The affordability of water service is a large and growing challenge for the sector. Utilities are facing substantial costs to upgrade infrastructure and to treat for emerging contaminants of concern, but also are grappling with how to fund these efforts without disproportionately impacting customers. So discussions around affordability at the household level are important not only in the strategic planning and day-to-day operation of water systems, but also for state and federal agencies considering new regulations. In these discussions, it's important to recognize that affordability is a complex issue, and household-level affordability and the consequences of policy changes cannot rest on a single metric like median household income.
Many stakeholders, AWWA included, have long advocated for better analysis of rulemaking to identify whether rule requirements are likely to cause affordability problems to low-income customers. Understanding impacts on fiscally challenged households is an important step to determining what can be done to address those challenges while still ensuring access to safe and reliable drinking water supplies.
Under current practice, the US Environmental Protection Agency (USEPA) prepares an extensive economic analysis for new Safe Drinking Water Act (SDWA) regulations. That analysis includes determining whether—across the nation as a whole—the health benefits of a rule are greater than the costs of implementation. USEPA looks specifically at the household-level cost implications of drinking water regulations only for small systems with the question of whether a small-system variance (i.e., a less expensive but equivalently protective compliance strategy) should be available. And USEPA prepares analyses to address several executive orders, including Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations.
In early 2020, AWWA convened a panel of experts on affordable water service and regulatory processes. The panel was co-chaired by Cary Coglianese from the University of Pennsylvania and John Graham of Indiana University. Because of the COVID-19 pandemic, the panel met through a series of virtual meetings that allowed the participants to discuss USEPA's existing practice regarding the evaluation of affordability, to brainstorm ideas, to consider practical analytical challenges, and to prepare a summary report. In mid-April, on behalf of the panel, AWWA released Improving the Evaluation of Household-Level Affordability in SDWA Rulemaking: New Approaches, synthesizing the panel's work. This report includes seven key recommendations, and it also includes four new analyses to be conducted:
- Analyze the impacts on customers in the lowest income quintile instead of focusing exclusively on median household income.
- Estimate the number and geographic distribution of systems that have a high potential for affordability challenges based on measures of community fiscal stress (such as percentage of homes with incomes at or below 200% of the poverty level).
- Evaluate the “single rate payer burden” on all rules for which costs are likely to overlap with the implementation of the proposed or final rule.
- Evaluate how the net benefits of a rule are distributed across household incomes, identifying whether low-income customers may pay a disproportionate share or may not receive a proportionate benefit.
The panel emphasized that analyzing impacts on household affordability is not meant to reduce health protections for low-income customers or anyone else. Instead, evaluating the impacts of regulatory options on household-level affordability should provide an opportunity to modify draft rule frameworks and implementation strategies to mitigate impacts on low-income households and consequently alleviate disparate impacts.
The panel's work sets the stage for improving current SDWA decision-making processes, which in turn will help lead to more informed decisions across the sector. Although work remains to fully demonstrate the recommended analyses, they nevertheless pave the way for a more informed future.
Here is a PDF of the aforementioned exper panel report:
Download_Improving_Eval_Household_Level_Affordability_SDWA_Rulemaking_New_Approaches
Enjoy!
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