Affordability top of mind at Water Utilities Issues Forum
June 13, 2018

The affordability of water has been a lingering concern for years. But as communities raise rates to meet the enormous and widespread water infrastructure challenge, the issue has moved to the front burner.

On Thursday at 11:15 a.m. in Mandalay Bay Ballroom A, the Water Utilities Issues Forum will explore the complicated relationship between water affordability and rates that reflect the full cost of service.

AWWA CEO David LaFrance will moderate the forum, which includes Rick Giardina, executive vice president of Raftelis; Manny Teodoro, associate professor at Texas A&M University; and Carla Reid, general manager of the Washington Suburban Sanitary Commission (WSSC).

“Water utilities have the complicated task of managing the tension between investing in their systems with revenue from water rates and assuring that water is affordable for everyone in their community,” LaFrance said.

The lively, facilitated discussion will cover a range of affordability topics and include a question-and-answer period with the audience.  

Giardina said he will focus on the idea that rates are the first and obvious answer to address affordability concerns.

“Yes, they can co-exist, and yes, we can have equity and still use rates to address affordability concerns,” Giardina told Connections

“A big issue is public communication and engagement,” Giardina added, “and whether that’s from the point of view of making folks aware of assistance programs, to maybe the other end of the spectrum -- working with decision and policy makers to arrive at systems programs, rate design, and rate structure that address the values of their community with regard to affordability.” 

Teodoro said he will discuss measuring affordability, the fact that providing water at an affordable rate is a core mission for utilities, and the idea that good decision-making about affordability requires conversations about values.

“We need an industry-wide conversation within AWWA and our sister organizations about the meaning of affordability,” Teodoro said. “People who run utilities look to us as leaders and we need to lead. AWWA creates standards for all kinds of technologies. Maybe we need to think about setting standards for affordability, or at least have that conversation.”

For the most part, when people think about affordability, Teodoro said, “they are not thinking about whether it is affordable to have a two-acre lawn or a prized orchid collection. What they’re really thinking about is, ‘Can people drink, cook, clean, and take care of basic household sanitation?’ ”

Forum panelist Carla Reid has first-hand experience with this topic. WSSC is in the midst of selecting a new rate structure based on various policy considerations, including affordability. Its current rate structure was adopted 25 years ago and the Maryland Public Service Commission (PSC) recently ordered WSSC to develop a new rate structure. The PSC determined that the existing structure was unreasonable because it was preferential to low-usage customers.

WSSC commissioners and management unanimously recommended three rate structure alternatives to local elected officials for their review and input following a transparent and collaborative public outreach process. In total, WSSC held or participated in nearly 30 public meetings and/or hearings -- which were attended by more than 1,500 customers -- before making their recommendations.

“The three rate structures we are recommending reflect customer preferences and the rate-setting policies selected by the commissioners, provide a more predictable revenue stream to pay for infrastructure improvements and better align costs with rates,” said Reid, who began her career at WSSC in 1986 and is the first woman to serve as general manager in WSSC’s 100-year history.

 The new rate structure is expected to take effect in July 2019, the same time WSSC will unveil a more comprehensive customer assistance program designed to address affordability concerns.

Giardina said he will also discuss the current rate design in Phoenix, and in other cities, and how the affordability issue has changed dramatically in the past decade.

“I have been doing rate studies for 40 years,” Giardina said, “but 10 to 15 years ago, we weren’t even talking about affordability. Today, we don’t do a study without considering affordability and I think that’s driven by two things – the fact that the cost of the commodity, the service we are providing, has increased so much that it is getting everybody’s attention, and the growing groundswell of belief that clean water for essential use is something we all should have.”

The challenge now, he said, is to figure out how – from both ratemaking and policy standpoints – to identify who is at risk, and how to address that risk through a combination of resources and customer assistance programs.

“So, this is a coming together of all these things and a great opportunity for us in the industry and AWWA to set some standards, develop some guidelines, and stake out a position on affordability and solutions to it,” Giardina said.

AWWA and a number of partners will host the first Transformative Issues Symposium on Affordability Aug. 6-7 in Washington, D.C.