By Alyse Greenberg
As water utilities work to upgrade aging infrastructure, address changes in water supply and demand, and meet regulatory requirements, many of the increased costs are passed through to customers. Increased rates mean that more utility customers may face difficulties in paying their bills. This can lead to increased arrearages, late payments, disconnection notices, and service terminations. To address these challenges and help their lowest income customers maintain access to water services, utilities are exploring the feasibility of customer assistance programs (CAPs).
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Recognizing this need, The Water Research Foundation partnered with other water sector organizations to produce Navigating Legal Pathways to Rate-Funded Customer Assistance Programs: A Guide for Water and Wastewater Utilities. The project includes participation from both the former Water Environment & Reuse Foundation and Water Research Foundation, allowing a perspective from the wastewater and drinking water industries. Those organizations merged effective January 2017 to form The Water Research Foundation.
This report, published in 2017, outlines how the legal framework in different states in the U.S. has shaped CAPs or limited their implementation. Specific emphasis was placed on CAPs that are funded through customer rate revenue. There are several types of CPAs defined by the U.S. Environmental Protection Agency (EPA) such as bill discounts, flexible terms, lifeline rate, temporary assistance and water efficiency. These are each designed to help low-income customers find a rate structure that they can meet.
As utilities design and implement CAPs, utilities must navigate a complex, confusing, and often ambiguous legal framework. In the U.S., regulations vary considerably from state to state, resulting in differing opportunities and challenges for utilities based on location. There is a need for guidance on legal issues regarding CAPs, especially how they can be funded, and for examples of innovative CAP implementation. Currently, only a few states have laws that clearly address the authority to establish CAPs from rate revenues. Some utilities are able to design affordability programs in ways that others aren’t able to as a result of different rules and regulations on different types of utilities. Some states have successfully justified CAP programs by demonstrating that these programs reduce costs from shutoff to service, bad debt, and other administrative costs. However, there are options for states whose laws do not address CAPs:
- Utilities can introduce language at the state level that address affordability, and work to adopt legal language that allows for rate-funded CAPs at a local-level.
- Utilities can demonstrate why their CAPs conform to existing statutes or design programs to overcome any limits.
- Utilities can creates CAPs without using rate revenue, such as getting funding through partnerships, charitable donations, or voluntary rate round-ups.
These options can help private and government-owned utilities get around regulatory language that may not encompass affordability programs and combat the potential concerns over limiting authority concerns to establish CAPs.
Affordability comparison of Atlanta, Georgia, and the U.S. Source: UNC Environmental Finance Center, 2017.
Navigating Legal Pathways includes nine case studies that demonstrate how utilities have implemented these three options to address regulatory challenges. Each of these utilities faced unique challenges and opportunities as it assessed the feasibility of creating a customer assistance program. For example, Atlanta, GA has among the highest water and wastewater rates in the nation. To accommodate their low-income customers, the City of Atlanta Department of Watershed Management implemented the “Care and Conserve Program” which provides financial assistance and plumbing repairs. At the program’s inception, rate revenues were not a source of funding for the program due the Gratuities Clause language and the concern of the ability of water and wastewater facilities to fund low-income CAPs. The program used private donations, grants, and later used royalties from the service line warranty program and customer donations. Since then, the language in the city code began to include “water and sewer revenues of the city’s drinking water and wastewater system” to fund Care and Conserve.
Number of U.S. states authorized (or not) to use rates revenue for CAPS. Source: UNC Environmental Finance Center, 2017.
The new ordinance has demonstrated that assisting low-income customers provides a “direct and substantial benefit” by retaining customers and reducing bad debt. The program includes water loss adjustments for leak vouchers up to $3000 and includes temporary assistance of bill payment up to $1000. Additionally, Care and Conserve has improved the city’s ability to operate revenue-producing utilities, and it is estimated the financial assistance collects $14,000 of customer revenue for every $42,000 of bill assistance issues on past due Care and Conserve accounts. As a result, in 2016, $1 million was added to Care and Conserve from drinking water and wastewater revenues. This program has successfully demonstrated how affordability programs can beneficially serve the community and provide water to all customers. The other studied facilities include California Water Service, SUEZ Water, DC Water, Great Lakes Water Authority and more.
In addition to the case studies and report, the project developed a website with further resources, accessible on the Environmental Finance Center website at efc.sog.unc.edu. The website contains an interactive map providing the details for each state and case study; an affordability tool, which uses various types of Census data to help assess the level of affordability in a specific community; and various affordability presentations. These project resources serve as a potential roadmap for utilities interested in establishing more ambitious CAPs; CAPs that are funded through customer rates.
Alyse Greenberg is an editorial assistant for the Water Research Foundation. She has been with the Water Research Foundation since 2016, where she reviews and publishes research reports, and writes and copyedits a variety of other materials. Alyse has worked in water for more than 15 years, primarily in watershed management in New Jersey. She obtained her B.A. in Biological Sciences from the University of Delaware and a certificate in Marketing and Communications from the Nonprofit Center at La Salle University.
