Of course, we all need water. But what happens when we can’t pay for it? For whatever reason, and there are many, at any given time about ten percent of the populace can’t pay their water bill. These reasons can be temporary, such as loss of a job or illness or, they can involve longer term issues such as chronic low incomes, fixed incomes, or long-term illness or unemployment. The recent pandemic has complicated matters for those unable to pay by compounding many of these concerns. Additionally, the pandemic has increased the number of customers with difficulty paying.
So Many Challenges!
Water utilities generally cover their costs through customer payments, so when customers can’t pay, it affects the financial sustainability of the utility. This is one of the major challenges of providing water to all customers, while maintaining the financial health of the utility, without having ratepayers subsidize those who are delinquent in their payments. The business of running a drinking water or wastewater utility is complex, with a wide variety of fixed costs associated with providing public services, such as salaries, buildings, vehicles, maintenance, and repair and replacement. Utilities must also cover the variable costs of energy, chemicals and other supplies. In addition, running a utility generally includes all other expenses normally associated with running a business and must ensure continuous service that meets all federal and state public health and environmental standards.
During the 2008 recession, many utilities had to find ways to adapt to provide social assistance to customers as their communities faced high unemployment, closed businesses, and a high rate of home mortgage foreclosures. In financially stressed cities like Detroit and Baltimore, shutting off water would disproportionately impact disadvantaged neighborhoods.
According to the Water Research Foundation, low-income households are three times more likely to have their water disconnected than other households. Those who may have difficulty paying their water and sewer bills include people on fixed incomes as well as households that face a temporary crisis such as job loss or illness. For these households there is a risk of disconnection due to extended nonpayment for service.
What To Do When People Can’t Pay Their Bills?
Water utilities need customers to pay, and some customers can’t pay – simple as that. So, in response to this conundrum, many utilities have partnered with local resources such as non-profits to administer programs to help those in need. These organizations work through the qualifying and verification process to identify those who need assistance with their water bills. It is in this way that some utilities are finding solutions to these challenges in their communities. In 2016, an EPA study found that close to 30% of utilities developed household affordability programs that focus on a customer’s ability to pay. These programs try to come up with innovative ways to meet customer needs as well as the utility’s obligations. The programs are not a one-size-fits-all approach, as each utility has developed and adapted their own programs to the needs and structures in their own communities. The programs are tailored to help households in need and to protect public health by minimizing disconnections of water service due to nonpayment.
However, the goal must be to help individuals be able to pay their water bill in the long term to keep water continuously flowing to customers and to keep the utility financially healthy. Because if the utility’s obligations can’t be met due to lack of funds, everybody loses.
Recessions and Pandemics
The recent recession and coronavirus pandemic have provided a renewed focus on water and wastewater service affordability. In fact, early on in the pandemic, nearly all utilities simultaneously suspended service shut offs for nonpayment without any formal coordination or requirement to do so. Similarly, the percentage of utilities that suspended collection of late fees ranged between 60-70%, according to an American Water Works (AWWA) member survey.
Traditionally, utilities have considered disconnecting water service to non-paying households as an essential tool for maintaining financial health. Additionally, most water utilities have established methods for discontinuing water service for nonpayment. These shutoff procedures typically provide notice sometimes up to 90 days, to allow customers to maintain service without having their water shut off.
Another less frequently used tool is meter flow restriction devices. In early 2020, Phoenix Water in Arizona began a pilot program installing these restricted devices to address delinquent accounts. This device cuts the flow of water down to a subsistence level in order to avoid complete shutoff while still allowing water for basic needs. Available water is effectively reduced but held at a level that is equitable to public health. The pilot involved 600 homes and the method was to insert a disk at the point where the meter connects to the service line. However, just as the utility initiated the program, the pandemic began. They decided to remove the devices and restore service to avoid any reduction in service during the pandemic.
Although many utilities have suspended the water shutoff practice during the pandemic, it will be interesting to see if they revert back to their standard practices or modify them to take into account basic sanitary health needs. It is worth noting that major water meter manufacturers are now selling “smart” meters that incorporate technology that allows utilities to shut off water remotely, saving time and money for the utility.
Written by: Frank Roth
Links to Part 2, White Paper