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No Relief for Low-Income Homes as Water Rates Soar

State law prevents water agencies from offering subsidies for low-income ratepayers. New legislation provides a path forward, but it is years away and offers no promise of relief for those struggling to pay their water bills.

Written by Matt Weiser Published on Read time Approx. 4 minutes

The drought is driving up water rates all over California as utilities scramble to cover revenue losses and pay for additional supplies. There will be no relief for low-income residents, who are caught in a legal conundrum that prevents most water agencies from discounting their rates.

State law does not provide any way for utilities to discount water rates for low-income families, unlike the longstanding “LifeLine” subsidies offered on phone bills and several programs for electricity discounts and even free home weatherization repairs. The disparity has been easy to overlook, because water has remained relatively cheap for a long time.

But water agencies are now moving fast to increase water rates because of financial strain caused by the drought and long-neglected system maintenance. Some are considering very large increases, such as the 57 percent hike over two years proposed by the city of Milpitas.

“There is definitely a need for subsidized water for people who are unable to pay,” said Omar Carrillo, a senior policy analyst at the Community Water Center, a nonprofit based in Visalia that works to ensure equal access to safe drinking water.

The problem is Proposition 218, a ballot measure approved by California voters in 1996 that changed the state constitution. The measure requires water agencies to prove, in an economic study, that their water rates cover only the actual cost of delivering water. Fundamentally, this does not permit rates to subsidize water provided to low-income customers, because this expense is not part of the cost of water delivery.

The law also requires utilities to seek voter approval of rate increases – but not just all voters, only property owners within the utility’s service area.

“Proposition 218 allows you to offer those (subsidy) programs – if you have an alternate source of money,” said Ann Bui, managing director of water services at Black & Veatch, a leading infrastructure consulting firm based in Kansas. “But most utilities don’t have access to any other source of money, because all their revenue is rate-based.”

Bui, who is based in Los Angeles, said the California water industry has been looking for a solution to the problem for years. It has yet to find one that works.

“How do you set up such a program? Because there clearly is a need,” she said. “We just haven’t gotten around to figuring it out yet.”

Most water agencies in the state are governed by an elected board, and they are reluctant to take on any new programs that require additional staff or resources. This was demonstrated earlier this year when the state imposed a 25 percent statewide water conservation mandate and many water agencies resisted.

One solution may be found in the sewage treatment sector. When such agencies receive federal grants, which are common to expand or build a wastewater treatment plant, they must agree to provide a rate discount for low-income customers. They often seek out grants to cover such discounts.

There are no similar requirements to subsidize water rates, Bui said. But a solution is at hand.

On October 9, Gov. Jerry Brown signed a new law, AB 401, that requires the State Water Resources Control Board and Board of Equalization to establish and fund a low-income water rate assistance program. The law, introduced by Assemblymember Bill Dodd, D-Napa, requires the agencies to recommend such a program to the Legislature no later than January 1, 2018.

“Too many Californians still lack affordable, safe drinking water,” Brown said in a signing statement. “Proposition 218 serves as the biggest impediment to public water systems being able to establish low-income rate assistance programs.”

However, the new law does not require the Legislature or any state agency to actually adopt a water-rate assistance program. It will come into existence only if the Legislature follows up with additional new laws.

Carrillo said the urgency of the problem is growing, as demonstrated by the 2,591 California families who have reported that wells have dried up, as of October 30, because of the ongoing drought. The actual number is probably much greater, because many families have chosen not to report their well problems and are surviving without government help. The long-term solution for many of these families is connecting to a nearby municipal water system, usually at great cost. The connection is followed, of course, by a lifetime of monthly water bills where none existed before.

Separately, the state has also spent $543,723 from emergency grant funds, as of October. 30, to subsidize water rates for 2,715 low-income households affected by the drought in 10 counties. This is a pilot program triggered by the drought and is not intended to be permanent. Again, the need is considered to be much greater: The Public Policy Institute of California estimated that, in 2013, one in five Californians was living in poverty, or as many as 6 million people.

“You can go without electricity, but you can’t go without water,” Carrillo said. “We definitely should have a system in place for people to have a basic level of water service.”

Top image: In this July 2, 2015 photo, Yaritza Pizano, 4, left, prays alongside her grandmother, Maria Marquez, in their home in the community of Okieville, on the outskirts of Tulare, Calif. As Yaritza’s family began to run out of water in 2014, she began to pray for it during her nightly prayer. “God, give us water so we don’t have to move,” she said in a recent prayer. (Gregory Bull, Associated Press)

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