907-729-3635 ntwc@anthc.org

Water service affordability is a common obstacle faced by many small communities running their own water systems. Although smaller in size, small community systems must meet the same safety standards and undergo the same treatment processes as larger systems. However, the cost of running smaller systems is shared by fewer customers, making rate affordability a challenge. Decision makers setting monthly rates must strike a delicate balance – how do you generate enough revenue to operate and maintain your community water system while offering the service at a price community members can afford? Look through the resources below for ideas on optimizing water service affordability in your community.

Determining What is Affordable in Your Community

There is no national standard for affordability of water and wastewater service, however, the most quoted figure is that it should not exceed 5 percent of median household income. In other words, if the median (middle of range) income for a household in your community is about $40,000 per year, each household should not pay more than $2,000 per year, or $167 per month, for water and wastewater service combined. Although the figures above may provide a good starting point, there are a number of reasons why using median household income to determine affordability may not be the best approach for your community. The Environmental Finance Center Network has put together a presentation on the Affordability of Water Service that provides information on how to more comprehensively assess what is affordable in your community, along with introducing the topics of customer assistance or affordability programs.

Minimizing Operation and Maintenance Costs

Lower operation and maintenance (O&M) costs reduce the overall revenue needed to sustain the utility. Savings in this category can potentially be passed on to customers in the form of lower monthly bills. Improved routine maintenance is one of the ways to effectively reduce long term O&M costs: the better equipment is cared for on a daily basis, the longer its lifespan and the less frequently it will need to be replaced.

Energy Efficiency

One of the most significant methods to reduce both utility costs and environmental impact of water and wastewater facility operation is to reduce the amount of energy being consumed. Energy efficiency measures will vary by: local environment, heating load, system size and types of fuels consumed. Some common energy efficiency measures to lower cost include:

  • Replacing old incandescent or fluorescent lights with energy efficient LED lighting.
  • Installing occupancy sensors to ensure that lights turn off when rooms are unoccupied.
  • Weatherizing buildings, air-sealing doors, improving insulation.
  • Converting systems to electronic controls, especially boiler controls.
  • In arctic regions, using heat tape only for freeze-up recovery.

In many cases, even more expensive energy efficiency retrofits (such as replacing old pumps with new energy efficient ones or expanding heat recovery systems) turn out to be cost effective over the equipment lifespan. In order to identify and prioritize energy efficiency measures that could make your utility more affordable and environmentally friendly, seek the assistance of an organization that can conduct an energy audit on your facility. A good energy audit should be able to lower your utilities energy consumption by 10-40 percent.

Setting Optimal Monthly Water/Wastewater Bill Rates

How much do customers need to pay each month in order to generate the revenue needed to keep the water and wastewater system running sustainably? Once you’ve developed a budget for your utility and evaluated what rates your community may be able to afford, click on the link below for more comprehensive resources on setting the optimal monthly rate for water/wastewater bills.

Utility Budgets and Rate Setting

Affordability and Customer Assistance Programs

If you find that the customer rates needed to fund operation and maintenance of the system exceed the amount that most customers are able to pay, then you may want to consider a management model that includes partial subsidization of the water system. If you find that the majority of customers are able to pay the required rates, but perhaps lower income customers or elders are not, you may want to consider an affordability program to assist those particularly vulnerable members of the community.

To gain a better overall understanding of affordability programs, the Water Research Foundation offers a thorough document on the topic: Best Practices in Customer Payment Assistance Programs.

Here are some additional examples of affordability programs to consider:

  • Allow customers to set up payment plans to pay down debt in increments over time.
  • Connect customers to public or private social assistance programs that help low-income households pay utility bills.
  • Debt forgiveness: offering a one-time forgiveness of debt to customers experiencing exceptional financial circumstances.
  • Offer reduced rates to Elders, the disabled or lowest income community members. This could be financed by:
    • Slightly increasing rates for all other customers
    • Subsidization from a variety of sources such as:
      • Taxes at the local store
      • Profits from local industry, such as tourism or fishing
      • BINGO revenue
      • Community general fund

Visit the Tohono O’odham Utility Authority’s website to view the outline of their Subsidy Program for assisting qualifying Elders and low-income customers. Visit the Navajo Tribal Utility Authority’s website to read about their Customer Programs, which include a 10 percent discount for senior citizens and customers with serious health conditions.

Customers Still Not Paying Bills

What about when rates are affordable, but some customers still aren’t paying their bills? Click on the link below for a list of tips for improving the proportion of customers who stay current on their bills.

Improving Water and Wastewater Bill Payment

Affordability and Customer Assistance Programs

If you find that the customer rates needed to fund operation and maintenance of the system exceed the amount that most customers are able to pay, then you may want to consider a management model that includes partial subsidization of the water system. If you find that the majority of customers are able to pay the required rates, but perhaps lower income customers or elders are not, you may want to consider an affordability program to assist those particularly vulnerable members of the community.

To gain a better overall understanding of affordability programs, the Water Research Foundation offers a thorough document on the topic: Best Practices in Customer Payment Assistance Programs.

Here are some additional examples of affordability programs to consider:

  • Allow customers to set up payment plans to pay down debt in increments over time.
  • Connect customers to public or private social assistance programs that help low-income households pay utility bills.
  • Debt forgiveness: offering a one-time forgiveness of debt to customers experiencing exceptional financial circumstances.
  • Offer reduced rates to Elders, the disabled or lowest income community members. This could be financed by:
    • Slightly increasing rates for all other customers
    • Subsidization from a variety of sources such as:
      • Taxes at the local store
      • Profits from local industry, such as tourism or fishing
      • BINGO revenue
      • Community general fund

Visit the Tohono O’odham Utility Authority’s website to view the outline of their Subsidy Program for assisting qualifying Elders and low-income customers. Visit the Navajo Tribal Utility Authority’s website to read about their Customer Programs, which include a 10 percent discount for senior citizens and customers with serious health conditions.