February 1, 2023
WASHINGTON — Today, the U.S. Environmental Protection Agency (EPA) announced its updated Clean Water Act Financial Capability Assessment (FCA) Guidance to help communities ensure public health protections and financial feasibility as they make plans to comply with the Clean Water Act (CWA). The Guidance outlines strategies for communities to follow to support affordable rates while planning investments in water infrastructure essential to protecting our Nation’s waters.
“EPA is committed to ensuring all communities have access to clean water and critical water services. We also recognize that a growing number of people struggle to afford their water bills,” said EPA Assistant Administrator for Water Radhika Fox. “The updated FCA Guidance provides a better process to assess communities’ ability to afford water quality improvements, and also highlights a variety of tools, including assistance programs, grants, and subsidized loans, to help communities plan and pay for necessary water infrastructure improvements.”
When discharges from municipal wastewater treatment facilities violate the CWA, EPA sets a schedule for the municipality to implement control measures to address the discharges as soon as possible. When negotiating CWA compliance schedules, EPA considers public health, environmental protection, and a community’s financial capability. The FCA Guidance outlines the financial information and formulas used to assess a community’s financial ability to make the needed water infrastructure investments essential for CWA implementation. The FCA Guidance is also used to evaluate the economic impacts on public entities of certain water quality standards (WQS) decisions.
For communities seeking extended CWA compliance schedules or certain changes to water quality standards, the updated FCA Guidance provides a clear process to demonstrate financial capability and ensure that a financial strategy is in place to support needed infrastructure upgrades without overburdening their most vulnerable ratepayers. The updated FCA Guidance also contains new measures that provide a better description of a community’s ability to afford water services, including community-specific poverty factors that are available and easy to find from census data. The FCA Guidance incorporates feedback from nearly 3,000 comments received during the public comment period and provides clear, step-by-step instructions for evaluating financial capability, including options for communities with less capacity.
The FCA Guidance is a starting point for negotiations and is not legally binding. The FCA Guidance recognizes that a variety of factors should be included in CWA schedule negotiations and encourages communities to bring their individual circumstances to those discussions. If a community has additional information that justifies a longer schedule than the general schedule benchmarks, this information can be submitted to EPA. Where appropriate, this information can result in different schedules than those suggested by the baseline analysis in the FCA Guidance.
The updated FCA Guidance provides ideas for working within legal boundaries and broadly consider how to minimize rate impacts to residents. For example, the FCA Guidance provides links to resources for obtaining available federal funding or for establishing programs to help low-income customers. In addition, EPA’s Water Finance Center can connect communities to technical assistance providers who can help with rate design and analysis, asset management planning, identifying sources of funding, and/or developing State Revolving Fund applications.
The FCA Guidance is available here.
The Updated FCA Guidance supersedes the 1997 Guidance for Financial Capability Assessment and Schedule Development to evaluate a community’s capability to fund CWA control measures in both the permitting and enforcement context. The FCA Guidance also supplements the public sector sections of the 1995 Interim Economic Guidance for Water Quality Standards to assist states and authorized tribes in assessing the degree of economic and social impact of potential WQS decisions.
During a 60-day public comment period on the proposed FCA Guidance, EPA received nearly 3,000 public comments from a wide range of stakeholders, including local governments, state governments, utilities and municipalities, environmental organizations, NGOs, and private citizens. The final FCA Guidance has been informed by the input provided during the comment period.