Affordability: Two Sides of the Same Coin

Abstract

The concept of water service affordability is a complex but unquestionably important topic for water systems and the communities they serve. There are numerous ways to measure what affordability is (too big of an issue for this column) and a variety of approaches to address it.

Drinking water, wastewater, stormwater, reuse, and other water services have been around for a long time, as have socioeconomic challenges including poverty and other hardships that have made it difficult for some customers to afford service. So why has affordability become such a big policy issue now? There is no single answer, but rather a combination of several factors coming together, which in aggregate have appropriately focused a lot of attention on this important issue.

On one side of the coin, there is no question that water systems will need to raise a lot of revenue. Infrastructure renewal and rehabilitation, inflation, and workforce concerns will cost hundreds of billions of dollars to US water systems. Additional drivers include the costs of meeting the updated Lead and Copper Rules, addressing per- and polyfluoroalkyl substances (commonly known as PFAS), adapting to climate change and preparing for extreme events, addressing cybersecurity, and a host of others. The substantial majority of costs borne by water systems are paid for through local rates and charges (or more simply, from payments of customers’ bills), and although some federal and state infrastructure assistance is available, it is limited.

Without the necessary financial resources (primarily derived locally), water systems simply can’t meet these challenges while continuing to deliver safe drinking water and provide clean water services. A challenge of affordability, in which some customers don’t pay or struggle to pay, harms water systems, depriving them of needed revenue and increasing administrative costs of collection. As noted in the AWWA Policy Statement on Financing, Accounting and Rates, the goal is full cost pricing that ensures “long-term financial integrity of the utility to provide safe, high quality, and reliable service to customers.”

The other side of the coin is equally compelling: water is essential to all aspects of life, and everyone needs it. Roughly 15% of people in United States get water from private wells, but most of the rest get it from public water systems. There's a compelling need for water to be affordable for health, safety, sanitary, and other reasons, with all these potentially being harmed when water is not affordable.

Still, water is typically a very small portion of a typical family's budget, even in a low-income household. In many places, charging one customer differently from others on the basis of income is simply not legal. The water sector can’t solve poverty and other economic challenges on its own. Addressing challenges with the costs of housing, food, medicine, and energy will inherently make water more affordable through reducing the squeeze on household budgets. But unlike all those other needs, water does not have any permanent federal assistance program to help meet this challenge for its low-income customers.

A recent successful program run through the US Department of Health and Human Services was known as the Low Income Household Water Assistance Program, modeled on the long-standing energy assistance program by a similar name. This program was stood up quickly after being authorized into law in December 2020, but as of October 2023, the program had run out of funds, and Congress has not provided more. Two recent Congressional bills, S. 3830, introduced by Sen. Alex Padilla (D-CA); and H.R 8032, introduced by Reps. Eric Sorenson (D-IL), Ori Chavez-DeRemer (D-OR), Kim Schrier (D-WA), and Jennifer Gonzalez Colon (R-PR), would establish a permanent low-income water assistance program if passed into law. The US Environmental Protection Agency is undertaking a study required by Section 50108 of the Infrastructure Investment and Jobs Act to determine the total need for affordability assistance.

Recognizing this challenge and opportunity, AWWA and several other water associations came together to study options and create recommendations. This inter-association group has been working to find a path to establish a permanent low-income water assistance program and to seek additional funds for the temporary program until a permanent program is established. Although addressing both sides of the affordability coin will require many actions, a permanent federal low-income assistance program like those recommended in the inter-association report would be an essential, meaningful, and large step toward that goal.