California Hones Drinking Water Affordability Plan

State considers four options as it designs nation’s first statewide affordability program.

By Brett Walton, Circle of Blue

Nearly five years ago, the California Legislature declared that the state’s residents have a right to “safe, clean, affordable, and accessible water.” Passage of the landmark law provoked a practical question that has always dogged the noble ideals of the right-to-water movement: how does a state government or municipal utility ensure clean and affordable water for all?

The need in California appears urgent. Water bills are a large and growing burden on the state’s poor. The price of water in San Francisco increased by double digits in six of the last seven years, according to the latest national assessment by Circle of Blue. In Fresno, the state’s most destitute big city, water rates rose 15 percent in the last year. San Diego water users paid more than 6 percent more for water in 2017 than the year before, a price increase much larger than the rate of inflation.

When evaluating the cost of drinking water treatment at the utility level, the U.S. Environmental Protection Agency defines affordability as no more than 2.5 percent of median household income. But this broad metric obscures hardship among the poor. A 2013 study found that 23 percent of households in the Sacramento metropolitan region had monthly water bills that exceeded 2 percent of income.

Bit by bit, California lawmakers have chipped at the affordability problem. In 2014 they passed a water bond, approved by voters, that directs $US 260 million in grants and loans for drinking water systems. Two years ago legislators set up a process for consolidating small, financially struggling systems with larger, better managed utilities. They mapped utilities that fail water quality standards and are exploring ways to use state funds to subsidize system operations and maintenance in rural areas.

Staff members at the California Water Resources Control Board are now taking a full swing at the affordability component of the right-to-water legislation. At the direction of the Legislature, they are developing an approach that has never been attempted in the United States: a state-run financial aid program to offset the rising cost of drinking water for households.

As it fills in the details, California, along with a few other jurisdictions, is on the leading edge of the national movement for affordable water. Like Philadelphia, which, on July 1, will introduce the nation’s first water rate based on household income, California is trying something new in an effort to bridge the gap between slow wage growth for the nation’s poor and the huge water infrastructure bill that is coming due as century-old pipes and inadequate treatment facilities are repaired and replaced.

The development of California’s program began with a public meeting last October. The state, with help from the Luskin Center for Innovation at the University of California, Los Angeles, identified four options for structuring the program. A round of public meetings that begins on June 20 will allow the public to offer recommendations.

Simple But Complex

AB 401, the law that ordered the Water Board to develop an affordability program, was signed by Gov. Jerry Brown on October 9, 2015. The law outlines questions that the Water Board needs to answer. The only clear detail in the law is a definition of “low-income” as a household earning 200 percent or less of federal poverty level. At the moment, that equals $US 49,200 a year for a family of four.

What the Legislature has directed is “descriptively simple, but a highly technically complex task,” Max Gomberg, the Water Resources Control Board official who is managing the effort, told Circle of Blue.

Simple in concept but complex in execution — it’s an accurate description of the affordable water movement in general. The water board must determine who is eligible, how to fund the program, what level of benefits to provide, and how the benefits will be disbursed to recipients.

The Water Board contracted with UCLA’s Luskin Center to run an economic analysis and help develop the options for the program structure. The board turned to the Wheeler Center at the University of California, Berkeley, for an analysis of legal obstacles. One obvious hurdle is Prop 218, which, in effect, prevents public utilities (but not investor-owned utilities) from charging higher rates on one set of customers in order to subsidize others. Prop 218 is one reason why few utilities have a low-income assistance program, Greg Pierce, senior researcher in the Luskin Center, told Circle of Blue.

The four options developed by the Luskin Center range from basic to intricate, and they are based on examples from three state energy assistance programs, which distributed nearly $US 1.9 billion in aid to households in 2015.

The Water Board’s most straightforward approach is for water utilities to enroll all eligible households — those below 200 percent of the federal poverty level — in a state-run program that would provide a 20 percent bill discount. Existing aid programs would be cancelled. Estimated annual cost to the state: $US 580 million.

A second option, also an entirely state-run program, offers a tiered benefit. Households whose bills average less than $US 100 per month receive a 20 percent discount while those with larger monthly water bills receive a 35 percent discount. Estimated cost: $US 619 million.

The third and fourth options take into account existing utility aid programs. Option three allows investor-owned utilities to continue their aid programs while all public utilities would be covered by the state plan. Estimated cost: $US 488 million. Option four allows all existing aid programs to continue, as long as they deliver a minimum level of benefits. Estimated cost: $US 277 million.

Each option has arguments in favor and against, says Gomberg. In simple terms, those arguments center on the ease of administration, cost, and the delivery mechanism for the benefits. The larger question is how to pay for it, which will likely be a tax or fee.

The complexity that Gomberg spoke of comes from the various ways in which people pay for water and receive state welfare. Renters might not see their water bill, which goes to the landlord. How will aid reach them? Should the benefit be a water bill discount or a tax rebate? Or should it be appended to an existing state program, such as CalFresh, which assists with food purchases?

All told, the state is aiming for consistency, Gomberg said: “We don’t want a state-run program with certain benefits and a local program that is so different that it is not fair. The equity consideration is key there.”

A state program is necessary for several reasons, proponents argue. One, it would fill a gap. More than half of Californians — 56 percent — get water from a utility that does not offer low-income assistance, according to Water Board figures. The numbers are strikingly similar nationwide. A survey published this spring from the American Water Works Association, the leading water utility trade group, found that 56 percent of the 567 utilities that responded do not have rate assistance.

Water groups and social organizations praise the state’s open, methodical approach. Jack Hawks, executive director of the California Water Association, which represents investor-owned utilities, told Circle of Blue that the Water Board has had “constructive dialogues” and the board sent an official to the association’s spring conference to discuss the matter. The association, at this point, is not advocating for a specific scenario but Hawks said it does not want its customers to be “double-dipped” — paying into a state-run program while also contributing money to their own utility aid programs.

The Community Water Center, a leading advocate of clean drinking water in California, is still evaluating the four options, according to Jonathan Nelson, the group’s policy director. But the universal coverage goal is worthwhile, he said. “We need to get access [to assistance programs] up to 100 percent, and then make sure the ability to access and navigate the program is as simple as possible,” he told Circle of Blue.

The State Water Board will hold five public meetings to discuss the scenarios. The meetings will be June 20 in Riverside, June 27 in Salinas, June 28 in Oakland, July 10 in Sacramento, and July 12 in Los Angeles.

Pierce said that suggestions from meeting attendees and written comments will help UCLA and the Water Board inform and refine the options. “Where the public discussion goes will influence the second round of scenarios,” he said.

The final plan for funding and implementing the program is due to the Legislature by February 1, 2018.

Note: This story has been updated since first published to clarify the U.S. Environmental Protection Agency’s definition of affordability.