Water Sector Reform #5: Environmental Justice
With a major federal investment in water infrastructure possibly on the horizon, the United States has a once-in-a-generation opportunity to leverage that money into a structural transformation of America’s water sector. This is the last in a series of posts outlining broad proposals to reform the management, governance, and regulation of U.S. drinking water, sewer, and stormwater systems. The first proposed reform was consolidation of water utilities; the second was an overhaul of financial regulation; the third was investment in information technology; the fourth was investment in water sector human capital.
My fifth proposal is to build environmental justice into federal water regulations.
Drinking water & environmental justice
It’s difficult to overstate just how much the Flint Water Crisis changed the national conversation on drinking water. As I’ve observed before, Flint’s water contamination wasn’t the first, or worst, or largest drinking water crisis in America in recent years, but for it’s the one that put a spotlight on water infrastructure. Last month a similar lead contamination in Newark grabbed headlines across the country again.
The lead contamination crises in Flint, Newark, and elsewhere turned the spotlight on an uncomfortable reality: America’s water systems problems are not just about infrastructure management, they’re also about institutional politics, race, ethnicity, and poverty. There’s a growing recognition that water infrastructure is an environmental justice issue. That’s expanded the political coalition interested in water infrastructure and raised the stakes in the politics of drinking water.
The color of drinking water
Anecdotes and case studies about drinking water and environmental justice abound. Looking for more rigorous evidence, David Switzer and I conducted the first nation-wide analysis of the relationships between race, ethnicity, socioeconomic status, and Safe Drinking Water Act (SDWA) compliance. Here’s what we found:
The red areas of the graph show high likelihood of drinking water violations, the blue areas show low likelihood. These results provide strong evidence of a systemic injustice in utilities serving low-income communities of color across the United States. In communities with higher populations of black and Hispanic individuals, SDWA health violations are more common. What’s more, race and ethnicity seem to matter most in determining drinking water quality in the poorest of communities. My analysis of public experiences with drinking water service also reveals important disparities by race and income. The racial disparities are far, far worse in Indian Country. My study with Mellie Haider and David Switzer found that Clean Water Act violations are 23% higher and SDWA violations are 59% higher on tribal facilities compared with non-tribal facilities.*
The reasons for these racial, ethnic, and socioeconomic disparities in water quality and utility service are varied and complex. In some cases it’s a familiar tale of urban de-industrialization and white flight; in others it’s a legacy of racial discrimination in housing or infrastructure development programs. Environmental injustices in drinking water aren’t just urban phenomena, either: majority-black and majority-Hispanic communities suffer from poor water quality across vast swaths of rural America—to say nothing of Indian Country.†
Unfortunately, the regulatory response to ongoing water quality problems in poor, minority communities is to loosen regulations or look past violations. Outsiders to the water sector are sometimes surprised to learn that there are no federal laws requiring racial, ethnic, or socioeconomic equity in water quality.
If we are going to pour hundreds of billions of federal dollars into water infrastructure, that money must bring us closer to environmental justice. My final water sector reform proposal, then, is to build environmental justice into federal water regulations. That means, at a minimum:
- Establishing standard metrics to assess racial, ethnic, and socioeconomic equity in environmental conditions and infrastructure investments. I’m working on some new environmental equity metrics that I hope to put into practice soon.
- Utilities must collect and publicly report data on service shutoffs and restorations.
- Regulators must demonstrate racial, ethnic, and socioeconomic equity in inspections and enforcement actions.
Eligibility for all federal infrastructure funding must be contingent on utilities demonstrating equity in conditions, investment, and administration, or adequate progress toward that goal. Extra funding and technical assistance should be targeted at communities that suffer from significant disparities due to historical or structural disadvantages—most obviously tribal systems.
Together with the other systemic reforms I’ve proposed, this commitment to environmental justice can rebuild trust in America’s water systems and build a broad political coalition in support of investment in the nation’s most essential infrastructure.
*We’ve got more research on tribal water issues in the, er, pipeline.
†Environmental injustice in rural America often come as a surprise to big city folks, who often seem to think that “rural” means “white.” Racial/ethnic disparities in water quality don’t surprise anyone who’s spent time in South Texas, Northern Arizona, or Alabama’s Black Belt.
Devils (and angels) in the details, Part 2
In early January the California Water Board released its draft proposal for a statewide low-income water bill assistance program. My last post summarized the path-breaking proposal and its promise for addressing affordability in the Golden State. It’s an admirable piece of work on a challenging and complex issue. The next couple posts wade into the tall policy grass in search of snakes. This one looks at the volume of water to be subsidized under the proposal.
Assistance for how much water?
An assistance program for water implies that there is some level of water consumption that is socially important, and that without assistance, water consumption would either fall below that level or force households to sacrifice other essential goods in order to pay for water. What is that level of water consumption? How much water is so important that taxpayers should subsidize it?
For California’s draft assistance proposal, the answer is 12 ccf (about 9,000 gallons) monthly per household.
Consumption in context
Not all residential water use is the same. Public policy discussions of water affordability are mostly concerned with essential needs like drinking, cooking, cleaning, and sanitation. We’re not generally concerned with the affordability of watering lawns, washing cars, or filling swimming pools.
The proposal’s 12 ccf price guideline implies 75 gallons per capita per day (gpcd) for a family of four. To give some context, California utilities average about 100 gpcd, which makes 75 gpcd seem pretty low. But it’s much higher than California’s 55 gpcd water efficiency standard (set to drop to 50 gpcd by 2030), and higher than typical water use in many California communities today. My own past affordability analyses have assumed 50 gpcd for essential use*; conservative San Francisco already averages just 42.4 gpcd for overall demand (not just essential use).†
There’s nothing magic about any of these numbers; in the end, the level of water consumption that is deserving of public subsidy is a decision to be made through the democratic process. But 12 ccf is a lot of water if the policy’s aim is to provide for essential water use. The draft proposal notes that the 12 ccf level is intended to allow for larger households and “modest amounts of outdoor irrigation.”
A perverse incentive
Why does any of this matter? Beyond the normative question of whether taxpayers ought to subsidize outdoor irrigation, a 12ccf standard may have the unintended effect of pushing water utilities toward less affordable, less conservation-oriented pricing.
Low fixed rates and low prices for essential water use make water affordable for everyone, whether or not they participate in an assistance program. Coupled with progressively higher volumetric prices, such rate structures help keep water affordable and encourage conservation. Unfortunately, many utilities have recently responded to falling average demand and revenue volatility by raising fixed rates and imposing higher costs for low-volume use. That’s good for utility revenue, but bad for affordability.
That’s where the perverse incentives creep in. A 12 ccf standard for assistance is likely to exacerbate the trend toward utilities raising fixed charges and low-volume rates. With the state’s assistance program providing aid to low-income customers, utilities can raise rates on volumes below 12 ccf with less concern for affordability impacts. That will naturally dampen the conservation incentive, as higher priced water becomes less expensive. Less obviously, higher prices for lower volumes will exacerbate affordability problems for anyone who is not enrolled in the assistance program. The draft proposal assumes an 84% participation rate; for the 16% of households who don’t participate (for whatever reason), affordability will probably get worse.
A footnote acknowledges a danger of strategic rate-setting (told you I’d get into the weeds!), observing that systems could respond to the assistance program by “shifting the rate burden to consumption levels below 12 CCF, and thus elevate the benefit for eligible households.” Apparently the concern is that utilities will game the assistance program as a means of channeling more state money to local customers. But from an affordability perspective, the more worrisome prospect is that the state’s assistance program will incentivize regressive pricing that ironically makes water less affordable for many.
This perverse incentive will exist no matter what volume is subsidized, but the greater the volume subsidized, the more perverse the incentive will be. If an assistance program is supposed to support a human right to water, then a more modest 6-8 ccf standard for support is more defensible and less susceptible to rate design gamesmanship.
*My January 2018 article on affordability measurement prompted a grouchy email from a San Francisco official who complained that 50 gpcd was an unrealistically high essential volume for evaluating affordability
†I chuckled when typing: “conservative San Francisco.” Our language is funny, sometimes.
Devils (and angels) in the details, Part 1
In 2012, to great fanfare, California governor Jerry Brown signed into law AB 685, which declared a “right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.” Last spring I observed that the crucial but unglamorous task of turning the lofty rhetoric of rights into a pragmatic program fell to the California Water Board staff under AB401.
Fast forward seven years: the Golden State now has a new governor, and he’s eagerly established himself as a champion for water access and affordability. Earlier this month the Water Board published its draft proposal for a statewide low-income water rate assistance program with an estimated annual price tag of $606 million. As with so many other areas of public policy, California is blazing a trail that other states and communities could follow. There are lots of interesting things about the proposal. Mostly, though, it’s big and it’s bold.
The proposal is complicated. At its heart is a three-tiered assistance program that would provide different discount of 20%, 35%, or 50%, depending on the combination of household income and monthly water prices at 12 ccf (about 9,000 gallons). Customers could qualify if their household income is less than 200% of the Federal Poverty Level (FPL).
The proposal is vague about how customers would enroll in the program, how often renewals would be required, who would make eligibility determinations, and who would be responsible for collecting and distributing benefits. The proposal smartly lays out several options for how the program would deliver benefits to participants. Eligible customers could get a water bill credit, an energy bill credit, a tax credit, or a direct payment via Electronic Benefits Transfer (EBT).
To pay for these benefits, the proposal calls for “progressive revenue sources,” including an increased tax on income over $1 million a year and sales taxes on bottled water. Under California law, these would require a supermajority vote in the legislature and a ballot referendum, respectively.
Go big or go home
The Water Board’s proposed program is remarkable in its breadth and boldness. The federal government’s LIHEAP has provided home energy bill assistance for decades, but the proposed California plan would be the country’s first statewide water bill assistance program, promising benefits targeted at low-income water utility customers (as opposed to subsidies for the utilities that serve them). The proposal envisions reaching as many as 4.3 million households. The three-tier eligibility and benefit framework is an admirable effort to match benefit levels to customers’ needs.
The proposal is also unabashedly redistributive in its aims, using tax revenue to subsidize low-income households’ water bills. This sort of redistributive approach is important for an assistance program in a state as large and economically diverse as California. The benefit levels are modest but significant, and although they provide percentage discounts, the three tiers smartly designed with absolute cost burdens in mind.
On the other hand…
Some aspects of the proposal are worrisome. Some bits are merely (and probably intentionally) vague, others could be addressed with some minor tweaks; but others are more fundamental. In the next few posts I’ll look at that other hand.