Brace Yourself for Another Bill

About 33 million households are likely to see a new bill turn up in their mailboxes soon: a water bill.

The Environmental Protection Agency, as part of efforts to promote water conservation, is seeking a rule change that would encourage landlords to charge tenants for every drop of water they use. The agency says people will think twice about taking those long hot showers if they realize their money is flowing down the drain along with the suds.

The price of water has been climbing steadily nationwide in the past few years, but the vast majority of the country's renters would never know it. That's because only about two million of the nation's roughly 35 million rental households are currently paying a separate bill for their water.

Several factors have contributed to the run-up in water prices, and the growing debate over who should foot the bill. For one, there is increasing demand, thanks to population and industry growth. At the same time, parts of the Pacific Northwest, the Plains and Southwest are suffering "severe to extreme" drought. In some cases, it has been that way for much of the past four or five years, says Jay Lawrimore, chief of the climate monitoring branch at the National Climatic Data Center in Asheville, N.C.

DOWN THE DRAIN • Residences in the U.S. (homes and apartments) use three times more water than businesses   • The average household uses enough water in a year to fill a five-foot deep, 32-foot-by-16-foot in-ground swimming pool four times over   • Water prices in Roanoke, Va., were up 32%; Seattle, up 23.8%; Boston, up 13.7%

Still, some cities have been hit particularly hard by the recent price surge. Among them: Roanoke, Va., where prices are up 32%; Binghamton, N.Y., up 26.7%; Seattle, 23.8%; Fort Smith, Ark., 15.6%; Boston, 13.7%; and Detroit, 13%. Utilities not only sell the water, but also usually set the rates.

If the EPA rule change passes -- and many experts believe it will -- many renters will be picking up more of this burden. They'll be writing out a new check every month for between $15 and $30, or $180 to $360 a year; that's roughly what the 106 million homeowners now pay for their water.

Currently, most landlords decide it's not worth the hassle to hit their renters up for these costs. Here's why: To charge their tenants, landlords have to adhere to many of the same guidelines as utilities, including hiring experts and doing water-quality testing. (The logic is that because the landlords are "selling" water, they need to be able to guarantee that it meets certain standards.) Property owners have argued that these measures are burdensome.

The EPA agrees, and last month proposed scrapping those requirements. That change would likely prompt huge numbers of property owners to install meters that track usage by individual apartments. The federal agency believes it would also spur a big drop in water consumption. "Helping to make people more aware of how much water they are using and the cost is one of the steps to produce environmental benefits," says G. Tracy Mehan III, the EPA's assistant administrator for water.

The deadline for comments on the proposal is Monday, and the EPA expects to make a final decision on the policy change early next year. So far, there hasn't been any significant opposition to the move, though some tenant groups argue that it's inequitable. "This is just one more way for building owners to pass on costs directly to renters and abdicate their responsibility for their properties," says Douglas Pensack, associate director of the Illinois Tenants Union.

Though supplies have ebbed in some areas, there's no permanent shortage of water in the U.S. While getting safe drinking water is a huge problem in many parts of the world, it's implausible that anytime in the foreseeable future Americans will turn on their faucets and have nothing come out. The current droughts could turn into surpluses at any time, and prices could drop again.

The complexity of managing water supplies was highlighted last week when the federal government signed a landmark deal that ensures that more water from the Colorado River will go to fast-growing cities in Southern California, while limiting supplies to farms. The agreement is aimed at ending years of rancor among Western states over water rights.

The new water proposal brings to mind changes in the electricity market. Until the energy crisis of the 1970s, tenants typically didn't pay for their own electricity. Today, of course, it's commonplace. Some research has shown double-digit drops in energy consumption by tenants in major cities in the year following that switchover. Regulators say that change in behavior has continued into the present, with tenants being more conscientious about turning off lights they're not using and flipping switches before they leave the house.

Some evidence suggests that water consumption could trace a similar arc if the new rules pass. Currently, landlords who charge tenants for their water do it in one of two ways: either by installing meters that measure usage in each apartment, or through "allocated" billing, where tenants pay a percentage of the building's total bill.

A study four years ago of apartments being charged for water for the first time found that usage in properties with individual meters fell 18% to 39%, while those in properties charged through allocated billing saw drops of only 6% to 27%. The study was done by Industrial Economics Inc. for the National Apartment Association and the National Multi Housing Council.

But there's one reason why people may not be so quick to give up their indulgent hot baths: Because water is generally much cheaper than electricity, people won't see as dramatic financial benefits when they cut back.

Just a decade ago, the thought of charging a tenant for something as basic as water was unthinkable. But in recent years, some of the country's biggest apartment owners, including Equity Residential in Chicago and AvalonBay Communities Inc., in Alexandria, Va., have begun doing just that. The number of renters paying water bills has been growing at an estimated 25% a year the past four years, according to Viterra Energy Services, a provider of tenant billing services.

State governments, too, have been pushing ahead on this issue. Recent moves by Alabama, Mississippi and Texas have made it easier for landlords to bill tenants for water. Massachusetts is now the only state that has a law against it, but efforts are under way to dunk that ban.

Write to Ray A. Smith at ray.smith@wsj.com

Updated October 23, 2003