US water utilities are contending with a convergence of familiar and emerging pressures, from ageing infrastructure and constrained budgets to surging industrial demand and an expanding regulatory agenda, according to the Black & Veatch 2026 Water Report. The report, based on a survey of more than 600 water, wastewater and stormwater professionals across the United States, finds a sector adapting under strain but struggling to fund solutions at the pace the challenges require.
Ageing infrastructure remains the top concern, cited by 66% of respondents. But the nature of the pressure is shifting. Costs have overtaken regulatory uncertainty as the dominant barrier to action, industrial demand from data centres is straining systems not built for it, and a widening gap between data collection and actual decision-making is leaving digital investment underused.
The funding problem
Forty-five percent of respondents expect current funding to fall short of infrastructure needs over the next decade. In response, utilities are pursuing a familiar toolkit: state revolving funds, municipal bonds and federal grants. But each comes with its own constraints. State revolving fund programmes face rising competition as more utilities chase a fixed pool of subsidised financing. Grant applications demand administrative capacity that smaller utilities often do not have.
Where the report breaks new ground is in charting a shift in how utilities think about rates. More are moving away from blanket cost-of-living-linked increases and instead aligning rate adjustments with the real cost of their capital programmes. Some are now pursuing double-digit revenue increases where rates have historically lagged true system costs. That conversation is politically fraught. When large, irregular rate increases replace steady annual ones, public resistance tends to harden, and the outcome can diverge sharply from what financial analysis would recommend.
Capital prioritisation has become the central discipline. Regulatory-driven projects, such as consent decree work and lead service line replacement, advance first because they are not optional. Behind them come projects tied to system reliability. What gets pushed back are the important-but-not-urgent investments, which accumulate quietly until they can no longer wait.
The PFAS pressure
Among the regulated risks demanding capital now, per- and polyfluoroalkyl substances, commonly known as PFAS or forever chemicals, are the most pressing. Fifty-one percent of respondents identify PFAS drinking water regulations as the greatest source of planning uncertainty. With public water systems required to act by 2029 if PFAS levels exceed maximum contaminant limits, 35% of drinking water providers are already planning or implementing treatment. Of those, 61% are pursuing main treatment plant retrofits.
The telling shift this year is that financial constraint, cited by 31% of respondents, has overtaken regulatory uncertainty, cited by 25%, as the primary barrier to addressing PFAS. Only 24% of utilities say they are confident of meeting their regulatory obligations without substantial rate increases.
Wastewater systems are now fully inside this challenge. Eighty percent of respondents with wastewater operations report testing influent, effluent or biosolids for PFAS. What began as a drinking water issue has become a system-wide one.
Microplastics, meanwhile, are hovering at the edge of regulatory attention without yet prompting concerted action. Fifty-nine percent of respondents report no current plans for microplastics management. In April 2026, the US Environmental Protection Agency added microplastics to its draft Sixth Contaminant Candidate List, a signal that monitoring requirements may follow in the coming years. For now, most utilities are preserving capital for more immediate and better-defined compliance obligations.
Data centres change the industrial water equation
Perhaps the sharpest finding in this year's report concerns industrial demand. Survey respondents point to general manufacturing and data centres as the two dominant sources of growing industrial water use, at 60% and 57% respectively. The report notes that data centre influence on public water utilities was minimal before 2022. That is no longer the case.
The scale of demand that data centres can generate is, by water utility standards, extraordinary. A food and beverage facility might require around 200,000 gallons per day; a single large data centre can require multiples of that. Nearly a third of respondents, 32%, report that their utility has already experienced capacity constraints or operational stress attributable primarily to high-volume industrial customers in the past 12 months.
The confidence gap this creates is measurable and widening. The share of utilities reporting that they can provide both water supply and system capacity to a large incoming industrial customer has fallen from 73% in 2024 to 60% in 2026. That 13-percentage-point drop in two years is significant for an industry accustomed to planning on 20 to 30-year horizons.
Utilities are beginning to respond with more structured approaches. Seventy-two percent now factor industrial water needs into their long-term resource planning, a meaningful shift from the previous practice of folding industrial demand in as a general percentage of total use. Some are also revising industrial rate structures, with 37% planning changes to account for the disproportionate pressure that data centre demand patterns place on system capacity.
The digital gap
The report's findings on digital water tell a story of investment outpacing implementation. Fifty-nine percent of utilities say they have a data or digital strategy. Seventy percent say they are collecting sufficient data. But only 19% say they are leveraging that data effectively. Fifty-one percent collect sufficient data but do not use it well.
The barriers are largely human and organisational rather than technological. Among utilities that are not achieving their digital strategy objectives, 71% cite staffing as the primary constraint. Legacy systems and IT infrastructure follow. Risk-based asset platforms, digital twins and AI-enabled controls are moving from concept to deployment, but slowly. Respondents rate their expertise in data science and AI at 1.78 on a scale of zero to five, and digital twins at 1.69.
The workforce dimension compounds everything. As experienced operators retire, utilities lose institutional knowledge that has historically guided how systems are run. Digital tools can in principle make good operational judgment more repeatable. In practice, that transition depends on training, management buy-in and sustained investment, all of which are constrained by the same funding pressures that dominate every other section of the report.
Resilience in motion
Running through all of the report's chapters is a concept that has moved from aspiration to operational priority: resilience. Sustainability has become a stated strategic focus for 79% of respondents, up from 58% the year before, and 60% expect to achieve their sustainability goals within 10 years. Resilience plans that previously existed as documents are, the report suggests, increasingly being translated into funded infrastructure programmes.
Collaborative project delivery is one measure of that shift. The number of alternative delivery projects in the water sector has tripled from 196 in early 2024 to 587 by late 2025, with investment growing from 19.4 billion dollars to 47.4 billion dollars across 43 states. More than half of respondents expect to increase their use of collaborative delivery models over the next three years.
The report's final message is neither pessimistic nor complacent. US water utilities understand their risks with considerable clarity. What separates the ones making progress from those stuck in place, the authors argue, is not awareness but the capacity to convert that awareness into sequenced, sustained capital investment, coordinated across engineering, finance and operations, and insulated from the disruptions of political cycles. That is the work now underway.
