Providing Critical Water Services through the COVID-19 Crisis

Utilities and policymakers, at all levels of government, are weighing options to respond to the pandemic, particularly to help struggling customers, cope with falling revenues, keep their workers healthy, and maintain services. Here we review the responses we have seen so far.

Moratoriums on service shut-offs: As of March 24, 364 municipalities and states had suspended water shut-offs, either voluntarily or by state order, protecting more than 40% percent of the U.S. population.¹ Executive orders have been issued in states like Indiana, Louisiana, and Maryland to suspend water service shut-offs. States such as Iowa and Kansas have issued emergency orders from their state public utility commissions. West Virginia and Tennessee have sent either guidance letters from their state commission boards or letters asking utilities to consider moratoriums on disconnections. While these moves are appropriate and necessary from a public health standpoint, we can’t ignore the impact nonpayment can have on utility revenues. Utilities rely heavily on rate revenues to maintain operations, service their debt, pay employees, and invest in system improvements.

Restart suspended service: On March 28, Michigan Gov. Gretchen Whitmer became the first governor to issue an executive order that addresses both moratoriums on shut-offs and restarting services. The order will restart suspended services and incorporate a $2 million grant program to assist utilities with reconnection fees and repair costs for 30 days; afterward, bill discounts for customers will be set to $25 a month in hopes of avoiding disconnections during the pandemic. It costs money to deliver water, so when a utility shuts off services, it is a means to ensure their own financial health. However, shutting off and restarting services also costs money, from administrative billing to legal filing to sending someone to start or stop a service. Whitmer’s executive order is a good example of what other states could do to ensure utilities and customers are supported during and after the pandemic. Restarting services will be a major challenge for utilities as they will face tighter budgetary constraints due to revenue and staff loss.

COVID-19 mitigation plans: The American Water Works Association recently surveyed 621 utilities across the country to gauge the initial impacts of COVID-19 and what mitigation plans were being made. According to the survey, 82% of utilities have business continuity plans in place or are in the process of developing them. Currently, they are closing facilities to the public, implementing telework requirements, and breaking up water treatment operators into smaller teams and different shifts to minimize contact. 

Flexible payment plan and other customer assistance programs: States like Wyoming and Texas have called on or ordered utilities in their states to offer deferred or flexible bill payment options to customers affected by COVID-19 and facing financial hardship. Such programs are common in the industry but generally implemented on an ad hoc and voluntary basis. Moreover, other utilities interested in this model may face legal uncertainty in adopting flexible payment programs. Many states have laws that prohibit charging low-income customers lower rates than other users, including anti-donation clauses that prevent utilities from assisting low-income customers. There are also laws specifically limiting cross-subsidization or differentiated rates, where one group of customers bears costs on behalf of another. In these cases, utilities may be limited in their ability to structure rates and assistance programs to help low-income customers afford services through the crisis.

Offer regulatory flexibility: EPA recently announced plans to share national guidance regarding regulatory enforcements and compliance waivers during COVID-19. For water, they will consider giving states more discretion in enforcing the Clean Water Act, which requires states to take steps in reducing sewage runoff. As expected, the agency did not mention the Safe Drinking Water Act and it is highly unlikely that EPA will end up allowing states to give compliance waivers to utilities. Unlike other government programs, water has extremely high public health standards that must always be upheld, especially through a crisis. If states are going to give regulatory flexibility to utilities, it will most likely resemble the efforts in Delaware and Kentucky. These states have relaxed state inspections, extended reporting deadlines, and annual assessments for localities, given more limited bandwidth at most public agencies. Ultimately, utilities will face obstacles in continuing to do tasks to meet regulatory compliance while adhering to COVID-19 mitigation plans.

Launch operator/workforce partnerships: Water utilities depend on a skilled but aging workforce. With COVID-19 threatening the health of utility workers, some localities have launched partnerships with private companies and neighboring towns to find temporary workers. For example, in Gordon, Alabama, the mayor reached out to the Alabama Rural Water Association after the town water operator had to quarantine. The trade group was able to help find a volunteer water system operator. Utility supervisors in two towns in Washington state, Coupeville and Langley, are prepared to assist one another in case of staff shortages. Overall, these examples highlight how fragile smaller systems are when it comes to handling COVID-19.

Boost available funding and financing: Unfortunately, due to higher-profile priorities and the need to move quickly, assistance specifically aimed at the water sector was not included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

However, the CARES Act includes three broad financial assistance and opportunities to localities and water utilities. First, under section 601 of the bill that provides $150 billion for “states, tribes, and local governments for necessary expenditures incurred due to the coronavirus public health emergency.” This funding is only available to localities that have a minimum population of 500,000 and could only benefit large utilities. Second, under section 4003, the bill provides $454 billion in liquidity to eligible businesses, states, and municipalities related to losses incurred as a result of the coronavirus. Unlike section 601, there is no minimum population size for a locality to use the funds so this can be a way for utilities to address revenue loss from bill payment suspensions. Third, eligible recipients of small business loans under section 1102 are authorized to use these funds to pay utility bills, including water.²

The potential for staffing shortages in the coming weeks and months is the top concern of water utility leaders. For example, the New Orleans Sewerage and Water Board is one of the largest utilities to acknowledge a staffing problem connected to the outbreak. On March 25, the board published a press release declaring that they already do not have enough workers to read meters, resulting in the practice of estimating water bills based on the previous four readings.

It should not take a pandemic to show how U.S. water systems are operating insufficiently and with limited resources. From 1977 to 2017, federal funding for water fell by 77% and states have historically implemented insufficient rates. Further, locally determined water and sewer rates have not kept pace with the overall needs of the systems, in part because many towns have large segments of the population who cannot afford to pay more and in part because locally elected officials fear being punished in the next election. Moreover, many water systems are fundamentally ill-equipped to respond to cost pressures and address affordability concerns, lacking effective asset management, and sustainable business models.

Infrastructure investment that specifically addresses water and wastewater could be considered as part of a future COVID-19 legislative response, along with additional aid to state/local governments. Specifically, Congress may consider relief to utilities to offset lost revenue while ensuring everyone has access to safe and clean water. Water services must continue to operate from a public health perspective. That means making sure systems have the flexibility/assistance they need to fill any worker gaps and maintain service to struggling consumers. The larger problem that COVID-19 has made apparent, and should be addressed if infrastructure investment is considered, is wholesale underinvestment, unsustainable asset management, and system fragmentation. The United States would be in a better position in a crisis like this if, at every level of government, there was a commitment to ensure that all Americans had access to safe, affordable drinking water.

^{1 Food & Water Watch, “Quarantine At Home – Even Though We’re Shutting Off Your Water,” March 2020. Available at: https://www.foodandwaterwatch.org/news/quarantine-home-even-though-were-shutting-off-your-water
2 National Association of Clean Water Agencies, “Water Sector Advocates for COVID-19 Aid, Focuses on Next Phase of Stimulus Legislation,” March 2020.
Available at: https://www.nacwa.org/news-publications/clean-water-current-archives/clean-water-current/2020/03/27/water-sector-advocates-for-covid-19-aid-focuses-on-next-phase-of-stimulus-legislation}