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Feature Article SCOTT J . RUBIN W ater Costs and Affordability in the United States: 1 9 9 0 to 2015 EARLY 2 5 YEARS AFTER THE D /D B P NEGOTIATIONS FOCUSED ATTENTION ON AFFORDABILITY, IT IS N O W A GOOD TIM E TO EXAM INE H O W THE GOST AND AFFO RDABILITY OF WATER SERVICE IN THE UNITED STATES HAVE CHANGED. wenty-frve years ago, the US Environmental Protection Agency I (USEPA) conducted a negotiated rulemaking on disinfectants and disinfection byproducts (D/DBP) in drinking water. One important issue that arose during these negotiations was how to determine whether new regulations would be affordable, Up until that time, no one bad conducted any rigorous analysis of water afford ability, though one early paper had highlighted a growing concern with low- income households that were unable to afford water sendee in some com munities (Saunders 1992). So, late one night during the negotiations, a few people huddled around a laptop computer in a hotel room and started look ing at income distribution curves and other data that might help inform deci sions about the affordability7of water service in the United States, These efforts resulted in several informative presentations and one of the first papers focused on water affordability (Rubin 1994). A few years latep the National Research Council issued a report on safe drink ing water that included a discussion of affordability (National Research Council 1997), At around this same rime, the Safe Drinking Water Act Amendments of 1996' included both specific affordability provisions and the state revolving fund program to help provide lower-cost capital to utilities. Since then, the water and wastewater industries* thinking about affordability has been shaped by a com prehensive study of water affordability programs (Saunders et al. 1998), the inclusion of a chapter on affordability7in the fifth edition of the AWWA Manual M l, Principles o f Water Rates, Fees an Charges (AWWA 2000), a report on affordability from the National Drinking Water Advisory Council (NDWAC 2003), and the publication of affordability guides by AWWA (2005) and the Water 48 aaesn ; a r e a gig n w j journal awwa 2018 American W ater Works Association Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 ED 002061 00095390-00001 Environment Federation (WEE 2007), as well as numerous papers, confer ence presentations, and reports, While surveys of water rales have been conducted biennially for nearly 30 years (AWWA 2016, Duke & M ontoya 1993), comprehensive studies examining the actual cost of water to consumers (that is, water bills) ate much less frequent (Robin 2005, 1998), T he distinction is important, because as Chesnutt and Beecher (1998) noted, conservation programs can be expected to increase water rates (that is, the price per unit of water), but often result in lower bills for water service (that is, the total cost to the consumer). Indeed, this distinction has become even more critical In light of the signifi cant decline to average household water consumption that has been observed for the past decade and longer (DeOreo & Mayer 2012, Coomes et ah 2010), As we approach the 25th anniver sary of the D/DBP negotiations that focused attention on affordability, it is an appropriate tim e to examine how the cost and affordability of w ater service in the United States have changed over the past 25 years, CHANGES IN WATER PRICES Water prices--the cost per unit of w a te r-h a v e tripled since 1990. According to data collected through biennial surveys, first by Ernst & Young and now by Raftelis Financial Consultants and AWWA, the typical cost in the United States for a resi dential custom er to purchase 1,000 ft3 of water increased from $ll,16/m onth in 1990 to $34.61/ month in 2016 (AWWA 2016, Duke & Montoya 1993). la contrast, over all consumer prices, as measured by the consumer price Index and typical incomes as m easured by median household income, have approxi mately doubled during the same period, as shown in Figure 1. CHANGES iN WATER BULLS As mentioned, there is an impor tant difference between the per-unit price of water and the actual water bills customers receive. Over the past 25 years, two significant trends have affected customers' water bills. First, the typical household uses less water now than it did in the past; for example, Coomes et af, (2010) esti mated that between 1978 and 2008, typical household water consump tion declined by approxim ately 13%. While the exact sources of the decline are not known with certainty, the Coomes study suggested that multiple factors may have been at play, including the Introduction of appliance and plumbing .fixture effi ciency standards, a redaction in the average number of people living in a household, drought conditions in some parts of the country, and increasing water prices. In addition, data collected by the US Census Bureau show a dramatic increase in the percentage of custom ers in multi-family housing units (e,g,, apartment buildings, condominiums) that receive a bill for water or wastewater service. Figure 2 provides an analysis of US census microdata from 1990 to 2015 using data compiled by the University of Minnesota (Ruggles et al, 2017). Figure 2 shows that dur ing this 25-year period, there has been little change in the percentage of FIG U R E 1 Changes In residential w ater price, inflation, and median household income {1990-2016} Water prie inflation ttedsan househo incoms Sierra Club v. EPA 18cv3472 NDCA atiem j a?ru 20!S* n:< \ jcurkai awwa 4$ 2018 American Water Works Association Tier 3/4 ED 002061 00095390-00002 FIGURE 2 Peresntage of households receiving water or wastewater bill by number of units In building I1S9&-ZS15) s 1SSO m 2010 single-family households that receive a water/wastewater bill, with the per centage remaining at about 70% for customers in detached houses and 6'0% for customers m single-family attached houses. In contrast, them has been a dramatic increase in the per centage of households in multi-unit buildings that: receive a water/wastewater bill Taking buildings with 50*3 or more units as an example, in 1990 only 2% of households said they received a water or wastewater bill; by 2015 th at percentage had increased eight-fold, to 1700, Similar significant increases occurred between 1990 and 2015 for all households In buildings with five or more units. Many households in multi-unit buildings do not receive water bills directly from the water utility provid ing service. Instead, their share of the buildingfs water bill is determined through submetering or the use of ratio billing methods by building own ers and operators. In a comprehensive study sponsored by USEPA and others, Mayer er al, (2004) estimated that increased submetering or other meth ods of billing consumers in multi-unit FIG U R E 3 Changes in residential w a te r and w astew ater h ill, w ater pries, inflation, and income {1990-2015} Single-family wafer,%ssiewater fell -- Mat -- Median heu&etfeks income Wafer price 3 m -i S 1990 2000 sets ear 5 S t e m { A P B a S O i i * 518:4 ; JO 8tAlAW fA 2018 American Water Worte Association Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 acts ED 002061 00095390-00003 FIGURE 4 Water/westewa l for households sosingfo-fomily buildings as a parcarstsf income (1890-21S1 m 1990 rn 2008 !U 2810 E 201S buildings could reduce wret con sumption by between 11 and 26% . This study was part of an effort by U5EP to promote submetering and other billing methods as a way to encourage w ater conservation in rm ltkm it buildings, and from the cen sus data, it appears that these efforts have achieved some level of success. The combination of declining con sumption in single-family housing and die Increased prevalence of direct bill ing in multi-unit buildings has contrib uted to declining per-household water usage, Hus affects utilities significantly, bemuse even though water prices are increasing much faster than the rate of inflation, it does not necessarily follow that water bills (the product of the water price and water consumption! wall exhibit the same trend. An analysis of US census data pro vides a 25-year history of actual water hills that households reported receiving. Figure 3 reproduces the data from Figure 1 hut adds a dashed line showing the increase in water/ wastewater bills from 1990 to 2015 for households in single-family build ings. These are the households that are most likely to receive their water or wastewater bills directly from the utility' rather than from a third party. That is, between 1990 and 2015, while the price of water tripled (a com pound annual Increase of 4,5% ), the average water/wastewater hill received by residential cus tomers of water utilities increased by a more modest (but still substan tial) 2,25 times fan annual increase of 3.3%). When compared with the rate of increase in general prices median incomes over this period, it does not necessarily follow that the same effect would occur for house holds with incomes higher or lower than the median, An analysis of US census data for households in singlefamiiy buildings shows that w ater costs as a percentage of income have been fairly stable, except for house holds with the lowest incomes. The combination of declining consumption in single-family housing and the increased prevalence cf direct billing in multi-unit buildings has contributed to declining per-household water usage. <1,8 times or 2.4% per year) and incomes (1,9 times or 2,6% annu ally), w ater hills increased by between 0.7 and 0,9% per year in excess of the increase in inflation and incomes, respectively, CHANGES IN THE AFFORDABILITY OF WATER SERVICE While w ater/w astew ater bills increased faster than the increase in Figure 4 shows rhar in 1990,67% of households in single-family build ings had bills for water and wastewater that were less than 1% of their income, % 2000, that percentage had dropped to 61% , and it has remained at that level through 2015, At the opposite end of the figure, in 1990, 7% of households in singlefamily buildings had water/wastewa ter bills that totaled 3% or more of Sierra Club v. EPA 18cv3472 NDCA RUBIK \ APRIL 2018 U:4 ) JOURNAL AWWA SI 2018 American Water Works Association Tier 3/4 ED 002061 00095390-00004 their incom e; th at percentage increased to 9% in 2000 and was snore than 10% in 2015, eo iC L u sio h is The water industry has seen many changes in the past 25 years, bar some things have remained fairly constant. In the United States, most water consumers in single-family buildings continue to pay less than 1% of their income for water and wastewater service. At lower income levels, however, water and wastewa ter hills are increasingly burdensome as costs increase faster than incomes. Indeed, between 1990 and 2015, the percentage of households its singlefamily buildings that paid 3% or more of their income for water and wastewater increased by 40% , from 7.4% of households in 1990 to 10,5% of households In 2015. The percentage increase, howeveg tells only part of the story. The num ber of households in single-family buildings that pay for water or waste water increased dramatically daring the 25 -year period, from 47 million to 66 million households, Thus, in 1990 about 3,3 million households paid 3% or more of their income for water and wastewater. By 201.5 the number of households devoting 3% or more of their income to water and wastewater had more than doubled to 6.8 million households. Those in the water industry have greatly increased their understanding of the affordability of water services to lower-income customers. Those efforts, however, have not stopped the costs of water services from continning to increase faster than incomes. If that trend continues, it can be expected that lower-income households will have even more dif ficulty paying their water and wastewater bills in full and on time. Con sequently, water and wastewater utilities will need to remain vigilant in controlling costs, continue to eval uate the need for land effectiveness of) affordability program s, and assess the adequacy of their cus tomer service operations, ABOUTTHEAUTHOR Scott], Rubin is a ing J*. consultant and attor ney working exclu sively on issues affect- the public utility industries. He was a member o f the Disinfectants and Disinfection Byproducts Rule negotiated rule making in 1992 and 1993 when be was serving as chair o f the Water Committee o f the National Association o f State Utility>Consumer Advocates, He left government service in 1934 to open his own practice. During the past 2S years, he has conducted research and provided guidance on affordability and customer sendee issues for AW W A, the National Rami Water Association, the Water Research Foundation:, and several utilities. Rubin can be readied at $mtt.j,mbm@ g?milcom, topssddoiorgil, ;?002/wwa,l2 REFERENCES AWWA, 2018, W1B Water end H/astewaier Bete Survey. AWWA, Denver, AWWA, 8095 0 st ed.), Thinking Outside the Sill A Utility Manager's Beide te Assisting lew-income Water easterners. AWWA, burner. AWWA,, 2080ISth ed.), Manuel of Water Supply Practices; M3, Principles of Water Bates, fees ami Charges, AWWA, Denver Chesnutt,! & Beecher, J,, 3838. Canservsden Rates in the fieai World, Journal awwa, soam Coemes, R;Rockaway,T; Rivard, j,; & Kernstein, 8., 2030. North America Residential Water Usage Trends Since 1392. Water Research Feondstien, Deliver, DeOreu, W. & Mayer, P.,2012. Insights Inis Declining Single-Family Residential Water Demands. JournalAWWA, 304:6:8383.. https#Moig/mS342i' iawwa,3832,104.0080. Duke, E, &Mantays, A., 1983. Trends inWater Pricing: Desalts of Ernst & Young's National Rate Surveys. Journal AWWA, 85:8:85. Mayer, P,;!bw!et .; DaOreo, W.; Celdweil, 8.; Miller, T.; Osann, 8.; Brawn, .; Bickel, 8; & Fisher, S,, 234. Notional Multiple FamilySiibmtmng endAllecatien Bitting Program Study. Aguaereft, Sadder, Cels. NDWAC INatianai Drinking Water Advisory Council), 2803,Baemmenriatims atthe NationalBanking WaterAdvisory mmcii teUS, SPA an to NatienaiSmaltSystems Afbrdabiihy Cfttma. US Envirsnmentsi Prmeedim Agency, Washington, National Research Council, 1982. Safe Water from Every Tap: Improving Water Service te Small Camtsnmitim, The National Academies Press, Washington. Rubin, 2885. Censes Oats Shed Light art US Water and Wastewater Costs. Jaumal AWW9, SIAM. Babin, S., 1898,A Nationwide leek at he Affordability of Water Service. Pros, 1988 AWWA Annual Coni, Dallas, Tex. Rubin. $,, 3934.Are Water Rates Becoming Unaffordable? Journal AWWA, 88:2:28. Reggies, Ssmadek, ft; Soeken, ft; Drover; J.; & Sobek, M., 281?, integrated Public Use Microdata Series: Version l.B [dataset). University of Minnesota, Minneapeis, https://dffi.nrg/30.1832g/ D830.VJ.O. Ssafiders, M., 3932.Wafer and Sewer Bates-- The Emerging Crisis farthe Peer. In Pme, Eighth NASUC Biennial Regulatory information Cent, Columbus, Ohio. Saunders, M.; Kimmai, R; Spade, M.; & Srnakway, N,, 1938. WaterAffertiebitity Programs. Awwa RF, Denver, WEE iWater Environment Federation), 2007. Affardebiiityot Wastewater Service. WEE, Alexandria. AWWA RESOURCES * AhordabilityHesoarce Comroumty.AWWA web page, www.awwa.org/resourees-toois/ j water-hnowiedge/afiordahslstyaspx. | Measuring Household Affordability for Water and Sewer Utilities, Teodoro, M.E, 2019. journal AWWA. 110:1:13, Product No. jRW JM HSllZ, *Manual M l, Prmdfdes of Water Rates, fees and Charges 17th ed.). AWWA, 201.7, AWWA Catalog No, 30001-7E. These resources have been supplied by journal AWWA staff, for information on these aad other AWWA resources, vis i www.awwa.org. h i 8U8HS 5 APBN. S 1 8 * 136:4 ; JO URM Al AWWA 2018 American Water Works Association Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 ED 002061 00095390-00005 Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 ED 002061 00095390-00006