By Stacey Isaac Berahzer

Water is such a universally essential service, that many utilities seek ways to help their low-income customers with affording the service. Generally referred to as a “customer assistance program” or CAP, this help can take different forms. Some utilities assist by repairing leaks and retrofitting low-income customers’ homes with water efficient devices. But, the more common approach is to provide some sort of financial assistance. For example, a special payment plan to help customers who have arrearages may be coupled with some debt forgiveness. Many utilities also offer discounts on the bills of customers who can prove their low-income status. But, is the cost of implementing such a program prohibitive? The good news is that there has never been a better time to find out.

 Reason One: First-time Federal Funding for Low-Income Water Customers

The first reason why this is a good time to find out what a bill assistance program would cost is the $638 million that the December 2020 COVID-19 spending package allocates for a Low-Income Household Drinking Water and Wastewater Emergency Assistance Program. This program was authorized by Section 533 of the U.S. Department of Health and Human Services’ (HHS) FY2021 appropriations portion of the package. It will be a useful addition to the limited list of ways that water utilities fund CAPs. Many water industry stakeholders and advocates have longed for a program like this for decades. They wanted assistance for residential water customers that was similar to the energy program called Low Income Home Energy Assistance Program (LIHEAP).

This funding may be temporary, and a drop in the proverbial bucket compared to the needs of water customers nationally, but it could be a good “pilot” for long term changes. For example, key features of the “green project reserve” that was included in the American Recovery and Reinvestment Act of 2009 (ARRA) to stimulate the economy have remained, in some form, to this day. So, water utilities should see this as a chance to get CAPs organized, in case there is future funding or increased pressure to provide these types of programs locally.

 Reason Two: A Revised Tool to Help Utilities

The second reason that this is the right time to figure out what a bill assistance program may cost your utility is that the UNC Environmental Finance Center (UNC EFC) recently released an upgraded version of an Excel-based tool that helps utilities address this question. The tool is meant as a guide to utility staff in estimating the cost of implementing a program to assist low-income residential customers in paying their bills. It provides a picture of the income distribution of households in the utility service areas, and it allows the utility to choose from different eligibility and program designs. As mentioned earlier, CAPs can take different forms, but this tool is specifically for CAPs that set aside funds that can be used to pay part, or all, of a customer's bill when the customer proves that they cannot afford to pay the full bill amount.

The purpose of the tool is to help utilities calculate a rough estimate of the annual cost of funding a bill payment assistance program. In this case, the goal of the CAP is to help some of the utility’s residential customers pay their bills and avoid penalties and disconnections associated with non-payment. The tool allows the utility to experiment with different eligibility criteria for customers. It does this by modelling how residential customers with an annual household income below a certain threshold would be eligible to participate in the bill payment assistance program. The utility CAP designers can also experiment, via the tool, with different levels of an annual maximum amount of financial assistance to provide to each participating residential customer.

New Features of the Tool

The original tool was developed in 2014 by the UNC EFC for the Water Research Foundation as part of the Defining Resilient Business Models for Water Utilities project (project #4366). The recent updates are part of a cooperative agreement with the U.S. Environmental Protection Agency under the Smart Management for Small Water Systems project. The enhancements address some key industry trends. Regionalization, which some may consider more of a “recommended practice” than a “trend,” is where multiple water utilities consolidate into one. The tool accommodates this by allowing the user to add more than one county, city or town. It then blends the data to estimate a utility's service population across multiple jurisdictions. This is an improvement over the previous version which only allowed entry of one jurisdiction, thereby masking socioeconomic differences among the different service areas. The ability to parse out the different jurisdictions has equity implications: if one city being served by a consolidated utility is more economically stressed, a utility may decide to focus its limited assistance dollars on that city. As equity concerns draw more attention nationally, the redesign of the tool has an overall focus on equity. More directly, it includes additional socioeconomic and demographic data, including race. It also provides graphs to better understand the residential customer base of the utility for equity decisions.

Another key new feature is eligibility based on income relative to the Federal Poverty Level (FPL). It’s no coincidence that the FPL feature was added. The new federal funding described in “Reason One” above does not tell states exactly how to distribute the funds, but it encourages them to take advantage of existing procedures and programs, such as LIHEAP. The FPL has been a key feature of eligibility criteria for existing CAPs at the local utility level, as well as state and national programs. In fact, the federal government is using percentage of households at or below the FPL as one of the major criteria in determining how large a portion of the $638 million each state and Indian Tribe will receive.

 Caveats

The tool now also includes input areas for administrative and marketing costs associated with a bill assistance program. To track the full cost of providing a CAP like this, these are two important inputs. Administrative costs may be a bit of a guess at the beginning. The guess becomes an even rougher one unless the utility has an existing CAP, or a similar program from which to draw experience. Marketing costs deserve special attention when it comes to CAPs. The cost of effective marketing can be substantial. Low-income customers tend to be hard to reach for several specific reasons. But, partnering with related organizations and programs is important. Research shows that partnering with organizations that provide school lunches or electricity bill assistance is an effective way to reach the right customers about a water CAP. However, the marketing budget entered into the tool should still be robust, so that the CAP does not go unused. The entries for administration and marketing can have a big influence on the tool’s results, so getting them right is important, yet difficult at the onset. In subsequent years, the utility will be able to enter more reliable and time-tested numbers though.

Also, this tool is meant only as a guide. It provides a range of what this type of CAP may cost.

 Can your Water Utility Afford NOT to Have a Bill Payment Assistance Program?

This tool is designed for a water utility concerned about the affordability of its rates on low-income residential customers. In addition, the utility is considering starting a bill payment assistance program that provides financial assistance to customers, but has not yet determined the program's costs.

With the rising cost of water services, coupled with the growing attention to how essential to health these services are, the question is probably better phrased as “Can your Water Utility Afford Not to Have a Bill Payment Assistance Program?