This article is informed by Addressing Water Affordability in California, a research paper written by Laila Heid in partnership with SPUR for her Master’s capstone project for the University of California, Berkeley’s Goldman School of Public Policy. For her research, Laila interviewed experts in the water affordability space and surveyed a sample of community water systems that did and did not apply for funds from the California Water and Wastewater Arrearage Payment Program, which provided financial relief for unpaid water bills during the COVID-19 pandemic.
Too many Californians lack access to affordable drinking water. In most water systems, the cost of meeting basic water needs exceeds the commonly used affordability threshold of 1.5% of income for people in poverty. The problem is only expected to worsen given the recent trends of rising water prices. Across the state, the inflation-adjusted cost of water increased by 45 percent between 2007 and 2015.
For water to be affordable, it cannot compromise the ability to pay for other essential items, such as food, rent or healthcare. Unfortunately, millions of Californians are forced to make these difficult tradeoffs. When families cannot afford to pay their water bill, they risk accruing hundreds of dollars in debt and the discontinuation of their water service. Indeed, hundreds of thousands of Californians have their water shut off each year due to nonpayment, cutting off their access to a basic necessity.
The onset of the COVID-19 pandemic in March 2020 spotlighted the inequitable access to affordable drinking water in California. Just weeks into the pandemic, Governor Gavin Newsom recognized water service as “critically important” to Californians’ wellbeing and to reducing the spread of coronavirus. As Californians faced mounting financial pressures from twin health and economic crises, the Newsom administration and the California state legislature rolled out several policies and programs to prevent water shutoffs and reduce water bill debt.
Among these programs was the California Water and Wastewater Arrearage Payment Program (CWWAPP). Established by the state legislature in July 2021, the $985 million program provided financial relief to community water systems and customers for unpaid bills accrued during the COVID-19 pandemic. Though temporary, CWWAPP was a first-of-its-kind program; as of the writing of this article, no U.S. state has established a state-funded water payment assistance program as expansive as CWWAPP.
CWWAPP was intended to relieve unprecedented levels of unpaid water bills that accumulated in the early days of the pandemic. As a result, some water systems, especially smaller systems, experienced a loss of revenue that made it more difficult to pay for operations and to provide safe drinking water. Meanwhile, customers behind on their bills accumulated water bill debt. The temporary moratorium on water shutoffs meant that California was at risk of widespread shutoffs once the moratorium ended in January 2022.
What was CWWAPP, and how did it work?
The California Legislature established CWWAPP with a one-time budget allocation of $985 million to relieve residential and commercial customer drinking water and wastewater debt accrued during the COVID-19 pandemic period. Administered by the State Water Board, the program operated in two phases. The first phase ran from October 2021 to January 2022 and allocated funding to water systems for drinking water arrearages. The second phase ran from January 2022 to May 2022 and allocated funding to systems for wastewater arrearages. This guide will address the drinking water portion of the program.
Participating systems received a one-time payment between November 2021 and January 2022 to cover all drinking water arrearages accrued by their customers during the pandemic period. The systems were required to credit their eligible customers’ accounts within 60 days of receiving their check.
Customer eligibility was based on accrued debt, not income or residency status. There were no income or legal residency requirements for customers to receive CWWAPP funds. Any residential or commercial customer who had outstanding drinking water or wastewater debt from the pandemic period and whose water system had applied for CWWAPP funding could have their drinking water and wastewater debt from the pandemic period relieved.
Figure 1. The Customer Journey
What are water bill debt, drinking water debt and wastewater debt?
Water bill debt is any amount owed by a customer on their water bill. Many customers receive water bills that charge for many things: Drinking water (the potable water delivered to a home or business), wastewater (treatment of the waste water that leaves a building), energy, stormwater, trash collection, street sweeping, taxes, fees and fines (including late fees) can all appear on the same bill. As a consequence, a customer’s water bill debt is often much larger than drinking water and wastewater debt.
Was CWWAPP a success?
Yes. While CWWAPP was imperfect, it did a great deal to help water systems and customers struggling with an unprecedented pandemic, and it did so despite being the first program of its kind in the United States. Some successes from the drinking water portion of the program include:
- More than 535,500 residential and commercial customers had their drinking water arrearages relieved. This represents over three quarters of the customers estimated to have drinking water debt in September 2021.
- The program relieved $300 million in water bill debt. On average, individual customers had $545 of drinking water debt relieved.
- Approximately 80 percent of California’s population was covered by CWWAPP. The 668 systems that received funding serve about 33.3 million Californians, or approximately 80 percent of the state’s population.
- In all but two counties, at least 50 percent of systems applied for CWWAPP. Fifty-six of California’s 58 counties saw at least 50 percent of their eligible water systems apply for CWWAPP, and 43 counties saw at least 75 percent of their eligible systems apply.
CWWAPP was a $985 million program, but is only expected to spend about $500 million. Was water bill debt overestimated?
The allocation for CWWAPP was largely based on the Water Board’s January 2021 Survey indicating there was $1 billion in water bill debt. There’s no doubt that the January survey yielded ambiguous results on how the $1 billion in debt was divided among water, wastewater and other charges. However, the $1 billion total estimate seems reasonably sound. Rather, it appears that CWWAPP was designed and implemented in such a way that made it impossible for it to use its full $1 billion allocation.
- CWWAPP did not relieve debt for all charges on a water bill. The $1 billion estimate included all charges that may appear on a water bill. The rationale for this approach was that if the customer does not pay their bill in full, they risk a water shutoff. However, instead of addressing all water bill debt, the legislature directed the CWWAPP program to forgive just drinking water and wastewater debt.
- CWWAPP didn’t relieve debt accumulated before or after the 15-month “pandemic period.” The January survey asked about water bill debt that systems had on the books at the time they responded, but the legislature directed that CWWAPP only forgive debt accrued between March 4, 2020 and June 15, 2021. A second survey from September 2021 estimated that Californians accrued $324 million in drinking water debt during the pandemic period.
- Not all systems participated in the program. In September 2021, the State Water Board found that at least 921 community water systems had customers with drinking water debt. However, just 603 systems received funding during the drinking water portion of CWWAPP
. Most of the systems that elected not to participate were small.
Most water systems, regardless of size, reported that implementing the program was difficult and time consuming. Factors that contributed to systems’ administrative burden included: isolating the drinking water portion of customer debt; aligning system billing cycles with the program implementation timeline; analyzing customer debt for the application and reporting requirements; applying credits to customer bills; and notifying customers of the CWWAPP credit. At least 25 percent of survey respondents that did not apply for CWWAPP reported that a lack of administrative capacity was among the reasons they did not apply for the program.
Figure 2. Number of Eligible Water Systems Funded, by Number of System Connections
- People were unaware that bill assistance was coming, and prioritized paying down their water bill debt. January 2021 was the nadir of the COVID-19 economic crisis. Over the following year, employment rates started to recover, and the state and federal government rolled out unprecedented levels of direct financial assistance. As a result, many customers paid off water bill debt, especially since there were mixed messages about when the shutoff moratorium would end and no coordinated effort to tell customers that help was on its way. As one water utility representative said, “I don’t think water systems could go out there and say, ‘stop paying your bill,’ but… you almost wish there was a way of… mentioning these provisional credits so you can let customers know, ‘Hey, we know you’re struggling right now. There is help for you in terms of your utility bill. So don’t worry about it and focus on getting food on the table.’”
The graphic below summarizes how the state’s understanding of water bill debt evolved throughout 2021 and illustrates some of the reasons why the program did not spend the full $1 billion allocated.
Figure 3. An Evolving View of Water Debt in California During the Pandemic
What did CWWAPP tell us about the need for an ongoing assistance program?
When people are financially struggling, they are unable to pay their water bill. In just the 16 months following the onset of COVID-19, Californians accrued over $400 million in drinking water and wastewater debt.
Research participants, including systems that participated in a voluntary survey, reported a need for an ongoing water payment assistance program. When asked “Do you see a need for a permanent, statewide water payment assistance program?” 73 percent of survey respondents said yes or maybe.
What can be learned from CWWAPP to guide an effective water bill assistance program in the future?
- Water systems will need to disaggregate drinking water, wastewater and other water bill debt. Without a way to distinguish drinking water and wastewater from other charges on a water bill, it will be challenging to design and implement a drinking water and wastewater payment assistance program. Moreover, until systems can disaggregate drinking water and wastewater charges from other charges on a water bill, there is no assurance that a water rate assistance program will prevent water shutoffs.
- Many systems will need technical and financial support to update their billing systems. As part of a bill assistance program, the state should also provide funding and technical support to water systems to update their billing systems to allow smoother administration of an assistance program. A primary goal of these updates should be to enable water systems to disaggregate different service charges, specifically drinking water and wastewater. In doing so, the state would help reduce the administrative load and the start-up costs associated with a statewide water payment assistance program. It would also make it easier for the state to understand the scope and magnitude of drinking water and wastewater bill debt in California. Preparing all community water systems to administer a bill assistance program would cost approximately $86 million over two years.
- Once billing systems are updated and statewide customer bill assistance in place, the legislature should act to prevent disconnections of drinking water when customers accumulate debt unrelated to drinking water and wastewater. Such an act would only be reasonable once systems have had the time and support needed to be able to track charges separately. But without it, a water and wastewater assistance program would do relatively little to prevent shutoffs.
- The state needs a better way to reach water customers, especially those of small systems. Relying on 3,000 community water systems, many of which are very small, to administer water bill assistance was problematic. While nearly all eligible large systems elected to participate in the program, nearly half of the very small systems did not. Managerial consolidations of small systems can help, but consolidating water systems is time-consuming. To jump-start efforts to reach customers of small systems, the state may need to rely on a separate organizational structure outside of water systems. This is the model employed by the federally funded Low Income Home Energy Assistance Program, which relies on local government agencies, nonprofits and companies to help provide energy bill assistance to low-income customers.
CWWAPP was an extraordinary effort that helped more than half a million Californian households maintain access to an essential service during a crisis. Even as the state and country emerge from the darkest days of the pandemic, long-term inflation of water rates, growing income inequality and accelerating climate change make clear that water affordability struggles are here to stay. The state will need to learn from and build upon its first experiment with water bill assistance to weather the rocky times ahead.