Original Water Proposal

[Company Logo Image] Michigan Welfare Rights Organization

Linking up the struggles!

"You get what you are organized to take!"

The Original Water Affordability Program Proposal, 1/05

Michigan Welfare Rights Organization's Water Affordability Program

It was drafted by Roger Colton of Fisher, Sheehan & Colton. The MWRO attorneys are Lorray Brown from the Michigan Poverty Law Program*, Marilyn Mullane from Michigan Legal Services, and Ted Phillips from the United Community Housing Coalition.

A WATER AFFORDABILITY PROGRAM FOR THE CITY OF DETROIT

Click here for information on recent Detroit City Council water rate votes. Slideshow summary presented before the Detroit City Council, February 10, 2006. Prepared by Roger Colton.

Components of the Affordability Program

Rate affordability component:

--Burden-based

--Fixed credit

	Arrearage management component.
	Water conservation component.

Cost Recover for Rate Affordability

Meters charge (not volumetric):

--Bad debt offsets

--Start-up expenses

Annual level of a meters charge:

--Residential: $12

--Commercial: $240

--Industrial: $3,300

--Municipal/school/housing: $900

Rate Affordability Expense Savings

	"Going forward" bad debt savings.
	Reduction in working capital.
	Reduction in credit and collection.
	Rationalize credit and collection.

Impacts of affordability program: Columbia Gas

	61% fewer disputes.
	53% fewer new payment plans.
	69% fewer broken payment plans.
	48% fewer shutoff notices.
	74% fewer orders for disconnections for nonpayment.

Impacts of affordability program: National Fuel Gas.

	30% increase in number of payments.
	10% increase in percentage of bill paid.
	80% decrease in number of disconnections.

Basic Consumer Protections Service disconnects for nonpayment.

	Waived late fees for low-income customers.
	Disconnect limitations:

--Ban notice with no present intent to disconnect.

--Impose time limit on efficacy of notice.

--Limit number of notices not acted upon.

Basic Consumer Protections Payment Plans for Arrears.

	Renegotiate payment plans with changed circumstances.
	Reinstate payment plan after default if no disconnect.
	Regular but not necessarily equal monthly payments.
	Cap payment plan payment at one month's average bill.

Innovations in collections

	Increased use of Electronic Funds Transfer (EFT) for ability-to-pay payment plans.
	Landlord receiverships whether or not gas and/or electric vendors involved.
	Cross-servicing residential accounts: city permits.
	Cross-servicing non-residential accounts: licenses and permits.

Summary of program proposal

Rate affordability program:

--Rate affordability

--Arrearage management

--Water conservation

	Fundamental consumer protections.
	Designated ability-to-pay collection initiatives.

*The Michigan Poverty Law Program (MPLP) is a cooperative effort of Legal Services of South Central Michigan and the University of Michigan Law School.

Prepared by Roger Colton, Fisher Sheehan & Colton Public Finance and General Economics

34 Warwick Road, Belmont, MA 02478, (617) 484-0587 January 2005

[MWRO note: The information provided here is directly reproduced from the Water Affordability Program proposal. Persons who are interested in viewing the entire report may do so at the MWRO office, or they may contact the recipients of the proposal: the Detroit Water and Sewerage Department, and members of Detroit City Council.]

Part 1: An Overview of Affordable Water Rates

[Pg 1] This proposal is presented to the Detroit Water and Sewerage Department (DWSD) on behalf of the Michigan Poverty Law Program/Michigan Legal Services and their related clients. In recent years, the unaffordability of water/sewer bills in the City of Detroit has become a substantial problem. Not only have customers been disconnected, and gone without service, but even the households that pay their bills incur substantial hardships because of the unaffordability of their bills.

While the unaffordability of water/sewer service certainly poses a social problem, it manifests itself as a business problem as well. The unaffordability of water/sewer service contributes to unpaid bills and the associated collections expenses associated with such unpaid bills. In addition, the unaffordability of water/sewer service contributes to increased costs such as uncollectible accounts and the working capital associated with arrears.

The affordability program contained in the narrative discussion below reflects the social need for affordable water/sewer bills and the business need for affordable water/sewer bills. The proposal contains three components:

	An explicit water/sewer affordability program, consisting of rate affordability, arrearage management, and water conservation;
	A proposal for basic consumer protections to be afforded low-income customers; and
	A proposal for innovative collections activities to be directed toward customers with an ability-to-pay.

Part 6: Summary

[Pg 44] Unaffordable water/sewer bills pose substantial problems to low-income Detroit residents. Not only do unaffordable bills impede the ability of low-income customers to make their water/sewer payments, but such bills also impose substantial physical, emotional and social hardships even on low-income customers that make their payments.

Beyond the impacts on low-income customers, water/sewer bills that are unaffordable to low-income Detroit residents pose a business problem for the Detroit Water and Sewerage Department (DWSD). Increased financial costs to the DWSD result from increased credit and collection expenses arising from the need to "chase" bill payments; increased working capital expenses associated with higher arrears, and increased bad debt/uncollectible expenses associated with long-term nonpayment.

This proposal contains three sets of recommendations to address these social and business problems associated with the unaffordability of water/sewer bills. The proposal recommends:

	Adoption of a rate affordability program, consisting of a rate discount component, an arrearage management component, and a water conservation component.
	Adoption of designated fundamental consumer protections involving late fees, service disconnections, and payment plans; and
	Adoption of designated collections initiatives directed toward customers having an ability-to-pay.

The combined effect of these three sets of recommendations will not only be to address the unaffordability problems facing low-income Detroit water/sewer customers, but also to rationalize the overall collection efforts undertaken by DWSD.

Each set of recommendations should be adopted.

[ Home ] [ Up ]