % tile) Upper ( 95th % tile)

Morbidity Increment 1996 0.1 $ 1.14 0.1 $ N/ A N/ A N/ A VSL 1990 4.8 $ 1.32 6.3 $ 5.5 $ 1.0 $ 14.5 $

WTP  Non Fatal Lymphoma 1990 2.8 $ 1.32 3.7 $ 3.2 $ 0.6 $ 8.5 $

WTP  Chronic Bronchitis 1998 0.6 $ 1.06 0.6 $ 0.6 $ 0.3 $ 1.1 $ CPI Update Factor Values at Year 2000 Price Level ( Millions)

Valuation Parameter Base Year Mean Value in Base Year ( Millions) chemotherapy treatments ( with attendant side effects), and generally diminished vitality over the duration of the illness. In the absence of more specific WTP studies, the WTP values for avoiding a case of curable lymphoma or a case of chronic bronchitis provides a reasonable, though not definitive, substitute for the value of avoiding non fatal bladder cancer.

Updating Price Levels All valuation parameters must be updated to the same price level so comparisons can be made in real terms. Values for VSL, WTP, and the morbidity increment used in the model are updated based on adjustment factors derived from Bureau of Labor Statistics ( BLS) consumer price index ( CPI) data so that each represents a year 2000 price level. Exhibit 5.24 presents these updates.

Exhibit 5.24 VSL, WTP, and Morbidity Increment Price Level Updates Notes: Morbidity increment value is presented as a point estimate.

Source: Derived from Appendix F ( Exhibits F. 1a and F. 1b).

Adjustments for Real Income Growth and Elasticity Although the price level ( year 2000) is held constant throughout the benefits model, projections of benefits in future years are subject to income elasticity adjustments. Income elasticity adjustments represent changes in valuation in relation to changes in real income. For example, if, for every 1 percent increase in real income, a particular consumer's WTP for a particular item increases by 1 percent, this would be represented by an income elasticity of 1. For most items, income elasticity values are actually less than 1, indicating that valuation of most items does not increase as fast as real income levels.

Based on an evaluation of the income elasticity literature, Kleckner and Neuman ( 2000) identified published studies from which elasticity values could be derived for both fatal and non fatal potential health effects. For fatal cancers, they identified a triangular distribution with a central estimate of 0.40 ( low end: 0.08; high end: 1.00) to best represent the uncertainty of that income elasticity value. For nonfatal cancers, a triangular distribution with a central estimate of 0.45 ( low end: 0.25; high end: 0.60) best represents the value. These distributions are used as assumptions in the Monte Carlo simulation to further characterize uncertainty in benefits estimates.

In order to apply the income elasticity values in the model, they must be combined with projections of real income growth over the time frame for analysis. Population and real gross domestic 11 Ideally, income elasticity measurements would be calculated using real per capita personal income growth. However, real per capita GDP is used as a proxy for real per capita personal income growth due to lack of appropriate data projections for real personal income growth. Historical data suggests that GDP and personal income grow at similar rates ( i. e., Table B 31 of the 2002 Economic Report of the President shows that both real per capita GDP and disposable personal income grew at an average annual rate of 2.3 percent between 1959 and 2000).

12 See Appendix A of Kleckner and Neuman ( 2000) for additional information on the derivation and application of income elasticity adjustments.

13 The distribution of VSL values used in this EA is derived based on a meta analysis of 26 different VSL studies, all representing different year price levels. These price levels were updated to a common 1990 price level as part of the analysis in " The Benefits and Costs of the Clean Air Act, 1970 1990" ( USEPA 1997b), from which the distribution used in this EA is taken.

14 Because the morbidity increment reflects a point estimate of direct medical costs and income elasticity figures used in this analysis are based on WTP values, income elasticity adjustments were not applied to the projected morbidity increment values ( only the CPI update factor is applied).

15 A 25 year analysis time frame was chosen to reflect the period before which most systems would need to reinvest in capital equipment replacement ( a 20 year useful life is assumed for the analysis). Since the benefits, as derived in this analysis, are a result of installing treatment equipment, this time frame was also applied to benefits projections. Economic Analysis for the Stage 2 DBPR Proposal 5 68 July 2003 product ( GDP) projections are combined to calculate per capita real GDP values. 11 Percent changes in these values over time can then be combined with income elasticity figures to derive a single adjustment factor. 12 Given any two time periods, this factor can be calculated as follows:

Income elasticity adjustment factor = ( eI 1  eI 2  I 2  I 1) / ( eI 2  eI 1  I 2  I 1)

where: e = income elasticity I 1 = real income ( per capita GDP) in the base year I 2 = real income ( per capita GDP) in the year of analysis Income elasticity adjustment factors are calculated from the same base year as the values subject to adjustment. For example, income elasticity factors for fatal cancers are calculated from a 1990 base year because that is the base year used in the study from which VSL estimates are derived. 13 The mean values of the income adjustment factors calculated for the Stage 2 benefits model range from 1.131 to 1.460 for fatal cancer valuation and 1.114 to 1.393 for non fatal valuation over the 25 year analysis time frame ( Appendix F presents detailed spreadsheets of these calculations). The adjusted yearly values for the VSL and WTP ( at a 2000 price level) are then calculated by multiplying the base value of each by the appropriate income elasticity adjustment factor. 14 Exhibit 5.25 presents the results of the income elasticity adjustments for the 25 year analysis time frame. 15 Economic Analysis for the Stage 2 DBPR Proposal 5 69 July 2003 Morbidity Increment Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 0.1 $ 7.2 $ 6.2 $ 1.1 $ 16.4 $ 4.2 $ 3.6 $ 0.6 $ 9.6 $ 0.7 $ 0.7 $ 0.3 $ 1.3 $

2004 0.1 $ 7.2 $ 6.3 $ 1.1 $ 16.6 $ 4.2 $ 3.7 $ 0.7 $ 9.7 $ 0.7 $ 0.7 $ 0.3 $ 1.4 $

2005 0.1 $ 7.3 $ 6.4 $ 1.1 $ 16.8 $ 4.3 $ 3.7 $ 0.7 $ 9.8 $ 0.8 $ 0.7 $ 0.3 $ 1.4 $

2006 0.1 $ 7.4 $ 6.4 $ 1.1 $ 17.0 $ 4.3 $ 3.8 $ 0.7 $ 9.9 $ 0.8 $ 0.7 $ 0.3 $ 1.4 $

2007 0.1 $ 7.5 $ 6.5 $ 1.2 $ 17.2 $ 4.4 $ 3.8 $ 0.7 $ 10.0 $ 0.8 $ 0.7 $ 0.3 $ 1.4 $

2008 0.1 $ 7.6 $ 6.6 $ 1.2 $ 17.4 $ 4.4 $ 3.8 $ 0.7 $ 10.1 $ 0.8 $ 0.7 $ 0.4 $ 1.4 $

2009 0.1 $ 7.7 $ 6.7 $ 1.2 $ 17.6 $ 4.5 $ 3.9 $ 0.7 $ 10.3 $ 0.8 $ 0.7 $ 0.4 $ 1.4 $

2010 0.1 $ 7.8 $ 6.7 $ 1.2 $ 17.8 $ 4.5 $ 3.9 $ 0.7 $ 10.4 $ 0.8 $ 0.7 $ 0.4 $ 1.4 $

2011 0.1 $ 7.8 $ 6.8 $ 1.2 $ 18.0 $ 4.6 $ 4.0 $ 0.7 $ 10.5 $ 0.8 $ 0.7 $ 0.4 $ 1.5 $

2012 0.1 $ 7.9 $ 6.9 $ 1.2 $ 18.2 $ 4.6 $ 4.0 $ 0.7 $ 10.6 $ 0.8 $ 0.7 $ 0.4 $ 1.5 $

2013 0.1 $ 8.0 $ 7.0 $ 1.2 $ 18.4 $ 4.7 $ 4.1 $ 0.7 $ 10.7 $ 0.8 $ 0.7 $ 0.4 $ 1.5 $

2014 0.1 $ 8.1 $ 7.1 $ 1.3 $ 18.6 $ 4.7 $ 4.1 $ 0.7 $ 10.8 $ 0.8 $ 0.8 $ 0.4 $ 1.5 $

2015 0.1 $ 8.2 $ 7.1 $ 1.3 $ 18.8 $ 4.8 $ 4.2 $ 0.7 $ 11.0 $ 0.8 $ 0.8 $ 0.4 $ 1.5 $

2016 0.1 $ 8.3 $ 7.2 $ 1.3 $ 19.0 $ 4.8 $ 4.2 $ 0.7 $ 11.1 $ 0.8 $ 0.8 $ 0.4 $ 1.5 $

2017 0.1 $ 8.4 $ 7.3 $ 1.3 $ 19.2 $ 4.9 $ 4.3 $ 0.8 $ 11.2 $ 0.8 $ 0.8 $ 0.4 $ 1.5 $

2018 0.1 $ 8.5 $ 7.4 $ 1.3 $ 19.4 $ 4.9 $ 4.3 $ 0.8 $ 11.3 $ 0.9 $ 0.8 $ 0.4 $ 1.6 $

2019 0.1 $ 8.6 $ 7.5 $ 1.3 $ 19.6 $ 5.0 $ 4.3 $ 0.8 $ 11.5 $ 0.9 $ 0.8 $ 0.4 $ 1.6 $

2020 0.1 $ 8.7 $ 7.5 $ 1.3 $ 19.9 $ 5.1 $ 4.4 $ 0.8 $ 11.6 $ 0.9 $ 0.8 $ 0.4 $ 1.6 $

2021 0.1 $ 8.8 $ 7.6 $ 1.4 $ 20.1 $ 5.1 $ 4.4 $ 0.8 $ 11.7 $ 0.9 $ 0.8 $ 0.4 $ 1.6 $

2022 0.1 $ 8.9 $ 7.7 $ 1.4 $ 20.3 $ 5.2 $ 4.5 $ 0.8 $ 11.8 $ 0.9 $ 0.8 $ 0.4 $ 1.6 $

2023 0.1 $ 9.0 $ 7.8 $ 1.4 $ 20.5 $ 5.2 $ 4.5 $ 0.8 $ 12.0 $ 0.9 $ 0.8 $ 0.4 $ 1.6 $

2024 0.1 $ 9.1 $ 7.9 $ 1.4 $ 20.8 $ 5.3 $ 4.6 $ 0.8 $ 12.1 $ 0.9 $ 0.8 $ 0.4 $ 1.7 $

2025 0.1 $ 9.2 $ 8.0 $ 1.4 $ 21.0 $ 5.3 $ 4.6 $ 0.8 $ 12.2 $ 0.9 $ 0.8 $ 0.4 $ 1.7 $

2026 0.1 $ 9.3 $ 8.0 $ 1.4 $ 21.2 $ 5.4 $ 4.7 $ 0.8 $ 12.4 $ 0.9 $ 0.8 $ 0.4 $ 1.7 $

2027 0.1 $ 9.4 $ 8.1 $ 1.4 $ 21.4 $ 5.5 $ 4.7 $ 0.8 $ 12.5 $ 0.9 $ 0.9 $ 0.4 $ 1.7 $

Notes:

Source: All values in millions of year 2000 dollars. VSL Fatal Cancer Cases WTP  Chronic Bronchitis WTP  Non Fatal Lymphoma Year Point Estimate Mean Value 90 Percent Confidence Bound Non Fatal Cancer Cases Values derived based on valuation distributions and inflation ( CPI) and income elasticity factors from Exhibits F. 1a, F. 1b, and F. 1e. Detail may not add exactly to totals due to independent rounding. Mean Value Mean Value Median Value 90 Percent Confidence Bound Median Value Median Value 90 Percent Confidence Bound Exhibit 5.25 Value of Morbidity Increment, VSL, and WTP by Year 16 Although the 2 and 17 percent PAR values are used throughout this section, EPA recognizes that the lower bound may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

17 See EPA's Guidelines for Preparing Economic Analyses ( USEPA 2000j) for a full discussion of the use of social discount rates in the evaluation of policy decisions. Economic Analysis for the Stage 2 DBPR Proposal 5 70 July 2003 5.6.3 Value of Benefits Resulting from the Stage 2 DBPR for the Preferred Alternative To assess the total value of benefits resulting from the Stage 2 DBPR, both the qualitative and quantitative benefits must be considered. Although information is not sufficient to quantify the value of preventing potential adverse reproductive and developmental health effects in the primary benefits analysis, the number of cases avoided and associated value could be significant ( see Section 5.9). Likewise, the value of other health and non health benefits could be substantial. Thus, the primary benefits analysis is a conservative quantification of the total benefits of this regulation.

To calculate the total value of benefits derived from reductions in bladder cancer cases as a result of the Stage 2 DBPR, a stream of estimated monetary benefits is calculated by combining the annual cases avoided ( Exhibit 5.21) with valuation inputs ( Exhibit 5.25) using Monte Carlo simulation. Use of a Monte Carlo simulation allows the characterization of uncertainty around final modeling outputs based on the uncertainty underlying the various valuation inputs. The Stage 2 DBPR benefits model uses distributions of VSL, WTP, and income elasticity values to attribute monetary values ( with uncertainty bounds) to the number of bladder cancer cases avoided. The values for cancer cases avoided at both the 2 and 17 percent PAR values16 and for both WTP estimates ( for curable lymphoma and chronic bronchitis) were calculated and carried through the Stage 2 DBPR benefits model. The results for fatal, non fatal, and total benefits are presented in Exhibits 5.26 ( note that the analysis assumptions, e. g. 2 % PAR WTP for Lymphoma, are in the table headings).

Calculating and Discounting the Stream of Benefits To allow comparison of future streams of costs and benefits, it is common practice to adjust both streams to a present value ( PV) using a social discount rate. This process takes into account the time preference that society places on expenditures and benefits and allows comparison of cost and benefit streams that vary over a given time period. 17 A present value for any future period can be calculated using the following equation:

PV = V( t) / ( 1 + R) t Where: t = The number of years from the reference period ( year 0 of the benefits stream) R = Social discount rate V( t) = The benefits occurring t years from the reference period There is much discussion among economists of the proper social discount rate to use for policy analysis. Therefore, for Stage 2 DBPR benefits analyses, PV calculations are made using two social discount rates thought to best represent current policy evaluation methodologies, 3 and 7 percent. Historically, the use of 3 percent is based on rates of return on relatively risk free investments, as described in the Guidelines for Preparing Economic Analyses ( USEPA 2000j). The rate of 7 percent is a recommendation of OMB as an estimate of " before tax rate of return to incremental private investment" ( USEPA 1996b). To allow evaluation on an annual basis, the total PV of benefits are annualized using the same social discount rates. Exhibit 5.27 presents the annualized present value of estimated benefits for the Stage 2 DBPR over the 25 year time frame for analysis. Economic Analysis for the Stage 2 DBPR Proposal 5 71 July 2003 Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003  $  $  $  $  $  $  $  $  $  $  $  $

2004  $  $  $  $  $  $  $  $  $  $  $  $

2005  $  $  $  $  $  $  $  $  $  $  $  $

2006 4.4 $ 3.9 $ 0.7 $ 10.1 $ 7.3 $ 6.3 $ 1.1 $ 16.6 $ 11.7 $ 10.2 $ 1.9 $ 26.7 $

2007 10.7 $ 9.3 $ 1.8 $ 24.3 $ 17.5 $ 15.2 $ 2.7 $ 40.1 $ 28.2 $ 24.5 $ 4.5 $ 64.4 $

2008 18.0 $ 15.7 $ 3.0 $ 41.0 $ 29.5 $ 25.6 $ 4.6 $ 67.6 $ 47.5 $ 41.3 $ 7.6 $ 108.6 $

2009 26.1 $ 22.7 $ 4.3 $ 59.4 $ 42.7 $ 37.1 $ 6.6 $ 97.9 $ 68.9 $ 59.9 $ 11.0 $ 157.3 $

2010 34.8 $ 30.3 $ 5.8 $ 79.1 $ 57.0 $ 49.5 $ 8.8 $ 130.5 $ 91.8 $ 79.8 $ 14.6 $ 209.7 $

2011 44.0 $ 38.3 $ 7.3 $ 100.1 $ 72.0 $ 62.6 $ 11.2 $ 165.0 $ 116.0 $ 100.9 $ 18.5 $ 265.1 $

2012 49.2 $ 42.8 $ 8.2 $ 111.8 $ 80.5 $ 70.0 $ 12.5 $ 184.4 $ 129.7 $ 112.8 $ 20.6 $ 296.3 $

2013 52.9 $ 46.1 $ 8.8 $ 120.4 $ 86.7 $ 75.3 $ 13.4 $ 198.5 $ 139.6 $ 121.4 $ 22.2 $ 318.9 $

2014 56.0 $ 48.7 $ 9.3 $ 127.3 $ 91.7 $ 79.7 $ 14.2 $ 210.0 $ 147.6 $ 128.4 $ 23.5 $ 337.3 $

2015 58.3 $ 50.8 $ 9.7 $ 132.7 $ 95.6 $ 83.1 $ 14.8 $ 218.9 $ 153.9 $ 133.9 $ 24.5 $ 351.6 $

2016 60.3 $ 52.6 $ 10.0 $ 137.3 $ 98.9 $ 85.9 $ 15.3 $ 226.5 $ 159.2 $ 138.5 $ 25.3 $ 363.8 $

2017 62.1 $ 54.1 $ 10.3 $ 141.3 $ 101.8 $ 88.5 $ 15.8 $ 233.2 $ 163.9 $ 142.6 $ 26.0 $ 374.5 $

2018 63.7 $ 55.5 $ 10.5 $ 145.0 $ 104.4 $ 90.8 $ 16.2 $ 239.2 $ 168.1 $ 146.2 $ 26.7 $ 384.2 $

2019 65.2 $ 56.8 $ 10.8 $ 148.4 $ 106.9 $ 92.9 $ 16.5 $ 244.8 $ 172.1 $ 149.7 $ 27.3 $ 393.2 $

2020 66.6 $ 58.0 $ 11.0 $ 151.6 $ 109.2 $ 94.9 $ 16.9 $ 250.1 $ 175.8 $ 152.9 $ 27.9 $ 401.7 $

2021 67.9 $ 59.2 $ 11.2 $ 154.6 $ 111.4 $ 96.8 $ 17.2 $ 255.1 $ 179.3 $ 156.0 $ 28.5 $ 409.7 $

2022 69.2 $ 60.3 $ 11.4 $ 157.5 $ 113.5 $ 98.6 $ 17.6 $ 260.0 $ 182.7 $ 158.9 $ 29.0 $ 417.5 $

2023 70.4 $ 61.3 $ 11.6 $ 160.3 $ 115.5 $ 100.4 $ 17.9 $ 264.6 $ 185.9 $ 161.7 $ 29.5 $ 424.9 $

2024 71.6 $ 62.4 $ 11.8 $ 163.1 $ 117.5 $ 102.1 $ 18.2 $ 269.2 $ 189.1 $ 164.5 $ 30.0 $ 432.2 $

2025 72.8 $ 63.4 $ 12.0 $ 165.7 $ 119.4 $ 103.8 $ 18.5 $ 273.6 $ 192.2 $ 167.2 $ 30.5 $ 439.3 $

2026 74.0 $ 64.4 $ 12.2 $ 168.3 $ 121.3 $ 105.4 $ 18.8 $ 277.9 $ 195.3 $ 169.8 $ 31.0 $ 446.3 $

2027 75.1 $ 65.4 $ 12.3 $ 170.9 $ 123.2 $ 107.1 $ 19.1 $ 282.2 $ 198.2 $ 172.4 $ 31.4 $ 453.1 $

Total 1,173.6 $ 1,022.0 $ 194.0 $ 2,670.0 $ 1,923.2 $ 1,671.6 $ 297.8 $ 4,406.2 $ 3,096.7 $ 2,693.5 $ 491.8 $ 7,076.2 $ Mean Value Median Value Mean Value Median Value 90 Percent Confidence Bound 90 Percent Confidence Bound Non Fatal Cases Total 2% Estimate of PAR, WTP for Lymphoma as the Basis for Non Fatal Cases Fatal Cases Year Mean Value Median Value 90 Percent Confidence Bound Exhibit 5.26 Non discounted Stream of Benefits from the Stage 2 DBPR Preferred Regulatory Alternative, All Systems, TTHM as Indicator Notes: All values in millions of year 2000 dollars. Detail may not add to totals due to independent rounding. EPA recognizes that the lower bound estimate of benefits may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

Source: Exhibit F. 2u. Economic Analysis for the Stage 2 DBPR Proposal 5 72 July 2003 Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003  $  $  $  $  $  $  $  $  $  $  $  $

2004  $  $  $  $  $  $  $  $  $  $  $  $

2005  $  $  $  $  $  $  $  $  $  $  $  $

2006 38.8 $ 33.8 $ 6.5 $ 88.1 $ 63.4 $ 55.1 $ 9.8 $ 145.3 $ 102.2 $ 88.9 $ 16.3 $ 233.4 $

2007 93.4 $ 81.3 $ 15.6 $ 212.2 $ 152.8 $ 132.8 $ 23.6 $ 350.0 $ 246.1 $ 214.1 $ 39.2 $ 562.2 $

2008 157.3 $ 137.0 $ 26.2 $ 357.6 $ 257.4 $ 223.7 $ 39.8 $ 589.7 $ 414.7 $ 360.7 $ 66.1 $ 947.4 $

2009 227.9 $ 198.5 $ 37.9 $ 518.1 $ 373.0 $ 324.2 $ 57.7 $ 854.5 $ 600.9 $ 522.7 $ 95.7 $ 1,372.7 $

2010 303.8 $ 264.6 $ 50.5 $ 690.6 $ 497.2 $ 432.1 $ 77.0 $ 1,139.1 $ 801.0 $ 696.7 $ 127.5 $ 1,829.8 $

2011 384.1 $ 334.5 $ 63.8 $ 873.3 $ 628.7 $ 546.4 $ 97.3 $ 1,440.4 $ 1,012.8 $ 880.9 $ 161.2 $ 2,313.7 $

2012 429.1 $ 373.7 $ 71.3 $ 975.8 $ 702.6 $ 610.6 $ 108.8 $ 1,609.7 $ 1,131.7 $ 984.4 $ 180.0 $ 2,585.5 $

2013 461.9 $ 402.2 $ 76.7 $ 1,050.3 $ 756.3 $ 657.3 $ 117.1 $ 1,732.7 $ 1,218.1 $ 1,059.6 $ 193.7 $ 2,783.0 $

2014 488.5 $ 425.4 $ 81.0 $ 1,110.9 $ 800.0 $ 695.3 $ 123.8 $ 1,832.8 $ 1,288.4 $ 1,120.7 $ 204.9 $ 2,943.8 $

2015 509.2 $ 443.4 $ 84.4 $ 1,158.1 $ 834.0 $ 724.9 $ 129.1 $ 1,910.7 $ 1,343.2 $ 1,168.3 $ 213.5 $ 3,068.9 $

2016 526.7 $ 458.7 $ 87.2 $ 1,198.0 $ 862.8 $ 749.9 $ 133.6 $ 1,976.7 $ 1,389.4 $ 1,208.6 $ 220.8 $ 3,174.7 $

2017 542.1 $ 472.1 $ 89.7 $ 1,233.2 $ 888.2 $ 772.0 $ 137.5 $ 2,034.9 $ 1,430.3 $ 1,244.1 $ 227.2 $ 3,268.1 $

2018 556.1 $ 484.3 $ 92.0 $ 1,265.2 $ 911.2 $ 792.1 $ 141.1 $ 2,087.8 $ 1,467.4 $ 1,276.3 $ 233.1 $ 3,353.0 $

2019 569.1 $ 495.6 $ 94.1 $ 1,294.8 $ 932.6 $ 810.6 $ 144.4 $ 2,136.8 $ 1,501.7 $ 1,306.2 $ 238.5 $ 3,431.6 $

2020 581.3 $ 506.2 $ 96.0 $ 1,322.7 $ 952.8 $ 828.1 $ 147.5 $ 2,182.9 $ 1,534.0 $ 1,334.3 $ 243.5 $ 3,505.5 $

2021 592.9 $ 516.3 $ 97.9 $ 1,349.2 $ 971.9 $ 844.8 $ 150.5 $ 2,226.8 $ 1,564.8 $ 1,361.0 $ 248.3 $ 3,575.9 $

2022 604.0 $ 526.0 $ 99.6 $ 1,374.6 $ 990.3 $ 860.7 $ 153.3 $ 2,268.8 $ 1,594.3 $ 1,386.7 $ 253.0 $ 3,643.4 $

2023 614.8 $ 535.3 $ 101.3 $ 1,399.1 $ 1,008.0 $ 876.1 $ 156.1 $ 2,309.5 $ 1,622.8 $ 1,411.4 $ 257.4 $ 3,708.6 $

2024 625.2 $ 544.4 $ 103.0 $ 1,423.0 $ 1,025.3 $ 891.1 $ 158.8 $ 2,349.0 $ 1,650.5 $ 1,435.5 $ 261.7 $ 3,772.0 $

2025 635.4 $ 553.2 $ 104.6 $ 1,446.3 $ 1,042.1 $ 905.8 $ 161.4 $ 2,387.6 $ 1,677.5 $ 1,459.0 $ 266.0 $ 3,833.9 $

2026 645.4 $ 561.9 $ 106.2 $ 1,469.2 $ 1,058.6 $ 920.1 $ 163.9 $ 2,425.5 $ 1,704.0 $ 1,482.0 $ 270.1 $ 3,894.7 $

2027 655.2 $ 570.5 $ 107.7 $ 1,491.7 $ 1,074.9 $ 934.3 $ 166.5 $ 2,462.8 $ 1,730.2 $ 1,504.7 $ 274.2 $ 3,954.5 $

Total 10,242.2 $ 8,918.9 $ 1,693.3 $ 23,302.0 $ 16,783.9 $ 14,588.1 $ 2,598.6 $ 38,454.2 $ 27,026.1 $ 23,507.0 $ 4,291.9 $ 61,756.2 $ Mean Value Median Value 90 Percent Confidence Bound 90 Percent Confidence Bound Median Value 90 Percent Confidence Bound Mean Value Median Value Year 17% Estimate of PAR, WTP for Lymphoma as the Basis for Non Fatal Cases Total Fatal Cases Non Fatal Cases Mean Value Exhibit 5.26 Non discounted Stream of Benefits from the Stage 2 DBPR Preferred Regulatory Alternative, All Systems, TTHM as Indicator ( cont.)

Notes: All values in millions of year 2000 dollars. Detail may not add to totals due to independent rounding. EPA recognizes that the lower bound estimate of benefits may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

Source: Exhibit F. 2u. Economic Analysis for the Stage 2 DBPR Proposal 5 73 July 2003 Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003  $  $  $  $  $  $  $  $  $  $  $  $

2004  $  $  $  $  $  $  $  $  $  $  $  $

2005  $  $  $  $  $  $  $  $  $  $  $  $

2006 4.4 $ 3.9 $ 0.7 $ 10.1 $ 1.3 $ 1.2 $ 0.6 $ 2.3 $ 5.7 $ 5.0 $ 1.3 $ 12.4 $

2007 10.7 $ 9.3 $ 1.8 $ 24.3 $ 3.1 $ 2.8 $ 1.4 $ 5.6 $ 13.8 $ 12.1 $ 3.2 $ 29.9 $

2008 18.0 $ 15.7 $ 3.0 $ 41.0 $ 5.2 $ 4.8 $ 2.3 $ 9.4 $ 23.2 $ 20.5 $ 5.3 $ 50.4 $

2009 26.1 $ 22.7 $ 4.3 $ 59.4 $ 7.5 $ 6.9 $ 3.4 $ 13.7 $ 33.6 $ 29.6 $ 7.7 $ 73.0 $

2010 34.8 $ 30.3 $ 5.8 $ 79.1 $ 10.0 $ 9.2 $ 4.5 $ 18.2 $ 44.8 $ 39.5 $ 10.3 $ 97.3 $

2011 44.0 $ 38.3 $ 7.3 $ 100.1 $ 12.6 $ 11.6 $ 5.7 $ 23.0 $ 56.6 $ 49.9 $ 13.0 $ 123.1 $

2012 49.2 $ 42.8 $ 8.2 $ 111.8 $ 14.0 $ 12.9 $ 6.3 $ 25.7 $ 63.2 $ 55.7 $ 14.5 $ 137.5 $

2013 52.9 $ 46.1 $ 8.8 $ 120.4 $ 15.1 $ 13.9 $ 6.8 $ 27.6 $ 68.0 $ 60.0 $ 15.6 $ 147.9 $

2014 56.0 $ 48.7 $ 9.3 $ 127.3 $ 15.9 $ 14.7 $ 7.2 $ 29.1 $ 71.9 $ 63.4 $ 16.5 $ 156.4 $

2015 58.3 $ 50.8 $ 9.7 $ 132.7 $ 16.6 $ 15.3 $ 7.5 $ 30.3 $ 74.9 $ 66.1 $ 17.1 $ 163.0 $

2016 60.3 $ 52.6 $ 10.0 $ 137.3 $ 17.1 $ 15.8 $ 7.7 $ 31.3 $ 77.4 $ 68.3 $ 17.7 $ 168.6 $

2017 62.1 $ 54.1 $ 10.3 $ 141.3 $ 17.6 $ 16.2 $ 7.9 $ 32.2 $ 79.7 $ 70.3 $ 18.2 $ 173.5 $

2018 63.7 $ 55.5 $ 10.5 $ 145.0 $ 18.0 $ 16.6 $ 8.1 $ 33.0 $ 81.7 $ 72.1 $ 18.6 $ 177.9 $

2019 65.2 $ 56.8 $ 10.8 $ 148.4 $ 18.4 $ 17.0 $ 8.3 $ 33.7 $ 83.6 $ 73.7 $ 19.0 $ 182.1 $

2020 66.6 $ 58.0 $ 11.0 $ 151.6 $ 18.7 $ 17.3 $ 8.4 $ 34.4 $ 85.3 $ 75.3 $ 19.4 $ 186.0 $

2021 67.9 $ 59.2 $ 11.2 $ 154.6 $ 19.1 $ 17.6 $ 8.6 $ 35.0 $ 87.0 $ 76.7 $ 19.8 $ 189.6 $

2022 69.2 $ 60.3 $ 11.4 $ 157.5 $ 19.4 $ 17.9 $ 8.7 $ 35.7 $ 88.6 $ 78.1 $ 20.1 $ 193.2 $

2023 70.4 $ 61.3 $ 11.6 $ 160.3 $ 19.7 $ 18.2 $ 8.9 $ 36.2 $ 90.2 $ 79.5 $ 20.5 $ 196.6 $

2024 71.6 $ 62.4 $ 11.8 $ 163.1 $ 20.0 $ 18.5 $ 9.0 $ 36.8 $ 91.7 $ 80.8 $ 20.8 $ 199.8 $

2025 72.8 $ 63.4 $ 12.0 $ 165.7 $ 20.3 $ 18.7 $ 9.1 $ 37.3 $ 93.1 $ 82.1 $ 21.1 $ 203.0 $

2026 74.0 $ 64.4 $ 12.2 $ 168.3 $ 20.6 $ 19.0 $ 9.3 $ 37.8 $ 94.5 $ 83.4 $ 21.4 $ 206.2 $

2027 75.1 $ 65.4 $ 12.3 $ 170.9 $ 20.9 $ 19.3 $ 9.4 $ 38.4 $ 95.9 $ 84.6 $ 21.7 $ 209.3 $

Total 1,173.6 $ 1,022.0 $ 194.0 $ 2,670.0 $ 330.8 $ 304.9 $ 148.9 $ 606.7 $ 1,504.4 $ 1,326.9 $ 342.9 $ 3,276.8 $ Mean Value Median Value Mean Value Median Value 90 Percent Confidence Bound 90 Percent Confidence Bound Non Fatal Cases Total 2% Estimate of PAR WTP for Chronic Bronchitis as the Basis for Non Fatal Cases Fatal Cases Year Mean Value Median Value 90 Percent Confidence Bound Exhibit 5.26 Non discounted Stream of Benefits from the Stage 2 DBPR Preferred Regulatory Alternative, All Systems, TTHM as Indicator ( cont.)

Notes: All values in millions of year 2000 dollars. Detail may not add to totals due to independent rounding. EPA recognizes that the lower bound estimate of benefits may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

Source: Exhibit F. 3u. Economic Analysis for the Stage 2 DBPR Proposal 5 74 July 2003 Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003  $  $  $  $  $  $  $  $  $  $  $  $

2004  $  $  $  $  $  $  $  $  $  $  $  $

2005  $  $  $  $  $  $  $  $  $  $  $  $

2006 38.8 $ 33.8 $ 6.5 $ 88.1 $ 11.2 $ 10.3 $ 5.0 $ 20.4 $ 49.9 $ 44.0 $ 11.5 $ 108.5 $

2007 93.4 $ 81.3 $ 15.6 $ 212.2 $ 26.8 $ 24.7 $ 12.1 $ 49.0 $ 120.2 $ 106.0 $ 27.7 $ 261.3 $

2008 157.3 $ 137.0 $ 26.2 $ 357.6 $ 45.1 $ 41.5 $ 20.4 $ 82.5 $ 202.4 $ 178.5 $ 46.6 $ 440.1 $

2009 227.9 $ 198.5 $ 37.9 $ 518.1 $ 65.3 $ 60.1 $ 29.4 $ 119.3 $ 293.2 $ 258.6 $ 67.4 $ 637.4 $

2010 303.8 $ 264.6 $ 50.5 $ 690.6 $ 86.9 $ 80.0 $ 39.2 $ 158.7 $ 390.6 $ 344.6 $ 89.7 $ 849.4 $

2011 384.1 $ 334.5 $ 63.8 $ 873.3 $ 109.6 $ 101.0 $ 49.4 $ 200.7 $ 493.7 $ 435.5 $ 113.3 $ 1,073.9 $

2012 429.1 $ 373.7 $ 71.3 $ 975.8 $ 122.3 $ 112.7 $ 55.1 $ 224.1 $ 551.5 $ 486.5 $ 126.4 $ 1,199.9 $

2013 461.9 $ 402.2 $ 76.7 $ 1,050.3 $ 131.5 $ 121.2 $ 59.2 $ 240.6 $ 593.3 $ 523.4 $ 135.9 $ 1,291.0 $

2014 488.5 $ 425.4 $ 81.0 $ 1,110.9 $ 138.8 $ 128.0 $ 62.6 $ 254.1 $ 627.3 $ 553.4 $ 143.6 $ 1,365.1 $

2015 509.2 $ 443.4 $ 84.4 $ 1,158.1 $ 144.5 $ 133.2 $ 65.0 $ 264.6 $ 653.6 $ 576.6 $ 149.4 $ 1,422.7 $

2016 526.7 $ 458.7 $ 87.2 $ 1,198.0 $ 149.2 $ 137.6 $ 67.1 $ 273.2 $ 675.9 $ 596.2 $ 154.3 $ 1,471.2 $

2017 542.1 $ 472.1 $ 89.7 $ 1,233.2 $ 153.3 $ 141.4 $ 69.0 $ 280.9 $ 695.4 $ 613.5 $ 158.7 $ 1,514.1 $

2018 556.1 $ 484.3 $ 92.0 $ 1,265.2 $ 157.0 $ 144.8 $ 70.6 $ 287.8 $ 713.1 $ 629.1 $ 162.6 $ 1,553.0 $

2019 569.1 $ 495.6 $ 94.1 $ 1,294.8 $ 160.4 $ 147.9 $ 72.1 $ 294.1 $ 729.5 $ 643.5 $ 166.2 $ 1,588.9 $

2020 581.3 $ 506.2 $ 96.0 $ 1,322.7 $ 163.6 $ 150.8 $ 73.5 $ 300.3 $ 744.8 $ 657.0 $ 169.5 $ 1,622.9 $

2021 592.9 $ 516.3 $ 97.9 $ 1,349.2 $ 166.5 $ 153.5 $ 74.9 $ 305.8 $ 759.4 $ 669.7 $ 172.8 $ 1,654.9 $

2022 604.0 $ 526.0 $ 99.6 $ 1,374.6 $ 169.3 $ 156.1 $ 76.2 $ 311.2 $ 773.4 $ 682.0 $ 175.8 $ 1,685.7 $

2023 614.8 $ 535.3 $ 101.3 $ 1,399.1 $ 172.1 $ 158.6 $ 77.4 $ 316.3 $ 786.8 $ 693.9 $ 178.7 $ 1,715.5 $

2024 625.2 $ 544.4 $ 103.0 $ 1,423.0 $ 174.7 $ 161.1 $ 78.5 $ 321.1 $ 799.9 $ 705.4 $ 181.5 $ 1,744.1 $

2025 635.4 $ 553.2 $ 104.6 $ 1,446.3 $ 177.2 $ 163.4 $ 79.8 $ 325.7 $ 812.6 $ 716.6 $ 184.4 $ 1,772.0 $

2026 645.4 $ 561.9 $ 106.2 $ 1,469.2 $ 179.6 $ 165.7 $ 80.9 $ 330.2 $ 825.0 $ 727.6 $ 187.1 $ 1,799.4 $

2027 655.2 $ 570.5 $ 107.7 $ 1,491.7 $ 182.0 $ 168.0 $ 81.9 $ 334.8 $ 837.3 $ 738.5 $ 189.6 $ 1,826.4 $

Total 10,242.2 $ 8,918.9 $ 1,693.3 $ 23,302.0 $ 2,886.8 $ 2,661.4 $ 1,299.2 $ 5,295.2 $ 13,129.0 $ 11,580.2 $ 2,992.5 $ 28,597.2 $ Mean Value Median Value 90 Percent Confidence Bound 90 Percent Confidence Bound Median Value 90 Percent Confidence Bound Mean Value Median Value Year 17% Estimate of PAR WTP for Chronic Bronchitis as the Basis for Non Fatal Cases Total Fatal Cases Non Fatal Cases Mean Value Exhibit 5.26 Non discounted Stream of Benefits from the Stage 2 DBPR Preferred Regulatory Alternative, All Systems, TTHM as Indicator ( cont.)

Notes: All values in millions of year 2000 dollars. Detail may not add to totals due to independent rounding. EPA recognizes that the lower bound estimate of benefits may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

Source: Exhibit F. 3u. Economic Analysis for the Stage 2 DBPR Proposal 5 75 July 2003 Exhibit 5.27 Benefits Summary for the Stage 2 DBPR, Preferred Regulatory Alternative ( Millions, 2000$)

Adverse Reproductive and Developmental Health Effects Avoided Causality has not been established, and numbers and types of cases avoided, as well as the value of such cases, were not quantified in the primary benefits analysis. Given the numbers of women of child bearing age exposed ( 58 million), the evidence indicates that the number of cases and the value of preventing those cases could be significant. See results of the illustrative calculation in Section 5.9 Number and Value of Estimated Bladder Cancer Cases Avoided 1 Causality has not been established; however, the weight of evidence supports PAR estimates of potential benefits. Zero is within the range of potential benefits, but evidence indicates that both the number of cases and the value of preventing those cases could be significant ( see below).

PAR Annual Average Cases Avoided Discount Rate, WTP for Non Fatal Cases Annualized Benefits of Cases Avoided ( 90 % Confidence Bounds 2)

Value of Fatal Cases Avoided Value of Non Fatal Cases Avoided Value of Total Cases Avoided 2 % 20.9 3 %, Lymphoma $ 42.8 ($ 7.1  97.4) $ 70.2 ($ 10.9  160.7) $ 113.0 ($ 17.9  258.2)

7 % Lymphoma $ 37.1 ($ 6.1  84.4) $ 60.8 ($ 9.4  139.3) $ 97.9 ($ 15.6  223.7)

3 % Bronchitis $ 42.8 ($ 7.1  97.4) $ 12.1 ($ 5.4  22.2) $ 54.9 ($ 12.5  119.6)

7 % Bronchitis $ 37.1 ($ 6.1  84.4) $ 10.5 ($ 4.7  19.2) $ 47.6 ($ 10.9  103.7)

17 % 182.2 3 %, Lymphoma $ 373.8 ($ 61.8  850.3) $ 612.4 ($ 94.8  1,403.1) $ 986.2 ($ 156.6  2,253.4)

7 % Lymphoma $ 323.9 ($ 53.6  736.7) $ 530.6 ($ 82.1  1,215.6) $ 854.4 ($ 135.8  1.952.3)

3 % Bronchitis $ 373.8 ($ 61.8  850.3) $ 105.5 ($ 47.5  193.5) $ 479.3 ($ 109.3  1.043.7)

7 % Bronchitis $ 323.9 ($ 53.6  736.7) $ 91.6 ($ 41.2  167.9) $ 415.5 ($ 94.9  904.6)

Other Health Benefits Qualitative assessment indicates that the value of other health benefits could be positive and significant.

Non Health Benefits Qualitative assessment indicates that the value of non health benefits could be positive. Notes: Detail may not add to totals due to independent rounding. 1. Based on TTHM as indicator. EPA recognizes that the lower bound estimate may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer. 2. The 90 percent confidence bounds shown in the exhibit reflect uncertainty in the VSL, WTP, and income elasticity adjustment.

Source: Summarized from detailed figures presented in Appendix E ( Exhibits E. 17d and E. 17g) and F ( Exhibits F. 2v and F. 2w, F. 3v and F. 3w). Economic Analysis for the Stage 2 DBPR Proposal 5 76 July 2003 5.6.4 Comparison of the Value of Benefits for Regulatory Alternatives This section compares the benefits of decreasing DBP occurrence under the Stage 2 DBPR preferred alternative with the three evaluated alternatives. The alternatives are summarized below ( see Chapter 4 for a more detailed discussion):

Preferred Alternative: 80 µ g/ L TTHM and 60 µ g/ L HAA5 as an LRAA; bromate MCL of 10 µ g/ L as an RAA based on monthly samples taken at the finished water point ( no change from the Stage 1 DBPR for bromate).

Alternative 1: 80 µ g/ L TTHM and 60 µ g/ L HAA5 as an LRAA; bromate MCL of 5 µ g/ L as an RAA based on monthly samples taken at the finished water point.

Alternative 2: 80 µ g/ L TTHM and 60 µ g/ L HAA5 as the single maximum value for any sample taken during the year; bromate MCL of 10 µ g/ L as an RAA based on monthly samples taken at the finished water point ( no change from the Stage 1 DBPR for bromate).

Alternative 3: 40 µ g/ L TTHM and 30 µ g/ L HAA5 as an RAA of all distribution samples taken; bromate MCL of 10 µ g/ L as an RAA based on monthly samples taken at the finished water point ( no change from the Stage 1 DBPR for bromate).

Exhibit 5.28 compares the value of benefits for all Stage 2 DBPR regulatory alternatives, using TTHM as an indicator for reduction in all DBPs. Although the primary objective of the Stage 2 DBPR is to reduce the unquantified risks of adverse potential reproductive and developmental health effects, the exhibit also shows that the quantified benefits of reducing cancer cases are considerable regardless of which alternative is chosen. Chapter 6 examines the costs of these Alternatives, and Chapter 9 compares the benefits and costs of the alternatives. Economic Analysis for the Stage 2 DBPR Proposal 5 77 July 2003 Exhibit 5.28 Number and Annualized Value of Estimated Bladder Cancer Cases Avoided for All Stage 2 DBPR Regulatory Alternatives ( Millions, 2000$) 1 Discount Rate, WTP for Non Fatal Cases Preferred Alternative Alternative 1 Alternative 2 Alternative 3 2% PAR Average Annual Number of Cases Avoided 21 22 135 161 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 113 ($ 18  258) $ 117 ($ 19  268) $ 773 ($ 116  1,675) $ 873 ($ 139  1,995)

7 % Lymphoma $ 98 ($ 16  224) $ 102 ($ 16  232) $ 636 ($ 101  $ 1,452) $ 757 ($ 120  1,730)

3 % Bronchitis $ 55 ($ 13  120) $ 57 ( 13  124) $ 356 ($ 81  776) $ 424 ($ 97  924)

7 % Bronchitis $ 48 ($ 11  104) $ 49 ($ 11  108) $ 309 ($ 71  673) $ 368 ($ 84  802)

17% PAR Value Average Number of Cases Avoided 182 189 1,182 1,408 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 986 ($ 157  2,253) $ 1,024 ($ 163  2340) $ 6,398 ($ 1,016  14,619) $ 7,621 ($ 1,211  17,415)

7 % Lymphoma $ 854 ($ 136  1,952) $ 887 ($ 141  2,027) $ 5,546 ($ 881  12,672) $ 6,607 ($ 1,050  15,097)

3 % Bronchitis $ 479 ($ 109  1,044) $ 498 ($ 114  1084) $ 3,109 ($ 709  6771) $ 3,704 ($ 845  8,066)

7 % Bronchitis $ 415 ($ 95  905) $ 431 ($ 99  940) $ 2,697 ($ 616  5,871) $ 3,213 ($ 734  6,995) Notes: 1. Based on TTHM as indicator. EPA recognizes that the lower bound estimate may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer 2. The 90 percent confidence bounds shown in the exhibit reflect uncertainty in the VSL, WTP, and income elasticity adjustment.

Source: Summarized from detailed figures presented in Appendix E ( Exhibits E. 17d and g, E. 19d and g, E. 20d and g, E. 21d and g) and Appendix F ( Exhibits F. 2v and w, F. 3v and w, F. 6d and e, F. 7d and e, F. 8d and 3, F. 9d and e, F. 10d and e, F. 11d and e). Economic Analysis for the Stage 2 DBPR Proposal 5 78 July 2003 5.7 Uncertainties In addition to the uncertainties quantified as part of the benefits evaluation, there are other uncertainties that could result in either an over or under estimation of the benefits presented in this chapter. Exhibit 5.29 presents a summary of these issues, references the section or appendix where the information is introduced, and estimates the potential effects that each may have on national benefits estimates. Two of the greatest uncertainties affecting the benefits of the Stage 2 DBPR are related to unquantified benefits estimates, as indicated by a bold " X" in Exhibit 5.29. Both of these factors result in an underestimation of quantified Stage 2 DBPR benefits. Another area of uncertainty is the effect of the IDSE on the compliance forecast   this uncertainty is addressed in a sensitivity analysis in Chapter 7.

In addition to the uncertainties listed in Exhibit 5.29, the potential costs or benefits of a possible interactive effect from the promulgation of more than one rule in a short period of time are also unquantified. EPA has taken into account compliance with the Stage 1 DBPR and considered the potential impacts of the Ground Water Rule, the Arsenic Rule, and the LT2ESWTR, but has not attempted to estimate the cumulative effects of the passage of other new regulations along with the Stage 2 DBPR.

5.8 Sensitivity Analyses To quantify the effects that differences in major modeling assumptions would have on the benefits analysis, sensitivity analyses were performed. This sections presents results for one analysis: the elimination of cessation lag calculations. Additional sensitivity analyses were performed to evaluate the impact of uncertainties in the compliance forecast ( e. g., related to impacts of the initial distribution system evaluation, consecutive systems, etc.) on benefits estimates. Results for these sensitivity analyses are presented in Chapter 7.

To gauge the magnitude of the impact on benefits valuation stemming from incorporation of cessation lag assumption into the model, the cessation lag computation was taken out of the model, keeping all other parameters the same. Thus, the risk and associated cases avoided were assumed to reach a new equilibrium immediately upon installation of treatment equipment. The summary results of this analysis are also shown in Exhibit 5.30 ( Appendix F contains detailed spreadsheets of case reductions and valuations by year). This sensitivity analysis shows that removal of the cessation lag assumptions from the model results in an increase of benefits by approximately 40 to 60 percent from the values shown in the primary analysis, depending on the PAR value and discount rate used. Economic Analysis for the Stage 2 DBPR Proposal 5 79 July 2003 Exhibit 5.29 Uncertainties and Possible Effect on Estimate of Benefits Uncertainty Section with Full Discussion of Uncertainty Effect on Benefit Estimate Underestimate Overestimate Unknown Impact Uncertainty in data quality of model inputs and assumptions for SWAT Appendix A X Accuracy of the SWAT DBP predictions and technology selections Appendix A X Uncertainty in deriving percent DBP reductions for ground water and small surface water systems from SWAT data. Appendix A Section 4.2 X 20% operational safety factor in assessing plant compliance Appendix A, Appendix B X Value of potential reproductive and developmental health effects avoided is not quantified in the primary analysis 5.6.1 X Analysis of reduction in DBP occurrence does not include results of IDSE 5.4 X Benefits of reduced cancers other than bladder cancer are not included in the quantitative analysis 5.5 X DBPs have a linear dose response relationship for bladder cancer effects 5.5 X Analysis of exposure reduction assumes TTHM and HAA5 to be proxies for all chlorination DBPs 5.5 X SWAT's predicted DBP reduction from Stage 1 to Stage 2 are good representations of occurrence levels for all systems ( adjusted for percent non compliers) 5.4.2 X Uncertainty in valuation inputs ( WTP and VSL 5.6 X PAR value range of 2 17 percent used to calculate the number of bladder cancer cases avoided is not absolute. EPA recognizes that the lower bound estimate may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer 5.2.2 X Note: Several of these uncertainties also impact costs ( see Chapter 6). Economic Analysis for the Stage 2 DBPR Proposal July 2003 5 80 Exhibit 5.30 Comparison of Number and Annualized Value of Estimated Bladder Cancer Cases Avoided for Stage 2 DBPR Sensitivity Analysis ( Millions, 2000$)

Discount Rate, WTP for Non Fatal Cases Preferred Alternative Sensitivity Analysis for No Cessation Lag and No Latency 2% PAR Average Annual of Cases Avoided 21 28 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 113 ($ 18  258) $ 153 ($ 24  349)

7 % Lymphoma $ 98 ($ 16  224) $ 140 ($ 22  320)

3 % Bronchitis $ 55 ($ 13  120) $ 74 ($ 17  162)

7 % Bronchitis $ 48 ($ 11  104) $ 68 ($ 16  $ 148)

17% PAR Value Average Number of Cases Avoided 182 241 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 986 ($ 157  2,253) $ 1,334 ($ 212  3,048)

7 % Lymphoma $ 854 ($ 136  1,952) $ 1,221 ($ 194  $ 2,789)

3 % Bronchitis $ 479 ($ 109  1,044) $ 649 ($ 148  1,413)

7 % Bronchitis $ 415 ($ 95  905) $ 594 ($ 136  1,293) Notes: 1. Based on TTHM as indicator. EPA recognizes that the lower bound estimate may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer 2. The 90 percent confidence bounds shown in the exhibit reflect uncertainty in the VSL, WTP, and income elasticity adjustment.

Source: For preferred alternative, see Exhibit 5.27. For the sensitivity analysis, quantitative values are summarized from detailed figures presented in Appendix E ( Exhibits E. 22d and g) and Appendix F ( Exhibits F. 12d and e, F. 13d and e). 18Use of unadjusted OR/ RR estimates has the effect of excluding possible biases from known confounders; however, EPA believes the unadjusted estimates are adequate for purposes of the illustrative calculations presented here 19The calculated lower 95% confidence intervals on PAR for all three studies were less than zero; however, they were truncated at zero for this analysis. Economic Analysis for the Stage 2 DBPR Proposal July 2003 5 81 5.9 Potential Fetal Losses Avoided EPA concurs with the conclusion presented by Simmons et al. ( 2002) that " the epidemiologic data, although not conclusive, are suggestive of potential developmental, reproductive, or carcinogenic health effects in humans exposed to DBPs." EPA does not believe the available evidence provides an adequate basis for quantifying potential reproductive/ developmental risks ( see Section 5.2.1 for a complete discussion of the reproductive and developmental health effects of DBPs). Nevertheless, given the widespread nature of exposure to DBPs, the importance our society places on reproductive/ developmental health, and the large number of fetal losses experienced each year in the US ( nearly 1 million), the Agency believes that it is important to provide some quantitative indication of the potential risk suggested by some of the published results on reproductive/ developmental endpoints, despite the absence of certainty regarding a causal link between disinfection byproducts and these risks. To do this, illustrative PAR calculations from several studies on the relationship between chlorinated water exposure and fetal loss have been adapted and applied to national statistics on annual incidence of fetal loss ( shown in section 5.9.1). Section 5.9.2 discusses valuation of these potential fetal losses avoided.

5.9.1 Reproductive Effects Illustrative Calculation EPA has calculated the unadjusted Odds Ratios ( OR's) or Relative Risks ( RR's) associated with each of the three distinct population based epidemiological studies of fetal loss published: Waller et al. 2001, King et al. 2000a, and Savitz et al. 1995. Exhibit 5.31 summarizes these studies   all three are high quality studies that have sufficient sample sizes and high response rates, adjustments for known confounders18, and have exposure assessment information from water treatment data, residential histories, and THM measurements. Because the populations in these three studies appear to have TTHM exposures significantly greater than those of the general US population, EPA has chosen to scale the results using ICR data to derive PAR values that are more relevant to the general US population ( Appendix G).

These three studies ( using unadjusted data to allow for comparability, and scaled to the TTHM levels reported in the ICR data base) yield median PARs of 0.4%, 1.7%, and 1.7% ( with 95% confidence intervals for each of the studies of 0 to 4% 19). Using the prevalence of fetal loss reported by CDC, the median PARs for these three studies suggest that the incidence of fetal loss attributable to exposure to chlorinated drinking water could range from 3,900 to 16,700 annually. As part of the analysis to evaluate potential reduction in fetal loss for the Stage 2 DBPR, EPA assumed that reductions in risk are proportional to the 28 percent reductions in the number of locations having one or more quarterly TTHM measurements that exceed the study population cut offs (> 75 to > 81 ug/ l, depending on study). This analysis would imply that a range of 1,100 to 4,700 fetal losses could be avoided per year as a result of the Stage 2 DBPR. Refer to Appendix G for derivation of PARs and detailed calculation of fetal losses avoided.

Caution is required in interpreting the numbers derived above because there may be significant differences in the study exposure populations versus the national exposure ( e. g., different types of DBP mixtures having similar TTHM levels). The estimates presented here are not part of EPA's quantitative benefits analysis, and the ranges are not meant to suggest upper and lower bounds. Rather, they are intended to illustrate quantitatively the potential risk implications of some of the published results. Economic Analysis for the Stage 2 DBPR Proposal July 2003 5 82 Exhibit 5.31 Summary of the Fetal Loss Human Epidemiology Studies Study Population Exposure Assessment Outcome Results1 Potential Confounders Waller et al. 2001 Prospective cohort of 4,209 pregnant women in prepaid health plan in CA 1989 91 Averaged all distribution TTHM measurements taken within the subjects first trimester or average measurements taken within 30 days of first trimester. Spontaneous abortion ( # 20 weeks of gestation) Recalculated 80mg/ L compared to < 80 mg/ L for unweighted utilitywide average RR= 1.25 ( 0.99,1.6)

Study based prevalence of exposure = 15% Gestational age at interview, maternal age, cigarette smoking, history of pregnancy loss, maternal race, employment during pregnancy King et al. 2000a Populationbased retrospective cohort of 47,275 births in Nova Scotia, Canada 1988 1995 Linked mother's residence at time of delivery to the levels of specific TTHMs monitored in the PWS and averaged predicted values of byproduct level for the months covering the pregnancy Stillbirth Recalculated 75 mg/ L compared to < 75 mg/ L RR= 1.28 ( 95% CI 0.98, 1.7)

Study based prevalence of exposure = 32% Smoking, maternal age Savitz et al. 1995 Populationbased casecontrol study of 126 cases and 122 controls in NC 1988 91 Fourth week of pregnancy used to assign the reported quarterly average TTHM Spontaneous abortion Recalculated 81 mg/ L compared to < 81 mg/ L OR= 1.06 ( 0.6,1.8)

Study based prevalence of exposure = 35% Maternal age, race, education, marital status, poverty level, smoking, alcohol use, nausea, employment 1OR and RR values were recalculated using crude Odds Ratios for the fetal loss sensitivity analysis. Economic Analysis for the Stage 2 DBPR Proposal July 2003 5 83 5.9.2 Value of Reductions in Fetal Losses Avoided EPA has not monetized the value of potential fetal loss but recognizes the significant value of improvement in developmental and reproductive health. See section 5.6.1 for a discussion of the value of reducing reproductive and developmental health risks.

The agency is investigating further work specific to the case of fetal loss valuation. One possible area of further research is the value that prospective parents attach to reducing risks during pregnancy. In this regard, the substantial lifestyle changes that prospective parents often undertake during pregnancy suggests that reducing these kinds of risks is of value. A second possible area of further investigation would be work on benefit transfer methodologies that address how existing studies can inform the estimation of the benefits of reduced fetal loss.

In the absence of valuation studies specific to the health endpoints of regulations, the Agency typically draws upon existing studies of similar health endpoints to estimate benefits. The " transfer" of the results of these studies to value similar health endpoints must be done carefully and methodically, controlling for differences in the health endpoints and in the relevant populations. Some researchers have attempted to transfer values using sophisticated analytical techniques such as preference calibration methods ( e. g., Smith, et al. 2002). Regardless of the approach used, " benefit transfer" requires systematic comparison of the similarities and differences in the health effects in the studies and those resulting from the regulation. Application of benefit transfer leads to a detailed qualitative examination of the implications of using those studies and potentially to empirical adjustments to the results of the existing studies.

Without more information and discussion on these subjects, EPA cannot fully consider and describe the implications of relying upon existing studies. However, research on valuation and benefit transfer continues to progress and the Agency anticipates that new research will support further efforts to value reproductive and developmental endpoints. Economic Analysis for the Stage 2 DBPR Proposal 6 1 July 2003 6. Cost Analysis 6.1 Introduction This chapter estimates the national costs of the Stage 2 Disinfectants and Disinfection Byproducts Rule ( DBPR). National costs include costs of implementation, Initial Distribution System Evaluations ( IDSEs), treatment changes ( capital and Operations and Maintenance ( O& M)), additional routine monitoring, and significant excursion evaluations.

The data presented in this chapter are derived from analyses of the Information Collection Rule ( ICR) data, ICR Supplemental Survey data, National Rural Water Survey data, Surface Water Analytical Tool ( SWAT) model results, the American Water Works Association Water Utility Database ( Water:\ STATS) ( AWWA 2000), State/ Primacy Agency data, and results of two expert opinion processes for small systems. For a complete explanation of these data sources, see Chapter 3 and Appendices A and B.

Section 6.1.1 of this chapter summarizes the overall methodology and data inputs used to estimate total national costs. Section 6.2 presents a summary of national costs along with the estimated number of systems and States/ Primacy Agencies expected to incur treatment and non treatment costs as a result of the various Stage 2 DBPR activities. The methodology for developing non treatment costs and breakouts of costs for different activities is provided in Section 6.3. Section 6.4 provides a detailed description of the methodology for estimating treatment costs. Section 6.5 builds on the nominal cost estimates in sections 6.3 and 6.4 by projecting them over a 25 year period according to the Stage 2 DBPR compliance schedule, estimating the present value of each cost, and annualizing each over a 25 year period. Household costs are presented next ( section 6.6), followed by discussions of unquantified costs ( section 6.7), uncertainty ( section 6.8), and lastly, comparison of regulatory alternatives ( section 6.9).

In support of this chapter:

° Appendix H offers a more complete explanation of the laboratory costs and labor hours for implementation, IDSE, and additional routine monitoring, as well as the assumptions and calculations for the significant excursion evaluation costs.

° Appendices A and B explain the derivation of the compliance forecasts ( i. e., the number of plants changing technology and which technologies they select) for surface water and disinfecting ground water systems, respectively. Appendix C provides supplemental compliance forecasts for the Stage 1 DBPR and Stage 2 DBPR regulatory alternatives.

° Appendix D contains the rule implementation schedule for different system types and rule activities ( used in projecting and annualizing costs over a 25 year period).

° Appendix J presents additional detail for technology unit costs.

° Appendix K presents cost projections, present value estimates, and annualization of costs for all Stage 2 DBPR regulatory alternatives and sensitivity analyses.

° Appendix L contains the Stage 2 DBPR cost model. Economic Analysis for the Stage 2 DBPR Proposal 6 2 July 2003 6.1.1 Overview of Methodology for Quantifying Stage 2 DBPR Costs To estimate the national costs of the Stage 2 DBPR, the Environmental Protection Agency ( EPA) calculated the incremental costs to be incurred by public water systems ( PWSs) and their States/ Primacy Agencies from the Stage 1 DBPR to the Stage 2 DBPR. Cost analyses for PWSs include an identification of treatment process improvements that systems may make, as well as estimates of the costs to implement the rule, conduct IDSEs, perform additional routine monitoring, and evaluate significant excursion events. System costs were estimated for different system types ( CWS or NTNCWS), source water types ( ground or surface), and size categories ( nine size categories are used based on population served, consistent with the drinking water Baseline Handbook). State/ Primacy Agency cost analyses include estimates of the labor burdens that States/ Primacy Agencies would face, such as training employees on the requirements of the Stage 2 DBPR, responding to PWS reports, and recordkeeping.

All cost calculations are performed in the Stage 2 DBPR Cost Model ( USEPA 2003j). Exhibit 6.1 shows the major components of the model and illustrates how they work together. The model is made up of a number of Microsoft ® Excel 2002 ( Excel) workbooks that are linked to each other, as well as macros and other functions that perform the various cost calculations. Each Excel workbook in the model contains an introduction sheet describing the function of every model worksheet. All input data sources are referenced to their source documents. Appendix L provides the model documentation along with a CD containing all the data files and models. Sections <IP_ADDRESS> through <IP_ADDRESS> provide a brief description of each cost model component. A discussion of the uncertainty in national cost estimates follows in section <IP_ADDRESS>.

<IP_ADDRESS> Baseline Data Inputs Baseline data inputs include the number and size of systems in the United States, the percent of ground water systems that disinfect, and average number of treatment plants per system. Derivations of the water industry baselines for the Stage 2 DBPR are discussed in Chapter 3. As noted in section 3.4, EPA uses different baselines for calculating treatment costs versus non treatment related rule activities   the Stage 2 DBPR System Baseline is used to estimate costs of non treatment rule activities in Appendix H, while the Stage 2 DBPR Plant Baseline is used to estimate treatment costs in section 6.4. Both the system and plant baselines are broken out by system and source water type and size, based on EPA's nine standard size categories ( consistent with the Drinking Water Baseline Handbook; USEPA, 2001h). To estimate non treatment costs in Appendix H, the system baseline is reorganized into different system size categories to reflect Stage 2 DBPR monitoring requirements.

In addition to the industry baseline, there are other types of baseline inputs used in the Stage 2 DBPR Cost Model. The derivation of two of these inputs, labor rates and laboratory fees, are discussed in detail below.

Labor Rates Labor costs to PWSs presented in the Stage 2 DBPR Economic Analysis ( EA) are estimated using hourly labor rates for technical and managerial labor categories. Labor rates representative of national averages, as reported by the Bureau of Labor Statistics ( BLS), are used in all analyses. For technical labor, the year 2000 mean hourly wage rate of $ 15.60 for Standard Occupational Classification ( SOC) 51 8031, " Water and Liquid Waste Treatment Plant and System Operators," is used. For managerial labor, the year 2000 mean hourly wage rate of $ 28.07 for SOC 17 2051, " Civil Engineers," is Economic Analysis for the Stage 2 DBPR Proposal 6 3 July 2003 Baseline Inputs Technology Unit Costs Technology Selection Forecasts Cost Models Non Treatment Cost Model Treatment Cost Model Projections and Discounting National Costs Household Costs Results used ( BLS 2001b). To account for the cost of fringe benefits, a 60 percent loading factor is applied to each of the BLS rates, resulting in a technical rate of $ 24.96 per hour and a managerial rate of $ 44.91 per hour.

Exhibit 6.1 Stage 2 DBPR Cost Model Components EPA recognizes that there may be significant variation in labor rates among PWSs. However, data are not currently available that would allow statistically valid assignment of labor rates to specific PWSs based on characteristics such as system size or classification. In the absence of such data, and because analyses in this EA are performed on a national level, the BLS data are used. 1 ECI information found on the web site www. bls. gov.

Economic Analysis for the Stage 2 DBPR Proposal 6 4 July 2003 Labor costs attributable to States/ Primacy Agencies are estimated based on an average annual full time equivalent ( FTE) labor cost, including overhead, of $ 55,000 ( 1997$). This rate was established based on State input during the development of the State Workload Model in 1997. For use in Stage 2 DBPR EA analyses, the $ 55,000 annual rate was updated to a year 2000 price level of $ 60,086 using Employment Cost Index Information ( ECI) information1 and converted to an hourly basis ( 1 FTE = 2,080 hours) to establish a State/ Primacy Agency rate of $ 28.89 per hour.

Laboratory Fees A laboratory fee, expressed as a cost per sample, is associated with total trihalomethane ( TTHM) and haloacetic acid ( HAA5) monitoring costs for IDSE and additional routine monitoring. Based on laboratory costs reported in the 1996 ICR, EPA estimated the laboratory fee at $ 220 per sample for all size categories. This rate includes shipping and is applied to all systems in this analysis because the variation is not expected to be significant. Some of the factors that may cause this rate to vary in practice are system size, the number of samples processed ( quantity discounts), and potential limited laboratory capacity for the one year IDSE monitoring. For example, larger plants likely have laboratory facilities onsite and are unlikely to face shipment costs. Although laboratory costs will be lower for multiple samples, there are no estimates of the number of systems that might try to take advantage of this savings, nor which laboratories will be able to handle the large number of samples over the one year period of IDSE monitoring. Laboratory fees are not expected to differ substantially between disinfecting ground water systems and surface water systems.

<IP_ADDRESS> Technology Unit Costs and Technology Selection Forecasts Available technologies for reducing DBPs were identified during the Stage 2 Microbial Disinfectants/ Disinfection Byproducts ( M DBP) Federal Advisory Committees Act ( FACA) deliberations ( USEPA 2000p). These include alternative disinfectants such as ozone, ultraviolet light ( UV), and chlorine dioxide, as well as DBP precursor removal technologies such as microfiltration or ultrafiltration. Converting to chloramines for residual disinfection was also identified as a relatively inexpensive technology that can limit DBP formation in many distribution systems.

Unit cost estimates for these technologies are in the form of " dollars per plant" for initial capital and yearly O& M activities. Derivation of unit costs for a wide range of plant sizes, represented by different design and average daily flow rates, are provided in the document, Technologies and Costs for Control of Microbial Contaminants and Disinfection Byproducts ( USEPA 2003o). EPA uses mean design and average daily flow for each of the nine system size categories ( shown in Exhibit 3.6) to estimate unit costs for each technology for each system type, source water type, and size category. This process is described in detail in section 6.4.1.

Compliance forecasts ( or technology selection forecasts) are estimates of how many plants will change technology to meet certain regulatory criteria and which technologies these plants will select.

Section 3.3 provides an overview of the tools used to generate the compliance forecasts. A detailed description of the derivation of the forecasts for surface and ground water plants are in Appendices A and B, respectively. 2 For purposes of analyses in this EA, all present value figures are presented at a year 2000 price level.

Present value calculations are performed to the expected year rule implementation ( 2003).

3 See EPA's Guidelines for Preparing Economic Analyses ( USEPA 2000j) for a full discussion of the use of social discount rates in the evaluation of policy decisions.

Economic Analysis for the Stage 2 DBPR Proposal 6 5 July 2003 <IP_ADDRESS> Projections and Discounting Nominal cost estimates for both non treatment and treatment activities are of two kinds: ( 1) onetime costs that occur near the beginning of the rule implementation period, and ( 2) annual " steady state" costs that systems and States/ Primacy Agencies will incur after systems have made necessary changes to treatment and/ or monitoring to comply with the Stage 2B DBPR. For the purposes of this EA, onetime and steady state costs were projected over a 25 year time period to coincide with the estimated life span of capital equipment ( typically estimated as 20 years for most technologies) and an average time lag of up to five years for technology installation after rule promulgation. The projected schedules for all rule activities are summarized in Appendix D.

As described previously in the Chapter 5 discussion of benefits, it is common practice to adjust benefits and costs to a present value2 using a social discount rate so that they can be compared to one another. This process takes into account the time preference that society places on expenditures and allows comparison of cost and benefit streams that are variable over a given time period. 3 Similar to calculating the present value of benefits ( see section 5.6.3), the present value of costs for any future period can be calculated using the following equation:

PV = V( t) / ( 1 + R) t Where: t = The number of years from the reference period R = Social discount rate V( t) = The cost occurring t years from the reference period There is much discussion among economists of the proper social discount rate to use for policy analysis. Therefore, for Stage 2 DBPR cost analyses, present value calculations are made using two social discount rates thought to best represent current policy evaluation methodologies, 3 and 7 percent. Historically, the use of a 3 percent is based on rates of return on relatively risk free investments, as described in the Guidelines for Preparing Economic Analyses ( USEPA 2000j). The rate of 7 percent is a recommendation of the Office of Management and Budget ( OMB) as an estimate of " before tax rate of return to incremental private investment" ( USEPA 1996b). For any future cost, the higher the discount rate, the lower the present value. Specifically, a future cost ( or stream of costs) evaluated at a 7 percent social discount rate will always result in a lower total present value cost than the same future cost evaluated at a 3 percent rate.

To allow evaluation on an annual basis, the total present value costs are annualized using the same social discount rates ( 3 and 7 percent) over 25 years. When applying social discount rates to annualize costs, the higher the discount rate, the higher the annualized cost. Thus, the magnitudes of the discount rates influence costs in the opposite direction ( i. e., a present value cost annualized at a 7 percent rate will always result in higher values than the same present value cost annualized at a 3 percent rate). The final relationship between annualized costs at 3 and 7 percent is dependent on the time frame for 4 Cost of capital estimates are used to account for interest payments that PWSs may incur and pass along to customers in the form of water bill increases. These rates may be different than social discount rates ( 3 and 7 percent) used elsewhere in the economic analysis. Social discount rates are more appropriate for estimating economic impacts on a national level. See EPA's Guidelines for Preparing Economic Analyses ( USEPA 2000j) for a full discussion of the use of social discount rates in the evaluation of policy decisions.

Economic Analysis for the Stage 2 DBPR Proposal 6 6 July 2003 annualization, as well as when the costs are incurred ( as set forth in the Rule Activity Schedule in Appendix D). Given a long enough time frame, the 7 percent annualized value will eventually be greater than the 3 percent annualized value.

Values derived based on this methodology are presented in subsequent sections of Chapter 6. Detailed spreadsheets of all cost calculations are provided in Appendix K.

<IP_ADDRESS> Household Costs EPA assumes that generally, systems may pass some or all of the costs of a new regulation on to their customers in the form of rate increases. Household costs, which are in units of $ per household per year, are estimated in this chapter to provide a measure of the increase in water bills that is expected to result from the Stage 2 DBPR. A distribution of possible household costs is developed within each system size category depending on which non treatment activities are performed and which treatment is selected, if any. Data inputs specific to household cost calculations are shown in Exhibits 6.2. A description of the household cost methodology is provided below.

1) The number of households served per plant is calculated by dividing the total households served ( Exhibit 3.7) by the total number of plants ( Exhibit 3.4).

2) The number of plants performing non treatment and treatment related rule activities are derived in section 6.4 and Appendix H ( non treatment activities are estimated on a persystem basis. The percent of systems performing non treatment related rule activities are assumed to be equivalent to percent of plants performing those activities).

3) Costs of capital rates are used to amortize one time costs over a 20 year period. The rates, summarized in Exhibit 6.2, are derived from Development of Cost of Capital Estimates for Public Water Systems, Final Report ( USEPA 2001j). 4 Amortized one time costs are added to annual costs to produce annual plant level costs for each technology and for each nontreatment related rule activity in units of $ per plant per year.

4) Average daily flow ( presented in Chapter 3, Exhibit 3.6) is converted to 1,000 gallons per plant per year and used to convert $ per plant per year ( from step 3) to $ per 1,000 gallons per year.

5) Estimated household usage rate ( 1,000 gallons per year) is used to convert $ per 1,000 gallons per year ( from step 4) to $ per household per year. Exhibit 6.2 summarizes the mean household usage rates used to estimate household costs in this chapter. These are as presented in the Baseline Handbook, as derived from the 1995 Community Water Systems Survey ( CWSS) ( note that household usage rates for the affordability analysis in Chapter 8 are median values from 1995 CWSS data, whereas the values in Exhibit 6.2 Economic Analysis for the Stage 2 DBPR Proposal 6 7 July 2003 Mean Annual Water Usage per Household ( 1,000 gallons) Public Cost of Capital Rate Private Cost of Capital Rate A B C £ 100 83 5.31% 6.22% 101 500 83 5.31% 6.22% 501 1,000 104 5.51% 6.22% 1,001 3,300 87 5.51% 6.22% 3,301 10,000 97 5.51% 6.22% 10,001 50,000 109 5.20% 5.66% 50,001 100,000 119 5.24% 6.27% 100,001 1 Million 125 5.24% 6.27% > 1 Million 125 5.24% 6.27%

Sources: ( A) Derived from the Third Edition of the Baseline Handbook ( USEPA, Table C. 4.2.3, all systems. Rates for systems serving < 500 people revised based on further analysis by EPA. ( B) and ( C) Development of Cost of Capital Estimates for Public Water Systems, Final Report ( USEPA, 2001j). System Size ( Population Served) are mean values). EPA recognizes that there may be significant variation in household water usage between specific PWSs ( table C. 4.2.3 of the handbook presents confidence intervals around these estimates), but believes that mean usage rate values are adequate for characterizing household costs.

6) Estimates of $ per household per year ( step 5) are combined with number of households incurring costs for each activity ( step 2) to generate distributions of possible household costs.

Exhibit 6.2 Household Cost Inputs <IP_ADDRESS> Modeled Uncertainty in National Costs As noted throughout this EA, EPA recognizes that there is variability among many of the input parameters to the Stage 2 DBPR cost model ( e. g., plants per system, population served, flow per population, labor rates, etc.). In most cases, there is insufficient information to fully characterize the distribution of variability on a national scale. EPA believes that mean values for the various input parameters are adequate to generate EPA's best estimate of national costs for the rule.

EPA recognizes that there is uncertainty in the national cost estimates, and has characterized the uncertainty around the mean unit technology costs in the Stage 2 DBPR cost model. To simulate the effect of this uncertainty on national costs, the model uses the " Crystal Ball" program to perform a Monte Carlo simulation in Excel. The assumptions for modeling uncertainty in unit costs are described in section 6.4.1. The results for the uncertainty analysis are presented in the form of 90 percent confidence bounds around the mean total national cost estimates. Economic Analysis for the Stage 2 DBPR Proposal 6 8 July 2003 6.2 Summary of the National Costs of the Stage 2 DBPR ( Preferred Alternative)

This section presents the estimated number of systems expected to incur costs as a result of the various Stage 2 DBPR activities. It also summarizes the one time costs and annualized costs of the rule. Costs are broken out in several ways, such as by rule activity, type of system, source water category, and system size. All costs presented in this section are for the Preferred Regulatory Alternative for the Stage 2 DBPR. Cost estimates for the other regulatory alternatives were derived using the same methods as for the Preferred Regulatory Alternative and are presented in section 6.9.

6.2.1 Systems Subject to Non Treatment Related Rule Activities Exhibit 6.3 shows the baseline number of systems subject to the Stage 2 DBPR and the estimated number of those systems performing various rule activities ( implementation, IDSE monitoring, additional routine monitoring, and significant excursion evaluations). Appendix H provides the derivation of these values.

As shown in Column E, only 69 percent of surface water and 7 percent of ground water community water systems ( CWSs) are predicted to conduct monitoring as part of the IDSE Standard Monitoring Program ( SMP). Systems not conducting the SMP include those serving fewer than 500 people that receive a waiver ( if their high TTHM and HAA5 sites are in the same location) and those that can qualify for the 40/ 30 certification ( systems with all Stage 1 DBPR data less than or equal to 40 µ g/ L TTHM and 30 µ g/ L HAA5 are eligible). Systems not conducting the IDSE SMP also include those that perform a System Specific Study ( SSS) instead of an SMP.

EPA estimates that some surface water systems serving between 500 and 9,999 people and some ground water systems serving between 500 to 99,999 people will conduct additional routine monitoring beyond the Stage 1 DBPR requirements. However, the number of compliance monitoring samples for some consecutive systems will be reduced from the Stage 1 DBPR to the Stage 2 DBPR because requirements for some systems are changing from plant based requirements to population based requirements ( see Appendix H for a detailed discussion of additional routine monitoring). EPA estimates that a minority of systems ( approximately 16 percent overall) will conduct additional routine monitoring beyond the Stage 1 DBPR requirements.

Because Stage 2 DBPR compliance is based on an annual average of samples collected at each site, EPA expects that a proportion of Stage 2 compliant systems will observe DBP concentrations high enough to trigger the requirement for a significant excursion evaluation. Column H shows the estimated number of systems that may conduct significant excursion evaluations. Economic Analysis for the Stage 2 DBPR Proposal 6 9 July 2003 A B C= B/ A* 100 D E= D/ A* 100 F G= F/ A* 100 H I= H/ A* 100 £ 100 1,283 1,283 100% 289.2 23% 0.0 0% 0.0 0% 101 500 2,120 2,120 100% 546.4 26% 42.5 2% 2.0 0% 501 1,000 1,313 1,313 100% 1,179.3 90% 546.6 42% 26.2 2% 1,001 3,300 2,467 2,467 100% 2,215.8 90% 1,027.0 42% 49.3 2% 3,301 10,000 1,928 1,928 100% 1,722.8 89% 1,084.3 56% 42.3 2% 10,001 50,000 1,690 1,690 100% 1,454.0 86% 0.0 0% 133.2 8% 50,001 100,000 313 313 100% 255.3 82% 0.0 0% 40.6 13% 100,001 1 Million 276 276 100% 213.3 77% 0.0 0% 41.1 15% > 1 Million 13 13 100% 9.9 76% 0.0 0% 3.3 25%

National Totals 11,403 11,403 100% 7,886 69% 2,700 24% 338 3%

£ 100 7,601 7,601 100% 236.2 3% 0.0 0% 0.0 0% 101 500 11,836 11,836 100% 392.6 3% 118.6 1% 0.0 0% 501 1,000 4,089 4,089 100% 482.0 12% 1,691.9 41% 0.0 0% 1,001 3,300 4,869 4,869 100% 573.9 12% 2,014.5 41% 0.0 0% 3,301 10,000 2,288 2,288 100% 270.5 12% 946.6 41% 0.0 0% 10,001 50,000 1,232 1,232 100% 218.0 18% 493.7 40% 0.0 0% 50,001 100,000 129 129 100% 22.8 18% 51.6 40% 0.0 0% 100,001 1 Million 60 60 100% 16.0 27% 22.8 38% 0.0 0% > 1 Million 2 2 100% 1.0 50% 0.9 44% 0.0 0% National Totals 32,105 32,105 100% 2,213 7% 5,341 17% 0 0%

£ 100 303 303 100% 0.0 0% 0.0 0% 0.0 0% 101 500 302 302 100% 0.0 0% 0.0 0% 0.0 0% 501 1,000 109 109 100% 0.0 0% 0.0 0% 0.0 0% 1,001 3,300 74 74 100% 0.0 0% 0.0 0% 0.0 0% 3,301 10,000 22 22 100% 0.0 0% 6.0 27% 0.0 0% 10,001 50,000 9 9 100% 8.0 89% 4.0 44% 0.0 0% 50,001 100,000 1 1 100% 1.0 100% 1.0 100% 0.0 0% 100,001 1 Million 1 1 100% 1.0 100% 1.0 100% 0.0 0% > 1 Million 0 0  0.0  0.0  0.0

National Totals 821 821 100% 10 1% 12 1% 0 0%

£ 100 3,662 3,662 100% 0.0 0% 0.0 0% 0.0 0% 101 500 2,624 2,624 100% 0.0 0% 0.8 0% 0.0 0% 501 1,000 717 717 100% 0.0 0% 5.1 1% 0.0 0% 1,001 3,300 267 267 100% 0.0 0% 1.9 1% 0.0 0% 3,301 10,000 27 27 100% 0.1 0% 0.3 1% 0.0 0% 10,001 50,000 4 4 100% 0.9 19% 0.9 19% 0.0 0% 50,001 100,000 0 0 100% 0.1 19% 0.1 19% 0.0 0% 100,001 1 Million 1 1 100% 0.0 0% 0.0 0% 0.0 0% > 1 Million 0 0  0.0  0.0  0.0  National Totals 7,303 7,303 100% 1 0% 9 0% 0 0%

GRAND TOTAL 51,632 51,632 100% 10,110 20% 8,062 16% 338 1%

Sources: ( A) Exhibit 3.3, column K. Surface Water and Mixed CWSs IDSE Monitoring Additional Routine Monitoring System Size ( Population Served) Stage 2 DBPR System Baseline Number and Percent of Systems Performing Various Rule Activities Implementation Significant Excursion Evaluations Ground Water Only CWSs Surface Water and Mixed NTNCWSs Ground Water Only NTNCWSs ( B), ( D), ( F), and ( H): Appendix H, Exhibit H. 14a. Note: Detail may not add to totals due to independent rounding. The derivations of systems affected are done using the Stage 2B monitoring size categories ( see section H. 1 for a description of these categories and rationale for their use). The estimated number of systems performing each activity by the monitoring categories ( as summarized in Exhibit H. 12) are apportioned back to the standard 9 size categories using percentages. Therefore, the number of systems conducting each activity shown in Columns D, E, and F of this exhibit are fractions in some cases. Also, Column D does not include the number of systems performing SSS's ( refer to Appendix H, Exhibits H. 4a and H. 4b for this estimate). Exhibit 6.3 Number of Systems Subject to Non Treatment Related Rule Activities Economic Analysis for the Stage 2 DBPR Proposal 6 10 July 2003 6.2.2 Plants Adding Treatment Exhibit 6.4 shows the baseline number of plants and the estimated percent of those plants adding treatment. The estimated percent of plants adding treatment is 2.8 percent for all systems ( see column C, " Grand Total All Plants" in Exhibit 6.4). A higher percentage of surface water plants are predicted to add treatment compared to ground water plants. However, the baseline number of ground water plants is larger than that of surface water plants, so there is a larger number of ground water plants adding treatment.

Although the number of plants adding treatment is small, treatment costs make up a significant portion of the total costs of the rule ( more than 80 percent of total rule costs). EPA recognizes that the number of plants changing technology in Exhibit 6.4 may be understated because plants may find higher TTHM or HAA5 concentrations at new sites identified during the IDSE. The number plants adding chloramines or advanced technology, however, may be overstated because low cost alternatives ( such as changing distribution system operations or consolidation with another system) were not considered. Moreover, EPA believes that the estimated number of ground water and small surface water plants adding chloramines or changing technology may be biased upward because their monitoring requirements are expected to be very similar from the Stage 1 to Stage 2 DBPR. Chapter 7 provides a more complete discussion, in addition to a quantitative analysis to assess the effects of those uncertainties. It is not known in which direction these uncertainties influence the estimates in Exhibit 6.4, but EPA believes this net impact to be low.

6.2.3 Summary of One Time Costs One time costs for systems include initial capital, implementation, and IDSE costs. State/ Primacy Agency costs include those associated with implementation and IDSEs. Exhibit 6.5 summarizes estimated total initial capital and other one time costs of the Stage 2 DBPR for systems and States/ Primacy Agencies. Economic Analysis for the Stage 2 DBPR Proposal 6 11 July 2003 System Size ( Population Served) Stage 2 DBPR Plant Baseline A B= C* A C £ 100 470 21 4.4% 101 500 799 26 3.3% 501 1,000 505 17 3.3% 1,001 3,300 1,103 41 3.7% 3,301 10,000 1,213 45 3.7% 10,001 50,000 1,287 75 5.8% 50,001 100,000 538 31 5.8% 100,001 1 Million 572 33 5.8% > 1 Million 74 4 5.8% National Totals 6,560 293 4.5%

£ 100 7,772 211 2.7% 101 500 15,725 461 2.9% 501 1,000 6,133 180 2.9% 1,001 3,300 7,890 184 2.3% 3,301 10,000 4,975 116 2.3% 10,001 50,000 5,367 112 2.1% 50,001 100,000 738 15 2.1% 100,001 1 Million 875 17 1.9% > 1 Million 18 0 1.9% National Totals 49,495 1,296 2.6%

£ 100 298 13 4.4% 101 500 301 10 3.3% 501 1,000 108 4 3.3% 1,001 3,300 72 3 3.7% 3,301 10,000 23 1 3.7% 10,001 50,000 9 1 5.8% 50,001 100,000 1 0 5.8% 100,001 1 Million 1 0 5.8% > 1 Million 0 0 0.0% National Totals 813 31 3.8%

£ 100 3,662 99 2.7% 101 500 2,624 77 2.9% 501 1,000 717 21 2.9% 1,001 3,300 267 6 2.3% 3,301 10,000 27 1 2.3% 10,001 50,000 4 0 2.1% 50,001 100,000 0 0 2.1% 100,001 1 Million 1 0 1.9% > 1 Million 0 0 0.0% National Totals 7,303 204 2.8%

Grand Total All Plants 64,171 1,824 2.8%

Note: Detail may not add to totals due to independent rounding.

Sources: ( A) Exhibit 3.4, column Q. Number and Percentage of Plants Adding Treatment ( C) Total percentage adding treatment for surface water plants ( Exhibit 6.14a) and ground water plants ( Exhibit 6.16a). Primarily Ground Water NTNCWSs Primarily Surface Water CWSs Primarily Ground Water CWSs Primarily Suface Water NTNCWSs Exhibit 6.4 Number and Percent of Plants Adding Treatment Economic Analysis for the Stage 2 DBPR Proposal 6 12 July 2003 Surface Water Disinfecting Ground Water Serving £ 10,000 Serving > 10,000 Serving £ 10,000 Serving > 10,000 Total Total Initial Capital Costs for the Rule 50.0 $ 214.64 $ 108.3 $ 100.3 $ 473.3 $

( 90% Confidence Bounds) ($ 43.1  57.1) ($ 188.2  240.9) ($ 91.5  125.1) ($ 90.0  110.7)

CWS Total Initial Capital 46.26 $ 213.8 $ 96.9 $ 100.1 $ 457.0 $

( 90% Confidence Bounds) ($ 39.8  52.7) ($ 187.4  239.9) ($ 81.6  112.1) ($ 89.8  110.4)

NTNCWS Total Initial Capital 3.79 $ 0.9 $ 11.4 $ 0.3 $ 16.3 $

( 90% Confidence Bounds) ($ 3.2  4.4) ($ 0.7  1.0) ($ 9.8  13.0) ($ 0.2  0.3)

CWS One Time Costs 16.7 $ 47.9 $ 8.1 $ 2.7 $ 75.4 $

Implementation 1.5 $ 0.4 $ 4.1 $ 0.2 $ 6.2 $

IDSE 15.2 $ 47.4 $ 4.0 $ 2.5 $ 69.2 $

NTNCWS One Time Costs 0.1 $ 0.2 $ 0.9 $ 0.0 $ 1.2 $

Implementation 0.1 $ 0.0 $ 0.9 $ 0.0 $ 1.0 $

IDSE  $ 0.2 $ 0.0 $ 0.0 $ 0.2 $

State/ Primacy Agency One Time Costs 14.4 $

Implementation 6.7 $

IDSE 7.7 $

Note: Detail may not add due to independent rounding. 90 percent confidence bounds reflect uncertainty in unit treatment costs. Sources: Initial Capital Costs from Exhibit 6.18. Implementation and IDSE costs from Exhibit 6.7. Exhibit 6.5 Initial Capital and One Time Costs for the Stage 2 DBPR ($ Millions) 5 The Stage 2 DBPR is being proposed in two phases: Stage 2A requires all systems to comply with TTHM/ HAA5 MCLs of 120/ 100 µ g/ L measured as locational running averages ( LRAAs) at each Stage 1 DBPR monitoring site and must continue to comply with the Stage 1 DBPR TTHM/ HAA5 MCLs of 80/ 60 µ g/ L, measured as running annual averages ( RAAs). Stage 2B ( starting six years after rule promulgation) includes systems serving at least 10,000 people must comply with TTHM/ HAA5 MCLs of 80/ 60 µ g/ L measured as LRAAs at the monitoring sites identified during an IDSE ( see Chapter 1 for further description). All monitoring costs for this chapter are based on Stage 2B.

6 100 percent purchasing systems buy or otherwise receive all of their finished water from another system.

7 Producing systems do not buy or otherwise receive all of their water ( i. e., they produce some or all of their own finished water).

Economic Analysis for the Stage 2 DBPR Proposal 6 13 July 2003 6.2.4 Summary of Total Annualized Costs Exhibit 6.6a and b summarize the total annualized costs for the Stage 2 DBPR Preferred Regulatory Alternative at 3 and 7 percent discount rates, respectively. These costs are derived from onetime costs and steady state annual costs ( i. e., the total annual costs expected after all systems and States implement the rule) in section 6.3 ( non treatment activity costs) and 6.4 ( treatment costs). The methodology for calculating the present value of costs and annualizing is discussed in sections 6.1.1 and 6.5.

6.3 Non Treatment Costs for Systems and States/ Primacy Agencies This section presents the estimated national costs for systems and States/ Primacy Agencies to perform Stage 2 DBPR rule activities that are not related to treatment. Chapter 1 contains a summary of the Stage 2 DBPR that describes these activities. The following subsections provide a brief summary of each activity and key assumptions used to estimate costs for each:

6.3.1 Rule Implementation 6.3.2 Initial Distribution System Evaluations 6.3.3 Additional Routine Monitoring 6.3.4 Significant Excursion Evaluations Appendix H provides a detailed methodology and calculations for all non treatment related costs. Note that cost calculations in Appendix H are performed using system inventory data broken out by alternative system size categories ( different from the standard nine system size categories used elsewhere in this EA) that EPA believes to be more appropriate for establishing number of samples required per system. Section 6.3.5 summarizes the one time and steady state annual costs for all non treatmentrelated Stage 2 DBPR activities.

For the IDSE and Stage 2B routine monitoring5, the Stage 2 DBPR sets forth different requirements for consecutive systems that buy all of their water ( these are defined as " 100 percent purchasing systems" 6) than for all other systems ( these are defined as " producing systems" 7). Monitoring requirements for 100 percent purchasing systems are not based on the number of plants as in the Stage 1 DBPR. They are based solely on population served and source water type. This approach is called the " population based" monitoring approach. A " plant based" monitoring approach, which is consistent with the Stage 1 DBPR, applies to all other producing systems. Costs in Appendix H are calculated separately for 100 percent purchasing and for producing systems. Economic Analysis for the Stage 2 DBPR Proposal 6 14 July 2003 Total System Costs Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Implementation IDSE Monitoring Significant Excursion Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

£   10,000 $ 2.23 $ 1.92 $ 2.54 $ 3.94 $ 3.66 $ 4.22 $ 0.08 $ 0.84 $ 1.20 $ 0.00 $ 8.30 $ 7.71 $ 8.89 > 10,000 $ 10.76 $ 9.44 $ 12.08 $ 10.08 $ 9.50 $ 10.67 $ 0.02 $ 2.68 $ 2.14 $ 0.01 $ 21.42 $ 19.51 $ 23.33 £ 10,000 $ 0.18 $ 0.15 $ 0.21 $ 0.43 $ 0.40 $ 0.46 $ 0.01 $ 0.00 $ 0.00 $ 0.00 $ 0.62 $ 0.56 $ 0.68 > 10,000 $ 0.04 $ 0.04 $ 0.05 $ 0.04 $ 0.04 $ 0.04 $ 0.00 $ 0.01 $ 0.01 $ 0.00 $ 0.10 $ 0.10 $ 0.11 £ 10,000 $ 4.68 $ 3.94 $ 5.41 $ 5.60 $ 5.19 $ 6.00 $ 0.21 $ 0.21 $ 1.16 $ 0.00 $ 11.85 $ 10.71 $ 12.99 > 10,000 $ 5.04 $ 4.52 $ 5.56 $ 7.31 $ 6.87 $ 7.77 $ 0.01 $ 0.14 $ 1.68 $ 0.00 $ 14.19 $ 13.23 $ 15.17 £ 10,000 $ 0.55 $ 0.47 $ 0.63 $ 0.81 $ 0.74 $ 0.88 $ 0.05 $ 0.00 $ 0.00 $ 0.00 $ 1.41 $ 1.26 $ 1.56 > 10,000 $ 0.01 $ 0.01 $ 0.01 $ 0.02 $ 0.02 $ 0.02 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.03 $ 0.04 TOTAL $ 23.49 $ 20.49 $ 26.49 $ 28.23 $ 26.41 $ 30.07 $ 0.38 $ 3.89 $ 1.92 $ 0.01 $ 57.93 $ 53.12 $ 62.77 $ 1.14 $ 59.08 $ 54.26 $ 63.91 Notes: Detail may not add due to independent rounding. 90 percent confidence bounds reflect uncertainty in unit treatment costs. Present value in millions of $ 2000 dollars. Estimates are discounted to 2003. Sources Capital Costs: SW CWS, Exhibit K. 2bb; SW NTNCWS, Exhibit K. 2bf; GW CWS, Exhibit K. 2bj; GW NTNCWS, Exhibit K. 2bn. O& M Costs: SW CWS, Exhibit K. 2bc; SW NTNCWS, Exhibit K. 2bg; GW CWS, Exhibit K. 2bk; GW NTNCWS, Exhibit K. 2bo. Non Treatment Costs: SW CWS, Exhibit K. 2bd; SW NTNCWS, Exhibit K. 2bh; GW CWS, Exhibit K. 2bl; GW NTNCWS, Exhibit K. 2bp. State Costs; Appendix H, Exhibit H. 15. Capital Costs Mean Value 90 Percent Confidence Bound O& M Costs Mean Value 90 Percent Confidence Bound Non Treatment Costs ( Point Estimate)

Mean Value Mean Value 90 Percent Confidence Bound 90 Percent Confidence Bound System Costs Total Costs of the Rule Surface Water CWSs Surface Water NTNCWSs Ground Water CWSs Ground Water NTNCWSs System Size ( Population Served) State Costs Exhibit 6.6a Total Annualized Costs for Stage 2 DBPR Rule Activities ($ Millions/ Year, 3 Percent Discount Rate) Economic Analysis for the Stage 2 DBPR Proposal 6 15 July 2003 Total System Costs Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Implementation IDSE Monitoring Significant Excursion Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

£   10,000 $ 2.69 $ 2.31 $ 3.06 $ 3.56 $ 3.31 $ 3.81 $ 0.11 $ 1.21 $ 1.03 $ 0.00 $ 8.61 $ 7.98 $ 9.24 > 10,000 $ 13.62 $ 11.94 $ 15.29 $ 9.38 $ 8.85 $ 9.93 $ 0.03 $ 3.94 $ 1.89 $ 0.01 $ 25.09 $ 22.88 $ 27.31 £ 10,000 $ 0.22 $ 0.19 $ 0.25 $ 0.39 $ 0.36 $ 0.41 $ 0.01 $ 0.00 $ 0.00 $ 0.00 $ 0.62 $ 0.55 $ 0.68 > 10,000 $ 0.05 $ 0.05 $ 0.06 $ 0.03 $ 0.03 $ 0.04 $ 0.00 $ 0.01 $ 0.01 $ 0.00 $ 0.12 $ 0.11 $ 0.12 £ 10,000 $ 5.63 $ 4.74 $ 6.51 $ 5.06 $ 4.69 $ 5.43 $ 0.28 $ 0.28 $ 0.99 $ 0.00 $ 12.24 $ 10.98 $ 13.49 > 10,000 $ 6.38 $ 5.72 $ 7.04 $ 6.81 $ 6.40 $ 7.23 $ 0.02 $ 0.21 $ 1.48 $ 0.00 $ 14.89 $ 13.83 $ 15.97 £ 10,000 $ 0.66 $ 0.57 $ 0.75 $ 0.74 $ 0.67 $ 0.80 $ 0.06 $ 0.00 $ 0.00 $ 0.00 $ 1.46 $ 1.30 $ 1.62 > 10,000 $ 0.02 $ 0.01 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.03 $ 0.04 TOTAL $ 29.26 $ 25.54 $ 32.98 $ 25.99 $ 24.32 $ 27.68 $ 0.51 $ 5.66 $ 1.64 $ 0.01 $ 63.07 $ 57.67 $ 68.48 $ 1.48 $ 64.55 $ 59.16 $ 69.96 Notes: Detail may not add due to independent rounding. 90 percent confidence bounds reflect uncertainty in unit treatment costs. Present value in millions of $ 2000 dollars. Estimates are discounted to 2003. Sources Capital Costs: SW CWS, Exhibit K. 2br; SW NTNCWS, Exhibit K. 2bv; GW CWS, Exhibit K. 2bz; GW NTNCWS, Exhibit K. 2cd. O& M Costs: SW CWS, Exhibit K. 2bs; SW NTNCWS, Exhibit K. 2bw; GW CWS, Exhibit K. 2ca; GW NTNCWS, Exhibit K. 2ce. Non Treatment Costs: SW CWS, Exhibit K. 2bt; SW NTNCWS, Exhibit K. 2bx; GW CWS, Exhibit K. 2cb; GW NTNCWS, Exhibit K. 2cf. State Costs: Appendix H, Exhibit H. 15. System Costs State Costs Total Costs of the Rule System Size ( Population Served) Capital Costs O& M Costs Non Treatment Costs ( Point Estimate)

Mean Value 90 Percent Confidence Bound Mean Value Surface Water CWSs Surface Water NTNCWSs Ground Water CWSs Ground Water NTNCWSs 90 Percent Confidence Bound 90 Percent Confidence Bound Mean Value Mean Value 90 Percent Confidence Bound Exhibit 6.6b Total Annualized Costs for Stage 2 DBPR Rule Activities ($ Millions/ Year, 7 Percent Discount Rate) Economic Analysis for the Stage 2 DBPR Proposal 6 16 July 2003 Although it is consistent with the Stage 1 DBPR, EPA has identified several potential issues with the plant based approach, such as:

° The number of required sample sites may be either excessive or insufficient in representing DBP occurrence throughout the system, particularly in situations where a small system uses multiple plants, or where a very large systems using a small number of plants.

° Plant based sampling requirements for mixed systems ( i. e., those receiving disinfected surface water and ground water in their distribution system) may be excessive, depending upon the system's characteristics.

° Plant based monitoring requirements pose unique implementation issues for systems with temporary supplies during the year.

The Stage 2 DBPR preamble describes these issues in detail and requests comment on them, particularly the significance of a plant based versus a population based monitoring approach. Appendix I compares costs and burden of the two approaches.

EPA is also considering an alternative schedule for the IDSE ( starting 2 years later for all systems) and an alternative to the IDSE whereby it is replaced with increased monitoring during the first year to reduce the burden on systems and EPA Regions and increase the technical involvement of the States. The cost implications of these IDSE alternatives are presented in Appendix I.

6.3.1 Rule Implementation Public Water Systems All systems subject to the Stage 2 DBPR will incur one time costs that include time for staff to read the rule and become familiar with its provisions and to train employees on rule requirements. The technical and managerial labor rates presented in section 6.1.1 were used along with estimates of labor hours to generate implementation costs for all systems. The mix of labor rates used to estimate implementation costs vary by activity and system size as summarized in Appendix H.

States/ Primacy Agencies With the exception of the IDSE, the Stage 2 DBPR is similar to the Stage 1 DBPR, which States have already implemented; therefore, additional implementation costs for the Stage 2 DBPR will be minimal. State/ Primacy Agency implementation activities include:

° Public notification ° Regulation adoption and program development ° Training State/ Primacy Agency staff ° Training PWS staff Economic Analysis for the Stage 2 DBPR Proposal 6 17 July 2003 ° Technical assistance ° Updating the data management system The number of FTEs required per activity was estimated by EPA based on previous experience with other rules. State/ Primacy Agency activities include public notification ( 0.1 FTEs), regulation adoption and program implementation ( 0.50 FTEs), training State/ Primacy Agency staff ( 0.25 FTEs), training PWS staff and technical assistance ( 1.00 FTE), and updating the management system ( 0.10 FTEs). The labor rates used to estimate State/ Primacy Agency costs are presented in section 6.1.1. The number of States and territories included the 50 States ( or EPA regions were States do not have primacy), 6 territories, and 1 tribal government.

6.3.2 Initial Distribution System Evaluations Public Water Systems The purpose of the IDSE is to identify compliance monitoring sites that are representative of the highest TTHM and HAA5 levels in the distribution system. IDSEs can be performed by either ( 1) conducting an SMP or ( 2) completing an SSS that may include historical data or hydraulic modeling results. Nontransient noncommunity water systems ( NTNCWSs) serving fewer than 10,000 people are not subject to IDSE requirements of the Stage 2 DBPR. A system does not have to perform the IDSE if: ( 1) all Stage 1 DBPR compliance samples are less than or equal to 40 : g/ L for TTHM and 30 : g/ L for HAA5, or ( 2) the system serves less than 500 people and its Stage 1 DBPR site represents both high TTHM and high HAA5 concentrations.

For systems performing an IDSE, costs will be incurred for evaluating their distribution systems to identify sampling sites, sampling, and reporting results. Systems electing to complete an SSS may not incur sampling costs; however, they will still incur labor costs for completing and submitting the report. Also, some systems that do not perform the IDSE may have more sampling sites required under the Stage 2 DBPR than under the Stage 1 DBPR and, thus, incur a small labor cost for selecting new Stage 2B sites. A detailed description of the process that EPA used to estimate the total national IDSE costs, as well as detailed calculation tables, are presented in Appendix H.

States/ Primacy Agencies States/ Primacy Agencies also will incur costs as a result of the IDSEs. The activities they will conduct include analyzing PWS IDSE reports, making determinations, consulting with PWSs, and IDSE recordkeeping.

6.3.3 Additional Routine Monitoring Public Water Systems Many systems will have the same monitoring requirements as under the Stage 1 DBPR and will, thus, incur no additional costs for this activity. As described in Chapter 1, consecutive systems that buy all of their finished water ( 100 percent purchasing systems) have a modified monitoring scheme based only on population served and source water type ( not number of plants, as for the Stage 1 DBPR). As a result, these systems may have more or fewer monitoring sites between the Stage 1 and Stage 2 DBPRs, Economic Analysis for the Stage 2 DBPR Proposal 6 18 July 2003 depending on how the State/ Primacy Agency determined their Stage 1 monitoring requirements. Incremental costs will be negative for systems that have fewer sites than the Stage 1 DBPR ( see Exhibit H. 8a in Appendix H). Total costs for all systems for additional routine monitoring, however, are positive.

For all other systems ( producing systems), only a portion may have one additional site per plant. Surface water systems serving 500 to 9,999 people and disinfecting ground water systems serving at least 500 people may have to take an additional sample for each sample period if their high TTHM concentrations occur at a different location than their high HAA5 concentrations.

Estimates of numbers of systems that have additional monitoring sites are provided in Appendix H. Costs for additional routine monitoring include laboratory analysis and labor for taking the sample.

States/ Primacy Agencies States/ Primacy Agencies will incur costs for additional routine monitoring related to review and evaluation of monitoring data submitted by systems.

6.3.4 Significant Excursion Evaluations Public Water Systems To address excess DBP levels that may occasionally occur ( but do not cause rule violations), the Stage 2 DBPR contains a provision for significant DBP excursions. If a significant excursion occurs, systems must conduct a significant excursion evaluation and discuss the evaluation with the State/ Primacy Agency no later than the next sanitary survey. A significant excursion evaluation must include an examination of distribution system operational practices and how these practices may be modified to reduce TTHM and HAA5 levels.

For systems that experience a significant excursion, a labor cost will be incurred for investigating and documenting the cause. EPA assumes that review of significant DBP excursion evaluations will occur as part of the normal review process during the sanitary survey and allocates no additional cost to systems for this activity. Appendix H provides estimates of the number of systems expected to experience a significant excursion and the associated costs.

States/ Primacy Agencies EPA assumes that review of significant DBP excursion evaluations will occur as part of the normal review process during the sanitary survey and allocates no additional cost to States/ Primacy Agencies for this activity. Economic Analysis for the Stage 2 DBPR Proposal 6 19 July 2003 6.3.5 Results ( One Time and Annual Steady State Costs)

Exhibit 6.7 summarizes the one time system costs for implementation and IDSEs, along with the annual steady state costs for additional routine monitoring and significant excursion evaluations. Note that IDSE costs make up the majority of the one time costs. Additional routine monitoring costs are much larger than the significant excursion yearly costs, mainly because of TTHM/ HAA5 laboratory fees.

One time and annual costs ( steady state) for States/ Primacy Agencies are summarized in Appendix H, Exhibit H. 15. Total one time costs for implementation and IDSEs are approximately $ 14.4 million ( including $ 6.7 million for implementation activities and $ 7.7 million for IDSE activities), while annual costs for additional routine monitoring are approximately $ 0.34 million.

6.4 Treatment Costs Treatment costs ( capital and O& M) make up the bulk of the costs associated with the Stage 2 DBPR. This section reviews the cost methodology used and total costs for the Preferred Regulatory Alternative as follows:

6.4.1 Presents the treatment technologies available to systems for meeting the Stage 2 DBPR and describes how unit costs were derived for each. This section also describes how uncertainty in unit costs is incorporated into the Stage 2 DBPR cost model.

6.4.2 Summarizes the methodology for generating compliance forecasts ( number of systems that need to add treatment and the treatment they select) for surface water and ground water plants and presents compliance forecasts for surface and ground water systems.

6.4.3 Presents results in the form of total initial capital and steady state O& M costs.

Section 6.5 builds on results from this section by showing how costs are projected according to the Stage 2 DBPR compliance schedule, how present values are calculated for those costs, and how results are annualized over 25 years to produce the total annualized costs of the rule.

6.4.1 Technologies and Unit Costs Systems that exceed the TTHM and HAA5 MCLs set by the Stage 2 DBPR will have to take action to bring themselves into compliance. For the purpose of estimating the costs of the Stage 2 DBPR, EPA assumes that this action always involves treatment modifications at the plant. In reality, some systems may make other less costly improvements ( such as modifying their distribution system operations or flushing) or may choose to consolidate with another system. Thus, national costs presented in this EA are most likely over stated ( see section 6.8 for a summary of uncertainties in the analysis).

Section <IP_ADDRESS> describes the treatment technologies and their operating conditions used to predict national treatment costs of the Stage 2 DBPR. Section <IP_ADDRESS> discusses alternatives to treatment identified by EPA and others during the Federal Advisory Committees Act ( FACA) process and explains why these processes are not included in the cost analysis for the Stage 2 DBPR. Economic Analysis for the Stage 2 DBPR Proposal 6 20 July 2003 One Time Costs ($) Annual Costs ( Steady State) ($)

Implementation IDSE Total Additional Routine Monitoring Significant Excursion Evaluations Total A B C= A+ B D E F= D+ E £ 100 192,142 $ 371,431 $ 563,573 $ ( 19,929) $  $ ( 19,929) $

101 500 319,933 $ 803,707 $ 1,123,641 $ ( 554) $ 60 $ ( 495) $

501 1,000 228,068 $ 2,825,436 $ 3,053,504 $ 396,375 $ 768 $ 397,142 $

1,001 3,300 428,518 $ 5,308,722 $ 5,737,240 $ 744,749 $ 1,442 $ 746,192 $

3,301 10,000 334,894 $ 5,878,472 $ 6,213,366 $ 764,000 $ 1,284 $ 765,284 $

10,001 50,000 294,016 $ 29,533,457 $ 29,827,473 $ ( 2,475,923) $ 8,004 $ ( 2,467,919) $

50,001 100,000 72,491 $ 8,808,897 $ 8,881,388 $ ( 615,042) $ 2,525 $ ( 612,517) $

100,001 1 Million 63,922 $ 8,434,192 $ 8,498,113 $ ( 30,375) $ 2,541 $ ( 27,834) $

> 1 Million 3,011 $ 643,422 $ 646,433 $ ( 4,899) $ 196 $ ( 4,703) $

National Totals 1,936,994 $ 62,607,736 $ 64,544,730 $ ( 1,241,599) $ 16,820 $ ( 1,224,779) $

£ 100 948,627 $ 403,626 $ 1,352,253 $ ( 3,511) $  $ ( 3,511) $

101 500 1,482,800 $ 687,968 $ 2,170,768 $ 39,488 $  $ 39,488 $

501 1,000 591,883 $ 1,065,493 $ 1,657,376 $ 639,156 $  $ 639,156 $

1,001 3,300 704,760 $ 1,268,690 $ 1,973,450 $ 761,047 $  $ 761,047 $

3,301 10,000 331,202 $ 613,342 $ 944,543 $ 376,555 $  $ 376,555 $

10,001 50,000 178,272 $ 1,987,279 $ 2,165,551 $ 2,032,063 $  $ 2,032,063 $

50,001 100,000 18,638 $ 207,766 $ 226,405 $ 212,449 $  $ 212,449 $

100,001 1 Million 8,684 $ 316,278 $ 324,961 $ 204,365 $  $ 204,365 $

> 1 Million 320 $ 20,850 $ 21,170 $ 8,260 $  $ 8,260 $ National Totals 4,265,185 $ 6,571,291 $ 10,836,476 $ 4,269,872 $  $ 4,269,872 $

£ 100 37,814 $  $ 37,814 $  $  $  $

101 500 38,168 $  $ 38,168 $  $  $  $

501 1,000 15,778 $  $ 15,778 $  $  $  $

1,001 3,300 10,712 $  $ 10,712 $  $  $  $

3,301 10,000 3,185 $  $ 3,185 $ 5,879 $  $ 5,879 $

10,001 50,000 1,303 $ 114,278 $ 115,581 $ 7,839 $  $ 7,839 $

50,001 100,000 174 $ 23,979 $ 24,153 $ 3,919 $  $ 3,919 $

100,001 1 Million 174 $ 35,969 $ 36,143 $ 7,839 $  $ 7,839 $

> 1 Million  $  $  $  $  $  $

National Totals 107,307 $ 174,227 $ 281,533 $ 25,476 $  $ 25,476 $

£ 100 457,015 $  $ 457,015 $  $  $  $

101 500 329,625 $  $ 329,625 $ 186 $  $ 186 $

501 1,000 103,772 $  $ 103,772 $ 1,258 $  $ 1,258 $

1,001 3,300 38,627 $  $ 38,627 $ 468 $  $ 468 $

3,301 10,000 3,963 $ 206 $ 4,169 $ 310 $  $ 310 $

10,001 50,000 620 $ 2,474 $ 3,094 $ 3,149 $  $ 3,149 $

50,001 100,000 52 $ 206 $ 258 $ 262 $  $ 262 $

100,001 1 Million 145 $ 87 $ 232 $  $  $  $

> 1 Million  $  $  $  $  $  $

National Totals 933,818 $ 2,973 $ 936,791 $ 5,634 $  $ 5,634 $

Grand Total All Systems 7,243,304 $ 69,356,227 $ 76,599,531 $ 3,059,382 $ 16,820 $ 3,076,202 $

Notes: Detail may not add due to independent rounding. Source: Exhibit H. 14b. See Exhibit H. 12b for estimated costs for non treatment related rule activities broken out according to the Stage 2B monitoring system size categories. 100% Ground Water NTNCWSs System Size ( Population Served)

Surface Water and Mixed CWSs 100% Ground Water CWSs Surface Water and Mixed NTNCWSs Exhibit 6.7 Summary of System Costs for Non Treatment Related Stage 2 DBPR Rule Activities ( One Time and Steady State) Economic Analysis for the Stage 2 DBPR Proposal 6 21 July 2003 <IP_ADDRESS> Technologies Used to Estimate Treatment Costs This section discusses the technologies available for surface water plants first, followed by the technologies used for ground water plants. A discussion of uncertainties in unit costs follows. A summary of unit treatment costs is presented at the end of the section. Appendix J supports the data in section <IP_ADDRESS>, showing the detailed derivation of unit costs over the entire range of expected plant flows.

Technologies for Surface Water Plants Exhibit 6.8a lists the treatment technologies that are available to surface water plants for complying with Stage 1 DBPR and Stage 2 DBPR regulatory alternatives. The technologies are identical to those presented in the SWAT Decision Tree ( Chapter 3 and Appendix A) with the exception of the following:

° Adjusting disinfection dose ° Moving the point of chlorination ° Enhanced coagulation/ enhanced softening ( required for the Stage 1 DBPR)

° Turbo coagulation As noted in section 3.61, these technologies represent operational changes to existing treatment configurations. Although these changes may result in small increases in chemical costs or minor capital improvements, EPA assumes their costs to be negligible when compared to the costs of the advanced technologies ( e. g., UV, ozone, granulated activated carbon, microfiltration/ ultra filtration). Also, most systems that are able to use these technologies are predicted to do so to meet the Stage 1 DBPR. For these reasons, the predicted costs for the Stage 2 DBPR do not include costs for operational changes ( section 6.8 summarizes uncertainties in national cost estimates).

Although EPA assumes that large surface water plants serving more than 100,000 people can select any of the technologies presented in Exhibit 6.8a, small plants may not be able to use a particular technology because of operational constraints or other reasons. Limitations on the use of technologies by small systems, summarized in the second column in Exhibit 6.8a, were identified during the small surface water expert review process ( see Appendix A for details).

The last column in Exhibit 6.8a identifies the design criteria and operating conditions for each technology used in this EA to generate costs. To capture the range of costs, the Technology and Cost ( T& C) document evaluated technologies over a range of possible influent water qualities and operating conditions ( USEPA 2003o). For the purposes of estimating the costs of the Stage 2 DBPR, the Technical Workgroup ( TWG) selected water quality and operating parameters that would capture the typical circumstances under which plants may use the technology. EPA does not propose that all systems would operate under these conditions, but they suffice to generate capital and O& M costs typical of the range of system types and sizes. While these assumptions simplify the true variety of operating conditions, EPA believes they capture reasonable estimates of national costs. The uncertainties associated with selecting these operational parameters and conditions are summarized in section 6.8.

Appendix A presents additional information on how each technology was modeled in SWAT, including log removal and disinfection credits for Giardia and viruses. Note that, for UV, the disinfection Economic Analysis for the Stage 2 DBPR Proposal 6 22 July 2003 credit for viruses was 2.0 logs for all runs. The primary disinfectant ( usually chlorine) dose was then modified to meet the remaining disinfection requirements.

Some advanced technologies were considered in combination for surface water systems to meet the Stage 2 DBPR ( as modeled in SWAT). When technologies are a combination of two or more unit processes ( e. g., Granular Activated Carbon   20 Minute Contact Time ( GAC20) with Advanced Disinfectants such as Chlorine Dioxide or Ozone), the technology unit costs are assumed to be the sum of the costs for each unit process. For example, the cost for implementing GAC20 with an Advanced Disinfectant ( e. g., Ozone) is equal to the sum of GAC20 and Ozone unit costs. This may over estimate unit costs since some economies of scale are expected when two or more technologies are installed at the same time.

Technologies for Ground Water Plants Exhibit 6.8b lists the treatment technologies used to estimate costs of the Stage 1 DBPR and Stage 2 DBPR regulatory alternatives for ground water plants. There are fewer technologies for disinfecting ground water plants than for surface water plants. As noted in Chapter 3 and Appendix B, the ICR Ground Water Delphi process concluded that disinfecting ground water systems would choose primarily from four treatment technologies   conversion to chloramines, ozone, GAC20, and nanofiltration. Limitations on technology use by small systems, as identified during the small ground water expert review process, are provided in the second column.

Because UV was still very much an emerging technology when the Ground Water Delphi process was conducted ( Spring, 2000), UV was not considered as a treatment option for large ground water plants for either the Stage 1 or Stage 2 DBPRs. UV was, however, considered an available technology for small ground water systems to meet Stage 2 DBPR requirements. The small system expert reviewers assumed UV would be used instead of chlorine to achieve 4.0 logs of virus inactivation in all circumstances. EPA currently estimates the dose required to inactivate 4.0 logs of Adenovirus to be on the order of 200 mJ/ cm2, much higher than the UV dose of 40 mJ/ cm2 assumed in the T& C document for surface water systems ( USEPA 2003o). Thus, the unit cost estimates shown in Exhibit 6.8b for UV ($/ plant) for small ground water plants reflect new estimates for a higher dose of 200 mJ/ cm2.

Unit Costs for the Stage 2 DBPR Mean unit costs for each of EPA's standard nine system size categories are derived from the T& C document ( USEPA 2003o). The T& C document contains between 16 and 20 point estimates of capital and O& M costs over the range of expected design and average flow rates. Appendix J displays these point estimates for the technologies and design criteria and operating conditions listed in Exhibits 6.8a and b. In previous T& C drafts, non linear cost curves were generated for specific flow ranges based on a more limited set of point estimates. Because the number of point estimates for the unit costs was increased to better represent the full range of expected flows, EPA believes that direct straight line interpolation between the point values is adequate for characterizing the changes in unit costs as flow increases or decreases. Along with the 16 to 20 point estimates, Appendix J graphically shows the relationship of unit cost and flow ( i. e., the point estimates connected by straight lines).

Unit costs for each technology, system type, source water type, and size category are estimated using ( 1) the unit cost data in Appendix J and ( 2) the mean design and average daily flow values presented in Exhibit 3.6. For example, the design flow for UV for surface water plants in CWSs serving Economic Analysis for the Stage 2 DBPR Proposal 6 23 July 2003 between 10,000 and 50,000 people is estimated to be 5.30691 MGD ( the value in Exhibit 3.6 is truncated to 5.307 MGD). Exhibit J. 5 shows that the capital cost for UV surface water plants is $ 408,427 for a design flow of 3.5 MGD and $ 660,687 for a design flow of 7.0 MGD. The cost for a 5.30691 MGD plant can be calculated by linear interpolation as:

Unit Cost = $ 408,427 + ($ 660,687  $ 408,427) * ( 5.30691 MGD  3.5 MGD)/( 7.0 MGD  3.5 MGD)

Unit Cost = $ 538,659 Exhibits 6.9a c and 6.10a c summarize annual O& M costs ($/ plant/ year), capital costs ($/ plant), and household costs ($/ household/ year) for surface and ground water technologies, respectively. Note that unit costs are different for surface and ground water plants because they are based on different mean design and average daily flows per plant as shown in Exhibit 3.6 for each system size category. Costs are provided for each technology and for each of the nine population size categories for plants in CWSs. Unit costs for NTNCWSs are not presented, but can be derived from the data in Appendix J using NTNCWS flows as summarized in Exhibit 3.6. Economic Analysis for the Stage 2 DBPR Proposal 6 24 July 2003 Exhibit 6.8a Treatment Technologies for Surface Water Plants Technology Constraints Design Criteria and Operating Conditions Switching to chloramines ( CLM) as a residual disinfectant Can be used alone or in conjunction with all other technologies in this exhibit Ammonia dose = 0.55 mg/ L ( output from SWAT)

Chlorine dioxide ( CLO2) Assumed not practical for systems serving 100 people or fewer EPA assumed that plants will not build a new contact basin for chlorine dioxide ClO2 dose = 1.25 mg/ L Ultraviolet light disinfection ( UV) 1 None Median water quality parameters   UV254 = 0.051 cm 1, turbidity = 0.1 NTU, alkalinity = 60 mg/ L as CaCO3, hardness = 100 mg/ L as CaCO3 Dose = 40 mJ/ cm2 Ozone Assumed not practical for systems serving 100 people or fewer Design dose = 3.2 mg/ L, contact time = 12 minutes2 Microfiltration / Ultrafiltration ( MF/ UF) None Median water quality parameters   Temperature= 10 ° C, disposal to sewer Granular activated carbon filtration, emptybed contact time of 10 minutes ( GAC10) Assumed not practical for small systems serving 10,000 people or fewer Reactivation frequency = 360 days 3 On site regeneration GAC10 + Advanced Disinfectants Assumed not practical for small systems serving 10,000 people or fewer Chlorine dioxide as the advanced disinfectant Reactivation frequency = 360 days 3 On site regeneration Granular activated carbon filtration, emptybed contact time of 20 minutes ( GAC20) None Reactivation frequency = 90 days 3 Onsite regeneration used for systems serving > 10,000 Media replacement used for systems serving < 10,000 GAC20 + Advanced Disinfectants None Systems serving > 10,000 ( GAC20 + chlorine dioxide) Systems serving 101  10,000 ( GAC20 + ozone) Systems serving < 100 ( GAC20 + UV) On site media regeneration used for systems serving > 10,000 Media replacement used for systems serving < 10,000 Membranes ( MF/ UF + nanofiltration [ NF]) None Median water quality parameters   MF/ UF: 10 ° C, disposal to sewer NF: 10 ° C, ocean discharge Notes: 1 Available for Stage 2 DBPR regulatory alternatives only; not considered available for the Stage 1 DBPR. UV was assumed to be used as a supplement to chlorine to achieve some of the required Giardia and virus inactivation, thereby reducing chlorine dosages. 2 Dose does not consider Cryptosporidium inactivation, and, therefore, may not represent what systems would do to meet Long Term 2 Enhanced Surface Water Treatment Rule ( LT2ESWTR) requirements. However, the higher dose is accounted for in the LT2ESWTR EA. 3 Median reactivation frequency generated by SWAT.

Source: T& C document ( USEPA 2003o), FACA deliberations for Stage 2 technologies ( USEPA 2000p). SWAT Decision Tree ( Appendix A), and Small Surface Water Delphi Groups ( Appendix A). Economic Analysis for the Stage 2 DBPR Proposal 6 25 July 2003 Exhibit 6.8b Treatment Technologies for Disinfecting Ground Water Plants Technology Constraints Design Criteria and Operating Conditions Switching to CLM as a Residual Disinfectant This advanced technology can be used alone or in conjunction with all the following technologies Ammonia dose = 0.15 mg/ L1 UV2 Was considered only for small systems with populations of 101 to 9,999 people Median water quality parameters   UV254 = 0.051 cm 1, turbidity = 0.1 NTU, alkalinity = 60 mg/ L as CaCO3, hardness = 100 mg/ L as CaCO3 Dose = approximately 200 mJ/ cm Ozone Assumed not practical for systems serving 100 or fewer people Design dose = approximately 3.2 mg/ L, contact time = 12 minutes GAC20 None Reactivation frequency = 240 days 3 On site regeneration used for systems serving more than 10,000 Media replacement used for systems serving 10,000 or fewer Nanofiltration None Median water quality parameters   Temperature= 10 ° C, ocean discharge Notes: 1 Dose based on decisions from the ICR Ground Water Delphi Group. 2 Available for Stage 2 DBPR regulatory alternatives only; not considered available for the Stage 1 DBPR. 3 Reactivation frequency based on decisions from the ICR Ground Water Delphi Group.

Source: T& C document ( USEPA 2003o), FACA deliberations for Stage 2 technologies ( USEPA 2000p), and ICR and Small Ground Water Delphi Groups ( Appendix B). Economic Analysis for the Stage 2 DBPR Proposal 6 26 July 2003 System Size ( Population Served) Plant Design Flow ( MGD) CLM CLO2 UV Ozone MF/ UF GAC10 GAC10+ AD GAC20 GAC20+ AD Membranes £ 100 0.02 $ 27,912 $ 12,290 $ 195,780 $ 49,092 $ 61,383 $ 267,764 101 500 0.08 $ 27,912 $ 31,610 $ 23,286 $ 306,733 $ 373,543 $ 122,745 $ 429,478 $ 520,958 501 1,000 0.22 $ 32,751 $ 37,879 $ 45,349 $ 369,250 $ 660,013 $ 277,100 $ 646,350 $ 924,433 1,001 3,300 0.57 $ 39,412 $ 41,018 $ 85,235 $ 526,634 $ 999,812 $ 612,051 $ 1,138,684 $ 1,547,250 3,301 10,000 1.40 $ 80,696 $ 80,008 $ 252,258 $ 838,817 $ 1,908,348 $ 1,648,226 $ 2,487,043 $ 3,186,040 10,001 50,000 5.31 $ 80,696 $ 195,786 $ 538,659 $ 1,730,528 $ 5,589,628 $ 2,551,722 $ 2,747,508 $ 4,204,626 $ 4,400,412 $ 10,534,960 50,001 100,000 8.28 $ 82,616 $ 212,286 $ 742,575 $ 2,235,129 $ 8,154,642 $ 3,483,285 $ 3,695,571 $ 5,810,626 $ 6,022,912 $ 15,725,380 100,001 1 Million 29.69 $ 165,386 $ 329,184 $ 2,028,345 $ 5,108,783 $ 24,903,615 $ 8,594,998 $ 8,924,182 $ 14,689,716 $ 15,018,901 $ 49,177,144 > 1 Million 191.61 $ 461,990 $ 827,573 $ 11,127,634 $ 21,647,379 $ 135,145,122 $ 34,041,536 $ 34,869,108 $ 59,705,859 $ 60,533,432 $ 250,437,418 System Size ( Population Served) Plant Average Daily Flow ( MGD) CLM CLO2 UV Ozone MF/ UF GAC10 GAC10+ AD GAC20 GAC20+ AD Membranes £ 100 0.01 $ 1,572 $ 3,563 $ 7,763 $ 20,780 $ 24,343 $ 16,932 101 500 0.03 $ 1,597 $ 15,087 $ 4,613 $ 56,559 $ 12,196 $ 47,927 $ 104,486 $ 29,172 501 1,000 0.08 $ 3,038 $ 16,831 $ 6,127 $ 57,150 $ 26,555 $ 62,104 $ 119,254 $ 64,437 1,001 3,300 0.23 $ 3,100 $ 17,900 $ 8,116 $ 58,350 $ 41,352 $ 122,580 $ 180,930 $ 110,925 3,301 10,000 0.58 $ 6,340 $ 20,197 $ 10,423 $ 61,564 $ 90,131 $ 187,653 $ 249,216 $ 252,904 10,001 50,000 2.33 $ 9,266 $ 23,271 $ 15,220 $ 78,851 $ 255,435 $ 101,023 $ 124,294 $ 289,147 $ 312,418 $ 806,702 50,001 100,000 3.81 $ 11,094 $ 26,421 $ 17,275 $ 91,751 $ 399,619 $ 135,646 $ 162,067 $ 381,837 $ 408,258 $ 1,282,212 100,001 1 Million 14.51 $ 20,209 $ 47,108 $ 32,558 $ 182,317 $ 1,324,136 $ 331,319 $ 378,427 $ 1,058,799 $ 1,105,907 $ 4,442,174 > 1 Million 102.57 $ 69,083 $ 186,738 $ 162,112 $ 973,448 $ 8,475,397 $ 1,669,231 $ 1,855,969 $ 5,772,375 $ 5,959,113 $ 28,833,411 Exhibit 6.9a Capital Costs ($/ Plant) for CWS Surface Water Plants Exhibit 6.9b Annual O& M Costs ($/ Plant/ Year) for CWS Surface Water Plants Economic Analysis for the Stage 2 DBPR Proposal 6 27 July 2003 System Size ( Population Served) Average Yearly Flow ( kgal) CLM CLO2 UV Ozone MF/ UF GAC10 GAC10+ AD GAC20 GAC20+ AD Membranes £ 100 83 $ 133.25 $ 154.51 $ 825.78 $ 835.70 $ 990.21 $ 1,340.19 101 500 83 $ 27.28 $ 122.03 $ 45.28 $ 567.55 $ 302.14 $ 400.72 $ 968.27 $ 504.85 501 1,000 104 $ 17.82 $ 61.43 $ 30.56 $ 271.09 $ 252.87 $ 262.33 $ 533.42 $ 437.67 1,001 3,300 87 $ 6.13 $ 20.40 $ 14.61 $ 98.11 $ 119.96 $ 166.33 $ 264.44 $ 230.46 3,301 10,000 97 $ 4.62 $ 9.48 $ 11.14 $ 46.52 $ 88.24 $ 114.90 $ 161.41 $ 183.41 10,001 50,000 109 $ 1.56 $ 3.87 $ 5.84 $ 21.72 $ 70.23 $ 30.53 $ 34.40 $ 62.38 $ 66.25 $ 164.40 50,001 100,000 119 $ 0.64 $ 1.57 $ 2.81 $ 9.86 $ 38.29 $ 15.11 $ 16.67 $ 30.74 $ 32.31 $ 92.07 100,001 1 Million 125 $ 0.31 $ 0.68 $ 1.82 $ 5.49 $ 30.74 $ 9.47 $ 10.14 $ 20.65 $ 21.33 $ 77.28 > 1 Million 125 $ 0.11 $ 0.27 $ 1.13 $ 2.89 $ 20.53 $ 4.68 $ 4.95 $ 11.18 $ 11.45 $ 51.73 Source: Derived using the design and average daily flows in Exhibit 3.6 and unit cost curves in Appendix J. Household costs are generated using the mean household usage rate and the cost of capital discount rates in Exhibit 6.2 Exhibit 6.9c Household Unit Costs ($/ Household/ Year) for CWS Surface Water Plants Economic Analysis for the Stage 2 DBPR Proposal 6 28 July 2003 System Size ( Population Served) Plant Design Flow ( MGD) CLM UV Ozone GAC20 NF £ 100 0.02 $ 27,912 $ 23,861 $ 306,733 $ 50,608 $ 73,532 101 500 0.07 $ 27,912 $ 36,018 $ 306,733 $ 102,757 $ 126,777 501 1,000 0.17 $ 29,198 $ 63,497 $ 328,171 $ 217,941 $ 212,740 1,001 3,300 0.39 $ 37,609 $ 123,845 $ 443,204 $ 444,258 $ 378,099 3,301 10,000 0.90 $ 48,050 $ 371,054 $ 629,790 $ 1,030,057 $ 812,081 10,001 50,000 1.64 $ 80,696 $ 945,191 $ 1,603,154 $ 1,544,905 50,001 100,000 4.22 $ 80,696 $ 1,532,936 $ 3,167,013 $ 3,950,992 100,001 1 Million 8.01 $ 82,205 $ 2,193,195 $ 5,099,663 $ 7,341,270 > 1 Million 45.68 $ 95,696 $ 7,294,404 $ 18,742,012 $ 35,018,125 System Size ( Population Served) Plant Average Daily Flow ( MGD) CLM UV Ozone GAC20 NF £ 100 0.01 $ 1,566 $ 4,113 $ 56,531 $ 11,009 $ 8,756 101 500 0.02 $ 1,570 $ 5,442 $ 56,531 $ 20,611 $ 12,322 501 1,000 0.05 $ 1,580 $ 7,135 $ 56,677 $ 35,377 $ 29,653 1,001 3,300 0.13 $ 2,983 $ 9,534 $ 57,501 $ 55,154 $ 48,408 3,301 10,000 0.34 $ 4,246 $ 11,462 $ 59,204 $ 97,752 $ 109,825 10,001 50,000 0.71 $ 6,131 $ 62,830 $ 108,019 $ 191,547 50,001 100,000 2.07 $ 7,594 $ 76,546 $ 157,008 $ 491,463 100,001 1 Million 4.46 $ 9,205 $ 97,357 $ 242,493 $ 1,025,376 > 1 Million 30.37 $ 20,049 $ 319,992 $ 1,048,412 $ 6,321,801 Exhibit 6.10a Capital Cost ($/ Plant/ Year) for CWS Disinfecting Ground Water Plants Exhibit 6.10b Annual O& M Costs ($/ Plant/ Year) for CWS Disinfecting Ground Water Plants Economic Analysis for the Stage 2 DBPR Proposal 6 29 July 2003 System Size ( Population Served) Mean Annual Water Usage per HH ( kgal) CLM UV Ozone GAC20 NF £ 100 83 $ 171.52 $ 264.87 $ 3,561.05 $ 659.24 $ 649.26 101 500 83 $ 36.93 $ 79.31 $ 769.87 $ 273.41 $ 215.85 501 1,000 104 $ 14.78 $ 45.57 $ 307.42 $ 195.95 $ 173.55 1,001 3,300 87 $ 6.88 $ 22.32 $ 105.97 $ 103.45 $ 89.68 3,301 10,000 97 $ 3.11 $ 16.02 $ 42.10 $ 69.19 $ 66.83 10,001 50,000 109 $ 1.33 $ 14.69 $ 25.07 $ 33.31 50,001 100,000 119 $ 0.46 $ 6.55 $ 13.50 $ 26.34 100,001 1 Million 125 $ 0.14 $ 2.36 $ 5.62 $ 13.79 > 1 Million 125 $ 0.03 $ 1.14 $ 3.20 $ 11.39 Source: Derived using the design and average daily flows in Exhibit 3.6 and unit cost curves in Appendix J. Household costs are generated using the mean household usage rate and the cost of capital discount rates in Exhibit 6.2 Exhibit 6.10c Household Unit Costs ($/ Household/ Year) for CWS Disinfecting Ground Water Plants Uncertainties in Unit Costs As stated in section 6.1.1, EPA recognizes that there are both variability and uncertainty in unit cost estimates for treatment. Variability is expected in the actual costs that will be experienced by different water systems with similar flows installing the same treatment technology. Otherwise similar systems may experience different capital and/ or O& M costs due to site specific factors. Inputs to unit costs such as water quality conditions, labor rates, and land costs can be highly variable and increase the system to system variability in unit costs. In developing the unit cost estimates, there is insufficient information to fully characterize what the distribution of this variability will be on a national scale for all of the treatments and all possible conditions.

The unit costs for this EA are developed as average or representative estimates of what these unit costs will be nationally. That is, in developing unit costs, design criteria for the technologies were selected to represent typical, or average, conditions for the universe of systems. As a result, there is uncertainty inherent in these unit cost estimates as they are based on independent assumptions with supporting data and vendor quotes, where available, rather than on an detailed aggregation of State, regional, or local estimates based on actual field conditions. In this EA, uncertainty in these national average unit cost factors is characterized as a triangular distribution with minimum and maximum values set at the following percentages relative to the best estimate:

° Capital costs: +/ 30%

° O& M costs: +/ 15%