Water sector groups propose new affordability metric

The American Water Works Association, National Association of Clean Water Agencies and Water Environment Federation have together produced a report that proposes a new approach for assessing community and household affordability for water services.

The report, “Developing a New Framework for Household Affordability and Financial Capability Assessment in the Water Sector,” builds on an October 2017 National Academy of Public Administration (NAPA) report on community water affordability.

The associations are hopeful the new analysis will assist the U.S. Environmental Protection Agency as it evaluates the definition of community affordability for water services. The proposed framework is an alternative to current reliance on median household income as the primary measure of affordability in regulatory decision-making.

AWWA, NACWA and WEF engaged a consulting team composed of Raftelis, Corona Environmental Consulting, and Galardi Rothstein Group to prepare the new analysis.

“Understanding the implications of affordability for water policy requires both considering the capacity of low-income households to afford service and the community’s financial capability,” said study co-author Bob Raucher. “This framework recognizes that no one metric can serve as a bright line for when water service is affordable for individual households.”

The analysis suggests implementing the following two-part metric to capture both economic burdens of water service on low-income households and the level of economic stress on households in a community:

  • Household Burden Indicator (HBI): The combined cost of water service (e.g., drinking water, wastewater, and stormwater) as a percent of the 20th percentile of community household income (the lowest quintile income) plus
  • Poverty Prevalence Indicator (PPI): The percentage of households in the community that are at or below 200% of federal poverty level.

This two-part metric can be calculated using readily accessible data and reflects both the economic burden that relatively low-income households in that community face and the prevalence of poverty in the community.

The NAPA report, “Developing a New Framework for Community Affordability of Clean Water Services,” was a result of a Senate Appropriation Committee rider. The rider required EPA to engage NAPA to conduct an independent study to create a definition of, and framework for, community affordability of clean water.

“This approach recognizes that individual households bear the cost of all the water services they receive – water, wastewater and stormwater management. Prescriptions for regulatory compliance must take that combined impact into account not just today but into the future,” said Eric Rothstein, another co-author.

“We hope this analysis will assist the water sector as it works with U.S. EPA to take on the increasingly pressing challenge of integrating affordability into water policy,” said co-author John Mastracchio.

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