Cultivating effective utility-regulator relationships around innovation: Lessons from four case studies in the U.S. municipal wastewater sector

Regulation is critical for protecting public and environmental health but is often perceived as
a barrier to innovation in the U.S. municipal wastewater sector. Before a wastewater utility
can implement a new technology, it must navigate applicable regulatory processes and
obtain necessary approvals, often including obtaining an updated wastewater discharge
permit. While all regulatory processes involve interactions between regulators and regulated
entities, innovative projects may require them to engage in new ways, heightening the
importance of the relationships between them. We investigated four case studies to examine
how regulatory relationships affect municipal wastewater utilities’ efforts to adopt new
technologies. Through cross-case analysis, we identified five interconnected characteristics
of regulatory relationships that appear to facilitate innovation, and whose absence could
impede it: clarity, capacity building, continuity, trust, and bounded flexibility. Appropriately
applied bounded flexibility—such as using regulatory discretion to tailor permits to reflect
the particular risks, benefits, and information needs of the technology at issue—may be key
for enabling socially and environmentally beneficial innovation. Yet all five characteristics
play important and mutually reinforcing roles in supporting innovation. By cultivating these
characteristics in their relationships, both utilities and regulators can take responsibility for
enabling appropriate implementation of innovative technologies. However, some parties,
particularly small and under-resourced utilities, may find cultivating these characteristics difficult.
Therefore, sector-wide support for effective utility-regulator relationships, including
coordinated regulatory and funding programs targeted to meet small utilities’ needs, may be
needed to bring beneficial innovation within reach for many wastewater utilities and the communities
they serve.