Balancing the Need for Investment with Low-income Customer Affordability

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As communities across the nation address the ever-pressing need to maintain and update its water infrastructure, a larger question looms, ‘How do sewer and water utilities make these much-needed investments while being mindful about affordability, particularly as it relates to low-income customers?’  In short, how do utilities balance the staggering need for investment vs. low-income customer affordability?

The Northeast Ohio Regional Sewer District (Sewer District), Greater Cleveland’s regional wastewater authority, is among those asking this important question.

In 2011, the Sewer District finalized its combined sewer overflow (CSO) consent decree – a $3 billion plan called Project Clean Lake – with the United States Environmental Protection Agency (EPA), United States Department of Justice and the Ohio Environmental Protection Agency.  Reaching a final agreement included a significant discussion about affordability, and where Greater Clevelanders ranked on the financial capability scale in the context of these negotiations. Median Household Income (MHI) was used as the basis for measuring affordability.

At the conclusion of the consent decree negotiations, the Sewer District customer base was determined to be a high economic impact community.  This meant that, while the overall program investment did not decrease, the length of time in which the Sewer District would be permitted to carry out the plan was extended over a longer period of time – 25 years – so as to lessen the overall financial impact.

The only benefit of affordability designations within the MHI framework of CSO negotiations is that it offers relief to the utility and the customer base as a whole.  The utilities can focus on projects over a longer period of time and it can spread the costs over a longer duration.  However, it doesn’t address the direct impact of low-income users and it gives the idea that wastewater rates are unaffordable for all customers, which is an unfortunate misperception.

For sewer and water utilities to be able to address the conundrum between the need to invest in its infrastructure and affordability, the affordability focus needs to be narrowed to those who face a true financial hardship related to increasing sewer rates.  This may be accomplished through the development of need-based rate savings programs or through the enhancement of the utilities’ existing programs.

Recently, my staff and I presented to our Board of Trustees our rate recommendation for the 2017 through 2021 rate period; these future increases will come on the heels of consistent increases over the past two and a half decades.  A component of the current recommendation includes increasing the overall participation in the Sewer District affordability programs from 50% of eligible households to 80% of eligible households by 2021.

The Sewer District advocates smart investments in infrastructure to ensure public health and safety. But, as I’ve noted, increases are more than some customers can bear. We will not defer critical improvements and maintenance at the cost of public safety; rather, we are suggesting an aggressive outreach campaign, which will be designed to encourage current customers to participate in the Sewer District’s existing rate savings programs.

Those programs include:

  • Homestead – Provides a rate reduction of 40% sewer rates to available customers age 65 or older, or to anyone under 65 who is totally disabled. An applicant’s total household income must not exceed $32,500 (effective January 1, 2016). Applicants must also own the property in which they live.
  • Affordability –Provides a rate reduction of 40% for those whose income is at or below 200% of the poverty level.
  • Crisis Assistance – Provides financial assistance of 50% of sewer balance (up to $300) toward customer account. This program benefits customers affected by a major event in their life, such as major medical expenses not covered by any other source, job loss, separation, or divorce.

NEORSD conducted a rate study that looked at areas within the Sewer District’s service area and targeted eligible customers who are not participants in those above-referenced programs. This information will be helpful as we conduct outreach to those customers.

Further, the importance of partnerships cannot be overstated, particularly with elected officials.  In February 2016, United States Representative Marcia Fudge (OH-11) introduced H.R. 4542 – the Low-Income Sewer and Water Assistance Program (LISWAP) Act of 2016, which aims to help low-income families pay for high sewer and water bills.  The Act does this by directing EPA to establish a pilot program awarding at least ten grants to communities under a consent decree to assist low-income households with bill payment.  Eligibility is based on income or receipt of other federal benefits, like Temporary Assistance for Needy Families (TANF) or the Low Income Household Energy Assistance Program (LIHEAP) that is employed for the energy sector.  George Hawkins, D.C. Water CEO and GM, noted at a recent congressional staff briefing in Washington D.C., which we both attended, that it is amazing that such a program exists for private sector energy companies and does not for our public utilities.

As consumers, we all know the importance of keeping our lights and heat on, and it would seem unfathomable that safe drinking water and sanitary sewer services would be seen as any less critical.  Over the last two years, the criticality of water services has been driven home by system failures.  These failures focus the need to raise revenues to invest, which means the need to address the true affordability issue, particularly for those customers in poverty.  H.R. 4542 is a bill that will give organizations like the Sewer District one more tool to continue to address water and wastewater infrastructure issues. It also finally gets the federal government to the financial table in correct fashion by helping those ratepayers most in need.

For an example of NACWA’s recent advocacy on affordability issues and in support of LISWAP, see the May 16 edition of the Clean Water Current.

 

By Julius Ciaccia, Chief Executive Officer, Northeast Ohio Regional Sewer District, Cleveland, OH, and NACWA Board Member

 

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