DELIVERING CUSTOMER ASSISTANCE TO WATER SERVICE USERS: THE ROLE OF THIRD PARTIES

March 23, 2021

Anna Morgan and Cindy Xie

Utility companies across the country have been outsourcing their customer assistance services. If they can find "third parties" to do this work, they can usually save money. They can also focus their limited staff time on other management tasks. Consumer assistance programs, or CAPs, operate differently in different cities. Utilities typically design the programs to support customers with disabilities, customers 65 and older, and customers at a certain percent at or below the Federal Poverty Level. Most CAPs support households in paying their water bills by providing a small grant or loan. Some programs offer reduced fees for a short period of time; they are intended to help someone out while they search for a job or are experiencing large medical bills. Not all states require water utilities to offer such assistance programs. For example, no law or regulation requires Pennsylvania's water utilities to provide service programs for low-income customers. However, several water utilities have voluntarily established them. This may be in response to an advocacy group or grassroots organization's demands for assistance programs or in attempts to mitigate water shutoffs in the short term. Generally, they are funded through utility and customer contributions. For example, customers may add a dollar to their monthly payment to help support a CAP program.

Dollar Energy Fund (DEF), founded in 1983, is an example of a nonprofit third party that manages CAPs for several utilities. DEF is located in Pittsburgh, PA, and works for and with utilities in 12 states. They provide various services, including administering CAPs, payment assistance, consumer education, payment counseling, weatherization, and conservation programs for gas, electric, water, sewage, and even telephone utility companies. DEF also provides a customer service program for utilities as a fee-for-service offering. This offering allows DEF to raise revenues for its operation, as well as funding for the CAPs.

DEF has 46 utility partners. Their signature CAP is the Hardship grant, a one-time assistance grant applied to a low-income household's utility bill. The funding is available on a first-come, first-served basis. Once the funding runs out, DEF stops accepting applications. DEF charges utilities an 8.25% fee to cover the cost of administering the grant program. The funding for the grants comes from a mixture of funds provided by the contracting utility and fundraising by DEF – the design of each program is unique. Some utilities only rely on DEF for their Hardship grant program, while other utilities contract with DEF for multiple services. DEF says that they streamline the administrative process using their iPartner software and have a degree of experience and knowledge in administering CAPs that utilities may not have. In addition, utilities may be able to take advantage of tax benefits by working with a nonprofit. DEF and utilities engage in community outreach efforts such as social media, bill inserts, and working with community partners. However, there is still a gap in reaching all households leaving many unaware about their CAP options.

Operation Fuel is a second (Hartford, Connecticut-based) nonprofit service organization providing state-wide assistance to low-income families in emergency and urgent circumstances since 1977. They work in the areas of gas, electric, and water, administering customer assistance programs on behalf of utilities. These include a one-time voucher program for people needing financial help with their water bills. In 2020, the organization served approximately 14,000 people and 6,000 households.

Operation Fuel currently receives around $2 million in funds from the state of Connecticut every year. They are supported by donations from ratepayers under an Add-A-Dollar donation program. Connecticut utility companies offer their customers an option to add one dollar to their monthly bills. All of the proceeds are used for energy assistance. Connecticut legislation mandates that all gas and electric companies serving more than 75,000 customers must participate in the Add-A-Dollar program, but some water utilities in the state participate voluntarily.

While nonprofit third parties can provide essential help to customers in need and the utilities that serve them, they have limited resources. DEF's Hardship grant serves far fewer customers than qualify. DEF stops accepting applications once all their available funds have been distributed. Neither the nonprofit nor the utility know how large the gap is between the number of customers in need and those who receive assistance, especially since not all customers are aware of the available programs and resources. CAPs are an important short-term solution to avoid water shutoffs and ensure a minimum water supply for households in need. Some would consider their full funding to be the responsibility of the utilities. But what happens when utilities themselves are financially stressed?

There are no permanent state or federal water customer assistance programs to assist low-income consumers. COVID-19 has exposed the need for such support. In December 2020, Congress finally addressed part of this unmet need by providing $638 million for low-income water and sewer customer assistance (out of a $900 billion COVID-19 relief bill). However, the Natural Resources Defense Council proposes a much more significant amount of federal funding, at least $4 billion, that Congress should provide for low-income water and wastewater customer assistance. 

CAPs are a necessary part of a portfolio of policies and programs needed to protect against water shutoffs in low-income communities. They should be funded on a continuing basis. Only providing relief during the COVID-19 pandemic ignores the broader and pressing issue of water affordability. Hopefully, all fifty states and the water utilities that serve them will expand their customer assistance programs.

Photo Credit: "Water Faucet" by Jenn Durfey, CC BY 2.0