AARP Hearing Center
Background
Access to clean water and effective sewer systems is vital. Water is essential for drinking, cooking, hygiene, and sanitation. Effective sewer systems are crucial for managing wastewater and preventing contamination. Community health depends directly on a sufficient supply of clean water and well-maintained sewer systems. Many people receive both water and sewer services from the same utility provider, ensuring coordinated management of these essential resources.
Approximately 50,000 U.S. community water systems provide water to households and businesses. Public drinking water systems serve about 90 percent of households, and private wells serve about 15 percent of the population. (These statistics add up to more than 100 percent because some households use both municipal and well water.) Still, an estimated 1.6 million Americans do not have access to running water or indoor plumbing. In addition to these access issues, safety is a significant concern. According to the Environmental Protection Agency, over 40 percent of community water systems are not in compliance with at least one drinking water safety rule.
Just 8 percent of water companies serve 80 percent of all customers. The remaining small players face large expenditures to improve infrastructure and comply with government requirements. Such efforts can result in dramatic price increases. To become financially viable, many small private or investor-owned water systems have merged (see also Utility Company Mergers). This often results in improved investments as well as rate increases, though it further consolidates the industry.
Community water system ownership takes several forms. They can be publicly or privately owned and operated. In addition, some public systems are managed by private contracts. Privatization does not ensure fair rates or improved service. By some estimates, private water companies charge an average of 60 percent more than public providers for a similar amount of usage. Many privatization contracts last for 20 years. These long-term contracts may lack incentives for private companies to control costs, and they may discourage efficient water service provision. In addition, contracts may not be flexible enough to address new problems arising after the partnership takes effect.
Water and sewer rates: Most communities have experienced a significant rise in water and sewer rates recently. The typical family in the 50 largest U.S. cities saw their bills increase by almost 5 percent between 2023 and 2024 alone. Their bills rose an average of 24 percent between 2019 and 2024. Rising rates pose a hardship for many older adults and households with fixed or limited incomes.
Rising bills mean that consumer debt related to water and sewer bills is a growing problem. Inefficient or leaky plumbing in some older residences exacerbates the problem. Household water and sewer debt can result in disconnection of service and, at worst, evictions and foreclosures (see also Evictions and Foreclosure Prevention). Building owners sometimes evict their tenants based on disconnection of service. Municipal water systems can place a lien on a home for unpaid water bills, eventually resulting in foreclosure. Debt forgiveness programs, flexible payment plans, and limits on fees and penalties can help minimize the impact of debts on these households with low and moderate incomes.
To help consumers afford their water and sewer service, several states and municipalities have adopted water rate-assistance programs for customers with low incomes (see also Low-Income Assistance Programs). However, the federal government has not established a permanent assistance program for water. Water and sewer utilities subject to state rate regulation can address affordability issues by adopting low-income assistance programs in their rate cases. A variety of such programs have been adopted. Rate subsidies and leak detection and repair assistance can also help lower bills for households with low and moderate incomes.
Water scarcity in areas experiencing drought has pushed up rates. Rate plans that charge higher rates at higher levels of usage can encourage conservation. However, this rate structure can increase rates for households with inefficient appliances and leaky plumbing, who may be more likely to have low and moderate incomes.
Infrastructure: Water and sewer infrastructure investments are needed to account for a growing population and to address deferred maintenance. The Environmental Protection Agency estimates that $625 billion is needed over the next 20 years to pay for water infrastructure investments alone. Current funding from all levels of government and ratepayer revenues may not be enough to address existing problems, putting upward pressure on rates.
Infrastructure upgrades can improve water quality. For example, many older water and wastewater systems rely on lead pipes, which can leach lead into drinking water and pose significant health risks. Replacing lead pipes leads to safer drinking water but is very expensive. Stormwater also affects drinking water safety. Rain or melted snow flows into streets and picks up pollutants. Some polluted wastewater ends up in drinking water sources such as rivers, lakes, reservoirs, and groundwater, contaminating them. To finance watershed protection infrastructure projects, municipalities have increased rates, issued bonds, or established a stormwater utility that is responsible for managing stormwater runoff in a community.
Tenant-paid water: Sometimes, the bill for water and wastewater services goes to a building owner rather than the tenants. The owner allocates the costs among tenants. The allocation may not be based on actual usage. Sometimes, additional fees are added.
WATER AND SEWER: Policy
WATER AND SEWER: Policy
Universal water and sewer service
Policymakers should ensure adequate, potable, and affordable water for everyone.
Service should be extended to communities that lack or have inadequate water and sewer service. Infrastructure financing should be structured to ensure affordability for households with low and moderate incomes.
Federal policymakers should allow states and localities reasonable flexibility in achieving national standards and goals for water quality. They should also require careful monitoring and strict accountability to ensure compliance with national standards.
Water and sewer assistance programs
Policymakers should create water and sewer assistance programs. Funding should be sufficient to enable all households with low incomes to afford adequate water and sewer service. Customers should automatically be enrolled when they enroll in other income-based financial assistance programs with similar qualifying criteria.
Programs should be designed to better target water and sewer assistance based on household income.
Policymakers should provide financial assistance for plumbing repairs and efficiency measures for households with low and moderate incomes (see also Funding for repairs and modifications).
Infrastructure financing
Policymakers should determine what sources of financing are in the best interest of ratepayers and taxpayers. They should examine all potential sources, including rate increases, federal loans, the issuance of bonds, and new or increased local taxes.
Congress should allocate sufficient funds to states and municipalities to help pay for increased water and sewer infrastructure and security needs.
Water cost controls
Regulators should help the water industry realize economies of scale. They should consider consolidation, technological innovations, and other methods to control costs.
Water resource management
Policymakers should establish long-term integrated resource management that ensures water demands for municipal, agricultural, and industrial uses are balanced with environmental protection and preservation of water quality.
Water conservation
Policymakers should develop and adequately fund water conservation programs. Any tiered rate structure should include an adequate amount of water at an affordable rate.
Policymakers should:
- Implement water-use accounting to track and analyzes water consumption data, optimizing resource management and promoting efficient water usage.
- Support households in lowering their water consumption through water audits, leak-detection programs, smart-meters that provide real-time data on water usage, and the use of water-conserving fixtures and appliances.
- Conduct education programs that inform and engage the public about efficient water usage and conservation.
State policymakers should also:
- require water suppliers to submit and regularly update water conservation plans,
- identify quantifiable goals for water conservation and require suppliers to incorporate these goals into their plans, and
- require utilities to provide consumers with information on basic household conservation measures.
State and local policymakers should encourage and facilitate the public’s involvement in deliberations on alternative sources of water, such as reclamation (the process of treating wastewater to make it reusable) and desalination (the process of removing salt and impurities from sea water).
Privatization
Policymakers should provide incentives for better performance and water quality in any proposal to sell a publicly owned water or wastewater system to an investor-owned utility. These could include using shorter contract terms with extensions based on performance, tying part of the management fee to meeting targets, and allowing the government to buy back the water system.
Ratemaking and consumer protections
Policymakers should use rate cases to adopt water and sewer rates for private utilities. Municipal utilities should also use a process to set rates similar to a rate case review for gas and electric services.
At a minimum, the following principles should guide rate reviews:
- Rate proceedings should follow the traditional cost-of-service model.
- The utility’s revenue requirement should be based on just and reasonable expenses necessary to provide service and investments that are prudent and used and useful to ratepayers.
- The utility’s rate of return should be fair and based on current market conditions.
- Rates should be stable, predictable, and understandable, with costs allocated fairly among customers.
- New surcharges unrelated to water and sewer service should be prohibited.
- Lost revenue or decoupling mechanisms that keep utility water revenues constant for any drop in sales should be prohibited.
Policymakers should establish consumer protections that include budget billing plans and reasonable disconnection procedures (see also AARP Utilities Principles and General Utility Issues). High bills should be adjusted if they were caused by leaks and evidence of repair is shown.
During an emergency that threatens health or safety, utilities should not be permitted to disconnect or refuse to connect water service to households with low and moderate incomes (see also Disasters and Extreme Weather).
Policymakers should prohibit evictions and foreclosures due to household water debt.
Policymakers should establish fair tenant billing and sub-metering practices. They should also require proprietors to engage in best practices that minimize water bills for their tenants. This includes repairing leaks and paying for common area usage.
Policymakers should adopt consumer protections for submetered and estimated water and wastewater bills, including billing standards and limitations on billing and service fees. Consumers should have the right to inspect and verify bills. The billing method should be disclosed in advance of signing a lease or purchase agreement.
Balancing goals and ensuring compliance
Policymakers should ensure that water demands for municipal, agricultural, and industrial uses are balanced with environmental protection and preservation of water quality.
Federal policymakers should allow states and localities reasonable flexibility in achieving national standards and goals for water quality. They should require careful monitoring and strict accountability to ensure compliance with national standards.