Access & Affordability
Affordability of water service is a growing concern as the costs of providing service continue to increase due to the need to replace aging infrastructure, comply with increasingly strict water quality requirements, and address the host of challenges to assuring sustainable, high quality, reliable service in the future. American Water is providing high quality water service safely, efficiently and at the most cost effective rate possible. The cost impact of providing high quality water service is an important issue for all of our customers, especially those who face economic hardships. Issues surrounding concepts of affordability, however, are complex and must be viewed in perspective. The term itself is ambiguous and difficult to define. In general, annual costs for water service are lower than for other traditional public utility services, such as electricity, natural gas and telecommunications services. In addition, customers, including low income customers, often spend far less for essential water service than for many other non-essential services and products, such as cable television, entertainment, tobacco, or bottled beverages.
Nonetheless, there is no question that for certain customers, increases in the cost of essential services of any type, including water, can contribute to economic hardship. In confronting issues of affordability, however, it is crucial to separate the pricing of the service from programs designed to mitigate adverse impacts on the most vulnerable customers. In order to assure sustainable, high quality service, and to promote conservation and wise use of this scarce resource, it is essential that prices reflect the true costs to provide the service. This is necessary to send appropriate signals about the true value of the service, prevent wasteful usage, and promote the efficient allocation of scarce resources. This is true not only with regard to water itself but also with regard to the resources necessary to treat and deliver water, such as energy usage and associated GHG emissions and the overall carbon footprint of the provision of water service in an era of climate change. In fact, the U.S. EPA has recognized full cost of service pricing as one of four “Pillars of Sustainability” along with along with better management, water efficiency, and watershed protection.
American Water’s policy with regard to affordability, therefore, is that water service should be priced at the true cost to provide the service, reflecting its true value, and the adverse economic impacts on vulnerable customers can and should be addressed through targeted assistance programs. Such programs should be designed to provide that assistance to those that truly need it and not to provide general subsidies to those customers who are not economically distressed. The National Association of Regulatory Utility Commissioners has identified targeted customer assistance programs as a best practice in addressing issues of affordability, along with other regulatory mechanisms such phase-ins, innovative payment arrangements, and rate consolidation of multi-divisional utilities to create economies of scale and spread costs over a larger customer base. Other types of customer assistance programs could be designed at the national level, similar to the Low Income Home Energy Assistance Programs in effect for energy customers.
Most of American Water’s utility subsidiaries have customer assistance programs that contain elements such as these or others that might involve helping the consumer reduce water usage, providing financial assistance and other provisions and we continue to investigate ways to assist our customers in meeting their financial obligations while retaining appropriate pricing policies that promote sustainability and wise use. More information on our financial assistance programs including H2O Help for Others and Low Income Payment Program can be found here.