The Conundrum of Water Affordability : What's at Stake

  In January, the Guardian newspaper published an article titled "California Households Owe $1bn in Water Bills as Affordability Crisis Worsens". For February, the Water Finance and Management journal had as its monthly topic, The Conundrum of Water Affordability. In November, after the inauguration of President Biden, the American Water Works Association sent a letter to the president with these requests:

"(1) Funding to help low income customers pay their water bills during the current pandemic emergency, (2) Funding to help those local water utilities that have suffered significant revenue losses due to the pandemic, so that they can continue to operate and provide safe water services; and (3) A definitive limitation to any mandated moratorium on disconnection of water service for non-payment, if such as moratorium is included in a legislative package" (p. 14). 

The letter also included provisions for increased infrastructure investment in WIFIA and SRF programs.   Historically, water utilities had financed water project in the following manner, according to a Water and Finance Management article by Lancaster and Cason: user fees and debt. Federal assistance has decreased from the time of the passage of the Clean Water Act in 1971, from 30 percent of infrastructure spending to less than 5 percent in 2020. Coupled with this decrease in federal support is the increase in the cost of compliance to federal rules. 

Given these circumstances, one can understand why the United States water industry has circulated the messages that water has a cost and the country has not arrived at the acceptance of water as a fundamental human right. With the current realities of aging water infrastructure and governmental compliance costs, utilities grapple with setting sustainable rates. 

When examining the issue of affordability, a utility must balance what rate payer can afford with infrastructure, distribution, and maintenance costs. In the article, How Will Water Affordability Be Defined for the Next 20 Years, Greg Baird clarified how many utilities currently determine water affordability: "the average water and sewer bill with a combined value over 4.0 percent or 4.5 percent median household income (%MHI) is considered 'unaffordable' (p. 22). This conforms to the 1997 EPA Financial Capability Assessment (FCA) and Schedule Development that designated a "2 percent of MHI benchmark intended to measure community-level affordability" (p. 22). Despite constant prodding between 1997 and 2016, in 2020, after obtaining direction from Congress, the EPA initiated action to update the FCA. Stakeholders continue to voice their recommendations on how utilities define affordability. 

The pandemic has heightened the issue of affordability. The Circle of Blue study, highlighted in the Guardian and repeated in a Water and Finance Management article, publicized the inability of many Californians and others to pay their water bills. According to the article, "more than 1.5 million households in 12 major U.S. cities with publicly operated water utilities owe $1.1 billion in past due water bills" (p.20). In California, the governor issued a moratorium on water shut-offs and sought water payment assistance. 

The recent Covid relief bill out of Congress will indicated how far the government will help alleviate the affordability issue. 

Bui, A., Orth, M, Allender, B. (February, 2021). The Conundrum of Water Affordability: What's at Stake. pp. 18-21. 

Lancaster, I. & Cason, K. October, 2020. Dealing with the Water/Wastewater funding Gap: Considerations for Today & Tomorrow. pp. 30-32

https://www.theguardian.com/us-news/2021/jan/19/california-water-bills-affordability-debt-crisis

https://waterfm.com/

https://waterfm.com/heres-what-the-water-sector-wants-from-congress-president-elect-biden/

https://waterfm.com/how-will-water-affordability-be-defined-for-the-next-20-years/