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Ensuring Drinking Water Affordability: Challenges and Opportunities in Local and
State Policy Making
October 19, 2017
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Luskin Center for Innovation
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Dedicated to enhancing the ability of governments and other organizations to provide environmental programs and services in fair, effective, and financially sustainable ways through:• Applied Research • Teaching and Outreach• Program Design and
Evaluation
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Paying for water and wastewater services in the United States• Highly fragmented and decentralized with local
government, non-profit, and for-profit service providers
• Federal legislation drives most environmental regulations/costs
• Federal government incentivizes private lending through interest tax exemptions and provides project level funding assistance to utilities through variety of federal programs
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Paying for water and wastewater services in the United States (Continued)• State governments establishes economic
regulatory framework– In most states, government/non-profit rate authority at
local level and for-profit rate authority under state regulatory commissions
• Variation in state government involvement in project level funding
• Customer assistance programs primarily implemented at utility level with very limited federal or state involvement
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Outline of Session
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• Background and Motivation: Why are we talking about drinking water affordability?
• Existing limitations and best practices by utilities to addressing affordability
• The state affordability experiment in California• Question and Answer
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Focus on customer-level affordability
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• Financial capability: the ability of the utility to pay for the capital and operations costs associated with providing safe and reliable service
• Affordability: the ability of individual customers to pay for services that are adequate to meet their basic needs
• These two abilities are related but we focus on the latter
Credit: (Davis and Teodoro, 2017)
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Debate about affordability metrics
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Why help households pay for water service?
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• #1- Health and livelihood impacts
• #2- Rapidly-rising retail cost of drinking water
• #3- Real stagnating incomes
• #4- Comparable programs exist in other sectors
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#1- Health and livelihood impacts
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• Affordable water consumption is a public health priority
• The retail cost of water has and will continue to rise
• If water is unaffordable, low-income households either: Consume less water than is healthy and/or Consume less of other vital services to pay for waterExperience adverse budgeting impacts
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#2- Rising retail costs
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#2- Highly unequal retail costs
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#2- Federal subsidies are falling
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# 3- Real incomes are stagnating
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• 200% of the Federal Poverty Line for a 4-person household is currently $48,600
Designation % of State Households
Below Federal Poverty Line14%
Below 150% Federal Poverty Line24%
Below 200% Federal Poverty Line34%
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#4- Affordability programs for other utilities
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Programs Expenditures
California Alternate Rates for Energy
$1,300 Million
Energy Savings Assistance Program $400 Million
Low-Income Home Energy Assistance Program
$173 Million
Universal Service Program (Telecommunications)
$723 Million
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#4- Affordability assistance for water
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Water Systems Percent of State's Population Served
Amount spent on LIRA in 2015
LADWP 10% $26 million CPUC Private Water Systems 14% $27 million
24 Other Large Urban Water Suppliers
7% $4.2 million
TOTAL 31% $57.2 million
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Assessment and Implementation Challenges
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Hot Customer Assistance Debates
• What metrics should be used:– To convey general concern– For regulatory relief– To qualify for funding assistance– For assisting individual customers
• How should customer level assistance be funded and administered?– What legal framework changes are needed– How do you reach “hard to reach”
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Moving beyond “percent MHI”…• Most used and most
critiqued metric• Historic focus on
what the “median” person pays for water as a percent of income
• Metric has been used beyond what it was meant to be used for….
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Household Level MetricExample DC Water Customer Assistance Eligibility
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Water and Wastewater Residential Rates Affordability Assessment Tool
On the EFC WebsiteGo to http://efc.sog.unc.eduand search for “Affordability Assessment Tool”
Free, simplified Excel tool allowing you to examine several metrics to assess how affordable your rates
are in your community
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Navigating Legal Pathways to Rate-Funded Customer Assistance Programs
https://efc.sog.unc.edu/pathways-to-rate-funded-customer-assistance
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Can a Utility Use its Primary Revenue Source (Rate Revenue) to Fund a
Customer Assistance Program• 52 state/territory legal snapshots• Nine case studies of well funded customer
assistance programs• Analysis of other sector approaches• Analysis of international approaches
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Non Commission Regulated Utilities: Ability to Implement CAPS Funded by
Ratepayer Revenues by State
Podcast: http://thewatervalues.com/2017/10/17/customer-assistance-programs-expanding-importance-stacey-isaac-berahzer/
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North Carolina Example• State rate setting statutes do not envision a
customer assistance program• Language suggests that income can not be
used to influence what a customer is “charged”
• Work Arounds– Use voluntary funding mechanisms and have
program implemented by charity (OWASA)– Use general tax dollars and have program
implemented by social service department (Raleigh)
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The Final Hurdle: Hard to Reach (H2R)!!
• Many households do not have relationship with their service provider
• Multi-family tenants• Providing them direct
assistance requires different strategies
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What are the Available Options for H2R Customers?
• Work DIRECTLY with the H2R and their landlords– Discounts to landlords– Vouchers– Discounts through energy utility– Discounts for affordable housing– Conservation– Target housing units rather than households
Shrink the H2R population– Sub-metering– Make single-family renters establish an account
• Provide INDIRECT assistance– Raise awareness/support existing assistance programs – Partner with community organizations to support
low-income households
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California’s prospective statewide program
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September 2012: Human Right to Water (HRW) bill passesCA Assembly Bill 685Water must be “safe, clean, affordable and accessible”Requires state agencies to consider the right when adopting new policies or giving grants to water systems
October 2015: Low-income Water Rate Assistance (LIRA) program study passes CA Assembly Bill 401 Report to the legislature on feasible plan designs due by
February 2018
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Open Affordability Questions
• How much consumption should be affordable?
• Should households paying less to live in hard to reach areas pay more for water service?
• Should water cost be included in housing affordability measures or vice versa?
• How should affordability assistance be financed?
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Individual water systems are diverse in capacity
020
4060
80Nu
mbe
r of C
omm
unity
Wat
er S
yste
ms
Very Small (0-500) Small (501-3,330) Medium (3,301-10,000) Large (10,001-100,000) Very Large (>100,000)
y y y y
County Water District Municipal Water District
Mutual Water Company Private Water Company
Irrigation District Unknown System Type
Community Water Systems in Los Angeles County by Size and Type (n=218)
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Many systems have high eligibility and can’t implement a CAP
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• In 22% of systems, which represents 10% of state’s population, more than half of households would be eligible
TULARE CUTLER PUD 87%FRESNO MENDOTA, CITY OF 83%TULARE EARLIMART PUD 81%SUTTER CITY OF YUBA CITY 81%FRESNO SAN JOAQUIN, CITY OF 81%TULARE PIXLEY PUBLIC UTIL DIST 81%SAN BERNARDINO CITY OF ADELANTO 80%KERN CITY OF MCFARLAND 77%KERN ARVIN COMMUNITY SERVICES DIST 76%TULARE TERRA BELLA IRRIGATION DISTRICT 76%SANTA BARBARA GUADALUPE WATER DEPARTMENT 75%
% of Households Below 200% Federal Poverty Line
County Water System Name
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Three Key CAP Scenario Features
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• Eligibility: the number of households qualified based on socioeconomic criteria
• Household Benefit: the type and level of annual financial assistance
• Potential annual program cost: 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑁𝑁𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑁𝑁𝑒𝑒𝑁𝑁 ℎ𝑜𝑜𝑁𝑁𝑜𝑜𝑁𝑁ℎ𝑜𝑜𝑒𝑒𝑜𝑜𝑜𝑜 × 𝐻𝐻𝑜𝑜𝑁𝑁𝑜𝑜𝑁𝑁ℎ𝑜𝑜𝑒𝑒𝑜𝑜 𝑁𝑁𝑁𝑁𝑏𝑏𝑁𝑁𝑜𝑜𝑒𝑒𝑏𝑏
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Four Program Scenario Alternatives
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• Scenario #1: All state households below 200% of the FPL are enrolled in a statewide program offering 20% discount on 12 CCF
• Scenario #2: All state households below 200% of FPL and paying less than $100 on their monthly water bill receive a 20% discount; households below 200% of FPL paying $100 or more on their monthly water bill receive a 35% discount
• Scenario # 3: All state households below 200% of FPL who are not served by a CPUC-regulated water system with an existing LIRA are enrolled in a separate, unified program offering 20% discount
• Scenario # 4: All state households below 200% of FPL who are served by a water system not currently offering a compliant LIRA are enrolled in separate, unified program offering 20% discount
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Scenario Options Considered• Eligibility definitions considered and empirically modeled include households:• 100%/150%/200% of FPL• Paying more than 150%, 200%, 300% of average state water bill – Provides benefits
to households below 200% FPL in a system with exceptional costs relative to the state average
• Spending 1,2,3,4,5% of income on drinking water bill- Provides benefits to individual households spending more than a certain percent of their income on water
• Below DAC, SDAC income lines used by other state programs - All state households with incomes below level used for Disadvantaged Community designation (80% of state median household income) or Severely Disadvantaged Community designation (60% of state median household income)
• Small Systems- Provides benefit to those households below 200%FPL that exist in small systems, serving less than 200 people
• Other benefit level definitions considered and empirically modeled:• 20% discount on monthly 10 or 14 CCF expenditure• 35%/50% discount on monthly 12 CCF expenditure• 25%/50%/75% discount on monthly 6 CCF expenditure
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Estimated Cost of these designs
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Program Scenario % of state’s households
covered
% of households eligible within
coverage definition
Estimated Annual New Program Cost
#1: Entire state program providing 20% discount
100% 34% $580 million
#2: Entire state program providing tiered (20-35%) discount
100% 34% $619 million
#3: Program excluding CPUC-regulated systems and providing 20% discount
86% 34% $488 million
#4: Program excluding all CWS with existing, compliant LIRAs and providing 20% discount
54% 33% $277 million
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Program Financing Options and Challenges
Precedent:• Unit-based consumption surcharge on customers
drinking water bills (Prop 218)
Potential:• Passage of a state-wide tax or fee (Prop 26)• Per account charges to both residential and non-
residential customers• Annual state income tax rebate to eligible
households financed by dedicated state fund
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Additional Administrative Considerations
• Drawing on existing statewide benefit programs: CARE, CalFresh, LIHEAP
Ongoing management considerations include:• yearly program management costs, • household enrollment verification, • future adjustments to program features, and• transparent monitoring of program performance
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Open Affordability Questions
• How much consumption should be affordable?
• Should households paying less to live in hard to reach areas pay more for water service?
• Should water cost be included in housing affordability measures or vice versa?
• How should affordability assistance be financed?
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Questions?Contact:
Greg Pierce: [email protected]
Stacey Isaac Berahzer: [email protected]@StaceyIB_enviro ; #wateraffordability
Jeff Hughes: [email protected]
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Affordability: Out of Pocket Costs
• Forced cost: poor quality leads to purchase
• Self-induced cost: bottled water, water stores
=> $3.79 for gallon of bottled water while typical cost of tap water is$0.002/gallon
• Difficulty with calculating given that it is not reported in any data source