Successful Water Reuse Programs

1. Successful Water Reuse Programs Chris Buls Vice President of Finance American Water National Association of Regulatory Utility Commissioner Staff Subcommittee on Accounting and Finance October 14, 2008

2. Forward Looking Statement Certain matters discussed in this presentation are forward-looking statements. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives, estimates or goals are also forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements.

3. American Water is the largest investor-owned water and wastewater services provider in North America, headquartered in Voorhees, NJ. American Water serves approximately 15 million people in 32 states and Canada, and employs more than 7,000 water professionals. American Water owns or operates over 870 water treatment plants & wells and 270 wastewater facilities. The company conducts over one million water quality tests each year for over 100 regulated parameters, and up to 50 types of water-related tests each day. www.amwater.com American Water reuses nearly 2 billion gallons per year

4. Reuse of Treated Wastewater • Water reuse in the U.S. is a large and growing practice • Nationally, an estimated 1.7 billion gallons per day is reused. • Reclaimed water use on a volume basis is growing an estimated 15% per year. • In 2002, Florida reclaimed 584 mgd. California ranked a close second with 525 mgd used every day. • Florida has an official goal of reclaiming 1 billion gallon per day by the year 2010.

5. Types of Reuse • Urban Reuse • Irrigation of parks, highway medians, golf courses, etc. • Commercial uses such as vehicle washing, window washing, etc. • Fire protection • Dust control and concrete production • Toilet and urinal flushing • Groundwater recharge • Augmentation of potable supplies • Industrial Reuse • Cooling water • Boiler make-up water • Industrial process water • Agricultural reuse • Environmental and recreational • To create, restore, and/or enhance wetlands • Recreational and aesthetic impoundments Reclaimed wastewater is an increasingly important source of supply

6. Current Regulations & Guidelines • Currently there are no federal regulations directly governing water reuse practices. • 25 states have regulations regarding the use of reclaimed water • 16 states have guidelines or design standards • 9 states have no regulations

7. Solaire, Battery Park Example: Membrane Bioreactors • American Water operates nearly 30 membrane bioreactors (MBRs), to treat wastewater and provide the potential for water reuse. • MBR Advantages: - Increased Reliability - High Quality Effluent - Free of Suspended Solids - Increased Pathogen Removal - Easily Automated - Reduced sludge - Reduced Footprint • American Water has experience with different membrane configurations (flat sheet and immersed membranes) and cost models. Wrentham Mall New Jersey Antham Foxboro

8. What is a “Membrane”? • In essence it is a sieve that strains out undesirable particles. • It can come in either sheets or fibers. • The membrane has tiny holes; water molecules pass through but larger particles are kept out. • Some membranes are designed to trap larger particles such as bacteria, protozoa and “suspended solids” • Others stop even the tiniest particles such as salts, viruses and pharmaceuticals.

9. Solaire in Building Recycling Battery Park City, NY • 293 Unit Building • 25,000 GPD Reclaimed Water • Treatment Plant Located in the Basement of a Luxury Apartment Building • Gold LEED Certified

10. Beneficial Reuse: Solaire • Recycles up to 25,000 GPD: • 9,000 GPD toilet flush water • 11,500 GPD cooling tower make-up • 6,000 GPD landscape irrigation • Advanced membrane bioreactor system: • 35% less overall energy consumption • 65% less energy at peak demand • 50% less potable water used than other high- rise buildings of same size • Rainwater collection system irrigates 10,000 square feet of rooftop gardens Treated Effluent Storage Tanks in Basement Equipment Room

11. MBR Technology

12. Anthem Arizona • Initial Service Date: 1999 • Design Capacity: 7 million GPD (water) 3 million GPD (wastewater) • Population Served: 13,000 • Treatment: • Prescreening • MBR • Anoxic • Aerobic • ZenoGem membranes • UV disinfection • Chlorine residual

13. Orange County Groundwater Replenishment System • Treats 70 MGD wastewater to a vey high level using microfiltration, reverse osmosis membranes and ultraviolet and hydrogen peroxide oxidation • Replenish the groundwater basin, to protect from seawater intrusion, and for industrial uses • Reduces the amount of wastewater released into the ocean and delays the need for another ocean outfall • Decreases reliance on imported water from northern California and the Colorado River • Helps reduce mineral build up in the groundwater. • Total program cost of $480.8 million • Anticipated Operating costs of $29 million a year

14. Economics of Beneficial Reuse • Upfront capital costs can be quite steep • Handling “Environmental” benefits is difficult • Comparative pricing versus cost of alternate supplies is not always valid • Which customer pays and benefits; Water, Wastewater or Both? • One size does not fit all, work with your local water and waste water utilities to create an environment for success

15. Solaire, Battery Park Conclusions Wrentham Mall • Wastewater reuse is an increasingly important element of the water cycle. • Drivers for reuse include lack of alternative water supplies, groundwater replenishment, barrier to saltwater intrusion, pollution management • Lack of federal regulations and varied applications makes defining reuse difficult • MBR technology perfect for reuse: compact, effective, automated • Pricing of reuse water is difficult – need to account for all the environmental benefits and the cost of the alternative supplies. New Jersey Atham Foxboro