16851_Authority_Aug_2023

30 The Authority | AUGUST 2023 W ater P ricing and A ffordability in the U.S.: P ublic vs . P rivate O wnership X. Zhang; M. González Rivas; M. Grant; M. E. Warner Official Journal of the World Water Council March 17, 2022 Excerpts from the research article W e examined the 500 largest commu- nity water systems in the US to explore whether ownership is related to annual water bills, and the percent of income that low-income households spend on water. Regression results show that, among the largest water systems, private ownership is related to higher water prices and less affordability for low-income families. In states with regulations favorable to private provid- ers, water utilities charge even higher prices. Affordability issues are more severe in communities with higher poverty and older infrastructure. Water policy needs to address ownership and regulation and explore new mecha- nisms to ensure water affordability for low-income residents. Highlights 6 Privately owned water systems have higher water prices and are less affordable. 6 Water prices are higher in states with regulation that fa- vors private investors. 6 Water affordability is low- er in communities with higher poverty and aging infrastructure, regardless of ownership type. 6 Water policy needs to ad- dress issues of regulatory control and mechanisms to enhance affordability. Introduction Water affordability is becoming a widespread water challenge in the US (Jones & Moulton, 2016; Mack & Wrase, 2017; Teodoro, 2019). . . . Our study builds upon previous studies examining factors related to water pricing and affordability for community water systems in the US (Beecher & Kalmbach, 2013; Wait & Petrie, 2017; Onda & Tewari, 2021). In addition to comprehensive represen- tation (including the entire universe of large water systems in the US), our study expands the analysis in the following ways: we are interested if ownership can differentiate water rates (the annual water bill for a typical household) and affordability (the percent low-income families spend on water). We also are interested if water price and affordability vary by state regulatory environment (regulation favorable to private providers), age of water infrastructure and community socioeconomic conditions (poverty and race). Literature Review . . . as large investor-owned utilities such as American Water and Essential Utilities’ Aqua America have grown in the US market, they have pushed for more regulatory favorability through surcharges, such as Distribution System Improvement Charges (DSIC) (which pass capital improvement costs directly on to ratepayers to enable rate hikes in between rate case review), ‘fair value’ legislation1 (valuing a water sys- tem asset above the book value), and other mechanisms that facilitate inves- tor earnings and acquisitions (Janney Capital Markets, 2013; American Wa- ter, 2015; Caffrey, 2020). Pennsylvania (PA) and New Jersey (NJ), which have the highest penetration of these two companies, have led the way in many of these pro-private regulatory changes (Janney Capital Markets, 2013; Kline, 2018; Caffrey, 2020). Methods Water system characteristics: 6 Ownership; 6 Regulation; and 6 Age of infrastructure. Our primary interest is in the dif- ference in price and affordability by public and private water systems. . . . Among the 500 water systems in our study, 321 are government-owned, 121 are cooperative and 58 are inves- tor-owned. In our data, water systems owned by the private sector have a significantly higher annual bill ($501)