July 2003 Recommendations of the NDWAC to US EPA on Its National Small Systems Affordability ...

174 Pages·2003·1.64 MB·English

Recommendations of the
National Drinking Water Advisory Council
to U.S. EPA on Its National Small Systems Affordability Criteria
July 2003

NDWAC Affordability Recommendations, July 2003
Recommendations of the NDWAC to U.S. EPA on Its
National Small Systems Affordability Criteria
Table of Contents
Abstract ____________________________________________________________________v
Acknowledgements ________________________________________________________ xviii
Section 1 Introduction_____________________________________________________1
1.1 NDWAC Affordability Work Group Charge____________________________1
1.2 NDWAC Affordability Work Group Membership________________________2
1.3 NDWAC Affordability Work Group Deliberative Process _________________2
1.4 Work Group Committees ___________________________________________2
1.5 Issues Considered in Making Water Affordable__________________________4
1.6 The State Role in Implementing the National Affordability Criteria __________4
1.6.1 Affecting the Cost of Water Production__________________________5
1.6.2 Developing and Implementing Variance and Exemption
Provisions _________________________________________________6
1.6.3 Providing or Facilitating Grant and/or Low-Interest Loans___________7
1.6.4 Public Education____________________________________________7
1.6.5 Resource Issues_____________________________________________8
Section 2 Affordability Criteria_____________________________________________9
2.1 Affordability: The Concept, Definitions, and Concerns____________________9
2.1.1 Definitions and Concept _____________________________________10
2.1.2 Affordability Issues_________________________________________13
2.2 Approaches to Determining Affordability _____________________________14
2.2.1 Defensive Expenditures______________________________________15
2.2.2 Willingness to Pay__________________________________________15
2.2.3 International Water Rate Comparisons__________________________16
2.2.4 Comparison to Other Household Expenditures____________________16
2.3 The EPA Affordability Criteria______________________________________17
2.4 The Six Charge Questions: Reactions and Recommendations______________17
2.4.1 EPA Affordability Criteria Concerns ___________________________18
2.4.2 Other Concerns, Suggestions and Recommendations_______________29
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NDWAC Affordability Recommendations, July 2003
Section 3 Financial Support Strategies______________________________________31
3.1 Introduction_____________________________________________________31
3.2 Discussion______________________________________________________31
3.2.1 Rate Setting Techniques to Enhance Water Affordability___________31
3.2.2 Low Income Water Assistance Program (LIWAP)_________________35
3.2.3 Modifications to Existing Sources of Funding to Address
Affordability______________________________________________41
3.2.4 New Sources of Funding to Address Affordability ________________50
3.3 Recommendations________________________________________________53
Section 4 System-Level Strategies for Addressing Affordability Challenges _______61
4.1 Introduction_____________________________________________________61
4.2 Discussion______________________________________________________61
4.2.1 Cooperation_______________________________________________61
4.2.2 National-Based Treatment Technologies________________________68
4.2.3 Alternatives to Central Treatment______________________________71
4.2.4 System Capacity Optimization ________________________________75
4.3 Recommendations________________________________________________77
Section 5 Public Education________________________________________________81
5.1 Introduction_____________________________________________________81
5.2 Approach to Public Education_______________________________________81
5.3 Recommendations________________________________________________82
Section 6 Conclusion and Recommendations _________________________________85
6.1 Affordability Criteria _____________________________________________85
6.1.1 Recommendations Regarding National Affordability Criteria________86
6.1.2 Comparison of Work Group and EEAC of EPA's SAB
Recommendations__________________________________________90
6.2 Financial Support Strategies For Addressing Affordability
Challenges______________________________________________________92
6.2.1 Rate-Making Strategies______________________________________92
6.2.2 Low Income Water Assistance Program_________________________93
6.2.3 Modification of Existing Programs_____________________________93
6.2.4 Potential New Funding Sources _______________________________93
6.2.5 Recommendations Regarding Financial Support Strategies__________94
6.3 System-Level Strategies For Addressing Affordability Challenges__________95
6.3.1 Cooperation_______________________________________________95
6.3.2 Treatment Technologies _____________________________________96
6.3.3 Alternatives to Central Treatment______________________________96
6.3.4 Capacity Optimization_______________________________________96
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NDWAC Affordability Recommendations, July 2003
6.3.5 Recommendations Regarding System-Level Strategies for
Addressing Affordability Challenges___________________________97
6.4 Public Education_________________________________________________98
6.4.1 Recommendations Regarding Public Education___________________98
6.5 NDWAC Perspective _____________________________________________99
Appendices
Appendix 1: Minority Views and Additional Comments _____________________101
Appendix 2: Final NDWAC Affordability Work Group Roster________________121
Appendix 3: National Drinking Water Advisory Council Ground Rules_________125
Appendix 4: Operating Protocols of the NDWAC Affordability Work
Group___________________________________________________127
Appendix 5: Illustration of Two Possible Approaches for Small System
Drinking Water Determinations ______________________________133
Appendix 6: American Water Works Association Manual M1: Principles of
Water Rates, Fees, and Charges (fifth ed.), Chapter 16: Low-Income
Affordability Rates ________________________________________145
Appendix 7: Gilbert’s Affordability Gap Graph____________________________153
Tables
Table 1: Work Group Composition____________________________________ vi
Table 2: Ratemaking Table – Lifeline Rates Example, All Customers Eligible, In
Dollars___________________________________________________56
A. Using Service Charge and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Block Rate
B. Using Minimum Bill and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Rate Using
5,000 Gallons per Month Minimum Consumption
Table 3: Ratemaking Table – Affordability Rates Example, Lifeline For Low-
Income Customers Only, In Dollars____________________________57
A. Using Service Charge and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Block Rate
B. Using Minimum Bill and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Rate Using
5,000 Gallons per Month Minimum Consumption
Table 4: Ratemaking Table – Lifeline Rates Example, All Customers Eligible, In
Percent Of MHI____________________________________________58
A. Using Service Charge and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Block Rate
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NDWAC Affordability Recommendations, July 2003
B. Using Minimum Bill and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Rate Using
5,000 Gallons per Month Minimum Consumption
Table 5: Ratemaking Table – Affordability Rates Example, Lifeline For Low-
Income Customers Only, In Percent Of MHI 59
A. Using Service Charge and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Block Rate
B. Using Minimum Bill and Consumption Charge Tariff Design:
Comparison of Uniform Consumption Rate and Inclining Rate Using
5,000 Gallons per Month Minimum Consumption
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NDWAC Affordability Recommendations, July 2003
Recommendations of the
National Drinking Water Advisory Council
To U.S. EPA on Its National Small Systems Affordability Criteria
Abstract
This document represents the report and recommendations of the National Drinking
Water Advisory Council’s (NDWAC’s) Work Group on the National Small Systems
Affordability Criteria. The Affordability Work Group consisted of 18 members, collectively
chosen to reflect a balanced range of expertise, experience, and perspectives. Work Group
members met five times between September 2002 and January 2003. The Work Group included
representatives of small and large water utilities, small system advocacy and technical assistance
organizations, academic and consulting experts on small systems and on economics, States and
local governments, tribes, and environmental and consumer groups. (See Table 1 on the
following page for introductory information about each of the 18 Work Group members.)
The Work Group was asked to provide advice to the NDWAC, which in turn is
providing recommendations for the U.S. Environmental Protection Agency (EPA) on the
national small systems affordability criteria associated with the variance technology provisions
of the Safe Drinking Water Act (SDWA). The Work Group was specifically asked – based on
six charge questions posed by EPA – to provide advice on EPA’s national-level affordability
criteria, the methodology used to derive the criteria, and EPA’s approach to applying these
criteria to National Primary Drinking Water Regulations. The Work Group also explored
strategies – including funding mechanisms and possible legislative actions – that may better
enable small systems to achieve compliance in a more cost-effective and/or less financially
burdensome manner.
Because the Affordability Work Group was formed under the auspices of the NDWAC, it
operated under the NDWAC’s ground rules for working groups (Appendix 3), as well as Work
Group-specific operating protocols (Appendix 4). The Affordability Work Group used
consensus decision-making procedures to guide its deliberations. However, it was recognized at
the outset of the deliberations that, due to the complex and controversial nature of the subject
matter to be discussed by the Work Group, consensus would probably not be reached on all
issues. Where consensus could not be reached, the Work Group was asked to present the range
of views expressed, along with a discussion of the potential pros and cons associated with the
various alternative approaches. Minority views on issues for which the Work Group did not
reach consensus, as well as additional comments submitted by Work Group members, can be
found in Appendix 1. These minority views and additional comments are an important part of
this report.
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NDWAC Affordability Recommendations, July 2003
TABLE 1
WORK GROUP COMPOSITION
WORK ORGANIZATIONAL CONNECTION TO SMALL SYSTEMS
GROUP AFFILIATION
MEMBER
Kevin Brown Utah Department of Kevin Brown is the Director of the Utah
Environmental Quality Department of Environmental Quality Division of
and Association of Drinking Water. He is also a member of the
State Drinking Water Association of State Drinking Water
Administrators Administrators (ASDWA). ASDWA represents
the drinking water programs in each of the 50
States and 6 territories in their efforts to ensure the
provision of safe, potable drinking water.
Together, ASDWA's members regulate
approximately 166,000 public water systems
serving 263 million people. ASDWA's primary
mission is the protection of public health through
the effective management of State drinking water
programs that implement the SDWA.
Stephen Cooke University of Idaho Stephen Cooke represented the discipline of
agricultural economics on the Work Group. He is
associate professor of agricultural economics in
the Department of Agricultural Economics and
Rural Sociology at the University of Idaho. Dr.
Cooke’s areas of responsibility are rural economic
development and local public finance.
Makia Epie National League of Councilman Makia Epie of Cedar Hill, Texas,
Cities represented the National League of Cities (NLC)
on the Work Group. NLC’s mission is to
strengthen and promote cities as centers of
opportunity, leadership, and governance. It
represents 49 State municipal leagues, more than
1,700 cities and town of all sizes directly and,
through the membership of the leagues, more than
18,000 municipalities in total. It is the oldest and
largest organization representing cities and the
only one that includes both mayors and city
council members as active participants.
Bruce Florquist National Drinking Bruce Florquist is a member of the NDWAC, as
Water Advisory well as a member of the Water Resources
Council Management Committee for the American Public
Works Association and the Public Works Director
in Rawlins, Wyoming.
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NDWAC Affordability Recommendations, July 2003
WORK ORGANIZATIONAL CONNECTION TO SMALL SYSTEMS
GROUP AFFILIATION
MEMBER
John Gaston California-Nevada John Gaston is a civil engineer with more than 35
Section of the years’ experience in the drinking water industry as
American Water Works both a regulator with the State of California and a
Association (AWWA) consultant with CH2M HILL. On this Work
and Association of Group, he represented both the California-Nevada
California Water Section of the American Water Works Association
Agencies and their 7,500 + members and the Association of
California Water Agencies, which represents 80
percent of the 36 million drinking water
consumers in California.
Jerry Gilbert J. Gilbert, Inc. Jerome B. Gilbert, consulting engineer, has been a
manager of large and small utilities and a State
regulator. He is also past president of the
American Water Works Association (AWWA)
and the AWWA Research Foundation
(AWWARF). He was a member of the NDWAC
Arsenic Cost Work Group, which gave rise to the
Affordability Work Group, and is a consultant to
utilities.
Merl Hackbart University of Kentucky Merl Hackbart is professor of finance and
administration at the University of Kentucky,
Gatton College of Business and Economics.
Saeid Kasraei Maryland Department Saeid Kasraei is the manager of the Maryland
of the Environment and Department of the Environment Water Supply
ASDWA Program. He is also a member of ASDWA, which
is described above under the entry for Kevin
Brown.
Laurie Marin Nez Perce Tribe Laurie Marin is the Utilities Planner for the Nez
Perce Tribe. The Nez Perce Tribe operates
community water systems that serve 3
economically depressed tribal communities of
under 50 connections each, located over 60 miles
apart.
David Monie Small Companies David Monie, a small system owner, also
Committee of the represents the Small Companies Committee of the
National Association of National Association of Water Companies
Water Companies (NAWC). The nation’s only trade organization
for the investor-owned water industry, the
NAWC’s 200 member systems provide drinking
water service to more than 20 million Americans
in 42 States every day. The NAWC serves as the
ambassador for this $2 billion industry that
employs 15,000 people.
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NDWAC Affordability Recommendations, July 2003
WORK ORGANIZATIONAL CONNECTION TO SMALL SYSTEMS
GROUP AFFILIATION
MEMBER
Diana Neidle Consumer Federation The Consumer Federation of America is a non-
of America profit association of more than 280 pro-consumer
groups, with a combined membership of 50
million, that was founded in 1968 to advance the
interests of consumers through advocacy and
education.
Erik Olson Natural Resources The Natural Resources Defense Council is a
Defense Council national non-profit public interest organization
dedicated to protecting public health and the
environment, with over 500,000 members. NRDC
strongly believes that all Americans deserve water
that is safe to drink and affordable. NRDC
recognizes the special challenges faced by small
water systems and believes that the best approach
to dealing with small system affordability issues is
to encourage cooperative strategies, innovative
small system package treatment and source
protection, and targeted public funding, rather than
giving small system water users “second tier”
lower quality tap water.
Bob Raucher Stratus Consulting Bob Raucher, executive vice president of Stratus
Consulting and an active member of AWWA, is
an economist with more than 25 years’ experience
on compliance cost and affordability issues
associated with the SDWA. He has worked
extensively on the equity and efficiency
implications of drinking water regulations,
financial strategies, and public health policies.
Velma Smith Campaign for Safe and The Campaign for Safe and Affordable Drinking
Affordable Water Water is a nationwide alliance of over 300
environmental, consumer, public health and other
organizations working to improve drinking water
and protect our nation’s drinking water sources.
The Campaign recognizes the unique problems of
small drinking water systems and supports
solutions to these problems that will ensure a good
quality of affordable water for all Americans.
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