Pilot program develops alternative affordability practices for utilities
Today, the US Water Alliance and Stantec, a global leader in sustainable design, released A Promising Water Pricing Model for Equity and Financial Resilience. This report presents an innovative model for pricing and billing water that is an opportunity to achieve greater equity by reducing water bills for most low-income households while preserving revenue and improving financial resilience for water utilities.
Like all common goods, affordable water and sanitation access benefits entire communities, not just individual customers. Yet in most places, revenue to provide these services comes from rates based on how much water a customer uses rather than what customers can afford or how various costs are accrued throughout the system. The COVID-19 pandemic emphasized how this system exposes both individuals and communities to public health and economic risks. It also showed how utilities are vulnerable to financial resilience challenges in situations where customer debt becomes greater than what these customers can realistically pay back.
“The water sector is overdue for a more sustainable business model that safeguards every customer’s ability to afford an essential service. This model represents a way to simultaneously improve utility financial resilience and reduce the burden water bills can have on low-income households,” said Mami Hara, CEO of the US Water Alliance.
The model developed and presented in the report is an outcome of Cincinnati Water Works’ participation in a nine city US Water Alliance pilot program to develop alternative affordability practices, with the goal of creating a context where water shutoffs for low-income people are not necessary.
“This model is an evolution in cost-based pricing that does a better job of aligning how water is paid for with the sources of utility costs than usage-based bills alone,” said John Take, executive vice president and chief growth and innovation officer at Stantec. “This alignment is a fundamentally more equitable approach. Running the data with our partners in Cincinnati showed it can have major affordability benefits.”
The hypothesis of the study is that specific system costs can be removed from traditional charges like flow and customer-based rates and instead be redistributed with a cost-based methodology using property characteristics that are more reflective of customers’ ability to pay, increasing affordability and equity. The analysis includes frontage feet of properties, parcel area, building footprint, property value, and number of bedrooms.
“This innovative approach to pricing water is intriguing because the model shows it would automatically help the majority of Cincinnati’s low-income customers better afford their water bills, unlike most customer-assistance programs that require customers to take action and enroll,” said Verna Arnette, interim executive director with Greater Cincinnati Water Works. “It addresses fundamental drawbacks to current programs, which are often resource intensive to implement and suffer from low participation rates.”
About the US Water Alliance
The US Water Alliance advances policies and programs to secure a sustainable water future for all. Established in 2008, the Alliance is a nonprofit organization that educates the nation on the true value of water and water equity, accelerates the adoption of One Water principles and solutions, and celebrates innovation in water management. The Alliance brings together diverse interests to identify and advance common-ground, achievable solutions to our nation's most pressing water challenges. Our nearly 200 members and partners include community leaders, water providers, public officials, business leaders, environmental organizations, policy organizations, and more.
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