Faced with the continuing down economy, many water and wastewater utilities have had to raise rates to fund mandated capital programs and cover increases in chemical and energy costs. Declining water sales due to conservation-oriented appliances and smaller households also are driving rates upward.

Managers, governing boards, and fellow customers are increasingly concerned about the impact of rate increases on customers who can least afford them, such as:

  • Low-income customers, whose ranks have grown because of continued higher-than-average levels of unemployment and under-employment
  • Elderly residents on fixed incomes
  • Other financially challenged groups such as customers with disabilities.

In addition to concern for customers’ physical welfare, disconnecting and reconnecting service is expensive. The nominal fees most utilities charge for these actions don’t fully recover the costs incurred.

If you’d like to establish or expand financial assistance to low-income customers, you can learn from utilities like the Portland Water Bureau (PWB) in Oregon, which began discounting rates in the 1980s. According to recently retired Finance and Support Services Director David Hasson, the program was established when the city faced substantial sewer rate increases to fund mandated capital improvements. The program elements described below have been added over the years as the Portland City Council responded to citizen interest in giving financially disadvantaged community members a lifeline for essential services.

Low-income bill discount program basics

The bureau’s bill discount program is available to customers whose household income is less than 60% of the State of Oregon’s median household income; eligibility varies by household size, as shown in the “Income Eligibility Requirements” table on page 48. Multnomah County, which administers other low-income programs including federally and state-funded energy assistance, determines eligibility. Candidates apply at any of nine Community Service Centers throughout the bureau’s 143-square-mile service area.

The discount is half of the bill for those consuming 5 CCF (500 cubic feet) or less a month.

Some utilities discount a percentage of the total bill. Portland, however, opted for a flat maximum credit to encourage conservation. Here’s the impact to city utilities of the 9,300 households that participate:

Portland Water Bureau annual revenue: $137.3 million

Subsidies to discount program: $1.6 million (1.2% of annual revenue)

Fee for county to administer program eligibility: $90,000 annually. The bureau takes this approach to prevent having to add administrative staff and procedures. Other utilities also consider such a partnership to be cost-effective. For example, the Cleveland Division of Water partners with the Cleveland Housing Network, which determines eligibility for the utility’s bill discount program based on criteria the network uses to qualify participants for the federally sponsored Home Energy Assistance Program (HEAP).

Bureau of Environmental Services annual revenue: $265 million

Subsidies to discount program: $3 million (1.1% of annual revenue)

Other forms of assistance

The Portland Water Bureau offers other programs designed to reduce the need for financial assistance and to help customers pay their bills on a timely basis:

  • Conservation information programs. Information on activities households can implement to reduce water usage (and therefore, bills) is distributed through churches and other community organizations
  • Payment plans. Monthly billing based on the customer’s estimated annual budget, which mitigates the seasonal peaks and valleys associated with billing quarterly
  • Crisis vouchers for addressing emergency situations
  • Plumbing fixture repair. Retired plumbers provide up to $1,900 in equivalent service value to repair dripping faucets or running toilets for customers who want to lower their water bill.

Additional “Safety Net” program

To address financial challenges arising from special circumstances that may not be recognized by standard household income criteria, the Portland City Council created a ‘Safety Net’ program. A household can qualify in one of three ways:

  • Change in employment status; i.e., a reduction in work hours, a loss of employment, or transition to a new job with a lower salary
  • Change in family status; i.e., divorce
  • Extraordinary medical expense; i.e., major surgery not covered by medical insurance or that imposes a very high cost for the patient’s share of financial responsibility

Qualifying households are eligible for the following assistance:

  • Immediate $50 credit toward outstanding balances
  • Waiver of all late fees
  • No shut-off of water service
  • Opportunity to work with the bureau to develop an interest-free customized payment plan
  • A credit of half the remaining balance or $300, whichever is less.

Because it addresses extraordinary circumstances, the Safety Net program touches fewer households; approximately 80 participate. Not all end up qualifying for the final credit, however; some have ongoing challenges that prevent them from maintaining the minimum monthly payments they’ve worked out with the bureau.

According to Hasson, affordability programs have received some scrutiny in light of the need to raise rates for all customers to address regulatory requirements related to water quality and the need to renew and replace aging infrastructure. To focus utility revenues on utility-related requirements, for example, some stakeholders have suggested the programs be funded through general revenues rather than utility revenues. The city council remains committed to affordability programs, though, believing they’re an important element in helping financially challenged members of the community to receive essential services.

Matichich ([email protected]) is global technology leader, financial services, for CH2M Hill.

Two Resources

The American Water Works Association’s (AWWA) recently released 6th edition of Principles of Water Rates, Fees, and Charges (M1 Manual)

A webinar accessible on AWWA’s website through Dec. 14, 2012, that covers three successful discount programs:

Initiated because of large required rate increases
Cleveland Division of Water, Ohio
Karen Lisowski, consulting engineer
216-664-2444 ext. 5633
[email protected]

The homestead program provides discounts for the totally and permanently disabled and residents 65 or older. Another program, administered by the Cleveland Housing Network, provides a 40% discount to qualifying households.

Initiated because of large capital program
Cape Coral Utilities, Fla.
Jeff Pearson, utilities director
(239) 574-0710
[email protected]

The water department offers two rate-reduction opportunities based on income and household size: the Hardship Deferral Program, which is based on income, and federally funded Connection Grant Assistance

Customer donation-supported discount program
Orange Water and Sewer Authority, N.C.
Kevin Ray, finance and procurement manager
[email protected]

“Taste of Hope”: Customers can have their bill rounded up to the nearest dollar amount and the additional money donated to the Taste of Hope Fund. Or they can have the authority add any whole dollar amount to their bill as a donation.

Lessons Learned from Water Utility Affordability Programs” webinar fees:

SINGLE VIEWER: Members $75; Nonmembers $120 TWO OR MORE VIEWERS: Members $255; Nonmembers $370.

Visit http://go.hw.net/waterlessons.