Real Action, Not Just Words on Affordability

BY CHRIS HORNBACK & NATHAN GARDNER-ANDREWS | WASHINGTON, DC

For nearly two decades, NACWA and its public utility members have been working to raise awareness and make real policy changes to address the affordability pressures mounting in communities across the country as a result of mandated federal spending on Clean Water Act (CWA) requirements.

Over the years, some in the federal government and many environmental activist groups suggested that NACWA and its members were simply using the affordability issue as a way to get more time to complete the required investments – or as a ruse to get away with doing less. But the reality is that the affordability challenge is real and has deep impacts in many communities across the nation – often hitting the poorest households and households of color the hardest. At a time when environmental justice (EJ) issues are, appropriately, taking center stage in debates over environmental policy, affordability is very much an EJ issue in many communities. And the reality is that NACWA and its public utility members have been largely responsible for the significant policy changes that we have seen over the last few years on this issue.

At the heart of the affordability challenge for clean water utilities is EPA’s 1997 Financial Capability Assessment (FCA) guidance that relies on percent of median household income (MHI). MHI cannot capture the impacts of the required spending on low-income households and is simply too blunt of a tool.

As soon as NACWA members began to raise the use of MHI as an issue, we started to engage policymakers in DC. We knew that getting EPA to change its methodology – to move away from MHI and look at the true impact on low-income ratepayers – would take some time (19 years and counting since NACWA’s first real push in 2003). But NACWA’s members also knew that regardless of how affordability was ultimately calculated, their communities would be facing very real challenges. More needed to be done to address the impacts this spending would have on low-income customers, and addressing these affordability concerns is a critical component of gaining and maintaining community trust.

That’s why NACWA’s advocacy has always proceeded on two tracks – to revise EPA’s financial capability assessment methodology AND to identify and seek a real solution to the low-income affordability challenge.

Following the economic downturn in 2009-2010, which further highlighted the challenges facing the nation’s communities, NACWA, along with the rest of the water sector and joined by municipal groups led by the US Conference of Mayors, advocated strongly for EPA to take action. The result was the 2012 Integrated Planning Policy, which would later be incorporated directly into the CWA thanks in large part to NACWA’s advocacy efforts. The adoption of integrated planning by EPA and Congress was an extraordinary achievement in and of itself, resetting the important federal, state, local partnership. But as soon as the Integrated Planning policy was issued, it was clear the affordability question still needed to be addressed.

In 2016, NACWA initiated its first comprehensive analysis of a potential federal low-income water ratepayer assistance program, followed shortly thereafter by an initial analysis of the cost of such a program and proposed funding sources. NACWA used the report and its findings to advance nascent conversations on Capitol Hill around the need to address the growing affordability issue. The following year, the National Academy of Public Administration issued a report calling on EPA to revise its 1997 FCA guidance, reinforcing points NACWA had been making for nearly 15 years.

Building on the report from NAPA, NACWA, together with its water sector and municipal partners, worked with EPA from 2017 to 2020 to craft a revised FCA document that addressed the concerns of the municipal and water utility community and those of other key stakeholders. A proposed revision which would have addressed many of the water sector’s concerns was poised for release before being withdrawn by the incoming Biden Administration in January 2021.

Unfortunately, the Biden Administration's EPA has more recently made fundamental changes to the carefully crafted guidance without meaningful engagement or input from NACWA or its partners. The changes EPA made effectively rewrite the core tenets of the document in multiple detrimental ways, including:

• Instead of looking at the actual impacts on individual low-income ratepayers – specifically what percent of a low-income household’s spending will go to water and wastewater bills – the new methodology uses community and national level benchmarks to measure whether a program or new requirement is unaffordable. Examining household level impacts is essential to any meaningful dialogue on affordability.

• Hard scheduling caps, in some cases allowing less time than even the existing guidance, are included in the latest version. The maximum length of time EPA will now allow is shorter than many existing schedules for communities that have previously demonstrated affordability impacts.

• Most troubling is EPA’s addition of a new Financial Alternatives Analysis that utilities are required to complete – potentially involving expansive efforts like the establishment of completely new rate structures, among a long list of other potential actions – before even being eligible for the relief the FCA shows they deserve.

At press time, NACWA has learned that OMB has freed up EPA to finalize the FCA proposal despite NACWA and its water sector and municipal partners’ requests to pause all efforts to finalize the guidance. EPA plans to walk key groups through the final guidance, but we understand the concerns discussed above have likely not been fully addressed. Work on the FCA document seems to have taken a step backwards, but NACWA’s efforts on establishing a permanent low-income water assistance program have taken off over the last few years.

While NACWA’s early work on the need for a federal water ratepayer assistance program got some traction, the COVID-19 pandemic put the seriousness of the issue on a major national stage for the first time and compelled the federal government to act by creating a temporary LowIncome Household Water Assistance Program (LIHWAP) in 2020 as part of COVID-19 emergency relief legislation. Housed at the federal Department of Health & Human Services, the program marked the first time the federal government has provided specific assistance to low-income households for drinking water and clean water costs.

However, the current program is only temporary in nature, and NACWA is leading the charge to create a permanent one. The Association is coordinating an effort with other water sector partners to develop a detailed report and policy recommendations outlining how Congress can establish a permanent water assistance program and what key elements the program should include. If the federal government deems food and heating/energy needs important enough to provide assistance to low- income households, why not water? The report and recommendations will be rolled out in early 2023 and will provide a strong foundation for continued NACWA advocacy on this issue.

While environmental activist groups have been strong supporters of a federal water customer assistance program, they continue to put pressure on utilities, seeking to penalize the very utilities leading the conversation on providing assistance for not taking enough action at the local level. Case in point was EPA’s addition of the Financial Alternatives Analysis to the latest revision of the FCA, which was the focus of a comment letter from a coalition of environmental activist groups on the draft FCA revisions from 2020.

But without the actions of NACWA’s clean water utility members over the last 20 years to push for a federal program and to shine a light on the impacts CWA spending was having on low-income customers, where would we be? The reality is that actions speak louder than words, and it is NACWA’s members who are the ones that are actually working on the ground – and will be for years to come – to address the affordability challenge.