Countering the Affordability Challenge

water bill

Great Lakes Water Authority’s WRAP Program Aims to Put Customers on a Path to Self-Sufficiency

A widely-held viewpoint across the municipal water sector is that water distribution and sewage collection service is underpriced. Water and sewer authorities operate primarily with funding from rate increases but still fall severely short in generating the revenue necessary to solve the infrastructure problems we hear about every day.

The public views the issue from another angle. People see their bills consistently increasing, and many who live in poverty struggle to pay for simple drinking water service. The situation is clearly rife with challenges. A disconnect exists between the real cost of modernizing infrastructure and what the public deems the appropriate cost for such upgrades.

Rate increases from drinking water and clean water utilities are needed to sustain high quality services, but their impact on low-income customers are a major cause of concern. In some communities, these concerns can go unnoticed or fly under the radar, but in others they can spark social unrest and public protest. While the general issue is not new, concerns about the impact of rising costs on affordability of water service are becoming more intense.

In the United States, there have been some high-profile instances of water shutoffs, notably in Detroit in recent years. Just this past March, more than 17,000 households were reported to have been at risk for water shutoffs, according to the Detroit Free Press. In 2017, more than 17,000 delinquent accounts were shut off, although this is an improvement from 2016 when there were nearly 28,000 and even greater numbers in prior years. In Detroit, the average past due amount is $663, Detroit Water & Sewerage Department (DWSD) Director Gary Brown told the Free Press.

Of course, instances of delinquent account shutoffs are often a product of low-income customers stuck in poverty. Clean water and stormwater utilities face similar challenges when it comes to customers struggling to pay bills. In 2014, the U.S. Conference of Mayors called EPA water affordability criteria evidence of “class-based environmental injustice.”

There have been more recent suggestions across the water sector that utilities should operate more as business entities, modernizing and incorporating technology at a faster pace. But even then, affordability issues for low-income customers would likely still exist.

GLWA

Keeping with the Michigan theme here, an interesting story has come out of the region courtesy of the Great Lakes Water Authority (GLWA), the regional water authority serving Southeast Michigan. The GLWA was formed in 2014 as a result of the City of Detroit’s bankruptcy. The authority began operations in 2016 and assumed much of DWSD’s operations. The creation of the authority aims to put the city in a better position to fund infrastructure improvements (GLWA signed a 40-year lease for control over the DWSD treatment plants, major transmission mains, sewage interceptors and related facilities for $50 million per year. The funds go directly toward capital improvement for the Detroit retail water system and to repair water infrastructure).

In 2016, concurrent with the beginning of operations at the authority, GLWA launched a payment assistance program that also provides educational programs, home water conservation audits and funding to fix leaks and minor home plumbing repairs. The goal of the program is to help put customers on a path to becoming more self-sufficient in paying their bills.

The WRAP

GLWA’s Water Residential Assistance Program, or WRAP, as it is widely known, was established as a result GLWA’s formation. The program is an effort of regional collaboration to assist low-income households with water and sewer bills and encourage water use efficiency in the communities that GLWA serves.

WRAP is the first program of its kind in Michigan and one of a few sustainable assistance plans in the country, according to the authority. The program was designed by an advisory team consisting of representatives of agencies from Macomb, Oakland and Wayne Counties. Day-to-day management of the program is conducted by GLWA partner Wayne Metro.

GLWA budgets 0.5 percent of its operating revenue for the program annually, which totaled $4.5 million for the first year. All GLWA water and wastewater member communities are eligible to apply for WRAP assistance.

Regarding utility customer assistance programs, it’s important to note that there is no federal, overarching law to enable water assistance programs. It’s up to individual states to administer programs and each state has unique and specific laws and circumstances.

In the case of GLWA, the Detroit mayor and officials in Macomb, Oakland and Wayne counties had to structure the WRAP program so that it complied with state law and so that it would be sustainable over a long term.

Sue McCormick, GLWA CEO, says that as a part of federal court proceedings during the creation of the GLWA, the authority was able to commit revenue to the assistance program that would be sustainable over time.

“The limitations of Michigan law always made it difficult to have sustainable funding for assistance programs,” she says. “There had been programs for years based on voluntary contributions, but that’s a difficult way to have a sustainable program for funding needs. We had a very unique circumstance that enabled us to launch this in conjunction with the creation of the GLWA.”

McCormick explains that extensive thought went into the initial design of the WRAP program so that it addressed a range of affordability issues. While the primary goal of the program was to help low-income customers having difficulty paying their bills, GLWA also recognized that an objective should be to provide transitional assistance so that customers are put on track to being able to pay bills consistently in the future.

“There are a variety of circumstances that can create challenges economically,” McCormick says. “Sometimes people are between jobs, sometimes people are out [living] on their own for the first time providing for themselves.”

She also adds that sometimes those who have difficulty paying bills are people who sometimes have some of the highest bills – and that can be because they don’t have the ability to fix the things that generate the high bill.

In response to this recognition, WRAP included measures to address factors that contribute to high water bills. Water conservation assistance measures and plumbing repairs were designed into the program to help customers reach a point where paying bills was more manageable.

Benefits & Qualifications

The WRAP program is set up so that the amount of money allocated to the program will grow annually as the annual revenue of the GLWA grows. Between March 2016 to June 2018, $11.6 million has been committed. In all, WRAP provides GLWA customers:

  • Payment assistance up to $1,000 per household per yearn — $25 per month towards a bill credit, and assistance with arrears;
  • Home repairs up to $1,000 per household to fix plumbing issues causing high usage (In 2017, GLWA made the change that eligible fixtures for replacement go beyond any that are simply leaking and now include any fixture that pre-dates the lead plumbing code);
  • Water saving kits and consumer training classes; and
  • Supportive WRAP-around services, which include referrals to energy, food and clothing assistance programs.

To qualify for the program, participants must meet the following requirements:

  • Have income at or below the 150 percent of the federal poverty threshold;
  • Be residential customers of the GLWA service area, with first priority to customers who have a past due bill and/or are in active shutoff;
  • Provide proof of residency or provide renter’s proof of responsibility for water on lease;
  • Customers with water usage 20 percent or more above average must participate in a home water audit and install water conservation measures; and
  • Stay current on monthly bill payment for 12 months.

WRAP also includes three program options are available for GLWA member communities that provide different levels of benefits:

Option 1

  • One-time home water audit for households above 120 percent average water usage
  • Minor plumbing repairs (up to $1,000 per household)
  • Monthly bill credits (up to $300 per year)
  • Arrearage assistance (up to $700 per year)

Option 2

  • One-time home water audit for households above 120 percent average water usage
  • Minor plumbing repairs (up to $1,000 per household)
  • Monthly bill credits (up to $300 per year)

Option 3

  • One-time home water audit for households above 120 percent average water usage
  • Minor plumbing repairs (up to $1,000 per household)

Success to Date

McCormick notes two specific areas that exemplify the success of the WRAP. In the first year of the program, homeowners who participated in the water conservation measures had savings of about $540. In the second year, it was roughly $420.

“For someone who has an affordability issue, if you can save over $400 or $500 a year on your water bill, that’s huge. To me, that’s such a success to be able to get bills down into affordable ranges and give them something that sustainable to pay over time,” she says.

She also notes customers who have been able to pay their bills with assistance and remain in the program. Since the program has been established, a significant number of residents in the City of Detroit who qualified for WRAP assistance were able to continue to pay their bills while remaining in the program, which also helps to clear old arrearages. This is contrary to in the past when customers in a payment plan had to pay their bill while also making a payment on the arrearage. For many low-income customers, that’s a very difficult thing to do even with some assistance, says McCormick.

“To me, [whether] people are staying in the program or they’re leaving the program and continuing to pay their bills, those are the statistics that tell us this is a success story,” she says.

Addressing an Industry-Wide Challenge

Although drinking water and wastewater authorities have long recognized the need for customer assistance, ultimately the need for fair treatment of low-income customers while maintaining appropriate levels of revenue will continue to be a challenge on a global scale.

“I think we have a challenge as state and as a nation to put enabling legislation in place that allows utilities to do this,” McCormick says. “I think that’s the start. There are benefits for everyone in the system for this.”

She explains that conservation measures are an essential aspect along with reducing challenges that come with collection efforts, which many times comes down to attempting to collect payment from customers who really can’t afford the services to begin with.

“There’s a tremendous amount of energy, money and effort that goes into the collections process,” she says. “Not just at the local level at the utility, but through cities, counties and the various ways to collect. All those things are beneficially affected by having this kind of affordability program.”


Andrew Farr is the associate editor of Water Finance & Management, published by Benjamin Media. He has covered the water sector in North America for six years and also covers the North American trenchless construction industry for sister publications Trenchless Technology and NASTT’s Trenchless Today.

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