Stacey Isaac Berahzer is a Senior Project Director for the Environmental Finance Center at the University of North Carolina, and works from a satellite office in Georgia.
Water prices are rising faster than any other utility service nationally. Of course, there is good reason for this – the industry has a large backlog of infrastructure needs.
While options such as public private partnerships represent promising areas for financing this backlog, it is mainly water customers who will be writing monthly checks to pay for these infrastructure projects.
With all indicators pointing toward a continued increase in water bills, the historic underpricing of water seems to be slowly righting itself. But, with this comes a greater need for utilities to consider the affordability issues of low income customers. Defining customer affordability has been a tough nut to crack. Perhaps the most quoted affordability threshold is 2.5% of median household income (MHI), but this “rule of thumb” has been criticized for blanketing small pockets of poverty within a census block. On the other hand, the same threshold is cited as sometimes pressuring a water utility to keep rates too low, while many of the utility’s customers can easily handle a higher rate. The bottom line is that defining affordability at the national scale is not easy!
At the utility level, programs addressing customer affordability can take different shapes, including:
- Lifeline rates – where a minimal amount of water is offered at a relatively low cost to all customers
- Bill payment assistance for low income customers
- Discounts for senior citizens
- Customer conservation assistance – for example, the City of Atlanta’s Care and Conserve program provides plumbing repairs as part of its affordability program
The bigger question seems to be, “how are such assistance programs administered and funded?” The answer lies in part on the dexterity of the utility, and in part on state policies.
In many states, a utility’s rate revenues are restricted from being used to finance these types of assistance programs. In North Carolina, water utility revenues are not to be used to even administer these programs. Hence, a popular approach for North Carolina customer assistance programs has been for the water utility to partner with a local charity or human services organization to administer the program. This has the main advantage of keeping water utilities free of having to verify personal income. (A side benefit could be that the partnership with a local reputable charity might also help boost a utility’s public relations.)
In a state like Georgia, a cursory look suggests that there are fewer direct customer bill payment assistance programs. This may be partly attributable to the “gratuities” language in Article 3, Paragraph VI of the state’s constitution. Water utilities seem leery about “donating” money to a human services organization, even if those funds will be used to assist with customer water bill payments.
Whether the utility administers the program directly or not, funding these assistance programs can be prickly. In cases where revenues from rates are not an option, utilities like the Orange Water and Sewer Authority (OWASA), NC have been creative in using bill round-up programs, where customers have the choice to designate the additional portion of their checks to hardship customers. Similarly, in Cary, NC utility customers can select to have a recurring fixed donation on their bills. Other utilities have successfully obtained outside grant funding for their assistance programs. In cases where cell phone and internet providers rent use of the water utility’s towers/tanks, the rental income has become a discrete pot of money that has replenished some assistance programs’ budgets. Another potential funding source for affordability programs that is gaining some traction is service line insurance.