These percentages were developed by EPA based on input from engineering professionals and reflect recommendations from the National Drinking Water Advisory Council ( NDWAC) ( 2001) in their review of the national cost estimation methodology for the Arsenic Rule. EPA believes that the uncertainties in capital and O& M costs for a given treatment technology are independent of one another and that uncertainties across all technologies are independent. 8 These compliance forecasts are for Stage 2B, which requires that compliance be met at revised sampling locations identified during the IDSE. Systems must also meet transitional MCLs of 120 : g/ L for TTHM and 100 : g/ L for HAA5 calculated as the locational running annual average ( LRAA) based on Stage 1 monitoring sites under Stage 2A. EPA assumes that any incremental costs incurred to meet Stage 2A requirements will be negligible. Therefore, it was estimated that all costs would be incurred to meet Stage 2B requirements.

Economic Analysis for the Stage 2 DBPR Proposal 6 30 July 2003 The uncertainty in unit costs is characterized by the median and 90 percent confidence bounds shown in the national cost summary exhibits in section 6.2 and later in this chapter.

<IP_ADDRESS> Alternatives to Treatment During the FACA process, the M DBP TWG identified many activities that systems potentially could use to reduce TTHM and HAA5 levels in the distribution system by reducing average residence time, including:

° Flushing more frequently, or looping sections of the distribution system to eliminate dead ends.

° Modifying portions of the distribution system with problematic DBP levels.

° Optimizing storage to minimize retention time in the distribution system.

The costs for these activities could range from close to zero ( e. g., changing tank operations without making capital improvements) to more substantial costs for reconfiguring storage facilities or looping distribution system networks. The benefits from distribution system activities that reduce DBP concentrations also vary widely and are dependent on system specific conditions. Therefore, these activities were not evaluated in this EA ( see section 6.7 for a discussion of unquantifiable costs).

Other alternatives to treatment that could reduce TTHM and HAA5 levels in the distribution system include connecting to a nearby water system or identifying another water source that has lower DBP precursor levels. While the latter may not be feasible for some remote systems, EPA estimates that more than 22 percent of all small systems are located within metropolitan regions where distances between neighboring utilities will not present a prohibitive barrier. To estimate this percentage, EPA used the April 2000 Safe Drinking Water Information System ( SDWIS) database to compare the zip codes for CWSs that serve 100 or fewer people and medium and large CWSs. EPA then determined that out of the 446 surface water CWSs that serve 100 or fewer people, 98 ( 22 percent) have zip codes that are identical to those for medium and large CWSs ( however, size of the zip code zone was not considered). Consolidation with another water system may represent the least cost alternative for many small systems.

6.4.2 Compliance Forecasts This section summarizes the methodology used to develop the compliance forecasts for surface and ground water systems and presents the results for the Stage 2 DBPR Preferred Regulatory Alternative. 8 Compliance forecasts for the other regulatory alternatives are presented in Appendix C.

The treatment compliance forecast for the Stage 2 DBPR has two components: 9 As noted in Chapter 3, the Stage 1 RIA predictions were not used for the pre Stage 2 baseline in this EA because new tools and data became available to better characterize plants.

Economic Analysis for the Stage 2 DBPR Proposal 6 31 July 2003 ° The percent of plants that must add treatment to comply with Stage 2 DBPR requirements. ° The percent of plants selecting specific treatment technologies.

This information, coupled with the baseline data presented in Chapter 3, provides an estimate of the total number of plants using specific technologies to meet the requirements of the Stage 2 DBPR.

<IP_ADDRESS> Overview of Compliance Forecast Methodology EPA used various tools to develop the compliance forecast for the Stage 2 DBPR regulatory alternatives. Because of inherent differences in water quality and treatment configurations, different methods were used for surface and disinfecting ground water systems and for large, medium, and small system sizes. Exhibit 6.11 summarizes the tools used to develop the treatment compliance forecast. Detailed descriptions of these tools are in the referenced appendices.

Exhibit 6.11 Tools Used to Develop the Stage 2 DBPR Compliance Forecasts System Size ( Population Served) Source Water Category Surface Water ( Appendix A) Disinfecting Ground Water ( Appendix B)

Large (> 100,000 people) SWAT ICR Ground Water Delphi Group Medium ( 10,001 to 100,000 people) Extrapolation from SWAT Extrapolation from large ground water system results Small (< 10,000 people) Extrapolation from SWAT, adjusted to deal with small system specific issues Extrapolation from large ground water system results, adjusted to deal with small systemspecific issues For cost and benefit analyses, the compliance forecast should reflect technology changes from the pre Stage 2 baseline ( i. e., after implementation of the Stage 1 DBPR). The best data available to characterize systems are from the ICR, which does not reflect treatment changes that may occur as a result of the Stage 1 DBPR. Therefore, the compliance forecast for the Stage 2 DBPR must account for treatment changes that will occur as a result of the Stage 1 DBPR. 9 The M DBP committee considered a straightforward, 2 step approach for estimating the Stage 2 DBPR compliance forecast, whereby compliance forecasts would be developed from pre Stage 1 to pre Stage 2 conditions, then from pre Stage 2 to post Stage 2 conditions ( the second step being used for costing). This approach was not selected, however, due to biases in SWAT. Economic Analysis for the Stage 2 DBPR Proposal 6 32 July 2003 As shown in Exhibit 6.11, SWAT was the main tool used to generate the compliance forecast for surface water systems. Analysis of SWAT in Appendix A shows that SWAT may predict more technology changes than ICR between Stage 1 and Stage 2. This could lead to an overprediction of the number of plants selecting advanced technologies and over specification of the advanced technologies they select. ( For example, SWAT may conclude that a plant must add membranes to meet Stage 2 based on predicted DBP data, when in actuality, the plant could use a less expensive technology that removes less DBPs, such as converting to chloramines, to meet the rule.)

To minimize potential biases in SWAT, the M DBP committee decided upon a 4 step compliance forecast methodology instead of the 2 step approach. The 4 step process begins with the pre Stage 1 baseline using ICR data, predicts the technology changes for the Stage 1 DBPR, predicts the changes for the Stage 2 DBPR using the same pre Stage 1 baseline, and takes the difference of the two to estimate costs and benefits. Exhibit 6.12 summarizes the steps for estimating the Stage 2 DBPR compliance forecast and lists the exhibits that present the results of each step.

Exhibit 6.12 Stage 2 DBPR Compliance Forecast Summary Step Description of Step Summary of Results for the Preferred Regulatory Alternative1 1 Model a pre Stage 1 baseline scenario ( Technologies in Place). Exhibits 3.15 and 3.16 2 Model technology selection to meet Stage 1 DBPR requirements from pre Stage 1 baseline conditions ( Stage 1 DBPR Technology Selection). Exhibits C. 1 and C. 2 3 Model technology selection to meet Stage 2 DBPR requirements from pre Stage 1 baseline conditions ( Stage 2 DBPR Technology Selection). Exhibits C. 3 and C. 4 4 Subtract the results in Step 2 from Step 3 and adjust to obtain the incremental impact ( Technology Selection Delta). Exhibits 6.14 and 6.162 1 The first exhibit referenced shows results for surface water plants, the second for ground water plants. 2 Values used for cost calculations.

This process effectively minimizes the bias in SWAT DBP predictions ( see analysis in Appendix A). The disadvantage of the 4 step process is that the compliance forecasts do not explicitly take into account treatment in place following Stage 1 when considering Stage 2 DBPR requirements. The availability of UV disinfection exacerbates this issue. UV is an emerging technology that has just recently been shown to be an effective disinfectant for many microorganisms of concern in drinking water. When developing the compliance forecast, EPA considered UV an available technology for meeting Stage 2 requirements, but not Stage 1 requirements. Some plants were then predicted to use UV for the Stage 2 DBPR instead of more expensive technologies such as ozone, MF/ UF, or GAC that were selected for the Stage 1 DBPR forecasts. Economic Analysis for the Stage 2 DBPR Proposal 6 33 July 2003 To account for different technologies being available for the Stage 1 DBPR versus the Stage 2 DBPR, EPA modeled the Stage 2 DBPR regulatory alternatives with and without UV as an available technology. Adjustments were then made to the Stage 2 DBPR technology selection forecasts to ensure that advanced technologies were not reduced from the Stage 1 to the Stage 2 DBPR. Appendices A and B provide detail on these adjustments, including ( in most cases) a flow diagram and sample calculations. <IP_ADDRESS> Surface Water Compliance Forecasts Appendix A presents detailed information on the compliance forecast methodology for large, medium, and small surface water systems. To summarize, modeled results from SWAT were used directly for large and medium surface water systems. SWAT forecasts were modified to produce small system compliance forecasts based on differences in water quality, regulatory history, and operational constraints. Adjustments were made to the Stage 2 DBPR compliance forecasts to correct for the Stage 1 DBPR baseline ( as noted in the previous section, UV was allowed for Stage 2, but not for Stage 1). The Stage 1 DBPR technology selection forecast was subtracted from the Stage 2 DBPR technology selection forecast ( both forecasts are predicted from the pre Stage 1 DBPR baseline) to produce the incremental technology changes for the Stage 2 DBPR ( or the technology selection deltas).

Exhibit 6.13 provides a graphical representation to aid the reader in interpreting surface water plant technology selection forecast results. Note that, as shown in Exhibit 6.13, chloramine use is applied as a percent of all surface water plants, regardless of whether or not they use advanced technologies. Exhibits 6.14a and 6.14b presents the technology selection deltas for the Stage 2 DBPR Preferred Regulatory Alternative for surface water systems. Chloramine use is estimated this way because, although SWAT evaluates each plant individually for suitability of changing to chloramine use, eligible plants are assigned chloramine use through a Monte Carlo probability function that is based upon an assumed maximum overall level of chloramine use nationally. This maximum national chloramine usage level is intended to reflect site specific circumstances and other local factors that would preclude chloramine usage at some plants for reasons other than technical suitability. Thus, SWAT produces a total percent converting to chloramines ( with and without advanced disinfection) for all plants subject to the rule ( see Appendix A for more information on how SWAT models chloramines).

Exhibit 6.15 presents the final post Stage 2 DPBR technologies in place for surface water systems under the Preferred Regulatory Alternative. For plants in small systems serving 10,000 people or fewer, post Stage 2 DBPR technologies in place can be derived by adding the predicted pre Stage 2 technologies in place ( Exhibit 3.17) to the technology selections in Exhibit 6.14. This is not true, however, for large and medium surface water systems   separate SWAT predictions must be used ( USEPA 2001e). This is because some large and medium systems with advanced technologies in place under pre Stage 1 conditions are predicted to move within the SWAT decision tree to meet DBP regulations ( unlike small systems which are assumed to have little to no advanced technologies for pre Stage 1). In other words, a plant starting with an advanced technology for pre Stage 1 conditions can be predicted by SWAT to need a more advanced ( and more expensive) technology to meet Stage 1 or Stage 2 regulatory requirements. The technology selection forecasts capture only the new technologies selected for rule compliance   the corresponding reduction in less expensive technologies from which plants are predicted to move is not captured in the technology selection output. The SWAT ending technology predictions, however, so incorporate reductions in less expensive advanced technologies to represent plant use for a given regulatory period. Economic Analysis for the Stage 2 DBPR Proposal 6 34 July 2003 Total Percent Converting to CLM ( column K) = ( II) + ( III) Not Adding Treatment or making operational changes to existing treatment configurations * Converting to CLM Only ( III) Adding Advanced Technology Only ( I)

Adding Advanced Technology and Converting to CLM ( II)

Total Percent Adding Technology ( column L) = ( I) + ( II) + ( III) Exhibit 6.13 Interpretation of Technology Selection Forecasts for Surface Water Plants ( Can Be Used with Technology Selection or Technology Selection Deltas)

Notes: Outer circle represents all surface water systems subject to the Stage 2 DBPR. This is a schematic representation only ( not actual data) * Operational changes to existing treatment configurations are not costed in this EA. See Section <IP_ADDRESS> for a list of operational changes considered in the surface water compliance forecast and Exhibit 5.19 for the percent of plants expected to make these changes to meet the Stage 2 DBPR . Economic Analysis for the Stage 2 DBPR Proposal 6 35 July 2003 Chlorine Dioxide UV Ozone MF/ UF GAC10 GAC10 + Advanced Disinfectants GAC20 GAC20 + Advanced Disinfectants A B C D E F G H I J K L = SUM( A: J) £ 100 0.8% 4 3.1% 14 0.0% 0 0.0% 0 0.6% 3 0.0% 0 3.0% 14 4.4% 21 101 500 2.1% 17 0.0% 0 0.4% 3 0.0% 0 0.0% 0 0.0% 0 0.7% 6 0.0% 0 3.6% 29 3.3% 26 501 1,000 2.1% 11 0.0% 0 0.4% 2 0.0% 0 0.0% 0 0.0% 0 0.7% 4 0.0% 0 3.6% 18 3.3% 17 1,001  3,300 2.5% 27 0.0% 0 0.5% 5 0.0% 0 0.0% 0 0.0% 0 0.7% 8 0.0% 0 4.0% 45 3.7% 41 3,301 10,000 2.5% 30 0.0% 0 0.5% 6 0.0% 0 0.0% 0 0.0% 0 0.7% 9 0.0% 0 4.0% 49 3.7% 45 10,001 50,000 3.6% 46 0.4% 5 0.7% 9 0.0% 0 0.0% 0 0.0% 0 0.7% 9 0.4% 5 0.0% 0 0.0% 0 5.1% 66 5.8% 75 50,001 100,000 3.6% 19 0.4% 2 0.7% 4 0.0% 0 0.0% 0 0.0% 0 0.7% 4 0.4% 2 0.0% 0 0.0% 0 5.1% 28 5.8% 31 100,001 1 Million 3.6% 21 0.4% 2 0.7% 4 0.0% 0 0.0% 0 0.0% 0 0.7% 4 0.4% 2 0.0% 0 0.0% 0 5.1% 29 5.8% 33 > 1 Million 3.6% 3 0.4% 0 0.7% 1 0.0% 0 0.0% 0 0.0% 0 0.7% 1 0.4% 0 0.0% 0 0.0% 0 5.1% 4 5.8% 4 Total %, Plants 2.7% 178 0.1% 9 0.7% 49 0.0% 0 0.0% 0 0.0% 0 0.3% 18 0.1% 9 0.4% 29 0.0% 0 4.3% 282 4.5% 293 Note: Detail may not add to totals due to independent rounding Source: Technology Selection for the Stage 2 Preferred Alternative minus the Stage 1 Technology Selection from Appendix C, Exhibit C. 1a. Total Adding Technology Total Converting to CLM System Size ( Population Served) Converting to CLM Only Advanced Technologies Membranes Chlorine Dioxide UV Ozone MF/ UF GAC10 GAC10 + Advanced Disinfectants GAC20 GAC20 + Advanced Disinfectants A B C D E F G H I J K L = SUM( A: J) £ 100 0.8% 2 3.1% 9 0.0% 0 0.0% 0 0.6% 2 0.0% 0 3.0% 9 4.4% 13 101 500 2.1% 6 0.0% 0 0.4% 1 0.0% 0 0.0% 0 0.0% 0 0.7% 2 0.0% 0 3.6% 11 3.3% 10 501 1,000 2.1% 2 0.0% 0 0.4% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 1 0.0% 0 3.6% 4 3.3% 4 1,001  3,300 2.5% 2 0.0% 0 0.5% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 1 0.0% 0 4.0% 3 3.7% 3 3,301 10,000 2.5% 1 0.0% 0 0.5% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 0 0.0% 0 4.0% 1 3.7% 1 10,001 50,000 3.6% 0 0.4% 0 0.7% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 0 0.4% 0 0.0% 0 0.0% 0 5.1% 0 5.8% 1 50,001 100,000 3.6% 0 0.4% 0 0.7% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 0 0.4% 0 0.0% 0 0.0% 0 5.1% 0 5.8% 0 100,001 1 Million 3.6% 0 0.4% 0 0.7% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 0 0.4% 0 0.0% 0 0.0% 0 5.1% 0 5.8% 0 > 1 Million 3.6% 0 0.4% 0 0.7% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 0 0.4% 0 0.0% 0 0.0% 0 5.1% 0 5.8% 0 Total %, Plants 1.7% 14 0.0% 0 1.4% 11 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.7% 5 0.0% 0 3.5% 28 3.8% 31 Note: Detail may not add to totals due to independent rounding Source: Technology Selection for the Stage 2 Preferred Alternative minus the Stage 1 Technology Selection from Appendix C, Exhibit C. 1b. Total Adding Technology Total Converting to CLM System Size ( Population Served) Converting to CLM Only Advanced Technologies Membranes Exhibit 6.14a Technology Selection Deltas for CWS Surface Water Plants, Preferred Regulatory Alternative Exhibit 6.14b Technology Selection Deltas for NTNCWS Surface Water Plants, Preferred Regulatory Alternative Economic Analysis for the Stage 2 DBPR Proposal 6 36 July 2003 NO ADVANCED TECHNOLOGIES 1 WITH ADVANCED TECHNOLOGY ( with CL2 or CLM)

CL2 CLM TOTAL Chlorine Dioxide UV Ozone MF/ UF GAC10 GAC10 + AD GAC20 GAC20 + AD Membranes TOTAL A B C D E F G H I J K L M = SUM( D: L) N £ 100 38.5% 181 31.3% 147 69.8% 328 3.1% 14 18.6% 88 3.8% 18 0.6% 3 4.1% 19 30.2% 142 42.6% 200 101 500 32.4% 259 37.7% 301 70.2% 560 2.4% 19 0.4% 3 11.9% 95 9.9% 79 2.3% 19 1.6% 13 1.3% 10 29.8% 238 51.1% 408 501 1,000 32.4% 164 37.7% 190 70.2% 354 2.4% 12 0.4% 2 11.9% 60 9.9% 50 2.3% 12 1.6% 8 1.3% 7 29.8% 151 51.1% 258 1,001  3,300 29.8% 329 43.9% 485 73.8% 814 5.1% 56 0.5% 5 10.1% 111 5.4% 60 2.6% 28 1.8% 20 0.7% 8 26.2% 289 56.8% 627 3,301 10,000 29.8% 362 43.9% 533 73.8% 895 5.1% 62 0.5% 6 10.1% 122 5.4% 66 2.6% 31 1.8% 22 0.7% 9 26.2% 318 56.8% 689 10,001 50,000 33.7% 434 38.5% 495 72.2% 929 7.0% 90 0.7% 9 12.8% 165 1.8% 24 2.2% 28 1.8% 24 0.7% 9 0.0% 0 0.7% 9 27.8% 358 56.8% 731 50,001 100,000 33.7% 181 38.5% 207 72.2% 388 7.0% 37 0.7% 4 12.8% 69 1.8% 10 2.2% 12 1.8% 10 0.7% 4 0.0% 0 0.7% 4 27.8% 150 56.8% 305 100,001 1 Million 33.7% 193 38.5% 220 72.2% 413 7.0% 40 0.7% 4 12.8% 73 1.8% 10 2.2% 13 1.8% 10 0.7% 4 0.0% 0 0.7% 4 27.8% 159 56.8% 325 > 1 Million 33.7% 25 38.5% 28 72.2% 53 7.0% 5 0.7% 1 12.8% 9 1.8% 1 2.2% 2 1.8% 1 0.7% 1 0.0% 0 0.7% 1 27.8% 20 56.8% 42 Total %, Plants 32.4% 2,127 39.7% 2,607 72.2% 4,734 4.9% 320 0.7% 49 10.7% 705 5.9% 388 0.8% 54 0.7% 45 1.9% 126 1.0% 66 1.1% 72 27.8% 1,826 54.6% 3,585 Note: Detail may not add to totals due to independent rounding 1 No advanced technologies includes conventional, non conventional, and softening plants. Source: Surface water systems serving 10,000 people or less: Add Technologies in Place for the Pre Stage 2 Baseline ( Exhibit 3.17) to the Technology Selection Delta for the Stage 2 Preferred Alternative. TOTAL USING CLM System Size ( Population Served)

NO ADVANCED TECHNOLOGIES 1 WITH ADVANCED TECHNOLOGY ( with CL2 or CLM)

CL2 CLM TOTAL Chlorine Dioxide UV Ozone MF/ UF GAC10 GAC10 + AD GAC20 GAC20 + AD Membranes TOTAL A B C D E F G H I J K L M = SUM( D: L) N £ 100 38.5% 115 31.3% 93 69.8% 208 3.1% 9 18.6% 56 3.8% 11 0.6% 2 4.1% 12 30.2% 90 42.6% 127 101 500 32.4% 98 37.7% 114 70.2% 211 2.4% 7 0.4% 1 11.9% 36 9.9% 30 2.3% 7 1.6% 5 1.3% 4 29.8% 90 51.1% 154 501 1,000 32.4% 35 37.7% 41 70.2% 76 2.4% 3 0.4% 0 11.9% 13 9.9% 11 2.3% 3 1.6% 2 1.3% 1 29.8% 32 51.1% 55 1,001  3,300 29.8% 21 43.9% 32 73.8% 53 5.1% 4 0.5% 0 10.1% 7 5.4% 4 2.6% 2 1.8% 1 0.7% 1 26.2% 19 56.8% 41 3,301 10,000 29.8% 7 43.9% 10 73.8% 17 5.1% 1 0.5% 0 10.1% 2 5.4% 1 2.6% 1 1.8% 0 0.7% 0 26.2% 6 56.8% 13 10,001 50,000 33.7% 3 38.5% 3 72.2% 6 7.0% 1 0.7% 0 12.8% 1 1.8% 0 2.2% 0 1.8% 0 0.7% 0 0.0% 0 0.7% 0 27.8% 3 56.8% 5 50,001 100,000 33.7% 0 38.5% 0 72.2% 1 7.0% 0 0.7% 0 12.8% 0 1.8% 0 2.2% 0 1.8% 0 0.7% 0 0.0% 0 0.7% 0 27.8% 0 56.8% 1 100,001 1 Million 33.7% 0 38.5% 0 72.2% 1 7.0% 0 0.7% 0 12.8% 0 1.8% 0 2.2% 0 1.8% 0 0.7% 0 0.0% 0 0.7% 0 27.8% 0 56.8% 1 > 1 Million 33.7% 0 38.5% 0 72.2% 0 7.0% 0 0.7% 0 12.8% 0 1.8% 0 2.2% 0 1.8% 0 0.7% 0 0.0% 0 0.7% 0 27.8% 0 56.8% 0 Total %, Plants 34.4% 280 36.1% 293 70.5% 573 1.9% 15 1.4% 11 7.3% 60 12.5% 102 0.0% 0 0.0% 0 2.9% 23 1.3% 10 2.3% 18 29.5% 240 48.7% 396 Note: Detail may not add to totals due to independent rounding 1 No advanced technologies includes conventional, non conventional, and softening plants. Source: Surface water systems serving 10,000 people or less: Add Technologies in Place for the Pre Stage 2 Baseline ( Exhibit 3.17) to the Technology Selection Delta for the Stage 2 Preferred Alternative. TOTAL USING CLM System Size ( Population Served) Exhibit 6.15a Post Stage 2 DBPR Technologies in Place for CWS Surface Water Plants, Preferred Regulatory Alternative Exhibit 6.15b Post Stage 2 DBPR Technologies in Place for NTNCWS Surface Water Plants, Preferred Regulatory Alternative Economic Analysis for the Stage 2 DBPR Proposal 6 37 July 2003 <IP_ADDRESS> Ground Water Compliance Forecasts Appendix B provides a detailed methodology and the results for the compliance forecasts for all ground water systems. In summary, the compliance forecast for large ground water plants was generated using the ICR Ground Water Delphi Process, which convened a group of ground water system experts. The results were stratified based on plant location ( Florida or Non Florida) and extrapolated to national levels. Because large and medium ground water plants are very similar with respect to treatment configurations and well fields, the compliance forecast for large ground water plants was also used for medium ground water plants ( the same Florida/ Non Florida stratification was applied). The compliance forecast for small ground water plants was based on results of the Large Ground Water Delphi process, but was adjusted to account for differences in total organic carbon ( TOC), softening use, and Florida/ Non Florida proportions.

Exhibits 6.16a and 6.16b present the technology selection deltas that were used for costing purposes. EPA used these deltas to estimate the ground water treatment costs of complying with the Stage 2 DBPR. Exhibits 6.17a and 6.17b present EPA's prediction of technologies that will be employed after systems comply with the Stage 2 DBPR.

<IP_ADDRESS> Uncertainties in Compliance Forecast There are uncertainties associated with the estimates of plants making treatment changes in Exhibit 6.14 One is the effect of the IDSE on predictions of non compliance. The number of plants adding chloramines or advanced technology could be understated because plants may find higher TTHM or HAA5 concentrations at new sites identified during the IDSE. The number of plants adding chloramines or advanced technology, however, may be overstated because of conservative assumptions used in the analysis. For example, compliance determination for plants is made assuming a 20 percent margin of safety under the MCLs. Systems complying by switching to chloramines may choose to meet the Stage 2 MCLs with a much smaller margin of safety since chloramines dampen the variability of DBP concentrations on distribution systems. Also, EPA believes that the estimated number of ground water and small surface water plants changing technology may be biased upward because their monitoring requirements and, thus, compliance calculation, are expected to be very similar from the Stage 1 to Stage 2 DBPR. Chapter 7 provides a more complete discussion of these uncertainties and includes a quantitative analysis to assess their effects. It is not known in which direction the net impact of these uncertainties influences the estimates in Exhibit 6.14.

6.4.3 Results ( Initial Capital and Steady State O& M Costs)

To estimate the total national costs of treatment, the plant unit costs ( capital and O& M in $/ plant as summarized in Exhibits 6.9 and 6.10) are multiplied by the Stage 2 DBPR technology selection deltas ( Exhibits 6.14 and 6.16). The calculations are performed for surface and ground water plants and CWS and NTNCWS systems separately. These costs are summed across technologies and size categories to estimate the total treatment costs for Stage 2 DBPR.

Exhibit 6.18 summarizes the estimated initial capital investment and annual steady state O& M costs. Results for these two exhibits are broken out by system type, source water type, and system size Economic Analysis for the Stage 2 DBPR Proposal 6 38 July 2003 6 38 category. Appendix K and Exhibits K. 1b through K. 1d provide similar cost information ( total initial capital and steady state O& M costs) for the Stage 2 DBPR regulatory alternatives. Economic Analysis for the Stage 2 DBPR Proposal 6 39 July 2003 CLM Only UV CL2 UV CLM Ozone CL2 Ozone CLM GAC20 CL2 GAC20 CLM Total Converting to CLM Total Adding Technology A B C D E F G H I J = A+ C+ E+ G+ I K = SUM( A: I) £ 100 1.0% 80 0.0% 0 1.3% 98 0.0% 0 0.0% 0 0.4% 33 0.0% 0 0.0% 0 0.0% 0 2.3% 178 2.7% 211 101 500 1.3% 210 0.0% 0 1.4% 225 0.0% 0 0.0% 0 0.2% 25 0.0% 0 0.0% 0 0.0% 0 2.8% 436 2.9% 461 501 1,000 1.3% 82 0.0% 0 1.4% 88 0.0% 0 0.0% 0 0.2% 10 0.0% 0 0.0% 0 0.0% 0 2.8% 170 2.9% 180 1,001  3,300 1.0% 79 0.0% 0 1.3% 102 0.0% 0 0.0% 0 0.0% 0 0.0% 3 0.0% 0 0.0% 0 2.3% 184 2.3% 184 3,301 10,000 1.0% 50 0.0% 0 1.3% 64 0.0% 0 0.0% 0 0.0% 0 0.0% 2 0.0% 0 0.0% 0 2.3% 116 2.3% 116 10,001 50,000 1.4% 76 0.1% 3 0.2% 12 0.0% 0 0.2% 8 0.0% 2 0.2% 11 2.0% 108 2.1% 112 50,001 100,000 1.4% 10 0.1% 0 0.2% 2 0.0% 0 0.2% 1 0.0% 0 0.2% 2 2.0% 15 2.1% 15 100,001 1 Million 1.3% 11 0.1% 0 0.2% 2 0.0% 0 0.1% 1 0.0% 0 0.2% 2 1.9% 16 1.9% 17 > 1 Million 1.3% 0 0.1% 0 0.2% 0 0.0% 0 0.1% 0 0.0% 0 0.2% 0 1.9% 0 1.9% 0 Total %, Plants 1.21% 599 0.00% 0 1.17% 578 0.01% 4 0.03% 15 0.14% 68 0.03% 16 0.00% 2 0.03% 15 2.5% 1,223 2.6% 1,296 Membranes CL2 Membranes CLM System Size ( Population Served)

CLM Only UV CL2 UV CLM Ozone CL2 Ozone CLM GAC20 CL2 GAC20 CLM Total Converting to CLM Total Adding Technology A B C D E F G H I J = A+ C+ E+ G+ I K = SUM( A: I) £ 100 1.0% 38 0.0% 0 1.3% 46 0.0% 0 0.0% 0 0.4% 15 0.0% 0 0.0% 0 0.0% 0 2.3% 84 2.7% 99 101 500 1.3% 35 0.0% 0 1.4% 38 0.0% 0 0.0% 0 0.2% 4 0.0% 0 0.0% 0 0.0% 0 2.8% 73 2.9% 77 501 1,000 1.3% 10 0.0% 0 1.4% 10 0.0% 0 0.0% 0 0.2% 1 0.0% 0 0.0% 0 0.0% 0 2.8% 20 2.9% 21 1,001  3,300 1.0% 3 0.0% 0 1.3% 3 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 2.3% 6 2.3% 6 3,301 10,000 1.0% 0 0.0% 0 1.3% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 2.3% 1 2.3% 1 10,001 50,000 1.4% 0 0.1% 0 0.2% 0 0.0% 0 0.2% 0 0.0% 0 0.2% 0 2.0% 0 2.1% 0 50,001 100,000 1.4% 0 0.1% 0 0.2% 0 0.0% 0 0.2% 0 0.0% 0 0.2% 0 2.0% 0 2.1% 0 100,001 1 Million 1.3% 0 0.1% 0 0.2% 0 0.0% 0 0.1% 0 0.0% 0 0.2% 0 1.9% 0 1.9% 0 > 1 Million 1.3% 0 0.1% 0 0.2% 0 0.0% 0 0.1% 0 0.0% 0 0.2% 0 1.9% 0 1.9% 0 Total %, Plants 1.17% 85 0.00% 0 1.34% 98 0.00% 0 0.00% 0 0.28% 21 0.00% 0 0.00% 0 0.00% 0 2.5% 183 2.8% 204 Note: Detail may not add to totals due to independent rounding Source: Technology Selection for the Stage 2 Preferred Alternative minus the Stage 1 Technology Selection from Appendix C, Exhibit C. 2b. Membranes CL2 Membranes CLM System Size ( Population Served) Exhibit 6.16a Technology Selection Deltas for CWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative Exhibit 6.16b Technology Selection Deltas for NTNCWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative Economic Analysis for the Stage 2 DBPR Proposal 6 40 July 2003 NO ADVANCED TECHNOLOGIES 1 WITH ADVANCED TECHNOLOGIES CL2 CLM TOTAL UV CL2 UV CLM Ozone CL2 Ozone CLM GAC20 CL2 GAC20 CLM TOTAL A B C = A+ B D E F G H I J K L = SUM( D: K) M = B+ E+ G+ I+ K £ 100 92.5% 7,186 3.9% 301 96.3% 7,488 0.0% 0 1.3% 98 0.0% 0 0.0% 0 0.4% 33 1.0% 80 0.4% 31 0.5% 41 3.7% 284 6.7% 521 101 500 92.9% 14,608 3.8% 599 96.7% 15,206 0.0% 0 1.4% 225 0.1% 22 0.4% 67 0.2% 25 0.6% 88 0.1% 18 0.5% 73 3.3% 519 6.7% 1,052 501 1,000 92.9% 5,697 3.8% 234 5,931 0.0% 0 1.4% 88 0.1% 9 0.4% 26 0.2% 10 0.6% 34 0.1% 7 0.5% 28 3.3% 202 6.7% 410 1,001  3,300 94.2% 7,436 3.0% 239 97.3% 7,675 0.0% 0 1.3% 102 0.2% 18 0.7% 55 0.0% 0 0.1% 7 0.0% 3 0.4% 30 2.7% 215 5.5% 432 3,301 10,000 94.2% 4,689 3.0% 151 4,840 0.0% 0 1.3% 64 0.2% 12 0.7% 35 0.0% 0 0.1% 4 0.0% 2 0.4% 19 2.7% 136 5.5% 273 10,001 50,000 87.0% 4,671 8.7% 467 95.7% 5,137 0.9% 48 1.0% 54 0.0% 0 0.2% 10 1.7% 91 0.5% 26 4.3% 230 10.4% 557 50,001 100,000 87.0% 643 8.7% 64 707 0.9% 7 1.0% 7 0.0% 0 0.2% 1 1.7% 13 0.5% 4 4.3% 32 10.4% 77 100,001 1 Million 87.7% 767 8.3% 73 96.0% 840 0.9% 8 0.9% 8 0.0% 0 0.2% 1 1.7% 15 0.4% 4 4.0% 35 9.8% 86 > 1 Million 87.7% 16 8.3% 2 17 0.9% 0 0.9% 0 0.0% 0 0.2% 0 1.7% 0 0.4% 0 4.0% 1 9.8% 2 Total %, Plants 92.4% 45,713 4.3% 2,128 96.7% 47,841 0.0% 0 1.2% 578 0.3% 124 0.5% 253 0.1% 68 0.5% 227 0.4% 180 0.5% 224 3.3% 1,653 6.9% 3,409 System Size ( Population Served) TOTAL USING CLM Membranes CL2 Membranes CLM NO ADVANCED TECHNOLOGIES 1 WITH ADVANCED TECHNOLOGIES CL2 CLM TOTAL UV CL2 UV CLM Ozone CL2 Ozone CLM GAC20 CL2 GAC20 CLM TOTAL A B C = A+ B D E F G H I J K L = SUM( D: K) M = B+ E+ G+ I+ K £ 100 92.5% 3,386 3.9% 142 96.3% 3,528 0.0% 0 1.3% 46 0.0% 0 0.0% 0 0.4% 15 1.0% 38 0.4% 15 0.5% 19 3.7% 134 6.7% 246 101 500 92.9% 2,438 3.8% 100 96.7% 2,538 0.0% 0 1.4% 38 0.1% 4 0.4% 11 0.2% 4 0.6% 15 0.1% 3 0.5% 12 3.3% 87 6.7% 176 501 1,000 92.9% 666 3.8% 27 693 0.0% 0 1.4% 10 0.1% 1 0.4% 3 0.2% 1 0.6% 4 0.1% 1 0.5% 3 3.3% 24 6.7% 48 1,001  3,300 94.2% 251 3.0% 8 97.3% 259 0.0% 0 1.3% 3 0.2% 1 0.7% 2 0.0% 0 0.1% 0 0.0% 0 0.4% 1 2.7% 7 5.5% 15 3,301 10,000 94.2% 26 3.0% 1 27 0.0% 0 1.3% 0 0.2% 0 0.7% 0 0.0% 0 0.1% 0 0.0% 0 0.4% 0 2.7% 1 5.5% 1 10,001 50,000 87.0% 4 8.7% 0 95.7% 4 0.9% 0 1.0% 0 0.0% 0 0.2% 0 1.7% 0 0.5% 0 4.3% 0 10.4% 0 50,001 100,000 87.0% 0 8.7% 0 0 0.9% 0 1.0% 0 0.0% 0 0.2% 0 1.7% 0 0.5% 0 4.3% 0 10.4% 0 100,001 1 Million 87.7% 1 8.3% 0 96.0% 1 0.9% 0 0.9% 0 0.0% 0 0.2% 0 1.7% 0 0.4% 0 4.0% 0 9.8% 0 > 1 Million 87.7% 0 8.3% 0 0 0.9% 0 0.9% 0 0.0% 0 0.2% 0 1.7% 0 0.4% 0 4.0% 0 9.8% 0 Total %, Plants 92.7% 6,772 3.8% 279 96.5% 7,051 0.0% 0 1.3% 98 0.1% 5 0.2% 16 0.3% 21 0.8% 57 0.3% 19 0.5% 36 3.5% 252 6.7% 486 Note: Detail may not add to totals due to independent rounding 1 No advanced technologies includes conventional, non conventional, and softening plants. Source: Add Technologies in Place for the Pre Stage 2 Baseline ( Exhibit 3.18) to the Technology Selection Delta for the Stage 2 Preferred Alternative. System Size ( Population Served) TOTAL USING CLM Membranes CL2 Membranes CLM Exhibit 6.17a Post Stage 2 DBPR Technologies in Place for CWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative Exhibit 6.17b Post Stage 2 DBPR Technologies in Place for NTNCWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative Economic Analysis for the Stage 2 DBPR Proposal 6 41 July 2003 Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

< 100 0.76 $ 0.75 $ 0.61 $ 0.90 $ 0.14 $ 0.14 $ 0.14 $ 0.15 $

101 500 3.43 $ 3.43 $ 2.90 $ 3.96 $ 0.65 $ 0.65 $ 0.60 $ 0.70 $

501 1,000 3.14 $ 3.14 $ 2.66 $ 3.62 $ 0.50 $ 0.50 $ 0.46 $ 0.54 $

1,001 3,300 11.42 $ 11.42 $ 9.83 $ 13.03 $ 1.64 $ 1.64 $ 1.52 $ 1.76 $

3,301 10K 27.52 $ 27.50 $ 23.86 $ 31.21 $ 2.58 $ 2.58 $ 2.40 $ 2.76 $

10,001 50K 57.05 $ 57.09 $ 50.18 $ 63.84 $ 3.40 $ 3.40 $ 3.22 $ 3.59 $

50,001 100K 31.63 $ 31.65 $ 27.80 $ 35.43 $ 1.82 $ 1.82 $ 1.72 $ 1.92 $

100,001 1M 82.26 $ 82.29 $ 72.18 $ 92.25 $ 4.64 $ 4.64 $ 4.37 $ 4.91 $

> 1 Million 42.85 $ 42.87 $ 37.27 $ 48.40 $ 2.96 $ 2.96 $ 2.77 $ 3.15 $

All Sizes 260.04 $ 260.16 $ 227.28 $ 292.63 $ 18.33 $ 18.33 $ 17.20 $ 19.48 $

< 100 0.47 $ 0.47 $ 0.38 $ 0.56 $ 0.09 $ 0.09 $ 0.08 $ 0.09 $

101 500 1.31 $ 1.31 $ 1.11 $ 1.51 $ 0.25 $ 0.25 $ 0.23 $ 0.27 $

501 1,000 0.72 $ 0.72 $ 0.61 $ 0.83 $ 0.11 $ 0.11 $ 0.10 $ 0.12 $

1,001 3,300 0.72 $ 0.72 $ 0.62 $ 0.83 $ 0.10 $ 0.10 $ 0.10 $ 0.11 $

3,301 10K 0.57 $ 0.57 $ 0.49 $ 0.64 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $

10,001 50K 0.51 $ 0.51 $ 0.45 $ 0.58 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $

50,001 100K 0.13 $ 0.13 $ 0.12 $ 0.15 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $

100,001 1M 0.21 $ 0.21 $ 0.18 $ 0.23 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $

> 1 Million  $  $  $  $  $  $  $  $

All Sizes 4.64 $ 4.64 $ 3.95 $ 5.33 $ 0.65 $ 0.65 $ 0.60 $ 0.69 $

264.68 $ 264.80 $ 231.23 $ 297.96 $ 18.98 $ 18.98 $ 17.80 $ 20.17 $

< 100 8.98 $ 8.98 $ 7.79 $ 10.18 $ 1.05 $ 1.05 $ 0.98 $ 1.11 $

101 500 22.85 $ 22.85 $ 19.63 $ 26.07 $ 2.43 $ 2.43 $ 2.25 $ 2.60 $

501 1,000 12.67 $ 12.68 $ 10.88 $ 14.46 $ 1.24 $ 1.24 $ 1.16 $ 1.33 $

1,001 3,300 20.95 $ 20.95 $ 17.48 $ 24.40 $ 1.70 $ 1.70 $ 1.56 $ 1.83 $

3,301 10K 31.47 $ 31.46 $ 25.85 $ 37.05 $ 1.43 $ 1.43 $ 1.32 $ 1.53 $

10,001 50K 55.86 $ 55.85 $ 50.42 $ 61.34 $ 4.98 $ 4.97 $ 4.71 $ 5.25 $

50,001 100K 14.96 $ 14.96 $ 13.38 $ 16.55 $ 1.33 $ 1.33 $ 1.24 $ 1.41 $

100,001 1M 26.96 $ 26.96 $ 24.00 $ 29.97 $ 2.68 $ 2.68 $ 2.50 $ 2.87 $

> 1 Million 2.28 $ 2.28 $ 2.01 $ 2.56 $ 0.31 $ 0.31 $ 0.28 $ 0.33 $

All Sizes 196.99 $ 196.97 $ 171.45 $ 222.58 $ 17.13 $ 17.13 $ 16.00 $ 18.28 $

< 100 4.18 $ 4.18 $ 3.65 $ 4.71 $ 0.47 $ 0.47 $ 0.42 $ 0.50 $

101 500 4.16 $ 4.16 $ 3.59 $ 4.74 $ 0.43 $ 0.43 $ 0.39 $ 0.46 $

501 1,000 1.90 $ 1.90 $ 1.64 $ 2.16 $ 0.18 $ 0.18 $ 0.16 $ 0.20 $

1,001 3,300 0.88 $ 0.88 $ 0.74 $ 1.03 $ 0.06 $ 0.06 $ 0.05 $ 0.06 $

3,301 10K 0.28 $ 0.28 $ 0.23 $ 0.33 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $

10,001 50K 0.12 $ 0.12 $ 0.11 $ 0.13 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $

50,001 100K 0.02 $ 0.02 $ 0.02 $ 0.03 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $

100,001 1M 0.12 $ 0.12 $ 0.11 $ 0.13 $ 0.01 $ 0.01 $ 0.01 $ 0.01 $

> 1 Million  $  $  $  $  $  $  $  $

All Sizes 11.66 $ 11.67 $ 10.08 $ 13.27 $ 1.17 $ 1.17 $ 1.06 $ 1.27 $

208.66 $ 208.64 $ 181.52 $ 235.85 $ 18.30 $ 18.29 $ 17.06 $ 19.54 $

473.34 $ 473.45 $ 412.76 $ 533.81 $ 37.27 $ 37.27 $ 34.86 $ 39.71 $

Notes:

Source: O& M Costs Mean Value Median Value 90 Percent Confidence Bound Subtotal Surface Water CWSs NTNCWSs Source Mean Value Median Value 90 Percent Confidence Bound System Classification System Size ( population served) Capital Costs Ground Water CWSs NTNCWSs Subtotal Total All values in millions of year 2000 dollars.

Detail may not add exactly to totals due to independent roundinH. Derived by multiplying unit costs in Exhibits 6.9 and 6.10 by Technology Selection Deltas in Exhibits 6.14 and 6.16 for the Preferred Alternative, summed for all technologies. This exhibit is identical to Exhibit K. 1a. Exhibit 6.18 Total Initial Capital Costs ($ Millions) and Steady State O& M Costs ($ Millions/ Year) Economic Analysis for the Stage 2 DBPR Proposal 6 42 July 2003 6.5 Projecting and Discounting Costs As described in detail in section <IP_ADDRESS>, it is common practice to adjust cost values that occur at some point in the future to a common, present value using social discount rates so that they can be compared to monetized benefits. In summary, the methodology for projecting and discounting costs is as follows:

° Project all nominal costs ( treatment, non treatment, and State) over a 25 year time horizon based on the rule implementation schedule in Appendix D.

° Calculate total present value costs using social discount rates. The same rates were used as for the benefits calculation: 3 and 7 percent ( see section <IP_ADDRESS> for a discussion of these rates).

° Annualize the costs over 25 years using the same social discount rates.

Appendix K contains results from each step above for each regulatory alternative. For the Preferred Alternative, Exhibits K. 2a through K. 2ar show the nominal costs projected over the rule schedule, and Exhibits K. 2as through K. 2cf show the present value of each cost calculated to the expected year of rule implementation ( 2003). The annualization step is shown at the bottom of the present value exhibits.

Exhibits 6.19a and 6.19b present the stream of present value costs and the total annualized costs for the Stage 2 DBPR Preferred Regulatory Alternative at 3 and 7 percent discount rates, respectively. These tables are equivalent to Exhibits K. 2as and K. 2aw in Appendix K. Economic Analysis for the Stage 2 DBPR Proposal 6 43 July 2003 Primacy Agencies Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 30.3 $ 30.3 $ 30.3 $ 0.1 $ 0.1 $ 0.1 $ 1.4 $ 1.4 $ 1.4 $ 0.0 $ 0.0 $ 0.0 $ 4.4 $ 36.2 $ 36.2 $ 36.2 $

2004 28.6 $ 28.6 $ 28.6 $ 0.1 $ 0.1 $ 0.1 $ 1.2 $ 1.2 $ 1.2 $ 0.0 $ 0.0 $ 0.0 $ 4.6 $ 34.5 $ 34.5 $ 34.5 $

2005 41.2 $ 36.2 $ 46.1 $ 0.6 $ 0.6 $ 0.7 $ 30.1 $ 26.7 $ 33.4 $ 1.8 $ 1.6 $ 2.0 $ 0.6 $ 74.3 $ 65.7 $ 82.9 $

2006 46.4 $ 41.4 $ 51.3 $ 0.7 $ 0.6 $ 0.8 $ 33.3 $ 29.9 $ 36.8 $ 1.4 $ 1.3 $ 1.6 $ 5.4 $ 87.3 $ 78.6 $ 95.9 $

2007 43.6 $ 38.6 $ 48.5 $ 0.7 $ 0.6 $ 0.8 $ 30.8 $ 27.4 $ 34.3 $ 1.5 $ 1.3 $ 1.7 $ 0.3 $ 76.9 $ 68.2 $ 85.6 $

2008 44.8 $ 39.8 $ 49.8 $ 0.8 $ 0.7 $ 0.9 $ 33.8 $ 30.3 $ 37.3 $ 2.0 $ 1.8 $ 2.2 $ 0.3 $ 81.6 $ 72.9 $ 90.4 $

2009 44.4 $ 39.4 $ 49.3 $ 0.8 $ 0.7 $ 0.9 $ 34.1 $ 30.6 $ 37.7 $ 1.6 $ 1.4 $ 1.8 $ 0.3 $ 81.2 $ 72.5 $ 90.0 $

2010 44.8 $ 39.8 $ 49.7 $ 0.8 $ 0.7 $ 0.9 $ 36.9 $ 33.3 $ 40.4 $ 1.7 $ 1.5 $ 1.9 $ 0.3 $ 84.5 $ 75.7 $ 93.3 $

2011 16.6 $ 15.2 $ 18.0 $ 0.8 $ 0.7 $ 0.8 $ 24.0 $ 21.9 $ 26.2 $ 1.7 $ 1.5 $ 1.9 $ 0.3 $ 43.4 $ 39.6 $ 47.2 $

2012 16.6 $ 15.2 $ 18.0 $ 0.8 $ 0.7 $ 0.9 $ 24.0 $ 21.9 $ 26.1 $ 1.8 $ 1.6 $ 2.0 $ 0.3 $ 43.4 $ 39.6 $ 47.2 $

2013 16.6 $ 15.2 $ 17.9 $ 0.8 $ 0.7 $ 0.9 $ 23.9 $ 21.8 $ 26.1 $ 1.8 $ 1.6 $ 2.0 $ 0.3 $ 43.4 $ 39.6 $ 47.2 $

2014 12.4 $ 11.5 $ 13.2 $ 0.5 $ 0.5 $ 0.5 $ 15.5 $ 14.6 $ 16.3 $ 0.8 $ 0.8 $ 0.9 $ 0.2 $ 29.4 $ 27.7 $ 31.2 $

2015 12.0 $ 11.2 $ 12.8 $ 0.5 $ 0.4 $ 0.5 $ 15.0 $ 14.2 $ 15.8 $ 0.8 $ 0.7 $ 0.9 $ 0.2 $ 28.5 $ 26.8 $ 30.3 $

2016 11.6 $ 10.9 $ 12.4 $ 0.5 $ 0.4 $ 0.5 $ 14.6 $ 13.8 $ 15.4 $ 0.8 $ 0.7 $ 0.9 $ 0.2 $ 27.7 $ 26.1 $ 29.4 $

2017 11.3 $ 10.6 $ 12.1 $ 0.4 $ 0.4 $ 0.5 $ 14.1 $ 13.4 $ 14.9 $ 0.8 $ 0.7 $ 0.8 $ 0.2 $ 26.9 $ 25.3 $ 28.5 $

2018 11.0 $ 10.3 $ 11.7 $ 0.4 $ 0.4 $ 0.5 $ 13.7 $ 13.0 $ 14.5 $ 0.8 $ 0.7 $ 0.8 $ 0.2 $ 26.1 $ 24.6 $ 27.7 $

2019 10.7 $ 10.0 $ 11.4 $ 0.4 $ 0.4 $ 0.4 $ 13.3 $ 12.6 $ 14.1 $ 0.7 $ 0.7 $ 0.8 $ 0.2 $ 25.4 $ 23.9 $ 26.9 $

2020 10.3 $ 9.7 $ 11.0 $ 0.4 $ 0.4 $ 0.4 $ 12.9 $ 12.3 $ 13.6 $ 0.7 $ 0.6 $ 0.8 $ 0.2 $ 24.6 $ 23.2 $ 26.1 $

2021 10.0 $ 9.4 $ 10.7 $ 0.4 $ 0.4 $ 0.4 $ 12.6 $ 11.9 $ 13.2 $ 0.7 $ 0.6 $ 0.7 $ 0.2 $ 23.9 $ 22.5 $ 25.3 $

2022 9.8 $ 9.1 $ 10.4 $ 0.4 $ 0.4 $ 0.4 $ 12.2 $ 11.6 $ 12.9 $ 0.7 $ 0.6 $ 0.7 $ 0.2 $ 23.2 $ 21.8 $ 24.6 $

2023 9.5 $ 8.8 $ 10.1 $ 0.4 $ 0.3 $ 0.4 $ 11.8 $ 11.2 $ 12.5 $ 0.6 $ 0.6 $ 0.7 $ 0.2 $ 22.5 $ 21.2 $ 23.9 $

2024 9.2 $ 8.6 $ 9.8 $ 0.4 $ 0.3 $ 0.4 $ 11.5 $ 10.9 $ 12.1 $ 0.6 $ 0.6 $ 0.7 $ 0.2 $ 21.9 $ 20.6 $ 23.2 $

2025 8.9 $ 8.3 $ 9.5 $ 0.4 $ 0.3 $ 0.4 $ 11.2 $ 10.6 $ 11.8 $ 0.6 $ 0.6 $ 0.7 $ 0.2 $ 21.2 $ 20.0 $ 22.5 $

2026 8.7 $ 8.1 $ 9.2 $ 0.3 $ 0.3 $ 0.4 $ 10.8 $ 10.3 $ 11.4 $ 0.6 $ 0.5 $ 0.6 $ 0.2 $ 20.6 $ 19.4 $ 21.9 $

2027 8.4 $ 7.9 $ 9.0 $ 0.3 $ 0.3 $ 0.4 $ 10.5 $ 10.0 $ 11.1 $ 0.6 $ 0.5 $ 0.6 $ 0.2 $ 20.0 $ 18.8 $ 21.2 $

Total 517.5 $ 474.1 $ 561.0 $ 12.6 $ 11.4 $ 13.7 $ 453.4 $ 416.9 $ 490.3 $ 25.2 $ 22.6 $ 27.8 $ 19.9 $ 1,028.7 $ 944.8 $ 1,112.9 $

Ann. 29.7 $ 27.2 $ 32.2 $ 0.7 $ 0.7 $ 0.8 $ 26.0 $ 23.9 $ 28.2 $ 1.4 $ 1.3 $ 1.6 $ 1.1 $ 59.1 $ 54.3 $ 63.9 $

Notes:

Ann = value of total annualized at discount rate.

Source: Identical to K. 2as, which is derived from Exhibits K. 2a through rr. 90 Percent Confidence Bound Total 90 Percent Confidence Bound 90 Percent Confidence Bound Surface Water NTNCWS Disinfecting Ground Water NTNCWS Surface Water CWS Mean Value Disinfecting Ground Water CWS Present values in millions of 2000 dollars. Estimates are discounted to 2003.

Detail may not add exactly to totals due to independent rounding. Mean Value Mean Value 90 Percent Confidence Bound Point Estimate Mean Value 90 Percent Confidence Bound Mean Value Exhibit 6.19a Total Annualized Costs at 3 Percent Social Discount Rate ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 6 44 July 2003 Primacy Agencies Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 30.3 $ 30.3 $ 30.3 $ 0.1 $ 0.1 $ 0.1 $ 1.4 $ 1.4 $ 1.4 $ 0.0 $ 0.0 $ 0.0 $ 4.4 $ 36.2 $ 36.2 $ 36.2 $

2004 27.6 $ 27.6 $ 27.6 $ 0.1 $ 0.1 $ 0.1 $ 1.2 $ 1.2 $ 1.2 $ 0.0 $ 0.0 $ 0.0 $ 4.4 $ 33.2 $ 33.2 $ 33.2 $

2005 38.2 $ 33.6 $ 42.7 $ 0.6 $ 0.5 $ 0.7 $ 27.9 $ 24.7 $ 31.0 $ 1.7 $ 1.5 $ 1.8 $ 0.6 $ 68.8 $ 60.9 $ 76.8 $

2006 41.4 $ 36.9 $ 45.8 $ 0.6 $ 0.5 $ 0.7 $ 29.7 $ 26.7 $ 32.8 $ 1.3 $ 1.1 $ 1.4 $ 4.9 $ 77.8 $ 70.1 $ 85.6 $

2007 37.4 $ 33.1 $ 41.7 $ 0.6 $ 0.5 $ 0.7 $ 26.5 $ 23.5 $ 29.5 $ 1.3 $ 1.1 $ 1.5 $ 0.3 $ 66.0 $ 58.6 $ 73.5 $

2008 37.0 $ 32.9 $ 41.1 $ 0.6 $ 0.6 $ 0.7 $ 27.9 $ 25.0 $ 30.8 $ 1.6 $ 1.5 $ 1.8 $ 0.2 $ 67.5 $ 60.3 $ 74.7 $

2009 35.3 $ 31.3 $ 39.2 $ 0.6 $ 0.6 $ 0.7 $ 27.2 $ 24.4 $ 30.0 $ 1.3 $ 1.2 $ 1.5 $ 0.2 $ 64.6 $ 57.7 $ 71.6 $

2010 34.3 $ 30.5 $ 38.1 $ 0.6 $ 0.6 $ 0.7 $ 28.2 $ 25.5 $ 31.0 $ 1.3 $ 1.2 $ 1.5 $ 0.2 $ 64.7 $ 58.0 $ 71.4 $

2011 12.2 $ 11.2 $ 13.3 $ 0.6 $ 0.5 $ 0.6 $ 17.7 $ 16.1 $ 19.3 $ 1.3 $ 1.1 $ 1.4 $ 0.2 $ 32.0 $ 29.2 $ 34.8 $

2012 11.8 $ 10.8 $ 12.8 $ 0.6 $ 0.5 $ 0.6 $ 17.0 $ 15.5 $ 18.5 $ 1.3 $ 1.1 $ 1.4 $ 0.2 $ 30.8 $ 28.1 $ 33.5 $

2013 11.3 $ 10.4 $ 12.3 $ 0.6 $ 0.5 $ 0.6 $ 16.4 $ 14.9 $ 17.8 $ 1.2 $ 1.1 $ 1.4 $ 0.2 $ 29.6 $ 27.1 $ 32.2 $

2014 8.1 $ 7.6 $ 8.7 $ 0.3 $ 0.3 $ 0.3 $ 10.2 $ 9.6 $ 10.7 $ 0.6 $ 0.5 $ 0.6 $ 0.2 $ 19.3 $ 18.2 $ 20.5 $

2015 7.6 $ 7.1 $ 8.1 $ 0.3 $ 0.3 $ 0.3 $ 9.5 $ 9.0 $ 10.0 $ 0.5 $ 0.5 $ 0.6 $ 0.2 $ 18.1 $ 17.0 $ 19.2 $

2016 7.1 $ 6.6 $ 7.6 $ 0.3 $ 0.3 $ 0.3 $ 8.9 $ 8.4 $ 9.4 $ 0.5 $ 0.4 $ 0.5 $ 0.1 $ 16.9 $ 15.9 $ 17.9 $

2017 6.6 $ 6.2 $ 7.1 $ 0.3 $ 0.2 $ 0.3 $ 8.3 $ 7.9 $ 8.7 $ 0.5 $ 0.4 $ 0.5 $ 0.1 $ 15.8 $ 14.8 $ 16.7 $

2018 6.2 $ 5.8 $ 6.6 $ 0.2 $ 0.2 $ 0.3 $ 7.8 $ 7.3 $ 8.2 $ 0.4 $ 0.4 $ 0.5 $ 0.1 $ 14.7 $ 13.9 $ 15.6 $

2019 5.8 $ 5.4 $ 6.2 $ 0.2 $ 0.2 $ 0.2 $ 7.2 $ 6.9 $ 7.6 $ 0.4 $ 0.4 $ 0.4 $ 0.1 $ 13.8 $ 13.0 $ 14.6 $

2020 5.4 $ 5.1 $ 5.8 $ 0.2 $ 0.2 $ 0.2 $ 6.8 $ 6.4 $ 7.1 $ 0.4 $ 0.3 $ 0.4 $ 0.1 $ 12.9 $ 12.1 $ 13.7 $

2021 5.1 $ 4.7 $ 5.4 $ 0.2 $ 0.2 $ 0.2 $ 6.3 $ 6.0 $ 6.7 $ 0.3 $ 0.3 $ 0.4 $ 0.1 $ 12.0 $ 11.3 $ 12.8 $

2022 4.7 $ 4.4 $ 5.0 $ 0.2 $ 0.2 $ 0.2 $ 5.9 $ 5.6 $ 6.2 $ 0.3 $ 0.3 $ 0.4 $ 0.1 $ 11.3 $ 10.6 $ 11.9 $

2023 4.4 $ 4.1 $ 4.7 $ 0.2 $ 0.2 $ 0.2 $ 5.5 $ 5.2 $ 5.8 $ 0.3 $ 0.3 $ 0.3 $ 0.1 $ 10.5 $ 9.9 $ 11.1 $

2024 4.1 $ 3.9 $ 4.4 $ 0.2 $ 0.2 $ 0.2 $ 5.2 $ 4.9 $ 5.4 $ 0.3 $ 0.3 $ 0.3 $ 0.1 $ 9.8 $ 9.2 $ 10.4 $

2025 3.9 $ 3.6 $ 4.1 $ 0.2 $ 0.1 $ 0.2 $ 4.8 $ 4.6 $ 5.1 $ 0.3 $ 0.2 $ 0.3 $ 0.1 $ 9.2 $ 8.6 $ 9.7 $

2026 3.6 $ 3.4 $ 3.8 $ 0.1 $ 0.1 $ 0.2 $ 4.5 $ 4.3 $ 4.8 $ 0.2 $ 0.2 $ 0.3 $ 0.1 $ 8.6 $ 8.1 $ 9.1 $

2027 3.4 $ 3.1 $ 3.6 $ 0.1 $ 0.1 $ 0.1 $ 4.2 $ 4.0 $ 4.4 $ 0.2 $ 0.2 $ 0.3 $ 0.1 $ 8.0 $ 7.5 $ 8.5 $

Total 392.8 $ 359.6 $ 425.9 $ 8.5 $ 7.7 $ 9.4 $ 316.2 $ 289.1 $ 343.4 $ 17.5 $ 15.6 $ 19.3 $ 17.3 $ 752.3 $ 689.4 $ 815.3 $

Ann. 33.7 $ 30.9 $ 36.5 $ 0.7 $ 0.7 $ 0.8 $ 27.1 $ 24.8 $ 29.5 $ 1.5 $ 1.3 $ 1.7 $ 1.5 $ 64.6 $ 59.2 $ 70.0 $

Notes:

Ann = value of total annualized at discount rate.

Source: Identical to Exhibit K. 2. aw, which is derived from Exhibits K. 2a through K. 2ar. Total 90 Percent Confidence Bound 90 Percent Confidence Bound Surface Water NTNCWS Disinfecting Ground Water NTNCWS Mean Value Mean Value Disinfecting Ground Water CWS 90 Percent Confidence Bound Surface Water CWS Present values in millions of 2000 dollars. Estimates are discounted to 2003.

Detail may not add exactly to totals due to independent rounding. Mean Value Mean Value Mean Value 90 Percent Confidence Bound 90 Percent Confidence Bound Point Estimate Exhibit 6.19b Total Annualized Costs at 7 Percent Social Discount Rate ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 6 45 July 2003 6.6 Household Costs EPA assumes that systems will, to the extent possible, pass cost increases on to their customers through increases in water rates. Exhibit 6.20 presents the mean, median, and 90th percentile of expected increases, along with the percent of households that are expected to face an increase of $ 1 or less per month ($ 12 or less per year) or $ 10 or less each month ($ 120 or less per year). Data are provided for all systems subject to the rule and also only the subset of systems adding treatment. Note that household cost increases in Exhibit 6.20 includes costs for non treatment related rule activities ( implementation, IDSE, additional routine monitoring, and significant excursion evaluations).

Exhibit 6.21 shows the cumulative distribution of household cost increases for all systems, and Exhibit 6.22 shows the distribution of household cost increases for only those systems adding treatment. Additionally, Exhibit 6.22 separately shows the cumulative distributions for systems adding treatment for the five small system size categories.

As shown in Exhibit 6.20, the mean, median, and 90th percentile household cost for all systems ( including those that do not add treatment) are $ 0.51, $ 0.02, and $ 0.47, respectively. The mean, median, and 90th percentile household costs for systems that install new treatment technologies are $ 8.52, $ 1.22 and $ 20.57, respectively. Note that the number of households affected by plants installing treatment could be greater than shown in Exhibit 6.20 because an entire system would most likely incur costs even if less than the total number of plants for that system add treatment ( this would result in lower household costs, however).

EPA estimates that, as a whole, households subject to the Stage 2 DBPR face minimal increases in their annual costs. Approximately 86 percent of the households potentially subject to the rule are served by systems serving at least 10,000 people; these systems experience the lowest increases in costs due to significant economies of scale. Households served by small systems that add treatment will face the greatest increases in annual costs. Exhibit 6.22c provides additional detail regarding the distribution of household costs for small systems.

Although cost model results predict that a few very small systems will experience large household cost increases as a result of adding advanced technology for the Stage 2 DBPR, these predictions are probably not realistic because small systems have other alternatives available to them besides adding treatment. For example, some of these systems currently may be operated on a part time basis; therefore, they may be able to modify the current operational schedule or use excessive capacity to avoid installing a costly technology to comply with the Stage 2 DBPR. The system also may identify another water source that has lower TTHM and HAA5 precursor levels. Systems that can identify such an alternate water source may not have to treat that water as intensely as their current source, resulting in lower treatment costs. Systems may elect to connect to a neighboring water system. While connecting to another system may not be feasible for some remote systems, EPA estimates that more than 22 percent of all small water systems are located within metropolitan regions ( USEPA 2000d) where distances between neighboring systems will not present a prohibitive barrier. Economic Analysis for the Stage 2 DBPR Proposal 6 46 July 2003 Total Number of Households Served Mean Annual Household Cost Increase Median Annual Household Cost Increase 90th Percentile Annual Household Cost Increase 95th Percentile Annual Household Cost Increase Percentage of Annual Household Cost Increase < $ 12 Percentage of Annual Household Cost Increase < $ 120 All Systems 98,254,000 ( 100.0) $ 0.51 $ 0.02 $ 0.47 $ 0.79 99.24% 99.96% All Small Systems 14,522,000 ( 100.0) $ 1.66 $ 0.18 $ 0.90 $ 2.96 98.23% 99.74% SW £ 10,000 3,165,000 ( 3.2%) $ 3.72 $ 0.90 $ 2.96 $ 5.51 97.89% 99.09% SW > 10,000 58,876,000 ( 59.9%) $ 0.34 $ 0.00 $ 0.32 $ 0.33 99.35% 100.00% GW £ 10,000 11,357,000 ( 11.6%) $ 1.08 $ 0.11 $ 0.53 $ 1.37 98.37% 99.92% GW > 10,000 24,857,000 ( 25.3%) $ 0.23 $ 0.01 $ 0.47 $ 0.47 99.57% 100.00% Households Served by Plants Adding Treatment Number of Households Served ( Percent of Total) Mean Annual Household Cost Increase Median Annual Household Cost Increase 90th Percentile Annual Household Cost Increase 95th Percentile Annual Household Cost Increase Percentage of Household Cost Increase < $ 12 Percentage of Household Cost Increase < $ 120 All Systems 4,793,000 ( 4.9%) $ 8.52 $ 1.22 $ 20.57 $ 33.98 84.47% 99.18% All Small Systems 422,000 ( 2.9%) $ 43.78 $ 19.05 $ 117.68 $ 166.67 39.38% 91.12% SW £ 10,000 142,000 ( 4.5%) $ 60.64 $ 9.08 $ 166.67 $ 270.04 54.36% 79.78% SW > 10,000 3,868,000 ( 6.6%) $ 5.02 $ 1.02 $ 11.58 $ 23.56 90.16% 99.96% GW £ 10,000 279,000 ( 2.5%) $ 35.18 $ 19.22 $ 72.07 $ 117.68 33.71% 96.94% GW > 10,000 504,000 ( 2.0%) $ 5.90 $ 1.33 $ 26.33 $ 33.24 78.73% 100.00%

Source: Results represent the sum of treatment and non treatment costs. Household costs for treatment are derived from household unit costs in Exhibits 6.9c and 6.10c combined with technology selection deltas in Exhibits 6.14 and 6.16. Household costs for non treatment related rule activities are derived from mean costs for each system size category for implementation, IDSE, additional routine monitoring, and significant excursion ( as derived in Appendix H). See section 6.1.1 for additional information on the derivation of household costs. Notes: Detail may not to total add due to independent rounding. Number of households served by systems adding treatment will be higher than households served by plants adding treatment because an entire system will incur costs even if less than the total number of plants for that system add treatment ( this would result in lower household costs, however). Exhibit 6.20 Annual Household Cost Increases Economic Analysis for the Stage 2 DBPR Proposal 6 47 July 2003 $ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 0% 20% 40% 60% 80% 100%

Cumulative Percent of Households ( N = 62,037,306) Annual Household Costs ($/ HH/ Year)

$ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 99.5% 99.6% 99.7% 99.8% 99.9% 100.0% Exhibit 6.21a Household Cost Distributions, All Surface Water Systems Subject to the Rule Economic Analysis for the Stage 2 DBPR Proposal 6 48 July 2003 $ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 0% 20% 40% 60% 80% 100%

Cumulative Percent of Households ( N = 32,721,321) Annual Household Costs ($/ HH/ Year)

$ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 99.5% 99.6% 99.7% 99.8% 99.9% 100.0% Exhibit 6.21b Household Cost Distributions, All Ground Water Systems Subject to the Rule Source: See Exhibit 6.20. Economic Analysis for the Stage 2 DBPR Proposal 6 49 July 2003 $ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 0% 20% 40% 60% 80% 100%

Cumulative Percent of Households ( N = 4,009,873) Annual Household Costs ($/ HH/ Year)

$ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 99.5% 99.6% 99.7% 99.8% 99.9% 100.0% Exhibit 6.22a Household Cost Distributions, Surface Water Systems Adding Treatment Economic Analysis for the Stage 2 DBPR Proposal 6 50 July 2003 $ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 0% 20% 40% 60% 80% 100%

Cumulative Percent of Households ( N = 727,256) Annual Household Costs ($/ HH/ Year)

$ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 99.5% 99.6% 99.7% 99.8% 99.9% 100.0% Exhibit 6.22b Household Cost Distributions, Ground Water Systems Adding Treatment Economic Analysis for the Stage 2 DBPR Proposal 6 51 July 2003 $ 0 $ 200 $ 400 $ 600 $ 800 $ 1,000 $ 1,200 $ 1,400 $ 1,600 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulative Percent Affected ( N = 391,332) Annual Household Costs ($/ HH/ Year) S1 S2 S3 S4 S5 Exhibit 6.22c Household Cost Distributions, Small Systems Adding Treatment ( Surface and Ground)

Note: S1= systems serving < 100; S2= systems serving 101 500; S3= systems serving 501 1,000; S4= systems serving 1,001 3,300; S5= systems serving 3,301 10,000.

Source: See Exhibit 6.20. Economic Analysis for the Stage 2 DBPR Proposal 6 52 July 2003 6.7 Unquantifiable Costs All significant costs that EPA has identified have been quantified. In some instances, EPA did not include a potential cost element because its effects are relatively minor and difficult to estimate. For example, it may be less costly for a small system to merge with neighboring systems than to add advanced treatment. Such changes have both costs ( legal fees and connecting infrastructure) and benefits ( economies of scale). Likewise, costs for procuring a new source of water would have costs for new infrastructure, but could result in lower treatment costs. In the absence of detailed information needed to evaluate situations such as these, EPA has included a discussion of possible effects where appropriate. In general, however, the expected net effect of such situations is lower costs to PWSs. Thus, the EA tends to present conservatively high estimates of costs in relation to unquantifiable costs. Such unquantifiable costs are also taken into account in the evaluation of uncertainties discussed below.

6.8 Uncertainty Analysis The uncertainties in this cost analysis could result in either an over estimate or under estimate of the costs as presented in this chapter. Exhibit 6.23 presents a summary of these issues, references the section or appendix where the information is introduced, and estimates the effects that each may have on national costs. Two of the greatest uncertainties affecting the costs of the Stage 2 DBPR are the SWAT predictions and the uncertainties in the compliance forecast. Uncertainties associated with SWAT are discussed in detail in other sections, as indicated in Exhibit 6.23. Sensitivity analyses were performed to assess the impact of uncertainties in the compliance forecast. The resulting cost and benefits estimates, are provided in Chapter 7.

Also unquantifiable are the potential costs or benefits of a possible interactive effect from the promulgation of more than one rule in a short period of time. EPA has taken into account compliance with the Stage 1 DBPR and the Ground Water Rule, but it has not attempted to estimate the cumulative effects of the passage of other new regulations along with the Stage 2 DBPR. Particularly, benefit/ cost analysis for the Stage 2 DBPR and its companion rule, the LT2ESWTR, are performed independently, overstating costs for some portion of estimated national costs for surface water systems. Economic Analysis for the Stage 2 DBPR Proposal 6 53 July 2003 Exhibit 6.23 Cost Uncertainty Summary Uncertainty Section With Full Discussion of Uncertainty Effect on Estimate of National Costs Underestimate Overestimate Unknown Impact Uncertainty in data quality of model inputs for SWAT Appendix A X Plant level analysis of compliance determination and treatment requirements used in SWAT Appendix A X SWAT model settings and assumptions Appendix A X Predictive accuracy of the willingness to pay ( WTP) model for regulated DBPs Appendix A X 20% operational safety factor in assessing plant compliance Appendix A Appendix B X Treatment costs do not include costs for operational changes in SWAT <IP_ADDRESS> X Medium operational and water quality parameters considered for technology unit costs <IP_ADDRESS> X Economies of scale for combination technologies not considered <IP_ADDRESS> X Low cost alternatives to treatment not considered <IP_ADDRESS> X IDSE may affect compliance forecast Chapter 7 X Compliance forecast for ground water and small surface water systems may be overstated. Safety factor for Chloramine systems may be too high. 7.2 X Note: Bold " X" indicates a relatively high area of uncertainty for which EPA has conducted a sensitivity analysis ( see Chapter 7). Economic Analysis for the Stage 2 DBPR Proposal 6 54 July 2003 Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

Preferred 59.1 $ 54.3 $ 63.9 $ 64.6 $ 59.2 $ 70.0 $ Alt. 1 182.3 $ 165.1 $ 199.6 $ 195.1 $ 175.9 $ 214.3 $ Alt. 2 409.6 $ 383.6 $ 435.7 $ 442.7 $ 413.4 $ 472.2 $ Alt. 3 594.3 $ 556.3 $ 631.9 $ 644.2 $ 601.1 $ 686.9 $ Note: Source: Appendix K. For the Preferred Alternative, see Exhibit K. 2as for 3% and K. 2aw for 7%. For Alternative 1, see Exhibit K. 3i for 3% and K. 3m for 7%. For Alternative 2, see Exhibit K. 4i fr 3% and K. 4m for 7%. For Alternative 3, see Exhibit K. 5i for 3% and K. 5m for 7%. 90 percent confidence bounds reflect uncertainty in unit treatment costs. Rule Alternative Total Annualized Cost ($ Millions) 3 Percent Discount Rate 7 Percent Discount Rate Mean Estimate 90 Percent Confidence Bound Mean Estimate 90 Percent Confidence Bound 6.9 Comparison of Regulatory Alternatives During the development of the Stage 2 DBPR, many regulatory alternatives were considered. Of these alternatives, four ( including the Preferred Alternative analyzed in this chapter) were chosen for further, in depth analysis. Chapter 4 provides a description of each alternative. Appendices A and B present compliance forecasts for the Preferred Alternative, and Appendix C presents the compliance forecasts for the other three alternatives, including the technology selection deltas.

The same process used for developing costs for the Preferred Alternative was used to develop costs for the other alternatives. Unit costs ( Exhibits 6.9 and 6.10) were multiplied by the technology selection deltas presented in Appendix C, and results were summed for all technologies. Exhibit 6.24 presents the summary of annualized costs for each alternative ( detailed costs for each alternative are presented in Appendix K). While the total annualized costs in Exhibit 6.24 include costs for nontreatment related rule activities ( implementation, IDSE, additional routine monitoring, and significant excursions), any increase in cost for the regulatory alternatives is fully attributable to treatment costs.

Exhibit 6.24 Total Annualized Cost for the Stage 2 DBPR Regulatory Alternatives ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 7 1 July 2003 7. Compliance Forecast Sensitivity Analyses 7.1 Introduction Some of the uncertainties in the inputs and assumptions used to estimate the impact of the Stage 2 Disinfectants and Disinfection Byproducts Rule ( DBPR) could lead to an under estimate of costs or benefits ( or both), while others may lead to an over estimate. One particularly important area of uncertainty is the effect that the Initial Distribution System Evaluation ( IDSE) will have on the actual number of plants needed to make a treatment change and which treatment technology they can use to comply with the rule relative to the number estimated by the Surface Water Analytical Tool ( SWAT) and other compliance forecast methods. A second important area of uncertainty is the predicted number of small surface water plants and ground water plants changing treatment, given that their Stage 2 DBPR monitoring requirements may be the same as their Stage 1 requirements.

The purpose of the IDSE is to identify compliance monitoring sites that are representative of high total trihalomethane ( TTHM) and haloacetic acid ( HAA5) concentrations in the distribution system. The IDSE may result in systems finding higher distribution system disinfection byproduct ( DBP) concentrations than predicted by SWAT. The degree to which this occurs influences the extent to which plants may have to add treatment to meet the requirements of the Stage 2 DBPR ( i. e., there may be more plants changing technology than are indicated for the preferred alternative), which would result in higher costs and benefits. EPA performed an IDSE sensitivity analysis to quantify this potential effect. The methodology and results of the IDSE sensitivity analysis are described in Section 7.2.

The Environmental Protection Agency ( EPA) believes that the results of the IDSE sensitivity analysis in section 7.2 provide an upper bound for the cost and benefit estimate. EPA believes that this upper bound is unlikely to be reached by the actual costs of the rule, however, because of conservative assumptions used to predict treatment changes that may lead to over predictions in costs and benefits. For example, compliance determination for plants is made assuming a 20 percent margin of safety under the MCLs. Systems complying by switching to chloramines may choose to meet the Stage 2 MCLs with a much smaller margin of safety since chloramines dampen the variability of DBP concentrations on distribution systems.

EPA also believes that the estimated number of ground water and small surface water plants changing technology and their technology selections may be biased upward because their monitoring requirements and, thus, compliance calculation, are expected to be very similar from the Stage 1 to Stage 2 DBPR. The Stage 1 DBPR required only one compliance monitoring location ( at the point of maximum residence time) for producing surface water systems serving between 500 and 10,000 people and for all ground water systems. The Stage 2 DBPR requires that these systems add an additional site if they determine that their high TTHM and high HAA5 concentrations do not occur at the same location. If systems maintain a single monitoring location for the Stage 2 DBPR, as many are expected to do, calculation of compliance will produce the same results for the running annual average ( RAA) and locational running annual average ( LRAA) measure, implying that they are not likely to add treatment for the Stage 2 DBPR if they comply with the Stage 1 DBPR. Based on evaluation of Information Collection Rule ( ICR) data and additional analyses for producing systems in Appendix H, EPA estimates that only 41% of ground water systems serving at least 500 people and 41% of all surface water systems serving 500 to 10,000 people will have to add an additional site for Stage 2 ( See Exhibit H. 8b). Economic Analysis for the Stage 2 DBPR Proposal 7 2 July 2003 To gauge the impact of the potential high bias in the compliance forecast, EPA prepared another sensitivity analysis ( the " minimal impact" sensitivity analysis) that assumed that no small surface water systems and none of the ground water systems make treatment changes to comply with the Stage 2 DBPR. The methodology and results for this analysis are summarized in section 7.3.

7.2 IDSE Sensitivity Analysis To evaluate the potential impacts of the IDSE on costs and benefits, two sensitivity analyses were performed ( IDSE No. 1 and IDSE No. 2). Each predicts increases in the percentage of plants that would add treatment due to the IDSE. To simulate the increase in the percentage adding treatment, SWAT was used to develop large surface water compliance forecasts for LRAA regulatory alternatives at 5 µ g/ L ( IDSE No. 1) and 10 µ g/ L ( IDSE No. 2) below the TTHM and HAA5 MCLs of 80 and 60 µ g/ L. All analyses were evaluated using a 20 percent safety factor ( as in the primary analysis). The same process used for developing costs for the Preferred Regulatory Alternative was used to develop costs for the IDSE sensitivity analyses. ( Unit costs in Exhibits 6.9 and 6.10 were multiplied by the selection delta numbers presented in Appendix C, Exhibits C. 31 and C. 32). There is no expected change in nontreatment costs.

Because small systems typically have smaller and less complex distribution systems, they are less likely to find higher TTHM and HAA5 concentrations due to the IDSE. The following adjustments were made to reduce the impacts of the IDSE on small water systems.

° The percentage changing technology and the subsequent increase in small surface water system and small ground water system costs for IDSE No. 1 and No. 2 were reduced by approximately one half.

° For all systems serving fewer than 500 people, the costs for IDSE 1 and 2 were further reduced to account for systems receiving very small system waivers from the IDSE ( 75% are predicted to receive a State waiver; see Appendix H).

° Because nontransient noncommunity water systems ( NTNCWSs) serving fewer than 10,000 are exempt from the IDSE, their treatment costs were assumed not to be affected in the sensitivity analysis.

All compliance forecasts ( ending technologies, selection technologies, and deltas) for IDSE sensitivity analyses are presented in Appendix C. Exhibit 7.1 summarizes the potential increase in the percent of plants adding treatment that were analyzed under the two IDSE sensitivity analyses. Exhibit 7.2 compares annual cases avoided, and the value of benefits derived from those cases, for the two IDSE sensitivity analyses to the Preferred Alternative. Note that benefits ( cases avoided and monetized benefits) increase more than three fold for IDSE Sensitivity Analysis No. 2.

Exhibit 7.3 compares total initial capital costs for the Preferred Regulatory Alternative and for the two IDSE sensitivity analyses. Note that for IDSE Sensitivity Analysis No. 2, the capital costs of the rule are more than doubled. Exhibits 7.4a and 7.4b compare the total annualized costs of the rule for the IDSE sensitivity analyses to those of the Preferred Regulatory Alternative at 3 and 7 percent discount rates, respectively. Total annualized costs include treatment costs, which changed for the sensitivity analysis, and non treatment costs, which are the same for each. Additional cost breakouts for the IDSE sensitivity Economic Analysis for the Stage 2 DBPR Proposal 7 3 July 2003 Percent Adding Treatment Preferred Alternative IDSE No. 1 IDSE No. 2 SW £ 10,000 3.7% 4.6% 4.8% SW > 10,000 5.8% 9.9% 15.1% GW £ 10,000 2.7% 2.8% 2.9% GW > 10,000 2.1% 3.2% 3.6% analyses ( Operations and Maintenance ( O& M), total annualized costs for different public water system ( PWS) types and source types), can be found in Appendix K ( sections K. 6 and K. 7).

Exhibit 7.1 Total Percent Adding Treatment from Stage 1 to Stage 2 for IDSE No. 1 and IDSE No. 2 ( CWSs)

Source: Derived from Technology Selection Deltas in Chapter 6 ( Preferred Alternative) and Appendix C, Exhibits C. 31 and C. 32 ( IDSE sensitivity analyses), weighted average of three small system size categories ( 0  100, 101  1,000, and 1,000  10,000) and two large system size categories ( 10,000  100,000, > 100,000), adjusted for small systems as described in section 7.2. Economic Analysis for the Stage 2 DBPR Proposal 7 4 July 2003 Exhibit 7.2 Comparison of Estimated Annual Cases and Annualized Benefits for IDSE Sensitivity Analyses and the Preferred Alternative ( Millions, 2000$) 1 Discount Rate, WTP for Non Fatal Cases Preferred Alternative IDSE Sensitivity Analysis 1 IDSE Sensitivity Analysis 2 2% PAR Average Number of Annual Cancer Cases Avoided 21 43 66 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 113 ($ 18  258) $ 231 ($ 37  527) $ 360 ($ 57  822)

7 % Lymphoma $ 98 ($ 16  224) $ 200 ($ 32  457) $ 312 ($ 50  713)

3 % Bronchitis $ 55 ($ 13  120) $ 112 ($ 26  244) $ 175 ($ 40  381)

7 % Bronchitis $ 48 ($ 11  104) $ 97 ($ 22  212) $ 152 ($ 35  330)

17% PAR Value Average Number of Annual Cancer Cases Avoided 182 372 580 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 986 ($ 157  2,253) $ 2,014 ($ 320  4,603) $ 3,140 ($ 499  7,175)

7 % Lymphoma $ 854 ($ 136  1,952) $ 1,746 ($ 277  3,989) $ 2,722 ($ 433  6,219)

3 % Bronchitis $ 479 ($ 109  1,044) $ 979 ($ 223  2,132) $ 1,526 ($ 348  3,323)

7 % Bronchitis $ 415 ($ 95  905) $ 849 ($ 194  1,848) $ 1,323 ($ 302  2,882)

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 5.29. For IDSE sensitivity analyses number 1, see Exhibits E. 23d and g, F. 14d and e, F. 15d and e. For IDSE sensitivity analysis number 2, see Exhibits E. 24d and g, F. 16d and e, and F. 17d and e. Economic Analysis for the Stage 2 DBPR Proposal 7 5 July 2003 Preferred Alternative IDSE Sensitivity 1 IDSE Sensitivity 2 90 Percent Confidence Bound 90 Percent Confidence Bound 90 Percent Confidence Bound Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

< 100 0.76 $ 0.61 $ 0.90 $ 1.08 $ 0.86 $ 1.29 $ 1.51 $ 1.27 $ 1.74 $

101 500 3.43 $ 2.90 $ 3.96 $ 5.12 $ 4.36 $ 5.86 $ 9.61 $ 8.64 $ 10.57 $

501 1,000 3.14 $ 2.66 $ 3.62 $ 4.76 $ 4.07 $ 5.44 $ 9.92 $ 8.99 $ 10.86 $

1,001 3,300 11.42 $ 9.83 $ 13.03 $ 17.65 $ 15.28 $ 20.07 $ 24.77 $ 22.08 $ 27.49 $

3,301 10K 27.52 $ 23.86 $ 31.21 $ 42.91 $ 37.45 $ 48.47 $ 63.92 $ 57.42 $ 70.60 $

10,001 50K 57.05 $ 50.18 $ 63.84 $ 88.55 $ 77.56 $ 99.57 $ 156.49 $ 141.52 $ 171.66 $

50,001 100K 31.63 $ 27.80 $ 35.43 $ 49.12 $ 42.94 $ 55.30 $ 87.38 $ 78.92 $ 95.94 $

100,001 1M 82.26 $ 72.18 $ 92.25 $ 129.90 $ 113.36 $ 146.45 $ 231.46 $ 208.59 $ 254.49 $

> 1 Million 42.85 $ 37.27 $ 48.40 $ 73.81 $ 64.21 $ 83.25 $ 129.91 $ 116.57 $ 143.36 $

All Sizes 260.04 $ 227.28 $ 292.63 $ 412.88 $ 360.08 $ 465.70 $ 714.95 $ 644.02 $ 786.70 $

< 100 0.47 $ 0.38 $ 0.56 $ 0.67 $ 0.54 $ 0.80 $ 0.92 $ 0.79 $ 1.06 $

101 500 1.31 $ 1.11 $ 1.51 $ 1.96 $ 1.68 $ 2.25 $ 3.72 $ 3.35 $ 4.08 $

501 1,000 0.72 $ 0.61 $ 0.83 $ 1.09 $ 0.93 $ 1.24 $ 2.25 $ 2.04 $ 2.46 $

1,001 3,300 0.72 $ 0.62 $ 0.83 $ 1.12 $ 0.97 $ 1.27 $ 1.57 $ 1.39 $ 1.74 $

3,301 10K 0.57 $ 0.49 $ 0.64 $ 0.88 $ 0.77 $ 1.00 $ 1.32 $ 1.18 $ 1.46 $

10,001 50K 0.51 $ 0.45 $ 0.58 $ 0.80 $ 0.70 $ 0.89 $ 1.42 $ 1.28 $ 1.55 $

50,001 100K 0.13 $ 0.12 $ 0.15 $ 0.21 $ 0.18 $ 0.24 $ 0.37 $ 0.34 $ 0.41 $

100,001 1M 0.21 $ 0.18 $ 0.23 $ 0.33 $ 0.29 $ 0.37 $ 0.58 $ 0.53 $ 0.64 $

> 1 Million  $  $  $  $  $  $  $  $  $

All Sizes 4.64 $ 3.95 $ 5.33 $ 7.06 $ 6.06 $ 8.06 $ 12.16 $ 10.89 $ 13.40 $

264.68 $ 231.23 $ 297.96 $ 419.94 $ 366.14 $ 473.76 $ 727.11 $ 654.91 $ 800.10 $

< 100 8.98 $ 7.79 $ 10.18 $ 11.06 $ 9.66 $ 12.47 $ 12.09 $ 10.57 $ 13.61 $

101 500 22.85 $ 19.63 $ 26.07 $ 23.91 $ 20.58 $ 27.24 $ 24.43 $ 21.01 $ 27.79 $

501 1,000 12.67 $ 10.88 $ 14.46 $ 13.19 $ 11.35 $ 15.04 $ 13.44 $ 11.58 $ 15.30 $

1,001 3,300 20.95 $ 17.48 $ 24.40 $ 21.23 $ 17.74 $ 24.69 $ 21.38 $ 17.90 $ 24.81 $

3,301 10K 31.47 $ 25.85 $ 37.05 $ 31.83 $ 26.16 $ 37.44 $ 32.02 $ 26.41 $ 37.56 $

10,001 50K 55.86 $ 50.42 $ 61.34 $ 89.54 $ 81.02 $ 98.14 $ 100.67 $ 91.08 $ 110.33 $

50,001 100K 14.96 $ 13.38 $ 16.55 $ 23.78 $ 21.37 $ 26.20 $ 26.69 $ 23.96 $ 29.45 $

100,001 1M 26.96 $ 24.00 $ 29.97 $ 41.39 $ 37.00 $ 45.80 $ 46.13 $ 41.17 $ 51.12 $

> 1 Million 2.28 $ 2.01 $ 2.56 $ 3.50 $ 3.09 $ 3.91 $ 3.90 $ 3.44 $ 4.36 $

All Sizes 196.99 $ 171.45 $ 222.58 $ 259.44 $ 227.96 $ 290.93 $ 280.76 $ 247.12 $ 314.33 $

< 100 4.18 $ 3.65 $ 4.71 $ 5.14 $ 4.52 $ 5.78 $ 5.63 $ 4.94 $ 6.31 $

101 500 4.16 $ 3.59 $ 4.74 $ 4.34 $ 3.76 $ 4.94 $ 4.44 $ 3.84 $ 5.03 $

501 1,000 1.90 $ 1.64 $ 2.16 $ 1.98 $ 1.71 $ 2.24 $ 2.02 $ 1.75 $ 2.28 $

1,001 3,300 0.88 $ 0.74 $ 1.03 $ 0.89 $ 0.75 $ 1.04 $ 0.90 $ 0.75 $ 1.05 $

3,301 10K 0.28 $ 0.23 $ 0.33 $ 0.28 $ 0.23 $ 0.33 $ 0.28 $ 0.23 $ 0.33 $

10,001 50K 0.12 $ 0.11 $ 0.13 $ 0.19 $ 0.17 $ 0.21 $ 0.21 $ 0.19 $ 0.24 $

50,001 100K 0.02 $ 0.02 $ 0.03 $ 0.04 $ 0.03 $ 0.04 $ 0.04 $ 0.04 $ 0.04 $

100,001 1M 0.12 $ 0.11 $ 0.13 $ 0.18 $ 0.16 $ 0.20 $ 0.21 $ 0.18 $ 0.23 $

> 1 Million  $  $  $  $  $  $  $  $  $

All Sizes 11.66 $ 10.08 $ 13.27 $ 13.05 $ 11.33 $ 14.79 $ 13.73 $ 11.91 $ 15.52 $

208.66 $ 181.52 $ 235.85 $ 272.49 $ 239.29 $ 305.71 $ 294.48 $ 259.03 $ 329.85 $

473.34 $ 412.76 $ 533.81 $ 692.43 $ 605.43 $ 779.47 $ 1,021.59 $ 913.95 $ 1,129.95 $

Notes:

Source: Total All values in millions of year 2000 dollars. 90 percent confidence bounds reflect uncertainty in unit treatment costs.

Detail may not add exactly to totals due to independent rounding. Derived from Appendix K, Exhibit K. 1a for the Preferred Alternative, K. 1e for IDSE Sensitivity Analysis 1, and K. 1f for IDSE Sensitivity Analysis 2. Ground Water CWSs NTNCWSs Subtotal Mean Value Mean Value Subtotal Surface Water CWSs NTNCWSs Source Mean Value System Classification System Size ( population served) Exhibit 7.3 Comparison of the Total Initial Capital Costs for IDSE Sensitivity Analyses and the Preferred Alternative ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 7 6 July 2003 Preferred Alternative IDSE Sensitivity 1 IDSE Sensitivity 2 90 Percent Confidence Bound 90 Percent Confidence Bound 90 Percent Confidence Bound Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $

2004 34.5 $ 34.5 $ 34.5 $ 34.5 $ 34.5 $ 34.5 $ 34.5 $ 34.5 $ 34.5 $

2005 74.3 $ 65.7 $ 82.9 $ 108.4 $ 95.8 $ 121.1 $ 160.3 $ 144.5 $ 176.3 $

2006 87.3 $ 78.6 $ 95.9 $ 121.8 $ 109.2 $ 134.5 $ 174.6 $ 158.8 $ 190.6 $

2007 76.9 $ 68.2 $ 85.6 $ 111.8 $ 99.1 $ 124.5 $ 165.4 $ 149.6 $ 181.4 $

2008 81.6 $ 72.9 $ 90.4 $ 116.9 $ 104.2 $ 129.6 $ 171.2 $ 155.4 $ 187.2 $

2009 81.2 $ 72.5 $ 90.0 $ 116.7 $ 104.0 $ 129.4 $ 171.7 $ 155.9 $ 187.7 $

2010 84.5 $ 75.7 $ 93.3 $ 120.2 $ 107.5 $ 132.9 $ 175.7 $ 159.9 $ 191.7 $

2011 43.4 $ 39.6 $ 47.2 $ 53.8 $ 49.2 $ 58.5 $ 70.9 $ 65.6 $ 76.2 $

2012 43.4 $ 39.6 $ 47.2 $ 53.9 $ 49.2 $ 58.5 $ 70.9 $ 65.7 $ 76.1 $

2013 43.4 $ 39.6 $ 47.2 $ 53.9 $ 49.2 $ 58.5 $ 70.8 $ 65.6 $ 76.1 $

2014 29.4 $ 27.7 $ 31.2 $ 36.9 $ 34.7 $ 39.2 $ 49.8 $ 47.2 $ 52.5 $

2015 28.5 $ 26.8 $ 30.3 $ 35.9 $ 33.7 $ 38.1 $ 48.4 $ 45.8 $ 51.0 $

2016 27.7 $ 26.1 $ 29.4 $ 34.8 $ 32.7 $ 36.9 $ 47.0 $ 44.5 $ 49.5 $

2017 26.9 $ 25.3 $ 28.5 $ 33.8 $ 31.7 $ 35.9 $ 45.6 $ 43.2 $ 48.0 $

2018 26.1 $ 24.6 $ 27.7 $ 32.8 $ 30.8 $ 34.8 $ 44.3 $ 41.9 $ 46.6 $

2019 25.4 $ 23.9 $ 26.9 $ 31.9 $ 29.9 $ 33.8 $ 43.0 $ 40.7 $ 45.3 $

2020 24.6 $ 23.2 $ 26.1 $ 30.9 $ 29.1 $ 32.8 $ 41.7 $ 39.5 $ 44.0 $

2021 23.9 $ 22.5 $ 25.3 $ 30.0 $ 28.2 $ 31.9 $ 40.5 $ 38.4 $ 42.7 $

2022 23.2 $ 21.8 $ 24.6 $ 29.2 $ 27.4 $ 30.9 $ 39.3 $ 37.2 $ 41.4 $

2023 22.5 $ 21.2 $ 23.9 $ 28.3 $ 26.6 $ 30.0 $ 38.2 $ 36.2 $ 40.2 $

2024 21.9 $ 20.6 $ 23.2 $ 27.5 $ 25.8 $ 29.2 $ 37.1 $ 35.1 $ 39.1 $

2025 21.2 $ 20.0 $ 22.5 $ 26.7 $ 25.1 $ 28.3 $ 36.0 $ 34.1 $ 37.9 $

2026 20.6 $ 19.4 $ 21.9 $ 25.9 $ 24.3 $ 27.5 $ 34.9 $ 33.1 $ 36.8 $

2027 20.0 $ 18.8 $ 21.2 $ 25.2 $ 23.6 $ 26.7 $ 33.9 $ 32.1 $ 35.7 $

Total 1,028.7 $ 944.8 $ 1,112.9 $ 1,358.1 $ 1,241.8 $ 1,474.4 $ 1,882.2 $ 1,740.7 $ 2,024.6 $

Ann. 59.1 $ 54.3 $ 63.9 $ 78.0 $ 71.3 $ 84.7 $ 108.1 $ 100.0 $ 116.3 $

Notes: Present values in millions of 2000 dollars. Estimates are discounted to 2003. 90 percent confidence bounds reflect uncertainty in unit treatment costs.

Detail may not add exactly to totals due to independent rounding.

Ann = value of total annualized at discount rate.

Source: Derived from Appendix K, Exhibit K. 2as for the Preferred Alternative, K. 6i for IDSE Sensitivity Analysis 1, and K. 7i for IDSE Sensitivity Analysis 2. Mean Value Mean Value Mean Value Exhibit 7.4a Comparison of Annualized Costs for the IDSE Sensitivity Analyses and the Preferred Alternative, 3 Percent Discount Rate ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 7 7 July 2003 Preferred Alternative IDSE Sensitivity 1 IDSE Sensitivity 2 90 Percent Confidence Bound 90 Percent Confidence Bound 90 Percent Confidence Bound Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $ 36.2 $

2004 33.2 $ 33.2 $ 33.2 $ 33.2 $ 33.2 $ 33.2 $ 33.2 $ 33.2 $ 33.2 $

2005 68.8 $ 60.9 $ 76.8 $ 100.5 $ 88.8 $ 112.2 $ 148.5 $ 133.9 $ 163.3 $

2006 77.8 $ 70.1 $ 85.6 $ 108.7 $ 97.4 $ 120.0 $ 155.8 $ 141.6 $ 170.0 $

2007 66.0 $ 58.6 $ 73.5 $ 96.0 $ 85.1 $ 106.9 $ 142.1 $ 128.4 $ 155.8 $

2008 67.5 $ 60.3 $ 74.7 $ 96.6 $ 86.1 $ 107.1 $ 141.5 $ 128.4 $ 154.7 $

2009 64.6 $ 57.7 $ 71.6 $ 92.9 $ 82.8 $ 103.0 $ 136.6 $ 124.0 $ 149.3 $

2010 64.7 $ 58.0 $ 71.4 $ 92.1 $ 82.3 $ 101.8 $ 134.6 $ 122.5 $ 146.8 $

2011 32.0 $ 29.2 $ 34.8 $ 39.7 $ 36.3 $ 43.1 $ 52.3 $ 48.4 $ 56.1 $

2012 30.8 $ 28.1 $ 33.5 $ 38.2 $ 34.9 $ 41.5 $ 50.3 $ 46.6 $ 54.0 $

2013 29.6 $ 27.1 $ 32.2 $ 36.8 $ 33.6 $ 39.9 $ 48.4 $ 44.8 $ 52.0 $

2014 19.3 $ 18.2 $ 20.5 $ 24.3 $ 22.8 $ 25.8 $ 32.8 $ 31.0 $ 34.5 $

2015 18.1 $ 17.0 $ 19.2 $ 22.7 $ 21.3 $ 24.1 $ 30.6 $ 29.0 $ 32.3 $

2016 16.9 $ 15.9 $ 17.9 $ 21.2 $ 19.9 $ 22.5 $ 28.6 $ 27.1 $ 30.1 $

2017 15.8 $ 14.8 $ 16.7 $ 19.8 $ 18.6 $ 21.0 $ 26.7 $ 25.3 $ 28.2 $

2018 14.7 $ 13.9 $ 15.6 $ 18.5 $ 17.4 $ 19.7 $ 25.0 $ 23.7 $ 26.3 $

2019 13.8 $ 13.0 $ 14.6 $ 17.3 $ 16.3 $ 18.4 $ 23.4 $ 22.1 $ 24.6 $

2020 12.9 $ 12.1 $ 13.7 $ 16.2 $ 15.2 $ 17.2 $ 21.8 $ 20.7 $ 23.0 $

2021 12.0 $ 11.3 $ 12.8 $ 15.1 $ 14.2 $ 16.1 $ 20.4 $ 19.3 $ 21.5 $

2022 11.3 $ 10.6 $ 11.9 $ 14.1 $ 13.3 $ 15.0 $ 19.1 $ 18.1 $ 20.1 $

2023 10.5 $ 9.9 $ 11.1 $ 13.2 $ 12.4 $ 14.0 $ 17.8 $ 16.9 $ 18.8 $

2024 9.8 $ 9.2 $ 10.4 $ 12.4 $ 11.6 $ 13.1 $ 16.7 $ 15.8 $ 17.5 $

2025 9.2 $ 8.6 $ 9.7 $ 11.5 $ 10.8 $ 12.2 $ 15.6 $ 14.7 $ 16.4 $

2026 8.6 $ 8.1 $ 9.1 $ 10.8 $ 10.1 $ 11.4 $ 14.6 $ 13.8 $ 15.3 $

2027 8.0 $ 7.5 $ 8.5 $ 10.1 $ 9.5 $ 10.7 $ 13.6 $ 12.9 $ 14.3 $

Total 752.3 $ 689.4 $ 815.3 $ 998.3 $ 910.2 $ 1,086.3 $ 1,386.2 $ 1,278.5 $ 1,494.5 $

Ann. 64.6 $ 59.2 $ 70.0 $ 85.7 $ 78.1 $ 93.2 $ 118.9 $ 109.7 $ 128.2 $

Notes: Present values in millions of 2000 dollars. Estimates are discounted to 2003. 90 percent confidence bounds reflect uncertainty in unit treatment costs.

Detail may not add exactly to totals due to independent rounding.

Ann = value of total annualized at discount rate.

Source: Derived from Appendix J, Exhibit K. 2aw for the Preferred Alternative, K. 6m for IDSE Sensitivity Analysis 1, and K. 7m for IDSE Sensitivity Analysis 2. Mean Value Mean Value Mean Value Exhibit 7.4b Comparison of Annualized Costs for the IDSE Sensitivity Analyses and the Preferred Alternative, 7 Percent Discount Rate ($ Millions) 1 Since the Minimal Impact Sensitivity Analysis only considers the costs and benefits from large surface water systems, Appendices E, F, and J do not contain separate sections for this sensitivity analysis.

Economic Analysis for the Stage 2 DBPR Proposal 7 8 July 2003 7.3 Minimal Impact Sensitivity Analysis For this analysis, EPA assumed that no surface water plants serving fewer than 10,000 people and no ground water plants would have to add treatment to meet Stage 2 DBPR requirements. The only costs and benefits are associated with the large surface water systems. 1 Exhibit 7.5 compares the estimated annual benefits for the Minimal Impact Sensitivity Analysis to those of the Preferred Regulatory Alternative. Exhibit 7.6 compares the estimated initial capital costs for the Minimal Impact Sensitivity Analysis to the Preferred Regulatory Alternative. Exhibits 7.7a and 7.7b compare the total annualized costs of the rule ( including treatment and non treatment costs) for the Minimal Impact Sensitivity Analysis to those of the Preferred Regulatory Alternative at 3 and 7 percent discount rates, respectively.

Note that while the cost figures are reduced dramatically for this sensitivity analysis ( from $ 59.1 million to $ 21.4 million using a 3 percent discount rate for the Preferred Regulatory Alternative to the Minimal Impacts Sensitivity Analysis, respectively), the benefits are not dramatically reduced ( from $ 113 million to $ 98 million using a 3 percent discount rate at the 2 percent PAR value for the Preferred Regulatory Alternative to the Minimal Impacts Sensitivity Analysis, respectively). Economic Analysis for the Stage 2 DBPR Proposal 7 9 July 2003 Exhibit 7.5 Comparison of Estimated Annual Cases and Annualized Benefits for Minimal Impact Sensitivity Analysis and the Preferred Alternative ( Millions, 2000$) 1 Discount Rate, WTP for Non Fatal Cases Preferred Alternative Minimal Impact Sensitivity Analysis 2% PAR Average Number of Annual Cancer Cases Avoided 21 158 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 113 ($ 18  258) $ 98 ($ 17  $ 239)

7 % Lymphoma $ 98 ($ 16  224) $ 85 ($ 14  $ 208)

3 % Bronchitis $ 55 ($ 13  120) $ 48 ($ 12  $ 111)

7 % Bronchitis $ 48 ($ 11  104) $ 41 ($ 10  $ 96)

17% PAR Value Average Number of Annual Cancer Cases Avoided 182 Annualized Benefits of Cases Avoided ( 90% Confidence Bounds) 2 3 %, Lymphoma $ 986 ($ 157  2,253) $ 854 ($ 145  $ 2087)

7 % Lymphoma $ 854 ($ 136  1,952) $ 742 ($ 126  $ 1812)

3 % Bronchitis $ 479 ($ 109  1,044) $ 415 ($ 101  $ 967)

7 % Bronchitis $ 415 ($ 95  905) $ 361 ($ 88  $ 840)

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 5.29. For the sensitivity analysis, see the preferred alternative results for large SW systems ( USEPA 2003i). Economic Analysis for the Stage 2 DBPR Proposal 7 10 July 2003 Preferred Alternative Minimal Impacts Sensitivity Analysis 90 Percent Confidence Bound 90 Percent Confidence Bound Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

< 100 0.76 $ 0.61 $ 0.90 $  $  $  $

101 500 3.43 $ 2.90 $ 3.96 $  $  $  $

501 1,000 3.14 $ 2.66 $ 3.62 $  $  $  $

1,001 3,300 11.42 $ 9.83 $ 13.03 $  $  $  $

3,301 10K 27.52 $ 23.86 $ 31.21 $  $  $  $

10,001 50K 57.05 $ 50.18 $ 63.84 $ 57.05 $ 50.18 $ 63.84 $

50,001 100K 31.63 $ 27.80 $ 35.43 $ 31.63 $ 27.80 $ 35.43 $

100,001 1M 82.26 $ 72.18 $ 92.25 $ 82.26 $ 72.18 $ 92.25 $

> 1 Million 42.85 $ 37.27 $ 48.40 $ 42.85 $ 37.27 $ 48.40 $

All Sizes 260.04 $ 227.28 $ 292.63 $ 213.78 $ 187.44 $ 239.92 $

< 100 0.47 $ 0.38 $ 0.56 $  $  $  $

101 500 1.31 $ 1.11 $ 1.51 $  $  $  $

501 1,000 0.72 $ 0.61 $ 0.83 $  $  $  $

1,001 3,300 0.72 $ 0.62 $ 0.83 $  $  $  $

3,301 10K 0.57 $ 0.49 $ 0.64 $  $  $  $

10,001 50K 0.51 $ 0.45 $ 0.58 $ 0.51 $ 0.45 $ 0.58 $

50,001 100K 0.13 $ 0.12 $ 0.15 $ 0.13 $ 0.12 $ 0.15 $

100,001 1M 0.21 $ 0.18 $ 0.23 $ 0.21 $ 0.18 $ 0.23 $

> 1 Million  $  $  $  $  $  $

All Sizes 4.64 $ 3.95 $ 5.33 $ 0.85 $ 0.75 $ 0.96 $

264.68 $ 231.23 $ 297.96 $ 214.64 $ 188.18 $ 240.88 $

< 100 8.98 $ 7.79 $ 10.18 $  $  $  $

101 500 22.85 $ 19.63 $ 26.07 $  $  $  $

501 1,000 12.67 $ 10.88 $ 14.46 $  $  $  $

1,001 3,300 20.95 $ 17.48 $ 24.40 $  $  $  $

3,301 10K 31.47 $ 25.85 $ 37.05 $  $  $  $

10,001 50K 55.86 $ 50.42 $ 61.34 $  $  $  $

50,001 100K 14.96 $ 13.38 $ 16.55 $  $  $  $

100,001 1M 26.96 $ 24.00 $ 29.97 $  $  $  $

> 1 Million 2.28 $ 2.01 $ 2.56 $  $  $  $

All Sizes 196.99 $ 171.45 $ 222.58 $  $  $  $

< 100 4.18 $ 3.65 $ 4.71 $  $  $  $

101 500 4.16 $ 3.59 $ 4.74 $  $  $  $

501 1,000 1.90 $ 1.64 $ 2.16 $  $  $  $

1,001 3,300 0.88 $ 0.74 $ 1.03 $  $  $  $

3,301 10K 0.28 $ 0.23 $ 0.33 $  $  $  $

10,001 50K 0.12 $ 0.11 $ 0.13 $  $  $  $

50,001 100K 0.02 $ 0.02 $ 0.03 $  $  $  $

100,001 1M 0.12 $ 0.11 $ 0.13 $  $  $  $

> 1 Million  $  $  $  $  $  $

All Sizes 11.66 $ 10.08 $ 13.27 $  $  $  $

208.66 $ 181.52 $ 235.85 $  $  $  $

473.34 $ 412.76 $ 533.81 $ 214.64 $ 188.18 $ 240.88 $

Notes:

Source: Mean Value Subtotal Surface Water CWSs NTNCWSs Source Mean Value System Classification System Size ( population served)

Ground Water CWSs NTNCWSs Subtotal Total All values in millions of year 2000 dollars. 90 percent confidence bounds reflect uncertainty in unit treatment costs.

Detail may not add exactly to totals due to independent rounding. Derived from Appendix K, Exhibit K. 1a for the Preferred Alternative. The Minimal Impact Sensitivity Analysis is the Preferred Alternative with no costs for small surface water systems and all ground water systems. Exhibit 7.6 Comparison of Initial Capital Costs for the Minimal Impact Sensitivity Analysis and the Preferred Alternative ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 7 11 July 2003 Preferred Alternative Minimal Impact Sensitivity Analysis 90 Percent Confidence Bound 90 Percent Confidence Bound Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 36.2 $ 36.2 $ 36.2 $ 23.9 $ 23.9 $ 23.9 $

2004 34.5 $ 34.5 $ 34.5 $ 23.0 $ 23.0 $ 23.0 $

2005 74.3 $ 65.7 $ 82.9 $ 35.6 $ 31.3 $ 39.8 $

2006 87.3 $ 78.6 $ 95.9 $ 36.7 $ 32.5 $ 40.9 $

2007 76.9 $ 68.2 $ 85.6 $ 37.4 $ 33.1 $ 41.6 $

2008 81.6 $ 72.9 $ 90.4 $ 38.1 $ 33.9 $ 42.3 $

2009 81.2 $ 72.5 $ 90.0 $ 37.5 $ 33.3 $ 41.7 $

2010 84.5 $ 75.7 $ 93.3 $ 36.9 $ 32.7 $ 41.0 $

2011 43.4 $ 39.6 $ 47.2 $ 7.7 $ 7.1 $ 8.3 $

2012 43.4 $ 39.6 $ 47.2 $ 7.4 $ 6.9 $ 8.0 $

2013 43.4 $ 39.6 $ 47.2 $ 7.2 $ 6.7 $ 7.8 $

2014 29.4 $ 27.7 $ 31.2 $ 7.0 $ 6.5 $ 7.6 $

2015 28.5 $ 26.8 $ 30.3 $ 6.8 $ 6.3 $ 7.3 $

2016 27.7 $ 26.1 $ 29.4 $ 6.6 $ 6.1 $ 7.1 $

2017 26.9 $ 25.3 $ 28.5 $ 6.4 $ 5.9 $ 6.9 $

2018 26.1 $ 24.6 $ 27.7 $ 6.2 $ 5.8 $ 6.7 $

2019 25.4 $ 23.9 $ 26.9 $ 6.0 $ 5.6 $ 6.5 $

2020 24.6 $ 23.2 $ 26.1 $ 5.9 $ 5.4 $ 6.3 $

2021 23.9 $ 22.5 $ 25.3 $ 5.7 $ 5.3 $ 6.1 $

2022 23.2 $ 21.8 $ 24.6 $ 5.5 $ 5.1 $ 6.0 $

2023 22.5 $ 21.2 $ 23.9 $ 5.4 $ 5.0 $ 5.8 $

2024 21.9 $ 20.6 $ 23.2 $ 5.2 $ 4.8 $ 5.6 $

2025 21.2 $ 20.0 $ 22.5 $ 5.1 $ 4.7 $ 5.5 $

2026 20.6 $ 19.4 $ 21.9 $ 4.9 $ 4.5 $ 5.3 $

2027 20.0 $ 18.8 $ 21.2 $ 4.8 $ 4.4 $ 5.1 $

Total 1,028.7 $ 944.8 $ 1,112.9 $ 372.9 $ 339.8 $ 406.2 $

Ann. 59.1 $ 54.3 $ 63.9 $ 21.4 $ 19.5 $ 23.3 $

Notes:

Detail may not add exactly to totals due to independent rounding.

Ann = value of total annualized at discount rate. Source: Mean Value Mean Value Derived from Derived from Appendix K, Exhibit K. 2as for the Preferred Alternative. The Minimal Impact Sensitivity Analysis is the Preferred Alternative with no costs for small surface water systems and all ground water systems. Present values in millions of 2000 dollars. Estimates are discounted to 2003. 90 percent confidence bounds reflect uncertainty in unit treatment costs. Exhibit 7.7a Comparison of Annualized Costs for the Minimal Impact Sensitivity Analyses and the Preferred Alternative, 3 Percent Discount Rate ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal 7 12 July 2003 Preferred Alternative Minimal Impact Sensitivity Analysis 90 Percent Confidence Bound 90 Percent Confidence Bound Lower ( 5th % tile) Upper ( 95th % tile) Lower ( 5th % tile) Upper ( 95th % tile)

2003 36.2 $ 36.2 $ 36.2 $ 23.9 $ 23.9 $ 23.9 $

2004 33.2 $ 33.2 $ 33.2 $ 22.2 $ 22.2 $ 22.2 $

2005 68.8 $ 60.9 $ 76.8 $ 33.0 $ 29.0 $ 36.9 $

2006 77.8 $ 70.1 $ 85.6 $ 32.7 $ 29.0 $ 36.5 $

2007 66.0 $ 58.6 $ 73.5 $ 32.1 $ 28.4 $ 35.7 $

2008 67.5 $ 60.3 $ 74.7 $ 31.5 $ 28.0 $ 35.0 $

2009 64.6 $ 57.7 $ 71.6 $ 29.8 $ 26.5 $ 33.1 $

2010 64.7 $ 58.0 $ 71.4 $ 28.2 $ 25.0 $ 31.4 $

2011 32.0 $ 29.2 $ 34.8 $ 5.6 $ 5.2 $ 6.1 $

2012 30.8 $ 28.1 $ 33.5 $ 5.3 $ 4.9 $ 5.7 $

2013 29.6 $ 27.1 $ 32.2 $ 4.9 $ 4.6 $ 5.3 $

2014 19.3 $ 18.2 $ 20.5 $ 4.6 $ 4.3 $ 5.0 $

2015 18.1 $ 17.0 $ 19.2 $ 4.3 $ 4.0 $ 4.6 $

2016 16.9 $ 15.9 $ 17.9 $ 4.0 $ 3.7 $ 4.3 $

2017 15.8 $ 14.8 $ 16.7 $ 3.8 $ 3.5 $ 4.1 $

2018 14.7 $ 13.9 $ 15.6 $ 3.5 $ 3.3 $ 3.8 $

2019 13.8 $ 13.0 $ 14.6 $ 3.3 $ 3.0 $ 3.5 $

2020 12.9 $ 12.1 $ 13.7 $ 3.1 $ 2.8 $ 3.3 $

2021 12.0 $ 11.3 $ 12.8 $ 2.9 $ 2.7 $ 3.1 $

2022 11.3 $ 10.6 $ 11.9 $ 2.7 $ 2.5 $ 2.9 $

2023 10.5 $ 9.9 $ 11.1 $ 2.5 $ 2.3 $ 2.7 $

2024 9.8 $ 9.2 $ 10.4 $ 2.3 $ 2.2 $ 2.5 $

2025 9.2 $ 8.6 $ 9.7 $ 2.2 $ 2.0 $ 2.4 $

2026 8.6 $ 8.1 $ 9.1 $ 2.0 $ 1.9 $ 2.2 $

2027 8.0 $ 7.5 $ 8.5 $ 1.9 $ 1.8 $ 2.1 $

Total 752.3 $ 689.4 $ 815.3 $ 292.4 $ 266.6 $ 318.3 $

Ann. 64.6 $ 59.2 $ 70.0 $ 25.1 $ 22.9 $ 27.3 $

Notes:

Detail may not add exactly to totals due to independent rounding.

Ann = value of total annualized at discount rate. Source: Derived from Derived from Appendix K, Exhibit K. 2aw for the Preferred Alternative. The Minimal Impact Sensitivity Analysis is the Preferred Alternative with no costs for small surface water systems and all ground water systems. Mean Value Mean Value Present values in millions of 2000 dollars. Estimates are discounted to 2003. 90 percent confidence bounds reflect uncertainty in unit treatment costs. Exhibit 7.7b Comparison of Annualized Costs for the Minimal Impact Sensitivity Analyses and the Preferred Alternative, 7 Percent Discount Rate ($ Millions) Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 1 8. Economic Impact Analysis 8.1 Introduction As part of the rulemaking process, the Environmental Protection Agency ( EPA) is required to address the potential direct and indirect burdens that the Stage 2 Disinfectants and Disinfection Byproducts Rule ( DBPR) may place on certain types of governments, businesses, and populations. This chapter presents the analyses EPA has performed in accordance with the following 12 Federal requirements.

1) The Regulatory Flexibility Act ( RFA) of 1980, as amended by the Small Business Regulatory Enforcement Fairness Act ( SBREFA) of 1996. 2) An analysis of small system affordability to determine variance technologies in accordance with Section 1415( e)( 1) of the 1996 Safe Drinking Water Act ( SDWA) Amendments. 3) Feasible technologies available to all systems as required by Section 1412( b)( 4)( E) of the 1996 SDWA Amendments. 4) A Technical, Financial, and Managerial Capacity Assessment as required by Section 1420( d)( 3) of the 1996 SDWA Amendments. 5) The Paperwork Reduction Act ( A separate Information Collection Request document contains the complete analysis). 6) The Unfunded Mandates Reform Act ( UMRA) of 1995. 7) Executive Order 13175 ( Consultation and Coordination with Indian Tribal Governments). 8) Impacts on sensitive subpopulations as required by Section 1412( b)( 3)( c)( i) of the 1996 SDWA Amendments. 9) Executive Order 13045 ( Protection of Children from Environmental Health Risks and Safety Risks). 10) Executive Order 12898 ( Federal Actions to Address Environmental Justice in Minority Populations and Low Income Populations). 11) Executive Order 13132 ( Federalism). 12) Executive Order 13211 ( Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use).

Many of the requirements and executive orders listed above call for an explanation of why the rule is necessary, the statutory authority for the rule, and the primary objectives that the rule is intended to achieve ( refer to Chapter 2 for more information regarding the objectives of the rule). More specifically, they are designed to assess the financial and health effects of the rule on sensitive, low income, and Tribal populations as well as on small systems. The chapter also examines how much additional capacity systems will need to meet Stage 2 DBPR requirements and whether there are existing, feasible technologies and treatment techniques available to meet rule requirements.

8.2 Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act The RFA, as amended by the SBREFA of 1996 ( 5 U. S. C. § 601 et seq.), generally requires an agency to prepare a regulatory flexibility analysis for any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or other statute, unless the Agency certifies that the rule will not have a significant economic impact on a substantial number of small entities ( 5 U. S. C. Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 2 603( a)). EPA must analyze the impacts of a regulation on all entities and individually for each type of entity, including public water systems ( PWSs) run by small businesses, small governments, and small organizations. Small entities include small businesses, small organizations, and small governmental jurisdictions.

Defining Small Entities Affected by the Rule The RFA defines small entities as including " small businesses," " small governments," and " small organizations" ( 5 U. S. C. 601). The RFA references the definition of " small business" found in the Small Business Act, which authorizes the Small Business Administration ( SBA) to further define " small business" by regulation. The SBA defines small businesses by category using the North American Industry Classification System ( NAICS). For example, in the manufacturing sector, the SBA generally defines small business in terms of number of employees; in the agriculture, mining, and electric, gas, and sanitary services sectors, the SBA generally defines small businesses in terms of annual receipts ( ranging from $ 0.5 million for crops to $ 25 million for certain types of pipelines). The RFA also authorizes an agency to adopt alternative definitions for each category of small entity " which are appropriate to the activities of the Agency after proposing the alternative definition( s) in the Federal Register and taking comment" ( 5 U. S. C. § 601( 3)( 5)). In addition to the above, agencies must consult with SBA's Chief Council for Advocacy to establish an alternative small business definition.

The screening analysis uses the following definitions of small entities affected by the Stage 2 DBPR:

° A " small business" is any small business concern that is independently owned and operated and not dominant in its field as defined by the Small Business Act ( 15 U. S. C. 632). Examples of PWSs within this category include small, privately owned PWSs and for profit businesses where provision of water may be ancillary, such as mobile home parks or day care centers.

° A " small organization" under the Stage 2 DBPR is any not for profit enterprise that is independently owned and operated, not dominant in its field, and operates a PWS. Examples of small organizations include churches, schools, and homeowners associations.

° A " small governmental jurisdiction" is a city, county, town, school district, or special district with a population of less than 50,000 ( 5 U. S. C. 601) that operates a PWS.

The Stage 2 DBPR applies to all community water systems ( CWSs) and nontransient noncommunity water systems ( NTNCWSs) that add a disinfectant other than ultraviolet light ( UV) or that deliver water that has been treated with a disinfectant other than UV. The NAICS code for PWSs is 22131 ( Administration of Water Supply and Irrigation Programs) and State agencies that include drinking water programs are classified as 92411 ( Administration of Air and Water Resources and Solid Waste Management Programs) or 923312 ( Administration of Public Health Programs). Ancillary systems ( i. e., those that supplement the function of other establishments like factories, power plants, mobile home parks, etc.) cannot be categorized in a single NAICS code. For ancillary systems, the NAICS code is that of the primary establishment or industry.

For purposes of assessing the impacts of the Stage 2 DBPR on small entities, EPA considered small entities to be PWSs serving 10,000 or fewer people, which is the cut off level specified by Congress in the 1996 Amendments to the SDWA for small system flexibility provisions. Because this definition does not correspond to the definitions for small businesses, governments, and nonprofit organizations, EPA 1 Revenue information was used whenever available. When it was not available, different measures, such as sales or annual operating expenditures, were used.

2 System information in this chapter is from the system baseline presented in Chapter 3 ( Exhibit 3.3). Discussions of plants changing technology refer to the Stage 2 DBPR treatment plants and baseline ( Exhibit 3.4). Systems conducting rule activities are presented in Exhibit 6.3, and plants adding treatment are presented in Exhibit 6.4.

Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 3 requested comment on an alternative definition of a small entity in the preamble to the proposed Consumer Confidence Report ( CCR) regulation ( 63 FR 7620 February 13, 1998). Comments showed that stakeholders support the proposed alternative definition. EPA also consulted with the SBA Office of Advocacy on the definition as it relates to small business analysis. In the preamble to the final CCR regulation ( 63 FR 4511 August 19, 1998), EPA stated its intent to establish this alternative definition for regulatory flexibility assessments under the RFA for all drinking water regulations and has, thus, used it for the Stage 2 DBPR.

EPA conducted a screening analysis to determine if the Stage 2 DBPR would have a significant economic impact on a substantial number of small entities. In this analysis, EPA evaluated the potential economic impact of the rule on small entities by comparing annualized compliance costs as a percentage of annual revenues1 for different small entity classifications. Chapter 3 of this Economic Analysis ( EA) provides data on the small entities potentially subject to the Stage 2 DBPR, and Chapter 6 discusses changes systems would need to make, as well as the likely costs. 2 Using information from these two chapters, along with additional information from the Safe Drinking Water Information System ( SDWIS), the Community Water System Survey ( CWSS), and the U. S. Census, EPA conducted a quantitative analysis of small system impacts resulting from the rule.

Measuring Significant Impacts To evaluate the impact that a small entity is expected to incur as a result of the rule, this analysis calculates the entity's annualized compliance costs as a percentage of sales ( for privately owned systems) or the entity's annualized compliance costs as a percentage of annual governmental revenue or expenditures ( for publicly owned systems). EPA guidance suggests using 1 percent as a threshold for determining significance, although additional factors may be considered. If compliance costs are less than 1 percent of sales or revenues, the regulation may in most cases be presumed to have no significant impact ( U. S. House of Representatives 1996). In addition, if no more than 100 systems experience economic impacts of 3 percent of their revenues or greater, than in most cases there is no significant impact.

Exhibits 8.1a and 8.1b present the data that EPA used for the screening analysis. Using this data, EPA calculated the annual compliance costs per system as a percentage of revenues or expenditures. These percentages are presented in Column D. The numbers of systems expected to incur costs of more than 1 and 3 percent of their revenues are presented in Columns F and H, respectively. The numbers of systems experiencing impacts of more than 1 and 3 percent of their revenues were compared to the total number of systems in each size category to calculate percentages, shown in Columns E and G. Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 4 Cost per System Cost per System per Revenue Percent of Systems Number of Systems Percent of Systems Number of Systems B C D = C/ B E F= A* E G H= A* G Small Governments 2,238 50% $ 2,396,249 $ 2,079 0.09% 1.67% 37 1.09% 24 < 100 384 $ 2,396,249 $ 35 0.00% 1.27% 5 0.00%  101 500 513 $ 2,396,249 $ 404 0.02% 1.53% 8 1.17% 6 501 1,000 283 $ 2,396,249 $ 2,698 0.11% 1.58% 4 1.46% 4 1,001 3,300 538 $ 2,396,249 $ 2,316 0.10% 1.79% 10 1.32% 7 3,301 10,000 519 $ 2,396,249 $ 2,079 0.09% 5.61% 29 3.71% 19 Small Businesses 1,835 41% $ 2,391,978 $ 2,079 0.09% 1.67% 31 1.09% 20 < 100 315 $ 2,391,978 $ 35 0.00% 1.27% 4 0.00%  101 500 421 $ 2,391,978 $ 404 0.02% 1.57% 7 1.17% 5 501 1,000 232 $ 2,391,978 $ 2,698 0.11% 1.58% 4 1.46% 3 1,001 3,300 441 $ 2,391,978 $ 2,316 0.10% 1.79% 8 1.32% 6 3,301 10,000 426 $ 2,391,978 $ 2,079 0.09% 5.61% 24 3.71% 16 Small Organizations 403 9% $ 4,446,165 $ 2,079 0.05% 1.27% 5 0.76% 3 < 100 69 $ 4,446,165 $ 35 0.00% 0.00%  0.00%  101 500 92 $ 4,446,165 $ 404 0.01% 1.44% 1 0.61% 1 501 1,000 51 $ 4,446,165 $ 2,698 0.06% 1.46% 1 0.75% 0 1,001 3,300 97 $ 4,446,165 $ 2,316 0.05% 1.32% 1 0.93% 1 3,301 10,000 94 $ 4,446,165 $ 2,079 0.05% 5.02% 5 3.71% 3 All Small Entities 4,476 100% $ 2,578,991 $ 2,079 0.08% 1.67% 75 1.09% 49 < 100 768 $ 2,578,991 $ 35 0.00% 1.27% 10 0.00%  101 500 1,027 $ 2,578,991 $ 404 0.02% 1.44% 15 1.17% 12 501 1,000 567 $ 2,578,991 $ 2,698 0.10% 1.58% 9 1.46% 8 1,001 3,300 1,075 $ 2,578,991 $ 2,316 0.09% 1.55% 17 1.32% 14 3,301 10,000 1,039 $ 2,578,991 $ 2,079 0.08% 5.61% 58 3.71% 39 Entity by System Size Number of Small Systems ( Percent) Average Annual Estimated Revenues1 per System ($) A Systems Experiencing Costs of > 3% of their Revenues Systems Experiencing Costs of > 1% of their Revenues Annualized 80th Percentile Compliance Cost ($) Exhibit 8.1a Annualized Compliance Cost as a Percentage of Revenues for All Small Entities Using Surface Water and GWUDI Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 5 Cost per System Cost per System per Revenue Percent of Systems Number of Systems Percent of Systems Number of Systems B C D = C/ B E F= A* E G H= A* G Small Governments 19,133 50% $ 2,396,249 $ 12 0.00% 0.28% 54 0.10% 19 < 100 5,641 $ 2,396,249 $ 11 0.00% 0.00%  0.00%  101 500 7,269 $ 2,396,249 $ 11 0.00% 0.13% 9 0.00%  501 1,000 2,403 $ 2,396,249 $ 390 0.02% 0.75% 18 0.07% 2 1,001 3,300 2,599 $ 2,396,249 $ 385 0.02% 1.26% 33 0.04% 1 3,301 10,000 1,221 $ 2,396,249 $ 388 0.02% 1.32% 16 1.32% 16 Small Businesses 15,689 41% $ 2,391,978 $ 12 0.00% 0.28% 44 0.10% 16 < 100 4,625 $ 2,391,978 $ 11 0.00% 0.00%  0.00%  101 500 5,960 $ 2,391,978 $ 11 0.00% 0.13% 8 0.00%  501 1,000 1,970 $ 2,391,978 $ 390 0.02% 0.75% 15 0.07% 1 1,001 3,300 2,131 $ 2,391,978 $ 385 0.02% 1.26% 27 0.04% 1 3,301 10,000 1,001 $ 2,391,978 $ 388 0.02% 1.32% 13 1.32% 13 Small Organizations 3,444 9% $ 4,446,165 $ 12 0.00% 0.10% 4 0.01% 0 < 100 1,015 $ 4,446,165 $ 11 0.00% 0.00%  0.00%  101 500 1,308 $ 4,446,165 $ 11 0.00% 0.00%  0.00%  501 1,000 433 $ 4,446,165 $ 390 0.01% 0.14% 1 0.00%  1,001 3,300 468 $ 4,446,165 $ 385 0.01% 0.04% 0 0.02% 0 3,301 10,000 220 $ 4,446,165 $ 388 0.01% 1.32% 3 0.04% 0 All Small Entities 38,265 100% $ 2,578,991 $ 12 0.00% 0.28% 109 0.10% 38 < 100 11,282 $ 2,578,991 $ 11 0.00% 0.00%  0.00%  101 500 14,537 $ 2,578,991 $ 11 0.00% 0.13% 19 0.00%  501 1,000 4,806 $ 2,578,991 $ 390 0.02% 0.14% 7 0.07% 3 1,001 3,300 5,198 $ 2,578,991 $ 385 0.01% 1.26% 66 0.04% 2 3,301 10,000 2,443 $ 2,578,991 $ 388 0.02% 1.32% 32 1.32% 32 A Entity by System Size Number of Small Systems ( Percent) Average Annual Estimated Revenues1 per System ($) Annualized 80th Percentile Compliance Cost ($) Systems Experiencing Costs of > 1% of their Revenues Systems Experiencing Costs of > 3% of their Revenues Exhibit 8.1b Annualized Compliance Cost as a Percentage of Revenues for All Small Entities Using Ground Water Only Note: Detail may not add due to independent rounding. 1 Revenue information was used whenever available. When it was not available, different measures, such as sales or annual operating expenditures, were used. Data were not available to differentiate revenue by system size.

Sources: ( A) Number of disinfecting community water systems ( CWSs) and nontransient noncommunity water systems ( NTNCWSs) serving fewer than 10,000 people from the system baseline in Exhibit 3.4, multiplied by 50%, 41%, and 9% to obtain number of small government, small businesses, and small organizations, respectively. ( B) Small Governments: Revenues from 1992 Census of Governments, GC92( 4) 4: Finances of Municipal and Township Governments, U. S. Dept. of Commerce, Bureau of the Census; price deflators from Table 7.11, Chain Type Quantity and Price Indexes for Government. All other price adjustments based on Consumer Price Index. ( C) Compliance costs were derived from the Stage 2 DBPR Cost Model ( USEPA 2003j). Costs represent present values annualized over 25 years at a 3 percent discount rate. ( E, G) Derived from the Stage 2 DBPR Cost Model ( USEPA 2003j).

The ratio of compliance cost to revenue was calculated using the 80th percentile of annualized ( at 3 percent) compliance costs and the average annual revenue. The average revenue for all was used for all systems and size categories because no information on the distribution of annual revenues was available. The resulting overall cost to revenue ratio for all small entity PWSs using surface water or GWUDI was 0.08 percent, and the ratio for small entity PWSs using ground water was 0 percent. The use of the 80th percentile compliance cost to determine the ratio implies that 80 percent of systems affected by the Stage 2 DBPR have lower compliance costs, and therefore, 80 percent of systems using surface water or GWUDI have ratios of even less than 0.08 percent. Thus, the threshold of 20 percent of systems having costs as percentages of revenues of 1 percent or more is not exceeded. Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 6 Further, EPA determined that a total of 75 small entity PWSs using surface water or GWUDI and 109 small entity PWSs using ground water, representing 1.67 and 0.28 percent of all small entity PWSs affected by the Stage 2 DBPR, respectively, will experience an impact of 1 percent or greater of average annual revenues. This is less than the criteria of 1,000 systems or 20 percent of systems used to determine significant impact. Within each class of small entity, the number of PWSs using surface water or GWUDI experiencing an impact of 1 percent or greater of average annual revenues ranges from 5 ( small organization PWSs) to 37 ( small government PWSs), which is 1.27 to 1.67 percent of the systems in each category. The number of PWSs using ground water experiencing an impact of 1 percent or greater of average annual revenues ranges from 4 ( small organization PWSs) to 54 ( small government PWSs), which is 0.10 to 0.28 percent of the systems in each category.

Further, the Agency has determined that 49 small entity PWSs using surface water or GWUDI and 38 small entity PWSs using ground water, representing 1.09 and 0.10 percent of all small entity PWSs subject to the Stage 2 DBPR, respectively, will experience an impact of 3 percent or greater of average annual revenues. This is less than the criterion of 100 systems used to determine significant impact at this cost level. Considering each class of small entity, the number of PWSs using surface water or GWUDI experiencing an impact of 3 percent or greater of average annual revenues ranges from 3 ( small organization PWS) to 24 ( small government PWSs), which is 0.76 to 1.09 percent of the systems in each category, respectively. The number of PWSs using ground water experiencing an impact of 3 percent or greater of average annual revenues ranges from 0 ( small organization PWSs) to 19 ( small government PWSs), which is 0.01 to 0.10 percent of the systems in each category.

Based on the information presented in Exhibits 8.1a and 8.1b, EPA certifies that the Stage 2 DBPR will not lead to significant economic impacts for a substantial number of small entities and, therefore, is not required by the RFA, as amended by SBREFA, to conduct an IRFA or a FRFA.

Obtaining Data on the Number of Small PWSs and Their Revenues or Expenditures EPA obtained data on the number of PWSs in each small entity category, which are presented in Column A of Exhibits 8.1a and 8.1b. The numbers of PWSs and their distribution among categories are derived from EPA's Baseline Handbook ( USEPA 2001h).

EPA also estimated the annual revenues or expenditures of small PWSs, presented in Column B of Exhibits 8.1a and 8.1b. PWS inventories, managed by EPA and other organizations, have traditionally been categorized by size and by the characteristics of the population served ( i. e., CWSs, NTNCWSs, and TNCWSs) rather than by NAICS code. Revenues by NAICS code are not readily applicable to EPA's categorization of systems. Therefore, alternative methods for determining revenue were developed, as discussed below.

The estimated revenues for small entities in Exhibits 8.1a and 8.1b are from the Bureau of the Census ( U. S. Department of Commerce 1992), the Safe Drinking Water Information System ( SDWIS), and additional data on independent privately owned CWSs, special districts, and authorities from the 1995 Community Water System Survey ( USEPA 1997c). Column A of Exhibits 8.1a and 8.1b shows the numbers of systems classified as small businesses, governments, and organizations, obtained using information from the Third Edition of the Baseline Handbook ( USEPA 2001h). These numbers were used to determine the weighted averages of estimated revenue. Column B shows the estimated revenues. 3Methodology recommended by Bruce E. Baker, State and Local Governments, Government Division, U. S. Bureau of Economic Analysis.

4The " other" category contains systems that do not yet have a specific function identified.

Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 7 Small government systems include municipal, county, state, federal, military, and special district systems. Data on revenue for townships and municipalities were obtained from the 1992 Census of Governments ( U. S. Department of Commerce 1992), converted to 2000 dollars by applying a conversion factor calculated from the national income and product account tables of the U. S. Bureau of Economic Analysis. 3 Specifically, the price deflators for 1992 and 2000 were obtained from Chain Type Price Indexes for State and Local Governments ( U. S. Department of Commerce 2002). The average revenue for all small governments with PWSs was calculated at $ 2,396,249.

Small business run PWSs in Exhibits 8.1a and 8.1b include both CWSs and NTNCWSs, such as privately owned CWSs, mobile home parks, country clubs, hotels, manufacturers, hospitals, and other establishments. For this analysis, all hospitals and day care centers are assumed to be businesses, as are 50 percent of systems classified as " other." 4 Estimated average revenue for the small businesses affected by the Stage 2 DBPR is $ 2,391,978.

Small organizations include primarily nonprofit NTNCWS such as schools and homeowners associations. The revenue estimates for small nonprofit organizations serving more than 500 people are actually higher than those for small businesses because the total number of such systems is small, and a large proportion of these organizations are schools and colleges with large budgets. This category also includes 50 percent of systems classified as " other." The average estimated revenue for small organizations affected by the Stage 2 DBPR is $ 4,446,165.

EPA also calculated the average estimated revenue for all small entity PWSs. This estimate is weighted to account for the number of small entity PWSs in each category ( government, business, and organization) affected by the Stage 2 DBPR. This overall average is $ 2,578,991.

Summary of the SBREFA Process The RFA, as amended by SBREFA, and Section 203 of UMRA require EPA to provide small governments with an opportunity for timely and meaningful participation in the regulatory development process. EPA provided stakeholders, including small governments, with several opportunities to provide input on the Stage 2 DBPR. For example, EPA conducted three outreach conference calls in Washington, DC to solicit feedback and information from the Small Entity Representatives ( SERs) on issues regarding Stage 2 DBPR impacts on small systems. SERs included small system operators, local government officials, and small nonprofit organizations.

During the first call, held on January 28, 2000, EPA presented an overview of the SDWA, as amended in 1996 and SBREFA. Issues and schedules for the Stage 2 DBPR rules were also discussed. The second call was held on February 25, 2000. EPA presented the stakeholders with an overview of the EPA regulatory development process and background on the development of the Stage 2 Microbial Disinfectants/ Disinfection Byproduct ( M DBP) Rules, particularly regarding health risks, issues/ options identified by the Federal Advisory Committees Act ( FACA) Committee, and Disinfection Byproduct ( DBP) and microbial occurrence in small systems. The third meeting was held on April 7, 2000. EPA Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 8 presented SERs with a cost estimate and an impact analysis for selected regulatory options. In addition, EPA presented SERs with schedules for the FACA and SBREFA processes.

These three outreach calls generated a wide range of information, issues, and technical input from SERs. To provide SERs with a foundation for commenting on these rules, EPA provided them with extensive background information. In general, the SERs were concerned about the impact of these proposed rules on small water systems ( because of their small staff and limited budgets), small systems' ability to acquire the technical and financial capability to implement requirements, maintaining the flexibility to tailor requirements to their needs, and limitations of small systems. The Agency used the feedback received during these meetings in developing the Stage 2 DBPR. EPA also mailed a draft version of the preamble to the attendees of these meetings.

The Agency convened a Small Business Advocacy Review ( SBAR) Panel, in accordance with the RFA, as amended by SBREFA, to address small entity concerns, including those of small local governments. EPA convened the SBAR Panel after completing the consultation meetings with SERs on the Stage 2 DBPR. Eight of the small entities represented small governments. SER's concerns were provided to the SBAR Panel when the Panel convened on April 25, 2000.

8.3 Small System Affordability Section 1415( e)( 1) of SDWA allows States/ Primacy Agencies to grant variances to small water systems ( i. e., those serving fewer than 10,000 people) in lieu of complying with a maximum contaminant level ( MCL) if EPA determines that no nationally affordable compliance technologies exist for that system size/ water quality combination. These variances may only be granted when EPA has identified a variance technology under Section 1412( b)( 15) for the contaminant, system size, and source water quality in question. The system must then install an EPA listed variance treatment technology ( § 1412( b)( 15)) that makes progress toward the MCL, if not necessarily reaching it. To list variance technologies, three showings must be made.

1) EPA must determine, on a national level, that there are no compliance technologies that are available and affordable for the given small system size category/ source water quality combination.

2) If there is no nationally affordable compliance technology, then EPA must identify a variance technology that may not reach the MCL, but that will allow small systems to make progress toward the MCL ( it must achieve the maximum reduction affordable). This technology must also be listed as a small system variance technology by EPA in order for small systems to be able to rely on it for regulatory purposes.

3) EPA must make a finding, on a national level, that the use of the variance technology would be protective of public health.

The State/ Primacy Agency must then make a site specific determination for each system as to whether the system can afford to meet the MCL based on affordability criteria developed by the State/ Primacy Agency. If the State/ Primacy Agency determines that compliance is not affordable for the system, it may grant a variance, but it must establish terms and conditions, as necessary, to ensure that the variance adequately protects human health. Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 9 The 1996 SDWA Amendments identify three categories of small PWSs that need to be addressed: ( 1) those serving a population of 3,301 to 10,000; ( 2) those serving a population of 501 to 3,300; and ( 3) those serving a population of 25 to 500. SDWA requires EPA to make determinations of available compliance technologies and, if needed, variance technologies for each size category. A compliance technology is a technology that is affordable and that achieves compliance with the MCL and/ or treatment technique. Compliance technologies can include point of entry ( POE) or point of use ( POU) treatment units. Variance technologies are specified only for those system size/ source water quality combinations for which there are no listed compliance technologies.

The following sections show how small system affordability was evaluated for the Stage 2 DBPR. The analysis is consistent with the methodology used in the document National Level Affordability Criteria Under the 1996 Amendments to the Safe Drinking Water Act ( USEPA 1998c) and the Variance Technology Findings for Contaminants Regulated Before 1996 ( USEPA 1998d). Because EPA determined that affordable compliance technologies are available for all small systems for the Stage 2 DBPR, EPA did not identify any variance technologies.

8.3.1 Affordability Threshold EPA discussed its draft national level affordability criteria in the August 6, 1998, Federal Register for the contaminants regulated before 1996. National level affordability criteria were developed by identifying an " affordability threshold" ( i. e., the total annual household water bill that would be considered affordable). In developing this threshold, EPA considered the percentage of median household income ( MHI) spent by an average household on comparable goods and services, including housing ( 28 percent), transportation ( 16 percent), food ( 12 percent), energy and fuels ( 3.3 percent), telephone ( 1.9 percent), water and other public services ( 0.7 percent), entertainment ( 4.4 percent), and alcohol and tobacco ( 1.5 percent). Another key factor that EPA used to select an affordability threshold was cost comparisons with other risk reduction activities for drinking water. Section 1412( b)( 4)( E)( ii) of SDWA identifies both POU and POE devices as compliance technologies for small systems. EPA examined the projected costs of these options, and also investigated the costs associated with supplying bottled water for drinking and cooking. The median income percentages associated with these riskreduction activities were more than 2.5 percent for POE devices and bottled water, and 2 percent for POU devices. Based on the foregoing analysis, EPA developed an affordability criterion of 2.5 percent of MHI, or approximately $ 800 ( 2000 dollars), for the affordability threshold ( USEPA 1998c).

The median water bill for households in each small system size category was subtracted from the affordability threshold to obtain the affordable level of expenditure per household for new treatment. This difference is referred to as the " available expenditure margin." Based on EPA's 1995 CWSS, median water bills were about $ 250 per year for small system customers. Thus, an average available expenditure margin of up to $ 550 per year was considered affordable for the contaminants regulated before 1996. However, the available expenditure margins are expected to change because water rates and MHI have increased. The 1995 MHI was updated to 2000 dollars using the Consumer Price Index ( CPI) ( BLS 2001a). The results are shown in Exhibit 8.2. The baseline for annual water bills ( median water bill from the 1995 CWSS) also increased to account for regulations promulgated after 1996, but before the Stage 2 DBPR is promulgated. 5 Costs from the Radionuclides Rule were not included in this analysis; however, they are assumed to be small. EPA is currently receiving input from a NDWAC Working Group on the national level affordability criteria. This process is expected to conclude in January 2003 with a report that will be sent to the NDWAC for their review before it is sent to EPA. EPA is reviewing a draft report published by the Science Advisory Board's Environmental Economics Advisory Committee on November 14, 2002 on its review of the national level affordability criteria. One of the charges given to both groups was to evaluate the process used by EPA to adjust the baseline water bills to account for costs attributable to regulations promulgated after 1996. The estimate presented in this EA was derived by spreading total annual or annualized costs for each rule ( at a 3 percent discount rate) over the total number of households by size category.

Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 10 MHI ( 2000) Pre 1996 Median Waterbills ( 2000) Adjusted Waterbills % MHI for Waterbills A B C D= C/ A E= A* 2.5% F= E C 0  500 35,148 $ 241 $ 290 $ 0.83% 879 $ 588 $ 501  3,300 30,893 $ 210 $ 230 $ 0.74% 772 $ 542 $ 3,301  10,000 31,559 $ 207 $ 219 $ 0.69% 789 $ 570 $ Affordability Threshold Available Expenditure Margin Baseline ( 2000$) Small System Available Expenditures Population Served For each rule promulgated after 1996, the total national costs for each small size category were averaged over the number of households within that size category. The mean costs per household for each size category were added to the national median annual household water bills. This was done for the following rules: the Arsenic Rule, Interim Enhanced Surface Water Treatment Rule ( IESWTR), Long Term 1 Enhanced Surface Water Treatment Rule ( LT1ESWTR), Stage 1 DBPR, Filter Backwash Recycling Rule, Consumer Confidence Rule, and Public Notification Rule. 5 As some rules affect ground and surface water systems disproportionately, the adjusted water bill is likely to be an over estimate of the true cost of the rules. However, the adjusted water bill may also under estimate costs, which were spread over the total number of households by size category, as opposed to only the households affected by each rule. Exhibit 8.2 presents the analysis before and after the baseline water bill was adjusted for regulations promulgated after 1996.

Exhibit 8.2 Derivation of Available Expenditure Margin Note: Detail may not add due to independent rounding. MHI= Median household income; HH= households; the baseline numbers and affordability threshold reflect the 25 500 population served category, but the average household cost for this category also contains those systems serving 0 25 people. The 0 25 system size category accounts for only 0.8% of all systems serving 0 500 people.

Sources: ( A) Variance Technology Findings for Contaminants Regulated Before 1996 ( USEPA 1998d), adjusted to 2000$ using the Consumer Price Index ( BLS 2001a). ( B) 1995 CWSS ( as reported in the document Variance Technology Findings for Contaminants Regulated Before 1996), adjusted to 2000$ using the Consumer Price Index ( BLS 2001a). ( C) Pre 1996 Median Water Bills ( 2000) from Column B plus mean HH costs for drinking water rules since 1996, except Radionuclides Rule. Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 11 Median Average Daily Flow Design Flow a b c d = 1.15* c 25 500 0.015 0.058 72 83 501 3,300 0.17 0.5 74 85 3,301 10,000 0.7 1.8 77 89 System Size ( Population Served) Median HH Consumption Rates ( kgal/ yr) Flows ( mgd) HH Consumption Rate Used for Costing 8.3.2 Affordable Compliance Technologies Section 1412( b)( 4)( E)( ii) of SDWA, as amended in 1996, requires EPA to list technologies that achieve compliance with MCLs established under the Act that are affordable and applicable to typical small drinking water systems. Owners and operators may choose any technology or technique that best suits their conditions, as long as the MCL is met.

This section presents household costs ($ per household per year) for various technologies for comparison to the available expenditure margin in Exhibit 8.2. The methodology for generating household cost estimates is explained in detail in section 6.1.1. In general, the analysis in this section followed the methodology in section 6.1.1; however, some inputs for household cost calculations in this section are different and, in some cases, are conservatively high compared to data used to generate household cost distributions in Chapter 6. A conservatively high estimate of household costs is used to more accurately reflect the high end variability in household costs. This allows affordability of the Stage 2 DBPR to be more confidently assessed across the range of all affected small systems.

The size categories specified in SDWA for affordable technology determinations are different than the nine standard size categories used in the majority of this Economic Analysis, and subsequently, mean design and average daily flows for each category are different. The Variance Technology Findings Document ( USEPA 1998d) describes in detail the derivation of design and average flows ( values are shown in Exhibit 8.3).

Exhibit 8.3 Affordability Analysis Inputs Source: a, b, and c: Variance Technology Findings for Contaminants Regulated Before 1996 ( USEPA 1998d). d. Consumption rates were adjusted upward by 15 percent to account for distribution system leaks.

For each technology, unit treatment costs ($ per 1,000 gallons) are estimated using the flow rates shown in Exhibit 8.3 and technology unit costs in Appendix I ( see Exhibit I. 27 for details on the derivation of unit treatment costs). Capital costs were annualized using a 7 percent discount rate rather than the costs of capital rates used to generate the distribution of household costs in Chapter 6. The unit treatment costs ($ per 1,000 gallons) were multiplied by annual household consumption rates to determine the annual household cost increase ($ per household) for each treatment technology. Annual consumption rates are shown in Exhibit 8.3 and represent median yearly consumption rates based on results from the 1995 Community Water System Survey ( CWSS). ( Note that mean yearly household consumption rates are shown in Exhibit 6.2 and are used for household cost estimates in Chapter 6). The values shown in 6Although the size categories specified by SDWA for the affordability analysis does not specifically cover systems serving fewer than 25 people ( per SDWA), these systems are included in all other analyses in this EA and are accounted for in Exhibit 8.4c. Thus, the estimate of the number of systems and households experiencing cost increases in Exhibit 8.4c is conservatively high.

7 Source: A total fo 1,535 small plants are predicted to add treatment, derived from Exhibit 6.4 Economic Analysis for the Stage 2 DBPR Proposal July 2003 8 12 Exhibit 8.3 were adjusted upward by 15 percent to account for water lost in the distribution system due to leaks.