A team of researchers from Duke University's Pratt School of Engineering; Nicholas Institute for Energy, Environment & Sustainability; and the Nicholas School of the Environment assessed the finances of 301 North Carolina water utilities and identified a significant and growing group of communities facing a conflicting dilemma of water affordability and utility cost recovery.

Water affordability is a growing concern, with inflation, aging infrastructure, source water protection, climate change, and other factors pushing up the cost of providing water. Customer assistance program (CAP) rate discounts provide needed assistance but may not be sufficient to ensure that water services are affordable. Rather than relying on one approach, such as CAPs, a combination of approaches might be optimal for addressing water affordability issues.

States and the federal government invest in water, wastewater, and stormwater infrastructure by providing subsidized loans and other financial assistance through State Revolving Fund (SRF) programs. The funds are capitalized with federal grants, state contributions, leveraged bonds, and loan repayments. Because the programs largely provide loans rather than grants, the repayment of principal and interest replenishes the pool of capital to finance infrastructure over time. Loan repayments are now the largest source of capital for SRFs.

Water is essential for life, and yet one of the nation’s most pressing water challenges has become ensuring that water services are affordable for households and communities. While there has been growing attention and concern around affordable water services, the actual scale of the problem remains poorly understood, in part because of the lack of data availability.

The cost of providing water services is increasing, placing greater financial burdens on individual households and utilities. Five metrics were calculated at multiple volumes of water usage and were applied to 1791 utilities, estimating bills from 2020 rates data, to gauge financial burdens in four states. More than a fifth of the population in 77% of utilities was experiencing poverty, suggesting widespread poverty is a major contributor to utility financial capability challenges.

Key Takeaways

Eleven utilities from across the United States were studied to understand the pandemic's effects on water consumption and utility revenues.

Most utilities in the study saw an overall increase in water consumption with a rise in residential demand that offset declines in nonresidential demand.

Most utilities in the study experienced increased revenues in 2020 compared with previous years, largely due to rate increases, inclining block rates, and an unusually warm summer.

An analysis of stream mitigation banking and the challenges of implementing market-based approaches to environmental conservation.

When people and industries leave a community, water utilities face the potential loss of revenue from departing customers and the cost and issues associated with maintaining excess system capacity.

Water systems seek to (1) ensure affordability, (2) maintain high service and quality, and (3) sustain fiscal viability; this creates a trilemma for shrinking cities that can ensure only two of the three.

This paper explores the evolution of water services in the United States. Most people have access to water, most tap water is drinkable, most dams are secure, most farms can grow more with less water, and most rivers are cleaner than they were 50 years ago. Most does not mean all. There is growing evidence that an increasing number of Americans are losing access to safe drinking water and sanitation—and others never had it at all.

May and June 2020 data for the eight water utilities in our study show diverging trends of water consumption and revenues as the COVID-19 pandemic continues, with states and local governments taking different approaches and timelines to rolling back restrictions. There are signs of recovery in water consumption and revenues for many utilities, mostly due to high residential consumption and billed revenues, not increased usage from non-residential customers.