Water utilities have special Rescue Act funding needs

Authors: Henrietta Locklear, MPA, Vice President (Email) and John Mastracchio, ASA, CFA, Vice President (Email)

The impacts of COVID-19 have laid open inequities and the holes in the safety nets in our communities. Significant numbers of water customers have not paid their bills for months, and some for more than a year. Some utilities have been reluctant to or barred from using traditional approaches such as turning water service off for nonpayment. Nonprofits have filled in gaps where they could, but are maxed out. Now there is more than $1 billion in aid coming to help these customers balance their accounts, but utilities will need to advocate for and connect to this assistance.

In addition to water bill assistance, the American Rescue Plan Act included other types of support that can be leveraged to help customers pay down outstanding balances or keep up with current bills. The Act provides $21.55 billion through September 30, 2027 for rental assistance (Sec. 3201) and nearly $10 billion through September 30, 2025 for homeowner assistance (Sec. 3206). These funds can be used to pay utility costs and arrears and could help renters who pay a direct utility bill.

In addition, the American Rescue Plan Act includes funding that goes directly to cities and counties to use for replacing lost revenue due to COVID-19. Investing in water infrastructure is one of the allowable uses of these funds (Sec. 603), and it represents an opportunity to help make up for lost revenue that otherwise may need to be considered in future rate planning.

Because water and wastewater utilities are typically enterprise funds operating outside of a municipal general fund, you may not always be sitting at the table when ARPA funding decisions are made. Raftelis can help you develop a sound action plan to prepare to help your customers once funding is available that includes:

• Connecting to customers who are struggling to pay their bills with aid that specifically addresses households at or below the 150% federal poverty level and those spending more than 30% of their income on housing.
• Working to reduce the number of delinquent accounts through proactively reaching out and placing customers on payment plans and referrals to nonprofit agencies that may assist with unpaid utility bills.
• Communicating to customers about all possible avenues for support.
• Carefully following the development of how these funds will be administered in your state so you can be first in line to advocate for your customers when the time comes.

Water utilities are unique in the current environment. Many states provide no other means to support water customers right now due to restrictions on using changes to their rate structures or providing direct aid to customers.

Utilities can advocate for ARPA funding by sharing the significant impact that utility bills have on household affordability. Providing aid to keep customers current on their water bills can free up household income for other critical needs. If a household becomes delinquent and is shut-off from water service, the home becomes uninhabitable. Homes that remain shut-off from water service cannot be lived in and can initiate a process that could move more people into homelessness, even if direct rental assistance is available.