Water Providers Now Concerned Over Affordability
Tuesday, August 31st, 2010It is not that affordability hasn’t always been a concern, but a recent look at some important data now suggests that affordability has become a major concern for providers of water and sewer utility services in the US. For the first time since the 1950’s, personal income in the United States has experienced negative annual growth; meaning personal income has actually fallen in real terms for the first time in almost 60 years. This is no surprise to Utility Consultants and those who read the daily news and understand the recession’s deepening hold on the US economy, but utility providers may want to pay special attention because while water and sewer rate increases were never popular, they are even less so when family income is declining instead of increasing.
Declining personal income trends now coincide with a persistent and increasing need for investment in water and sewer plant and facilities. Many utilities provide ongoing services to customers using infrastructure that is in serious need of replacement or upgrade. Failure of this infrastructure can lead to major service disruptions, damage to residences and businesses and even to local waterways. Recognizing this increasing need, the US Conference of Mayors recently issued a report predicting significantly increased levels of spending on water utility infrastructure. According to the Conference, this spending could be as much as a four-fold increase over current levels.
What constitutes true ‘affordability’ is based on multiple definitions, but the EPA holds that a utility fee is unaffordable if it is greater than 2.5% of median household income. This baseline measurement is interesting when taken into context with the way water is used and water rates are determined. Older homes in less affluent neighborhoods – presumably with lower income levels – have also been presumed to consume lower volumes of water and therefore would pay less on a monthly basis. This water use model also held that affluent customers would simply consume more and would therefore pay more.
This last argument has been frequently used to support applications for water utility fee increases. Recent studies in Milwaukee, WI, however, have found that water use levels tended to be highest in aging areas of town. (Milwaukee Wisconsin Journal Sentinel, July 17, 2010). The surprising conclusion; older neighborhoods simply consumed more water.
Relatively higher usage in older neighborhoods is very much a possibility in every community due to newer homes being constructed under newer building codes with more stringent plumbing requirements that tend to conserve water; older homes were not subject to those codes and have older plumbing fixtures that tend to use more water (including more sewage thanks to older toilets and sinks).
So, while there is increasing pressure to increase water and sewer rates to pay for very expensive infrastructure replacements, the burden on customers is also becoming more severe in relative terms as their own personal incomes decline. Older neighborhoods with lower household incomes could actually be using more water than originally thought, and therefore the impact on those customer bills is even more pronounced. It is very possible that affordability in your community may be a more difficult thing to measure than just comparing the average utility bill to the median household income (the method the EPA uses).
Author Jason Mumm is a widely respected among Utility Consultants and Water fees Consultants. With many years of experience helping utilities control infrastructure costs and consumer fees, Jason provides services through his organization – StepWise Advisors.
categories: environment,Conservation,Government,Water Rates,municipal news,Government Management,Water conservation