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Philly's New Water Pricing Model for Low-Income Residents Isa U.S.-first By Erin Bonney Casey The City of Philadelphia has thrust itself into the broader national discussion on the affordabil ity o f water with its newly launched and tmiqae water pricing model. In an era of rising water rates and constrained municipal budgets, Philadelphia is adapting to shifting market conditions. The goal of PiiiladelpMa's innovative pricing structure, the first o f its kind in tire United States, has been designed to insulate the poor from rising water rates, while mitigating the rise o f late and unpaid water bills. Nationally, residential water and wastewater bills have steadily increased by an average 5.7 percent annually over the past five years, outpac ing average annual income growth (5 percent) and inflation (i-,9percent), according to Biuefield Research. Sate increases in Philadelphia are nec essary for the publicly-owned water utility to cover annual operating expenses and capital expenses totaling an estimated $1.04 billion from 2016 and 2025. Rate increaseslike these are placing pressure on low-income customers and m agnifying the financial challenges faring municipal water utilities. In Philadelphia, water and sewer bills make up approximately 14 percent, or $64 pet month, of average household utility bills including gas, power, mobile phone service, and cable -internet. As a resul t, delinquency has become a major issue for the Philadelphia Water Department (PWP). In total, unpaid water bills exceed $260 million, cou pled with 40 percent o f customers lulling behind on bill paymentsat any given time. This has under mined water and sewer services and forced new pricing strategies. The issue o f water affordability is especially pronounced in Philadelphia, which ranks 22 out o f the top SO large metropolitan areas for water bills. Philadelphia households' water and sewer WATERFM.COM bids have already increased 29 percent since TAP program, up from the approximately 7,500 2012, and another 5 percent increase is planned currently enrolled hi the Water Revenue for 2018. Further, over 20 percent o f households Assistance Program (WRAP). Philadelphia's new faced a water shutoff at least once since 2012. income -based pricing structure follows the exam W ith the city's poverty rate at 26,4 percent, well ple of the energy sector, which implemented above tire 13.5 percent national average, placing income-based rates in Pennsylvania when the additional burdens on the lowest income resi industry was deregulated in the 1900s. dents is unsustainable. Broadly speaking, tiered water pricing struc Attempting to address these issues, the City of tures have traditionally been the most common Philadelphia has launched a tiered assistance pro mechanisrn employed by titilities and municipal! gram (TAP), an income based water rate structure, ties to limit die cost of critical watersupplies, while- making the city the first in the nation to establish charging premiums for higher water usage (e.g. water rates based on income. 'The change stems swimming pools, lawn irrigation). Nevertheless, from PhiladelphiaCity Council's establishment of Bluefkld's analysis shows that rate increases since an Income-Based Water Revenue Assistance 20X2 have had a greater impact on low water users Program (IWRAP) in 2015, W hat makes the pro in 26 o f the top SO largest water utilities hr tire gram tmiqae is that it applies to all households United States. making less than ISO percent of the poverty line, Nationally, water ntlllties are seeking innova without requiring residents to fall behind on bills tive strategies to recoup water utility costs. In some or undergo a lengthy applications process before cases, utilities are shifting to higher fixed rates to qualify for rate assistance. protect utility revenues tram consumption fluc The program requites households making 0 to tuations. Austin Water, for example, is moving 50 percent o f the poverty line to pay 2 percent of towards a structure that relies on higher fixed monthly income for water, households at S I to rates to smooth out utility revenues. Utilizing a 100 percent o f the.poverty line will pay 2.5 percent different innovative pricing mechanism, the City o f income for water, and a household between 101 of Atlanta has levied a I percent sales tax that goes and ISO percent o f the poverty line will pay 3 per towards water, sewer, and stormwater projects cent for water. The department estimates that instead of raising rates by 25 percent over the next dose to 60,000 customers will be eligible for the three years. Meanwhile, the State o f California is in the process o f designing a statewide program to In Philadelphia, water and sewer bills make up approximately 14 percent, or $64 per month, of average household utility bills including gas, power, mobile phone service and cable-internet. provide aid to residents who need help paving their water bilk. The effectiveness o f Philadelphia's new pric ing model remains to be seen, but it is dear that rising costs and public pushback are forcing utili ties to move beyond traditional pricing practices to keep pace. IErin Bonney Casey is a research director for Biuefield Research and leads Bluefield's U.S. municipal water practice. She can be reached at ebonneyiBbluefieldresearch.com. Biuefield Research pro vides data and analysis on U.S. water markets through insight services, reports and consulting. Learn more at bluefieidresearchxorn. T 2011 - WATER FIN A N CE & MANAGEMENT 15 Sierra Club v. EPA 18cv3472 NDCA Tier 5 ED 002061 00094263-00001