Home water bills in Philadelphia could jump 18% over the next two years, if the Philadelphia Water Department’s latest rate request is approved.
The department has proposed changes that would hike the bill for the typical residential customer to about $91 per month this September, and then to $97 a year later. The current typical bill is a little shy of $82.
That would add about $180 more per year for a typical, or median, customer who uses 430 cubic feet of water a month.
If approved in its current form, the change would represent the biggest percentage increase in water bills in at least a decade. By the end of 2026, the typical bill would be 45% higher than it was in 2016.
The city’s independent Rate Board is reviewing arguments from the Public Advocate, who represents the interests of customers and is arguing for a smaller increase. The board will make a decision on the new rates in late July, and could end up lowering the hike a bit, as it has in past years.
However, whatever the board decides, many residents will have little choice but to accept that they’ll be paying much more for water and sewer services in the coming years, said Robert Ballenger, a Community Legal Services attorney who serves as the Public Advocate.
“Unfortunately, the costs of running the utility and managing all of the investments that need to be made, to make sure that we are able to benefit from safe drinking water and have the environmental benefits of clean water in the city of Philadelphia, are getting more and more expensive,” he said.
Water costs are rising nationally
The Water Department says it needs to raise the rates that pay for water, sewers and stormwater management so it can cover the increasing costs of its operations and ensure its financial stability.
When it announced the rate request in February, the agency cited the rising costs of labor, materials, equipment, laboratory services, regulatory obligations and capital projects.
“What’s really driving rates higher in a lot of places, and this is certainly true in Philadelphia, is the need for infrastructure investment, the need to repair aging infrastructure and to comply with EPA decrees that require the city to manage and reduce the impact of wet weather, which causes our old system to overflow,” Ballenger said.
Across the country, the combined water and sewer bill for a typical U.S. household rose 4.6% from 2023 to 2024, and it’s up 24% since 2019, according to Bluefield Research, a Boston firm that provides data to water utilities and other companies.
The Northeast, which has older utility systems that require more expensive upgrades, had the highest regional costs, with bills averaging nearly $142 a month, per Bluefield. In the South the regional average was $118.
“We are working to reduce operating costs as much as possible,” PWD Commissioner Randy Hayman said. “We are limiting budget requests, reducing stormwater management grants, refinancing debt, and obtaining low-cost loans and grants from PENNVEST, the state’s infrastructure fund, and other sources.”
The Water Department’s budget is $569 million this year and is proposed to increase 12.5%, to $640 million, in the fiscal year that starts in July.
A small change makes a big difference
The Rate Board is considering a number of often highly technical questions as it weighs how much of an increase to allow. They largely fall into two buckets: how much money the Water Department will need to operate over the next few years, and how actual charges should be set and divided up among different groups of customers.
One of the many calculations in the first category tries to predict how much the department’s costs will increase in the future due to inflation. PWD proposes using a well-known tool for estimating prices, the consumer price index (CPI).
An expert working for the Public Advocate says a different tool, the personal consumption expenditures price index (PCE), predicts inflation more reliably for certain costs — and, as it happens, will produce lower results.
The Water Department projection “is that the costs are going to go up by a little more than 3%. Ours is that they’re going to go up by a little more than 2%,” Ballenger said. “Not a huge difference, but the way that translates when you’re talking about millions of dollars in costs is pretty important.”
Another example is the way future changes in water usage are estimated.
Households use less water than they used to, thanks to the gradual replacement of fixtures like toilets and showerheads with more efficient versions. Ballenger recalled that years ago the Water Department’s “typical” customer used 600 cubic feet per month, whereas the figure is now 430 CFs.
When it projects future declines in usage, which will affect how much it earns from providing water, the department wants to use a three-year compound growth rate, he said. Meanwhile, the Public Advocate’s expert said an average growth rate is more accurate and should be used in the water rate calculations.
In general, Ballenger said, the Water Department is very focused on making sure it has enough funding to cover all its costs, which “promotes more conservative assumptions than really are appropriate.” The Public Advocate is more focused on helping consumers, in part by making sure projections aren’t unnecessarily high.
Homeowners vs. big water users
The other part of the rate case is concerned with how billing works, including how water charges are divided up among residential and small business customers on one hand, and big commercial customers on the other.
That’s more complicated than it might seem, because it’s not just based on how much water flows through each user’s pipes. It’s also influenced by factors like the maximum amount different customers need at different times, which determines how big a pipe is needed, how much pumping capacity is available, and other infrastructure questions.
The Public Advocate argues that the rate allocation the Water Department wants to continue using has been overcharging homeowners.
“What we’re saying is the profile that has been used in determining rates and charges in the past has not reflected what we now know to be the demands of the residential and small commercial customers,” Ballenger said.
The newest data suggests that the maximum capacity costs for those users should be allocated differently, he said. That would result in home users seeing a roughly 5% increase in water costs, rather than the 9% currently proposed, and big commercial customers bearing a larger portion of those costs. That doesn’t include sewer charges.
Ballenger noted that another entity, the Philadelphia Large Users Group, will also provide testimony as part of the rate case. He expects they will argue that the current rate allocation be maintained, which would prevent their members from seeing the higher charges the Public Advocate is arguing for.
The Rate Board will also review the structure of the Water Department’s Tiered Assistance Program (TAP). It provides eligible low-income customers with a reduced, fixed monthly bill based on their income, as well as forgiveness of past-due bills, protection from shutoffs, leak repairs and other services.
A strategy for more federal funding
Ballenger said he’s also trying to get the Water Department to commit itself to an initiative that he believes could yield more federal help for infrastructure improvements, and potentially blunt future rate hikes.
The federal government already provides states with funding for water utilities, which the department accesses through low-cost loans and pays back with interest.
For disadvantaged communities, additional subsidies are also available that function like grants rather than loans, further reducing their utilities’ financing costs. Philadelphia isn’t eligible because, despite its significant levels of poverty, residents’ average wealth is still too high, Ballenger said.
But the Public Advocate team believes that language in the 2021 Bipartisan Infrastructure Law could in the future let PWD qualify for the subsidies, if the money goes directly to help low-income customers. The department could potentially make itself eligible by setting up a program to help those customers finance water-saving measure and repairs, Ballenger said.
“We’re trying to position the city to better get federal dollars to avoid the long-term impact of these investments,” he said. “That’s really an important step for us to take, because the long-term dollars associated with the capital programs, and what that would ultimately cost customers, is pretty staggering.”
The search for more federal funding coincides with moves by the Trump administration to reduce support for some big infrastructure projects. Last month the Federal Emergency Management Agency said it’s ending a resilience program that had been expected to send Philly $25 million to reduce overflows in Northern Liberties and nearby neighborhoods. During storms, overflows can send raw sewage into rivers and basements.
The Rate Board has already held a number of public hearings on the Water Department’s rate request and has more scheduled this month. The board plans to make a final decision on July 23 and the first set of new rates will go into effect September 1.
