NACWA says EPA’s FCA Guidance fails to affect low-income affordability

The National Association of Clean Water Agencies (NACWA) expressed its disappointment this week at the outcome of a nearly five-year process to significantly overhaul the U.S. EPA’s Financial Capability Assessment (FCA) Guidance and ‘meaningfully address’ the growing ratepayer affordability gap.

First issued in 1997, the initial FCA Guidance is a critical document designed to gauge how much a community can afford to pay to meet increasing compliance requirements under the Clean Water Act (CWA). Over the decades the sector has found the 1997 Guidance to be outdated and seriously flawed in how it determines the impact of CWA spending on individual low-income households, and multiple entities including Congress have called for meaningful revisions. 

NACWA and its utility members – municipal clean water service providers who work directly on the ground with low-income households – have partnered with other water sector and municipal groups in recent years to advocate for a new approach to affordability. The new approach examines the impacts of new CWA mandates and related bill increases on actual low-income households within an impacted community. NACWA says broad-bush comparisons of community and national level metrics often serve to mask the actual impact on individual households.

According to NACWA, the new EPA FCA Guidance fails to take this household level approach, meaning the true impact on these low-income households may not be fully considered, leaving them to continue paying a disproportionately greater amount of their income on clean water bills. 

Even more concerning, many of these same households are in Environmental Justice (EJ) communities. By failing to be fully transparent regarding the impacts of EPA mandates on individual low-income households, a greater financial burden will ultimately fall on these EJ communities, NACWA says.

NACWA adds that the guidance has the opposite effect of the Biden-Harris Administration’s stated goal and commitment of addressing disadvantaged communities and their affordability and environmental justice challenges.

Other water sector associations including the American Water Works Association (AWWA) and Water Environment Federation (WEF) joined NACWA in objecting to a proposed FCA Guidance released in April 2022.

Tom Sigmund, NACWA president and executive director of NEW Water in Green Bay, Wisconsin, said: “Today’s action by EPA ensures that low-income households across the United States, in both urban and rural communities, will continue to unfairly bear the brunt of increasing clean water rates – and will have to continue to make difficult choices about paying their water and sewer bill or other basic expenses.

The guidance comes amid growing financial challenges for drinking water and clean water utilities as they seek to make investments in other priorities like lead pipe removal and climate resiliency. NACWA says EPA’s action repeats the mistakes of the past, locking communities into rigid spending regimes that ultimately place low-income and disadvantaged communities in the untenable position of being unable to afford their water and sewer bills.”

Additional elements of the FCA Guidance that were roundly criticized by NACWA and other water sector and municipal group in the Agency’s 2022 draft remain in the final version, with only minor changes that do not address the association’s concerns. These include an arbitrary cap on the amount of time communities may be allowed to implement CWA mandates and a new requirement for communities to complete a complex economic analysis before regulators will consider providing extended compliance schedules. Both these elements will make it much more difficult, and expensive, for communities to address affordability challenges for their low-income residents. Also of concern is EPA’s use of a guidance document to mandate this additional economic analysis. Such requirements must be subjected to a full notice and comment rulemaking process before being considered.

NACWA is urging Congress to review the new FCA Guidance with a clear understanding that the impacts on low-income water customers must be fully considered in any assessment of financial capability, and that the new FCA Guidance fails to meet that core objective.

NACWA said looks forward to working with EPA and Congress to address the “flaws” in the FCA Guidance and to create a new document that will truly address the unfair economic burden facing low-income households across the nation.

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