By Kurt Wright, PE, Wright & Associates, Inc.
Introduction
Let’s take a snapshot of utility rates in the USA from a particular angle—as a percentage of Median Household Income (MHI).
Think of a charcuterie board for food for a gathering. No one would consider the charcuterie board as a full-course meal. Using that analogy, the information provided below is a charcuterie board of information about rates collected from the Internet. It is not a full-course meal; in other words, it is not intended to be considered an academic exercise or research project. Its value is to provide general information about how Americans perceive their utility bills.
Internet research was engaged near the end of 2024 for average monthly utility bills in the United States for various categories like water, sewer, electricity, natural gas, etc. A wide variety of sources were retrieved from the internet search engine. A decision was made to select only one source for average monthly utility bills to provide some type of statistical normality to the data. Also, only one source was used for the annual monthly income, and that was the United States Census Bureau. Readers can easily search these same sources for themselves, should they desire to do so.
The two chosen sources for the information in this Appendix are provided below.
This Old House website1: www.ThisOldHouse.com
The United States Census Bureau website https://www.census.gov/library/publications/2024/demo/p60-282.html
Some assumptions need to be made in this discussion. Again, this is not a scientific study. Therefore, assumptions and generalizations must be made. However, the reader will understand the context of these assumptions and generalizations and will be able to draw their own conclusions.
By citing information from This Old House, the author is not rendering an opinion that the data is accurate. Rather, it was readily available information from the internet, and the source was considered to be reasonable. Therefore, it was used in the exercise below. If the reader wishes to know more about the source, it is available on the last page of this document.
Assumptions in the use of the data are provided below.
- A “Theoretical Household” is set up below. The “Theoretical Household” uses various utilities, for which a monthly bill was extracted from the website of This Old House. No level of granularity was provided regarding them. For example, an electric bill and a natural gas bill are shown on This Old House website; however, no details are given about these two bills. Are these two utility bills interrelated such that they are for a typical residence that uses both natural gas and electricity? The answer is not known. Figure 1 assumes that this is the case. Therefore, users of this information are made aware of the data’s weaknesses.
- There is no indication on This Old House website regarding the average size of the residence connected to these utility bills.
- The salary is presented as an annual Median Household Income (MHI). Note that it is a median and not an average; however, the utility bills are an average across the board for U.S. citizens.
- The U. S. Census Bureau and This Old House are obviously not connected in any way. Therefore, it begs the question, “Is the average residence for which the monthly utility bills provided by This Old House website a residence where the MHI is the same as the median MHI?” The answer is not known. Figures 1, 2, and 3 assume that this is the case.
- A presupposition is made regarding the data utilized below: it is a reflection more of rural America than metropolitan areas like New York City, Chicago, or Los Angeles. The author has no data upon which to base this presupposition. The reader may choose to ignore this presupposition if they so choose.
- Despite the above, it is believed that the use of the data, as shown below, does provide some common sense information, although it may not be one hundred percent accurate.
A “Theoretical Household”
The “Theoretical Household” is set up below, showing the average monthly utility bills as derived from This Old House website.
Figure SEQ Figure \* ARABIC 1: Average Monthly Utility Bills in the USA for a “Theoretical Household”
| No. | Category | Average Monthly Utility Bill | Source | Date |
| 1 | Sewer | $71 | Thisoldhouse.com | 2024 |
| 2 | Water | $39 | Thisoldhouse.com | 2024 |
| 3 | Gas1 | $80 | Thisoldhouse.com | 2024 |
| 4 | Internet/Cable | $118 | Thisoldhouse.com | 2024 |
| 5 | Electric | $135 | Thisoldhouse.com | 2024 |
| 6 | Phone | $166 | Thisoldhouse.com | 2024 |
| Total of above utility bills | $610 | Thisoldhouse.com | 2024 | |
| 1 It is assumed that This Old House website means natural gas. | ||||
The U.S. Census Bureau states that the annual Median Household Income (MHI) in the USA for the calendar year 2023 was $80,610. Since the utility rates in Figure 1 are for the calendar year 2024, the MHI must be adjusted upward to represent the MHI for the calendar year 2024. Using a nominal CPI of 3%, the 2023 MHI was adjusted upward to $83,028, which is $6,919 per month.
Outcomes: Percentage of MHI for Utility Bills
Using the data mentioned above, Figure 2 shows that the total of all monthly utility bills for the “Theoretical Household” represents 8.81% of the monthly MHI, which rounds up to 9%.
Figure SEQ Figure \* ARABIC 2: Percentage of All Monthly Utility Bills to MHI
| Category | Monthly Amount |
| All Utility Bills | $610 |
| Median Monthly Household Income (MHI) | $6,919 |
| All Utility Bills as a Percentage of MHI | 8.81% |
| All Utility Bills as a Percentage of MHI – Rounded Up | 9% |
Utilizing the same data, Figure 3 shows that the percentage of monthly water and sewer bills for the “Theoretical Household” compared to the monthly MHI is 1.59%, which rounds up to 2%.
Figure SEQ Figure \* ARABIC 3: Percentage of Water and Sewer Monthly Utility Bills to MHI
| Category | Monthly Amount |
| Water & Sewer Bills Only | $110 |
| Median Monthly Household Income (MHI) | $6,919 |
| Water & Sewer Bills as a Percentage of MHI | 1.59% |
| Water & Sewer Bills as a Percentage of MHI – Rounded Up | 2% |
From the exercise above, it would appear that, on average, citizens of the United States, generally speaking, are used to paying around two percent of their monthly income for water and sewer service. This brings back memories of something that the EPA published in the mid-1990s.
EPA and Rate Benchmarks
In February 1997, the Environmental Protection Agency published document EPA-832-B-97-004 titled “Combined Sewer Overflows—Guidance for Financial Capability Assessment and Schedule Development” (1997 Guidance). The purpose of the 1997 Guidance is presented below.
The Combined Sewer Overflow Policy recognizes the need to address the relative importance of environmental and financial issues when developing an implementation schedule for Combined Sewer Overflow controls to be contained in the long-term control plans and the NPDES permit or other enforceable mechanism.
EPA developed the 1997 Guidance to address the many Combined Sewer Overflows (CSOs) that existed in the USA at that time. One of the goals of the CWA was to reduce these CSOs. However, reducing them created a tremendous cost burden on communities with combined sewers, and they were struggling to comply. Hence, the EPA provided local communities with information to determine their financial capability for compliance. Based on the 1997 Guidance, if a community found that they did not have the financial wherewithal to reduce the CSOs in the time frame directed by the CWA, the Regional EPA Administrators and State Agencies worked out a revised compliance schedule to ease the financial burden.
The 1997 Guidance provided a two-phased approach. Phase one was a residential indicator, while Phase two was a permittee financial indicator. A matrix could then be developed by comparing the residential indicator with the permittee financial indicator. From that matrix, a determination could be made regarding the community’s ability to afford CWA compliance.
Phase one, the residential indicator, was based on determining the cost per household (CPH) for compliance and dividing it by the median household income (MHI). The CPH included the utility’s annual wastewater system costs plus CSO compliance. The reader is directed to the 1997 Guidance for details about this indicator if they are interested; it is still available on the Internet. The table presented in Figure 4 is copied from the 1997 Guidance section regarding the residential indicator. Note the range of 1.0 and 2.0 Percent of MHI. Greater than 2.0 Percent of MHI is considered “High.”
Figure 4: EPA’s Table for the Residential Indicator
| Financial Impact | Residential Indicator (CPH as % MHI) |
| Low | Less than 1.0 Percent of MHI |
| Mid-Range | 1.0 – 2.0 Percent of MHI |
| High | Greater than 2.0 Percent of MHI |
In March 2024, the EPA published document EPA-800B2001, titled “Clean Water Act Financial Capability Assessment Guidance” (2024 Guidance). This document refers back to the 1997 Guidance but enhances and develops the concepts contained in it, as well as introducing other indicators such as the Lowest Quintile Poverty Indicator Score. It is interesting to note that the 2024 Guidance still uses the table shown in Figure 4, which is shown on page 9 of that document. Twenty-seven years later, the range of 1.0 and 2.0 Percent of MHI remains. And greater than 2.0 Percent of MHI is considered “High.”
EFC and Rate Benchmarks
There are several Environmental Finance Centers, or EFCs, across the United States which are affiliated with the EPA. They were established to assist communities with environmental finance issues. Their goal is to help local governments and organizations address and manage the financial aspects of environmental programs, such as water and wastewater infrastructure, stormwater management, and sustainable development. The EFCs provide a range of services, including technical assistance, training, and financial planning support. They work to enhance the ability of communities to develop and implement effective environmental programs by offering expertise and resources tailored to local needs. They have been conducting research and providing assistance to Local Government Units (LGUs) regarding Rate Setting and Asset Management for many years, focusing on small communities. There is an EFC located within the UNC School of Government https://efc.sog.unc.edu/. The UNC–EFC maintains a Rate Dashboard on its website. A screenshot of it is presented in Figure 5. The lower right corner presents a dial showing an indicator that is titled “Median Affordability.” This indicator is based on the cost of annual water and sewer bills as a percentage of the Median Household Income. Figure 4 shows the water and sewer bills and the Median Affordability for a random North Carolina municipality. Here, in this case, its Median Affordability is 1.36% of MHI. It is interesting to note that the range for this municipality is between 1.0 and 2.0 percent MHI.
In discussing the Median Affordability dial with key representatives of UNC–EFC, they state that although it is presented on their Rate Dashboard as a dial starting with zero and ending with six percent, it is not intended to make any judgments as to whether a particular municipality’s Median Affordability is low, medium, or high. This dial is only stating a value, and that is all. Thus, UNC–EFC does not render a determination regarding this indicator one way or the other. However, it is impossible to miss the image that the Median Affordability dial shows an increasingly darker color as the dial passes beyond 3% and that it stops at 6%.
Figure SEQ Figure \* ARABIC 5: UNC- EFC Rate Dashboard
In the Water Industry Today
From the information that has been discussed, it appears that the average citizen in the United States is used to paying around two percent of the MHI for water and sewer service. It could be argued that it might be 2% for each or a total of 4%; however, that argument is countered by the table shown in Figure 3.
Whether it is 2% or 4%, this is not a reasonable expectation. Here is the reason why. The revenue generated from such rates will not be sufficient to repair, rehabilitate, or replace (RRR) the average utility’s aging infrastructure on its own. EPA stated in its Clean Watersheds Needs Survey, Report to Congress, April 2022, “The total nationwide reported clean water infrastructure needs identified as of January 1, 2022, were $630.1 billion for the period between January 1, 2022, and December 31, 2041…” This translates to roughly $33 billion per year. EPA stated in its 7th Drinking Water Infrastructure Needs Survey and Assessment Report to Congress, April 2023, “…a twenty-year capital improvement need of $625 billion.” This translates to roughly $31 billion per year. Added together, and without adjusting for inflation, this is a rough order of magnitude of around $64 billion per year for water and wastewater infrastructure needs. Although there are other sources of information for the projected costs to update and improve our nation’s water and wastewater infrastructure, we’ll stick with EPA’s projections in this discussion.
Despite Congress allocating billions of dollars for water and wastewater improvements in recent years, federal funding remains insufficient to close the annual gap. Bridging this shortfall is not feasible with water and sewer rates that hover around two to four percent of the median household income (MHI). This creates a paradox between the need for infrastructure investment and the affordability of water and sewer services.
Complicating the issue of rate affordability, there is no universally accepted metric in the U.S. for determining affordable water and sewer rates. Although EPA Guidance documents refer to it, they do not represent that a percentage of MHI is a universally accepted indicator. Similarly, the UNC-EFC refers to a percentage of MHI on their Rate Dashboard; however, it is only an indicator with no opinion regarding it. Dr. Manny Teodoro, a professor of public policy, management, and politics at the La Follette School of Public Affairs at the University of Wisconsin-Madison, is actively researching the issue of rate affordability. His work focuses on utility rate affordability and can be found on his website: www.MannyTeodoro.com.” More research such as this is needed.
Conclusions
The following salient points have been presented in this discussion.
- The average U.S. citizen appears to be used to paying around 2% of their MHI for water and sewer service.
- There is an annual multi-billion dollar funding gap in the U.S. for repairing, rehabilitating, and replacing water and sewer infrastructure.
- Two to four percent of MHI is not sufficient to maintain aging water and sewer infrastructure.
- Federal and state grant funding programs in the U.S. are insufficient to make up the difference.
- There is no universally accepted metric in the U.S. for setting benchmarks for affordable water and sewer rates.
- There is a need to conduct in-depth research about the affordability of water and sewer rates for U.S. citizens.
- It would be helpful to develop a universally acceptable matrix to determine the affordability of water and sewer rates for U.S. citizens.
- A funding paradox exists in the U.S. between the need for infrastructure improvement and the affordability of water and sewer services; there are no simple solutions to this funding paradox.
Despite these somewhat discouraging factors, there is something that all municipalities can do. It may not solve the problem in and of itself; however, it is a key step in the right direction. And that is to develop and maintain an Asset Management Program. An Asset Management Program will highlight the needs in the community and provide a “go-to” source when funding becomes available through means such as grants, economic development opportunities, and other contributions. This enables the municipality to spend the right amount of money on the right thing at the right time.
Information about This Old House
In case the reader is curious about the website www.ThisOldHouse.com, information about it was extracted from their website, and it is provided in the text box below.
Written BY Kurt Wright, Owner/President, SDG Engineering, Inc
Mr. Wright established his own professional engineering firm in 2002 based in Rutherford County, North Carolina. The corporate mission is to meet client’s requirements by providing quality professional water and wastewater engineering services with solutions for a sustainable environment. Mr. Wright has 36 years of experience in engineering planning, design, project financing (grantsmanship), advertisement/bidding, contract administration, construction management, and startup services for numerous types of projects. Most of Mr. Wright’s experience is with municipal water and wastewater infrastructure. Mr. Wright’s experience with Asset Management began in 2012 with his membership in BAMI-I (Buried Asset Management Institute – International). Mr. Wright was the chief author of the Asset Management Plan for the town of Spindale, NC, which was approved by the state of North Carolina in 2013. He holds a certificate of completion for CTAM 100, 200, 300 & 400, is a Professional Water Asset Manager (PWAM), and contributed to the development of the CTAM 200 and 400 training manuals
