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Detroit panel proposal urges tiered billing for water

Joel Kurth
The Detroit News
  • Under the proposal, customers would charge low rates for the first few thousand gallons a month.
  • The Blue Ribbon Panel on Affordability urges higher for residents when they exceed that amount.
  • The current average monthly residential bill is about $75.
  • One panel member, Meeko Williams, said the draft has good ideas but doesn’t go far enough.

A panel of experts convened to make water more affordable in Detroit wants to structure rates to increase conservation and slow an 18-month crackdown on past-due bills that’s led to tens of thousands of shutoffs.

The group appointed by the Detroit City Council, the Blue Ribbon Panel on Affordability, wants the city to move to tiered bills, which would charge customers low rates for the first few thousand gallons per month and bill them at higher ones if they exceed that amount, according to a draft of the 47-page proposal obtained by The Detroit News.

Known as inclining block rates, the billing system offers incentives to use less — and is expected to help low-income residents pay water bills that are among the highest in the nation, the report stated. The average monthly residential bill is about $75.

“Detroit’s water affordability challenge is undeniable and as daunting as anywhere in the United States,” the report states. “Water rates and shutoff policies cannot solve endemic problems of poverty in the region.”

Rate systems, like the one proposed, are sometimes controversial because they can raise bills for higher users. But any change is at least a year away, according to the draft. And the plan, which is set to go to the council next week, is silent on how the city should set up the rate tiers.

The report comes after Detroit last year disconnected service to about 26,500 homes as part of a campaign to put delinquent accounts into payment plans. More than a fifth of all homes, 44,000, are on repayment plans, while about 9,000 are eligible for shutoffs.

Disconnections will remain an option to guarantee payment, said Gary Brown, director of the Detroit Water and Sewerage Department.

“We’re trying to change the culture, but I’m obligated to enforce contracts,” he said.

Other elements of the proposal include making it easier to pay bills and increasing assistance for the needy.

The panel, though, rejected suggestions to forgive delinquencies or cap rates for low-income residents. The report argued that such income-based pricing could violate a 1998 Michigan Supreme Court decision that ruled municipal utilities can only set prices based on actual costs.

Meeko Williams, a member of the panel, said the draft has good ideas but doesn’t go far enough. He pushed for a plan that would reduce delinquent bills by at least 20 percent, arguing that years of billing problems in the city made it difficult to have faith in any of the debts.

“This is just putting something on the table. It doesn’t address long-term affordability,” said Williams, who also is chief director of the Detroit Water Brigade, a group that delivers bottled water to those whose service was terminated.

Common among cell phone providers, inclining block rates are used to set water rates in Cleveland, Tuscon, Arizona, and in parts of California. But they’ve also attracted court challenges in several Los Angeles suburbs over claims the system gouges heavy water users.

The Detroit draft doesn’t detail how the system would work, beyond saying bills should “assure that minimum levels of service required for health and sanitary purposes are more broadly affordable.”

One concern is that bills for average and above-average users could increase because of discounts for minimal users.

That depends on how the blocks are structured, Janice A. Beecher, director of the Institute for Public Utilities at Michigan State University, wrote in an email to The News. Well-designed plans leave fewer customers in high-rate tiers, she said.

“A change in the rate structure could affect the customer’s bill, depending on their usage,” wrote Beecher, who is a member of the affordability panel.

“Even a customer using the same amount of water could see a change in their bill.”

Since Jan. 1, a newly created system — the Great Lakes Water Authority — is managing water and sewer for the three counties. It pays Detroit $50 million a year for 40 years to lease its suburban water assets. The city is obligated to fund its own usage and maintain water and sewer infrastructure within the city.

Robert Daddow, chairman of the authority, said the new group “doesn’t want to get involved” in how Detroit calculates rates, so long as it’s legal and collects enough money to pay for usage.

Brown said the panel’s recommendations are a small part of larger reform efforts.

The city also is looking to expand assistance programs. This month, the Wayne Metro Community Action Agency won a contract to administer $4.6 million in help residents whose incomes are 150 percent of poverty levels or less.

The money comes from 0.5 percent of annual revenues of the Great Lakes Water Authority. The contract calls for the Detroit-based nonprofit to provide other services as well, such as home repairs, classes and usage audits, to reduce consumption.

Brown wants to set aside some of that money to encourage residents with back debts to keep up with payments. Those who don’t miss payments for six months or more, for instance, could get a break on their back bills, he said.

The fund is available to help residents throughout the Tri-Counties. The total delinquency of Detroit residents alone is about $40 million, nine times more than the fund is expected to raise.

“That money is going to run out quick,” Williams predicted.

Other changes include partnering with DTE for payment kiosks to increase convenience; increasing outreach efforts with the city to steer the needy to assistance, and overhauling billing systems to address bills to individuals, rather than residences.

For years, Detroit has addressed statements to “resident,” allowing landlords and tenants to avoid big bills, while service could continue for months and sometimes years in vacant homes.

JKurth@detroitnews.com

Twitter: @cityhallinsider