Water pricing and affordability in the US: public vs. private ownership

Water affordability is becoming a widespread water challenge in the US (Jones & Moulton, 2016; Mack & Wrase, 2017; Teodoro, 2019). Recent reports on water affordability in the US argue that this is particularly important for low-income and minority communities, which tend to be disproportionately affected by increasing water bills (Mack & Wrase, 2017; NAACP, 2019; Lakhani, 2020; Swain et al., 2020; Onda & Tewari, 2021). There is a general misconception that water and sanitation service challenges pertain mainly to the global south (Martins et al., 2016; González-Gómez et al., 2020), but there is growing awareness of the challenges faced in the global north.

Water rates vary across countries and even within regions of the same country and scholars have analyzed the variety of factors that influence water rates (Wait & Petrie, 2017; González-Gómez & García-Rubio, 2018; Hellwig & Polk, 2020). One of them is ownership structure, which is the focus of our paper. Specifically, is there a significant difference in water rates across private and public water utilities? While some studies show that privately owned water utilities charge higher prices for water services (Beecher & Kalmbach, 2013; Wait & Petrie, 2017; Onda & Tewari, 2021), others found no difference between public and private operators (Bel et al., 2010).

Our study builds upon previous studies examining factors related to water pricing and affordability for community water systems in the US (Beecher & Kalmbach, 2013; Wait & Petrie, 2017; Onda & Tewari, 2021). In addition to comprehensive representation (including the entire universe of large water systems in the US), our study expands the analysis in the following ways: we are interested if ownership can differentiate water rates (the annual water bill for a typical household) and affordability (the percent low-income families spend on water). We also are interested if water price and affordability vary by state regulatory environment (regulation favorable to private providers), age of water infrastructure and community socioeconomic conditions (poverty and race).

Our analysis builds on previous studies comparing water rates across public and private water utilities, including factors that have been considered relevant in the literature as important determinants of water rates (Saal & Parker, 2001; Ruester & Zschille, 2010; García-Valiñas et al., 2013; Barbosa & Brusca, 2015; Romano et al., 2015; Wait & Petrie, 2017; Hellwig & Polk, 2020). One factor studied in the literature, and the focus of this paper, is ownership structure. The empirical evidence is not conclusive. For example, García-Valiñas et al. (2013) distinguished between three types of ownership structures in Spain and found that the lowest prices are in local publicly owned utilities. Barbosa & Brusca (2015) also found that privately owned utilities in Brazil charge higher prices, even when utilities are under local and regional regulatory agencies' price mechanisms. However, Romano et al. (2015) found no difference between public and private utilities in Italy. One study found that privately owned utilities in Germany charge higher prices and this is explained by higher investment (Ruester & Zschille, 2010), but Saal & Parker (2001) found that it is not investment but rather profit seeking which drives higher prices among private operators in the UK.

The importance of ownership structure in water service provision has been widely discussed in the literature. Water prices include the costs of acquisition, treatment and delivery of water. One argument is that privately owned utilities might be more efficient than public ones because profit maximization drives the incentive for efficient allocation of resources and cost reduction, an incentive that might be lacking for public utilities (Rubenstein, 2000). However, others have argued that the same idea of profit maximization drives privately owned utilities to seek rate increases, as they try to maximize their rates (Lobina & Hall, 2000; Lobina, 2005; Romano & Guerrini, 2014). There are empirical studies across the world supporting both arguments, but a meta-regression analysis found that there is no statistical support for lower costs with private water operators (Bel et al., 2010). Other studies found that there is no conclusive evidence that sets one ownership structure superior to the other (Bel & Warner, 2008; Abbott & Cohen, 2009).

Property rights theory argues for-profit operators will try to reduce quality in order to increase profits (Hart, Shleifer & Vishny, 1997). However, close regulation of water operators' quality through the Environmental Protection Agency (EPA) standards, and of pricing through state Public Utility Commissions (PUCs), prevents reductions in quality to enhance profits, so drinking water standards in the US must be met by both private and public utilities (Wait & Petrie, 2017). However, with a natural monopoly such as water, problems with information asymmetry make it difficult to structure contracts. This is why Megginson (2005), who generally supports privatization in other sectors, recommends water services should not be privatized. Other studies explore the relationship between prices charged by privately owned utilities and their exposure to competition, as observed in contract renewals (Chong et al., 2006), or ‘benchmark’ competition within the same localities (Wallsten & Kosec, 2008). We must distinguish competition for the market from competition in the market (Bel & Warner, 2008). As a natural monopoly, there is generally no competition in water service delivery at the local level.

As a natural monopoly, water requires careful regulation to ensure quality and avoid excessive pricing, but also requires attention to issues related to the environment, public health and equity (Cotta, 2012). The regulatory framework, regarding both environment and price, is a key factor that influences water rates and other water policies (Megdal, 2012). For example, Bel et al. (2013), in a comparison of privatization of water services across two regions in Spain, found that the institutional capacity of regional regulatory agencies is central for protecting the interests of users. More specifically to the US, a study of the role of public vs. private sector for water management in Arizona (Megdal, 2012) argues that the state regulatory commission and local bodies can have significant implications for water utility practices regarding investments, water conservation, and other policies. These in turn can have an effect on rates.

In the US, states play an important role in water utility rate regulation. Public and private utilities are regulated differently. Private utilities are financially regulated by PUCs in 45 states (Beecher, 2019) and public water utilities are regulated by PUCs in six states (Environmental Finance Center, 2017). Water quality is regulated for all utilities, both public and private, by the EPA and state government agencies. The level of regulation or the proximity of the regulator to the utility can lower costs of enforcing contracts (Beecher, 2009). According to the US EPA's Safe Drinking Water Information System (2021), among the very large community water systems (serving more than 100,000 people), most are owned by local governments. But as large investor-owned utilities such as American Water and Essential Utilities' Aqua America have grown in the US market, they have pushed for more regulatory favorability through surcharges, such as Distribution System Improvement Charges (DSIC) (which pass capital improvement costs directly on to ratepayers to enable rate hikes in between rate case review), ‘fair value’ legislation¹ (valuing a water system asset above the book value), and other mechanisms that facilitate investor earnings and acquisitions (Janney Capital Markets, 2013; American Water, 2015; Caffrey, 2020). Pennsylvania (PA) and New Jersey (NJ), which have the highest penetration of these two companies, have led the way in many of these pro-private regulatory changes (Janney Capital Markets, 2013; Kline, 2018; Caffrey, 2020).

There are many other factors, besides ownership, that might affect water rates, namely size, source of water, age of system, etc. (comprehensive reviews of the factors affecting water prices include Zetlan & Gasson, 2013; González-Gómez & García-Rubio, 2018). The size of the utility may make a difference in water pricing because of economies of scale (Carvalho et al., 2012). Water systems are capital-intensive, and small systems lack economies of scale, which leads to a higher per-capita cost in smaller communities (AWWA, 2013; Perch, 2017). Rural systems have high per-capita costs in particular because they are less dense, require more miles of water lines per customer and tend to be located in more economically distressed areas (National Research Council, 1997). Larger utilities can reduce costs of operation through their ability to obtain cheaper prices for larger orders for inputs and materials given their size. For example, scale economies help explain higher levels of efficiency in water utilities in Portugal (Correia & Marques, 2011). But, in the case of investor-owned utilities, whether these savings get passed on to ratepayers in lower prices depends on whether they get passed on to shareholders as profit instead.

Water prices also are affected by the age and condition of the infrastructure. Investing in the water system infrastructure has been a decade-long challenge in the US (ASCE, 2021), as federal funding for water services infrastructure declined since the mid-1970s (Congressional Budget Office, 2015; University of North Carolina, 2015). Increased demands for system expansion and meeting water quality standards, removing lead pipes and promoting water conservation, often result in increasing water service rates, as utilities seek to modernize their water systems (Jacobson, 2016; Mack & Wrase, 2017; González Rivas, 2020; González & Schroering, 2021). Through 2050, more than $1.7 trillion in investment is needed for drinking water infrastructure due to population growth and the need for service expansion, replacement and upgrading (AWWA, 2013). Aging infrastructure is one of the key challenges across water utilities in the US, according to the 2019 Survey of the American Water Works Association (AWWA, 2019a). While the 2021 American Rescue Plan Act and the 2021 Infrastructure Act provide funding for upgrading municipal water and sewer systems (US Treasury, 2021), the high cost of water infrastructure could push local governments to pursue privatization (Robinson, 2013).

Other physical characteristics affect water rates, such as topographic characteristics of the place and water source, as this has implications for the technology used and the costs incurred to access water. Water is generally classified into ground and surface water, and while both sources can provide safe drinking water, the process of treating groundwater tends to be less costly than for surface water because, in general, it is less polluted and more reliable during drought periods (Howe, 2005; Safe water, 2017; González-Gómez & García-Rubio, 2018). However, costs of groundwater are higher in drought-prone areas where requirements for recharge and concerns regarding nitrate pollution or need for desalination are higher (Megdal, 2012; Moran, et al., 2017). Therefore, in regions where severe drought is recurrent, water utilities will incur higher costs for water production (Wait & Petrie, 2017; AWWA, 2019b).

The characteristics of the cities where utilities operate, such as population density and population growth, can also potentially affect what water utilities charge for services, as it is more cost efficient to maintain infrastructure in areas with higher densities (Bel & Warner, 2008). Utilities also need to consider the costs of infrastructure maintenance and expansion in areas experiencing population growth to keep up with increasing water demand, which contributes to increasing costs (Jacobs & Howe, 2005). By contrast, in communities with small or declining population, water systems face sunk infrastructure costs and a declining consumer base, which can also lead to higher rates (Jacobson, 2016; González Rivas, 2020; Grant, 2020; Hellwig & Polk, 2020).

Other factors that capture the structural conditions of a place, such as socioeconomic characteristics of the population served, are also important considerations. Communities with a higher percentage of poverty may face more problems in ensuring affordability (Mack & Wrase, 2017; NAACP, 2019; González Rivas, 2020; Lakhani, 2020; Swain et al., 2020). The COVID-19 pandemic has raised attention to the need to address water affordability. During the pandemic, many states and hundreds of cities passed moratoria to prevent water disconnections for low-income households (FWW, 2020) and this was associated with lower COVID-19 infection rates (Zhang et al., 2021). A study of water shutoff moratoriums during COVID-19 found that US cities with higher income, larger shares of people of color and higher levels of income inequality, were more likely to protect low-income consumers from water shutoff (Warner et al., 2020). The COVID-19 pandemic increased recognition that water affordability programs are needed to address the water access challenges of the lowest income households in the US (Warner et al., 2021). Attention should be given to water rates, subsidies and programs to address arrearages. States, municipalities and utilities all have a role to play (Homsy & Warner, 2020; Swain et al., 2020; Pierce et al., 2021).

In the models that follow we explore these factors to assess if water rates are different in communities with public or private operators. The next section presents our data, followed by our models and results. The final section concludes.

We compiled the water bill information for all the 500 largest community water systems in the US for our database. Ours is the first national study to look at all of the 500 largest community water systems in the US. The 500 largest community water systems were identified based on service population, using the US EPA's Safe Drinking Water Federal Information System. We used service population and location to match these utilities to the city or county where they were located. The 500 largest water systems are from 48 states and the District of Columbia, and collectively serve about 140 million people (44% of the entire US population in 2015). Private owners are more common in smaller systems (EPA, 2021), but our interest is in the differences in water prices in the more complex large urban systems from which the majority of US residents receive their water services.

Water price is measured by the typical household annual bill. We compiled water utility rate schedules in January 2015 from utility websites, local government ordinances or calls to the utility's customer service line. Seasonal rates were weighted to arrive at an annual average. Bills were inclusive of all reoccurring drinking water-related fees and surcharges, excluding late fees, one-time charges, and stormwater and wastewater fees. Wastewater services are commonly provided by a separate agency and are difficult to compare between jurisdictions. Moreover, a report from the Government Accountability Office shows that 97% of sewer services are provided by publicly owned utilities (GAO, 2010). The estimated indoor usage of a typical US family was estimated to be 60,000 gallons a year based on the standard metric of 50 gallons per person per day for indoor water usage (e.g. see AWWA, 2019a) and the average family size of about 3.27 (US Census, 2016)².

To get at water affordability, we give special attention to lower income residents. The EPA has traditionally assessed clean water compliance, and the cost impact on rates for the median household. In 2020, the EPA noted this metric provides an inaccurate picture of water affordability and revised its affordability guidance to capture the impact on low-income households, which face disparate utility burdens, given the regressive nature of water billing regimes (EPA, 2020). We measure water affordability as the percent of household income spent on water by the lowest quintile of household income to reflect the EPA (2020) guidance and that of other water affordability experts (Colton, 2005; Teodoro, 2019; Onda & Tewari, 2021; Pierce et al., 2021). Our annual bill and affordability data for the 500 largest water systems found that water systems with higher annual bills are clustered in NJ, PA, Illinois, Michigan, West Virginia and California. However, most states have at least one water system where low-income households spend more than 3% of their income on water bills (see Figure 1 in Supplementary Material). Our models explore factors related to water pricing and water affordability in terms of water system characteristics, water supply and water demand. The equations are shown below.

Water price (annual bill) = f{private ownership, regulation, service population, age of infrastructure, water source, level of drought, community socioeconomic factors (inequality, poverty, percent minority, population density, population growth)}.

Water affordability (percent of household income spent on water services by the lowest quintile of household income) = f{private ownership, regulation, service population, age of infrastructure, water source, level of drought, community socioeconomic factors (inequality, poverty, percent minority, population density, population growth)}.

Our primary interest is in the difference in price and affordability by public and private water systems. We created a dummy variable to measure if the water system is owned by a private company. While there is a broad range of ownership structures in the US, especially among smaller systems (EPA, 2021; Onda & Tewari, 2021), our study focuses on the largest systems, which include public (government and cooperative) and private (investor-owned) utilities. Among the 500 water systems in our study, 321 are government-owned, 121 are cooperative and 58 are investor-owned. In our data, water systems owned by the private sector have a significantly higher annual bill ($501) than water systems owned by the public sector ($315). Low-income households also spent a higher percent of their income on water services if the utility is owned by the private sector (4.39% of income) than if it is owned by the public sector (2.84% of income). We expect that private ownership will be related to a higher water price and less affordability after controlling for other factors.

We also control for state regulatory structure. We created a dummy variable at the state level for states that regulate public water utilities through their PUCs. Six state PUCs regulate at least some public water systems: Indiana, Maine, PA, Rhode Island, West Virginia and Wisconsin. We did not control for states where the PUC regulates private operators, because all the 58 privately owned water systems in our sample are located in states where the PUC regulates private utilities. To capture states which have created regulatory policy more favorable to private operators, we created a dummy variable to control for NJ and PA. PA and NJ are leaders in implementing new regulations that favor private operators (e.g. DSIC and fair market value) (Janney Capital Markets, 2013; Kline, 2018; Caffrey, 2020).

Age of infrastructure could also be a factor on price. We use the percent of occupied housing built before 1940 as a proxy for older water pipelines. Older pipes will have a higher need of replacement and this would be related to higher water prices. Descriptive statistics of model variables are shown in Table 1.

Water supply is measured by the water source and the level of drought. Groundwater is generally less expensive than surface water due to less pollution from stormwater runoff (Safe water, 2017; González-Gómez & García-Rubio, 2018), and lower capital and labor costs for treatment and distribution than surface water (Wait & Petrie, 2017). However, the chronic overdraft of groundwater could concentrate natural and anthropogenic pollutants and increase treatment costs due to degraded water quality and the need for advanced water treatment (e.g. desalination) (Megdal, 2012; Moran, et al., 2017; Pottinger, 2017). Among the 500 largest water systems in our data, 18% used groundwater and 82% used surface water. We created a dummy variable to measure if the water source is related to water price and water affordability for low-income households.

Drought lowers local water availability and quality, which could increase the cost of accessing alternative water sources and the cost of additional water treatment (National Integrated Drought Information System, 2022). Some water utilities could increase the water price to offset the increased costs, and limit water consumption due to decreased water availability (Wait & Petrie, 2017). Data on the level of drought are from the United States Drought Monitor (2015), and are available at the county level. The 500 large water systems in our database are located in 321 counties. The level of drought is measured on a scale of abnormally dry, moderate drought, severe drought, extreme drought and exceptional drought (United States Drought Monitor, 2015). We did a correlation analysis between the level of drought and the annual water price, and results show that severe or higher levels of drought are significantly related to higher water prices (correlation coefficient = 0.20, p < 0.05). We created a variable to measure the average percent of counties with severe drought or higher in 2015. Forty two percent of the 500 water systems in our sample are located in counties having severe drought or higher in 2015. We expect that water systems located in counties with a higher percent of severe drought will have higher water rates and less affordability. For systems that derive their water from regional sources, water scarcity at the regional level would be important. While we do not include regional controls, the county level drought levels are clustered, with higher levels in more arid regions.

Water demand is measured by the number of people served by the water system, and community socioeconomic conditions. In our data on the 500 largest water systems, the mean service population was 279,946 people. We link the water system locations with county and city level data from American Community Survey (2011–2015 averages) to explore socioeconomic conditions related to water pricing and affordability. We include variables on income inequality (Gini), poverty rate, percent minority, population density and population growth. We expect prices could be higher in both shrinking and growing communities, so we control for population growth using American Community Survey data (total population in 2015/total population in 2011-1).

We ran ordinary least squares regression models on factors related to water price and affordability controlling for ownership, regulation, water supply and community characteristics. Results are shown in Table 2.

Our model results show that, among the largest 500 water systems in the US, private ownership results in higher water prices and less affordability, after controlling for all other factors. Private ownership has the largest effect on average annual water bill of all model variables. Results show that the average annual water bill is $144 higher in the privately owned water systems than in the publicly owned water systems. Also, in communities with privately owned water systems, low-income households spend 1.55% more of their income on their water bills. These results hold after controlling for other factors, namely regulatory environment, water supply, age of system and community demographics that would affect water price and affordability.

All private systems in our sample are regulated. However, in NJ and PA water regulations have become more favorable to private operators than in many other states, and our model results show this leads to higher prices in those states. Only six states regulate public systems, but this has no effect on price or affordability. This may be because publicly owned systems are directly accountable to ratepayers and do not have to pay shareholder dividends.

Water supply and drought can affect water pricing and affordability. Model results show that community water systems using groundwater are more likely to have a lower water bill and have a lower percent of household income spent on water services, as expected. Also, a higher percent of severe drought in the county where the water system is located is related to a higher annual water bill. Age of system also matters. Water systems in communities with more housing built before 1940 have higher annual bills and are less affordable. These communities need to replace aging water pipes and this can raise costs.

We controlled the demographic characteristics of the community and found that population size, density and growth are not related to price differences. However, water systems that serve more people are more affordable, due to economies of scale.

Poverty has an important effect on water affordability. Low-income households in communities with a higher poverty rate spend a larger percentage of their income on their water bills. The relation between poverty rate and household spending implies the flaws of the market-based water price: water, as a necessary good, is not affordable for many low-income households. Thus, affordability programs are needed.

We found that public ownership is related to lower prices in the 500 largest city water systems after controlling for regulation, water supply and demand. Privately owned water systems have significantly higher annual bills and are less affordable for low-income families. What might explain this difference?

Our results show regulation matters. In NJ and PA, regulations are more favorable to private providers (Janney Capital Markets, 2013; Kline, 2018; Caffrey, 2020). Model results show regulatory differences in these two states lead to an $89 higher annual water bill in NJ and PA. By contrast, our models found that there is no impact of regulation of publicly owned utilities on water price or affordability. This may be because publicly owned utilities have a broader interest beyond profit; they are generally interested in fair pricing and affordability to their residents (McDonald, 2018; Mann & Warner, 2019). For example, during the COVID-19 pandemic, states with regulated water utilities were more likely to impose a water shutoff moratorium to protect residents from water disconnection (Warner et al., 2020).

Local governments' ratemaking varies by jurisdiction and governing structure. The rate decisions could be made by elected council members, appointed water board members or a related governmental body. Research from Germany has found that the existence of multiple political interests could lead to higher water prices (Hellwig & Polk, 2021), and research on Italian water utilities shows how differences in institutional context, ownership and stakeholders can affect system performance (D'Amore et al., 2021). Studies from California have found that the complexity of ownership and governance in water systems, with public systems more likely to institute conservation policies (Pierce & Gmoser-Daskalakis, 2021), and private systems more likely to charge higher prices and implement water affordability programs (Onda & Tewari, 2021). National data found that public systems are more likely to implement both conservation and affordability programs (Homsy & Warner, 2020).

In six states, PUCs regulate water rates of at least some municipally owned systems (Beecher, 2018). For example, in PA, Pittsburgh's water utility was placed under PUC oversight in 2017 after a failed private management arrangement resulted in elevated levels of lead and general mismanagement of the utility (González Rivas & Schroering, 2021). National research has found that municipally owned utilities are also more likely to protect low-income residents from water shutoff (Homsy & Warner, 2020; Warner et al., 2020). Regarding problems with water affordability, private ownership and poverty rate are the primary drivers.

Table 3 shows data on selected states. In Table 3, we see that the highest number of private systems are in California, but prices and affordability are a bigger problem in NJ and PA, the states with the next highest number of private providers. State regulation appears to explain the difference. According to industry reports (Janney Capital Markets, 2013), NJ and PA have more regulations more favorable to private providers and California has regulations least favorable to private providers. For example, California requires private systems serving more than 10,000 customers to provide low-income rate assistance programs (Onda & Tewari, 2021). By contrast, NJ and PA are states where regulatory capture³ is found in shifts in state regulation to favor private interests over the public. For example, an American Water investor presentation (2015) described legislation in NJ and PA that enabled its growth: the NJ Water Infrastructure Protection Act (N.J.S.A. 58:30-1 et seq), which is fair market value legislation and allows the private purchase of municipal systems without a public referendum; and Act 11 of 2012 in PA, which allows the recovery of wastewater acquisitions and costs through increases in drinking water rates. There were 15 new regulatory mechanisms put into place across the company's footprint from 2010 to 2015, and the company's customer acquisitions were concentrated in states that authorize the use of ‘fair market value’ (American Water, 2016), which leads to inflated acquisition prices and no consideration of the original source of funds (e.g. state and federal investments) when the system is privatized. These regulatory shifts create bidirectional pressure to privatize, as cities can sell their water utilities for a short-term revenue gain (Robinson, 2013; Gallos, 2021). These features cede public control and lead to higher household water prices.

Michigan has a serious affordability problem, but none of the large water systems in that state are private. Table 3 shows that communities in Michigan have a higher poverty rate and on average, a decreasing population. Prices are not higher, but affordability is a major challenge. Poverty, population decline and aging infrastructure explain the difference. Public systems have not been able to address this challenge without implementing new investment and new affordability programs (Butts & Gasteyer, 2011; Rockowitz et al., 2018). Thus, the issue is not just private ownership and regulatory capture, but also problems of aging infrastructure, population decline and poverty in older communities. To provide adequate customer assistance and affordability programs requires state and federal support (Swain et al., 2020; Pierce et al., 2021).

Older cities with low population growth face challenges with water system upgrading and affordability. T-test results show that communities in NJ, PA and Michigan have lower population growth (0.45%) than other communities in our sample (4.53%). While our initial models did not find a direct effect of population growth on price, if we drop the variables for age of infrastructure (age of housing) and favorable private regulation, then we found that communities with population growth have lower water prices and more affordability (see Table 1 in the Supplementary Material). Growing places can spread costs across new residential developments. Many of the communities with the highest prices are in deindustrialized places with both old infrastructure and high poverty. Addressing these problems requires a comprehensive approach.

Our study of the 500 largest community water systems in the US shows that privately owned systems have higher annual bills and lower affordability, consistent with previous findings in the US (Wait & Petrie, 2017; Onda & Tewari, 2021). We control for the major factors that would affect price and affordability (demand, supply and regulatory features) and this result remains. Of further concern is the issue of regulatory capture. While California has the largest number of private providers in our dataset, it has strong regulation. This helps the systems in California maintain affordability (Onda & Tewari, 2021). By contrast NJ and PA have the next highest levels of privatization and their prices are some of the highest in the sample. American Water and Aqua America (now called Essential Utilities), which are the largest US-based investor-owned water utilities, have successfully advocated for regulatory and legislative changes that facilitate acquisitions and price increases, including ‘fair value’ legislation and DSIC to facilitate cost shifts to ratepayers (Janney Capital Markets, 2013; American Water, 2015; Aqua America, 2015; Caffrey, 2020; Gallos, 2021)⁴. These pro-private regulatory changes are spreading across the US. As of 2019, 10 states had passed fair market value legislation, and this is expected to lead to more acquisitions and consolidation in the future (Beecher, 2019). As private equity becomes more involved in community water systems, they seek a shorter time frame for expected profits (Mann & Warner, 2019; Beecher & Kalmbach, 2021). This leads to higher prices and more affordability problems. While affordability is also a challenge in publicly owned systems, such as Michigan and the well-documented problems in Flint and Detroit (Butts & Gasteyer, 2011; Rockowitz et al., 2018), our overall model results show it is private ownership and regulatory capture that primarily drive these results.

The debate over public vs. private ownership of drinking water systems has focused primarily on issues of efficiency and price. Our study contributes to the growing body of literature that challenges the claimed efficiency benefits of private ownership (Lobina & Hall, 2000; Bel et al., 2010). But as water systems age and affordability challenges rise (Gasteyer et al., 2016; Mack & Wrase, 2017; NAACP, 2019), this creates a challenge for both public and private systems to address. A national survey by the American Water Works Association found that while more than three-quarters of responding water utilities suspended shutoffs initially in response to the pandemic, only 38% had a fully implemented water assistance program (AWWA, 2021).The US is an exception among wealthy countries as it does not have a permanent low-income assistance program for water, which is in sharp contrast to the assistance program for the energy sector, which has been running for 40 years (Warner et al., 2021). Research on affordability shows that state-level programs work best (Swain et al., 2020) as do targeted approaches to provide ongoing bill assistance as well as shutoff protection (Pierce et al., 2021). Cities can implement percentage-of-income water affordability programs with arrears management components to reduce water bill burdens and address the water arrearages of low-income households. Baltimore and Philadelphia are examples of public systems which have water affordability programs based on income (Grant, 2020; Mack et al., 2020). In addition, the federal government has a role to play in addressing national water affordability issues by expanding grants and low-interest loans to localities through the Drinking Water and Clean Water State Revolving Loan Programs and United States Department of Agriculture's Rural Water and Waste Disposal Loan and Grant Program. As a response to COVID-19, the federal government launched a temporary emergency program in the American Rescue Plan to assist households with water bills (Office of Community Service, 2021), and the Infrastructure Investment and Jobs Act of 2021 created a separate unfunded water assistance pilot program. Long-term federal funding must be prioritized to help communities facing affordability challenges.

One important argument regarding water tariffs is related to resource conservation in the context of increasing water demand (Zetland & Gasson, 2013; Pierce et al., 2021). While water conservation is an important issue, it should not be an obstacle to addressing water affordability for low-income households. There is evidence that affordability programs can also promote water conservation. For example, a recent study of Philadelphia's Tiered Assistance Program found that affordability programs based on household income in the US do not have a negative effect on water conservation efforts (Mack, et al., 2020). A national study of US municipalities found that municipally owned systems were more likely to both impose conservation practices and protect consumers from water shutoff (Homsy & Warner, 2020).

Some cities across the US have brought privatized systems back under public control. This remunicipalization process shows attention to a broader set of public objectives beyond price (Warner, 2021). These include attention to conservation, investment, access and local control (McDonald, 2018; Mann & Warner, 2019; McDonald et al., 2020; González Rivas & Schroering, 2021), but the challenges of affordability and investment remain (Bel, 2020; Pierce et al., 2021). The debate on water price and affordability needs to move beyond the question of ownership to issues of regulatory control and mechanisms to enhance affordability.

Data cannot be made publicly available; readers should contact the corresponding author for details.

We would like to thank Austin Aldag for his help in linking the data sets. This work is funded in part with support from the Atkinson Center for Sustainable Futures and the Center for Cities at Cornell University, and the USDA NIFA grant #2021-67023-34437.