Although historically underpriced, water and wastewater rates in some parts of the United States are increasing sharply. While the rate increases are necessary to address infrastructure funding needs and make up for lower per capita water use, higher rates also mean that a larger percentage of customers are finding paying for water and wastewater service a financial burden.
The Affordability Challenge
In order to keep rates at a realistic level for their main customer base, many water and wastewater utilities are considering ways to assist their low-income customers. The options available to a utility that wants to address this equity issue differ depending on the state. A few state statutes, for example, are very prescriptive that a utility can, and in some cases “should” provide low-income assistance, but most states have more ambiguous language or leave more up to the discretion of the utility itself. A further complication is that some state utility regulatory commissions treat public versus private investor-owned utilities differently when it comes to customer assistance programs (CAPs). This makes for a challenging environment for a utility that wants to respond to the business and altruistic concerns over low-income customers.
Much has been published on the general topic of affordability and the programs designed to make it easier from rate revenues for low-income households to pay for their water and wastewater services. However, so far there has been little guidance on the legal framework influencing the feasibility of rate revenue funded CAPs in different states.
Navigating Legal Pathways to Rate-Funded Customer Assistance Programs
This project summarizes the principal legal barriers and opportunities to establishing an assistance program for low-income water and wastewater utilities in each of the 50 states, as well as Puerto Rico and the District of Columbia. Several case studies at the utility level highlight how CAPs are funded in light of the relevant state regulations. The project also includes potential model programs from other utility sectors, as well as potential model programs internationally.
This project focuses on how CAPs can be financed by the utility. Specifically, the emphasis is on the ability to finance CAPs directly from rate revenues.
The entire report can be accessed under the Resources tab.
A State-by-State Analysis
The following map categorizes each state according to one of four categories based on the level of authorization for rate-funded CAPs. Designating a state to one of these four categories involved a methodical process, but was also subjective to some extent: part science and part art. Utilities regulated by state commissions tend to have a different level of authority on rate-funded CAPs compared to utilities not regulated by the commission in a given state. In addition to the 52 state summaries, nine utility-level case studies have also been developed to illustrate some of the findings derived from the legal summaries around the nation. Some of these utilities use funding other than rate revenues, whereas others demonstrate innovative ways of creating alternative pathways to somehow address or confront the ambiguity in their relevant state’s statutes.
Map and individual state summaries (NJ, IN, and VA) are currently being updated.
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EFC Affordability Tool
Another recent project looked at how utilities can develop CAPs specifically for multi-family residential and other “hard to reach” customers. This research can be found here: http://www.waterrf.org/Pages/Projects.aspx?PID=4557
Led by the Environmental Finance Center at The University of North Carolina at Chapel Hill, the project team includes Abt Environmental Research, Corona Environmental Consulting, as well as prominent advisors, Roger Colton and Scott Rubin.