Ratepayer Support for Infrastructure

by | May 18, 2021 | Education, ServLine, Water Solutions

While aging infrastructure is a well-known and mounting problem for the water industry, underinvestment can have devastating long-term consequences for the U.S. economy and the American public. While there are various governmental funding programs at the state and national levels that will assist in closing the gap, customer fees will continue to be the primary source of infrastructure funding, and rate increases will be needed to finalize projects and maintain that infrastructure over its lifespan.

The 2021 Infrastructure Report Card, released in March, revealed an $81 billion water infrastructure investment gap for 2019 alone. Should this underinvestment continue, the annual funding gap is expected to grow to $136 billion by 2039. American Society of Civil Engineers (ASCE) has modeled two investment scenarios over the next 20 years to illustrate dramatically different potential outcomes. “Failure to Act” would result in widespread water service disruptions, making industries less efficient and profitable, and leading to a $2.9 trillion decline in the gross domestic product and over 630,000 fewer jobs by 2039. Costs to U.S. households would increase by seven times and communities would suffer more frequent service interruptions, street flooding and other negative effects. Conversely, in the same timeframe, “Closing the Gap” would benefit the U.S. economy and its citizens with the creation of 800,000 new jobs, increased disposable income of $2,000 per household and a $4.5 trillion increase in gross domestic product.

Smaller water utilities face greater financial challenges than their large counterparts, having less access to capital and limited reserves, even prior to the Covid-19 pandemic, which has resulted in unprecedented economic hardship for the rural water sector. A 2020 sustainability assessment by the National Rural Water Association concluded that small systems, which comprise 91% of the community water supply inventory, have revenues to cover their operations and debt ratio, but that revenue is not sufficient to fund major infrastructure projects due to lower economies of scale and the inability of the ratepayer to afford increased cost for service.

In general, the public often takes their utility service for granted, which hinders the process for rate increases needed to implement infrastructure improvements and maintain a financially sustainable utility service. However, many systems are looking at public-private partnerships to offer better service and protection, thereby reinforcing positive customer relationships and experience that can result in a greater appreciation for the utility and its vital role in the community.

For example, customers are experiencing increasing numbers of service line breaks and leaks, and the Environmental Protection Agency (EPA) estimates household leaks can waste more than 1 trillion gallons annually nationwide. That’s equal to the annual household water use of more than 11 million homes. One of the most negative customer relationship events for a water utility occurs when a customer receives an extraordinarily high water bill, usually caused by a service line leak or plumbing problem. The customer immediately expects the utility to absorb the increased bill, as 70% of Americans are not aware of their responsibility for the private-side service line. When explained, the customer may accept that responsibility, but the conversation is typically confrontational in nature and the customer is generally dissatisfied. Plus, the utility might have to absorb a bad-debt expense in the event the customer simply cannot afford to pay.

But what if, in that conversation, the utility could say, “No problem, it’s covered”? The customer would be happy, appreciative and supportive of the system because their needs and expectations were met. Additionally, the interaction between the ratepayer and the staff would be positive, and the system would be paid for the water lost from the leak. The result is a happy customer, which equals a supportive ratepayer.

The ServLine Leak Protection Program offered by HomeServe and provided through the utility delivers this experience to utilities and their customers. Data from 150 systems across the nation who have implemented this program demonstrates that, when this program is offered, the individual ratepayers’ participation rate is 96%. For those customers who have had claims, satisfaction with the utility is increased by 70%, on average.

In addition to covering the water bill overage for the customer, the ServLine Program eliminates the financial loss for the forgiven portion of the water bill for systems that include overage subsidies as part of their leak adjustment programs. For systems that operate as lending institutions, requiring full payment but carrying the debt, ServLine eliminates this process and the utility resources required for administration, while providing the most positive customer outcome. According to Kenny Baird, General Manager of LaFollette Utilities, “Working with ServLine has been a win-win for our customers and the utility. It has saved both the utility and customers thousands of dollars, and the process has been easy and efficient, with claims being handled promptly.”

The ServLine Program is a good example of a partnership that helps to strengthen the relationship between the system and its customers by providing education, valuable protection and exceptional service. Creating allies through positive and transparent customer relationships is a crucial component of obtaining public support for the funding required to address aging infrastructure for the foreseeable future. Water companies interested in offering protection to customers can visit www.servline.com.

About Sam Wade

Mr. Wade began his career in rural water in 1972 as a water and wastewater systems operator and city manager in Minnesota before becoming the manager of the Minnesota Rural Water Association in 1982.

In 1985 Mr. Wade joined the National Rural Water Association (NRWA) as the Training Director and became the Deputy CEO and Chief Operating Officer two years later. For more than 30 years Mr. Wade helped provide the leadership needed for the NRWA to train, support, and promote water and wastewater professionals that serve rural America. Mr. Wade retired from the NRWA in 2019 and now works as an industry consultant.

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