Affordability: A multifaceted issue
Everybody needs water to ensure their health and well-being. The majority of people in this country receive water from a central system of some type and size and these systems require funding to provide the service. Increasingly, the cost of installing, maintaining, and operating the necessary infrastructure has risen dramatically. These costs must be passed on to system users, generally in the form of user fees, in order for the system to continue to operate. As costs increase, it has become more difficult for some customers to afford the bills. The inability to pay is an issue for both the customer and the utility. Customers may be forced to make difficult choices between paying for water and paying for other essential needs (e.g., food, shelter, medicines) while may be unable to manage their water systems if a large percentage of customers are unable to pay. This “affordability” dilemma was the subject of a recent EPA report, published in December 2024, titled, “Water Affordability Needs Assessment: Report to Congress.” It was prepared in response to a directive in the Infrastructure Investment and Jobs Act (IIJA) Section 50108.
The 2024 EPA Report on Affordability
The EPA report cites statistics that show between 12 and 19 million households may lack affordable water service and the cost to assist these consumers may be between $5 and $8.8 billion dollars. The EPA report delved into how systems and customers might be impacted by affordability concerns and potential options to address the issue. While much can be said about affordability and its causes and how that damages both systems and their customers, the main focus in the EPA report is potential solutions. (For anyone wanting to dive deeper into the basic issues around affordability, Section 2 of the EPA report has a good summary of the issue and describes applicable research studies.) The report acknowledges that there is no single solution to affordability and offers potential options that could be implemented at the federal, state, and/or local level in three broad categories: 1) establishing a federal water affordability assistance program, 2) increasing education, outreach, and knowledge around solutions to address affordability, and 3) finding ways to reduce water infrastructure capital and operating costs.
While much can be said about affordability and its causes and how that damages both systems and their customers, the focus here will be on the potential solutions. One proposed solution is the establishment of a federal water assistance program of some type. While there is a need for a nationwide pilot program to provide funding to all households facing the inability to pay their water bills, it may be difficult to establish one immediately, especially given the overall need of approximately $5 to $9 billion.
Solution 1: Establish a federal water affordability assistance program
EPA suggests starting with a pilot program to fund eight pilots of utilities of differing sizes and facing various challenges to demonstrate the effectiveness (or not) of a national water affordability program. The funding level for this type of program is around $115 to $185 million. The total amount needed would depend on enrollment rate of customers. One issue to be addressed is how to reach particularly vulnerable customers that may have difficulty enrolling or those, such as renters, who do not receive a bill in their name. Some of the funds may need to be dedicated to individuals who reach out to customers and inform them of the programs and help them apply. Potentially, there could also be automatic enrollment for customers who are on other forms of assistance. The information from the pilots would provide valuable information regarding the effectiveness of a federal program and whether this approach is favorable to other options to address affordability or could be used in addition to other options.
Solution 2: Increasing education, outreach, and knowledge around solutions to address affordability
Even though affordability has been an issue for a long time, there is still a lack of knowledge of all the opportunities that can be used to help address it. There is a need to increase education, outreach, and knowledge around potential solutions. This approach could include, according to the EPA Report:
- webinars
- workshops
- promoting success stories and best practices
- encouraging states to promote and support asset management practices within utilities
- promoting regional solutions including partnerships and consolidations
- encouraging and supporting the evaluation of true cost pricing, rates, rate structures, and approaches to help low-income residents.
Additionally, it is important to understand which utility-level customer assistance programs have been successful and share that information widely across utilities to help them choose programs that will work for them.
Solution 3: Finding ways to reduce water infrastructure capital and operating costs
Costs have risen dramatically for installing new infrastructure in water systems and for operating and maintaining the infrastructure that is already in place. While the other two strategies are focused on the costs for consumers, the last strategy – increasing ways to reduce water infrastructure capital and operating costs – is focused on the utility side. One part of this solution is to increase the use of the state revolving funds that provide low-cost financing for water facilities. These funds also provide additional subsidy for disadvantaged communities. These programs may, in some cases, be unknown to eligible applicants so additional outreach to ensure that all entities know about the program and its potential advantages is important. The Environmental Financial Advisory Board (EFAB) also looked at this issue and made several recommendations regarding how costs may be reduced for infrastructure. A blog on this report that discusses the options can be accessed here. There is also a need to continue research into both sides of the equation – how to help reduce costs for water utilities and how affordability is impacting various categories of customers.
Final thoughts
The three main categories of solutions: federal water assistance programs, increasing education, outreach, and knowledge around affordability, and reducing water infrastructure capital and operating costs, may help address the issue of affordability. However, this is a large and growing problem that is multi-faceted and it will take a concerted effort by the entire water sector (federal, state, and local governments, non-governmental organizations, philanthropic entities, educational institutions, and the private sector) to make meaningful progress.