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Feature Article SCOTT J. RUBIN Water Costs and Affordability in the United States: 1990 to 2015 NEARLY 25 YEARS AFTER THE D /D B P NEGOTIATIONS FOCUSED ATTENTION ON AFFORDABILITY, IT IS NOW A GOOD TIME TO EXAMINE HOW THE COST AND AFFORDABILITY OF WATER SERVICE IN THE UNITED STATES HAVE CHANGED. wenty-five years ago, the US Environmental Protection Agency (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 had conducted any rigorous analysis of water afford ability, though one early paper had highlighted a growing concern with lowincome households that were unable to afford water service 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 affordability of 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 later, 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 time, 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 affordability in the fifth edition of the AWWA Manual M l. Principles o f Water Rates, Fees and 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 Layout imagery by Shuuerstook.com/Julia-art and Bilon Photos 48 RUBIN I APRIL 2018 110:4 j JOURNAL AWWA 2018 American Water Works Association Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 ED 002061 00095716-00001 Environment Federation (WEF 2007), as well as numerous papers, confer ence presentations, and reports. While surveys of water rates have been conducted biennially for nearly 30 years (AWWA 2 0 1 6 , Duke & M ontoya 1993), comprehensive studies examining the actual cost of water to consumers (that is, water bills) are much less frequent (Rubin 2 0 0 5 , 1 9 9 8 ). The distin ction 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 in average household water consumption that has been observed for the past decade and longer (DeOreo & Mayer 2012, Coomes et al. 2010). As we approach the 25th anniver sary of the D/DBP negotiations that focused attention on affordability, it is an appropriate time to examine how the cost and affordability of water service in the United States have changed over the past 25 years. CHANGES IN WATER PRICES Water prices--the cost per unit of w ater-- have 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 $ 1 1 ,16/month in 1990 to $34.61/ month in 2016 (AWWA 2016, Duke & Montoya 1993). In contrast, over all consumer prices, as measured by the consumer price index and typical incomes as measured by median household income, have approxi mately doubled during the same period, as shown in Figure 1. CHANGES IN WATER BILLS 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 p ast; for example, Coomes et al. (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 Coom es study suggested that multiple factors may have been at play, including the introduction of appliance and plumbing fixture effi ciency standards, a reduction in the average number of people living in a household, drought conditions in some p arts 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 FIGURE 1 Chang es in residential water price, inflation, and median household income (1990-2016) Water price Inflation Median household income Sierra Club v. EPA 18cv3472 NDCA RUBIN I APRIL 2018 110:4 | JOURNAL AWWA 49 2018 American Water Works Association Tier 3/4 ED 002061 00095716-00002 FIGURE 2 Percentage of households receiving water or wastewater bill by number of units in building (1990-2015) 1990 m 2000 m 2010 s B 2015 single-family households that receive a water/wastewater bill, with the per centage remaining at about 70% for customers in detached houses and 60% for customers in single-family attached houses. In contrast, there has been a dramatic increase in the per centage of households in multi-unit buildings that receive a water/waste water bill. Taking buildings with 50 or more units as an example, in 1990 only 2% of households said they received a water or wastewater bill; by 2015 that percentage had increased eight-fold, to 17%. Similar significant increases occurred between 1990 and 2015 for all households in buildings with five or more units. M any households in multi-unit buildings do not receive water bills directly from the water utility provid ing service. Instead, their share of the building's 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 et al. (2004) estimated that increased submetering or other meth ods of billing consumers in multi-unit FIGURE 3 Chang es in residential water and wastewater bill, water price, inflation, and income (1990-2015) -- Single-family water/wastewater bill -- Inflation Median household income -- Water price 50 RUBIN I APRIL 2018 110:4 j JOURNAL AWWA 2018 American Water Works Association Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 ED 002061 00095716-00003 FIGURE 4 Water/wastewater bill for households in single-family buildings as a percent of income (1990-2015) m 1990 2000 m 2010 E3 2015 buildings could reduce water con sumption by between 11 and 26% . This study was part of an effort by USEPA to promote submetering and other billing methods as a way to encourage water conservation in multi-unit 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 the increased prevalence of direct bill ing in multi-unit buildings has contrib uted to declining per-household water usage. This affects utilities significantly, because 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) will exhibit the same trend. An analysis of US census data pro vides a 25-year history of actual water bills that households reported receiving. Figure 3 reproduces the data from Figure 1 but 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/wastewa ter bill received by residential cus tomers of water utilities increased by a more modest (but still substan tial) 2.25 times (an 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 single family buildings shows that water 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 of 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 bills 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 that in 1990, 67% of households in single-family build ings had bills for water and wastewater that were less than 1% of their income. By 2000, that percentage had dropped to 6 1 % , and it has remained at that level through 2015. At the opposite end of the figure, in 1990, 7% of households in single family buildings had water/wastewa ter bills that totaled 3% or more of Sierra Club v. EPA 18cv3472 NDCA RUBIN I APRIL 2018 110:4 | JOURNAL AWWA 51 2018 American Water Works Association Tier 3/4 ED 002061 00095716-00004 their incom e; that percentage increased to 9% in 2000 and was more than 10% in 2015. CONCLUSIONS The water industry has seen many changes in the past 25 years, but some things have remained fairly constant. In the United States, most water consum ers in single-fam ily buildings continue to pay less than 1 % of their income for water and wastewater service. At lower income levels, however, water and wastewa ter bills are increasingly burdensome as costs increase faster than incomes. Indeed, between 1990 and 2015, the percentage of households in single fam ily buildings that paid 3 % or more of their income for water and wastewater increased by 40% , from 7 .4 % of h ouseholds in 1990 to 10.5% of households in 2015. The percentage increase, however, tells only part of the story. The num ber of households in single-family buildings that pay for water or wastewater increased dramatically during 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 2015 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 con tinuing 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 (and effectiveness of) affordability program s, and assess the adequacy of their cus tomer service operations. ABOUTTHEAUTHOR ScottJ. Rubin is a f consultant and attor ney working exclu sively on issues affect BM jfjlf . ing the public utility industries. He was H H ______ M B a member o f the Disinfectants and Disinfection Byproducts Rule negotiated rule- making in 1992 and 1993 when he 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 1994 to open his own practice. During the past 25 years, he has conducted research and provided guidance on affordability and customer service issues for AWWA, the National Rural Water Association, the Water Research Foundation, and several utilities. Rubin can be reached at scott.j.rubin@gmail. com. https://doi.org/10.! 002/awwa. 1062 REFERENCES AWWA, 2016. 2016 Water and Wastewater Rate Survey. AWWA, Denver. AWWA, 2005 (1st ed.). Thinking Outside the Bill: A Utility Manager's Guide to Assisting Low-Income Water Customers. AWWA, Denver. AWWA, 2000 (5th ed.). Manual of W ater Supply Practices M l. Principles of Water Rates, Fees and Charges. AWWA, Denver. Chesnutt, T. & Beecher, J., 1998. Conservation Rates in the Real World. Journal AWWA, 90:2:60. Coomes, R; Rockaway, T.; Rivard, J.; & Kornstein, B., 2010. North America Residential Water Usage Trends Since 1992. W ater Research Foundation, Denver. DeOreo, W. & Mayer, R, 2012. Insights Into Declining Single-Family Residential W ater Demands. Journal AWWA, 104:6:E383. https://doi.org/10.5942/ ja w w a .2 0 1 2.104.0080. Duke, E. & Montoya, A., 1993. Trends in W ater Pricing: Results of Ernst & Young's National Rate Surveys. Journal AWWA, 85:5:55. Mayer, P.; Towler, E.; DeOreo, W.; Caldwell, E.; Miller, I ; Osann, E.; Brown, E.; Bickel, P.; & Fisher, S., 2004. National Multiple Family Submetering and Allocation Billing Program Study. Aguacraft, Boulder, Colo. NDWAC (National Drinking Water Advisory Council), 2003. Recommendations of the National Drinking Water Advisory Council to U.S. EPA on Its National Small Systems Affordability Criteria. US Environmental Protection Agency, Washington. National Research Council, 1997. Safe Water From Every Tap: Improving Water Service to Small Communities. The National Academies Press, W ashington. Rubin, S., 2005. Census Data Shed Light on US W ater and W astew ater Costs. Journal AWWA, 97:4:99. Rubin, S., 1998. A Nationwide Look at the A ffordability of W ater Service. Proc. 1998 AW W A Annual Conf., Dallas, Tex. Rubin, S., 1994. Are W ater Rates Becoming Unaffordable? Journal AWWA, 86:2:79. Ruggles, S.; Genadek, K.; Goeken, R.; Grover, J.; & Sobek, M., 2017. Integrated Public Use M icrodata Series: Version 7.0 [dataset]. University of Minnesota, Minneapolis, https://d0i.0rg/l0.18128/ D010.V7.0. Saunders, M., 1992. W ater and Sewer Rates-- The Emerging Crisis for the Poor. In Proc. Eighth NARUC Biennial Regulatory Information Conf., Columbus, Ohio. Saunders, M.; Kimmel, R; Spade, M.; & Brockway, N., 1998. Water Affordability Programs. AwwaRF, Denver. WEF (W ater Environment Federation), 2007. Affordability o f Wastewater Service. WEF, Alexandria. AWWA RESOURCES Affordability Resource Community. AWWA web page. www.awwa.org/resources~tools/ water-knowledge/affordability.aspx. Measuring Household Affordability for Water and Sewer Utilities. Teodoro, M.P., 201 8. Journal AWWA, 110:1:13. Product No. JAW_0085712. Manual M l, Principles of Water Rates, Fees and Charges (7th ed.). AWWA, 2017. AWWA Catalog No. 30001-7E. These resources have been supplied by Journal AWWA staff. For information on these and other AWWA resources, visit www.awwa.org. 52 RUBIN I APRIL 2018 110:4 j JOURNAL AWWA 2018 American Water Works Association Sierra Club v. EPA 18cv3472 NDCA Tier 3/4 ED 002061 00095716-00005