What is the difference between assistance and affordability and why is it important to make the distinction?
I’ll start with affordability. We define affordability as our customers’ ability to pay for the water and/or wastewater services we provide. To be more specific, American Water defines affordability by looking at the percentage of the cost of water/ wastewater services to the total household income. We’re proud to say that on average, this percentage for American Water customers is flat or going down over time . Assistance relates to programs that help customers be able to pay for water/wastewater services.
What do you see as barriers to addressing affordability?
First, affordability is not going to get easier or go away in our industry. The American Society of Civil Engineers (ASCE’s) released its 2021 report card grading of the nation’s infrastructure, which gave the U.S.’s water infrastructure a C- grade and wastewater infrastructure a D+ grade. ASCE estimates the need for investment in all utility infrastructure over the next 25 years to exceed $1 trillion. Customers will see an increase in their utility bills as aging water and wastewater systems are replaced.
From my chair, one of the greatest barriers to affordability is the lack of funding available for customers struggling to manage their utility bills. While there are many programs out there, the need is greater than the availability of funding. That is why we believe that both programmatic solutions and structural solutions are needed to address affordability.
Additionally, water system fragmentation is also a barrier to maintaining affordability in our industry. There are over 50,000 water systems in the US. Customers serviced by smaller, struggling water utility systems, some with as few as 10 customers, don’t have the benefit that water system consolidation can bring to their communities and individual customers through spreading operational costs to a larger customer base when systems are consolidated and take advantage of economies of scale.
What solutions to addressing affordability do you see as most advantageous for water and wastewater customers?
I see industry consolidation as the best long-term solution for affordability. Consolidation would allow for systems to be able to better leverage economies of size and scale, as well as leveraging best practices to provide clean, safe, affordable water and wastewater services. However, I believe because the need is so great, we need to have multiple solutions/programs – this is not an “or,” it needs to be an “and.”
Learn more about our customer assistance efforts in this month’s The Pipeline Newsletter.