Indiana: exploring utility rate affordability - part 3

In Part 1 of this series we introduced the topic of utility rate affordability and discussed the various factors causing concern about the pace of utility rate increases. In Part 2 we further explored ways municipalities have traditionally determined affordability and introduced alternative methodologies to assessing affordability.

This article we will consider how affordability should be determined.

How Should Affordability Be Determined? 

How should one define affordability if standard formulaic answers can’t be applied across the board? Dr. Manuel Teodoro proposed a two-step process based on the answers to these two questions (Measuring Household Affordability for Water and Sewer Utilities (2018 © American Water Works Association):

1. What amount is reasonable for households of limited means to pay for essential water and wastewater services?
2. What economic sacrifices are reasonable to expect low-income households to make in order to pay for water and wastewater? 

These questions focus attention on the fixed-income and low-income households in our communities that are most impacted by affordability concerns. Carrying out these steps involves. 

Partner with local social service agencies

The simplest way of assessing affordability is reaching out to local social service agencies. These agencies may already have programs such as energy assistance programs in place, which means they already have information on households that qualify and participate in these programs. 

The information the agencies provide can help determine at a high level how many households are experiencing affordability issues. It can also help in developing customer assistance programs (CAPs) that partner with these agencies to providing household assistance.

Affordability Analysis