(1)The California Safe Drinking Water Act provides for the operation of public water systems and imposes on the State Water Resources Control Board various responsibilities and duties relating to the regulation of drinking water to protect public health. Existing law establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long terms. Existing law requires the state board to annually adopt a fund expenditure plan, as provided, and requires expenditures from the fund to be consistent with the fund expenditure plan. Existing law requires the state board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment.

This bill would require the state board to update a needs analysis of the states public water systems to include an assessment, as specified, of the funds necessary to provide a 20% bill credit for low-income households served by community water systems with fewer than 3,300 service connections and for community water systems with fewer than 3,300 service connections to meet a specified affordability threshold on or before July 1, 2026, and on or before July 1 of every 3 years thereafter.

(2)Existing law requires the state board, by January 1, 2018, to develop a plan for the funding and implementation of the Low-Income Water Rate Assistance Program. Existing law requires the plan to include, among other things, a description of the method for collecting moneys to support and implement the program and a description of the method for determining the amount of moneys that may need to be collected from water ratepayers to fund the program.

This bill would require qualified systems, defined as any retail water supplier that serves over 3,300 residential connections, to begin providing water rate assistance to eligible ratepayers, defined to mean a low-income residential ratepayer with an annual household income that is no greater than 200% of the federal poverty guideline level, on or before April July 1, 2027. The bill would require a qualified system to automatically enroll an eligible ratepayer in the water rate assistance program if available information, which includes, among other things, authorizing a ratepayer to confirm eligibility by self-certification made under penalty of perjury, indicates that they are qualified to receive assistance and provide a water bill credit, as specified. By expanding the crime of perjury, the bill would impose a state-mandated local program.

The bill would require a qualified system, on or before July September 1, 2026, to provide an opportunity for each ratepayer to provide a voluntary contribution as part of the ratepayers water bill to provide funding for the qualified systems water rate assistance program. The bill would require a qualified system to recommend a voluntary contribution amount on the bill of each ratepayer, other than an eligible ratepayer, at a level that will intended to raise sufficient funding to provide a discount bill credit to eligible ratepayers, pay for the qualified systems administrative costs to implement the program, program beginning January 1, 2025, and establish a balancing account if the qualified system chooses to do so. The bill would require a qualified system to notify ratepayers of the voluntary contribution on the water bill and provide each ratepayer the option and method of opting out of the voluntary contribution, as specified. The bill would also prohibit a qualified system from sanctioning or holding liable a ratepayer in any manner for not paying the voluntary contribution. The bill would authorize a qualified system to use any state or federal funds that are available to support a ratepayer assistance program by offsetting or supplementing the funds collected from voluntary contributions. The bill would authorize the Attorney General to bring an action in state court to restrain the use of any method, act, or practice in violation of these provisions, except as provided.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)The California Safe Drinking Water Act provides for the operation of public water systems and imposes on the State Water Resources Control Board various responsibilities and duties relating to the regulation of drinking water to protect public health. Existing law establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long terms. Existing law requires the state board to annually adopt a fund expenditure plan, as provided, and requires expenditures from the fund to be consistent with the fund expenditure plan. Existing law requires the state board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment.

This bill would require the state board to update a needs analysis of the states public water systems to include an assessment, as specified, of the funds necessary to provide a 20% discount bill credit for low-income households served by community water systems with fewer than 3,000 3,300 service connections and for community water systems with fewer than 3,000 3,300 service connections to meet a specified affordability threshold on or before July 1, 2026, and on or before July 1 of every 3 years thereafter.

The California Safe Drinking Water Act provides for the operation of public water systems and imposes on the State Water Resources Control Board various responsibilities and duties relating to the regulation of drinking water to protect public health. Existing law establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long terms. Existing law requires the state board to annually adopt a fund expenditure plan, as provided, and requires expenditures from the fund to be consistent with the fund expenditure plan. Existing law requires the state board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment.

This bill would require the state board to develop a update a needs analysis of the states public water systems to include an assessment, as specified, of the funds necessary to provide a 20% discount for low-income households served by community water systems with fewer than 3,000 service connections and for community water systems with fewer than 3,000 service connections to meet a specified affordability threshold on or before May 1, 2025, July 1, 2026, and on or before May 1 of each year July 1 of every 3 years thereafter.

The California Safe Drinking Water Act provides for the operation of public water systems and imposes on the State Water Resources Control Board various responsibilities and duties relating to the regulation of drinking water to protect public health. Existing law establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long terms. Existing law requires the state board to annually adopt a fund expenditure plan, as provided, and requires expenditures from the fund to be consistent with the fund expenditure plan. Existing law requires the state board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment.

This bill would require the state board to develop a needs analysis of the states public water systems on or before May 1, 2025, and on or before May 1 of each year thereafter.

Date of Hearing: August 7, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 1255

Author:(Durazo) – As Amended Ver:June 19, 2024

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires a retail water supplier that serves over 3,300 residential connections to establish a water rate assistance program (WRAP) to help eligible low-income customers pay their water and wastewater bills, with funding from voluntary contributions paid by other customers through charges on water bills; and requires the State Water Resources Control Board (SWRCB) to conduct a needs assessment for a similar program for low-income customers of smaller water suppliers.

Specifically, this bill, among other things:

1. Requires any retail water supplier that serves over 3,300 residential connections (qualified system), by July 1, 2027, to provide water rate assistance to any eligible residential ratepayer, defined as having an annual household income up to 200% of the federal poverty level.
2. Requires the assistance to be a bill credit of no less than 20% of total water and wastewater charges, or the maximum bill credit funding is able to support, but, if funding supports less than a 10% bill credit, then instead requires provision of crisis assistance in the form of credits to reduce arrearages, to the extent funds are available.
3. Requires automatic enrollment of a ratepayer in the WRAP if eligibility is indicated by available information including self-certification made under penalty of perjury.
4. Requires a qualified system, by September 1, 2026, to provide an opportunity for each ratepayer to make a voluntary contribution as part of the ratepayer’s water bill to provide funding for the qualified system’s WRAP.
5. Requires a qualified system to recommend a voluntary contribution amount on the bill of each ratepayer, other than an eligible ratepayer, at a level intended to raise sufficient funding to provide a bill credit to eligible ratepayers and pay administrative costs to implement the program beginning January 1, 2025, with recommended contributions not to exceed 5% of a ratepayer’s water and wastewater charges.
6. Requires a qualified system to notify ratepayers of the voluntary contribution on the water bill and to provide the option and method of opting out of the voluntary contribution.
7. Authorizes a qualified system to begin collecting voluntary contributions to fund the WRAP on or before September 1, 2026, and provides that, beginning July 1, 2027, no more than 10% of voluntary contributions may be used for administrative costs.
8. Provides if, after three months of accepting voluntary contributions, a qualified system can demonstrate insufficient funds to support a minimum bill credit of either 10% or $5 per month and pay administrative costs, the system must instead use the collected contributions to provide ongoing crisis assistance.
9. Prohibits a qualified system from sanctioning or holding liable a ratepayer in any manner for not paying the voluntary contribution.
10. Authorizes a qualified system to use any state or federal funds available to support a WRAP by offsetting or supplementing the funds collected from voluntary contributions.
11. Authorizes the Attorney General to bring an action in state court to restrain the use of any method, act, or practice in violation of this bill.
12. Requires the SWRCB, beginning in 2028, to require a qualified system to submit annual reports on its WRAP.
13. Requires the California Public Utilities Commission (CPUC), by January 1, 2026, to establish a mechanism for electrical corporations and gas corporations to provide data to all qualified systems no later than April 1, 2026, and annually thereafter, regarding ratepayers enrolled in, or eligible to be enrolled in, the California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) low-income rate discount programs.
14. Requires SWRCB, by July 1, 2026, and every three years thereafter, in consultation with an advisory group and stakeholders, to update the needs analysis of the state’s public water systems to include an assessment of funds necessary to provide a 20% bill credit for low-income households served by community water systems with fewer than 3,300 service connections.
15. Requires SWRCB, in developing this assessment, to collect arrearage data from water systems not regulated by the CPUC and to request data from the CPUC on those water systems it regulates; use data from the United Census Bureau and comparable sources to estimate the number of households in need of assistance; identify available data on water rates charged by community water systems with fewer than 3,300 service connections; and use averages where data is unavailable for a water system.

FISCAL EFFECT:

The SWRCB reports costs of $450,000 annually ongoing from the Safe Drinking Water Account to update the drinking water needs assessment and to implement the requirement that suppliers provide information on WRAPs in technical reports to SWRCB, plus one-time contracting costs of $225,000 to update and maintain IT systems. 

The CPUC reports costs of $249,000 annually ongoing from the Public Utilities Reimbursement Account for one permanent full-time administrative law judge (ALJ) to establish regulations for the CPUC’s regulated water utilities to meet this bill’s requirements, including to develop opt-in or opt-out mechanisms; establish a refund process for customers that opt-out after the last billing cycle; determine acceptable “alternative amounts” for customer contributions; establish a process to include charges on customer bills; and describe a process for paying the voluntary contribution into appropriate balancing accounts. After the rulemaking, the ALJ would adjudicate balancing account reasonableness, adjudicate customer complaints for over-billing, failure to process customers’ opt-out requests, credit customers who opt-out accurately, and process enforcement actions. Tasks to share data from the CARE and FERA programs with water systems would be included in the ALJ’s work or absorbed by existing staff for those programs.

COMMENTS:

1. Purpose. According to the author:

While recognizing water as a basic human right, California has been at the epicenter of a water affordability and access crisis, especially for communities of color.  The State [Water] Board reported that water rates rose 45% from 2007 to 2015. Those rate increases led to more than 1.6 million households having an average $500 water and/or sewer utility debt, further exacerbating the problem have been how efforts to address this access gap have been delayed including AB 401 (Chap. 662, Stats. 2015). SB 1255 is a critically needed bill that will finally establish a statewide water rate assistance program for large and medium water systems that serve most of the state’s population, through a voluntary ratepayer contribution fund, that will not require use of assessments or fees, consistent with Prop. 218. This program will direct voluntarily collected funds to help qualified households, defined as those with an annual household income that is no greater than 200% of the federal poverty guideline level.

1. Background. As many California households struggle to pay monthly bills, the price of safe, clean water continues to increase due to climate related weather events, aging infrastructure, under-investment in drinking water systems, declining financial support from the state and federal government, and stricter water quality regulations, among other constraints. This bill seeks to help eligible low-income households pay monthly water bills, similar to how the existing CARE and FERA programs provide discounts on monthly electric and gas utility bills for eligible low-income customers. The CARE and FERA programs are funded through a mandatory rate surcharge paid by all other utility customers, with the total subsidy amount needed to provide the bill discounts spread across millions of other customers. In contrast, the majority of water systems required by this bill to provide water rate assistance serve between 3,300 and 10,000 customers. The WRAP prescribed by this bill relies on voluntary contributions by water ratepayers with many detailed implementation requirements that water systems would need to build in to billing and accounting systems and continually adjust depending on program participation.

Although stakeholders express general agreement with the goal of this bill and the critical need to address water affordability in California, opponents claim this bill (a gut-and-amend in the second house) is so complex it will result in water systems incurring more administrative costs than the amount of funding it will generate to provide actual bill discounts to low-income ratepayers. The Assembly Committee on Utilities and Energy stated that myriad concerns persist with this bill, including, among others, the funding instability and potentially negative perception of the program from the opt-out approach to voluntary contributions; the 10% cap on administrative costs; the assumption that 60% of ratepayers will voluntarily contribute, considered very high for economically disadvantaged communities; the equities of placing a high burden on non-eligible ratepayers especially for a water system with a high percentage of eligible customers; the constraints of Propositions 218 and 26 on publicly owned water utilities to collect rates for rate relief from one customer to another; and concerns with self-certification of eligibility.

1. Prior Legislation. SB 222 (Dodd), of the 2021-22 Legislative Session, would have created a Low-Income Water Rate Assistance program for all California water agencies. SB 222 was vetoed by the Governor, citing the lack of funding for the program.

AB 401 (Dodd), Chapter 662, Statutes of 2015, required the SWRCB, in collaboration with the State Board of Equalization and relevant stakeholders, to develop a plan for funding and implementing a Low-Income Water Rate Assistance Program.

AB 685 (Eng), Chapter 524, Statutes of 2012, declared the right to clean, safe, and affordable water for drinking and sanitation.

Analysis Prepared by: Jacqueline Kinney / APPR. / (916) 319-2081

Date of Hearing: July 1, 2024

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

SBPCA Bill Id:SB 1255

Author:(Durazo) – As Amended Ver:June 19, 2024

SENATE VOTE: 33-6

SUBJECT: Public water systems: needs analysis: water rate assistance program

SUMMARY: Requires, on or before July 1, 2027, retail water suppliers that serve over 3,300 residential connections to establish a water rate assistance program (WRAP), as specified, to provide assistance to eligible ratepayers for their water and wastewater bills.

Specifically, this bill:

Definitions:

1. Defines “available information” as any of the following:
   1. Information documenting the residential ratepayer’s participation in an affordability program, as specified;
   2. A benefits award letter provided by the residential ratepayer documenting that the customer is an enrollee in, or is a recipient of, an affordability program; or
   3. Self-certification of eligibility, under penalty of perjury, by the residential ratepayer.
2. Defines “balancing account” as a reserved amount of sufficient funding to address fluctuations in voluntary contributions received or changes in eligible ratepayers, not to exceed 25% of the annual expenditures of the program.
3. Defines “eligible ratepayer” as a low-income residential ratepayer with an annual household income that is no greater than 200% of the federal poverty guideline level.
4. Defines “qualified system” as any retail water supplier that serves over 3,300 residential connections.

Needs Analysis:

1. Requires the State Water Resources Control Board (State Water Board), on or before July 1, 2026, and on or before July 1 of each three years thereafter, to, in consultation with the Safe and Affordable Funding for Equity and Resilience (SAFER) Program advisory group and appropriate stakeholders, to update the needs analysis of the state’s public water systems.
2. Requires the update of the needs analysis to include:
3. An assessment of the funds necessary to provide a 20% bill credit for low-income households served by community water systems with fewer than 3,300 service connections; and,
4. An assessment of the funds necessary for community water systems with fewer than 3,300 service connections to meet the affordability threshold established pursuant to the SAFER Program Fund Expenditure Plan.
5. Requires the State Water Board, in order to develop the assessment described above, to do all of the following:
6. Collect arrearage data from water systems not regulated by the California Public Utilities Commission (CPUC) and request data from the CPUC on the systems they regulate;
7. Estimate the number of households in need of assistance using arrearage data as well as information provided by the United States Census or other comparable data sources;
8. Identify available data on water rates charged by community water systems with fewer than 3,300 service connections; and,
9. Where data is unavailable for a water system, use an average of existing data to estimate the level of need for that system.

Water Rate Assistance Program (WRAP):

1. Requires, on or before July 1, 2027, a qualified system, other than a system that already offers an existing WRAP, to establish a WRAP, as specified, and to begin providing water rate assistance to eligible ratepayers.

2) Requires a WRAP offered pursuant to this bill to, at a minimum, include both of the

following:

1. Automatic enrollment of eligible ratepayers if available information, as defined in the bill, indicates that they are qualified to receive assistance; and,
2. Provision of a bill credit for eligible ratepayers of no less than 20% of the total water charges, and, if present on the bill, wastewater charges, for a volume of water similar to that identified in urban water use objectives law (currently 47 gallons per capita daily for indoor residential water) or, if the eligible ratepayer uses less, the actual volume used.
3. Provides that in the event that there is not sufficient funding for the WRAP, including any balancing account funds, to support a 20% bill credit, the WRAP shall provide the maximum bill credit available that funding is able to support, unless the maximum bill credit available that funding is able to support is less than 10%, in which case the qualified system shall instead provide crisis assistance to the extent funds are available, as specified.
4. Authorizes the qualified system to select the elements, as described below, of the water charges upon which the bill credit is applied or to provide a bill credit as a set percentage of the total water bill, provided that the total bill credit is equivalent in value to the bill credit required above.
5. Provides that the element, or elements, of the drinking water charges upon which the bill credit may be applied, include, but are not limited to, the fixed, volumetric, or fixed and volumetric charges levied by the system.
6. Authorizes a qualified system to, on or before September 1, 2026, begin collecting voluntary contributions for the reasonable costs, as specified, associated with the administration of the WRAP and to establish initial program funding.

7) Prohibits, beginning July 1, 2027, the reasonable costs associated with the administration of the WRAP from exceeding 10% of voluntary contributions collected.

1. Authorizes a qualified system to, in establishing a WRAP, establish a balancing account to manage fluctuations in voluntary contributions and the granting of bill credits to eligible ratepayers.
2. Provides that this bill does not require a qualified system to use funds other than voluntary contributions collected pursuant to the WRAP to provide rate assistance to eligible ratepayers or to pay for associated administrative costs, but provides that a qualified system may use other funds available for this purpose that are not derived from fees or assessments, as allowed by the California Constitution.
3. Exempts any qualified system that offers an existing water rate assistance program on or before September 1, 2026, that meets the minimum enrollment and bill credit requirements specified in this bill by July 1, 2027, from being required to comply with the provisions of this bill, and authorizes those systems to collect voluntary contributions to supplement or expand the existing program or to provide crisis assistance.
4. Provides that nothing in this bill shall prohibit a qualified system from offering assistance to residential ratepayers if the program does either, or both, of the following

a) Provides a greater bill credit benefit; or,

b) Exceeds the definition of low income as specified in this bill for ratepayer eligibility.

1. Authorizes any public water system that is not a qualified system to collect voluntary contributions to fund a water affordability program, but does not require the system to comply with the provisions of this bill.
2. Authorizes a qualified system to require verification of eligibility from a sample of enrolled eligible ratepayers on an annual basis to verify the ratepayer’s low-income status and eligibility for assistance, and to remove any ratepayers found to not be eligible for assistance from the WRAP.
3. Requires a qualified system to continue to have a WRAP as long as there is sufficient funding available to provide water rate assistance or crisis assistance, to pay for the qualified system’s reasonable costs for administration of the program, and to establish a balancing account if the qualified system chooses to do so.

Crisis Assistance:

1. Requires that if, after three months of accepting voluntary contributions, the qualified system can demonstrate there will not be sufficient funds to support a program at a minimum of a 10% discount or $5 per month, whichever amount is greater, and pay for the qualified system’s reasonable costs for administration of the program, the system must instead use the collected contributions to provide ongoing crisis assistance and pay for the qualified system’s reasonable costs for administration of crisis assistance.
2. Requires crisis assistance to be offered on or before July 1, 2027, and to be offered to eligible ratepayers, at a minimum, when a qualified system provides a discontinuation of residential water service notification or when an eligible customer contacts the qualified system about a delinquent account.
3. Limits crisis assistance to only being provided to an eligible ratepayer once per year and limits it to an amount determined by the qualified system, taking into account the overall past due amount and available funding. Provides that to the extent the amount of crisis assistance provided does not eliminate an eligible ratepayer’s arrearages, the ratepayer shall enter into an amortization agreement, alternative payment schedule, or plan for deferred or reduced payment, pursuant to discontinuation of residential water service law, to be eligible for crisis assistance.

Voluntary Contributions:

1. Requires, on or before September 1, 2026, a qualified system to provide an opportunity for each ratepayer of the system to provide a voluntary contribution as part of the ratepayer’s water bill to provide funding for the qualified system’s WRAP.
2. Requires a qualified system to establish a recommended voluntary contribution amount on the bill of each ratepayer other than an eligible ratepayer based on available information as of July 1, 2026, at a level intended to raise sufficient funding to provide a bill credit to eligible ratepayers, pay for the qualified system’s administrative costs to implement a WRAP beginning January 1, 2025, and establish a balancing account if the qualified system chooses to do so.

1. Requires a qualified system, when setting the recommended voluntary contribution, to assume that 60% of ratepayers other than eligible ratepayers will provide the contribution. Authorizes a qualified system, on or before July 1, 2027, to adjust the voluntary contribution, as necessary, considering the previous year’s actual participation rate. Prohibits the recommended voluntary contribution from exceeding 5% of the charges for water and wastewater on the water bill for any residential ratepayer.
2. Requires a bill from a qualified system to label the voluntary contribution in a way that describes the purpose of the funds. Requires the qualified system to notify their ratepayers of the voluntary contribution and, in a visually accessible manner and using clear and unambiguous language, to provide each ratepayer the option and method of opting out of providing the voluntary contribution at least three months prior to beginning collection of the voluntary contribution, and thereafter on at least an annual basis.
3. Requires voluntary contributions to commence on the qualified system’s subsequent billing cycle from the notice.
4. Authorizes the qualified system to choose to include alternative amounts for contributions.
5. Requires a qualified system to also provide this information on its internet website in English, and any other language spoken by at least 10% of the people residing in its service area, and other languages, as specified.
6. Authorizes a ratepayer to opt out of the voluntary contribution at any time in a manner that is specified by the qualified system in the notice about the voluntary contributions, with voluntary contributions terminating on the qualified system’s subsequent normal billing cycle.
7. Provides that a ratepayer may only request a refund for contributions made since the last notice of opportunity to opt out of the program was provided or for the period of the last billing cycle prior to the date the ratepayer opts out, whichever time period is greater. Authorizes qualified systems to provide refunds in the form of a bill credit.
8. Prohibits a qualified system from sanctioning, taking any enforcement or collection action against, imposing any late charge or penalty against, or otherwise holding liable a ratepayer in any manner for exercising the option of not paying a voluntary contribution.
9. Requires the voluntary contributions to be used only to provide rate assistance to eligible ratepayers, pay for associated administrative costs to implement the WRAP, and establish a balancing account. Authorizes administrative costs of establishing the WRAP to be reimbursed from voluntary contributions.
10. Authorizes a qualified system to contract with a third party to receive voluntary contributions and comply with the requirements of the bill.
11. Requires that any partial payment made by a ratepayer that is insufficient to pay for charges on the bill be used to pay the qualified system’s charges shown on the ratepayer’s bill before being attributed to a voluntary contribution.
12. Prohibits a penalty or late fee from being assessed by a qualified system for the failure of a ratepayer to make timely payment of a voluntary contribution regardless of whether the ratepayer has exercised the option of not paying a voluntary contribution.
13. Authorizes a qualified system to use any state or federal funds that are available to support a WRAP by offsetting or supplementing the funds collected from voluntary contributions.

CPUC Data Collection:

1. Requires the CPUC to, on or before January 1, 2026, establish a mechanism for electrical corporations and gas corporations to provide data to all qualified systems no later than April 1, 2026, and annually by April 1 thereafter, regarding ratepayers enrolled in, or eligible to be enrolled in, the California Alternate Rates for Energy (CARE) program and the Family Electric Rate Assistance (FERA) program.
2. Authorizes all qualified systems to enter into agreements with local gas and electric publicly owned utilities (POUs), including, but not limited to, municipal utility districts and irrigation districts, for the purpose of regularly receiving data regarding ratepayers enrolled in, or eligible to be enrolled in, affordability programs benefiting eligible ratepayers.
3. Specifies the laws under which the data collection is subject.

State Water Board Data Collection:

1. Requires the State Water Board, beginning in 2028, to require qualified systems to annually report the following information in required technical reports:
2. The total amount of voluntary contributions collected, the administrative costs of operating the WRAP, the number of eligible households that were provided rate assistance or crisis assistance, and the total amount of rate assistance or crisis assistance provided to eligible households; and,
3. An evaluation of available relevant information regarding any arrearages that remain after application of bill assistance.

Enforcement:

1. Authorizes the Attorney General to bring an action in state court to restrain, by temporary or permanent injunction, the use of any method, act, or practice in violation of the WRAP provisions of this bill by a qualified system, other than a system that has an existing WRAP program, including nonparticipation by a qualified system.
2. Prohibits the Attorney General from bringing an action against a qualified system with an existing WRAP program for failing to meet the requirements of the bill, as long as the qualified system makes a good faith effort to raise sufficient funding.

EXISTING LAW:

1. Provides that the California CPUC has regulatory authority over public utilities, including water investor-owned utilities (IOUs). Defines “public utility” to include every water corporation and sewer system corporation where the service is performed for, or the commodity delivered to, the public or any portion thereof. (California Constitution Article XII and Public Utilities Code (PUC) § 2701)
2. Declares that it is the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking and sanitary purposes. (Water Code (WC) § 106.3)
3. Establishes the California Safe Drinking Water Act to provide for the operation of public water systems and imposes on the State Water Board various responsibilities and duties relating to the regulation of drinking water to protect public health. (Health & Safety Code (HSC) §§ 116270 – 116755)
4. Establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long term. (HSC §116766)
5. Defines a "public water system" as a system for the provision of water for human consumption through pipes or other constructed conveyances that has or more service connections or regularly serves at least 25 individuals daily at least 60 days out of the year. (HSC § 116275)
6. Defines a "community water system" as a public water system that serves at least 15 service connections used by yearlong residents or regularly serves at least 25 yearlong residents of the area served by the system. (HSC § 116275(i))
7. Requires the CPUC to continue the CARE program for low-income electric and gas customers with annual household incomes less than 200% of the federal poverty guideline levels. (PUC § 739.1)
8. Requires the CPUC to continue the FERA program to residential customers of the state’s three largest electrical IOUs consisting of households of three or more persons with total household annual gross income levels between 200 and 250% of the federal poverty guideline level. (PUC § 739.12)
9. Requires the State Water Board, by January 1, 2018, to develop a plan for the funding and implementation of the Low-Income Water Rate Assistance Program, as prescribed. Requires the State Water Board to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for any needed legislative action. (WC§189.5)
10. Requires the State Water Board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment. (HSC §§ 116768 – 116770)

FISCAL EFFECT: Unknown. This bill has been significantly amended with recently adopted amendments, such that its prior fiscal analysis no longer applies. This measure is keyed fiscal and will be referred to the Assembly Committee on Appropriations for its review.

BACKGROUND:

Human Right to Water – AB 685 (Eng, Chapter 524, Statutes of 2012) established California as the first state to enact a Human Right to Water law. Public policy continues to be focused on the right of every human being to have safe, clean, affordable, and accessible water adequate for human consumption, cooking and sanitation. However, challenges such as the need for an adequate supply of water suitable for drinking, the costs of constructing and maintaining treatment and distribution systems, and the number and nature of small public water systems – especially those in economically disadvantaged communities – among others continue to plague the State’s progress in achieving this human right.^[1]

Regulation of California’s Drinking Water Systems – The State Water Board has primary responsibility for regulating the state’s drinking water quality.^[2] It works together with the CPUC or local agencies who regulate water utilities. More specifically, the CPUC regulates water IOUs to ensure that ratepayers have access to safe and reliable water utility infrastructure and services. Water POUs are governed by local boards, not the CPUC, in addition to the State Water Board. To distinguish and outline the responsibilities between these governing bodies, the State Water Board has entered into a memorandum of understanding with the CPUC;^[3] for many of these responsibilities though, the State Water Board and CPUC work in consultation with one another. The following describes in greater detail the various groups with regulatory oversight of California’s drinking water systems:

• State Water Resources Control Board (State Water Board): Specifically, the State Water Board has general authority with regard to water quality and drinking water functions, and administers provisions relating to public water systems and regulation of drinking water to protect public health. These include establishing drinking water standards, maximum contaminant levels in drinking water, and permitting public water systems. The State Water Board oversees approximately 7,500 public water systems which are also overseen by either the CPUC or local boards.^[4]
• CPUC: The CPUC Water Division regulates over 100 water and sewer IOUs providing water service to about 16% of California’s residents with annual water and wastewater revenues totaling $1.4 billion.^[5] Approximately 95% of those residents are served by nine large water utilities each serving more than 10,000 connections. The majority of the CPUC-regulated water utilities (92) have service connections of 2,000 or less, and 87 of those have service connections of 500 or less. As with other IOUs, the CPUC regulates the customer rates assessed by water utilities under its jurisdiction, ensuring that costs are just and reasonable.
• Water POUs: The majority of California’s water customers (more than 80%) are served by cities, water districts, and mutual water companies, which are governed by local boards. These utilities are not regulated by the CPUC, but are instead governed by the city council, or other local governing bodies, which set their own rates. Like IOUs, these utilities can also vary greatly in size of their customer base, from the Los Angeles Department of Water and Power which owns and maintains over 700,000 water meters and service connections,^[6] to the City of Ukiah’s water system that serves approximately 6,000 customers.^[7]
• Public Water Systems – Existing law stipulates that a public water system (PWS) provides water for human consumption to 15 or more connections, or serves 25 or more people daily for at least 60 days out of the year.^[8] These systems can include not only large city or regional water suppliers, but also small housing communities, businesses, schools, and hospitals. A public water system is not necessarily a public entity, and most are privately owned. Approximately 92% of PWS serve less than 1,000 connections.^[9] The State Water Board has primary responsibility for regulating all PWS, but other state agencies can also regulate certain aspects of specific classes of water systems: 1) the CPUC for IOUs, 2) the Division of Corporations for mutual water companies, and 3) the Department of Housing and Community Development for mobile home parks.

In summary, the existence of a numerous number of state and local agencies make the allocation and management of the state’s water resources complex. According to a 2018 report published by the Public Policy Institute, on, Allocating California’s Water, “California’s system for allocating water prevents it from meeting the state’s diverse needs, especially in times of scarcity. It is fragmented, inconsistent, and lacking in transparency and clear lines of authority.”

The High Costs of Water – The State Drinking Water Plan for California has indicated that water costs have, on average over a five-year period from 2012 to 2017, increased about 35% within all size groups of water systems.^[10] Average water costs remain highest in the San Francisco Bay Area, Central Coast, and Southern California, and lowest in the Central Valley/Agricultural (including Imperial County), Foothill, and Mountain/Desert regions.^[11] On average, customers of small water systems (serving fewer than 200 service connections) pay approximately 21% more for water than customers served by larger systems. Unfortunately, many economically disadvantaged communities are served by small water systems which face several barriers to funding their operations.^[12] The State Water Board expects that the cost of drinking water will continue to rise into the future.

Statewide Plan for Funding a Low-Income Water Rate Assistance Program – AB 401 (Dodd, Chapter 662, Statutes of 2015) required the State Water Board, in collaboration with the State Board of Equalization and relevant stakeholders, to develop a plan for funding and implementing a Low-Income Water Rate Assistance Program, which was known as W-LIRA. In the development of the plan, the state board was permitted to consider existing rate assistance programs authorized by the CPUC and provide recommendations for other cost-effective methods of offering assistance to low-income water customers. In addition, the State Water Board was required to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for legislative action that may need to be taken. In a report released in February 2020, the State Water Board recommended W-LIRA be funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.^[13] Such a program would be able to provide qualifying customers bill discounts, crisis assistance, and a tax credit for those who are renters and pay for their water indirectly through rent. These bill discounts were modeled on the low-income assistance program for customers of CPUC-regulated electrical and gas utilities, and the crisis assistance was modeled on the federal energy crisis program known as Low Income Heating and Assistance Program (LIHEAP), which is administered by the Community Services and Development Department in California.

State Water Board’s 2023 Needs Assessment – In 2019, the Legislature enacted SB 200 (Dodd, Chapter 120, Statutes of 2019), which enabled the State Water Board to create the Safe and Affordable Funding for Equity and Resilience (SAFER) Drinking Water Program. SB 200 established a set of tools, funding sources, and regulatory authorities that the State Water Board harnesses for the SAFER Program to help struggling water systems sustainably and affordably provide safe drinking water.

The SAFER Program’s expenditure plan must be based on data and analysis drawn from the annually updated drinking water needs assessment (referred to as the Needs Assessment), which was established by SB 862 (Committee on Budget and Fiscal Review, Chapter 449, Statutes of 2018). The State Water Board also typically hosts a series of workshops throughout the year for stakeholders to provide comments and inform SAFER’s expenditure plan.

In response to stakeholder feedback after the release of the 2021 and 2022 Needs Assessments, the State Water Board, in partnership with the Office of Environmental Health Hazard Assessment (OEHHA), hosted three public Affordability Workshops in 2022 to re-evaluate previously utilized affordability indicators, research new affordability indicators, and explore how to incorporate a new affordability indicator that measures disposable income limitations into the 2023 Needs Assessment and beyond.^[14] For the 2023 Needs Assessment, the State Water Board staff analyzed 2,845 community water systems. The majority were identified as having low affordability burden (45%) followed by a medium affordability burden (12%) and a high affordability burden (3%).^[15]

Proposition 218 and Proposition 26 –Water POUs, unlike IOUs, are subject to constraints on their ability to collect rates for rate relief from one customer to another due to the enactment of these propositions:

• Passed in 1996, Proposition 218 requires, among other things, that the revenues derived from property related fees and charges not exceed the funds required to provide the property related service.^[16] It also requires for any fee or charge imposed by a service to be immediately available to the property owner, rather than for future or potential use.
• Adopted in 2010, Proposition 26 places the burden on local governments to prove by a preponderance of evidence that the amount of a fee or charge is “no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits from, the governmental activity.”^[17] Simply, charges for programs that provide general public benefits, or that exceed the costs of providing the service, are considered special taxes and require approval by two-thirds of the state legislature or a two-thirds popular vote at the local level. As a result, water POUs instead fund existing W-LIRA programs from revenues derived from sources other than water rates and charges, such as lease revenues or voluntary donations. These non-rate revenue options are limited and considered insufficient to sustainably fund W-LIRA programs throughout the state.

As acknowledged by the AB 401 report, funding individual water low-income rate assistance programs at the system level without violating constitutional restrictions would likely be infeasible for publicly owned water systems.^[18] Systems could impose special taxes, but those measures would need to be submitted to the local electorates and approved by a two-thirds majority.^[19] Additionally, for those systems with high eligibility burdens, there may be significant local resistance to approving such taxes.

CPUC-Regulated Water Utilities low-Income Assistance Program – The CPUC has authorized the largest nine water utilities to offer low-income rate assistance programs similar in concept to those provided to electricity customers through the California Alternate Rates for Energy (CARE) program. However, each program varies in terms of the amount of assistance provided to low-income customers and the method by which surcharges to cover the cost of the program are collected from non-participating ratepayers. All nine Class A water utilities, one Class B utility, and one Class C utility offer discounts on their monthly bills for qualifying low-income customers.^[20] Water utilities have been transitioning the unique names of their low-income assistance programs to the uniform name Customer Assistance Program (CAP) pursuant to the CPUC’s direction. Discounts and surcharges supporting these programs are reviewed in each utility’s general rate case proceeding.

COMMENTS:

1. Author’s Statement. According to the author, “While recognizing water as a basic human right, California has been at the epicenter of a water affordability and access crisis, especially for communities of color.  The State [Water] Board reported that water rates rose 45% from 2007 to 2015.  Those rate increases led to more than 1.6 million households having an average $500 water and/or sewer utility debt Further exacerbating the problem have been how efforts to address this access gap have been delayed including. AB 401 (Chap. 662, Stats. 2015). SB 1255 is a critically needed bill that will finally establish a statewide water rate assistance program for large and medium water systems that serve most of the state’s population, through a voluntary ratepayer contribution fund, that will not require use of assessments or fees, consistent with Prop. 218. This program will direct voluntarily collected funds to help qualified households, defined as those with an annual household income that is no greater than 200% of the federal poverty guideline level."
2. Complications with Financing Water Infrastructure. Local governments in California provide most water related services such as water service, sewer service, flood control, and storm water management. According to a 2014 Policy Institute of California (PPIC) report, Paying for Water in California, there are currently four funding sources for water currently in California:
3. Fees, which include water and wastewater bills, property assessments or fees, developer or connection fees, and permitting fees;
4. Taxes, which include both general and special taxes, including parcel taxes;
5. Fines and penalties, which include excessive pumping of groundwater or directly to customers in violation of rationing restrictions during drought emergencies; and
6. Bonds, which include general obligation and revenue bonds.

Local agencies frequently point to the series of constitutional reforms such as Proposition 218 as a barrier for generating necessary revenue to fund the cost of water related services. Proposition 218 requires that fees charged by local agencies be proportional to the cost of service and places limits the use of funds. The intent of this proposition was to ensure that fees and other charges paid by property owners reflect only the cost to serve them and do not subsidize other government programs. Consequently, public water utilities are prevented from using revenue from water bills to offset the cost of operating assistance programs for low-income residents.

1. Low-Income Energy Affordability Programs (CARE and FERA) as Models.

• CARE Program. Currently, about 25 years old, the CARE program is the primary existing state policy to help low-income customers of the state’s IOUs pay their electric and gas bills.^[21] Households enrolled in CARE receive a 30-35% discount – 20% if the household is subscribed to an IOU with fewer than 100,000 customers – on their electric bill and a 20% discount on their natural gas bill.^[22] CARE is funded through a rate surcharge paid by all other utility customers, both residential and non-residential. The spending on CARE has grown massively since its inception in 1998. At the beginning of 2001, the four largest utilities – Pacific Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E), Southern California Edison (SCE), and Southern California Gas Company (SoCal Gas) – spent about $126 million on the program;^[23] by the end of 2022, the utilities spent $1.9 billion to help 4.5 million households.^[24] In their May 2023 monthly reports, the IOUs cited penetration rates, or the percentage of eligible beneficiaries that are enrolled, between 90-112%, with a cumulative authorized program budget of over $1.4 billion serving over 4.8 million customers.^[25] The IOUs continue to engage in outreach to increase penetration rates of CARE today.^[26]
• FERA Program. The FERA program was established by a CPUC decision in 2004 as the Lower Middle Income Large Household program for families of three or more persons.^[27] FERA is funded by “public purpose program surcharge^[28]” that appears on utility bills, like CARE. FERA offers an 18% discount on electric bills if household income slightly exceeds CARE allowances (up to 250% of federal poverty). FERA is an effort to help families who may have incomes that are just above the income eligibility for CARE, but who likely still experience hardships paying their utility bills. According to the CPUC, the IOUs did not meet the 50% (Range from 11.7% to 28%)^[29] enrollment goal by 2023 and are exploring ways to increase program enrollment.

CARE and FERA together cost approximately $6 to $12 for non-qualified customers. However, the costs of a water assistance program to non-qualified customers is difficult to quantify and compare. Unlike electrical and/or gas IOUs which can serve millions of customers and take advantage of economies of scale, California’s water utilities serve much smaller bases of retail customers. The majority of drinking water systems serve fewer than 10,000 customers; since this bill would require all water utilities with more than 3,300 customers to establish a water assistance program that means the majority of water systems that would be required by this bill to establish a program would have between 3,300 and 10,000 customers. For comparison, Southern California Edison serves nearly 3.2 million residential customers. The differences in scale could become even larger if there are water customers who choose to opt out of the water assistance program – as this bill puts forward a program that is funded by voluntary contributions. Electric and gas customers do not, by contrast, have the option to opt out of the CARE and FERA surcharge. Importantly, while the CARE and FERA programs provide a helpful bill discount to qualified customers, they do not guarantee an affordable bill.

1. Balancing Tradeoffs is Challenging. While water may not be as costly as other essential needs such as housing and healthcare, many households that are already struggling to afford day-to-day basics have difficulty paying their bills. This is prevalent among low-income households. On the other hand, climate related weather events, aging infrastructure, under-investment in drinking water systems, declining financial support from the state and federal government, and stricter water quality regulations, among other constraints contribute to the increasing price of water. As such, most water systems face a big dilemma: they need to balance tradeoffs between providing affordable water while simultaneously attempting to control its increasing cost.
2. Lack of Funding in Perpetuity. As mentioned above, relying on voluntary contributions as a funding mechanism for a water assistance program, as proposed by this measure, introduces uncertainties in the program’s budget. With individuals being hit hard by the increasing prices of essential goods including utilities, food, and fuel, customers who do not qualify as low-income may still feel some heartburn at the thought of additional costs, however small they might be.

The committee is also unclear on how much the ratio of qualified customers to non-qualified customers could vary from one utility to another. In service areas that might serve a greater density of qualified customers than others, non-qualified customers could face a higher cost burden. With the option to opt-out and a cap on the surcharge – the bill requires the surcharge to be no more than 5% of a customer’s water and wastewater bill – there is a likely case that the voluntary donations are insufficient in supporting the low-income assistance program.

1. Outreach. CARE has reached high penetration rates due to urging by the CPUC for outreach efforts. Unlike CARE, FERA enrollment participation rates are low across all three large IOUs. Comparatively, the water utilities may equally struggle to reach eligible low-income households as required by this measure unless more targeted outreach is also simultaneously conducted.
2. California’s Promise. California’s Human Right to Water Act declared access to safe, clean, affordable, and accessible water adequate for human consumption, cooking and sanitary purposes as a basic human right. The affordability of water, and therefore, water utility rates, has a strong impact on that right. California has passed numerous succeeding laws^[30] to move closer and closer to realizing this policy, but much work remains ahead. While the magnitude of the challenges that continue to lay ahead is clear – approximately 34% of Californians live in households with incomes under 200% of the federal poverty line^[31] and 1 in 10 California households are in arrears on their water payments^[32] – the solutions remain more elusive. Certainly, establishing a water assistance program to increase the affordability of water for low-income households, as proposed by this legislation may help to make strides in meeting the state policy, but a successful program will hinge on thoughtful planning and implementation, with diverse stakeholder input and support, or it could risk spending state and ratepayer dollars in a manner that is unstable and untenable. It also remains a question as to how such a program can be implemented by water POUs that are precluded from collecting funds for rate relief by Propositions 218 and 26.

This legislation is unquestionably a meritorious effort in uplifting low-income communities and should be revisited in the near future. More immediately, however, it may be valuable for the author and sponsors to continue having meaningful conversations with diverse stakeholders to assess the best practices and mechanisms that are viable, equitable, and ultimately create a successful program before instituting a statewide mandated program as this bill stipulates.

1. Myriad of Concerns Persist. While this bill is supported by over 40+ organizations, significant opposition from numerous entities such as CMUA, ACWA, Water Agencies and many others remain. Some of the pending concerns include:

• Voluntary Contributions/Opt-Out Approach: This bill would require retail water agencies to provide each ratepayer the option and method of opting out of providing the "voluntary contribution" to fund the low-income water rate assistance program, at least three months prior to beginning collection of the "voluntary contribution," and at least annually thereafter. According to ACWA, the proposed "opt-out" approach would lack transparency and would create damaging distrust. The bill should instead propose an “opt-in” approach…. The bill would require notice of the voluntary contribution, but many ratepayers would not see the notice (e.g., customers on automatic payments) and would be charged for the "voluntary" contribution on their water bill. They could later opt out and seek refunds, as specified, but this would create funding instability and a negative public perception of the program. It is also important to note that many ratepayers will be at income levels not far above the eligibility cut-off for this program….This concern is also shared by CMUA and numerous other opposing groups. CMUA also contends, “We urge the author to amend the bill so water systems have the flexibility to decide whether using an opt-in or opt-out approach is most appropriate for their customers.
• Administrative Costs: This bill restricts a water system's ability to offset administrative expenses by establishing a 10% limit on voluntary contributions for administrative costs. According to CMUA, “Locally administered program is expected to have significant costs that for many agencies will exceed the 10% cap..{We} urge the author to engage with water systems on a more appropriate cap or other way to keep costs at a reasonable level so ratepayers not participating in the program aren’t subsidizing other customers, which could create constitutional issues for water systems.” Many other opposing groups share similar concerns.

• 60% Ratepayer Participation: This bill requires a qualified system, when setting the recommended voluntary contribution, to assume that 60% of ratepayers other than eligible ratepayers will provide the volunteer contribution. Creating and funding a low-income water rate assistance program solely through voluntary contributions from ratepayers may not be an easy task. According to San Gabriel Valley Water Association, “the current version of the bill assumes 60% ratepayer participation, which may not align with the reality of many communities. The bill also lacks guidance on how a water system serving a large economically disadvantaged population can afford a program when more residents may need assistance than can contribute to funding it.” This issue has equally been raised by other opposing groups.
• Potential Fraud: The bill defines “available information” as Self-certification of eligibility, under penalty of perjury, by the residential ratepayer. Opposing groups contend that “Self-Certification should not be an allowed method of establishing eligibility… This option is too susceptible to fraud…”
• Short Timelines for Deliberations: Ten water agencies from San Bernardino and Riverside counties write in an "oppose unless amended" position, by stating "It is very concerning that this bill is a second house gut and amend. SB 1255 is a significant new policy that deserves ample discussion from both houses and stakeholders…”
• Too Many to List: Given the limited time this committee has had to vet this proposal, the above-bulleted list does not reflect a bevy of other concerns and questions brought forth to the committee.

1. Prior Legislation

SB 222 (Dodd, 2021) would have created a Low-Income Water Rate Assistance program for all California water agencies. This bill was vetoed by the Governor.

SB 200 (Monning) created the SAFER program to support rollout of safe and affordable drinking water for disadvantaged communities. Chapter 120, Statutes of 2019

AB 217 (E. Garcia, 2019) would have created the Safe Drinking Water for All Act (Act), which would have established the Safe and Affordable Drinking Water Fund (Fund) to provide a source of funding for safe drinking water for all Californians, and long-term sustainability of drinking water systems. Would have imposed several fees on agricultural activities and a charge on retail water systems that together would provide the source of revenue to the Fund. This bill was subsequently amended into another subject.

SB 669 (Caballero, 2019) would have established the Safe Drinking Water Fund to assist community water systems in disadvantaged communities that are chronically noncompliant. Would have created Safe Drinking Water Trust Fund to receive funding from the state and provide the fund source to the Safe Drinking Water Fund. This bill was held in the Senate Appropriations Committee.

SB 669 (Caballero, 2019) would have established the Safe Drinking Water Fund to assist community water systems in disadvantaged communities that are chronically noncompliant. Would have created Safe Drinking Water Trust Fund to receive funding from the state and provide the fund source to the Safe Drinking Water Fund. This bill was held in the Senate Appropriations Committee.

SB 998 (Dodd) required all public water systems (with more than 200 connections) to have a written policy on discontinuation of residential water service, provide that policy in multiple languages, include provisions for not shutting off water for certain customers that meet specified criteria, prohibit the shutoff of water service until the bill has been delinquent for 60 days, and caps the reconnection fees for restoring water service. Status: Chapter 891, Statutes of 2018

SB 623 (Monning, 2017) would have created the Safe and Affordable Drinking Water Fund, administered by the State Water Board, and would have imposed water, fertilizer and dairy fees to fund safe drinking water programs. This bill was held in the Assembly Rules Committee.

AB 401 (Dodd) required the State Water Board, in collaboration with the State Board of Equalization and relevant stakeholders, to develop a plan for funding and implementing a Low-Income Water Rate Assistance Program. Status: Chapter 662, Statutes of 2015

AB 685 (Eng) declared the right to clean, safe, and affordable water for drinking and sanitation. Chapter 524, Statutes of 2012

Support

350 Humboldt
California Coastal Protection Network
California Coastkeeper Alliance
California Environmental Justice Alliance (CEJA) Action
California Environmental Voters
California Immigrant Policy Center
California Water Association
California Water Research
Central California Environmental Justice Network
Clean Water Action
Cleanearth4kids.org
Climate Resolve
Community Water Center
Courage California
Defenders of Wildlife
Environmental Defense Fund
Environmental Working Group
Families Advocating for Chemical and Toxics Safety
Friends Committee on Legislation of California
Friends of The River
Grace - End Child Poverty in California
Heal the Bay
LA Waterkeeper
Leadership Counsel for Justice & Accountability
Los Angeles Alliance for A New Economy
Lutheran Office of Public Policy - California
Mono Lake Committee
National Parks Conservation Association
National Resources Defense Council
Natural Resources Defense Council
Physicians for Social Responsibility - Los Angeles
Planning and Conservation League
San Francisco Baykeeper
San Francisco Public Utilities Commission
Sierra Club California
The Nature Conservancy
Ufcw - Western States Council
Union of Concerned Scientists
Voices for Progress
Western Center on Law & Poverty

Support If Amended

Sweetwater Authority

Oppose

Helix Water District
Valley Center Municipal Water District
Vista Irrigation District

Oppose Unless Amended

Association of California Water Agencies (ACWA)
California Municipal Utilities Association
City of Chino
City of Chino Hills
City of Montclair
Cucamonga Valley Water District
Eastern Municipal Water District
Elsinore Valley Municipal Water District
Inland Empire Utilities Agency
Irvine Ranch Water District
Monte Vista Water District
Ontario Municipal Utilities Company
Rancho California Water District
Regional Water Authority
San Gabriel Valley Water Association
Western Municipal Water District

Other

East Bay Municipal Utility District

Analysis Prepared by: Lina V. Malova / U. & E. / (916) 319-2083

1. State Water Resources Control Board, “Report to the Legislature in Compliance with the Health and Safety Code Section 116365”; September 2021 ↑

2. Ibid ↑

3. CPUC; “Memorandum of Understanding Between the State Water Resources Control Board and the California Public Utilities Commission Regarding the Regulation of Public Water Systems”; https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/news-and-outreach/documents/news-office/mous/12920-signed-mou-between-cpuc-and-swrcb.pdf?sc_lang=en&hash=9E9654130F6F54CDAC0E3751845F896D ↑

4. https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/waterpartnership.html ↑

5. CPUC, “Water Division”; https://www.cpuc.ca.gov/about-cpuc/divisions/water-division ↑

6. LADWP, “Provision of Water Service for Single-Family Residential Dwelling Units” December 2018 ↑

7. The Ukiah Daily, “Improving Ukiah water system’ has been a massive project’ https://www.ukiahdailyjournal.com/2021/05/12/improving-ukiah-water-supply-system-has-been-a-massive-project/ ↑

8. HSC § 116275 ↑

9. https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/waterpartnership.html ↑

10. Ranges between 23 to 40%. State Water Resources Control Board, Pg VIII; “Safe Drinking Water Plan for California.” September 2021 ↑

11. Ibid ↑

12. Ibid ↑

13. State Water Board, “Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program.” February, 2020 ↑

14. Workshop 1 (August 8, 2022); Presentation: https://bit.ly/3jsI4k8 ↑

15. California Water Board, “2023 Drinking Water Needs Assessment;” Pg 28; April 2023 ↑

16. California Constitution Article XIIID, § 6, Subd.(b)(1) ↑

17. California Constitution, Article XIIIC, § 1 ↑

18. State Water Board, Pg. 22; “Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program.” February, 2020 ↑

19. Cal. Const., art. XIIIC, § 2, subd. (d) ↑

20. Class A Utilities having more than 10,000 service connections, Class B Utilities having between 2,000 service connections and 10,000 service connections, Class C Utilities having between 500 service connections and 2,000 service connections. ↑

21. Public Utilities Code § 739.1 ↑

22. CPUC; “California Alternate Rates for Energy (CARE)”; https://www.cpuc.ca.gov/consumer-support/financial-assistance-savings-and-discounts/california-alternate-rates-for-energy. ↑

23. LIHEAP Clearinghouse; “State PBF/USF History, Legislation, and Implementation”; https://liheapch.acf.hhs.gov/dereg/states/california.htm; August 2016. ↑

24. See each IOU report at https://liob.cpuc.ca.gov/monthly-annual-reports/. ↑

25. Or roughly ~$292/customer per year, without accounting for other indirect costs such as CARE participant exemptions from some legislatively mandated program fees. See each IOU report at https://liob.cpuc.ca.gov/monthly-annual-reports/. ↑

26. Advice 7107-E, PG&E; “Information-only Advice Letter on Pacific Gas and Electric Company’s Progress to Increase Family Electric Rate Assistance Program Enrollment Pursuant to Decision (D.)18-08-013”; December 2023. ↑

27. CPUC; Pg 54; “AB 67 Report” April 2024 ↑

28. These charges are assessed on the amount of electricity used ↑

29. Based on the reports submitted to the CPUC in April 2023, estimated enrollment participation rates for the FERA program ranged from 11.7 to 28% among the three IOUs. ↑

30. These laws include: SB 88 (2015), SB 552 (2016), SB 1263 (2016), AB 401 (2015), AB 1668, SB 606 (2018), AB 2501 (2018), SB 998 (2018), and SB 200 (2019). ↑

31. State Water Board, Pg. 13; “Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program.” February, 2020 ↑

32. LA Times; “Millions of Californians are struggling to pay for water”; October 2022; https://www.latimes.com/california/story/2022-10-24/millions-of-californians-are-struggling-to-pay-for-water ↑

Date of Hearing: July 1, 2024

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

SBPCA Bill Id:SB 1255

Author:(Durazo) – As Amended Ver:June 19, 2024

SENATE VOTE: 33-6

SUBJECT: Public water systems: needs analysis: water rate assistance program

SUMMARY: Requires, on or before July 1, 2027, retail water suppliers that serve over 3,300 residential connections to establish a water rate assistance program (WRAP), as specified, to provide assistance to eligible ratepayers for their water and wastewater bills.

Specifically, this bill:

Definitions:

1. Defines “available information” as any of the following:
   1. Information documenting the residential ratepayer’s participation in an affordability program, as specified;
   2. A benefits award letter provided by the residential ratepayer documenting that the customer is an enrollee in, or is a recipient of, an affordability program; or
   3. Self-certification of eligibility, under penalty of perjury, by the residential ratepayer.
2. Defines “balancing account” as a reserved amount of sufficient funding to address fluctuations in voluntary contributions received or changes in eligible ratepayers, not to exceed 25% of the annual expenditures of the program.
3. Defines “eligible ratepayer” as a low-income residential ratepayer with an annual household income that is no greater than 200% of the federal poverty guideline level.
4. Defines “qualified system” as any retail water supplier that serves over 3,300 residential connections.

Needs Analysis:

1. Requires the State Water Resources Control Board (State Water Board), on or before July 1, 2026, and on or before July 1 of each three years thereafter, to, in consultation with the Safe and Affordable Funding for Equity and Resilience (SAFER) Program advisory group and appropriate stakeholders, to update the needs analysis of the state’s public water systems.
2. Requires the update of the needs analysis to include:
3. An assessment of the funds necessary to provide a 20% bill credit for low-income households served by community water systems with fewer than 3,300 service connections; and,
4. An assessment of the funds necessary for community water systems with fewer than 3,300 service connections to meet the affordability threshold established pursuant to the SAFER Program Fund Expenditure Plan.
5. Requires the State Water Board, in order to develop the assessment described above, to do all of the following:
6. Collect arrearage data from water systems not regulated by the California Public Utilities Commission (CPUC) and request data from the CPUC on the systems they regulate;
7. Estimate the number of households in need of assistance using arrearage data as well as information provided by the United States Census or other comparable data sources;
8. Identify available data on water rates charged by community water systems with fewer than 3,300 service connections; and,
9. Where data is unavailable for a water system, use an average of existing data to estimate the level of need for that system.

Water Rate Assistance Program (WRAP):

1. Requires, on or before July 1, 2027, a qualified system, other than a system that already offers an existing WRAP, to establish a WRAP, as specified, and to begin providing water rate assistance to eligible ratepayers.

2) Requires a WRAP offered pursuant to this bill to, at a minimum, include both of the

following:

1. Automatic enrollment of eligible ratepayers if available information, as defined in the bill, indicates that they are qualified to receive assistance; and,
2. Provision of a bill credit for eligible ratepayers of no less than 20% of the total water charges, and, if present on the bill, wastewater charges, for a volume of water similar to that identified in urban water use objectives law (currently 47 gallons per capita daily for indoor residential water) or, if the eligible ratepayer uses less, the actual volume used.
3. Provides that in the event that there is not sufficient funding for the WRAP, including any balancing account funds, to support a 20% bill credit, the WRAP shall provide the maximum bill credit available that funding is able to support, unless the maximum bill credit available that funding is able to support is less than 10%, in which case the qualified system shall instead provide crisis assistance to the extent funds are available, as specified.
4. Authorizes the qualified system to select the elements, as described below, of the water charges upon which the bill credit is applied or to provide a bill credit as a set percentage of the total water bill, provided that the total bill credit is equivalent in value to the bill credit required above.
5. Provides that the element, or elements, of the drinking water charges upon which the bill credit may be applied, include, but are not limited to, the fixed, volumetric, or fixed and volumetric charges levied by the system.
6. Authorizes a qualified system to, on or before September 1, 2026, begin collecting voluntary contributions for the reasonable costs, as specified, associated with the administration of the WRAP and to establish initial program funding.

7) Prohibits, beginning July 1, 2027, the reasonable costs associated with the administration of the WRAP from exceeding 10% of voluntary contributions collected.

1. Authorizes a qualified system to, in establishing a WRAP, establish a balancing account to manage fluctuations in voluntary contributions and the granting of bill credits to eligible ratepayers.
2. Provides that this bill does not require a qualified system to use funds other than voluntary contributions collected pursuant to the WRAP to provide rate assistance to eligible ratepayers or to pay for associated administrative costs, but provides that a qualified system may use other funds available for this purpose that are not derived from fees or assessments, as allowed by the California Constitution.
3. Exempts any qualified system that offers an existing water rate assistance program on or before September 1, 2026, that meets the minimum enrollment and bill credit requirements specified in this bill by July 1, 2027, from being required to comply with the provisions of this bill, and authorizes those systems to collect voluntary contributions to supplement or expand the existing program or to provide crisis assistance.
4. Provides that nothing in this bill shall prohibit a qualified system from offering assistance to residential ratepayers if the program does either, or both, of the following

a) Provides a greater bill credit benefit; or,

b) Exceeds the definition of low income as specified in this bill for ratepayer eligibility.

1. Authorizes any public water system that is not a qualified system to collect voluntary contributions to fund a water affordability program, but does not require the system to comply with the provisions of this bill.
2. Authorizes a qualified system to require verification of eligibility from a sample of enrolled eligible ratepayers on an annual basis to verify the ratepayer’s low-income status and eligibility for assistance, and to remove any ratepayers found to not be eligible for assistance from the WRAP.
3. Requires a qualified system to continue to have a WRAP as long as there is sufficient funding available to provide water rate assistance or crisis assistance, to pay for the qualified system’s reasonable costs for administration of the program, and to establish a balancing account if the qualified system chooses to do so.

Crisis Assistance:

1. Requires that if, after three months of accepting voluntary contributions, the qualified system can demonstrate there will not be sufficient funds to support a program at a minimum of a 10% discount or $5 per month, whichever amount is greater, and pay for the qualified system’s reasonable costs for administration of the program, the system must instead use the collected contributions to provide ongoing crisis assistance and pay for the qualified system’s reasonable costs for administration of crisis assistance.
2. Requires crisis assistance to be offered on or before July 1, 2027, and to be offered to eligible ratepayers, at a minimum, when a qualified system provides a discontinuation of residential water service notification or when an eligible customer contacts the qualified system about a delinquent account.
3. Limits crisis assistance to only being provided to an eligible ratepayer once per year and limits it to an amount determined by the qualified system, taking into account the overall past due amount and available funding. Provides that to the extent the amount of crisis assistance provided does not eliminate an eligible ratepayer’s arrearages, the ratepayer shall enter into an amortization agreement, alternative payment schedule, or plan for deferred or reduced payment, pursuant to discontinuation of residential water service law, to be eligible for crisis assistance.

Voluntary Contributions:

1. Requires, on or before September 1, 2026, a qualified system to provide an opportunity for each ratepayer of the system to provide a voluntary contribution as part of the ratepayer’s water bill to provide funding for the qualified system’s WRAP.
2. Requires a qualified system to establish a recommended voluntary contribution amount on the bill of each ratepayer other than an eligible ratepayer based on available information as of July 1, 2026, at a level intended to raise sufficient funding to provide a bill credit to eligible ratepayers, pay for the qualified system’s administrative costs to implement a WRAP beginning January 1, 2025, and establish a balancing account if the qualified system chooses to do so.

1. Requires a qualified system, when setting the recommended voluntary contribution, to assume that 60% of ratepayers other than eligible ratepayers will provide the contribution. Authorizes a qualified system, on or before July 1, 2027, to adjust the voluntary contribution, as necessary, considering the previous year’s actual participation rate. Prohibits the recommended voluntary contribution from exceeding 5% of the charges for water and wastewater on the water bill for any residential ratepayer.
2. Requires a bill from a qualified system to label the voluntary contribution in a way that describes the purpose of the funds. Requires the qualified system to notify their ratepayers of the voluntary contribution and, in a visually accessible manner and using clear and unambiguous language, to provide each ratepayer the option and method of opting out of providing the voluntary contribution at least three months prior to beginning collection of the voluntary contribution, and thereafter on at least an annual basis.
3. Requires voluntary contributions to commence on the qualified system’s subsequent billing cycle from the notice.
4. Authorizes the qualified system to choose to include alternative amounts for contributions.
5. Requires a qualified system to also provide this information on its internet website in English, and any other language spoken by at least 10% of the people residing in its service area, and other languages, as specified.
6. Authorizes a ratepayer to opt out of the voluntary contribution at any time in a manner that is specified by the qualified system in the notice about the voluntary contributions, with voluntary contributions terminating on the qualified system’s subsequent normal billing cycle.
7. Provides that a ratepayer may only request a refund for contributions made since the last notice of opportunity to opt out of the program was provided or for the period of the last billing cycle prior to the date the ratepayer opts out, whichever time period is greater. Authorizes qualified systems to provide refunds in the form of a bill credit.
8. Prohibits a qualified system from sanctioning, taking any enforcement or collection action against, imposing any late charge or penalty against, or otherwise holding liable a ratepayer in any manner for exercising the option of not paying a voluntary contribution.
9. Requires the voluntary contributions to be used only to provide rate assistance to eligible ratepayers, pay for associated administrative costs to implement the WRAP, and establish a balancing account. Authorizes administrative costs of establishing the WRAP to be reimbursed from voluntary contributions.
10. Authorizes a qualified system to contract with a third party to receive voluntary contributions and comply with the requirements of the bill.
11. Requires that any partial payment made by a ratepayer that is insufficient to pay for charges on the bill be used to pay the qualified system’s charges shown on the ratepayer’s bill before being attributed to a voluntary contribution.
12. Prohibits a penalty or late fee from being assessed by a qualified system for the failure of a ratepayer to make timely payment of a voluntary contribution regardless of whether the ratepayer has exercised the option of not paying a voluntary contribution.
13. Authorizes a qualified system to use any state or federal funds that are available to support a WRAP by offsetting or supplementing the funds collected from voluntary contributions.

CPUC Data Collection:

1. Requires the CPUC to, on or before January 1, 2026, establish a mechanism for electrical corporations and gas corporations to provide data to all qualified systems no later than April 1, 2026, and annually by April 1 thereafter, regarding ratepayers enrolled in, or eligible to be enrolled in, the California Alternate Rates for Energy (CARE) program and the Family Electric Rate Assistance (FERA) program.
2. Authorizes all qualified systems to enter into agreements with local gas and electric publicly owned utilities (POUs), including, but not limited to, municipal utility districts and irrigation districts, for the purpose of regularly receiving data regarding ratepayers enrolled in, or eligible to be enrolled in, affordability programs benefiting eligible ratepayers.
3. Specifies the laws under which the data collection is subject.

State Water Board Data Collection:

1. Requires the State Water Board, beginning in 2028, to require qualified systems to annually report the following information in required technical reports:
2. The total amount of voluntary contributions collected, the administrative costs of operating the WRAP, the number of eligible households that were provided rate assistance or crisis assistance, and the total amount of rate assistance or crisis assistance provided to eligible households; and,
3. An evaluation of available relevant information regarding any arrearages that remain after application of bill assistance.

Enforcement:

1. Authorizes the Attorney General to bring an action in state court to restrain, by temporary or permanent injunction, the use of any method, act, or practice in violation of the WRAP provisions of this bill by a qualified system, other than a system that has an existing WRAP program, including nonparticipation by a qualified system.
2. Prohibits the Attorney General from bringing an action against a qualified system with an existing WRAP program for failing to meet the requirements of the bill, as long as the qualified system makes a good faith effort to raise sufficient funding.

EXISTING LAW:

1. Provides that the California CPUC has regulatory authority over public utilities, including water investor-owned utilities (IOUs). Defines “public utility” to include every water corporation and sewer system corporation where the service is performed for, or the commodity delivered to, the public or any portion thereof. (California Constitution Article XII and Public Utilities Code (PUC) § 2701)
2. Declares that it is the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking and sanitary purposes. (Water Code (WC) § 106.3)
3. Establishes the California Safe Drinking Water Act to provide for the operation of public water systems and imposes on the State Water Board various responsibilities and duties relating to the regulation of drinking water to protect public health. (Health & Safety Code (HSC) §§ 116270 – 116755)
4. Establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long term. (HSC §116766)
5. Defines a "public water system" as a system for the provision of water for human consumption through pipes or other constructed conveyances that has or more service connections or regularly serves at least 25 individuals daily at least 60 days out of the year. (HSC § 116275)
6. Defines a "community water system" as a public water system that serves at least 15 service connections used by yearlong residents or regularly serves at least 25 yearlong residents of the area served by the system. (HSC § 116275(i))
7. Requires the CPUC to continue the CARE program for low-income electric and gas customers with annual household incomes less than 200% of the federal poverty guideline levels. (PUC § 739.1)
8. Requires the CPUC to continue the FERA program to residential customers of the state’s three largest electrical IOUs consisting of households of three or more persons with total household annual gross income levels between 200 and 250% of the federal poverty guideline level. (PUC § 739.12)
9. Requires the State Water Board, by January 1, 2018, to develop a plan for the funding and implementation of the Low-Income Water Rate Assistance Program, as prescribed. Requires the State Water Board to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for any needed legislative action. (WC§189.5)
10. Requires the State Water Board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment. (HSC §§ 116768 – 116770)

FISCAL EFFECT: Unknown. This bill has been significantly amended with recently adopted amendments, such that its prior fiscal analysis no longer applies. This measure is keyed fiscal and will be referred to the Assembly Committee on Appropriations for its review.

BACKGROUND:

Human Right to Water – AB 685 (Eng, Chapter 524, Statutes of 2012) established California as the first state to enact a Human Right to Water law. Public policy continues to be focused on the right of every human being to have safe, clean, affordable, and accessible water adequate for human consumption, cooking and sanitation. However, challenges such as the need for an adequate supply of water suitable for drinking, the costs of constructing and maintaining treatment and distribution systems, and the number and nature of small public water systems – especially those in economically disadvantaged communities – among others continue to plague the State’s progress in achieving this human right.^[1]

Regulation of California’s Drinking Water Systems – The State Water Board has primary responsibility for regulating the state’s drinking water quality.^[2] It works together with the CPUC or local agencies who regulate water utilities. More specifically, the CPUC regulates water IOUs to ensure that ratepayers have access to safe and reliable water utility infrastructure and services. Water POUs are governed by local boards, not the CPUC, in addition to the State Water Board. To distinguish and outline the responsibilities between these governing bodies, the State Water Board has entered into a memorandum of understanding with the CPUC;^[3] for many of these responsibilities though, the State Water Board and CPUC work in consultation with one another. The following describes in greater detail the various groups with regulatory oversight of California’s drinking water systems:

• State Water Resources Control Board (State Water Board): Specifically, the State Water Board has general authority with regard to water quality and drinking water functions, and administers provisions relating to public water systems and regulation of drinking water to protect public health. These include establishing drinking water standards, maximum contaminant levels in drinking water, and permitting public water systems. The State Water Board oversees approximately 7,500 public water systems which are also overseen by either the CPUC or local boards.^[4]
• CPUC: The CPUC Water Division regulates over 100 water and sewer IOUs providing water service to about 16% of California’s residents with annual water and wastewater revenues totaling $1.4 billion.^[5] Approximately 95% of those residents are served by nine large water utilities each serving more than 10,000 connections. The majority of the CPUC-regulated water utilities (92) have service connections of 2,000 or less, and 87 of those have service connections of 500 or less. As with other IOUs, the CPUC regulates the customer rates assessed by water utilities under its jurisdiction, ensuring that costs are just and reasonable.
• Water POUs: The majority of California’s water customers (more than 80%) are served by cities, water districts, and mutual water companies, which are governed by local boards. These utilities are not regulated by the CPUC, but are instead governed by the city council, or other local governing bodies, which set their own rates. Like IOUs, these utilities can also vary greatly in size of their customer base, from the Los Angeles Department of Water and Power which owns and maintains over 700,000 water meters and service connections,^[6] to the City of Ukiah’s water system that serves approximately 6,000 customers.^[7]
• Public Water Systems – Existing law stipulates that a public water system (PWS) provides water for human consumption to 15 or more connections, or serves 25 or more people daily for at least 60 days out of the year.^[8] These systems can include not only large city or regional water suppliers, but also small housing communities, businesses, schools, and hospitals. A public water system is not necessarily a public entity, and most are privately owned. Approximately 92% of PWS serve less than 1,000 connections.^[9] The State Water Board has primary responsibility for regulating all PWS, but other state agencies can also regulate certain aspects of specific classes of water systems: 1) the CPUC for IOUs, 2) the Division of Corporations for mutual water companies, and 3) the Department of Housing and Community Development for mobile home parks.

In summary, the existence of a numerous number of state and local agencies make the allocation and management of the state’s water resources complex. According to a 2018 report published by the Public Policy Institute, on, Allocating California’s Water, “California’s system for allocating water prevents it from meeting the state’s diverse needs, especially in times of scarcity. It is fragmented, inconsistent, and lacking in transparency and clear lines of authority.”

The High Costs of Water – The State Drinking Water Plan for California has indicated that water costs have, on average over a five-year period from 2012 to 2017, increased about 35% within all size groups of water systems.^[10] Average water costs remain highest in the San Francisco Bay Area, Central Coast, and Southern California, and lowest in the Central Valley/Agricultural (including Imperial County), Foothill, and Mountain/Desert regions.^[11] On average, customers of small water systems (serving fewer than 200 service connections) pay approximately 21% more for water than customers served by larger systems. Unfortunately, many economically disadvantaged communities are served by small water systems which face several barriers to funding their operations.^[12] The State Water Board expects that the cost of drinking water will continue to rise into the future.

Statewide Plan for Funding a Low-Income Water Rate Assistance Program – AB 401 (Dodd, Chapter 662, Statutes of 2015) required the State Water Board, in collaboration with the State Board of Equalization and relevant stakeholders, to develop a plan for funding and implementing a Low-Income Water Rate Assistance Program, which was known as W-LIRA. In the development of the plan, the state board was permitted to consider existing rate assistance programs authorized by the CPUC and provide recommendations for other cost-effective methods of offering assistance to low-income water customers. In addition, the State Water Board was required to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for legislative action that may need to be taken. In a report released in February 2020, the State Water Board recommended W-LIRA be funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.^[13] Such a program would be able to provide qualifying customers bill discounts, crisis assistance, and a tax credit for those who are renters and pay for their water indirectly through rent. These bill discounts were modeled on the low-income assistance program for customers of CPUC-regulated electrical and gas utilities, and the crisis assistance was modeled on the federal energy crisis program known as Low Income Heating and Assistance Program (LIHEAP), which is administered by the Community Services and Development Department in California.

State Water Board’s 2023 Needs Assessment – In 2019, the Legislature enacted SB 200 (Dodd, Chapter 120, Statutes of 2019), which enabled the State Water Board to create the Safe and Affordable Funding for Equity and Resilience (SAFER) Drinking Water Program. SB 200 established a set of tools, funding sources, and regulatory authorities that the State Water Board harnesses for the SAFER Program to help struggling water systems sustainably and affordably provide safe drinking water.

The SAFER Program’s expenditure plan must be based on data and analysis drawn from the annually updated drinking water needs assessment (referred to as the Needs Assessment), which was established by SB 862 (Committee on Budget and Fiscal Review, Chapter 449, Statutes of 2018). The State Water Board also typically hosts a series of workshops throughout the year for stakeholders to provide comments and inform SAFER’s expenditure plan.

In response to stakeholder feedback after the release of the 2021 and 2022 Needs Assessments, the State Water Board, in partnership with the Office of Environmental Health Hazard Assessment (OEHHA), hosted three public Affordability Workshops in 2022 to re-evaluate previously utilized affordability indicators, research new affordability indicators, and explore how to incorporate a new affordability indicator that measures disposable income limitations into the 2023 Needs Assessment and beyond.^[14] For the 2023 Needs Assessment, the State Water Board staff analyzed 2,845 community water systems. The majority were identified as having low affordability burden (45%) followed by a medium affordability burden (12%) and a high affordability burden (3%).^[15]

Proposition 218 and Proposition 26 –Water POUs, unlike IOUs, are subject to constraints on their ability to collect rates for rate relief from one customer to another due to the enactment of these propositions:

• Passed in 1996, Proposition 218 requires, among other things, that the revenues derived from property related fees and charges not exceed the funds required to provide the property related service.^[16] It also requires for any fee or charge imposed by a service to be immediately available to the property owner, rather than for future or potential use.
• Adopted in 2010, Proposition 26 places the burden on local governments to prove by a preponderance of evidence that the amount of a fee or charge is “no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits from, the governmental activity.”^[17] Simply, charges for programs that provide general public benefits, or that exceed the costs of providing the service, are considered special taxes and require approval by two-thirds of the state legislature or a two-thirds popular vote at the local level. As a result, water POUs instead fund existing W-LIRA programs from revenues derived from sources other than water rates and charges, such as lease revenues or voluntary donations. These non-rate revenue options are limited and considered insufficient to sustainably fund W-LIRA programs throughout the state.

As acknowledged by the AB 401 report, funding individual water low-income rate assistance programs at the system level without violating constitutional restrictions would likely be infeasible for publicly owned water systems.^[18] Systems could impose special taxes, but those measures would need to be submitted to the local electorates and approved by a two-thirds majority.^[19] Additionally, for those systems with high eligibility burdens, there may be significant local resistance to approving such taxes.

CPUC-Regulated Water Utilities low-Income Assistance Program – The CPUC has authorized the largest nine water utilities to offer low-income rate assistance programs similar in concept to those provided to electricity customers through the California Alternate Rates for Energy (CARE) program. However, each program varies in terms of the amount of assistance provided to low-income customers and the method by which surcharges to cover the cost of the program are collected from non-participating ratepayers. All nine Class A water utilities, one Class B utility, and one Class C utility offer discounts on their monthly bills for qualifying low-income customers.^[20] Water utilities have been transitioning the unique names of their low-income assistance programs to the uniform name Customer Assistance Program (CAP) pursuant to the CPUC’s direction. Discounts and surcharges supporting these programs are reviewed in each utility’s general rate case proceeding.

COMMENTS:

1. Author’s Statement. According to the author, “While recognizing water as a basic human right, California has been at the epicenter of a water affordability and access crisis, especially for communities of color.  The State [Water] Board reported that water rates rose 45% from 2007 to 2015.  Those rate increases led to more than 1.6 million households having an average $500 water and/or sewer utility debt Further exacerbating the problem have been how efforts to address this access gap have been delayed including. AB 401 (Chap. 662, Stats. 2015). SB 1255 is a critically needed bill that will finally establish a statewide water rate assistance program for large and medium water systems that serve most of the state’s population, through a voluntary ratepayer contribution fund, that will not require use of assessments or fees, consistent with Prop. 218. This program will direct voluntarily collected funds to help qualified households, defined as those with an annual household income that is no greater than 200% of the federal poverty guideline level."
2. Complications with Financing Water Infrastructure. Local governments in California provide most water related services such as water service, sewer service, flood control, and storm water management. According to a 2014 Policy Institute of California (PPIC) report, Paying for Water in California, there are currently four funding sources for water currently in California:
3. Fees, which include water and wastewater bills, property assessments or fees, developer or connection fees, and permitting fees;
4. Taxes, which include both general and special taxes, including parcel taxes;
5. Fines and penalties, which include excessive pumping of groundwater or directly to customers in violation of rationing restrictions during drought emergencies; and
6. Bonds, which include general obligation and revenue bonds.

Local agencies frequently point to the series of constitutional reforms such as Proposition 218 as a barrier for generating necessary revenue to fund the cost of water related services. Proposition 218 requires that fees charged by local agencies be proportional to the cost of service and places limits on the use of funds. The intent of this proposition was to ensure that fees and other charges paid by property owners reflect only the cost to serve them and do not subsidize other government programs. Consequently, public water utilities are prevented from using revenue from water bills to offset the cost of operating assistance programs for low-income residents.

1. Low-Income Energy Affordability Programs (CARE and FERA) as Models.

• CARE Program. Currently, about 25 years old, the CARE program is the primary existing state policy to help low-income customers of the state’s IOUs pay their electric and gas bills.^[21] Households enrolled in CARE receive a 30-35% discount – 20% if the household is subscribed to an IOU with fewer than 100,000 customers – on their electric bill and a 20% discount on their natural gas bill.^[22] CARE is funded through a rate surcharge paid by all other utility customers, both residential and non-residential. The spending on CARE has grown massively since its inception in 1998. At the beginning of 2001, the four largest utilities – Pacific Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E), Southern California Edison (SCE), and Southern California Gas Company (SoCal Gas) – spent about $126 million on the program;^[23] by the end of 2022, the utilities spent $1.9 billion to help 4.5 million households.^[24] In their May 2023 monthly reports, the IOUs cited penetration rates, or the percentage of eligible beneficiaries that are enrolled, between 90-112%, with a cumulative authorized program budget of over $1.4 billion serving over 4.8 million customers.^[25] The IOUs continue to engage in outreach to increase penetration rates of CARE today.^[26]
• FERA Program. The FERA program was established by a CPUC decision in 2004 as the Lower Middle Income Large Household program for families of three or more persons.^[27] FERA is funded by “public purpose program surcharge^[28]” that appears on utility bills, like CARE. FERA offers an 18% discount on electric bills if household income slightly exceeds CARE allowances (up to 250% of federal poverty). FERA is an effort to help families who may have incomes that are just above the income eligibility for CARE, but who likely still experience hardships paying their utility bills. According to the CPUC, the IOUs did not meet the 50% (Range from 11.7% to 28%)^[29] enrollment goal by 2023 and are exploring ways to increase program enrollment.

CARE and FERA together cost approximately $6 to $12 for non-qualified customers. However, the costs of a water assistance program to non-qualified customers is difficult to quantify and compare. Unlike electrical and/or gas IOUs which can serve millions of customers and take advantage of economies of scale, California’s water utilities serve much smaller bases of retail customers. The majority of drinking water systems serve fewer than 10,000 customers; since this bill would require all water utilities with more than 3,300 customers to establish a water assistance program that means the majority of water systems that would be required by this bill to establish a program would have between 3,300 and 10,000 customers. For comparison, Southern California Edison serves nearly 3.2 million residential customers. The differences in scale could become even larger if there are water customers who choose to opt out of the water assistance program – this bill puts forward a program that is funded by voluntary contributions. Electric and gas customers do not, by contrast, have the option to opt out of the CARE and FERA surcharge. Importantly, while the CARE and FERA programs provide a helpful bill discount to qualified customers, they do not guarantee an affordable bill.

1. Balancing Tradeoffs is Challenging. While water may not be as costly as other essential needs such as housing and healthcare, many households that are already struggling to afford day-to-day basics have difficulty paying their bills. This is prevalent among low-income households. On the other hand, climate related weather events, aging infrastructure, under-investment in drinking water systems, declining financial support from the state and federal government, and stricter water quality regulations, among other constraints contribute to the increasing price of water. As such, most water systems face a big dilemma: they need to balance tradeoffs between providing affordable water while simultaneously attempting to control its increasing cost.
2. Lack of Funding in Perpetuity. As mentioned above, relying on voluntary contributions as a funding mechanism for a water assistance program, as proposed by this measure, introduces uncertainties in the program’s budget. With individuals being hit hard by the increasing prices of essential goods including utilities, food, and fuel, customers who do not qualify as low-income may still feel heartburn at the thought of additional costs, however small they might be.

The committee is also unclear on how much the ratio of qualified customers to non-qualified customers could vary from one utility to another. In service areas that might serve a greater density of qualified customers than others, non-qualified customers could face a higher cost burden. With the option to opt-out and a cap on the surcharge – the bill requires the surcharge to be no more than 5% of a customer’s water and wastewater bill – there is a likely case that the voluntary donations are insufficient in supporting the low-income assistance program.

1. Outreach. CARE has reached high penetration rates due to urging by the CPUC for outreach efforts. Unlike CARE, FERA enrollment participation rates are low across all three large IOUs. Comparatively, the water utilities may equally struggle to reach eligible low-income households as required by this measure unless more targeted outreach is also simultaneously conducted.
2. California’s Promise. California’s Human Right to Water Act declared access to safe, clean, affordable, and accessible water adequate for human consumption, cooking and sanitary purposes as a basic human right. The affordability of water, and therefore, water utility rates, has a strong impact on that right. California has passed numerous succeeding laws^[30] to move closer and closer and closer to realizing this policy, but much work remains ahead. While the magnitude of the challenges that continue to lay ahead is clear – approximately 34% of Californians live in households with incomes under 200% of the federal poverty line^[31] and 1 in 10 California households are in arrears on their water payments^[32] – the solutions remain more elusive. Certainly, establishing a water assistance program to increase the affordability of water for low-income households, as proposed by this legislation may help to make strides in meeting the state policy, but a successful program will hinge on thoughtful planning and implementation, with diverse stakeholder input and support, or it could risk spending state and ratepayer dollars in a manner that is unstable and untenable. It also remains a question as to how such a program can be implemented by water POUs that are precluded from collecting funds for rate relief by Propositions 218 and 26.

This legislation is unquestionably a meritorious effort in uplifting low-income communities and should be revisited in the near future. More immediately, however, it may be valuable for the author and sponsors to continue having meaningful conversations with diverse stakeholders to assess the best practices and mechanisms that are viable, equitable, and ultimately successful program before instituting a statewide mandated program as this bill stipulates.

1. Myriad of Concerns Persist. While this bill is supported by over 40+ organizations, significant opposition from numerous entities such as CMUA, ACWA, Water Agencies and many others remain. Some of the pending concerns include:

• Voluntary Contributions/Opt-Out Approach: This bill would require retail water agencies to provide each ratepayer the option and method of opting out of providing the "voluntary contribution" to fund the low-income water rate assistance program, at least three months prior to beginning collection of the "voluntary contribution," and at least annually thereafter. According to ACWA, the proposed "opt-out" approach would lack transparency and would create damaging distrust. The bill should instead propose an “opt-in” approach…. The bill would require notice of the voluntary contribution, but many ratepayers would not see the notice (e.g., customers on automatic payments) and would be charged for the "voluntary" contribution on their water bill. They could later opt out and seek refunds, as specified, but this would create funding instability and a negative public perception of the program. It is also important to note that many ratepayers will be at income levels not far above the eligibility cut-off for this program….This concern is also shared by CMUA and numerous other opposing groups. CMUA also contends, “We urge the author to amend the bill so water systems have the flexibility to decide whether using an opt-in or opt-out approach is most appropriate for their customers.
• Administrative Costs: This bill restricts a water system's ability to offset administrative expenses by establishing a 10% limit on voluntary contributions for administrative costs. According to CMUA, “Locally administered program is expected to have significant costs that for many agencies will exceed the 10% cap..{We} urge the author to engage with water systems on a more appropriate cap or other way to keep costs at a reasonable level so ratepayers not participating in the program aren’t subsidizing other customers, which could create constitutional issues for water systems.” Many other opposing groups share similar concerns.

• 60% Ratepayer Participation: This bill requires a qualified system, when setting the recommended voluntary contribution, to assume that 60% of ratepayers other than eligible ratepayers will provide the volunteer contribution. Creating and funding a low-income water rate assistance program solely through voluntary contributions from ratepayers may not be an easy task. According to San Gabriel Valley Water Association, “the current version of the bill assumes 60% ratepayer participation, which may not align with the reality of many communities. The bill also lacks guidance on how a water system serving a large economically disadvantaged population can afford a program when more residents may need assistance than can contribute to funding it.” This issue has equally been raised by other opposing groups.
• Potential Fraud: The bill defines “available information” as Self-certification of eligibility, under penalty of perjury, by the residential ratepayer. Opposing groups contend that “Self-Certification should not be an allowed method of establishing eligibility… This option is too susceptible to fraud…”
• Short Timelines for Deliberations: Ten water agencies from San Bernardino and Riverside counties write in an "oppose unless amended" position, by stating "It is very concerning that this bill is a second house gut and amend. SB 1255 is a significant new policy that deserves ample discussion from both houses and stakeholders…”
• Too Many to List: Given the limited time this committee has had to vet this proposal, the above-bulleted list does not reflect a bevy of other questions and concerns brought forth to the committee.

1. Prior Legislation

SB 222 (Dodd, 2021) would have created a Low-Income Water Rate Assistance program for all California water agencies. This bill was vetoed by the Governor.

SB 200 (Monning) created the SAFER program to support rollout of safe and affordable drinking water for disadvantaged communities. Chapter 120, Statutes of 2019

AB 217 (E. Garcia, 2019) would have created the Safe Drinking Water for All Act (Act), which would have established the Safe and Affordable Drinking Water Fund (Fund) to provide a source of funding for safe drinking water for all Californians, and long-term sustainability of drinking water systems. Would have imposed several fees on agricultural activities and a charge on retail water systems that together would provide the source of revenue to the Fund. This bill was subsequently amended into another subject.

SB 669 (Caballero, 2019) would have established the Safe Drinking Water Fund to assist community water systems in disadvantaged communities that are chronically noncompliant. Would have created Safe Drinking Water Trust Fund to receive funding from the state and provide the fund source to the Safe Drinking Water Fund. This bill was held in the Senate Appropriations Committee.

SB 669 (Caballero, 2019) would have established the Safe Drinking Water Fund to assist community water systems in disadvantaged communities that are chronically noncompliant. Would have created Safe Drinking Water Trust Fund to receive funding from the state and provide the fund source to the Safe Drinking Water Fund. This bill was held in the Senate Appropriations Committee.

SB 998 (Dodd) required all public water systems (with more than 200 connections) to have a written policy on discontinuation of residential water service, provide that policy in multiple languages, include provisions for not shutting off water for certain customers that meet specified criteria, prohibit the shutoff of water service until the bill has been delinquent for 60 days, and caps the reconnection fees for restoring water service. Status: Chapter 891, Statutes of 2018

SB 623 (Monning, 2017) would have created the Safe and Affordable Drinking Water Fund, administered by the State Water Board, and would have imposed water, fertilizer and dairy fees to fund safe drinking water programs. This bill was held in the Assembly Rules Committee.

AB 401 (Dodd) required the State Water Board, in collaboration with the State Board of Equalization and relevant stakeholders, to develop a plan for funding and implementing a Low-Income Water Rate Assistance Program. Status: Chapter 662, Statutes of 2015

AB 685 (Eng) declared the right to clean, safe, and affordable water for drinking and sanitation. Chapter 524, Statutes of 2012

Support

350 Humboldt
California Coastal Protection Network
California Coastkeeper Alliance
California Environmental Justice Alliance (CEJA) Action
California Environmental Voters
California Immigrant Policy Center
California Water Association
California Water Research
Central California Environmental Justice Network
Clean Water Action
Cleanearth4kids.org
Climate Resolve
Community Water Center
Courage California
Defenders of Wildlife
Environmental Defense Fund
Environmental Working Group
Families Advocating for Chemical and Toxics Safety
Friends Committee on Legislation of California
Friends of The River
Grace - End Child Poverty in California
Heal the Bay
LA Waterkeeper
Leadership Counsel for Justice & Accountability
Los Angeles Alliance for A New Economy
Lutheran Office of Public Policy - California
Mono Lake Committee
National Parks Conservation Association
National Resources Defense Council
Natural Resources Defense Council
Physicians for Social Responsibility - Los Angeles
Planning and Conservation League
San Francisco Baykeeper
San Francisco Public Utilities Commission
Sierra Club California
The Nature Conservancy
Ufcw - Western States Council
Union of Concerned Scientists
Voices for Progress
Western Center on Law & Poverty

Support If Amended

Sweetwater Authority

Oppose

Helix Water District
Valley Center Municipal Water District
Vista Irrigation District

Oppose Unless Amended

Association of California Water Agencies (ACWA)
California Municipal Utilities Association
City of Chino
City of Chino Hills
City of Montclair
Cucamonga Valley Water District
Eastern Municipal Water District
Elsinore Valley Municipal Water District
Inland Empire Utilities Agency
Irvine Ranch Water District
Monte Vista Water District
Ontario Municipal Utilities Company
Rancho California Water District
Regional Water Authority
San Gabriel Valley Water Association
Western Municipal Water District

Other

East Bay Municipal Utility District

Analysis Prepared by: Lina V. Malova / U. & E. / (916) 319-2083

1. State Water Resources Control Board, “Report to the Legislature in Compliance with the Health and Safety Code Section 116365”; September 2021 ↑

2. Ibid ↑

3. CPUC; “Memorandum of Understanding Between the State Water Resources Control Board and the California Public Utilities Commission Regarding the Regulation of Public Water Systems”; https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/news-and-outreach/documents/news-office/mous/12920-signed-mou-between-cpuc-and-swrcb.pdf?sc_lang=en&hash=9E9654130F6F54CDAC0E3751845F896D ↑

4. https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/waterpartnership.html ↑

5. CPUC, “Water Division”; https://www.cpuc.ca.gov/about-cpuc/divisions/water-division ↑

6. LADWP, “Provision of Water Service for Single-Family Residential Dwelling Units” December 2018 ↑

7. The Ukiah Daily, “Improving Ukiah water system’ has been a massive project’ https://www.ukiahdailyjournal.com/2021/05/12/improving-ukiah-water-supply-system-has-been-a-massive-project/ ↑

8. HSC § 116275 ↑

9. https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/waterpartnership.html ↑

10. Ranges between 23 to 40%. State Water Resources Control Board, Pg VIII; “Safe Drinking Water Plan for California.” September 2021 ↑

11. Ibid ↑

12. Ibid ↑

13. State Water Board, “Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program.” February, 2020 ↑

14. Workshop 1 (August 8, 2022); Presentation: https://bit.ly/3jsI4k8 ↑

15. California Water Board, “2023 Drinking Water Needs Assessment;” Pg 28; April 2023 ↑

16. California Constitution Article XIIID, § 6, Subd.(b)(1) ↑

17. California Constitution, Article XIIIC, § 1 ↑

18. State Water Board, Pg. 22; “Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program.” February, 2020 ↑

19. Cal. Const., art. XIIIC, § 2, subd. (d) ↑

20. Class A Utilities having more than 10,000 service connections, Class B Utilities having between 2,000 service connections and 10,000 service connections, Class C Utilities having between 500 service connections and 2,000 service connections. ↑

21. Public Utilities Code § 739.1 ↑

22. CPUC; “California Alternate Rates for Energy (CARE)”; https://www.cpuc.ca.gov/consumer-support/financial-assistance-savings-and-discounts/california-alternate-rates-for-energy. ↑

23. LIHEAP Clearinghouse; “State PBF/USF History, Legislation, and Implementation”; https://liheapch.acf.hhs.gov/dereg/states/california.htm; August 2016. ↑

24. See each IOU report at https://liob.cpuc.ca.gov/monthly-annual-reports/. ↑

25. Or roughly ~$292/customer per year, without accounting for other indirect costs such as CARE participant exemptions from some legislatively mandated program fees. See each IOU report at https://liob.cpuc.ca.gov/monthly-annual-reports/. ↑

26. Advice 7107-E, PG&E; “Information-only Advice Letter on Pacific Gas and Electric Company’s Progress to Increase Family Electric Rate Assistance Program Enrollment Pursuant to Decision (D.)18-08-013”; December 2023. ↑

27. CPUC; Pg 54; “AB 67 Report” April 2024 ↑

28. These charges are assessed on the amount of electricity used ↑

29. Based on the reports submitted to the CPUC in April 2023, estimated enrollment participation rates for the FERA program ranged from 11.7 to 28% among the three IOUs. ↑

30. These laws include: SB 88 (2015), SB 552 (2016), SB 1263 (2016), AB 401 (2015), AB 1668, SB 606 (2018), AB 2501 (2018), SB 998 (2018), and SB 200 (2019). ↑

31. State Water Board, Pg. 13; “Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program.” February, 2020 ↑

32. LA Times; “Millions of Californians are struggling to pay for water”; October 2022; https://www.latimes.com/california/story/2022-10-24/millions-of-californians-are-struggling-to-pay-for-water ↑

Date of Hearing: June 25, 2024

ASSEMBLY COMMITTEE ON ENVIRONMENTAL SAFETY AND TOXIC MATERIALS

Eduardo Garcia, Chair

SBPCA Bill Id:SB 1255

Author:(Durazo) – As Amended Ver:June 19, 2024

SENATE VOTE: 33-6

SUBJECT: Public water systems: needs analysis: water rate assistance program

SUMMARY: Requires, on or before July 1, 2027, retail water suppliers that serve over 3,300 residential connections to establish a water rate assistance program (WRAP), as specified, to provide assistance to eligible ratepayers for their water and wastewater bills. Specifically, this bill:

Findings:

1. Makes legislative findings about the human right to water and water affordability.

Definitions:

1. Defines "available information" as any of the following:
   1. Information documenting the residential ratepayer’s participation in an affordability program, as specified;
   2. A benefits award letter provided by the residential ratepayer documenting that the customer is an enrollee in, or is a recipient of, an affordability program; or,
   3. Self-certification of eligibility, under penalty of perjury, by the residential ratepayer.
2. Defines "balancing account" as a reserved amount of sufficient funding to address fluctuations in voluntary contributions received or changes in eligible ratepayers, not to exceed 25% of the annual expenditures of the program.
3. Defines "crisis assistance" as direct bill credits to accounts of eligible ratepayers to reduce accrued arrearages.
4. Defines "eligible ratepayer" as a low-income residential ratepayer with an annual household income that is no greater than 200% of the federal poverty guideline level.
5. Defines "qualified system" as any retail water supplier that serves over 3,300 residential connections.

Needs analysis:

1. Requires the State Water Resources Control Board (State Water Board), on or before July 1, 2026, and on or before July 1 of each three years thereafter, to, in consultation with the Safe and Affordable Funding for Equity and Resilience (SAFER) Program advisory group and appropriate stakeholders, update the needs analysis of the state’s public water systems.

1. Requires the update of the needs analysis to include:
   1. An assessment of the funds necessary to provide a 20% bill credit for low-income households served by community water systems with fewer than 3,300 service connections; and,
   2. An assessment of the funds necessary for community water systems with fewer than 3,300 service connections to meet the affordability threshold established pursuant to the SAFER Program Fund Expenditure Plan.
2. Requires the State Water Board, in order to develop the assessment described above, to do all of the following:
   1. Collect arrearage data from water systems not regulated by the California Public Utilities Commission (CPUC) and request data from the CPUC on the systems they regulate;
   2. Estimate the number of households in need of assistance using arrearage data as well as information provided by the United States Census or other comparable data source;
   3. Identify available data on water rates charged by community water systems with fewer than 3,300 service connections; and,
   4. Where data is unavailable for a water system, use an average of existing data to estimate the level of need for that system.

Water rate assistance program (WRAP):

1. Requires, on or before July 1, 2027, a qualified system, other than a system that already offers an existing WRAP, to establish a WRAP, as specified, and to begin providing water rate assistance to eligible ratepayers.
2. Requires a WRAP offered pursuant to this bill to, at a minimum, include both of the following:
   1. Automatic enrollment of eligible ratepayers if available information, as defined in the bill, indicates that they are qualified to receive assistance; and,
   2. Provision of a bill credit for eligible ratepayers of no less than 20% of the total water charges, and, if present on the bill, wastewater charges, for a volume of water similar to that identified in urban water use objectives law (currently 47 gallons per capita daily for indoor residential water) or, if the eligible ratepayer uses less, the actual volume used.
3. Provides that in the event that there is not sufficient funding for the WRAP, including any balancing account funds, to support a 20% bill credit, the WRAP shall provide the maximum bill credit available that funding is able to support, unless the maximum bill credit available that funding is able to support is less than 10%, in which case the qualified system shall instead provide crisis assistance to the extent funds are available, as specified.
4. Authorizes the qualified system to select the elements, as described below, of the water charges upon which the bill credit is applied or to provide a bill credit as a set percentage of the total water bill, provided that the total bill credit is equivalent in value to the bill credit required above.
5. Provides that the element, or elements, of the drinking water charges upon which the bill credit may be applied include, but are not limited to, the fixed, volumetric, or fixed and volumetric charges levied by the system.
6. Authorizes a qualified system to, on or before September 1, 2026, begin collecting voluntary contributions for the reasonable costs, as specified, associated with the administration of the WRAP and to establish initial program funding.
7. Prohibits, beginning July 1, 2027, the reasonable costs associated with the administration of the WRAP from exceeding 10% of voluntary contributions collected.
8. Authorizes a qualified system to, in establishing a WRAP, establish a balancing account to manage fluctuations in voluntary contributions and the granting of bill credits to eligible ratepayers.
9. Provides that this bill does not require a qualified system to use funds other than voluntary contributions collected pursuant to the WRAP to provide rate assistance to eligible ratepayers or to pay for associated administrative costs, but provides that a qualified system may use other funds available for this purpose that are not derived from fees or assessments, as allowed by the California Constitution.
10. Exempts any qualified system that offers an existing water rate assistance program on or before September 1, 2026, that meets the minimum enrollment and bill credit requirements specified in this bill by July 1, 2027, from being required to comply with the provisions of this bill, and authorizes those systems to collect voluntary contributions to supplement or expand the existing program or to provide crisis assistance.
11. Provides that nothing in this bill shall prohibit a qualified system from offering assistance to residential ratepayers if the program does either, or both, of the following:
    1. Provides a greater bill credit benefit; or,
    2. Exceeds the definition of low income as specified in this bill for ratepayer eligibility.
12. Authorizes any public water system that is not a qualified system to collect voluntary contributions to fund a water affordability program, but does not require the system to comply with the provisions of this bill.
13. Authorizes a qualified system to require verification of eligibility from a sample of enrolled eligible ratepayers on an annual basis to verify the ratepayer’s low-income status and eligibility for assistance, and to remove any ratepayers found to not be eligible for assistance from the WRAP.
14. Requires a qualified system to continue to have a WRAP as long as there is sufficient funding available to provide water rate assistance or crisis assistance, to pay for the qualified system’s reasonable costs for administration of the program, and to establish a balancing account if the qualified system chooses to do so.

Crisis assistance:

1. Requires that if, after three months of accepting voluntary contributions, the qualified system can demonstrate there will not be sufficient funds to support a program at a minimum of a 10-percent discount or $5 per month, whichever amount is greater, and pay for the qualified system’s reasonable costs for administration of the program, the system must instead use the collected contributions to provide ongoing crisis assistance and pay for the qualified system’s reasonable costs for administration of crisis assistance.
2. Requires crisis assistance to be offered on or before July 1, 2027, and to be offered to eligible ratepayers, at a minimum, when a qualified system provides a discontinuation of residential water service notification or when an eligible customer contacts the qualified system about a delinquent account.
3. Limits crisis assistance to only being provided to an eligible ratepayer once per year and limits it to an amount determined by the qualified system, taking into account the overall past due amount and available funding. Provides that to the extent the amount of crisis assistance provided does not eliminate an eligible ratepayer’s arrearages, the ratepayer shall enter into an amortization agreement, alternative payment schedule, or plan for deferred or reduced payment, pursuant to discontinuation of residential water service law, to be eligible for crisis assistance.

Voluntary contributions:

1. Requires, on or before September 1, 2026, a qualified system to provide an opportunity for each ratepayer of the system to provide a voluntary contribution as part of the ratepayer’s water bill to provide funding for the qualified system’s WRAP.
2. Requires a qualified system to establish a recommended voluntary contribution amount on the bill of each ratepayer other than an eligible ratepayer based on available information as of July 1, 2026, at a level intended to raise sufficient funding to provide a bill credit to eligible ratepayers, pay for the qualified system’s administrative costs to implement a WRAP beginning January 1, 2025, and establish a balancing account if the qualified system chooses to do so.
3. Requires a qualified system, when setting the recommended voluntary contribution, to assume that 60% of ratepayers other than eligible ratepayers will provide the contribution. Authorizes a qualified system, on or before July 1, 2027, to adjust the voluntary contribution, as necessary, considering the previous year’s actual participation rate. Prohibits the recommended voluntary contribution from exceeding 5% of the charges for water and wastewater on the water bill for any residential ratepayer.
4. Requires a bill from a qualified system to label the voluntary contribution in a way that describes the purpose of the funds. Requires the qualified system to notify their ratepayers of the voluntary contribution and, in a visually accessible manner and using clear and unambiguous language, to provide each ratepayer the option and method of opting out of providing the voluntary contribution at least three months prior to beginning collection of the voluntary contribution, and thereafter on at least an annual basis.
5. Requires voluntary contributions to commence on the qualified system’s subsequent billing cycle from the notice.
6. Authorizes the qualified system to choose to include alternative amounts for contributions.
7. Requires a qualified system to also provide this information on its internet website in English, and any other language spoken by at least 10% of the people residing in its service area, and other languages, as specified.
8. Authorizes a ratepayer to opt out of the voluntary contribution at any time in a manner that is specified by the qualified system in the notice about the voluntary contributions, with voluntary contributions terminating on the qualified system’s subsequent normal billing cycle.
9. Provides that a ratepayer may only request a refund for contributions made since the last notice of opportunity to opt out of the program was provided or for the period of the last billing cycle prior to the date the ratepayer opts out, whichever time period is greater. Authorizes qualified systems to provide refunds in the form of a bill credit.
10. Prohibits a qualified system from sanctioning, taking any enforcement or collection action against, imposing any late charge or penalty against, or otherwise holding liable a ratepayer in any manner for exercising the option of not paying a voluntary contribution.
11. Requires the voluntary contributions to be used only to provide rate assistance to eligible ratepayers, pay for associated administrative costs to implement the WRAP, and establish a balancing account. Authorizes administrative costs of establishing the WRAP to be reimbursed from voluntary contributions.
12. Authorizes a qualified system to contract with a third party to receive the voluntary contributions and comply with the requirements of the bill.
13. Requires that any partial payment made by a ratepayer that is insufficient to pay for charges on the bill be used to pay the qualified system’s charges shown on the ratepayer’s bill before being attributed to a voluntary contribution.
14. Prohibits a penalty or late fee from being assessed by a qualified system for the failure of a ratepayer to make timely payment of a voluntary contribution regardless of whether the ratepayer has exercised the option of not paying a voluntary contribution.
15. Authorizes a qualified system to use any state or federal funds that are available to support a WRAP by offsetting or supplementing the funds collected from voluntary contributions.

California Public Utilities Commission (CPUC) data collection:

1. Requires the CPUC to, on or before January 1, 2026, establish a mechanism for electrical corporations and gas corporations to provide data to all qualified systems no later than April 1, 2026, and annually by April 1 thereafter, regarding ratepayers enrolled in, or eligible to be enrolled in, the California Alternate Rates for Energy (CARE) program and the Family Electric Rate Assistance (FERA) program.
2. Authorizes all qualified systems to enter into agreements with local publicly owned electric utilities and local publicly owned gas utilities, including, but not limited to, municipal utility districts and irrigation districts, for the purpose of regularly receiving data regarding ratepayers enrolled in, or eligible to be enrolled in, affordability programs benefiting eligible ratepayers.
3. Specifies the laws under which the data collection is subject.

State Water Board data collection:

1. Requires the State Water Board, beginning in 2028, to require qualified systems to annually report the following information in required technical reports:
   1. The total amount of voluntary contributions collected, the administrative costs of operating the WRAP, the number of eligible households that were provided rate assistance or crisis assistance, and the total amount of rate assistance or crisis assistance provided to eligible households; and,
   2. An evaluation of available relevant information regarding any arrearages that remain after application of bill assistance.

Enforcement:

1. Authorizes the Attorney General to bring an action in state court to restrain, by temporary or permanent injunction, the use of any method, act, or practice in violation of the WRAP provisions of this bill by a qualified system, other than a system that has an existing WRAP program, including nonparticipation by a qualified system.
2. Prohibits the Attorney General from bringing an action against a qualified system with an existing WRAP program for failing to meet the requirements of the bill, as long as the qualified system makes a good faith effort to raise sufficient funding.

EXISTING LAW:

1. Declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes. (Water Code (WC) § 106.3)
2. Requires the State Water Board, by January 1, 2018, to develop a plan for the funding and implementation of the Low-Income Water Rate Assistance Program, as specified. (WC § 189.5(b))
3. Requires the State Water Board, by February 1, 2018, to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the Low-Income Water Rate Assistance Program, including recommendations for needed legislative action. (WC § 189.5 (e))
4. Establishes the California Safe Drinking Water Act to provide for the operation of public water systems and imposes on the State Water Board various responsibilities and duties relating to the regulation of drinking water to protect public health. (Health & Safety Code §§ 116270 – 116755)
   
5. Requires the CPUC to continue the CARE program to low-income electric and gas customers with annual household incomes less than 200% of the federal poverty guideline levels. (Public Utilities Code § 739.1)
6. Declares that access to an adequate supply of healthful water is a basic necessity of human life, and that it shall be made available to all residents of California at an affordable cost. (Public Utilities Code § 739.8 (a))
7. Requires the CPUC to consider, and authorizes it to implement, programs to provide rate relief for low-income ratepayers. (Public Utilities Code § 739.8 (b))
8. Requires the CPUC to consider, and authorizes it to implement, programs to assist low-income ratepayers in order to provide appropriate incentives and capabilities to achieve water conservation goals. (Public Utilities Code § 739.8 (c))
9. Requires the CPUC to continue the FERA program to residential cusomers of the state’s three largest investor owned utilities for households of three or more persons with total household annual gross income levels between 200% and 250% of the federal poverty guideline level. (Public Utilities Code § 739.12)

FISCAL EFFECT: Unknown.

COMMENTS:

Need for the bill: According to the author,

"While recognizing water as a basic human right, California has been at the epicenter of a water affordability and access crisis, especially for communities of color. The State [Water] Board reported that water rates rose 45% from 2007 to 2015. Those rate increases led to more than 1.6 million households having an average $500 water and/or sewer utility debt, with more than 150,000 of those households having a dangerously higher debt owed of $1,000 or more during the COVID-19 Pandemic.

Further exacerbating the problem have been how efforts to address this access gap have been delayed. While AB 401 (Chap. 662, Stats. 2015) required the State [Water] Board to prepare a Low-Income Water Rate Assistance Program, no program has been created to date.

SB 1255 is a critically needed bill that will finally establish a statewide water rate assistance program for large and medium water systems that serve most of the state’s population. Specifically, SB 1255 will require water suppliers with over 3,300 connections to provide ratepayer assistance to eligible ratepayers, through a voluntary ratepayer contribution fund, that will not require use of assessments or fees, consistent with Prop. 218. This program will direct voluntarily collected funds to help qualified households, defined as those with an annual household income that is no greater than 200 percent of the federal poverty guideline level."

Human right to water: By enacting Assembly Bill (AB) 685 (Eng, Chapter 524, Statutes of 2012), California became the first state with a Human Right to Water law. AB 685 establishes state policy that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitation. It also requires all relevant state agencies to consider this state policy when revising, adopting, or establishing policies, regulations, and grant criteria. To date, water supply issues; contaminants; costs of treatment and distribution systems; climate change; the number and nature of small public water systems, especially in disadvantaged communities; and, many other factors continue to challenge the State’s progress in implementing the Human Right to Water.

Increasing water affordability challenge: Drinking water is a basic human need; however, according to the State Water Board’s February 2020 report, Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program (2020 report), California households find it increasingly difficult to fulfill this need because the retail cost of water has risen substantially over the last decade and is expected to continue to escalate. The 2020 report notes that, adjusting for inflation, the average California household paid around 45% more per month for drinking water service in 2015 than in 2007. Additional data presented in the State Water Board’s September 2021, Safe Drinking Water Plan for California (2021 Safe Drinking Water Plan), shows that water costs have, on average over a five-year period from 2012 to 2017, increased about 35% within all size groups of water systems (ranging from 23% to 40 %). The 2021 Safe Drinking Water Plan states that on average, customers of small water systems (public water systems serving fewer than 200 service connections) pay approximately 21% more for water than customers served by larger systems. Many economically disadvantaged communities are served by small water systems making, water affordability a significant issue among residents in these communities.

The 2020 report explains that the high and rising costs of other basic needs for California residents, including housing, food, and other utility services, means that cost increases for any single need, such as water, can force families to make difficult and risky tradeoffs that could harm their health and welfare. When families are unable to pay their bills, these trade-offs include skipping meals and going hungry, delaying or avoiding medical treatment, risking eviction, or facing potential disconnection for electric, gas, or water services. Unfortunately, expenditures to meet basic water needs are expected to continue to rise rapidly due to the need for water systems to replace aging infrastructure, meet treatment standards, diversify supplies, and maintain a well-trained workforce. Given the staggering rise of costs across sectors since the referenced reports were produced, it can be assumed that water affordability has worsened since then.

The 2021 Safe Drinking Water Plan summarizes the concerns about, and recommendation to remedy, issues surrounding the cost of water in California as, "Over the past decades, the cost of drinking water, adjusted for inflation, has been on the rise and this trend is expected to continue. To address the issue of affordability, there is a need for a statewide rate assistance program."

Low-Income Water Rate Assistance Program report: To better understand and address drinking water affordability, AB 401 (Dodd, Chapter 662, Statutes of 2015) required the State Water Board, in collaboration with the State Board of Equalization and relevant stakeholders, to develop a plan for funding and implementing a Low-Income WRAP. AB 401 also required the State Water Board to submit a report to the Legislature by February 1, 2018, with its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for legislative action that may need to be taken. In response, the State Water Board published the 2020 Report, mentioned previously, but no statewide Low-Income WRAP has been adopted to date.

The State Water Board, in the 2020 Report, further argues for the need for a statewide water low income rate assistance program as follows,

"…Providing all low-income households with financial assistance to help pay their water bills is a small, but important, way the state can support the provision of basic necessities for all Californians. There are at least four additional rationales for supporting the development of a [WRAP] in California:

1. The devastating health and livelihood impacts people experience when water is unaffordable,
2. The rapidly rising retail cost of drinking water,
3. The general absence of robust low-income rate assistance or affordability programs for water, despite the availability of comparable programs for other utility needs, and
4. The inability of many individual water systems to self-fund a rate assistance program."

The State Water Board, in the 2020 Report, recommends components of a successful program to help low-income households afford drinking water, including identifying potential program recipients, mechanisms for delivering assistance to low-income households, and possible funding sources to implement a low income rate assistance program. The recommendations outlined in the report reflect discussions with public interest groups and stakeholders. For qualifying customers, the program recommended by the State Water Board will support bill discounts, crisis assistance, and a tax credit for renters who pay for their water indirectly through rent.

According to the report,

"Only about half of California’s population is served by a community water system (CWS) offering some form of rate assistance program, and most of these existing programs have low levels of enrollment and limited financial resources. As a result, less than 20% of the state’s low income population served by CWSs currently receives benefits from a low-income rate assistance program.

There are financial obstacles to providing a rate assistance program to water users at the system level. Many of the approximately 2,900 individual CWS cannot operate standalone rate assistance programs because they lack an adequate rate base to support benefit expenditures… Using 200% of the federal poverty level (FPL) as the baseline eligibility criteria for [low income water rate assistance] programs would mean that—for many large systems—more than 50% of their customers would be eligible for assistance. The problem is even more extreme for many smaller systems. To operate individual low-income rate assistance programs, these systems would likely have to impose outsized burdens on higher-income households. Even then, publicly-owned systems would be legally prevented from imposing water rates on non-eligible customers that exceed the cost of serving those customers.

Due to the impracticality of a comprehensive low-income rate assistance program at the system level, the [State Water] Board envisions a statewide program with benefits distributed through water bills, crisis assistance for water ratepayers, and a renter’s water credit for residents who pay for their water indirectly through rent.

The [State Water] Board recommends the use of progressive revenue sources (i.e., taxes) for most of the program cost to avoid burdening the very state residents the program seeks to serve. For example, taxes on personal and business income would provide progressive revenues. To balance potential volatility of these sources, the [State Water] Board also recommends taxes on bottled water, which should generate more stable revenue and have a direct nexus to water use.

Eligibility criteria and benefit levels would influence the total program costs. AB 401 defined “low-income” as 200% of the FPL; however, the [State Water] Board evaluated alternate eligibility criteria that could feasibly be implemented across the state… Benefit levels could be tied to the cost of water, other assistance programs, or certain affordability criteria."

How does the WRAP align with the 2020 Report recommendations? The Leadership Counsel for Justice and Accountability, one of the sponsors of the bill, responds to the recommendations in the 2020 Report by noting that SB 1255, while different in some regards to the recommendations of the 2020 Report, does include a number of the report’s recommendations, as follows. First, SB 1255 uses the recommended income cutoff for eligibility (200% of the federal poverty level, which, in 2020, included 34% of Californians—roughly 13 million people). Second, the benefit is structured as a percentage of the water bill, and recent amendments conform with the spirit of the 2020 Report by better ensuring consistency with conservation goals. Third, the benefit will be delivered via the water bill rather than through other mechanisms (e.g., CalFresh). The Leadership Counsel for Justice and Accountability argues that the reason that this structure will work is because it does not apply to smaller systems with fewer than 3,300 connections, and because there is built in flexibility to adjust the benefit down to 10% and/or to shift to crisis assistance if enough funds are not collected. The Leadership Counsel for Justice and Accountability states that one reason that the WRAP established by the bill is funded by voluntary contributions is because SB 222 (2021) was structured as a state-funded program, and it was vetoed for lack of funding (see following sections). They maintain that the WRAP could be a $450 million or more program if it relied on a state funding source.

CPUC-regulated water utilities low-income assistance programs: Low-income WRAP are already operating throughout the state. According to the California Water Association, which represents regulated water utilities, in December 2005, the CPUC adopted a Water Action Plan setting forth its policy objectives to assist low-income ratepayers struggling with payments for basic monthly water service. Currently, there are nine Class A water utilities under the CPUC’s jurisdiction, each of which has an individualized low-income rate assistance program. These programs were established on a case-by-case basis, without standardization, as part of the utility’s General Rate Case. Each program differs in its availability of monthly discounts and recovery of costs. Customers are made aware of the low-income programs through various means, including bill inserts, public participation hearings, and company websites. The majority of low-income customers have been automatically enrolled into these existing low-income rate assistance programs through the CPUC-authorized biannual customer data exchange between water and energy utilities. Customers who receive automatic enrollment are sent notices by the utilities of their enrollment with an option to opt out of the low-income program. Permanent low-income rate assistance allows investments in infrastructure to occur, alleviating pressure on rates.

This bill: This bill requires a qualified system, defined as any retail water supplier that serves over 3,300 residential connections, to, on or before July 1, 2027, to establish a WRAP to begin providing water rate assistance to eligible ratepayers, as defined. SB 1255 exempts a qualified system that already offers a WRAP from many of the requirements of the bill. SB 1255 requires a WRAP offered pursuant to the bill to, at a minimum, include automatic enrollment of eligible ratepayers; and, provision of a bill credit for eligible ratepayers of no less than 20% of their total water charges, and, if present on the bill, wastewater charges. SB 1255 additionally requires that, in the event that there is not sufficient funding in the WRAP, including any balancing account funds, to support a 20% bill credit to eligible ratepayers, the WRAP provide the maximum bill credit available that funding is able to support, unless the maximum bill credit available that funding is able to support is less than 10%, in which case the qualified system must instead provide crisis assistance to the extent funds are available.

SB 222 veto: SB 222 (Dodd, 2021) would have required the State Water Board to develop and administer a statewide WRAP to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. Unlike SB 1255, which establishes a voluntary contribution program for the funding of the WRAP, SB 222 did not have an identified funding source. Governor Gavin Newsom vetoed SB 222 on September 28, 2022, and submitted the following veto message:

"This bill establishes a Water Rate Assistance Program and Water Rate Assistance Fund to provide water affordability assistance for drinking and wastewater services to low-income ratepayers. The State Water Resources Control Board would be required to administer the program, and community water systems and wastewater systems would be subsequently required to provide rate assistance to residential ratepayers. This is a permanent program that would not be implemented or initiated until funding is provided. At this time, there is no sustainable, ongoing funding identified.

Lowering costs and making sure that Californians have access to safe and affordable drinking water is a top priority of this administration. The last two budgets have provided billions in rebates, debt relief, assistance grants, and free support services. For water costs alone, the 2021-22 Budget provided $1 billion to the State Water Board for the California Water and Wastewater Arrearage Payment Program, which cleared unpaid water and wastewater debts resulting from the pandemic. This year, our 2022-23 budget added an additional $200 million to the Low-Income Household Water Assistance Program at the Department of Community Services and Development. These are programs that were both approved and funded by the Legislature.

I commend the author and stakeholders for their work during this Legislative session to craft a vision for such a program. However, this bill does not have any funding identified, and because it is an ongoing program that would require all community water systems and wastewater systems to participate, signing this policy would result in significant General Fund pressures in the billions of dollars to continuously provide such assistance."

This bill: In response to the Governor’s veto message and to fund the WRAP established in the bill, SB 1255 requires, on or before September 1, 2026, each qualified system to provide an opt-out opportunity for ratepayers to voluntarily contribute, as part of their water bill, to fund the system’s WRAP. Under the bill, qualified systems must establish a recommended voluntary contribution amount on the bill of each ratepayer (other than a ratepayer who is eligible to receive benefits under the WRAP), at a level intended to raise sufficient funding to provide a bill credit to eligible ratepayers, to pay for the qualified system’s administrative costs to implement a WRAP, and to establish a balancing account if the qualified system chooses to do so. SB 1255 specifies how qualified systems must determine the appropriate amount of, and manage, the voluntary contributions to fund the WRAP. The bill also requires that if, after three months of accepting voluntary contributions, a qualified system can demonstrate there will not be sufficient funds to support a program at a minimum of a 10% discount or $5 per month, whichever amount is greater, and also to pay for the qualified system’s costs to administer the WRAP, the system must instead use the collected contributions to provide an ongoing crisis assistance program.

This bill includes additional provisions that support the provision of affordable drinking water, including:

1. Requiring the State Water Board, on or before July 1, 2026, and on or before July 1 of each three years thereafter, to update the needs analysis of the state’s public water systems using specified arrearages data;
2. Requiring the CPUC to, on or before January 1, 2026, establish a mechanism for electrical corporations and gas corporations to provide data to all qualified systems regarding ratepayers enrolled in, or eligible to be enrolled in, the CARE program and the FERA program, both of which provide discounts on energy bills for income qualified households; and,
3. Authorizing the Attorney General to bring an action in state court to restrain, by temporary or permanent injunction, the use of any method, act, or practice in violation of the WRAP provisions of this bill by a qualified system, other than a system that has an existing WRAP program, including nonparticipation by a qualified system.

Moving forward: Both proponents and opponents of this bill appear to agree that a statewide WRAP is needed. Recent author’s amendments have addressed some of the opposition’s concerns with the WRAP structure proposed by the bill, and the author and sponsors continue to have conversations with stakeholders. Remaining concerns are focused on whether the program should include wastewater, how the WRAP will be administered, and how funds will be collected, including whether there will be an opt-in or opt-out structure for ratepayers to contribute to the program.

Arguments in support: A coalition of more than 30 environmental justice, environmental, and community organizations writes in a "support" position,

"Access to safe and affordable drinking water and sanitation is a human right. (AB 685, 2012). However, water rates have continued to rise, outpacing inflation with a 45% increase between 2007 and 2015. During the pandemic, water arrearages grew to over $1 billion, prompting legislators to create the California Water and Wastewater Arrearages Payment Program, through which the [State] Water Board is on track to successfully provide over $800 million in assistance to California families. The 2023 SAFER Needs Assessment found that almost 450 water systems in California have either a medium or high affordability burden. In 2020, the Water Board finalized a report on a pathway and cost assessment for a Low-Income Water Rate Assistance Program, pursuant to AB 401 from 2015.

Recent amendments to SB 1255 will fill a large portion of the needed assistance for low-income Californians by requiring systems that can fund a [low income rate assistance] program with voluntary ratepayer contributions to do so. Ratepayers served by these systems will be able to choose not to pay this contribution at any time and any contribution would be capped at 5% of their bill. These funds should allow most systems over 3,300 service connections to provide a 20% bill credit for customers and expand access to assistance by automatically enrolling customers who are already enrolled in the CARES program. This means that eligible ratepayers will receive assistance quickly without having to submit a new application demonstrating their eligibility if they have already done so for another program with similar eligibility criteria. Many provisions of SB 1255 are also designed to assist water systems in complying with the law, including balancing accounts to address any uncertainty and exemptions for systems where voluntary contributions may not provide for a 20% bill credit. Water systems that already have a water affordability program can keep their program, provided it meets or exceeds the minimum requirements of SB 1255. In the event collections are insufficient to fund a bill credit, the funding may be used to establish a crisis assistance program.

SB 1255 also would also require the [State] Water Board to update its existing Drinking Water Needs Assessment, using existing information the Water Board already collects, to identify the affordability needs of small water systems under 3,300 service connections.

SB 1255 will empower many water systems to start to address the water affordability crisis in a manner consistent with Proposition 218, and provide California with a better understanding of the needs of small water systems. This is a critical step to fulfilling the Human Right to Water in California. We thank you for championing this bill."

The California Water Association (CWA) argues in support of SB 1255, "To protect customers, a permanent low-income water assistance program will help ensure low-income customers have access to high-quality drinking water through customer assistance programs and water conservation initiatives that help them save money by reducing water usage. CWA’s members have a long history of providing rate assistance programs to their low-income customers and serve as a model for this legislation. However, water utilities across California can and should do more to provide low-income rate assistance to their customers, but this is not possible without SB 1255."

Arguments in opposition:

The Association of California Water Agencies (ACWA) writes in an "oppose unless amended" position (other opponents implied agreement with ACWA’s letter),

"There can be a workable and efficient State water [low income rate assistance] program in California. However, ACWA has serious concerns about the workability of this brand-new proposal… On June 19 the Author amended SB 1255 to include many of [ACWA’s] suggested amendments, addressing ACWA’s concerns regarding the proposed program timeline, application of bill credits as it pertains to water use efficiency and flexibility for qualified systems to determine to which element or elements of water charges it applies the credit, and eligibility verification… Unfortunately, the August 19 amendments did not address the other concerns and suggested amendments. Following is an overview of some of ACWA’s remaining concerns that would be addressed through amendments…:

Voluntary Contributions - Opt-Out Approach – The proposed "opt-out" approach would lack transparency and would create damaging distrust. The bill should instead propose an “opt-in” approach…. The bill would require notice of the voluntary contribution, but many ratepayers would not see the notice (e.g., customers on automatic payments) and would be charged for the "voluntary" contribution on their water bill. They could later opt out and seek refunds, as specified, but this would create funding instability and a negative public perception of the program. It is also important to note that many ratepayers will be at income levels not far above the eligibility cut-off for this program….

Application of Bill Credit – Drinking Water Not Wastewater – The bill should be limited to a credit for drinking water charges and not apply to wastewater charges… There is an equity issue if some customers receive a credit for wastewater charges and some customers (who are billed only for drinking water on the water bill) do not receive that additional credit…

Administrative Costs - The proposal to restrict administrative costs to less than or equal to 10 percent of the amount of voluntary contributions… is not realistic or prudent because no one knows what the level of voluntary contributions would be. This section should be deleted….

Participation-Level Assumption - The proposed required 60%-participation-level assumption needs to be reconsidered given the diverse circumstances for systems across California…

Self-Certification - Self-Certification should not be an allowed method of establishing eligibility… This option is too susceptible to fraud…

Existing Programs - Discussion is needed regarding how the bill should address existing [low income rate assistance] programs…

Needs Assessment –… Arrearages are not a good basis for estimating the funding needed for [low income rate assistance]. Arrearages for nonpayment exist for multiple reasons. For example, some ratepayers with high incomes may have not paid their bills, ratepayers with low incomes will have paid their water bills and not have arrearages, etc. ACWA suggests that the State use existing income information that the State holds and estimate how many low-income ratepayers there are for these systems."

Ten water agencies from San Bernardino and Riverside counties write in an "oppose unless amended" position, "It is very concerning that this bill is a second house gut and amend. SB 1255 is a significant new policy that deserves ample discussion from both houses and stakeholders. It would be best to take the recent amendments as a starting point for discussions over the winter with the sponsors and stakeholders to create a program that comports with the intent of the sponsors without creating administrative and possibly legal (Proposition 218) challenges for retail water suppliers."

Related legislation:

SB 222 (Dodd, 2021). Would have required the State Water Board to develop and administer a statewide WRAP to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. SB 222 was vetoed by Governor Gavin Newsom.

SB 200 (Monning, Chapter 120, Statutes of 2019). Establishes the Safe and Affordable Drinking Water Fund (Fund) to help water systems provide an adequate and affordable supply of safe drinking water in both the near and the long terms. Transfers to the Fund annually, until June 30, 2030, 5% of the proceeds of the Greenhouse Gas Reduction Fund, up to $130 million.

SB 998 (Dodd, Chapter 981, Statutes of 2018). Requires all public water systems with more than 200 connections to have a written policy on discontinuation of residential water service, including provisions for not shutting off water for certain customers that meet specified criteria.

AB 401 (Dodd, Chapter 662, Statutes of 2015). Requires the State Water Board to develop a plan for funding and implementation of a statewide Low-Income WRAP.

AB 685 (Eng, Chapter 524, Statutes of 2012). Establishes as policy of the state that every human being has the right to clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes and requires relevant state agencies to consider this policy when revising, adopting, or establishing policies, regulations, and grant criteria pertinent to the human uses of water.

Double referral: This bill was referred to the Assembly Committee on Environmental Safety and Toxic Materials and the Assembly Committee on Utilities and Energy. Should this bill pass the Assembly Committee on Environmental Safety and Toxic Materials, it will be referred to the Assembly Committee on Utilities and Energy.

REGISTERED SUPPORT / OPPOSITION:

Support

350 Humboldt
California Coastal Protection Network
California Coastkeeper Alliance
California Environmental Justice Alliance (CEJA) Action
California Environmental Voters
California State Council of Service Employees International Union (SEIU California)
California Water Association
California Water Research
Central California Environmental Justice Network
Clean Water Action
Cleanearth4kids.org
Climate Resolve
Community Water Center
Courage California
Defenders of Wildlife
Environmental Working Group
Facts: Families Advocating for Chemical & Toxics Safety
Friends Committee on Legislation of California
Friends of The River
Grace - End Child Poverty in California
Heal the Bay
LA Waterkeeper
Leadership Counsel for Justice & Accountability
Leadership Counsel for Justice and Accountability
Los Angeles Alliance for A New Economy
Lutheran Office of Public Policy - California
Mono Lake Committee
National Parks Conservation Association
Natural Resources Defense Council
Physicians for Social Responsibility - Los Angeles
Planning and Conservation League
San Francisco Baykeeper
Sierra Club California
UFCW - Western States Council
Union of Concerned Scientists
Voices for Progress

Opposition

Amador Water Agency
Association of California Water Agencies (ACWA)
California Municipal Utilities Association
City of Chino
City of Chino Hills
City of Montclair
Cucamonga Valley Water District
Desert Water Agency
Eastern Municipal Water District
Elsinore Valley Municipal Water District
Helix Water District

Inland Empire Utilities Agency
Irvine Ranch Water District
Mesa Water District
Monte Vista Water District
Mountain Counties Water Resources Association
Ontario Municipal Utilities Company
Padre Dam Municipal Water District
Rancho California Water District
Southern California Water Coalition

Valley Center Municipal Water District
Vista Irrigation District

Analysis Prepared by: Shannon McKinney / E.S. & T.M. /

 THIRD READING  

Bill No: SB 1255

Author: Durazo (D), et al.

Amended: 4/1/24

Vote: 21

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 5-1, 4/17/24

AYES: Allen, Archuleta, Gonzalez, Menjivar, Skinner

NOES: Nguyen

NO VOTE RECORDED: Dahle

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/16/24

AYES: Caballero, Ashby, Becker, Bradford, Wahab

NOES: Jones, Seyarto

SUBJECT: Public water systems: needs analysis

SOURCE: Clean Water Action

Community Water Center

Leadership Counsel for Justice and Accountability

DIGEST: Requires the State Water Resources Control Board (State Water Board) to update a needs analysis of the state’s public water systems to include an assessment of the funds necessary to: provide a 20% discount for low-income households served by specified community water systems; and for those same community water systems to meet a specified affordability threshold.

ANALYSIS:

Existing law:

1. Establishes the California Safe Drinking Water Act to provide for the operation of public water systems and imposes on the State Water Board various responsibilities and duties relating to the regulation of drinking water to protect public health. (Health & Safety Code (HSC) §§116270 – 116755)
   
2. Establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long terms. (HSC §116766)
   
3. Defines a "public water system" as a system for the provision of water for human consumption through pipes or other constructed conveyances that has 15 or more service connections or regularly serves at least 25 individuals daily at least 60 days out of the year. (HSC § 116275)
4. Requires the State Water Board, by January 1, 2018, to develop a plan for the funding and implementation of the Low-Income Water Rate Assistance Program, as prescribed. Requires the State Water Board, by February 1, 2018, to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for any needed legislative action. (Water Code (WC) §189.5)
   
5. Requires the State Water Board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment. (HSC §§ 116768 – 116770).
   
6. Declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes. (WC §106.3)

This bill:

1. Requires the State Water Board, on or before July, 1, 2026, and on or before that date of every three years thereafter, to update a needs analysis of the state’s public water systems, as specified. Stipulates that the analysis include an assessment of funds necessary to provide: a 20% discount for low-income households served by community water systems with fewer than 3,000 connections; and for community water systems with fewer than 3,000 service connections to meet a specified affordability threshold.
   
2. Requires the State Water Board, in development of this assessment, to do all of the following:
   1. Collect arrearage data from water systems not regulated by the Public Utilities Commission (PUC) and request data from the PUC on those systems they regulate;
   2. Estimate the number of households in need of assistance using arrearage data as well as information provided by the U.S. Census or other comparable data source;
   3. Identify available data on water rates charged by community water systems with fewer than 3,000 connections; and
   4. Where data is unavailable for a water system, use an average of existing data to estimate the level of need for that system.
      
3. Declares that, to inform future legislation, the State Water Board should develop regularly updated data on resources needed to support small water systems to guide the creation of a future program to fulfill the right of customers of these systems to affordable drinking and wastewater.

Background

1. California’s drinking water program. The regulation of water supply, water quality, and the various types of water systems that serve drinking water is shared among several agencies, including local agencies, in California. The State Water Board has primary responsibility for regulating all public water systems and directly enforces the federal Safe Drinking Water Act (SDWA) for all large water systems (those with 200 or more service connections), including those water systems regulated under the California Public Utilities Commission, Division of Corporations, or Department of Housing and Community Development. For small water systems (those with less than 200 connections), local health departments can be delegated to have regulatory authority as the local primacy agency.
   
2. Human right to water. In 2012, California became the first state to enact a Human Right to Water law, AB 685 (Eng, Chapter 524, Statutes of 2012). Public policy continues to be focused on the right of every human being to have safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitation. Water supply, contaminants, costs of treatment and distribution systems, the number and nature of small public water systems, especially in disadvantaged communities, and many other factors will continue to challenge progress in addressing the Human Right to Water.
3. The cost of water. According to the State Drinking Water Plan for California, September 2021, water costs have, on average over a five-year period from 2012 to 2017, increased about 35 percent within all size groups of water systems (range of 23 to 40 percent). Average water costs remain highest in the San Francisco Bay Area, Central Coast, and Southern California, and lowest in the Central Valley/Agricultural (including Imperial County), Foothill, and Mountain/Desert regions. On average, customers of small water systems (PWS serving fewer than 200 service connections) pay approximately 21 percent more for water than those customers served by larger systems. Many economically disadvantaged communities are served by small water systems. As a result, water affordability has become a significant issue among residents in these communities.

According to the State Water Board, “Over the past decades, the cost of drinking water, adjusted for inflation, has been on the rise and this trend is expected to continue. To address the issue of affordability, there is a need for a statewide rate assistance program.”

1. Recommendations for implementation of a statewide low-income water rate assistance program February 2020. In February 2020, the State Water Board released a report, to develop a plan for funding and implementing a low-income water rate assistance program (W-LIRA). This report was required by AB 401(Dodd, Chapter 662, Statutes of 2015). In the report, the State Water Board recommends components for developing a successful program to help low-income households afford their drinking water. Specifically, this report identifies potential program recipients, different mechanisms for delivering assistance to low-income households, and possible funding sources to implement such a W-LIRA program. The recommendations outlined within the report reflect discussions with public interest groups and stakeholders. According to the report:

“Only about half of California’s population is served by a community water system (CWS) offering some form of rate assistance program, and most of these existing programs have low levels of enrollment and limited financial resources. As a result, less than 20% of the state’s low-income population served by CWSs currently receives benefits from a low-income rate assistance program…

“Rising drinking water costs have been outpacing inflation and the multitude of upward cost drivers are likely to intensify, leading to even greater future water rate increases across the state. These rate increases will reduce affordability for low-income households already struggling with numerous rising expenses for housing, food, utilities, and other basic needs. This report offers a set of recommendations for rate assistance programs with statewide coverage and meaningful benefit levels. These recommendations have a significant cost, but these are costs that California should support given the clear need and our already existing financial assistance to low-income households for other basic needs."

1. State Water Board’s 2023 needs assessment and affordability-related enhancements. In 2019, the Legislature passed and the Governor signed SB 200 (Dodd), which enabled the State Water Board to create the Safe and Affordable Funding for Equity and Resilience (SAFER) Drinking Water Program. SB 200 established a set of tools, funding sources, and regulatory authorities that the State Water Board harnesses through the SAFER Program to help struggling water systems sustainably and affordably provide safe drinking water.
   

The annual Drinking Water Needs Assessment (Needs Assessment), required to be carried out by the SAFER Program, provides foundational information and recommendations to guide this work. The Needs Assessment is comprised of four core components: the Failing Water System List, the Risk Assessment, the Cost Assessment, and the Affordability Assessment. Three different water system types— public water systems, state small water systems and domestic wells— are analyzed within the 2023 Needs Assessment.

The results of the annual Needs Assessment are used by the State Water Board and the SAFER Advisory Group to inform the prioritization of available state funding and technical assistance within the Safe and Affordable Drinking Water Fund (SADWF) Fund Expenditure Plan (FEP). The State Water Board typically hosts a series of workshops throughout the year to inform the FEP.

In response to stakeholder feedback after the release of the 2021 and 2022 Needs Assessments, the State Water Board in partnership with the Office of Environmental Health Hazard Assessment (OEHHA), hosted three public Affordability Workshops in 2022 to re-evaluate previously utilized affordability indicators, research new affordability indicators, and explore how to incorporate a new affordability indicator that measures disposable income limitations into the 2023 Needs Assessment and beyond. These workshops also analyzed different approaches for determining Disadvantage Communities (DAC)s and establishing an “affordability threshold.” Based on feedback from the public workshops, the State Water Board and OEHHA developed a new affordability indicator, “Household Socioeconomic Burden,” a composite indicator that is a combined measure of Housing Burden and Poverty Prevalence that measures the extent to which low-income customers may have affordability challenges now or in the future because their disposable income is constrained by high housing costs.

To assess which systems may be facing the greatest affordability burden, the State Water Board analyzed how many water systems exceeded thresholds for multiple affordability indicators. For the 2023 Affordability Assessment, State Water Board staff analyzed 2,845 community water systems. The majority were identified as having a low affordability burden (45%) followed by a medium affordability burden (12%) and a high affordability burden (3%). Overall, there is a higher proportion of DAC/SDAC systems that have a high or medium affordability burden compared to non-DAC and missing DAC status systems.

Comments

1. Purpose of Bill. According to the author, “While recognizing water as a basic human right, California has been at the epicenter of a water affordability and access crisis, especially for communities of color. The State Board reported that water rates rose 45% from 2007 to 2015. Those rate increases have led to more than 1.6 million households having an average $500 water and/or sewer utility debt, with more than 150,000 of those households having a dangerously higher debt owed of $1,000 or more.

“Further exacerbating the problem have been how efforts to address this access gap have been delayed. While AB 401 (Chap. 662, Stats. 2015)-required the State Board to prepare a Low-Income Water Rate Assistance Program, no program has been created to date.

“SB 1255 will direct the State Board to regularly assess the cost of ensuring that water is affordable for small water systems under 3,000 service connections. This will allow the State Board to understand the cost to support disadvantaged communities to achieve water affordability.”

1. SB 222 veto. SB 222 (Dodd, 2022) would have required the State Water Board to develop and administer a statewide Water Rate Assistance Program to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. The Governor’s veto message states:
   
   “Lowering costs and making sure that Californians have access to safe and affordable drinking water is a top priority of this administration…I commend the author and stakeholders for their work during this Legislative session to craft a vision for such a program. However, this bill does not have any funding identified, and because it is an ongoing program that would require all community water systems and wastewater systems to participate, signing this policy would result in significant General Fund pressures in the billions of dollars to continuously provide such assistance…Bills with significant fiscal impact, such as this measure, should be considered and accounted for as part of the annual budget process.”
   
2. Expands the scope of annual drinking water Needs Assessment. SB 1255 would direct the Board to include in its annual Needs Assessment an examination of how much it would cost to ensure water is affordable for individuals served by small water systems and for those systems to meet an affordability threshold. The bill builds off of AB 401 (Dodd, 2015) and expands upon the important work currently being done by the State Water Board to assess which water systems may be facing the greatest affordability burden. This information could help inform the Legislature on the resources necessary to fulfill the right of customers of these systems to affordable drinking water and wastewater.
   

Related/Prior Legislation

SB 222 (Dodd, 2021) would have created a Low-Income Water Rate Assistance program for all California water agencies. This bill was vetoed by the Governor.

SB 200 (Monning, Chapter 120, Statutes of 2019) created the SAFER program to support rollout of safe and affordable drinking water for disadvantaged communities.

AB 401 (Dodd, Chapter 662, Statutes of 2015) directed the State Water Board to develop a plan for funding and implementation of a statewide low-income rate assistance program.

AB 685 (Eng, Chapter 524, Statutes of 2012) declared the right to clean, safe, and affordable water for drinking and sanitation.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee analysis, the fiscal impact is “Unknown, potentially significant ongoing costs (special fund) for the State Water Board to update a needs analysis of the state’s public water systems as required by the provisions of this bill.”

SUPPORT: (Verified 05/16/24)

Clean Water Action (co-source)

Community Water Center (co-source)

Leadership Counsel for Justice and Accountability (co-source)

California Association of Professional Scientists
California Coastal Protection Network
California Coastkeeper Alliance
California Environmental Voters
California Water Research
Cleanearth4kids.org
Friends of The River
Heal the Bay
Los Angeles Alliance for A New Economy
Los Angeles Waterkeeper
Mono Lake Committee
Natural Resources Defense Council
Planning and Conservation League
Union of Concerned Scientists

OPPOSITION: (Verified 05/16/24)

None received

Prepared by: Gabrielle Meindl / E.Q. / (916) 651-4108

5/17/24 18:49:02

**** END ****

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

SB 1255 (Durazo) - Public water systems: needs analysis

Bill Summary:

This bill would require the State Water Resources Control Board (State Water Board) to update a needs analysis of the state’s public water systems to include an assessment of the funds necessary to: 1) provide a 20% discount for low-income households served by specified community water systems; and 2) for those same community water systems to meet a specified affordability threshold.

Fiscal Impact:

• Unknown, potentially significant ongoing costs (special fund) for the State Water Board to update a needs analysis of the state’s public water systems as required by the provisions of this bill.

Background:

California’s drinking water program. The regulation of water supply, water quality, and the various types of water systems that serve drinking water is shared among several agencies, including local agencies, in California. The State Water Board has primary responsibility for regulating all public water systems and directly enforces the federal Safe Drinking Water Act (SDWA) for all large water systems (those with 200 or more service connections), including those water systems regulated under the California Public Utilities Commission, Division of Corporations, or Department of Housing and Community Development. For small water systems (those with less than 200 connections), local health departments can be delegated to have regulatory authority as the local primacy agency.

Human right to water. In 2012, California became the first state to enact a Human Right to Water law, AB 685 (Eng, Chapter 524, Statutes of 2012). Public policy continues to be focused on the right of every human being to have safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitation. Water supply, contaminants, costs of treatment and distribution systems, the number and nature of small public water systems, especially in disadvantaged communities, and many other factors will continue to challenge progress in addressing the Human Right to Water.

The cost of water. According to the State Drinking Water Plan for California, September 2021, water costs have, on average over a five-year period from 2012 to 2017, increased about 35 percent within all size groups of water systems (range of 23 to 40 percent). Average water costs remain highest in the San Francisco Bay Area, Central Coast, and Southern California, and lowest in the Central Valley/Agricultural (including Imperial County), Foothill, and Mountain/Desert regions. On average, customers of small water systems (PWS serving fewer than 200 service connections) pay approximately 21 percent more for water than those customers served by larger systems. Many economically disadvantaged communities are served by small water systems. As a result, water affordability has become a significant issue among residents in these communities.

According to the State Water Board, “Over the past decades, the cost of drinking water, adjusted for inflation, has been on the rise and this trend is expected to continue. To address the issue of affordability, there is a need for a statewide rate assistance program.”

Recommendations for implementation of a statewide low-income water rate assistance program February 2020. In February 2020, the State Water Board released a report, to develop plan for funding and implementing a low-income water rate assistance program (W-LIRA). This report was required by AB 401(Dodd, Chapter 662, Statutes of 2015). In the report, the State Water Board recommends components for developing a successful program to help low-income households afford their drinking water. Specifically, this report identifies potential program recipients, different mechanisms for delivering assistance to low-income households, and possible funding sources to implement such a W-LIRA program.

State Water Board’s 2023 needs assessment and affordability-related enhancements. In 2019, the Legislature passed and the Governor signed SB 200 (Dodd), which enabled the State Water Board to create the Safe and Affordable Funding for Equity and Resilience (SAFER) Drinking Water Program. SB 200 established a set of tools, funding sources, and regulatory authorities that the State Water Board harnesses through the SAFER Program to help struggling water systems sustainably and affordably provide safe drinking water.

The annual Drinking Water Needs Assessment (Needs Assessment), required to be carried out by the SAFER Program, provides foundational information and recommendations to guide this work. The Needs Assessment is comprised of four core components: the Failing Water System List, the Risk Assessment, the Cost Assessment, and the Affordability Assessment. Three different water system types— public water systems, state small water systems and domestic wells— are analyzed within the 2023 Needs Assessment.

The results of the annual Needs Assessment are used by the State Water Board and the SAFER Advisory Group to inform the prioritization of available state funding and technical assistance within the Safe and Affordable Drinking Water Fund (SADWF) Fund Expenditure Plan (FEP). The State Water Board typically hosts a series of workshops throughout the year to inform the FEP.

In response to stakeholder feedback after the release of the 2021 and 2022 Needs Assessments, the State Water Board in partnership with the Office of Environmental Health Hazard Assessment (OEHHA), hosted three public Affordability Workshops in 2022 to re-evaluate previously utilized affordability indicators, research new affordability indicators, and explore how to incorporate a new affordability indicator that measures disposable income limitations into the 2023 Needs Assessment and beyond. These workshops also analyzed different approaches for determining Disadvantage Communities (DAC)s and establishing an “affordability threshold.” Based on feedback from the public workshops, the State Water Board and OEHHA developed a new affordability indicator, “Household Socioeconomic Burden,” a composite indicator that is a combined measure of Housing Burden and Poverty Prevalence that measures the extent to which low-income customers may have affordability challenges now or in the future because their disposable income is constrained by high housing costs.

To assess which systems may be facing the greatest affordability burden, the State Water Board analyzed how many water systems exceeded thresholds for multiple affordability indicators. For the 2023 Affordability Assessment, State Water Board staff analyzed 2,845 community water systems. The majority were identified as having low affordability burden (45%) followed by a medium affordability burden (12%) and a high affordability burden (3%). Overall, there is a higher proportion of DAC/SDAC systems that have a high or medium affordability burden compared to non-DAC and missing DAC status systems.

Proposed Law:

This bill would require the State Water Board to update a needs analysis of the state’s public water systems to include an assessment of the funds necessary to: 1) provide a 20% discount for low-income households served by specified community water systems; and 2) for those same community water systems to meet a specified affordability threshold. Specifically, this bill would:

1. Require the State Water Board, on or before July, 1, 2026, and on or before that date of every three years thereafter, to update a needs analysis of the state’s public water systems, as specified. Stipulate that the analysis include an assessment of funds necessary to provide: 1) a 20% discount for low-income households served by community water systems with fewer than 3,000 connections; and 2) for community water systems with fewer than 3,000 service connections to meet a specified affordability threshold.
   
2. Require the State Water Board, in development of this assessment, to do all of the following:
   1. Collect arrearage data from water systems not regulated by the Public Utilities Commission (PUC) and request data from the PUC on those systems they regulate;
   2. Estimate the number of households in need of assistance using arrearage data as well as information provided by the U.S. Census or other comparable data source;
   3. Identify available data on water rates charged by community water systems with fewer than 3,000 connections; and
   4. Where data is unavailable for a water system, use an average of existing data to estimate the level of need for that system.
      
3. Declare that, to inform future legislation, the State Water Board should develop regularly updated data on resources needed to support small water systems to guide the creation of a future program to fulfill the right of customers of these systems to affordable drinking and wastewater.

Related Legislation:

SB 222 (Dodd, 2021) would have created a Low-Income Water Rate Assistance program for all California water agencies. This bill was vetoed by the Governor.

SB 200 (Monning, Chapter 120, Statutes of 2019) created the SAFER program to support rollout of safe and affordable drinking water for disadvantaged communities.

AB 401 (Dodd, Chapter 662, Statutes of 2015) directed the State Water Board to develop a plan for funding and implementation of a statewide low-income rate assistance program.

AB 685 (Eng, Chapter 524, Statutes of 2012) declared the right to clean, safe, and affordable water for drinking and sanitation.

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SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Allen, Chair

2023 - 2024 Regular

Bill No: SB 1255

SUBJECT: Public water systems: needs analysis

DIGEST: Requires the State Water Resources Control Board (State Water Board) to update a needs analysis of the state’s public water systems to include an assessment of the funds necessary to: provide a 20% discount for low-income households served by specified community water systems; and for those same community water systems to meet a specified affordability threshold.

ANALYSIS:

Existing law:

1. Establishes the California Safe Drinking Water Act to provide for the operation of public water systems and imposes on the State Water Board various responsibilities and duties relating to the regulation of drinking water to protect public health. (Health & Safety Code (HSC) §§116270 – 116755)
   
2. Establishes the Safe and Affordable Drinking Water Fund in the State Treasury to help water systems provide an adequate and affordable supply of safe drinking water in both the near and long terms. (HSC §116766)
   
3. Defines a "public water system" as a system for the provision of water for human consumption through pipes or other constructed conveyances that has 15 or more service connections or regularly serves at least 25 individuals daily at least 60 days out of the year. (HSC § 116275)
4. Requires the State Water Board, by January 1, 2018, to develop a plan for the funding and implementation of the Low-Income Water Rate Assistance Program, as prescribed. Requires the State Water Board, by February 1, 2018, to report to the Legislature on its findings regarding the feasibility, financial stability, and desired structure of the program, including any recommendations for any needed legislative action. (Water Code (WC) §189.5)
   
5. Requires the State Water Board to base the fund expenditure plan on data and analysis drawn from a specified drinking water needs assessment. (HSC §§ 116768 – 116770).
   
6. Declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes. (WC §106.3)

This bill:

1. Requires the State Water Board, on or before July, 1, 2026, and on or before that date of every three years thereafter, to update a needs analysis of the state’s public water systems, as specified. Stipulates that the analysis include an assessment of funds necessary to provide: a 20% discount for low-income households served by community water systems with fewer than 3,000 connections; and for community water systems with fewer than 3,000 service connections to meet a specified affordability threshold.
   
2. Requires the State Water Board, in development of this assessment, to do all of the following:
   1. Collect arrearage data from water systems not regulated by the Public Utilities Commission (PUC) and request data from the PUC on those systems they regulate;
   2. Estimate the number of households in need of assistance using arrearage data as well as information provided by the U.S. Census or other comparable data source;
   3. Identify available data on water rates charged by community water systems with fewer than 3,000 connections; and
   4. Where data is unavailable for a water system, use an average of existing data to estimate the level of need for that system.
      
3. Declares that, to inform future legislation, the State Water Board should develop regularly updated data on resources needed to support small water systems to guide the creation of a future program to fulfill the right of customers of these systems to affordable drinking and wastewater.

Background

1. California’s drinking water program. The regulation of water supply, water quality, and the various types of water systems that serve drinking water is shared among several agencies, including local agencies, in California. The State Water Board has primary responsibility for regulating all public water systems and directly enforces the federal Safe Drinking Water Act (SDWA) for all large water systems (those with 200 or more service connections), including those water systems regulated under the California Public Utilities Commission, Division of Corporations, or Department of Housing and Community Development. For small water systems (those with less than 200 connections), local health departments can be delegated to have regulatory authority as the local primacy agency.
   
2. Human right to water. In 2012, California became the first state to enact a Human Right to Water law, AB 685 (Eng, Chapter 524, Statutes of 2012). Public policy continues to be focused on the right of every human being to have safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitation. Water supply, contaminants, costs of treatment and distribution systems, the number and nature of small public water systems, especially in disadvantaged communities, and many other factors will continue to challenge progress in addressing the Human Right to Water.
3. The cost of water. According to the State Drinking Water Plan for California, September 2021, water costs have, on average over a five-year period from 2012 to 2017, increased about 35 percent within all size groups of water systems (range of 23 to 40 percent). Average water costs remain highest in the San Francisco Bay Area, Central Coast, and Southern California, and lowest in the Central Valley/Agricultural (including Imperial County), Foothill, and Mountain/Desert regions. On average, customers of small water systems (PWS serving fewer than 200 service connections) pay approximately 21 percent more for water than those customers served by larger systems. Many economically disadvantaged communities are served by small water systems. As a result, water affordability has become a significant issue among residents in these communities.

According to the State Water Board, “Over the past decades, the cost of drinking water, adjusted for inflation, has been on the rise and this trend is expected to continue. To address the issue of affordability, there is a need for a statewide rate assistance program.”

1. Recommendations for implementation of a statewide low-income water rate assistance program February 2020. In February 2020, the State Water Board released a report, to develop plan for funding and implementing a low-income water rate assistance program (W-LIRA). This report was required by AB 401(Dodd, Chapter 662, Statutes of 2015). In the report, the State Water Board recommends components for developing a successful program to help low-income households afford their drinking water. Specifically, this report identifies potential program recipients, different mechanisms for delivering assistance to low-income households, and possible funding sources to implement such a W-LIRA program. The recommendations outlined within the report reflect discussions with public interest groups and stakeholders. According to the report:

“Only about half of California’s population is served by a community water system (CWS) offering some form of rate assistance program, and most of these existing programs have low levels of enrollment and limited financial resources. As a result, less than 20% of the state’s low-income population served by CWSs currently receives benefits from a low-income rate assistance program…

“Rising drinking water costs have been outpacing inflation and the multitude of upward cost drivers are likely to intensify, leading to even greater future water rate increases across the state. These rate increases will reduce affordability for low-income households already struggling with numerous rising expenses for housing, food, utilities, and other basic needs. This report offers a set of recommendations for rate assistance programs with statewide coverage and meaningful benefit levels. These recommendations have a significant cost, but these are costs that California should support given the clear need and our already existing financial assistance to low-income households for other basic needs."

1. State Water Board’s 2023 needs assessment and affordability-related enhancements. In 2019, the Legislature passed and the Governor signed SB 200 (Dodd), which enabled the State Water Board to create the Safe and Affordable Funding for Equity and Resilience (SAFER) Drinking Water Program. SB 200 established a set of tools, funding sources, and regulatory authorities that the State Water Board harnesses through the SAFER Program to help struggling water systems sustainably and affordably provide safe drinking water.
   

The annual Drinking Water Needs Assessment (Needs Assessment), required to be carried out by the SAFER Program, provides foundational information and recommendations to guide this work. The Needs Assessment is comprised of four core components: the Failing Water System List, the Risk Assessment, the Cost Assessment, and the Affordability Assessment. Three different water system types— public water systems, state small water systems and domestic wells— are analyzed within the 2023 Needs Assessment.

The results of the annual Needs Assessment are used by the State Water Board and the SAFER Advisory Group to inform the prioritization of available state funding and technical assistance within the Safe and Affordable Drinking Water Fund (SADWF) Fund Expenditure Plan (FEP). The State Water Board typically hosts a series of workshops throughout the year to inform the FEP.

In response to stakeholder feedback after the release of the 2021 and 2022 Needs Assessments, the State Water Board in partnership with the Office of Environmental Health Hazard Assessment (OEHHA), hosted three public Affordability Workshops in 2022 to re-evaluate previously utilized affordability indicators, research new affordability indicators, and explore how to incorporate a new affordability indicator that measures disposable income limitations into the 2023 Needs Assessment and beyond. These workshops also analyzed different approaches for determining Disadvantage Communities (DAC)s and establishing an “affordability threshold.” Based on feedback from the public workshops, the State Water Board and OEHHA developed a new affordability indicator, “Household Socioeconomic Burden,” a composite indicator that is a combined measure of Housing Burden and Poverty Prevalence that measures the extent to which low-income customers may have affordability challenges now or in the future because their disposable income is constrained by high housing costs.

To assess which systems may be facing the greatest affordability burden, the State Water Board analyzed how many water systems exceeded thresholds for multiple affordability indicators. For the 2023 Affordability Assessment, State Water Board staff analyzed 2,845 community water systems. The majority were identified as having low affordability burden (45%) followed by a medium affordability burden (12%) and a high affordability burden (3%). Overall, there is a higher proportion of DAC/SDAC systems that have a high or medium affordability burden compared to non-DAC and missing DAC status systems.

Comments

1. Purpose of Bill. According to the author, “While recognizing water as a basic human right, California has been at the epicenter of a water affordability and access crisis, especially for communities of color. The State Board reported that water rates rose 45% from 2007 to 2015. Those rate increases have led to more than 1.6 million households having an average $500 water and/or sewer utility debt, with more than 150,000 of those households having a dangerously higher debt owed of $1,000 or more.

“Further exacerbating the problem have been how efforts to address this access gap have been delayed. While AB 401 (Chap. 662, Stats. 2015)-required the State Board to prepare a Low-Income Water Rate Assistance Program, no program has been created to date.

“SB 1255 will direct the State Board to regularly assess the cost of ensuring that water is affordable for small water systems under 3,000 service connections. This will allow the State Board to understand the cost to support disadvantaged communities to achieve water affordability.”

1. SB 222 veto. SB 222 (Dodd, 2022) would have required the State Water Board to develop and administer a statewide Water Rate Assistance Program to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. The Governor’s veto message states:
   
   “Lowering costs and making sure that Californians have access to safe and affordable drinking water is a top priority of this administration…I commend the author and stakeholders for their work during this Legislative session to craft a vision for such a program. However, this bill does not have any funding identified, and because it is an ongoing program that would require all community water systems and wastewater systems to participate, signing this policy would result in significant General Fund pressures in the billions of dollars to continuously provide such assistance…Bills with significant fiscal impact, such as this measure, should be considered and accounted for as part of the annual budget process.”
   
2. Expands the scope of annual drinking water Needs Assessment. SB 1255 would direct the Board to include in its annual Needs Assessment an examination of how much it would cost to ensure water is affordable for individuals served by small water systems and for those systems to meet an affordability threshold. The bill builds off of AB 401 (Dodd, 2015) and expands upon the important work currently being done by the State Water Board to assess which water systems may be facing the greatest affordability burden. This information could help inform the Legislature on the resources necessary to fulfill the right of customers of these systems to affordable drinking water and wastewater.
   

Related/Prior Legislation

SB 222 (Dodd, 2021) would have created a Low-Income Water Rate Assistance program for all California water agencies. This bill was vetoed by the Governor.

SB 200 (Monning, Chapter 120, Statutes of 2019) created the SAFER program to support rollout of safe and affordable drinking water for disadvantaged communities.

AB 401 (Dodd, Chapter 662, Statutes of 2015) directed the State Water Board to develop a plan for funding and implementation of a statewide low-income rate assistance program.

AB 685 (Eng, Chapter 524, Statutes of 2012) declared the right to clean, safe, and affordable water for drinking and sanitation.

SOURCE:

Clean Water Action, Community Water Center, and Leadership Counsel for Justice and Accountability

SUPPORT:

California Coastal Protection Network
California Coastkeeper Alliance
California Environmental Voters
California Water Research
Clean Water Action
Cleanearth4kids.org
Community Water Center
Friends of The River
Leadership Counsel for Justice & Accountability
Los Angeles Alliance for A New Economy
Los Angeles Waterkeeper
Mono Lake Committee
Planning and Conservation League
Union of Concerned Scientists

OPPOSITION:

None received

ARGUMENTS IN SUPPORT:

According to a coalition letter environmental and environmental justice organizations, “Access to safe and affordable drinking water and sanitation is a human right. (AB 685, 2012). However, water rates have continued to rise, outpacing inflation with a 45% increase between 2007 and 2015. During the pandemic, water arrearages grew to over $1 billion, prompting legislators to create the California Water and Wastewater Arrearages Payment Program, through which the Water Board is on track to successfully provide over $800 million in assistance to California families. The 2023 SAFER Needs Assessment found that almost 450 water systems in California have either a medium or high affordability burden.

“In 2020, the Water Board finalized a report on a pathway and cost assessment for a Low-Income Water Rate Assistance Program, pursuant to AB 401 from 2015, which found a total cost for that program of $141 million per year. As costs have continued to rise, we need better data to grasp the scale of the program for small water systems who traditionally lack the economies of scale to keep water rates affordable or provide customer assistance programs. SB 1255 provides this

information by requiring the State Board to include this information in the annual needs assessment that is already part of the SAFER Program. SB 1255 provides California with a better understanding of the water affordability crisis for

small water systems, which is a necessary step to solving the crisis.”

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