‘Fundamentally unaffordable’: Why private water utilities in NC can mean higher bills
For homeowners served by Carolina Water Service and facing looming rate increases, the question isn’t just how much their water bill might rise — it’s why their water system works so differently from the one down the road.
Carolina Water is a private, investor-owned utility, not a city-run water system that operates in communities across the state. That distinction shapes how rates are set, what oversight exists when prices increase, and what options customers have when bills become unaffordable. North Carolina homeowners say those issues are now front and center as state regulators consider Carolina Water’s latest request for higher water and sewer rates with a potential increase of 34% for residents.
“Water is different from electricity or cable,” said Jeff Wenberg, president of the Carolina Trace Association in Sanford and a former municipal public works commissioner and state environmental official. “You can’t shop around, and you can’t opt out.”
For advocacy groups that work on water access, those structural differences are often where affordability problems begin.
“They are monopolies, and residents can’t opt out,” said Hope Taylor, executive director of Clean Water for North Carolina, a nonprofit focused on water quality and access. “That lack of choice makes affordability and accountability especially important.” Taylor said Clean Water for North Carolina has seen similar affordability concerns emerge in communities served by private utilities across the state, particularly among residents on fixed incomes.
“Once a private company controls the system, customers often have very limited leverage,” she said. “Even when the water is safe, the bills can become a serious burden for people who don’t have the option to switch providers.”
North Carolina has about 1,500 privately-owned water and wastewater companies, according to a 2017 report by the UNC Environmental Finance Center. Together they serve about 856,000 North Carolinians, compared to millions served by government and publicly owned systems.
How they differ
Investor-owned water utilities such as Carolina Water operate under a different legal and financial framework than municipal systems, said Dr. Ahmed Rachid El-Khattabi, research director at the UNC Environmental Finance Center.
Private utilities are regulated by the Utilities Commission under state law. When changing rates, they must submit detailed financial, engineering and operational evidence, and the commission evaluates whether proposed rates appropriately cover operating costs, capital investments and allow an opportunity to earn revenue, El-Khattabi said.
Municipal water systems, by contrast, are owned by cities, towns or local authorities and set rates locally through governing boards such as city councils or utility commissions. They are not subject to Utilities Commission rate oversight.
When municipal systems borrow money, El-Khattabi said, they fall under the oversight of the state’s Local Government Commission, which can require corrective action if rates are insufficient to cover debts.
Access to money also differs. Municipal utilities generally qualify for a broader range of subsidized state and federal infrastructure money. Investor-owned utilities in North Carolina may have more limited access to those programs, El-Khattabi said, meaning more costs show up on customers’ bills.
In her work with communities across the state, Taylor said the impacts are often most visible in smaller or rural systems.
“Private water systems often serve places that are more expensive to maintain and don’t have the same economies of scale as city systems,” she said. “When you combine that with limited funding options, the costs tend to fall hardest on the people paying the bills.”
Those dynamics are central to the opposition now forming around Carolina Water’s proposal, Wenberg said.
In filings and testimony submitted to the Utilities Commission, residents argue that Carolina Water’s rates already exceed statewide averages for municipal water and sewer service and that the proposed increases would widen that gap.
“It’s just fundamentally unaffordable and it’s fundamentally unfair,” Wenberg said. “Part of it is the business model, part of it is the policies of the state regarding eligibility for public funding, and part of it is the basic structure of an investor owned, private equity owned utility. It’s all aggregating to make our rate picture completely unaffordable.”
Carolina Water Service disputes comparisons between its rates and municipal systems, saying the costs of providing service can vary widely from one area to another.
In a statement to the Observer, spokesperson Jessica Dey said drinking water and sewer rates depend on factors such as terrain, distance from water sources, population size and the condition of existing infrastructure. She said direct comparisons between utilities can be misleading because municipal systems often offset water costs through taxes, tap fees or other government revenue.
The Utilities Commission has said investor-owned utilities remain subject to regulatory oversight. In an email to the Observer, interim general counsel Josh Sundt said the commission considers public testimony and evidence from utilities, consumers and the commission’s Public Staff before setting rates.
But for many customers, that oversight offers little comfort when water bills keep rising and there is no alternative provider.
“You can’t just decide to leave,” Wenberg said. “And when you’re locked into a system like that, every increase hits harder.”
And while those upset with their municipal water systems can try to vote out their elected officials and apply for oversight boards, those fighting to get state regulators to deny price hikes say the process has left them frustrated. “We were very disturbed by that process and how you feel like you didn’t have a voice and nobody really cared,” said Sue Quartiero, a Lake Norman-area resident who opposes the rate increase. “So this time, we knew it was an uphill battle... We almost feel like there’s nothing we can do, but we’ve got to fight the fight so we can sleep at night.”
