Today, thanks to years of tireless effort by NACWA, its members and its water sector partners, the US Environmental Protection Agency (EPA) has taken an historic step to update its affordability methodology and create a new pathway for communities and EPA to assess clean water affordability challenges. EPA released a pre-publication version of a Federal Register notice seeking comment on its Draft 2020 Financial Capability Assessment. In conversations with NACWA, EPA has indicated that this new approach will effectively take the place of the existing 1997 guidance.

NACWA has been working for nearly two decades to move EPA away from relying exclusively on percent of median household income (MHI) as an indicator of affordability in the Clean Water Act context. EPA’s action today is a major step toward overhauling its financial capability assessment methodology to better account for the impacts on economically disadvantaged communities.

NACWA’s most recent advocacy on this issue was based on a series of recommendations in a report developed jointly with the American Water Works Association (AWWA) and the Water Environment Federation (WEF), which was sent to EPA in April 2019. The water sector report outlined new metrics for evaluating financial capability to better account for impacts on low-income populations

Since that time, the water sector associations have been working in lockstep to engage EPA and push the Agency to change its methodology. While EPA’s proposed approach continues to rely, in part, on its old metrics, key elements from the water sector report have been incorporated into EPA’s new draft document that directly influence the determination of financial burden based on impacts to low- income communities.

In conversations with the collaborating water sector organizations, EPA has indicated that this new document “pivots” away from the 1997 guidance, though it does not appear likely that EPA will withdraw the 1997 guidance. While the 2020 document contains elements from the older guidance, EPA has noted that the 2020 document,when finalized, will be the new starting point for financial capability conversations going forward, not merely a supplement to the 1997 document.

This is a major departure from previous policy statements from EPA on affordability and is the first time EPA has said that the 1997 guidance would no longer be the foundation for all negotiations. NACWA is still reviewing EPA’s proposal to determine the extent to which this is clearly articulated.

Based on preliminary discussions with EPA, the new document contains two alternative approaches, both of which include mandatory consideration of impacts on low-income populations and the prevalence of poverty. This has been one of NACWA’s top priorities since the early 2000s. Utilities will get to decide what alternative they want to use. There are also specific instructions for including drinking water costs, though it falls short of our initial ask that they use total water cost throughout the entire assessment methodology.

Another positive element of the document is language included from EPA’s Office of Science and Technology outlining how this new approach will be used in place of its existing methodology for evaluating economic impacts in the context of water quality standards variances and use attainability analyses (UAAs).

NACWA is working together with AWWA and WEF to review the draft document in more detail and will be engaging the experts who developed the water sector report to provide a comprehensive review of what EPA has drafted. We will also be sharing a more detailed analysis of the document with the membership soon.

EPA announced the new document via Press Release quoting Adam Krantz, NACWA CEO and other municipal and water sector leaders.

Once published in the Federal Register, EPA is asking for public comments within 30 days. The EPA staff are highly motivated to get this finalized before the end of 2020 and NACWA and its fellow organizations will be working quickly to get comments developed. Please send any feedback or comments to Chris Hornback at chornback@nacwa.org.https://www.epa.gov/sites/production/files/2020-09/documents/pre-publication_frn-fca.pdf