FINANCIAL
     Mggnbers


 Karen Massey, Chair

   Helen Akparanta

     Aural Arndt

    William Cobb

    Edwin Crooks

     Hope Cupit

     Lisa Daniel

  Marie De La Parra

  Donna D LI char me

    Rick GJardina

 Ann Grodnik-Nagle

Heather Himrnelberger

   Jeffrey Hughes

   Philip Johnson

     Mark Kim

    Suzanne Kim

   Courtney Knight

     Thomas Liu

  James MacAdam

  Mathilde McLean

 G. Tracy Mehan, III

   Wayne Seaton

   Blanca Surgeon

   Joanne Throws

   Leanne Tobias

   Jeffrey Walker

 Jennifer Wasinger

   Richard Weiss


   Michael Shapiro
     Designated
   Federal Official
February 26,2016

Dr, Andrew Sawyers, Director
Office of Wastewater Management
United Stales Environmental Protection Agency
1200 Pennsylvania Avenue, NW
Washington, DC 20460

Dear Dr. Sawyers:

The Environmental Financial Advisory Board (EFAB) is pleased to present you with recommenda-
tions on how the Water Infrastructure Resiliency and Finance Center (WLRFC) ean best support com-
munities across the country in addressing water and wastewater affordabiiity issues at the household
level.

Under your leadership, EFAB was issued a charge from the U.S. EPA's Office of Water in May 2015
to identify ways that  the Center can assist local governments with affnrdahility challenges in imple-
mentation of their water infrastructure projects with a particular enphasis on addressing the challeng-
es of household affordabiiity.  A work group was formed and (1) reviewed the Center's Water System
Rate Assistance Program Research Report (the work scope and anticipated deliverables as well as the
January 2016  draft report), (2) identified and summarized affordability-related current and future
work from a number of water and waslewater industry sources, (3) reviewed and summarized afforda-
biiity practices from  the eleetric and natural gas industries,  and (4) developed a number of recommen-
dations for consideration by the Center,

The board believes that the Center can play a critical role in the identification and dissemination of
information regarding affordabilily programs in addition to serving as a condoit for leveraging the
affordabiiity experiences of the electric and natural gss industries.

The board's four recommendations are summarized below:

    1.   EFAB recommends that  US EPA/the Center add additional survey questions to its  Water
        System Rate Assistance Program Research Report (the Research Report):

        (i) "How are Affordabilily Decisions Made?"
        (ii) "What are ihe Funding Sources?"
        (iii) "How is Success Measured'?'"

     Information regarding these questinns will prnvide a foundation for water and wastewater ser-
     vice providers  to evaluate specific affordabiiity initiatives.   Furthermore, we recommend the
     following changes to the Centers January 2016 draft Research  Report: (i) redefine "large utility"
     and "medium utility" in the Research Report - and recalculate and summarize the existing sum-
     mary data and figures according to this redefinition and (si) include "medium utility" and "small
     utility" case studies.

    2.   EFAB recommends that US EPA/the Center serve  in a facilitation function to encourage part-
        nerships with stales and utilities by acting as a clearinghouse or the central source for afford-
        abilitv program information, especially as it relates to states sharing affordabiiity information
        with other states and information on addressing institutional or legal restrictions related to
        affordabiiity programs.

    3.   EFAB recommends that US HPA/the Center also serve as the central source for affordibility
        information  from the EFCs and other interest groups- such as the American Water Works
                               Innovative and Cost Effective Environmental Protection

-------
        Association (A WWA) and the Water Environment Federation (WEF) - on their respective current and
        future research reports, tools and publications.

    4.   Last and since household affordability programs exist in the electric and natural gas industry, EFAB
        recommends  that US  EPA/the Center  compile and  evaluate the development and funding  of
        affordabiilty programs in that industry (and possibly other industries), including the various funding
        sources as well as any funding limitations, and determine how it might best be used and conveyed to
        local water and wastewater providers (e.g., directly and/or through partnerships).

We are pleased to provide you with the detailed results of our recommendations in a document entitled
Household Affordability Challenges in the Water Sector. We hope that you find our review, observations and
specific recommendations valuable to EPA and we thank you for the opportunity to assist you with this charge.
Sincerely5
Karen Massey, Chair
Environmental Financial Advisory Board

Enclosure

-------
              EFAB Report
       Household Affordability
 Challenges  in the Water Sector
Last year, US EPA formed the Water Infrastructure and Resiliency Finance Center (the Center). With
the goal of assisting the Center to identify ways that the Center can assist states and utilities with
addressing household affordability challenges, EFAB has analyzed and prepared this report which
summarizes and details the four general recommendations that were developed to address this
important nationwide objective.

-------
Table of Contents



    I.      Execute Summary	,	1


    It,      Introduction/Background	,	,	,2


    111.     EFAB Recommendations	3
           A,  Expand Work m Current US EPA Water System Rate Assistance Program Research Report
               	3

           B.  Facilitate Partnerships with States  and Utilities  by Serving  as the Central  Source for
               Affordabillty Information......	,.,	,.,5

           C.  Identify and Summarize Current  and Future  Work from the University-Affiliated
               Environmental Finance Centers ("EFCs") and Other Sources	6

           D.  Review/Analyze  the  Eiectric  and  Natural Gas  Industry Affordability  Practices and
               Effectiveness	.,...,	8
    IV,     Summa ly/Conclusion	.,	...,.,..,		.10

-------
         HOUSEHOLD AFFORDABILITY CHALLENGES IN THE WATER SECTOR
1.      EXECUTIVE SUMMARY

In May 2015, EFAB received a request from  US EPA and its newly-formed Water Infrastructure  and
Resiliency Finance Center (the Center). The essence of the request is shown below:

    "The  Center requests that EFAB identify ways that the Center can assist local governments with
    affordability challenges in implementation  of their water infrastructure projects with a particular
    emphasis on addressing the challenges of household affordability."

Since this charge relates specifically to affordability at the household  level, our recommendations to the
Center do not consider project-specific or system-wide programs, initiatives or other matters intended to
reduce overall service level costs or enhance utility system operations  or efficiencies. As a result, our four
general recommendations are as follows:

First, EFAB recommends that US EPA/the Center add additional survey questions to its Water System Rate
Assistance Program Research Report ("the Research Report"). The purpose  of the Research Report  was
to compile  certain information on the various water and wastewater systems that have implemented
affordability/rate  assistance programs "to address household or  specific service area affordability
problems". We encouraged the Center, through its currently on-going Research Report survey efforts, to
investigate  the following additional survey questions:

    (i)      "How are Affordability Decisions Made?" - including a discussion of a ny statutory, regulatory
           and/or oversight factors as well as defining "affordability" and determining initial as well as
           any ongoing eligibility requirements;

           "What ore the Funding Sources?"  - including a discussion of the range of funding sources,
           such as from the water utility, customers, privates, community, etc.; and

           "How is Success Measured?"-is success measured and, if so, what are the standards/metrics
           used by water utilities?

In our discussions with US EPA/the Center, the first two recommended questions will be incorporated into
the work scope/deliverables and the  third recommended question  will  be discussed in the Research
Report.

Furthermore, we reviewed the draft Research Report which was released on January 14, 2016.  Based
upon our review and our goal to expand the usefulness of the Research Report to all water utilities, we
recommend the following: (i) redefine "large utility" and "medium utility" in the Research Report - and
recalculate and summarize the existing summary data and figures according to this redefinition and (ii)
include "medium utility" and "small utility" case studies.

-------
Second, EFAB recommends  that  US EPA/the Center  serve in a facilitation function  to  encourage
partnerships with states and  utilities by acting as a clearinghouse or the central source for affordability
program information, especially as it relates to states sharing affordability information with other states
and information on addressing institutional or legal restrictions related to affordability programs.  By
having complete, accurate and relevant information at a central source, EPA/the Center can provide the
needed information to assist states and utilities with implementing successful programs to  address the
household affordability challenge.

Third,  EFAB recommends that US  EPA/the Center  also serve  as the  central source for affordabOity
information from the EFCs and other interest groups - such as  the American Water Works Association
{AWWA} and the Water Environment Federation (WEF) - on their respective current and future research
reports, tools and publications. Since a central source for this important and useful information is not
currently available, we  believe that the Center can be an  important catalyst for the compilation and
dissemination of this valuable information to states and utilities alike.

Last and since  household affordability programs exist  in the electric  and natural gas  industry,  EFAB
recommends that US EPA/the Center compile and evaluate the development and funding of affordability
programs in that industry  (and possibly other industries), including the various funding  sources as well as
any funding limitations, and determine  how  it might best  be  used  and conveyed to local water and
wastewater providers {e.g., directly and/or through partnerships).

II.      INTRODUCTION/BACKGROUND

In May 2015, EFAB received the following request from US EPA and its newly-formed Water Infrastructure
and Resiliency Finance Center:

"Many  communities are  experiencing significant financial  hardship  establishing adequate revenue
streams necessary to finance projects and activities to maintain and upgrade their water infrastructure
and meet their Clean Water Act and Safe Drinking Water Act obligations. While communities  meet
affordability tests at the community level, many households within  that community face tremendous
challenges, EPA has taken several steps to include flexibility in  its programs to help communities meet
their obligations in an affordable manner. Integrated planning is a refatively new initiative at EPA, which
allows communities to consider all of their CWA obligations and focus first on those projects that offer
the greatest gains  in public health and environmental protection, On  June 5, 2012,  EPA finalized the
Framework for  Developing Integrated Plans, An important aspect of  the integrated planning process is
how the financial capability  of a community is considered when developing  schedules for municipal
projects necessary to meet  CWA  obligations. On November  24,  2014, EPA developed the Financial
Capability Assessment Framework that provides greater clarity on the flexibilities  built into existing EPA
guidance that local governments can use in assessing their financial capability. The Center is focused on
exploring tools and technical assistance /or communities that  can address the financial gap between
the total cast of the needed infrastructure and the ability to pay for the infrastructure at the community
and household level. The Center  requests that  EFAB identify ways that the Center can  assist local
governments with affordability challenges in implementation of their water infrastructure projects with
a particular emjoftasls on addressing the challenges of household affordaUHty", (Emphasis added)

-------
Affordability is and will be an important issue for the largest and the smallest water utilities alike. While
cost cutting and efficiency efforts can result in minimizing utility costs, the affordability of water and
wastewater service at the  household level, will  continue to  be  a challenge, particularly for capital
requirements to address aging infrastructure.  The  degree and  magnitude of this issue  may  vary
significantly from one utility provider to another as well as by service and geographic region and by the
size of the utility.

In the next section, we have provided our recommendations and analysis on what role the Center can play
to  address the  household  affordability  challenges in the  water  sector.   With  most  of our
recommendations, we recommend that US EPA/the Center serve as the central source or clearinghouse
for this information.  Furthermore with  respect  to our  recommendations,  EFAB believes that EPA's
Research Report as well as our recommendations for EPA/the Center to serve as a central source for
affordability program information  from various entities, as well as from other industries are  important
first steps to focus  on household affordability matters but does  not guarantee that utilities will access it,
properly evaluate it or make decisions that lead to successful programs. Additionaliy in our interpretation
of the EPA charge  and subsequent discussions with EPA staff,  we did not consider  the charge to  be a
request to:  (i) conduct new research, (ii) complete a literature search or (iii) examine operational or capital
planning tools and/or other practices to reduce costs.

ill.      EFAB RECOMMENDATIONS

A.      Expand Work in Current US EPA Water System Rate Assistance Program Research Report

During EFAB's discussion of the charge with US EPA and the Center, we were informed that US EPA was
starting on a Water System  Rate Assistance Program Research  Report (the Research Report) as  of
October 2015.  The purpose of the Research Report was to compile certain information on the various
water and wastewater systems that have implemented affordability/rate assistance programs "to address
household  or specific service area affordability problems".  The Research Report,  with an  estimated
completion date of January 2016, will consist of two parts:

        1.      Program summary report of the various  water and/or wastewater systems that  have
               established affordability/rate assistance programs - based upon over 200 summaries of
               affordability/rate assistance programs compiled from public websites; and

        2.      Approximately three  individual case studies of affordability/rate assistance programs
               based upon in-depth interviews to illustrate how best practices have been implemented
               (which includes various information such as the discount available, target population,
               program eligibility, program funding, etc.).

EFAB commends US EPA and  the Center for initiating  this Research  Report as we believe the Research
Report will not only provide valuable insights for US EPA and the Center on existing afford ability/rate
assistance  programs,  but also  serve as  a resource  for  all water utilities to either  refine existing
affordability/rate assistance programs or implement proven affordability/rate assistance programs that
best meet the needs of their respective communities.

-------
To insure that the Research Report findings will be most useful to US EPA, the Center and al! water utilities,
EFAB,  in  November  2015,  reviewed the  Research Report's  work scope  (and  deliverables)  and
recommended the following additional survey questions:

       1.      "How  ore Affardability Decisions  Made?" - including  discussion  of any statutory,
               regulatory and/or oversight factors as well as defining "affordability" and determining
               initial as well as any ongoing eligibility requirements;

       2.      "What are the Funding Sources?" - including a discussion of the range of funding sources,
               such as from the water utility, customers, privates, community, etc.; and

       3,      "Haw  is  Success  Measured?" -  is success measured  and, if so,  what  are  the
               standards/metrics used by water utilities?

We discussed each of these recommended questions in detail directly with US EPA/the Center staff. We
were informed that the first two recommended questions would be added to the Research Reports' work
scope/deliverables and that our third recommended question may be challenging to implement  Under
the Information Collection Request (ICR) guidelines, US EPA or any federal agency is not allowed to
conduct a survey or ask questions to more than nine non-federal individuals unless approved by the Office
of Management and Budget.  Thus, US EPA/the Center plans to implement our third recommended
question as part of the in-depth interview with the three water/wastewater utilities referenced in the
second part of the Research Report above. Additionally, to address our third recommended question, US
EPA/the Center plans to include a section in the Research Report which generally discusses the metrics
that can be used to address this third recommended question.

Additionally on January 14, 2016, EPA released its draft Research  Report for comments. Based upon our
review, we believe that the Research Report provides valuable information for the user but places an
emphasis on "large utilities" and less emphasis on "medium utilities". As a result,  we have the following
recommendations:

       1.      Redefine  "Large Utility" and "Medium Utility" in the Research Report - currently, the
               Research  Report categorizes  all utilities as either a "large utility" (serving ">100,000
               people") or a "medium utility" (serving "10,000-100,000 people"). We recommend that
               EPA/the Center uses the following definition which is widely used in the industry: (i) large
               utility - serving a population of at least 500,000, (ii) medium utility - serving a population
               of 100,000-500,000 and (iii)  small  utility  - serving a population of below  100,000.
               Furthermore,  we recommend that all summary data and figures be recalculated and
               summarized according to our redefinition  above, which  we believe will provide more
               detail and useful information for all water utility users; and

       2,      Include "Medium Utility" and "Small Utility" Case Studies ~ currently, the Research Report
               has three case studies for utilities which are all large utilities. To expand the usefulness
               of the  Research Report to all water utilities, we recommend  that EPA/the Center include
               "medium utility" and "small utility" case studies.  As noted in the ICR discussion above,
               EPA/the Center may be able to include up to nine case studies for the Research Report,
               which  thus provides the opportunity to include  three medium utility case studies and
               three small utility case studies.

-------
Recommended US EPA/Center Action.  EFAB understands that US EPA/the Center plans to make the
Research  Reports findings available  to all states and  water utilities.   In November  2015, EFAB
recommended three additional questions for the Research Report,  In our review of the draft Research
Report released on January 14,2016 and with our goal of expanding the usefulness of the Research Report
to al! water utilities, we recommend that EPA/the Center: (i) redefine "large utility" and "medium utility"
in the Research Report - and recalculate and summarize the existing summary data and figures according
to this redefinition and (ii) include "medium utility" and "small utility" case studies.

B.     Facilitate Partnerships  With States and  Utilities  by Serving  as  the Central Source for
       Affordability Information

As previously discussed, affordability concerns affect ail water utilities. For the larger utilities and in many
major metropolitan areas, the water utilities may, in some portions of their service area, have a relatively
affluent customer base, as measured by the area's median household income (MHI) or other measures,
but stili have certain areas that fall well below the area's MHI levels. At the same time, smaller utilities
often face affordability challenges since they typically have more limited staff resources and  fewer
customers to absorb the costs for infrastructure, operations, and maintenance. Additionally, in smaller
utilities, affordability concerns may impact a relatively larger proportion of the service area or simply be
"the issue" with that particular water utility.

One way to address affordability concerns is to establish partnerships and networks to share information.
Partnerships can result in the effective exchange of knowledge and best practices. There are several types
of partnerships that can be considered, including: (i) partnerships between state entities and utilities and
(ii) partnerships between states.

States can assist water utilities by sharing important affordability information. The types of information
can include: (i) information on successful affordability programs used by other utilities, (ii) information
regarding successful partnership arrangements, and fiii) successful partnership programs used in other
states. States can also assist utilities by addressing institutional or legal restrictions related to affordability
programs. For example, if a state law, such as an anti-donation clause, prohibits utilities from providing
subsidies to low-income customers, the state can investigate ways to provide assistance that will be in
compliance with the law. if state laws or regulations require al! customers to pay the same rate, perhaps
some consideration can be given to considering a system in which some low income customers can have
a discounted  rate.   In the case of private  utilities,  there  may be rules or regulations  that require
"reasonable rates" to be charged. However, the rules associated with "reasonable" may prevent the
actions designed to promote affordability. States may wish to examine the ways in which to deaf with
regulating private utility rates and determine the best ways to ensure affordability.

Similarly, states can partner with each other by sharing approaches that work well within their state with
other states.  States can share success stories/case  studies on successful affordabitity programs and
partnership approaches.

Recommended US EPA/Center Action.  Overall, EFAB believes that EPA/the  Center can best promote
partnerships with the states and utilities by serving as a clearinghouse for the various affordabitity-related
information discussed above, especially as it relates  to states sharing affordability information with other
states and information on addressing institutional or legal restrictions related  to affordability programs.
By having complete, accurate  and relevant information at a  central source, EPA/the Center can assist

-------
states  and utilities with implementing successful  programs to address the household  affordability
challenge.

C.     Identify and Summarize Current and Future Work from the University-Affiliated Environmental
       Finance Centers f"EFCs") and Other Sources

For years, the Environmental Finance Centers and other interest groups (such as the AWWA and WEF)
across  the country have worked with communities to address  a  variety of environmental finance
challenges including water and wastewater affordability. Many EFCs have also developed tools that assess
financial capacity of customers and pricing and non-pricing programs to reduce the financial impact of
water service on low wealth households.  EFCs have worked  at the regional, state and individual utility
level on affordability issues. Many EFCs also provide utility level advising or multi-topic water finance
education events that include material on affordability strategies,  EFCs are also involved in applied
research projects that study national trends and best practices related to affordability.

To better  understand the work that the EFCs and other interest groups have already completed in the
affordability area, we recommend that EPA/the Center compile a summary of related work that all the
EFCs and interest groups have already completed or are in the process of completing. As an example of
this and  to illustrate the variety and depth  of completed  and existing research  reports, tools  and
publications in this area, we have compiled a summary of the various current and future activities and
resources related to household affordability prepared by the University of North Carolina EFC and shown
below,

       1.  A component of a large water finance research project was devoted to affordability and shows
           key trends across the country as well as practices:

       http://www,waterrfJorB/PaKes/Proiects.aspx?PIO=4366
       from
       http://www.efc.sQR.unc.edu/project/defi^

       2.  An Excel tool that  helps a utility estimate how much an affordability program might cost the
           utility;

       http://www.efc.5og.unc.edu/reslib/item/water-utility-cu5tomer-assi5tance-program-cQst-
       estimation-tool
       and
       http://www.waterrf.orB/resources/pages/PubllcVVebTool5-detaii.aspx?ltem{D=24

       3.  Water and Wastewater Residential Rates Affordability Assessment Tool- a nether Excel-based
           tool that helps to assess affordability for residential customers:

       http://www.efc.sQg._unc.edu/resiib/item/water-wastewater-residentialrraies-affordabilitv-
       assessment-tool:

       and related webinars like: Affordability chapter from

       http://www.efc.soK.unc.edu/proiect/defining:re_sJjient-busine5S-mode|-water-utilities

-------
4.  Defining Affordability: Targeting Federal Funds to Improve Water Quality to "Disadvantaged
    Communities"   in   North  Carolina  -  http://www.efc.sQg.unc.edu/reslib/item/defining-
    affordabilitv-targeting-federa^funds-improve-water-qualitv-disadvantaged

5.  Affordability   of   Wastewater   Connection    Costs    in   the    Florida   Keys
    http://www.efc.50B.unc.edu/reslib/item/affQrdabilitv-wastewater-connection-costs-fiorida-
    keys and http://www.efc.sog.unc.edu/reslib/item/affordabiIity-recurring-customeir^charges-
    florida-kevs

6.  Dashboards   include   an   afford ability   dial   in   most   cases   (may   be   link  to
    http://www.etc,sog.unc.edu/prQject/Ljtilitv-financial-sustainability-and-rates-dashbo_ar_d_s)

7.  Training session example: http://www.efc.sog.unc.edu/event/cifa-national-state-revolving-
    fund-workshop-2014-affordabiiity

8.  Research Project Currently Underway: The EFC at UNC is  working with Abt Environmental
    Research on a  Water Research Foundation  funded study entitled "Customer Assistance
    Programs for Multi-Family Residential and other Hard  to Reach Customers."  The primary
    objective of this project is to provide water utilities  with pragmatic options, evaluation
    criteria, and lessons learned, and guidance for customer assistance programs targeting hard
    to reach customers. The intent is to help water providers identify and assess their options for
    reaching these customers directly, and/or indirectly through other channels and programs.
    The objective is also to better enable utilities to establish a business process for effectively
    implementing, monitoring the effectiveness of, and continually improving their assistance
    programs aimed at hard  to reach customers. A secondary objective is to extend the insights
    gleaned on  customer assistance  program to enhance other  utility  communication and
    outreach  activities that  pertain  to  hard  to  reach members of  the  community -
    http://www.efc.sog.unc.edu/proiect/customer-assistance-programs

9.  EFC staff is currently contributing to the "Low-Income Affordability Programs" chapter of the
    AWWA "Ml Principles of Water Rates, Fees and Charges," 7th Edition that will be published
    in 2016.

10. Blog posts include:

The  Increasing  Need  to Address  Customer Affordability  - Blog  Post;  May  29th,   2012;
http://efc.web.unc.edu/2012/05/29/the-increasing-need-to-address-customer-affordabilitv/

"Percent MHI" Indicator of  Affordability  of Residential Rates: Using the U.S. Census  Bureau's
Median Household  Income Data http://efc.web.unc.edu/2013/gi/09/percent-mhi-indicatQr-of-
affordabilitv-of-residential-rates-using-the-u-s-census-bureaus-median-househQld-income-data/

http://efc.web.unc.edu/2014/ll/26/thanksgiving-affordabiiity/

http://efc.web.unc.edu/2014/08/21/touching-affordability-water-sewer-bilis-alabama-2014-
aiabama-residential-water-wastewater-rates-dashboard/

http://efc.web.unc.edu/2015/10/2B/custQmer-assistance-programs/

-------
Recommended US EPA/Center Action.  EFAB believes that EPA/the Center should serve as the central
source for affordability information from the EFCs and interest groups on their respective current and
future research reports, tools and publications.  Since a central source for this  important and useful
information is not currently available, we believe that EPA/the Center can be an important catalyst for the
compilation and dissemination of this valuable information to states and utilities alike.

D,     Re view/ Analyze the Electric and Natural Gas Industry Affordability Practices and Effectiveness

As a general rule, the water industry has historically lagged the electric and natural gas industry on a
variety of fronts including affordability (as well as other areas such as integrated resource planning,
demand  management, and conservation}.  Therefore, there is much  to be  learned on the topic of
household affordability from these other utility providers.  EFAB encourages US EPA/the Center to look to
the successes and failures of trie electric and natural gas industry to identify benchmarks, best practices
and  transferable opportunities  for the  development  and  funding of affordability  programs  and
institutional structures and resources that might be created to build upon the earlier discussion in this
report related to partnerships and clearinghouse opportunities.

As the Center identifies and evaluates the affordability programs and approaches used by the electric and
natural gas industry, it will  be critical to also understand the means by which these programs are funded.
The preponderance of programs in the electric industry are provided by rate-regulated,, investor-owned
utilities subject to state regulation. The funding of these programs may be influenced by the regulatory
framework and their transferability to the water and wastewater industry may,  in similar fashion, be
limited by state utility regulation, legislation and/or legal precedents. Thus, we encourage the Center to
also look into possible funding limitations.

The following  sources/links provide an initial perspective of program  options/sources, as wel! as an
example  of how an "affordability clearinghouse" might be  structured.

For example, Xcel Energy of Colorado and  Minnesota  (both state-regulated utility providers) offer
programs funded by ratepayers.

    Xcel inerev - Cojoradjo

    Gas and Electric Affordability (GAP-EAR) programs are ratepayer funded non-emergency energy
    assistance programs, Customer outreach for income-qualified customers will be done through
    periodic mailings with an Invitation letter and an application in Spanish and/or English. Colorado
    income qualifying gas  and or electric customers are defined as those customers who received
    assistance for the current or most recent heating season from  the Colorado Low Income Energy
    Assistance  (LEAP)  program.  This  program  is a federally funded  state  supervised, county
    administered program.

-------
    Xcel Energy- Minnesota

    Affordability Charge - A surcharge to recover the costs of offering bill payment assistance and
    discount programs for low-income customers.

    Gas Affordability Program - A surcharge to recover the costs of offering a low-income customer
    co-pay program  designed  to reduce  natural  gas service disconnections.  Billed  to all non-
    interruptible customers.

Additionally the fallowing is from a state of California website and provides information on the state's
Low Income Home Energy Assistance Program (LIHEAP) Clearinghouse:

http://www.liheapch.acf.hhs.gov/profiies/California.htm

This clearinghouse is a good example of the previous reference to partnerships and how these might be
used to compile and make available information regarding affordabiiity programs, eligibility criteria, etc.

LIHEAP is  a federal program (administered at the state level) that provides assistance to eligible low-
income households to manage and meet their immediate home heating and/or cooling needs.
    What kind of assistance does LIHEAP offer?

    LIHEAP offers several kinds of services to help low-income households meet their home energy
    needs. These services include:
           The Home Energy Assistance Program (HEAP) provides one-time financial assistance to
           help offset an eligible household's energy costs (utility bill).
           The  Energy Crisis Intervention  Program  (ECIP) provides assistance to  low-income
           households that are in a crisis situation. Examples include a household that has received
           a 24- to 48-hour disconnect notice or service termination by its utility  company or a
           household facing an energy-related crisis of life-threatening emergency in the applicant's
           household, including a combustible appliance.
           LIHEAP  Weatherization  provides free  energy efficiency upgrades to  low-income
           households to lower their monthly utility bills, while improving the health and safety of
           the household's occupants. Click here to find out more about Weatherization services
           offered in California.
           Another service offered as a component to other LIHEAP services includes  energy budget
           counseling, education on  basic energy efficiency practices and  instruction on the proper
           use and maintenance of installed  weatherization measures.
       http://www.liheapch.acf.hhs.gov/profiles/California.htm

-------
Another example from California regarding low-income rate assistance is the California Alternate Rates
for Energy (CARE).  Low-income customers that are enrolled in the CARE program receive a 20 percent
discount on their electric and naturai gas bills. The following website provides additional information
regarding income eligibility guidelines, application forms and process, etc.:

www.cpyc.ca.gov/PUC/enerEv/Low+lncome/care.htm

Recommended US EPA/Center Action. There is much that can be learned from the electric and natural
gas utility industries relative to the development and funding of household affordability programs. EFAB
recommends that EPA/the Center compile and evaluate this information, including the various funding
sources as well as any funding limitations, and determine how it might best be used and conveyed to local
water and wastewater providers (e.g., directly and/or through partnerships).

IV,    SUMMARY/CONCLUSION

The EFAB viewed its charge as specifically relating to affordability at the household  level.  As such, our
recommendations to  EPA/the Center  do not consider project-specific or system-wide  programs,
initiatives, etc. intended to reduce overall service costs.  As a result, our four general recommendations
are as follows:

First, EFAB recommends that US EPA/the Center add additional survey questions to its Water System Rate
Assistance Program Research Report (the Research Report). The purpose of the Research Report was to
compile certain information on the various  water and  wastewater systems that  have implemented
afford ability/rate assistance programs  "to address household  or specific service  area affordability
problems". We encouraged the Center, through its currently on-going Research Report survey efforts, to
investigate the following additional survey questions:

   (i)      "How ore Affordobility Decisions Made?" - including discussion of any statutory, regulatory
           and/or oversight factors as well as defining "affordability" and determining initial as well as
           any ongoing eligibility requirements;

           "What are the Funding  Sources?" - including a discussion of the range of funding  sources,
           such as from the water utility, customers, privates, community, etc.; and

           "How Is Success Measured?"- is success measured and, if so, what are the standards/metrics
           used by water utilities?

In our discussions with US EPA/the Center, the  first two recommended questions will be incorporated into
the work scope/deliverables and the third recommended  question will be discussed in the Research
Report.

Furthermore, we reviewed the draft Research Report which was released on January 14, 2016,  Based
upon our review and our goal to expand the usefulness of the Research Report to all water utilities, we
recommend the following: (j) redefine "large  utility" and  "medium utility" in the Research Report- and
recalculate and summarize the existing summary data and figures according to this  redefinition and (ii}
include "medium utility" and "small  utility" case studies.
                                              10

-------
Second, EFAB recommends that  US EPA/the  Center serve in  a  facilitation  function to encourage
partnerships with states and utilities by acting as a clearinghouse or the central source for affordability
program information, especially as it relates to states sharing affordability information with other states
and information on addressing institutional or  legal  restrictions related to affordability programs. By
having complete, accurate and relevant information at a central source, EPA/the Center can assist states
and utilities with implementing successful programs to address the household affordability challenge.

Third,  EFAB  recommends that US  EPA/the Center also serve as the central source for affordability
information from the EFCs and other interest groups - such as the  American Water Works Association
(AWWA) and the Water Environment Federation (WEF) - on their respective current and future research
reports, tools and publications.  Since a central  source for this important and useful  information is not
currently available, we believe that EPA/the Center can be an important catalyst for the compilation and
dissemination of this valuable information to states and utilities alike.

Last and since  household affordability  programs exist in  the  electric and natural gas industry, EFAB
recommends that US EPA/the Center compile and evaluate the development and funding of affordability
programs in that industry, including the various funding  sources as  well as any funding limitations, and
determine how  it might best be used and conveyed to tocal water and wastewater providers (e.g., directly
and/or through  partnerships).
                                  ************************
                                                                        Publication W83QR16QQ2

-------

-------