Unlike other common goods, residential water and wastewater service costs are primarily charged based on individual usage. The result is a system that places a significant cost burden at the local level and threatens access to a life-sustaining resource for those who struggle to pay for it.
This new report outlines a cost-based approach to pricing water by moving costs from usage-based rates to charges based on a customer’s property characteristics. In tandem with the US Water Alliance and our partners in Cincinnati and Milwaukee, we determined that property value was the most effective in achieving more equitable outcomes than the current utility pricing model. These methods could have the added benefit of increasing the proportion of fixed revenue while simultaneously addressing affordability concerns, potentially meeting multiple utility objectives.
The report also highlights this pricing model to guide utilities through their own restructuring, including protections for outliers, cost of service considerations, rate design considerations, revenue considerations, state legal and regulatory context, municipal context, tax considerations, administrative burden on utilities, community engagement and collaboration, and messaging and framing.
The affordability challenge is a growing problem, and new approaches are critical to provide equitable access and ensure utility revenue stability. The findings from A Promising Water Pricing Model for Equity and Financial Resilience show just that—we can simultaneously improve utility financial resilience and reduce the burden water bills can have on low-income households.