Pricing Water to Ensure Equity and Financial Resilience
Today, the US Water Alliance and Stantec released A Promising Water Pricing Model for Equity and Financial Resilience. This report presents an innovative model for pricing and billing water that represents an opportunity to achieve greater equity by reducing water bills for most low-income households while preserving revenue and improving financial resilience for water utilities.
Like all common goods, affordable water and sanitation access benefits entire communities, not just individual customers. Yet in most places, revenue to provide these services comes from rates based on how much water a customer uses rather than what customers can afford or how various costs are accrued throughout the system. The COVID-19 pandemic further revealed how this approach can expose both individuals and communities to public health and economic risks. It also showed how utilities can be vulnerable to financial resilience challenges when customer debt becomes greater than what indebted customers can realistically pay back.
“The water sector seeks more sustainable business models that safeguard every customer’s ability to afford an essential service. This innovative model can enhance utility financial resilience and reduce the burden water bills can have on low-income households,” says Mami Hara, CEO of the US Water Alliance.
“This model effectively aligns billing with sources of utility costs,” says John Take, Executive Vice President and Chief Growth and Innovation Officer at Stantec. “This alignment is a more equitable approach than solely usage-based billing. Running the data with our partners in Cincinnati showed it can have significant affordability benefits.”
The model developed and presented in this report is an outcome of Cincinnati Water Works’ participation in a nine-city US Water Alliance pilot program to develop alternative affordability practices with the goal of preventing water shutoffs for low-income people.
“This innovative approach to pricing water is intriguing because the model shows it would automatically help the majority of Cincinnati’s low-income customers better afford their water bills, unlike most customer assistance programs that require customers to take action and enroll,” says Verna Arnette, Interim Executive Director with Greater Cincinnati Water Works. “It addresses fundamental drawbacks to current programs, which are often resource intensive to implement and suffer from low participation rates.”