Water sector: EPA’s proposed Financial Capability Guidance “falls well short” on affordability, environmental justice

In April, associations representing the U.S. water utility sector submitted comments to EPA in response to its draft of the proposed Financial Capability Assessment Guidance, in which several groups said the agency’s proposal “falls well short” of meeting the purpose of the revision of the guidance.

The proposed guidance outlines strategies for communities to support affordable utility rates while planning investments in water infrastructure that are essential for Clean Water Act implementation.

The FCA Guidance is used by municipalities when devising plans to dramatically reduce discharges from Combined Sewer Systems. During that process, municipalities and EPA negotiate schedules with specific timeframes for implementation. The Proposed 2022 FCA Guidance describes the financial information and formulas the agency intends to use to assess the financial resources a community has available to implement control measures and timeframes associated with implementation.

Once finalized, EPA intends for the Proposed 2022 FCA to replace the 1997 Guidance for Financial Capability Assessment and Schedule Development to evaluate a community’s capability to fund CWA control measures in both the permitting and enforcement context. 

The National Association of Clean Water Agencies (NACWA), American Water Works Association (AWWA) and Water Environment Association (WEF) expressed objection in a joint letter. NACWA says it opposes the guidance for multiple reasons, including because it is inconsistent with the Biden Administration’s professed focus on environmental justice concerns. 

The Association of Metropolitan Water Agencies also submitted comments. AMWA’s key comment is that EPA’s guidance could make a stronger recommendation for communities to factor known drinking water costs into financial rate models that determine wastewater affordability.

The letter also acknowledges the draft’s inclusion of environmental justice considerations and expresses a preference for “Alternative 2” in the proposed guidance, as this alternative “appropriately recognizes how the complexity and uniqueness of each community’s water infrastructure burdens affect their ratepayers’ ability to pay for these services and federal mandates.”

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