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There are many ways to assess affordability of residential rates. A common metric is to compute the proportion of the Median Household Income of the community that would be spent on a year’s worth of “average bills” (termed Percent MHI). This is one metric, but is not the only metric by which the affordability of residential rates can be (or perhaps should be) assessed. This easy-to-use Excel tool guides a utility to obtain a range of Census data on its community in order to assess the relative affordability of its water & wastewater rates on its residential customers using multiple metrics. This provides the utility with more information and a more comprehensive understanding of the affordability of its rates than based on %MHI. Affordability is assessed for the average customer, low-income customers, and a full range of households based on their various income levels, both all households and only homeowners. The tool also allows a utility to compare two rate structures side-by-side, enabling the utility to assess the affordability of its current rates alongside alternative rates. The tool is designed to be used by individual utilities (or by people who are advising utilities). Data input should take just a few minutes.
Note: always consider the financial needs and condition of the utility while addressing affordability of rates. Setting artificially low rates at the expense of financial sustainability eventually leads to financial constraints that prevent the utility from investing in its assets, leading to deteriorating conditions and provision of poor quality water, ultimately harming public health and service. Read the blog posts linked throughout this tool for more information on how you can provide assistance to customers that are unable to pay their bills, or contact the EFC for assistance on how to set rates.
How to use the tool
Download the tool from the link above, and follow the built-in instructions to input the utility’s current average monthly charge and a few socioeconomic data for your service area obtained from the U.S. Census Bureau’s website following the step-by-step instructions included in the Inputs worksheet. Data input should only take a few minutes. The tool then computes several affordability assessment metrics and presents the results with text that describes how affordability can be assessed for different groups of customers.
What’s new in version 1.9 (June 14, 2021)?
- Updated to use 2019 American Community Survey (ACS) data.
What’s new in version 1.8 (January 15, 2020)?
- Updated to use 2018 American Community Survey (ACS) data.
- Updated instructions on how to obtain data to use in the tool.
This tool was developed while assisting small water systems in the Smart Management for Small Water Systems project under a cooperative agreement with the U.S. Environmental Protection Agency.