Ohio Low-Income Assistance Programs

Transcription

1 THE METROPOLITAN SEWER DISTRICT OF GREATER CINCINNATI Report on Low Income Assistance Programs February 2011

2 EXECUTIVE SUMMARY EXECUTIVE SUMMARY Black & Veatch has evaluated regional and other low-income assistance programs to provide background information related to the potential implementation of a low-income assistance program by the Metropolitan Sewer District of Greater Cincinnati (District or MSD). In general, wastewater utilities that have accepted Federal grants are obligated to comply with Federal user charge requirements that each user or user class pays its proportionate share of operation and maintenance costs. However, the Water Quality Act of 1987 allows grantees to provide lower rates for low-income residential users if the grantee: Provides for public notice and hearing of the proposed low-income charges. Defines the low-income user charge rate as a uniform percentage of the user charge rate charged other residential users. Absorbs the low-income program costs proportionately from all other user classes. Based on a survey of Ohio cities having a population greater than 100,000, three of the six major Ohio cities were found to offer a low-income assistance program for wastewater utility customers. The Ohio cities offering low-income assistance programs for its wastewater customers include Columbus, Cleveland, and Toledo. To be eligible for the Columbus low-income assistance program, a customer must first be eligible for an existing Federal or state assistance program such as Ohio Medicaid, HEAP, and food stamps. The eligible Columbus customers receive a 20 percent discount on the volume portion of their wastewater bill. Residents in the Cleveland area are provided a 20 percent discount of their wastewater services providing the customer meets the state s homestead exemption requirements which requires a 2010 household income of no more than $29,500, owner occupancy of the residential property, and proof that the owner is at least 65 years of age or permanently disabled. The City of Toledo also uses the state s homestead eligibility requirements and provides a 25 percent reduction in wastewater charges for the first 20 hundred cubic feet (Ccf) of billed wastewater volume. Area gas and electric utilities also provide assistance to low-income customers. Duke Energy (electric) and Spectra Energy (gas) are regulated utilities that are required to offer Percentage of Income Payment Plans to qualified low-income customers to avoid disconnection of service. Both utilities also participate in the Federal Home Energy Assistance Program that helps low-income customers with their winter heating bills and Winter Crisis Program that provides emergency assistance to customers that have been disconnected or been notified of a pending disconnection. A weatherization program is also available to customers with household income less than 150 percent of Federal poverty guidelines. Spectra Energy also offers a HeatShare Program. The HeatShare program is funded by customer donations and administered by the Salvation Army for the benefit of customers unable to pay their heating bills due to unexpected financial difficulties. Other assistance programs outside the State of Ohio are summarized in the report. The City of Los Angeles offers a 31 percent discount on wastewater bills to single family residential customers who meet income levels established by the Board of Water and Power Commissioners. Metropolitan St. Louis Sewer District grants single family residential customers having a combined household income of less than 150 percent of the Federal poverty guidelines and limited financial resources a 50 percent discount on combined wastewater and stormwater bills. The City of Norfolk, Virginia offers financial assistance to customers with household income less than 200 percent of the Federal poverty guidelines and liquid assets of less than $2,000. Viable options for discounting the cost of wastewater service for District customers include discounting all or part of the utility bill for low-income customers, assistance in emergency situations, and a lifeline rate Black & Veatch 1 February 2011

3 EXECUTIVE SUMMARY structure. Lifeline rate structures typically are based on the volume of usage, rather than income levels, and therefore are available to all customers. It is proposed the District consider two low-income programs: an emergency assistance program administered by others and a discounted rate program similar to those offered by other large utilities. Selection of either or both of these programs should be consistent with the District s goal of either establishing a limited emergency relief program or a more encompassing bill payment assistance program based on a discounted rate structure. The emergency assistance program has the advantage that it avoids any revisions to the current rate structure and billing procedures. An emergency assistance program would have a smaller impact on rates than a more robust bill payment assistance program. However, this program could be expanded to provide assistance on a more routine basis if desired. The advantage of a discounted rate program is that it assists qualified lowincome customers on a regular monthly basis. However, a new customer class would need to be defined, modifications to billing procedures of area water providers billing on behalf of the District would be needed, and additional administrative efforts would be required to verify customer eligibility. The potential impact of a discounted low-income program on general service customers is estimated to be about $0.274 per hundred cubic feet of billed wastewater volume. This assumes a 100 percent participation level of qualified lowincome users (estimated to be 30 percent of all residential customers) and a 30 percent low-income discount rate on the entire wastewater bill. This estimate assumes that low-income customers have an average quarterly volume of 19 Ccf. Based on these assumptions, the bill for an average residential customer would need to increase by about $2.74 per quarter or by about 2.04 percent for this assumed rate impact scenario. Black & Veatch 2 February 2011

4 Introduction The Metropolitan Sewer District of Greater Cincinnati (District or MSD) has contracted with Black & Veatch to analyze regional and other low-income assistance programs as a first step in the possible implementation of a low-income assistance program for the wastewater utility. This report addresses the authority for such a program, potential participation in the program by eligible low-income customers, a description of lowincome assistance programs maintained by other utilities, basic considerations of such programs, and the potential cost impact of proposed alternative assistance programs. Authority Wastewater utilities that have accepted Federal grants are obligated to comply with Federal user charge requirements. One of the primary requirements is that each user (or user class) pays its proportionate share of operation and maintenance (including replacement) costs of treatment works within the grantee s service area, based on the user s proportionate contribution to the total wastewater loading from all users (or user classes). This requirement would seem to prohibit a low-income assistance program since the implementation of such a program could result in users or user classes not paying their proportionate share of operation and maintenance costs. However, the enactment of the Water Quality Act of 1987 on February 4, 1987 included a provision that allows grantees to provide lower rates for low-income residential users provided that the following three provisions are met by the grantee: 1. Provide for public notice and hearing of the proposed low-income charges. 2. Define the low-income user charge rate as a uniform percentage of the user charge rate charged other residential users. 3. Absorb the low-income program costs proportionately from all other user classes. The user charge regulations define a low-income residential user as any residence with a household income below the Federal poverty level [published annually in the Federal Register by the U.S. Department of Health and Human Services under the authority of 42 U.S.C. 9902(2)] or any residence designated as low income under State law or regulation. Potential Program Participation The potential participation of wastewater customers in a low-income program depends on the eligibility requirements imposed by the utility, how well the proposed program is publicized, and how easy it is to qualify eligible recipients and administer the program. The user charge requirements allow the use of Federal poverty guidelines as a means of determining potential eligibility for low-income residential rates. It also allows wastewater utilities to set eligibility requirements through local ordinances. For example, a lowincome user for a potential low-income wastewater assistance program could be defined as any household with an income at or below 100 percent, 150 percent, or 200 percent of the Federal poverty level. Other criteria for eligibility could be the qualification and or participation in other low-income programs. For example, the City of Columbus qualifies potential low-income customers based on their current participation in other low-income programs that are based on various percentages of the Federal poverty guidelines. The 2009 Federal poverty guidelines for the 48 contiguous states and the District of Columbia are presented in Table 1 below. Black & Veatch 3 February 2011

5 Table Department of Health and Human Services Poverty Guidelines Family 100% 125% 150% 175% 200% Size Poverty (a) Poverty Poverty(b) Poverty (c) Poverty $ $ $ $ $ 1 10,830 13,538 16,245 18,953 21, ,570 18,213 21,855 25,498 29, ,310 22,888 27,465 32,043 36, ,050 27,563 33,075 38,588 44, ,790 32,238 38,685 45,133 51, ,530 36,913 44,295 51,678 59, ,270 41,588 49,905 58,223 66, ,010 46,263 55,515 64,768 74,020 (a) For family units of more than 8 members, add $3,740 for each additional memb (b) Eligibility requirement currently used by the state's Percentage of Income Payment Plan (PIPP) for regulated utilities. (c) Eligibility requirement currently used in Cleveland, OH and the state and federally funded Home Energy Assistance Program (HEAP). Source: Federal Register, Vol. 74, No. 14, January 23, 2009 pp census data shown for the City of Cincinnati (City) and Hamilton County (County), which is based on the American Community Survey (ACS) 5-Year Estimates by the US Census Bureau, indicates that 16.7 percent of households in the City and 9.7 percent of households in the County have incomes less than $10,000. Since this value is close to the 2009 poverty levels ($10,830) for a one member household, it can be assumed that at least 16.7 percent of households within the City and 9.7 percent of households within the County would qualify for low-income assistance at the 100 percent of poverty level. The same data indicates that 8.5 percent of households in the City and 6.0 percent of households in the County have annual incomes in the range of $10,000 to $14,999. If a low-income program is based on 150 percent of Federal poverty guidelines then at least 25.2 ( ) percent of households within the City and at least 15.7 percent ( ) within the County could qualify for low-income assistance. Both of these estimates assume one person households. Assuming the average person per household is 2.25 persons (2.25 for City and 2.49 for County per Census data), then the 100 percent theoretical poverty income for this family size would be $15,505 ($14,570 + $3,740 x 0.25) and the income at 175 percent of this level would be $27,134. The census data indicates an additional 13.5 percent of City households and 11.0 percent of County households have incomes in the $15,000 to $24,999 range. Therefore, the number of households that could potentially qualify for low-income assistance with a 175 percent of poverty requirement would be at least 38.7 percent ( ) for the City and 26.7 percent ( ) for the entire County if households are assumed to have an average family size of 2.25 people. A distribution of the City and County households by income category is shown in the graph below. Black & Veatch 4 February 2011

6 Household Income Distribution Percentage 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% City County Includes City 0 50, , , ,000 Household Income The first vertical line intersects the curve at the $18,953 ($10,830 x 1.75) annual level for a one person household while the second vertical line intersects the curve at the $27,134 ($15,505 x 1.75) annual level for a theoretical 2.25 person household. Both values assume adoption of an eligibility requirement equal to 175 percent of Federal poverty guidelines as used by other regional low-income programs. However, a comparison of the City s 2000 Census data, which is based on 1999 data, and the estimated 2009 ACS data for City show only small differences in the two (1999 and 2009) curves. Therefore, since the City distribution has not significantly changed over the past ten years, the indicated 2009 curves may be fairly representative of projected 2009 income distributions. 100% 90% 80% 70% Household Income & 2000 Percentage 60% 50% 40% 30% 20% 10% 0% 0 50, , , , Household Income Black & Veatch 5 February 2011

7 Based on the above analysis, it is reasonable to estimate that a potential low-income program for wastewater customers at or below the 175 percent poverty guidelines used by other regional utilities could be applicable for 20 to 30 percent of the customers currently served by the wastewater utility with the majority of these customers residing inside the City. However, it is unlikely that this level of participation can be reached because some qualified low-income families will not apply for assistance due to their refusal to accept public assistance, not being aware of the program, perceived difficulty in applying for assistance, and other perceived barriers. In addition, many of these eligible families likely live in apartments and do not directly pay a wastewater utility bill. Local Low-income Assistance Programs A few local utilities offer reduced rates or payment assistance for qualified low-income customers. A brief discussion of these programs is presented below. Greater Cincinnati Water Works A Customer Relations representative of the water utility stated that the Greater Cincinnati Water Works currently does not have a program that assists low income water customers. A review of information on their website also indicates the absence of any low-income assistance program. Duke Energy Electric power is provided to Hamilton County residents by Duke Energy. Duke Energy merged with Cinergy in April Cinergy Corporation was created in October 1994 from the merger of the Cincinnati Gas & Electric Company (CG&E) in Ohio with PSI Energy in Indiana and later with Union, Light, Heat & Power (ULH&P) in Kentucky. References to these former utility companies can still be found on the Internet and other sources. On January 3, 2007, Duke Energy spun off its gas operations to form Spectra Energy. Percentage of Income Payment Plan (PIPP) Electric utilities such as Duke Energy that serve customers in Ohio are required to participate in the statewide Percentage of Income Payment Plan (PIPP). The PIPP is a special payment plan that requires qualified customers to pay a portion of their household income each month to maintain utility service. Qualified customers are those customers that have gross household incomes at or below 150 percent of the Federal poverty guidelines. The maximum heating bill for customers with natural gas as a primary heating source is 10 percent of their monthly household income every month or if natural gas is a secondary heating source, qualified customers pay 5 percent of their monthly household income. Customers with electricity as a primary heating source pay 15 percent of their gross monthly household income every month from November 1 to April 15 and for the rest of the year they pay the greater of 15 percent of their gross monthly household income or the current electric bill. If electricity is a secondary heating source, the payment process is the same except the percentage is set at 3 percent for those with incomes 50 percent or less of the federal poverty line and 5 percent for all other qualified customers. Customers that participate in this payment plan are still responsible for any unpaid balances on their electric bills. However, Effective November 1, 2010, the PIPP program was improved to make monthly payments more affordable year round and is now called the PIPP Plus. Under this program, customers that make their monthly payment on time and in full can have some of their old debt and the rest of that month s bill forgiven in the form of a credit to their utility account. The PIPP is administered by the Ohio Department of Development. Customers can enroll in the PIPP Plus program through this agency or a local community action agency and must also apply for all other energy assistance available to the customer. Existing PIPP customers are automatically enrolled in the PIPP Plus program. Black & Veatch 6 February 2011

8 HeatShare Program The HeatShare Program is to assist customers in need with heating bills over the winter season. Qualified customers are those that are subject to disconnection of service. This program does not follow government assistance guidelines to determine eligibility. Qualified customers can apply for a one-time annual assistance beginning mid-january through May. This program is administered in conjunction with the Salvation Army. Ohio Gas Residential Low Income Pilot Program This program is for low-income low-usage natural gas customers. Low-usage is defined usage levels of less than 900 ccf annually. The program accepts up to 10,000 participants. The income level requirement is at 175 percent of the Federal Poverty Guidelines, with an additional $6,545 per person for a household over eight members. Customers on this program cannot be participants of the PIPP program. Ohio Electric Residential Low Income Pilot Program This program is for low-income electric customers. The program accepts up to 10,000 participants. The income level requirement is at 200 percent of the Federal Poverty Guidelines, with an additional $7,480 per person for a household over eight members. Customers on this program cannot be participants of the PIPP program. Energy Maintenance Service Energy Maintenance Services are available to elderly and/or disabled customers on heating and cooling equipment to avoid energy waste in a home. Qualified customers will have an income of 175 percent or less than the Federal Poverty Guidelines, own their own home, be a Duke Energy electric customer and receive heat from Duke Energy or distributed electric or gas. Home Weatherization Assistance Program (HWAP) The Home Weather Assistance Program (HWAP) is part of the energy assistance programs. Customers that qualify for this program will have incomes at or below the levels listed in the following table by family size. Annual Income for Households with People in Family Natural Gas Heat Electric Heat 1 $15,315 $20,420 2 $20,535 $27,380 3 $27,755 $34,340 4 $30,975 $41,300 5 $36,195 $48,260 6 $41,415 $55,220 HWAP is supported by Federal funds and designed to reduce the energy usage of qualified low-income households throughout the state. Assistance includes insulation; air leakage reduction; heating system tuning and cleaning; electric base-load analyses to determine efficiency of electric usage by appliances and lighting; and health and safety inspections and testing. This program is administered locally by community action and local government agencies. Life Support Duke Energy offers a Life Support Program for customers who need to use electrically powered life support equipment. Black & Veatch 7 February 2011

9 Ohio Water/Wastewater Assistance Programs In order to identify low-income assistance programs administered by other water or wastewater utilities in the state, a survey of the water and wastewater utilities serving Ohio cities having a population greater than 100,000 was conducted. The results of this survey are shown below in Table 2. Table 2 Low-Income Assistance Program Survey Results Low-income Water Estimated July 1, 2009 or Wastewater Assistance Program Population Yes No Columbus 753,572 Cleveland 439,013 Cincinnati 332,572 Toledo 316,725 Akron 208,800 Dayton 155,781 As indicated by this table, three of the four largest cities in the state have a low-income assistance program for their wastewater customers. In each case, the program or a similar program is also available for water utility customers. A description of each of the wastewater programs is presented below. Columbus, Ohio The City of Columbus, Ohio offers a Low-Income Water and Sewer Discount Program to qualified water and wastewater utility customers. Qualified customers must have an active City of Columbus water or sewer account for their residence in their name. The customer must be eligible for food stamp benefits, Ohio Medicaid, Low Income Home Energy Assistant, Home Energy Assistance (HEAP), Ohio Works First, or public housing benefits. In addition, customers must meet the Federal Poverty level income requirement as a household. All qualified low-income residential customers may receive a twenty percent discount on usage charges of their sewer and water bill. People in Family Annual Household Income 1 $16,802 2 $22,260 3 $26,019 4 $32,865 5 $37,952 6 $42,345 7 $46,433 8 $52,688 9 $62,436 Master metered properties are also eligible to receive a 20 percent discount on the commodity portion of their water and sewer bill if household income levels are at or below the Federal Poverty level or participate in any one of the low income programs listed in the previous paragraph. Black & Veatch 8 February 2011

10 Eligibility for this program must be established annually. Falsifying information or failing to notify the utility of a change in eligibility status may lead to termination of water service, recovery of past discounts, and civil or criminal actions. The City of Columbus also offers a Senior Citizen Electricity and Water Discount Program. Qualified customers must 1) be 60 years of age or older, 2) have an active City of Columbus electric account 3) live in a single-family home 3) have a household income of less than approximately 150 percent of the 2010 Federal Poverty Guidelines. Qualified customers receive a 10 percent discount on their electric bill, but not less than the minimum monthly charge and a waiver on the Water Base Charges. Cleveland, Ohio Wastewater collection and treatment services for the City of Cleveland are provided by the Northeast Ohio Regional Sewer District (NEORSD). A schedule of Homestead Rates is available to NEORSD customers who are 65 years or older and those that are totally disabled, regardless of age. In addition, effective January 1, 2010, the household annual income must not exceed $30,385 and the property must be owner-occupied. In addition, the Cleveland Housing Network offers a 20 percent discount on their water bill to customers that are at or less than the following income guidelines. People in Family Annual Household Income 1 $17,150 2 $23,100 3 $29,050 4 $35,000 5 $40,950 Add $5,950 for each additional member Toledo, Ohio Water, wastewater, and stormwater discounts are available to senior citizens in the City of Toledo that are enrolled in the Lucas County Homestead Exemption Program. The wastewater discount provides a 25 percent reduction in the wastewater rate for the first 2,000 cubic feet of billed wastewater volume. To qualify for the Lucas County Homestead Exemption Program, the senior citizens or disabled applicants must meet these criteria: (1) City of Toledo resident; (2) Enrolled in the Lucas County Homestead Exemption Program; (3) Own and occupy a single-family residence; and (4) Must be the contract holder or spouse of the contract holder of the utility service. There are no income requirements to apply, however Lucas County has income restrictions. Applications for this program are accepted from January 1 through the first Monday in June of each calendar year. Existing Wastewater Utility Low-Income Assistance Programs Black & Veatch assists several wastewater utilities with development of their wastewater rates. A description of the low-income assistance programs offered by a small sample of large wastewater utilities is presented below. Los Angeles, California The Los Angeles Department of Water and Power offers a residential Low Income Discount Program (LIDP) to low income customers. To qualify for the wastewater low-income discount program, a customer must first submit a Low Income Discount Application Form to the Los Angeles Department of Water and Power. This is a very simple form that includes the applicant s name, service address, water account number, number of people living in household, combined gross income whether taxable or non-taxable, and some form of proof of this income such as the previous year s state or Federal income tax return. The maximum annual gross Black & Veatch 9 February 2011

11 income levels for the number of persons in a household are periodically set by the Board of Water and Power Commissioners. Income levels published for the year 2010 are approximately equal to 200 percent of the Federal poverty income guidelines However, it is not clear if these income levels are actually based on such guidelines but they seem to follow the same format. For example, they allow $7,600 for each additional person in a household versus the $3,740 allowance stated by the Federal poverty income guidelines. A Senior Citizen Lifeline Rate is offered to senior citizens at the age of 62 years or older or disabled citizens. The qualifying requirements are that the individual is a customer of the City of Los Angeles utility with an annual household income of $32,000. In addition, discounts are available to individuals that require the use of essential life-support devices and those that are physician certified to be a paraplegic, hemiplegic, quadriplegic, multiple sclerosis patient, neuromuscular patient, or scleroderma patient being treated life threatening illnesses. This program is also available to individuals with a compromised immune system medically requiring additional heating and/or cooling allowance. Metropolitan St. Louis Sewer District The Low-Income Assistance Program provided by the Metropolitan St. Louis Sewer allows qualified lowincome customers to receive a 50 percent discount on their combined monthly wastewater and stormwater service bill To be eligible for the low-income program, a customer must: (1) own and occupy a single unit residence and receive a wastewater bill in his or his spouse s name; (2) have a prior year household income less than 150 percent of the current Health & Human Services poverty guidelines and less than 175 percent for disabled individuals and seniors 62 years or older; (3) have liquid assets and real estate less than $3,000, excluding house of residence; and (4) have name of the applicant or the spouse on the service account. Applicants with a prior past due balance are also required to make arrangements to pay the balance in order to participate in the program. Eligible low-income customers are required to complete a new application with the required documentation on an annual basis to maintain their eligibility for the program. City of Norfolk, Virginia The City of Norfolk initiated a lifeline program in 1999 to help Norfolk citizens avoid disruption in water services. The program offers financial assistance to low-income senior citizens and other low-income families to provide relief from the combined services utility bill. The maximum annual bill assistance provided under this program is $270 per customer paid directly to the Hampton Roads Utility Billing Service on the customer s behalf. The program also provides a $500 maximum annual assistance allowance for plumbing repairs by licensed plumbers on behalf of the owner occupants. To be eligible for the lifeline program, a person must currently be receiving water service in Norfolk, have a monthly household income less than 200 percent of the Federal poverty income guidelines, and have liquid assets (bank accounts, certificates of deposits or credit union accounts) less than $2,000. The program is jointly administered by the Norfolk Department of Utilities, the Hampton Roads Sanitation District and the Norfolk Department of Human Services. The Hampton Roads Planning District Commission (HRPDC) sponsors a Help to Others (H2O) program that offers one-time utility bill assistance to people in financial crisis. To qualify for the program the application must be located in the service area of the water or sewer utility, must be in danger of losing residential water service and must demonstrate a personal or family crisis. The assistance is only provided once over a 12- month period amounting to the lesser of $250 or the balance due. Black & Veatch 10 February 2011

12 Basic Considerations of Low-Income Assistance Programs For years, the electric and gas utilities have grappled with handling the increasing gap between the cost of utility service and low-income households ability to pay. Over time, there have been several approaches developed to address the problem, many of which are applicable to the wastewater industry. These are the following types of programs implemented by energy and water utilities: Rate discounts Lifeline rates Customer service charge waivers Direct payment assistance through human services agencies Solicitation of bill assistance donations from general service customers Conservation Plumbing repair assistance Vouchers for purchase of low-flow devices Vouchers for insulation and weatherization measures Bill forgiveness plans Budget billing/payment plans Lifeline Rates The concept behind a rate discount or lifeline rate is to afford low-income recipients a minimum amount of water for sanitary requirements below cost. An American Water Works Association Research Foundation (AWWARF) study on water affordability programs indicated that there are several goals to be considered when implementing lifeline rates: Structuring charges to the ability to pay Structuring charges to specific customer situations Maximizing the degree to which rates are based on cost Keeping credit and collection costs to a minimum Maximizing net required revenues collected to the extent possible Sustaining a stable cash flow Ensuring that targeted ratepayers understand the program Achieving acceptance by the public through communication Preserving a role for the wastewater utility Lessening the costs of identifying and enlisting participants Minimizing the cost of calculating the bill Minimizing administration complexities Encouraging conservation and efficient use of water Eliminating past arrearages Having realistic expectations of program participants The examples below are possible approaches to discounting the cost of wastewater service for District customers: Providing funds for utility bill payment in emergency situations (Norfolk, Virginia, Tucson Water, Phoenix Water) Relinquishing customer service charges of low-income customers A discount (percent or otherwise) on the volume rate offered to low-income customers (Columbus, Ohio) A discount (percent or otherwise) on the total bill (Cleveland, Toledo, Los Angeles and St. Louis) Black & Veatch 11 February 2011

13 A lifeline rate with up to three usage blocks - this approach is considered nondiscriminatory in that it is available to all customers (the Kansas City, Missouri water utility uses this general approach by having a low cost first rate block followed by higher declining block rates): An initial block to cover the minimum amount of billed wastewater volume necessary for the average size household at a nominal rate A second block to cover billed wastewater volume above minimum to average household usage (all households) at a higher rate A final block to cover all other billed wastewater volume at an even higher rate Affordability An essential consideration in the implementation of any new water or wastewater rates is whether the customers of the utility can afford to pay the increased utility charges. The major problem with such an assessment is how to measure affordability. Chapter 16 of the American Water Works publication titled "Principles of Water Rates, Fees, and Charges" (AWWA M1 manual - Fifth Edition) references three possible guidelines for determining affordability. The manual states: "The first issue to consider is at what point a water bill becomes unaffordable. While there is no clear answer to this question, the following guidelines can help utilities make such a determination: The Safe Drinking Water Act (S. 1547) established special assistance in communities where the average residential water bill exceeds 2 percent of median income. The US Department of Agriculture has a program to provide funds for water and wastewater systems. Loans are made for projects where the residential water bills are 1.5 percent of the community's median income. Grants are awarded for costs in excess of 1.5 percent. The AWWARF report, Water Affordability Programs, suggests that programs should not be based on median income but on rates that cause water bills to exceed 2 percent of income for impoverished households. Because of the focus on impoverished households, a measure of 2 percent was selected to determine if water service costs were burdensome." There have been several affordability thresholds for wastewater service offered over the past 10 years. These thresholds are discussed in the Water Environment Federation s Manual of Practice No. 27 publication titled Financing and Charges for Wastewater Systems. This manual concludes that there is not a general consensus regarding what is affordable for wastewater service. The affordability measures presented in this manual appear to all be in a range of 1 to 3 percent of mean household income with prevalence toward a 2 percent value. Therefore, a reasonable measure of affordability for wastewater service could be considered as 2% of median household income. However, for low-income households, 2% of actual income may be a better approach. The inflation adjusted 2009 median household income is reported by the U.S. Census Bureau to be $33,855 for Cincinnati residents and $48,363 for all Hamilton County residents. Therefore, a quarterly wastewater bill of $ ($33,855/4 x 2%) could be considered affordable by average wastewater customers served by the District. Obstacles to Participation in Wastewater Affordability Programs Many elderly and low-income targeted participants of low-income programs often do not participate or are not able to participate for a number of reasons. When implementing a wastewater affordability program, MSD should be aware of the following potential obstacles to participation as identified by the National Consumer Law Center: Low visibility or promotion about the program s existence Poor understanding of how to apply for the program Poor understanding of eligibility requirements of the program Black & Veatch 12 February 2011

14 Perception that taking advantage of the program would violate a notion of the principle of self-reliance (this is prevalent among the elderly) Supposed stigma of receiving public welfare Complicated and taxing application process Perceived hostile attitude of program representative who accept the applications (this is where training can significantly reduce the problem) Lack of access to or funds for transportation to apply for the program Language barriers Lower educational barriers Vision barriers in reading the program information for the low-income elderly (many of whom vision prescriptions may be outdated) Suspicion of utilities and reluctance to provide information about household income Lack of funds for the initial outlays to take advantage of capital assistance programs such as efficient fixture or appliance rebates Proposed Low-income Program for MSD Two alternative low-income programs are proposed for the District s consideration. These alternatives include an emergency assistance program and a discounted rate program similar to those currently provided by other large wastewater utilities. Selection of one or both of these programs will depend on the District s primary goal of either establishing a limited emergency program or a more robust bill payment assistance program as the major component of a comprehensive low-income assistance program. Emergency Assistance Alternative The main advantage of an emergency assistance based low-income wastewater assistance program is that the mechanism to administer the program may already be in place for the District s wastewater customers through the HeatShare program administered by Salvation Army or other programs administered by local community action agencies. Under this alternative, the District could provide funds similar to those provided by gas utility donations to the Salvation Army to be targeted for low-income residents served by the wastewater utility. This alternative would have the smallest impact on rates imposed on wastewater customers and could potentially be absorbed by the utility without an additional rate increase. Total costs for the program would be the amount of money set aside for the program plus an administration fee so the Salvation Army or other public assistance group could provide the necessary staff to serve wastewater assistance applicants. This program could also be expanded in the future to provide wastewater rate relief to qualified customers on a more routine instead of emergency basis. For this alternative, a qualified customer could be provided assistance from additional funds set aside for this purpose by the District and administered by the Salvation Army, community action agencies, or local governments based on participation in another government supported program or by household income. Discounted Rate Alternative The primary advantage of this type of a low-income program is that it assists low-income customers on a routine monthly basis and is much more robust than an emergency assistance program. The main disadvantage is that it would require the utility to develop a new customer class to include qualified lowincome customers, changes in existing billing systems and additional administrative effort to annually verify income qualifications of these customers. One way to create such a customer class is from information maintained by the HEAP program. These data would need to be entered into the water utility billing databases that bill wastewater customers on behalf of the wastewater utility. Black & Veatch 13 February 2011

15 Discounted rates could be based on a reduced service charge, a reduced volume charge (Columbus), or a reduction in the entire wastewater charge (Cleveland and Toledo). If the discounted rate alternative is selected for a potential low-income program, it is recommended that it apply to the entire wastewater bill. The allowed low-income subsidy and resulting surcharge to all other customers depends on the level of participation by qualified low-income customers and the rate discount allowed for these customers. Table 3 presents a summary matrix of assumed participation levels and rate discount percentages. Participation of qualified lowincome participants is expected to range from about 5 to 30 percent of households served by the wastewater utility and potential discounts allowed are assumed to range from 5 to 30 percent, although higher discounts could be granted by the District if desired. Table 3 Potential Low-Income Subsidies and Rate Impacts Due to Rate Discounts Potential Potential Wastewater Rate Discount for Participation Low-Income Qualified Customers - % Percentage Accounts % Subsidy - $ 9, , , ,900 1,083,800 1,354,800 1,625,700 Rate Impact - $/Ccf % 15 % 20 % 25 % 30 % Subsidy - $ 19, ,400 1,054,800 1,582,200 2,109,600 2,637,100 3,164,500 Rate Impact - $/Ccf Subsidy - $ 29, ,100 1,582,200 2,373,400 3,164,500 3,955,600 4,746,700 Rate Impact - $/Ccf Subsidy - $ 39,200 1,054,800 2,109,600 3,164,500 4,219,300 5,274,100 6,328,900 Rate Impact - $/Ccf Subsidy - $ 49,000 1,318,500 2,637,100 3,955,600 5,274,100 6,592,700 7,911,200 Rate Impact - $/Ccf Subsidy - $ 58,800 1,582,200 3,164,500 4,746,700 6,328,900 7,911,200 9,493,400 Rate Impact - $/Ccf Notes: Subsidy assumes low-income accounts have an average billed wastewater volume of 19.0 Ccf/quarter. Rate Impact is equal to the subsidy divided by the non subsidized billed wastewater volume Ccf - Hundred cubic feet The number of potential low-income accounts in the District is based on total 2010 residential accounts of 196,366 multiplied by the applicable percentage shown in the first column of the table. The indicated subsidy for each participation level and assumed low-income discount is based on the revenue that would currently be generated by the indicated number of participating low-income customers under the current wastewater rates that became effective in January 9, The subsidies assume an average billed residential wastewater volume of 19 hundred cubic feet per quarterly billing period. This subsidy increases in proportion to the rate discount allowed the low-income customers. The impact on all other customers due to the low-income subsidy is assumed to be fully recovered by the volume charge. The impact is thus equal to the cost of the subsidy divided by the non-subsidized billed wastewater volume. Therefore, the impact or surcharge on all other customers served by the utility increases not only due to the increase in the allowed low-income Black & Veatch 14 February 2011

16 discount but also due to the decrease of non-subsidized volume as the number of low-income participants increase. The maximum rate impact indicated by Table 3 would occur if all of the qualified low-income customers in the District (estimated at about 30 percent of all residential customers served) participated in the program and the District allowed a 30 percent discount for qualified low-income customers. Under this scenario, the total subsidy would be about $9,493,400 and the impact on the existing volume charges would be an increase of $0.274/Ccf. This would result in the need to increase the existing wastewater volume charge of $4.614/Ccf for billed wastewater volume less than 15 Ccf to $4.888/Ccf and the existing wastewater volume charge of $3.690/Ccf for billed wastewater volume greater than 15 Ccf to $3.964/Ccf while holding the existing $92.10 quarterly minimum charge for a 5/8-inch meter and all other minimum charges at their current levels. The wastewater charges applied to qualified low-income customers would then be 70 percent of the indicated increased charges for this discount rate scenario. Therefore, low-income rates would be reduced to a $64.47 quarterly minimum charge for a 5/8-inch meter and a $3.421 ($4.888 x 0.7)/Ccf volume charge for billed wastewater volume less than 15 Ccf, and $2.775 ($3.964 x 0.7)/Ccf volume charge for billed wastewater volume greater than 15 Ccf which would be applicable to all low-income residential users. Assuming an average residential volume of 19 Ccf per quarter, the average residential bill for low-income customers would decrease from $ to $96.10 or a percent decrease while the average bill for all other average residential customers would increase by $2.74 per quarter or about a 2.04 percent increase. The impact of all other scenarios shown in Table 3 would be less than this 30 percent participation and 30 percent discount scenario. Black & Veatch 15 February 2011