MSU Extension Center for Local Government Finance & Policy

It is a difficult task to establish water rates that are affordable for all customers and cover the full costs of water and sewer services (including infrastructure replacement and maintenance, regulatory compliance, and system integrity risks). Water and wastewater rates rose considerably across the U.S. According to a U.S. Department of Energy Office of Scientific and Technical Information[1] report, between 2008 and 2016, the average water rates across all utilities in the sample increased by nearly 40% while the average wastewater rates increased by 24%.

In the height of the pandemic, Congress made over $1 billion available to water providers to discourage the practice of shutting off household access to water when water bills carry a balance due. The Low Income Household Water Assistance Program (LIHWAP) is modeled on the over 40 year running Department of Health and Human Services federal energy assistance program, Low Income Home Energy Assistance Program (LIHEAP). Clearly, Congress understands the need to support access to life-sustaining utility costs.  Michigan’s allotted LIHWAP funds total over $36 million. There is no permanent authorization for LIHWAP and this means there is no permanent funding source for this federal water bill support. The program ends in Michigan on September 30, 2023 (unless the funds are used up early).

According to data[2]as of the fourth quarter of 2022, nationally over 400,000 households have been assisted with their water or wastewater services. LIHWAP assistance involves restoring water that was shut off, preventing disconnection of water service, funding provided toward outstanding water bill balances. To date[3], of the households served, over 30,000 families have had their water service restored and 217,000 have avoided water service shutoff. In Michigan, 4,700 households across the state have been assisted with their water and waste water services. The state has signed 268 LIHWAP agreements with water service providers in order for them to qualify for a portion of the $36 million in LIHWAP funds.

However, it is worth noting that the limitation on a household’s assistance of $1,000 will put a dent in the unpaid water bills, but will not resolve them, thus many households will remain in jeopardy of having their water service disconnected once a locality decides to reinstate this practice. The City of Saginaw has lifted its pandemic-imposed moratorium on water service shutoffs. The city said that its decision to resume water shutoffs was driven by the growing amount of arrears on the public water utility balance sheet. The temporary LIHWAP funds have helped some Saginaw households, but it’s just a drop in the bucket of what is needed. The City of Flint tied its desire to upgrade water meters with its decision to reinstate water shutoffs. As of the beginning of 2022, according to the city, about 4,000 residences had meters that do not properly monitor or read water usage. The city targeted those households for water service disconnection unless they agreed to switch their water meter (at the expense of the city).

LIHWAP and Affordable Water Service Plans

In addition to restoring service to households disconnected due to arrearages and preventing disconnections for households at risk of disconnection due to arrearages, the LIHWAP also encourages water service providers to reduce water rates charged so as to address the chronic water instability millions of households face.

The City of Flint recently joined the Great Lakes Water Authority (GLWA) Water Residential Assistance Program in a 2-year water bill assistance program targeted to lower income households[4]. The Flint Water Residential Assistance Program Income Based Plan provides qualifying households with water bill credits, and arrearage and minor plumbing repair assistance. To address the chronic water instability many Flint residents endure, households receive assistance so that their water and sewer bill expense is no more than 3% of the household’s income.  

All water providers have customers that get behind on their water and sewer bill payments. Poverty rates are increasing for many seniors. The poverty rate for people ages 65 and over increased from 9.3% in 2012-2016 to 9.6% in 2017-2021. Across the country, more counties saw poverty rates among older populations increase than decrease from 2012-2016 to 2017-2021. Fortunately, children experienced the opposite pattern. The national child poverty rate declined from 21.2% in the 2012-2016 period to 17.0% in the 2017-2021 period. Poverty rates for Michigan’s older population are not improving and in several counties the poverty rate is increasing (see census map).

Water burdened customers, such as seniors or the income challenged, benefit from water bill assistance programs. However, according to survey results reported in the 2020 water report by Black & Veatch, over 50% of respondents don’t offer any water rate discount programs to water customers in their service area. Most, 40%, stated that these programs are not offered because there is no regulatory requirement to do so and 10% said that they are subject to regulation prohibiting the offering of customer assistance programs. Even though not mandated by regulations, 38% do offer rate discount programs. The Environmental Policy Innovation Center’s report on water bill assistance programs offered by 20 of the largest water utilities in the U.S. found 20% of the utilities do not offer a customer assistance program and 50% of those that do, restrict assistance to homeowners. Assistance programs tend to provide similar levels of assistance regardless of the water rates charged, which disadvantages customers living in high-cost water systems.  

As of today, the Low Income Household Water Assistance Program (LIHWAP) does not have new funding to continue after this year. President Biden’s FY2023 budget proposed expanding LIHEAP (rolling LIHWAP into this program) with additional funding for families struggling with home energy and water bills. Unfortunately, the additional federal support for water burdened households was not supported by the Congress. In the 117^th Congress two bills[5] to extend federal support for water burdened households were introduced, however these bills did not advance.

We are just days (but it feels like months) into the 118^th Congress. The LIHWAP program is delivering needed support to families across the nation, but the funding is running dry at the end of the year. Congress must quickly decide if keeping the water on for our most vulnerable neighbors is a worthy investment.

[1] “Water and Wastewater Annual Price Escalation Rates for Selected Cities across the United States.” Water and Wastewater Annual Price Escalation Rates for Selected Cities across the United States (Technical Report) | OSTI.GOV, 27 Oct. 2017, www.osti.gov/biblio/1413878-water-wastewaterannual-price-escalation-rates-selected-cities-across-united-state

[2] LIHWAP Data Dashboard https://lihwap-hhs-acf.opendata.arcgis.com/

[3] Curiously, Alaska, Nevada, New Hampshire, Virginia, Washington D.C. and Wyoming have not distributed LIHWAP funding as of 18 months since the funding was made available. North Dakota is the only state not to participate in the LIHWAP program and its allocated funds were distributed to the 49 participating states.

[4] 200% Federal Poverty Level or below

[5] The Assistance, Quality, and Affordability Act of 2021 (H.R.3291) and Low-Income Water Customer Assistance Program of 2021 (H.R.3293)