How the federal government might end shutoffs & keep water flowing during the COVID-19 crisis
The COVID-19 crisis has escalated America’s water and sewer affordability challenge into a full-blown health emergency. Many low-income households struggle to pay for these essential services in the best of times, and the specter of shutoffs for non-payment now threatens to worsen the pandemic. It’s hard to wash hands, cook at home, and maintain adequate sanitation without water service.
In response to the fast-moving crisis, scores of utilities are suspending shutoffs and restoring service for the duration of the pandemic. That is a prudent move in this emergency, but suspending shutoffs and restoring service carries significant financial risks for utilities and does not fundamentally solve the affordability problem, even in the short-run. An end to shutoffs does not mean an end to high prices, late fees, or penalties. When the crisis passes, many customers will still have outstanding balances running into the thousands of dollars and once again face the threat of shut-offs. Meanwhile, in plenty of places shutoffs continue even as COVID-19 rages.
Federal water bill relief?
Last week Congress passed a monumental $2 trillion economic rescue package in response to the COVID-19 crisis sweeping the country. During the helter-skelter Capitol Hill negotiations over the COVID-19 bill, House members proposed $1.5 billion in water assistance relief for low-income households. Modeled after LIHEAP, the federal low-income energy assistance program, the proposal would have provided financial assistance to income-qualified households to help pay for water bills through existing LIHEAP administrative processes. The proposal didn’t make it into the bill that finally reached President Trump’s desk.
Although the water bill assistance would surely have helped many, it would likely have made little difference in the big picture. For starters, while $1.5 billion is a lot of money, means-tested assistance programs are costly to administer and burdensome for customers who need help. This sort of relief can help, but will take time to work its way through administrative processes and into consumers’ accounts to prevent shutoffs. Even at their best, means-tested programs help a small fraction of the eligible population—historically LIHEAP has reached only about 16% of those eligible for assistance. Complicating matters is the extreme fragmentation of the U.S. water sector, with 50,000 mostly small water systems operating across the country. Some of the poorest Americans live in small communities where utilities’ and social service organizations have limited capacity to administer assistance. The need for immediate relief in the face of a pandemic demands faster, farther-reaching action.
Bigger, bolder, faster action*
So what might work better? I’ve long argued that pricing, not assistance programs, is the best way to tackle water affordability. With the pandemic upon us and a massive, emergency need for universal in-home water and sanitation, it’s worth considering a similarly massive, emergency financial response. Here’s an outline of a scheme that could quickly end shutoffs and maximize short-term affordability relief with the lowest management cost to utilities and zero administrative burdens on customers.
The federal government should provide formulaic, conditional grants directly to water utilities. Grants would be awarded as a percentage of each utility’s budgeted 2020 annual rate revenue, with the percentage equal to the community’s poverty rate. For example, Seattle Public Utilities’ 2020 budget calls for $205 million in water revenue and about 12% of its population lives in poverty, so its grant would be $24.6 million. Detroit’s budgeted water rate revenue for 2019-2020 is $131 million and its poverty rate is 33%, so its grant would be $43.2 million.
In exchange for this cash injection, utilities would have to meet simple conditions on pricing and customer administration. Specifically, for the duration of the national COVID-19 pandemic, utilities would:
- End residential shutoffs for non-payment;
- Restore service to all occupied residences currently shut off;
- End residential foreclosures and financial penalties for non-payment or service restoration;
- Forgive all outstanding penalties, fees, and interest on residential water accounts;
- Structure prices so that 6,000 gallons of monthly residential water and sewer service costs less than $58 (eight hours of labor at federal minimum wage).
All community water systems that operate on a fee-for-service basis would qualify, including municipal, tribal, special district, and investor-owned systems. Utilities could use the money to offset revenue losses due to COVID-19 crisis, fund assistance programs, or maintain and improve capital.
Federal funds would be channeled from EPA through existing state Drinking Water Revolving Funds directly into utility coffers, requiring very little additional administrative capacity. There would be no administrative burden at all on customers. Administration for very small systems could be managed through state or county governments.
With annual water utility revenue totaling something like $70 billion and a national poverty rate of 11.8%, the program would end up costing around $8.5 billion dollars. For another $10 billion we could extend the program to cover sewer revenue, too. Until last week, those would seem like absurdly large sums, but they’re rounding errors in the $2 trillion-dollar package that Congress just approved.
Emergency & aftermath
To be clear, this isn’t a carefully considered, meticulously modeled plan—it’s an idea meant to get water flowing immediately in response to an urgent need. These are big, blunt policy instruments, but the proposal outlined here could be introduced on Monday, signed into law by Wednesday, and water service restored in communities across the country by Friday. In a pandemic every moment matters.
Lasting, sustainable solutions for the water sector will require more fundamental reforms to the way that we govern, finance, and manage these critical systems. I hope that once the COVID-19 storm fades, a renewed commitment to improving the American water sector is one of its silver linings.
*Thanks to Wendi Wilkes for prompting and helping me think this through via Twitter. She deserves a share of the credit if you like this idea, but no blame if you hate it.
Lessons from California water conservation, 2019
Tough water times may be back in California. After the Golden State suffered through a historically severe drought from 2012-2017, pleasantly wet weather in 2018-2019 refilled reservoirs and replenished mountain snowpacks. But the state’s drought monitor shows that the past few months have trended drier, and water managers are worried that the state might be slipping back toward another drought.
One fortunate legacy of California’s recent struggles with drought is the California Water Board’s investment in data collection and dissemination. Researchers are learning important lessons about water management from that wealth of data on water consumption and conservation. Complete data for 2019 are now available, and I’ve just had a first look.
Three things emerge from my initial cut at the 2019 data that merit mention against the ominous backdrop of a looming drought.
1. A way of life
California’s overall urban water use remains down significantly from the pre-drought days. The state government established emergency conservation rules during the peak of the drought, cutting statewide urban water consumption by nearly 25%. But Governor Jerry Brown and other leaders also vowed to make water conservation “a way of life” that would extend beyond the emergency.
Californians seem to have taken the goal to heart, at least in aggregate. Though water conservation is not at the zealous peak we saw in 2015-2016, it remains strong:
Falling conservation in 2018 led to some hand-wringing, but conservation rebounded in 2019 to a statewide aggregate 18.1% relative to the state’s official 2013 baseline. That’s pretty remarkable and suggests that much of the reduction in California’s urban water demand is more or less permanent. Absent severe drought or monsoon-like precipitation, California’s overall water conservation will likely remain in the mid-to-high teens for the foreseeable future. That’s a public policy success story.
2. Persistent public-private disparity
One of the most fascinating findings that emerged from my earlier analysis of the California drought with Youlang Zhang and David Switzer was that the state’s private, investor-owned utilities conserved significantly more water than local government utilities during the drought.* We linked that difference in drought response to the institutions that govern water finance. We also found that the public-private conservation gap persisted even after the drought ended, with the greatest disparities during the summer when water demands are at their highest. Back in 2018 your humble blogger forecasted that that “public and private conservation will converge in the spring and diverge again in the summer and autumn.” And indeed, the pattern held: there was essentially no difference between public and private water utility conservation during the winter months, but during the 2018 May-September peak season, California’s investor-owned systems saved more water than their local government counterparts.
Did the pattern persist in 2019? In short, yes:
As you can see, public and private utility conservation move in pretty close parallel. During the non-peak period (January-April and October-December), there is essentially no difference in average conservation by ownership. But a public-private gap emerged again during the May-September peak period. In 2018 the difference was 2.3%; in 2019 the gap was smaller—investor-owned utilities saved an average of 1.5% more water than local governments. To give that percentage some context, think of it this way: if public utilities saved at the same rate as private utilities in 2019, the difference would have been about 15 billion gallons, roughly equivalent to the City of Long Beach’s annual water consumption.
The public-private disparity in summertime conservation now also appears to be a way of life in California. The difference is almost certainly related to pricing and revenue. Decoupling über alles.
3. Indoor outpacing outdoor?Finally, the five years of data now in front of us show how California’s urban water conservation relates to overall seasonal demand. In 2015, when severe outdoor irrigation restrictions were in effect for much of California, 70% of the state’s conservation came from reduced demand in the peak season. Since then, the share of peak season consumption has fallen to about half:
In 2019 non-peak conservation crept up to 52% of overall savings. It’s hard to infer exactly what’s driving this pattern from aggregated monthly data, but the picture suggests that the most persistent water savings seen in California over the past five years has come from indoor efficiency. Average water consumption in 2019 was about 98 gallons per person per day (gpcd), but some cities are far lower. For example, water demand in conservative San Francisco shows hardly any seasonal peak at all, and averages just 42 gpcd—a level approaching the theoretical minimum to sustain developed world conditions.
While there are probably still plenty of savings to be had from indoor efficiency, meeting the challenge of another potential drought year—and driving further sustainable conservation—will require tackling peak demands through pricing and regulation. Get ready for another year of water cops and rate revolts.
© 2020 Manny Teodoro