The trouble with water discounts

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0:11I have in front of me a market conundrum in the form of two glasses. Both look pretty much identical, but they come with two very different prices. One costs about$1.30, the other costs less than a penny. You may have guessed it, but I'm talking about bottled water versus tap water. We've done a lot of stories on the economics of water and how tap water is surprisingly cheap. At the same time, water utilities often don't have enough revenue to patch up their aging infrastructure. So if customers are willing to spend so much on bottled water, and water providers need more cash, why don't they just charge more?

0:56This is The Indicator from Planet Money. I'm Darian Woods. And joining us today to answer that very question is Stephen Basaha from the Gulf States Newsroom. Hey, thanks for having me. And yes, we're a family of public radio stations in Alabama, Louisiana, and Mississippi. And today we talk about why it's so hard to raise rates while still making sure everyone has access to what's considered an essential human right, clean drinking water. We also hear about how a plan to solve that in Mississippi led to a threat to cut off hundreds of thousands of people from food stamps.

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3:04Get time back to focus on your high-impact work. Download Grammarly for free at grammarly.com slash podcast. That's grammarly.com slash podcast. To find an answer to our water pricing contradiction, we called up Manny Teodoro. He's a professor of public affairs at the University of Wisconsin-Madison and kind of a water influencer. I think my wife got tired of listening to me grouse about things. So she said, you should write a blog with all these great ideas you've got for applied stuff in the world. So I started writing this blog. That was back in 2018. And Manny quickly realized that this was a much better way of sharing his ideas than complaining to his wife or even writing peer-reviewed papers.

3:46So the fun thing is, while I don't have a following in the hundreds of thousands or millions or anything, what I do have is an audience of people who are very specialized. Like the heads of water providers who could actually put his ideas into action. Now, when it comes to our water question, it's important to acknowledge that water utilities do actually raise rates. In fact, the rates for water are rising faster than inflation. But Manny says water in the U.S. is still really cheap. Water might account for one, maybe two percent of your household budget. The problem is that's not true for everyone.

4:22For people with low income, water eats up something like seven percent of their budget. And that's what's stopping many utilities from really raising rates. Charging more would hurt the customers who can't afford it. The challenge for utilities is, how do you help the low-income folks afford this essential service? The solution here might seem really simple, right? Just give a discount to the people who make less. And Manny says that's exactly what a lot of water providers try to do. The trouble is, utilities don't actually know who's making less. And to find out means verifying someone's income and a lot of paperwork for everyone.

5:00So most customers never bother signing up. They're going to make a rational decision. Is it worth me spending maybe hours collecting all this information, submitting it for the chance that I might get a$20 or$30 a month break on my utility bill for the chance that I might? And then I'll have to renew it again next year? They're just going to decide it's not worth it. Manny says participation rates for these discount programs are low. Getting just 30 % of people who are eligible to sign up is considered a success. But that still means a majority of the people these programs were meant to help are left out.

5:36So Manning came up with his own idea for how to sign up a lot more people. Rather than trying to build an entire new income qualification program and all of the administrative processes, procedures, costs, and burdens that come with that, what if we leveraged existing programs? Which is a fancy way of saying just copy someone else's notes. Basically, there are already government agencies doing the hard work of vetting people for different welfare programs. So utilities should just get their hands on those records and automatically give a discount to whoever's already been approved. You don't need to hire a whole bunch of staff people.

6:14And it's simple for the participant. They don't have any more paperwork to fill out. And if you're going to copy someone else's homework, why not go to the best kid in class? Manny says that means turning to SNAP. Officially, that's the Supplemental Nutrition Assistance Program. And unofficially, we're talking food stamps. Manny picked SNAP because participation rates are very high, like 80 % nationally. Manny put this idea in one of his blog posts. And then, months later... I saw an AP story about Jackson's new water rates. I'm reading this and I'm going, wow, that looks really familiar. Hmm, they copied the homework about copying the homework.

6:54The head of Jackson, Mississippi's water provider was listening and copying. Last year, Ted Hennepin was trying to figure out a way to keep bills down for low-income customers. And he read Manny's blog and thought, let's give it a shot. Here he is announcing the plan. We really think it's a better way to deal with water bills across the country. And giving Manny his flowers. There's a professor out of University of Wisconsin. Manny Teodora has been studying this at length. Now, Jackson's water troubles are like an extreme version of the rest of the country. In 2022, the city went nearly seven weeks without safe-to-drink tap water because its main treatment plant failed.

7:36Jackson Water's version of Manny's plan includes raising rates to cover its debt and infrastructure repairs. But most customers on Snap would automatically get a$30 discount, so their bills would be cheaper. So this was it. A real-world version of Manny's plan set for primetime. Well, that was the plan anyway. But that plan ran into a big roadblock, the federal government. Specifically, the Departments of Agriculture and the DOJ. They said a water utility should not have free access to whoever's on SNAP. So he called Manny Teodoro back up, and he seemed to be taking it about as well as expected.

8:14Lawyers, man! No comment. Don't want to get in trouble with any lawyers. Now, the Department of Justice said it would be happy to work with Jackson Water for a version of the plan where people could opt into sharing their SNAP status rather than the original automatic version. But Manny says having people opt in instead of getting the discount automatically means needing to advertise the benefit and then still getting people to do that pesky paperwork. The fight over this plan has really escalated. The Department of Agriculture threatened to cut off the entire state of Mississippi from SNAP. Manny says this is a profoundly troubling threat.

8:54The idea that a federal agency would cut off benefits to an entire state is really disturbing and honestly perplexing. The Justice Department said it wouldn't comment while there's still litigation going on. But in court filings, it said giving this information to a private water utility would violate people's privacy. And betraying that trust could lead to fewer people signing up. We wanted to ask people in Jackson who this water plan was meant to help what they thought. And that's how I met Howard Lewis. Good morning. How are we doing? I'm fine this morning. And you? Howard was waiting at a food bank, so it seems like he needed help.

9:36But here's the thing. He's not enrolled in SNAP. You see, how much you get from SNAP depends on how much you make, and it might not be worth the paperwork. If I get SNAP, what good is it going to do to me? It seems like you might get a water discount, too. Water discount? Shucks. No, that discount is kind of, like I said, unfair. It'll be unfair. Do help everybody. Don't be, you know, just some people. The thing is, participation in SNAP can vary a lot, state to state. Mississippi has one of the lowest. Only about 60 % of people eligible in this state actually get SNAP. So relying on SNAP to decide who deserves help covering their water bill in Jackson means leaving out a lot of people who need help.

10:23And Manny acknowledges that. That's a reasonable concern. My response would always be, okay, compared to what? You know, what's the alternative? A federal judge supported Jackson Waters' position. The Department of Justice is appealing. In the meantime, customers can still get that discount by proving they're on Snap. Not exactly paperwork, but still more work than Manny or Jackson Water wants customers doing to make their water bills affordable.

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