Deep Dive: Water Affordability

The costs of drinking water and wastewater have more than doubled in the US since 2000. In California, the average household paid around 45% more per month in 2015 than in 2007 for drinking water. Multiple factors have led to higher water rates, including greater operational costs due to aging infrastructure and climate adaptation. Water affordability disproportionately affects low-income households and communities of color. The inability to pay for water bills can lead to additional charges, water shutoffs, foreclosure, and family separation.

Affordability (or lack thereof) can be thought as the level of burden a bill imposes on a customer as a percentage of income, typically ranging between 3-4.5%.

The Pacific Institute defines water affordability such that the cost of essential water and sanitation should be inexpensive enough that cost does not prevent access, nor interfere with other essential expenditures (e.g., food, health care, housing, transportation education).

Lessons from California

Policies in California demonstrate the potential for better transparency regarding water shutoffs, innovative funding mechanisms to assist water service providers to supply safe and affordable drinking water, and provides a template for how to develop a state-wide low-income water rate assistance program that prioritizes disadvantaged communities. The advocacy work of organizations like the Leadership Counsel for Justice and Accountability, Clean Water Actionand Community Water Center, successfully advanced action on water affordability in a state that has long suffered from unaffordable water rates, drastically apparent during the COVID-19 pandemic and the subsequent economic recession.

Key Policy Language – Low-Income Water Rate Assistance Act

The Low-Income Water Rate Assistance Act (Assembly Bill 401) was added to the Water Code in 2015 (Section 189.5), and directed the State Water Resources Control Board to develop a plan for the funding and implementation of a statewide Low-Income Water Rate Assistance (W-LIRA) Program. The Act defines low-income as “a household with income that is equal to or no greater than 200 percent of the federal poverty guideline level.”  

The Act dictates that the plan should include a  “description of the mechanism for providing funding assistance under the program through either direct credits to enrollees in the program or reimbursements to water service providers, including a method for verifying income eligibility of low-income ratepayers, clarification of the role of the Public Utilities Commission and water utilities in determining and verifying customer eligibility, and recommendations regarding the structure of the program, particularly whether it will be administered by the state or locally administered.”  

Advocacy and Implementation in California

Assembly member Bill Dodd, who championed AB 401, and has introduced several other subsequent bills related to water access and affordability, pointed to his own district at the time of the bill’s passage as an example of rising unaffordability—the median income in Lucerne hovered at half of the state average, with ratepayers paying an average of $1,300 for water service per year. Californians have faced rising water rates and stagnated wages for years. Around half of California’s population is served by a community water system (CWS) providing customer rate assistance programs, but these programs historically have low levels of participation and limited resources.    

Low Income Water Rate Assistance (W-LIRA) Recommendations 

The final report making recommendations on the statewide W-LIRA program was released by the Board in February 2020 after several years of public input. Excellent comments submitted to the Board regarding their W-LIRA plan recommendations by the Pacific Institute, Sierra Club, Clean Water Action, and others in 2017 can be found here and provide useful considerations for other water affordability advocates who may be considering best practices and approaches for the design, funding, and implementation of W-LIRA programs in other states.  

Key recommendations in the Board’s plan include: 

  • A statewide program with benefits distributed through water bills,
  • Crisis assistance for water ratepayers, 
  • Renter’s water credit for residents who pay for water indirectly through rent, 
  • Covering program cost through progressive revenue sources such as taxes, including taxes on personal and business income and bottled water taxes, 
  • Proposes a tiered direct bill credit to all eligible households, regardless of residency status.  

Implementation of the Low-Income Water Rate Assistance Program has not yet occurred, but in tandem with this program, California has made additional commitments to funding safe and affordable drinking water. On July 24, 2019, Governor Newsom signed Senate Bill 200, establishing the Safe and Affordable Drinking Water (SADW) Fund as part of the Safe and Affordable Funding for Equity and Resilience (SAFER) Program. Starting in fiscal year 2020-2021, 5% of the annual proceeds of the Greenhouse Gas Reduction Fund (up to $130 million) will be deposited into the SADW Fund. Funds will support local assistance to “fund grants, loans, contracts, or services to help water systems provide safe and affordable drinking water.” 

The Safe and Affordable Drinking Water Fund Coalition—compromised of Clean Water Action, Leadership Counsel for Justice and Accountability, and Community Water Center—build grassroots power, engage in meaningful communication and community-based research, and advocate for policy and funding solutions to California’s water crises. The Coalition’s work to build leadership skills and bring the personal stories of community members who have faced unaffordable and/or unsafe drinking water conditions to the attention of legislators, city and county officials, and agency employees contributed to the progression of California’s Human Right to Water commitment. 

Nataly Escobedo-Garcia, with Leadership Counsel for Justice and Accountability  reiterates that, “Passing a bill is not easy, but implementing it can be that much harder. We’ll actively monitor the process and make sure that residents are involved through different aspects of the process. We actually have folks that we work with who are on the advisory group for the Safe and Affordable Drinking Water Fund. So that has been one way we monitor that process. Other ways we monitor is just continuing to work closely with the agencies who are either receiving the funding or are going to be implementing the policies or bills or legislation to make sure that that process continues to be community driven.”  

Pending bills, such as Senate Bill 222 (Dodd, 2021), may further solidify legislative and grassroots water advocates efforts to establish robust affordability and assistance programs. SB 222 would require the Department of Community Services and Development to develop and administer a Water Rate Assistance Program, to direct water bill assistance, water bill credits, and water crisis assistance, and would require 80% of total funds to be directly applied to customer assistance

Key Policy Language – Water Shutoff Protection Act

The Water Shutoff Protection Act of 2018 (SB 998) went into effect in February 2020. The Act outlines the requirements for urban and community water systems to inform customers of delinquent water bills, details contact requirements, and states that if a bill is appealed by a resident, the water system may not discontinue service while the appeal is pending.   

“An urban and community water system shall not discontinue residential service for nonpayment until a payment by a customer has been delinquent for at least 60 days.” Previously, water shutoffs could occur after 34 days of non-payment.  

“No less than seven business days before discontinuation of residential service for nonpayment, an urban and community water system shall contact the customer named on the account by telephone or written notice.” Communications must be provided in six language options and in any language spoken by at least 10 percent of people residing in the service area.  

Discontinuation of residential service for nonpayment cannot occur if the following three conditions are met: 

“(1) The customer, or a tenant of the customer, submits to the urban and community water system the certification of a primary care provider… that discontinuation of residential service will be life threatening to, or pose a serious threat to the health and safety of, a resident of the premises where residential service is provided.
(2) The customer demonstrates that he or she is financially unable to pay for residential service within the normal billing cycle. 
(3) The customer is willing to enter into an amortization agreement, alternative payment schedule, or a plan for deferred or reduced payment.” 

CWSs must annually report on their websites and to the State Water Resources Control Board the number of service discontinuations for inability to pay.

Advocacy and Implementation

While the Act does not fundamentally increase water affordability in California, it does provide basic protections to customers to prevent shutoffs and provides avenues to pay off debt with caps set on the cost of reconnection fees and late fees. Repayment typically must occur within 12 months, though water suppliers may allow for longer repayment periods to avoid undue hardship for a customer. A limitation of the Act is that it only applies to urban and community water systems with 200 or more connections.  

Data on water shutoffs nationwide is sparse. A major aspect of the Water Shutoff Protection Act’s implementation includes required reporting of service discontinuation for inability to pay. An analysis of the State Water Board’s 2018 annual report by Pacific Institute reveals that, “196,800 single-family households lost access to drinking water at least once in 2018 because of service disconnections.” Access to this type of data is a crucial component to understanding equity and affordability in our water systems. Under SB 998, utilities have been required to report shutoff data since February 2020. 

Results from a recent study by the State Water Resources Control Board highlight the growing problem of residential water debt in California (an estimated 1.6 million households were late on water bills, totally over $1 billion), which could put millions at risk of shutoffs. Stop-gap measures to provide debt relief through short-term COVID-19 federal recovery funding are in the works.

Lessons from Illinois

The building blocks for a state-wide water assistance program is taking shape in Illinois. Two pieces of legislation passed in 2021- the Water and Sewer Financial Assistance Act (House Bill 0414) and the Lead Service Line Replacement and Notification Act (House Bill 3739)– offer two frameworks for low-income water and sewer assistance payment programs.

Key Policy Language – Water and Sewer Financial Assistance Act

The Water and Sewer Financial Assistance Act was signed into law in August 2021 and went into effect immediately. In the Act’s opening paragraph, it states, 

“The General Assembly finds that: The health, welfare, and prosperity of the people of the State of Illinois require that water and sewer services are affordable and that all citizens receive essential levels of water and sewer services regardless of economic circumstance.”  

Access to Affordable Water and Sewer Services 

“(1) A low-income water and sewer assistance payment plan should be established that incorporates income assistance for citizens to have access to affordable water and sewer services.
(2) The ability of public utilities and other entities, to receive just compensation for providing services should not be jeopardized by this policy.” 

Water and Sewer Assistance Program 

“The Department is authorized to institute a program, whereby a water or sewer provider may voluntarily participate to ensure the availability and affordability of water and sewer services to low-income citizens…” 

… “The Department is authorized to institute an outreach program directed at low-income minority heads of households and heads of households age 60 or older. The Department shall implement the program through rules adopted pursuant to the Illinois Administrative Procedure Act.” 

Eligibility and Participation Conditions 

Any person who is a resident of the State of Illinois, and whose household income is not greater than an amount determined annually by the Department may apply for assistance pursuant to this Act in accordance with rules adopted by the Department. In setting the annual eligibility level, the Department shall consider the amount of available funding and may not set a limit higher than the eligibility limit for assistance under the Energy Assistance Act.” 

The Energy Assistance Act’s eligibility limit for assistance is defined as not higher than 150% of the federal nonfarm poverty level or 60% of the State median income for the current State fiscal year. The Department may adjust the percentage of poverty level annually according to federal guidelines and funding availability.  

“Applicants who qualify for assistance… shall, subject to appropriation from the General Assembly and subject to the availability of funds to the Department, receive water and sewer assistance… The Department … shall commit funds for each qualified applicant in an amount determined by the Department. In determining the amounts of assistance to be provided to or on behalf of a qualified applicant, the Department shall ensure that the highest amounts of assistance go to households with the greatest need for financial assistance in relation to household income. The Department shall include factors such as water and sewer costs, household size, household income, and region of the State when determining individual household benefits. In adopting rules for the administration of this Section, the Department shall ensure that a minimum of one-third of funds are available for benefits to eligible households with the lowest incomes and that elderly households, and households with persons with disabilities are offered a priority application period.” 

The Act specifies that if adequate funds are available, additional benefits may be distributed, with priority to households with excessively high usage costs or past due amounts, especially households with “elderly members, children, or a person with a disability.”  

Water and Sewer Low-Income Assistance Fund and Charges 

This special fund resides in the State Treasury, and is authorized to receive money from voluntary donations from “individuals, foundations, corporations, and other sources; by statutory deposit; and by authorized collections…”  

“The Fund is also authorized to receive moneys from the federal government, including, but not limited to, any pass through moneys as a result of a public health emergency. Subject to appropriation, the Department shall use moneys from the Water and Sewer Low-Income Assistance Fund for payments to water or sewer providers on behalf of their customers who are participants in the program authorized under this Act.”  

The yearly administrative expenses of the Fund “may not exceed 10% of the amount collected during that year… except when unspent funds from the Water and Sewer Low-Income Assistance Fund are reallocated from a previous year.” 

Effective January 1, 2022, each water or sewer provider must assess each of its customer accounts a “monthly Water and Sewer Assistance Charge for the Water and Sewer Low-Income Assistance Fund.” The charges are: “1) $0.10 per month for each account for residential water service; 2) $0.10 per month for each account for residential sewer service; 3) $5.00 per month for each account for non-residential water service; and 4) $5.00 per month for each account for non-residential sewer service.” 

“The Department of Revenue shall deposit into the Water and Sewer Low-Income Assistance Fund all moneys remitted to it… provided, however, that the amounts remitted by each water or sewer provider shall be used to provide assistance only to that water or sewer provider’s customers.” 

“The water or sewer providers shall coordinate with the Department to establish an equitable and practical methodology for implementing this subsection beginning with the 2022 program year.” 

“The charges imposed … shall apply to customers of a water or sewer provider only if the water or sewer provider voluntarily makes an affirmative decision to impose the charge… If a water or sewer provider does not assess this charge, the Department may not use funds from the Water and Sewer Low-Income Assistance Fund to provide benefits to its customers In its use of federal funds under this Act, the Department may not cause a disproportionate share of those federal funds to benefit customers of water or sewer providers that do not assess the Water and Sewer Assistance Charge.” 

Advocacy and Implementation Efforts

Questions Remain Over How Widespread Assistance Will Be

While the General Assembly declared, in the opening paragraph of this Act, that the state requires “all citizens receive essential levels of water and sewer services regardless of economic circumstance,” the subsequent parameters of the assistance program fall short. A major hindrance to the Water and Sewer Assistance Program’s positive impact on Illinois residents is the fact that the program is voluntary for water or sewer providers. The fund and charge are for any water or sewer utility under the jurisdiction of the ICC. The ICC regulates investor-owned utilities (those that are privately owned). If a service provider chooses not to participate, their customers will not be able to access the assistance funds. American Water, the largest private water and wastewater utility company in the US, supported the legislation, and while many organizations who focus on advancing water affordability did not oppose it, there was not broad support or endorsement from those groups. Since the Act is so new, it is yet unclear how much willingness to join exists across the state (Illinois Rural Water Association opposed the bill). Organizations and individuals supportive of this program will need to mobilize efforts to ensure implementation bears meaningful change.  

HB 0414 uses some of the same language as the low-income water assistance policy and program embedded in the Lead Service Line Replacement and Notification Act (HB 3739), which goes into effect January 1, 2022. The two programs will operate independently of one another, as will the emergency, temporary Low-Income Home Water Assistance Program (LIHWAP). The Department of Commerce has authority over both state programs. Both prioritize households with the greatest water affordability needs, but the program described in HB 3739 applies to “any person who is a resident of the State” who meets the income requirements.  

Key Policy Language – Lead Service Line Replacement and Notification Act 

 The Lead Service Line Replacement and Notification Act (HB 3739) passed in 2021. In addition to outlining the state’s approach to removing all lead service lines in the state, the Act also directed the Department of Commerce to create a low-income water assistance policy and program. The language of the bill is included here: 

Low-Income Water Assistance Policy and Program and Customer Assistance Programs 

The Act directs the Department of Commerce to establish “a comprehensive, low-income water assistance policy and program that incorporates financial assistance and includes, but is not limited to, water efficiency or water quality projects, such as lead service line replacement, or other measures to ensure that residents have access to affordable and clean water.” 

“Any person who is a resident of the State and whose household income is not greater than an amount determined annually by the Department may apply for assistance…  In setting the annual eligibility level, the Department shall consider the amount of available funding and may not set a limit higher than 150% of the poverty guidelines.” 

The Department “shall ensure that the highest amounts of assistance go to households with the greatest water costs in relation to household income. The Department may consider factors such as water costs, household size, household income, and region of the State when determining individual household benefits… the Department shall ensure that a minimum of one-third of the funds for the program are available for benefits to eligible households with the lowest incomes and that elderly households, households with persons with disabilities, and households with children under 6 years of age are offered a priority application period.” 

Additionally, the Illinois Commerce Commission “may allow or direct a water utility to establish a customer assistance program that provides financial relief to residential customers who qualify for income-related assistance… The Commission shall adopt rules to implement this subsection. The rules shall require customer assistance programs under this subsection to coordinate with utility energy efficiency programs and the Illinois Home Weatherization Assistance Program for the purpose of informing eligible customers of additional resources that may help the customer conserve water. 

Advocacy and Implementation Efforts

Uncertainty Around Funding, Impact of Multiple Programs

As noted in our deep dive on HB 3739 related to state action on lead service line removal, this landmark legislation took several years to come to fruition. The low-income water assistance policy and program stands at the front of the legislation, which was sponsored by Senator Melinda Bush and Representative Lamont Robinson. A broad coalition supported the bill, including Natural Resources Defense Council (NRDC), Little Village Environmental Justice Organization, Blacks in Green, Illinois Environmental Council (IEC), Illinois Pipe Trades Association, and Metropolitan Planning Council (MPC). The language of HB 3739’s low-income water assistance program is more expansive than that of HB 0414, covering the whole state and equitably focused on those will lowest incomes in relation to water costs.  

Next steps for implementation of the low-income water assistance program hinge on an appropriation for the program, and the Illinois Department of Commerce and Economic Opportunity’s subsequent rule-making process, which must be adopted within 180 days of an appropriation. The Fiscal Year (FY) 2022 state budget, approved in July 2021, does not include an appropriation for the low-income water assistance program.  

The enacted appropriations for FY 2022 do include a new appropriation of $55,000,000 from the Community Services Block Grant Fund for the state’s Low Income Home Water Assistance Program (LIHWAP), which will function for two years. Depending on the final outcomes of bipartisan infrastructure bill and the reconciliation bill at the federal level, Illinois may channel funds from those infrastructure investments into the low-income water assistance program.