IS A STORM WATER PUBLIC UTILITY IN YOUR FUTURE?

Management of storm water increasingly is a hot issue for municipalities. Several drivers are contributing to this situation, including:

1. The federal Clean Water Act and USEPA regulations that may require collection and treatment of contaminated storm water.

2. Environmental laws and regulations that may require separation of storm water mains from wastewater mains. When storm water is allowed to enter into the wastewater system, wastewater mains can become surcharged, causing basement backups, and wastewater biological process treatment facilities can wash out. (See my blog, "Illegal Storm Water Connections...Going Away From The Flow", May 7, 2010).

3. Flooding of properties, buildings and streets upon major rain events.

One possible approach for storm water management may be for municipalities to form and operate storm water public utilities, much in the manner that they may own and operate water, wastewater or electric public utilities. A recent Florida example is discussed in City of Gainesville v. State, 778 So.2d 519 (FL. App. 2001).

The City formed a storm water public utility and billed properties in the city a utility charge for storm water management utility services. The charges are based on the cost of providing storm water management services to different classes of properties. The charges are computed based upon equivalent residential units (ERU) of 2,300 square feet, representing the average impervious area for all developed, detached single family homes in the city. The ERU for commercial properties is computed based upon measurement of the developed, impervious area of each property. Undeveloped properties and properties which do not contribute to storm water runoff are exempt. Credits are available to property owners who retain all or a portion of storm water runoff from their property.

The Court held that, under Florida law, the city had authority to establish storm water management systems and to finance them by collecting utility charges. Of course, the availability of the storm water public utility approach depends on the legislative authority of a particular state. See also State v. City of Charleston, 513 S.E.2d 97 (1999). For a related discussion, also see "Strapped Cities Hit Nonprofits With Fees", Wall Street Journal, December 27, 2010, Sec. A-1, p.1.

IS THERE A SANTA CLAUS?

At this Holiday time of year, it is difficult to find a water topic that is appropriate. However, the general scope of the law does not disappoint. So, I digress temporarily to see what the law may say about Santa Claus.

One may recall the classic movie "Miracle On 34th Street" where a judge, after a trial. found a jolly old man to be Santa Claus because the Post Office delivered tons of mail to him addressed to Santa Claus. Of course, the movie is both fictional and dated, as today the Post Office likely would deliver only tons of catalogs addressed to "occupant."

There are, however, real court decisions involving Santa Claus, and I will share three of them.

In an Ohio case, a man petitioned the court to change his name to "Santa Robert Claus." The court noted that he "is a rotund gentleman with a full white beard and wears wire glasses, which he says attributes to people commenting on his resemblance of Santa Claus." According to the court, the petitioner stated "I don't want people to say you look like Santa, I want to be Santa."

The Court denied the petition, finding it to be against public policy. The court reasoned as follows:

"The court finds that there is an economic value to the name of Santa Claus. The court finds no fraudulent intent of the petitioner to take advantage of the economic value for the use of the name. However, the court finds public policy reasons to deny the petitioner's request, particularly the interference with the rights of others. The petitioner is seeking more than a name change. He is seeking the identity of an individual that this culture has recognized throughout the world, for well over one hundred years. Thus, the public has a proprietary interest in the identity of Santa Claus, both in the name and the persona. Santa Claus is really an icon of our culture; he exists in the minds of millions of children and adults.

"The history of Santa Claus-the North Pole, the elves, Mrs. Claus, reindeer-is a treasure that society passes on from generation to generation, and the petitioner seeks to take not only the name of Santa Claus, but to take on the identity of Santa Claus. Although thousands of people every year do take on the identity of Santa Claus around Christmas, the court believes it would be very misleading to the children in the community, particularly the children in the area that the petitioner lives, to approve the applicant's name change petition." (In re Name Change of Handley, 736 N.E. 2d 125 (Ohio Prob. 2000)).

An opposite result was reached in a Utah decision. A man petitioned to change his name to "Santa Claus." The trial court denied the petition. It found that such a name change would likely create confusion and misunderstanding, and might discourage people from ever suing someone named Santa Claus. On appeal, the Utah Supreme Court reversed, ordering the name change to be granted. It said that there was no evidence that confusion and misunderstanding would result from the name change. It noted that the man already tells others that he is Santa Claus, and allowing him to legally change his name to reflect his practice is more likely to avoid confusion. A dissenting opinion cited the Ohio decision in the Handley case in support of denial of the petition. (In the matter of the Application of David Lynn Porter, 31 P. 3rd 519 (Utah 2001)).

It appears that being Santa Claus may not avoid legal issues either. In another Ohio case, a man was charged with a misdemeanor because he displayed to a police officer an Ohio identity card which identified him as Santa Claus. The man presented various documents in support of his motion to dismiss the charge, including:

A certificate of birth for one Santa Claus born at the North Pole December 25 in 383 A.D. to Mr. Claus and Holly Noel with Dr. Snowflake attending;

Ohio identification cards for various years issued to Santa by the state, with photos and indicating residence at i Noel Drive, North Pole USA;

A certificate of title and vehicle registrations issued to Santa at the same address for a 1965 Volkswagen.

The court dismissed the charge. It stated, in part: "Santa routinely paid (and the state of Ohio accepted) taxes and registration fees under the name of Santa for many years....To sustain the burden of going forward, the state must make a showing that Santa knowingly displayed an identification card that was 'fictitious'. This the state has not done. The fact that Santa had an ongoing relationship for 20 years with the BMV is not indicative of 'artificiality or contrivance' for, in fact, under the publicly held records of the Ohio Bureau of Motor Vehicles, Santa has been a 'real person' since as early as 1982." (State of Ohio v. Hayes a.k.a. Santa Claus, 774 N.E. 2d 807 (Ohio Mun. 2002)).

So, is there really a Santa Claus? You be the judge.

THE ICEMAN GO-ETH

Water has several properties. One of these is ice-a liquid becomes a solid at a certain temperature. In the 21st century, most of us likely think of ice only as something to slip and fall on in winter and something to chill our beverages in summer.

However, ice became a significant necessity in the latter half of the 19th century and early part of the 20th century-as a "refrigerant." In Chicago, for example, several companies emerged to engage in the business of cutting blocks of lake ice, storing the ice under sawdust and straw in warehouses, and delivering ice to houses and businesses.

It appears that a common source for Chicago ice were lakes in northern Indiana, particularly in LaPorte county. Indeed, my parent's cottage property on one of such lakes was subject to an old easement along the lake shore for harvesting of ice by a packing company. Most likely, Indiana ice was shipped to Chicago by railroad.

Prior to the electric compressor refrigerator we use today, homes used blocks of ice in their "ice boxes"-a term still often used to refer to a modern refrigerator. Frequently, such old ice boxes are viewed as desirable antiques by collectors, and thereby retain a life in the 21st century.

By the 1950s, sales of block ice had diminished, along with the ice companies. I can recall two exceptions: milk delivery trucks still rumbled down neighborhood streets, cooled by large blocks of ice which dripped melting water wherever they stopped. And a vacation car trip necessitated a metal cooler in the trunk for beverages and sandwiches, chilled by a block of ice which took up half of the cooler and soaked the sandwiches with melted water. Ice would be purchased from gas station vending machines along the route, the machines emblazoned with "ICE" in huge red letters. If one visits today Cedar Pass Lodge in the South Dakota Badlands, one still will see a large ice vending machine. Though inoperable, it stands as a Mount Rushmore of the ice industry.

Yes, the ice man go-eth, but memories linger.

A WATER CURRENCY EVENT

A few days ago, in a fit of uncharacteristic cleaning, I removed a drawer from a small Eastlake chest I use to store things I never look at again but think I may do so some day.

At the back of the inside of the chest, behind the drawer, an interesting item was wedged. It is a colonial note for four shillings, dated August 2, 1775, issued by the Colony of New York to finance its water works. The top of the note reads: "New York Water Works." It is small, about 2 inches by 31/2 inches, and is hand signed. It reads, in part: "This note shall entitle the Bearer to the sum of Four Shillings current money of the Colony of New York, payable on Demand, by the Mayor, Aldermen, and Commonalty of the City of New York, at the Chamberlain of said City, pursuant to a vote of the said Mayor, Aldermen, and Commonalty, of this date." On the back of the note are pictured a water pumping station and flowing fountains.

This note, as well as similar notes, were colonial currency of the day. I had purchased it early in my career as a curious illustration of an early form of financing for a municipal water system.

Interestingly, this note, which is over 235 years old, was issued less than one month after the signing of the Declaration of Independence. It also was a time when there were many loyalists in New York, some of which still thought that a compromise could be reached with the king of England.

Today, some water system improvements are financed by the issuance of bonds, with the debt service recovered in rates paid by the users of the systems-a procedure not that different from the essence of the 1775 note. However, today there appears to be a growing trend, and dependence, toward "financing" water system improvements by receipt of grant money from the federal and state governments. Of course, not every system can receive a grant, which means that users of other systems may be financing systems that provide no benefit to them.

There were no grants in 1775 to finance water system improvements. How did they do it? Maybe, occasionally we need to look at the back of a drawer for unseen ideas forgotten because we see only the immediate.

DISCRIMINATION IN RATES: FREE SERVICE AND DISCOUNTS

Historically, utilities frequently have provided service without charge to public and governmental buildings and uses, such as administrative offices, libraries, schools and even churches. Utilities have attempted to explain such free service on public relations-good will grounds or as a franchise concession.

However, free service cannot be justified by cost of service ratemaking principles and is unreasonable discrimination on its face. So, for example, a New Jersey court held that a contract was unjustly discriminatory because an electric utility agreed to provide free lighting service to municipal buildings. City of Plainfield v. Public Service Electric and Gas Company, 412 A.2d 759 (N.J. 1980). The Wisconsin Public Service Commission has prohibited a municipal owned water utility from providing free or discounted service to municipal departments. City of Westby, 2-U-5017; City of Brodhead, 2-U-5092, 1958 WL 7484. An Indiana court has held that the state regulatory commission could set telephone rates to be charged a city even if the franchise granted the telephone company called for free service. Winfield v. Public Service Commission, 118 N.E. 531 (Ind. 1918).

Discounted rates, such as for senior citizens or for lifeline programs have been held to be invalid discrimination in some states. For example, see Mountain States Legal Foundation v. Utah Public Service Commission, 636 P. 2d 1047 (Utah 1981). Along lines similar to discounted rates, a Massachusetts court held that a disproportionate large water rate increase to one industrial customer compared with other industrial customers was illegal discrimination. Massachusetts Municipal Wholesale Electric Company v. City of Springfield, 726 N.E. 2d 973 (Mass. App. 2000).

Some states have approved economic development discounted rates as legal discrimination when the evidence shows all customers will benefit from the assumed additional load and revenue. Re Northern Indiana Public Service Company , 96 PUR4th 267 (Ind. U.R.C. 1988).

DISCRIMINATION IN SERVICE

The word "discrimination" can be emotionally charged, particularly when used in racial, religious, nationality and similar contexts. In such settings, a legal prohibition against discrimination generally tends to be absolute.

In the public utilities world, a prohibition against "discrimination" also can be applicable. Typically, such discrimination can arise in two situations: (1) establishment of rates and (2) extension of service.

However, in the public utilities world, not all discrimination necessarily is illegal. Discrimination can be reasonable or just-a legal discrimination.

A future posting will discuss rate discrimination. An Illinois Appellate Court decision will illustrate a claim of service discrimination. (Schroeder v. City of Grayville, 520 NE2d 1032 (5th Dist. 1988)

Plaintiffs were non-residents of a city. In their complaint, they accused the city of discrimination because it refused to supply water to their property located outside the city limits. Plaintiffs alleged that refusal to extend water service to their property was in retaliation to their prior refusal to grant an easement requested by the city. The complaint alleged that the city improperly discriminated against plaintiffs because the city had supplied water to other non-residents similarly situated.

Plaintiffs argued that a city owning and operating a water system does so in its business or proprietary capacity and is obligated to refrain from unreasonable discrimination against persons similarly situated. The city argued that it had no duty to provide water to non-residents in absence of a contractual undertaking obligating it do so.

The Appellate Court noted established caselaw that a municipality owning and operating a water system is no different than a private water utility; and that private utilities are prohibited from engaging in unreasonable discrimination in rates or manner of service. The Court concluded that "the reasoning in these cases supports plaintiffs' claim that defendants' refusal to provide them water, while providing water to others similarly situated, is an unreasonably discriminatory manner of service." (Id. at 1034)

Arguably there may be circumstances where a municipality can refuse service to non-residents without bumping into a discrimination issue. For example, a city may have a firm policy requiring a non-resident to enter into an annexation or pre-annexation agreement. Or a city may not have sufficient "backbone" plant capacity to take on additional non-resident customers. Or the city may not have distribution facilities in proximity to the non-resident land and, therefore, requires payment for an extension of lines, for which the non-resident is unwilling to pay. The point is that establishing the existence of unreasonable discrimination in service is not always a simple matter.

GOOD TO THE LAST DROP

Recently, I attended an estate auction held in a farm yard surrounded by hovering corn stalks, mysterious metal storage structures and biting flies. Several generations of possessions were piled upon farm wagons awaiting eager bidders. On one of the wagons, I spied two cast iron water hand pumps, one red, the other green.

When a ring man held up the green one for the auctioneer to start his chant, the ring man pumped the handle up and down as if he were pumping water at a sink in an imaginary farm kitchen. But, of course, there was no water to be pumped--only the dusty air of the farm yard. At that moment, I wondered what it would be like if my pump or faucet were dry and produced only air. Many parts of this country as well as other parts of the world face that prospect.

But, alas, there WAS water to be had at the auction, though at a significant cost. A food vendor squeezed within a small trailer next to the auction site was selling bottles of drinking water for about $1 each. That works out to be about $8 per gallon or $8,000 per 1,000 gallons.

What is the point? There are two points to be made. First, safe drinking water increasingly is becoming a scare commodity, particularly as demand grows across the world.

Second, to deliver safe drinking water to our hand pumps and faucets costs more and more as time goes on. In August, Black & Veatch issued the findings of its sixth "50 Largest Cities Water and Wastewater Rate Survey." The survey found that the average annual increase in typical residential water bills from 2001-2009 was 5.3%, and for residential sewer bills, 5.5%. These annual increases were more than twice the average annual CPI-D increases of 2.4%. (See www.bv.com/top50ratesurvey)

According to Black & Veatch's analysis of the survey, causes for the bill increases included:

1. Increases in operating and maintenance expenses, such as for electricity and chemicals.

2. Lower usage, and corresponding lower revenue to cover fixed costs such as debt service.

3. Pension and health care benefits.

4. Regulatory and legal requirements.

5. Aging infrastructure, requiring replacement and upgrading.

To the list, I would add the "scarcity factor." In some areas, ground water supplies are diminishing and surface water supplies are becoming less reliable or more costly to utilize. Utility systems are being compelled to search for alternative supplies, which may involve construction of transmission pipelines or more extensive treatment facilities.

No, I did not bid on either hand pump, nor did I buy a bottle of water. I journeyed home thirsty but more appreciative of the glass of cool water from my faucet. It really was good to the last drop.

PRIVATE LIVES FOR PUBLIC BODIES--PART 2

Some in the media have implied that the purpose for privatization of municipal-owned water and wastewater systems is to raise needed money for other municipal activities. Some critics have asserted that privatization of these systems could result in higher rates for service.

However, in reality, there can be many different reasons for privatization beyond the raising of capital. I will cite two examples from my experience. A small town sold its water system to an investor-owned water utility company because the town leaders could no longer endure the prospect of disconnecting service to their neighbors who were not paying their water bills.

In another example, a larger town sold its water system to the same water company because its wells were going dry and the distribution system needed a costly upgrade. The water company was able to extend a long pipeline from its source of supply and treatment facilities to provide the town with a reliable supply and had the resources needed to upgrade the distribution system.

Therefore, while some privatization transactions may have the objective of providing funds to a municipality, privatizations may be pursued for other reasons such as:

1. Management issues (the headache factor). Operation of water and wastewater systems in compliance with all the multiplying and complex regulations under the Safe Drinking water Act, Clean Water Act and other rules requires a technical expertise that may be beyond a town's capability or endurance.

2. Cost factors. Utilities are experiencing increasing costs for staff and other operating expenses such as power and chemicals; increasing costs for security measures; and increasing capital costs for upgrades and replacements of infrastructure.

3. Source of supply factors. Wells may be reducing in productivity, necessitating searches for alternative and likely more expensive supplies.

Speculation that privatization necessarily will result in higher rates may be misplaced. In the first place, the rates of a municipal system may be unreasonably low due to subsidies from municipal funds other than rate revenue or due to deferrals of maintenance or upgrades that would have caused rate increases. Beyond that, acquisition or operation of a municipal-owned system by an investor-owned utility under some form of privatization can result in mitigation of any rate increase that would result from operational improvements or facility upgrades.

For example, a regional investor-owned water utility can offer economies of scale and efficiencies not available to a stand-alone town. Such a utility will have staff and expertise to handle regulatory compliance and monitoring requirements, security enhancements and management matters. If revenue requirements increase due to upgrades in operation or facilities, proposed rate increases most likely will require approval from a state utility commission. In addition, there may be regulation by contract. The privatization agreement may contain conditions and undertakings related to performance and rates. Indeed, customers may find that they have more rate protection after privatization than under prior municipal ownership.

PRIVATE LIVES FOR PUBLIC BODIES

The Wall Street Journal, in its August 12, 2010 print edition, discussed cities which are considering proposals to privatize their municipal-owned water and/or wastewater systems. The article suggests that a motivation for such privatization measures is the need to produce money for cash-strapped municipalities.

There is no inherent reason why water and wastewater utilities should be government owned. In the case of water, general caselaw is that municipalities which own water utilities do so in their proprietary capacity, not in their governmental capacity. There are no apparent natural efficiencies with governmental ownership. Further, there is caselaw that municipal systems can earn a profit.

Provision of water and/or wastewater service by investor-owned utilities is not a new idea. Many cities in the United States receive such service from such investor-owned utilities as American Water Works Co., Aqua America Inc., American States Water Co., California Water Service, Connecticut Water Service Co., and Middlesex Water Co. In Illinois, for example, cities such as Champaign, Urbana, Streator, Sterling, Pontiac, Peoria, and Kankakee have been served by investor-owned water companies for well over one hundred years. In addition, there are many small communities across the country there are served by small, local water and/or wasterwater public utility companies.

In a way, privatization is a misnomer. Most regional water and wastewater utility companies are owned by investors in the general public. All of the companies named above are listed on stock exchanges. Further, they are "public" utilities, affected with the public interest and regulated accordingly.

What is driving privatization today? It appears that the drivers include the following:

1. Evolving more stringent USEPA environmental standards are imposing capital requirements to enhance treatment facilities.

2. Infrastructure is becoming old, obsolete and worn out, imposing replacement costs.

3. There are increased risks of standards violations and civil liability for water-borne disease or polluted discharge.

4. For some, there is a need to find new water sources if supply.

5. For some, managing the systems is a headache and stressful to administrative resources.

6. Privatization can produce capital or free up capital for other municipal purposes.

7 Rate increases caused by increased costs to upgrade and operate systems are politically unattractive.

8. Regional public utilities can achieve economies of scale, which can mitigate rate increases.

9. Regional public utilities generally have expertise regarding management, compliance, and operations issues.

In most states, government-owned water and wastewater utilities are not subject to regulatory commission jurisdiction. Therefore, customers who have issues as to quality of service or reasonableness of rates are limited to litigation in the courts.
However, public utility companies generally are subject to regulatory commission jurisdiction in the states in which they operate. Customers, in such cases, can participate in rate and other proceedings before such agencies.

It should be kept in mind that privatization is not a singular concept. It can take several different forms: for example, out right sale of system assets, lease of assets, management contract, public-private partnership, etc.

EXCESSIVE RAIN CAN CAUSE PAIN: FLOODING AND SEWER BACK-UPS CLAIMS

Heavy rains this summer in many parts of the country, including Illinois, have resulted in flooded basements and other damage for some property owners. Storm water inflow into a sanitary sewer system can surcharge the system, causing sewer back-ups into houses. Surface water can inundate window wells and crawl spaces. Power outages can render sump pumps helpless.

Review of a few Illinois court decisions suggests some of the issues a property owner may encounter when seeking to recover for damages caused by such heavy rain events.

One obvious issue concerns recovery attempts under property insurance policies. In Industrial Enclosure Corp. v. Glenview Insurance Agency, 379 Ill. App. 434 (1st Dist. 2008), an insurance policy covered sewer back-ups but excluded flooding. Thus the coverage did not cover flooding damage in a building primarily due to creek overflow and surface water runoff caused by a 17 inch rain event. The court found that the insurance agent had no duty to advise customers of the import and meaning of provisions of policies faithfully procured according to the customer's requirements. The court said that the burden is on the customer to know the meaning of the policies it accepts. See also Smith v. Union Automobile Indemnity Co., 323 Ill. App. 3d 741 (2d Dist. 2001), upholding a policy exclusion for water damage primarily due to rain caused surface water flooding.

Another issue can be whether a property owner can recover from a municipality for sewer back-ups from the town's sanitary sewer system. In Dial v. City of O'Fallon, 81 Ill.2d 548 (1980), the Illinois Supreme Court affirmed that a city can be liable for sewer back-ups into a house during heavy rainfall, as a trespass. In Hull v. City of Griggsville, 29 Ill. App. 3d 253 (4th Dist. 1975), the court held that a city was liable for sewer back-up damage in a basement caused by a broken tile in the city's sewer system. The court said that, since the city had exclusive control of its sewer system and the customer did not contribute to the happening of the damage, the city was responsible.

A related issue is whether a municipality can claim immunity from liability for sewer back-up damage. This is a complex question. In Trtanj v. City of Granite City, 379 Ill. App. 3d 795 (5th Dist. 2008), the court held that a city did not have immunity in a suit to recover damages for sewer back-up to the basement. But see Alexander v. Consumers Illinois Water Co., 358 Ill. App. 3d 774 (3d Dist. 2005), where a sanitary sewer main became clogged from debris when a home owner cleaned out the lateral service line serving the homeowner's property. The court said that the village was immune from claims that it should have adopted rules prohibiting home owners from discharging debris into the sewer service laterals.

These court decisions provide an example of some of the issues a property owner may encounter when seeking relief from damages caused by heavy rain event flooding and sewer back-ups. However, it would seem that a good beginning point for anticipating the consequences of heavy rain events is to know the terms of one's insurance policy.

WATER UTILITIES FACE RATE INCREASE PRESSURES

Although the economy may be viewed as sluggish, and inflation rates currently are low, water and wastewater utilities nevertheless are experiencing pressures to increase rates for service. What are some of the drivers for the need to increase rates at this time?

1. Replacement of Aging Infrastructure. Various estimates range from $200 to $300 billion nationally to replace mains, treatment and pumping facilities that have exhausted their useful lives.

2. Compliance with Increasingly More Stringent Standards and Monitoring Requirements. Under the Safe Drinking Water Act and the Clean Water Act, utilities are subject to what appear to be ever increasing USEPA regulations as well as litigation claims.

3. Need for Enhanced Security Measures. Security has come to the forefront in imposing capital and operating costs, particularly for water utilities because water is essential for public health and safety.

4. Response to Diminishing Sources of Water Supply. Not every utility has the benefit of Lake Michigan water, but even that source of supply is limited. Surface waters such as rivers and ground water aquifers also have limitations in both quantity and quality. The more contaminated a source is, the more treatment and cost are required.

5. Expansion of Capacity. Although current economic conditions may have dampened customer growth for now, the fact is that growth can be expected in the future, which translates into expansion of mains and treatment facilities.

These factors, as well as other pressures, cause the need for rate adjustments to alleviate these cost drivers. Without such rate adjustments, utilities can be tempted to defer addressing needed expenditures. Insufficient rates can cause misallocation of water as a resource, impede replacement of assets, frustrate regulatory compliance, and reduce security and quality of service.

Rates should be reviewed and adjusted on a regular periodic basis and established to recover fully all costs of service, based upon cost of service studies. Further, innovative rate structures can be developed. For example, many utilities successfully have implemented rate riders or surcharges to base rates to recover costs incurred for ongoing main replacement programs.

Adequate rates also should facilitate utilities' attraction of financing at reasonable costs for required capital requirements. Certainly, utilities should not avoid needed rate increases in the hope of receiving federal or state grants of limited availability.

USEPA ANNOUNCES PROPOSED TOTAL COLIFORM RULE REVSIONS

USEPA has announced that it is proposing to revise its Total Coliform rule. That rule, first effective December 31, 1990, establishes limits for total coliform levels in treated drinking water provided by affected public water supplies.

"The coliforms are a broad class of bacteria which live in the digestive tracts of humans and many animals. The presence of coliform bacteria in tap water suggests that the treatment system is not working properly or that there is a problem in the distribution system that moves treated water from the treatment plant to customer homes." (www.epa.gov/safewater/disinfection/tcr/basicinformation.html)

The presence of total coliforms in drinking water generally is controlled by disinfection applications, of which chlorination is the oldest methodology and probably still the most commonly used, although other approaches also are being used.

The Total Coliform rule establishes a maximum contaminant level (MCL) or limit for total coliforms, which is an enforceable, absolute standard. It also establishes a Maximum Contaminant Level Goal (MCLG) of zero, which is an non-enforceable health based goal. Compliance with the MCL is determined by required sampling of treated water.

The presence of coliforms in water does not necessarily constitute pathogens, but instead can serve as a signal that there may be a problem with the integrity of the system or its operation that could permit pathogens or other bacteria to enter the system.

The proposed revisions to the rule will require water utilities to find and fix the problem that permits microbacterial presence when sampling results are positive. They also provide incentives for better system operation and update public notice requirements. To learn more about the proposed revisions see www.epa.gov/safewater/disinfection/tcr/index.html

IT'S ALL IN THE ATTITUDE

Long before the Chicago Blackhawks and Stanley Cup of 2010, there was a Chief Black Hawk and the Black Hawk War of 1832. Many regular army soldiers as well as volunteer militia joined in a frustrating search through marshes of southwestern Wisconsin, hunting for the Chief and his followers. One of the volunteers was Abraham Lincoln. One of the regulars was Second Lieutenant Phillip Cooke, Acting Adjutant for the 6th Regiment, U.S. Army Infantry.

Recently, I came across an interesting and instructive quote by Cooke, writing of his marching and encamping on July 21, 1832, in his book "Scenes and Adventures in the Army: Or Romance of Military Life":

"What wealth is there in a cheerful spirit! A good soldier never grumbles ( if he can help it);--when his rights are invaded, he pursues the most quiet, firm, and effectual mode of redress."

It would seem that this quote is good advice for anyone. However, it can be particularly good advice for anyone engaged in water or wastewater operations when encountering regulatory, administrative, financial or operational issues.

LOOK BEFORE YOU LEAP

Court decisions can be quite instructive. A case in point is M.N. Bleich & Co. v. Emmett, 295 S.W. 223 (Tex. C.C.A. 1927).

A customer came to a grocery store to buy feed. While there, he alleged, he expressed a desire to urinate and asked the privilege of using the store's toilet. He was directed to the back room, which was dark and had no light. In entering it, he fell into an open freight elevator pit in the room. While the man was on his hands and knees, an employee of the store lowered the freight elevator unto the man. THe facts do not indicate whether the man was able to urinate under these circumstances.

The court affirmed a judgment for the customer, finding negligence by the store to its invitee. There was some question whether the store's employee had authority to direct the customer where to urinate. It seems that there in fact was no toilet in the back room--just stacks of feed. The employee told the customer "that if he wanted to urinate to go to the dark corner behind the hay; that that was the place used for such purposes." One witness testified that for ten years "he would sometimes go where the elevator was to urinate."

On a motion for rehearing, however, the appeals court changed its mind and reversed the judgment for the customer. "The undisputed evidence shows that appellant had not provided a toilet in the rear of his feed compartment for use by any one; such place as a toilet or place to urinate; and that he had no knowledge that such place had ever been so used. Under such circumstances there was, we now think, no invitation, either expressed or implied by appellant extended to appellee to use any part of the feed compartment as a place to urinate." Id. at 228.

The condition of the feed was not addressed, and presumably this subject remained in a void.

ILLEGAL STORM WATER CONNECTIONS...GOING AWAY FROM THE FLOW

A nemesis of a wastewater treatment facility is extraneous storm water flow to the plant in rain events. Almost all wastewater treatment facilities are designed to receive and treat only domestic sanitary sewage and pretreated industrial wastewater. Most treatment plants depend upon biological processes to treat wastewater to meet strict Clean Water Act standards upon discharge to a waterbody. If a rain event causes storm water to enter the sanitary sewer mains and to flow to the treatment plant, these biological processes can be disrupted. Wastewater can be "washed out" of the plant without having received full treatment, causing pollution of the receiving stream or lake and violation of applicable standards. In addition high storm water flows can cause sanitary sewer mains to become surcharged, resulting in backups into basements and overflows from manholes.

Extraneous storm water flows are caused by inflow and infiltration of storm water into the sanitary sewer collection system. Inflow and infiltration commonly are referred to as "I & I".

Infiltration of storm water can occur when sanitary sewer mains have become broken or separated in some manner so as to permit ground water to enter. Breaks can occur due to such diverse causes as tree roots or heaving of the soil during freeze and thaw cycles. Infiltration generally is the responsibility of the utility. However, infiltration likely is not the primary source of extraneous flows to the treatment facility.

Storm water inflows into the sanitary mains occur, for the most part, due to deliberate connection of devices which discharge storm water flow into the sanitary system. In addition, sanitary sewer manhole covers located in streets or swales can permit inflow if not sealed.

Examples of inflow devices connected to the sanitary sewer service line on customer property typically include downspouts, sump pumps which drain footing drains and window wells, patio drains, driveway drains, garage floor drains and crawl space drains. Connections which permit the inflow of storm water into the sanitary sewer system generally are deemed "illegal connections", and should be disconnected. Obviously, it can be difficult for a utility to police for illegal connections. For example, sump pumps can be disconnected and reconnected fairly easily.

Several years ago, I developed a protocol for a utility client to control illegal connections. The protocol requires customers to permit inspection of their premises to determine if there is compliance with rules prohibiting the establishment or maintenance of illegal connections. In the event of a finding of non-compliance and failure to disconnect illegal connections, or in the event or refusal to permit inspection, the utility may disconnect water or wastewater service to the customer. This protocol has been successful for the client and has been adopted by other utilities.

LONGING FOR THE PAPER TALE

The practice of law has changed over the years. Paper has become almost obsolete--replaced by everything electronic. Court and regulatory agency pleadings and exhibits are filed and served on parties on line. Briefs are read on a computer screen. Communication is by e-mail. Laptops replace legal pads. And legal work can be performed anywhere there is a wireless connection available.

Oh, where has paper gone? Perry Mason frequently won his cases when Della rushed into the courtroom at the last moment with some secret document. Today, would the moment be as dramatic, if she appeared breathlessly with a tweet on her hand held?

In Miracle on 34th Street, Santa Claus' attorney was able to prove that Santa was the real thing when the Post Office dumped hundreds of kids' letters addressed to Santa on the judge's bench. If the Post Office, a federal agency, deemed this person calling himself Santa the real thing, then it had to be true. Today, the Post Office does not deliver text messages, e-mails or tweets--only hundreds of obscure, unwanted catalogs would be dumped on the judge. Santa's attorney would be out of luck.

Even the concept of a "brief case" seems to have become obsolete. When I was a law student clerking at a law firm one summer, I was assigned to organize and carry the trial attorney's brief case. Then during the trials, it was my job to pull out of the brief case and hand to the attorney at the correct moment any written motion, exhibit or trial brief that he needed. Now, that was real paper work! Later, as a practicing attorney, I carried my own brief case, filled with papers and, discreetly, my lunch. Today, laptop cases have replaced brief cases.

A few years ago, I represented a wastewater utility accused of discharging treated effluent to a small stream in excess of certain limits. There was so much paper involved--regulations, exhibits, monitoring reports, test reports, studies, articles, caselaw, etc.--that my entire car trunk was filled. I did not have enough brief cases to carry all of it into the hearing room, so I loaded all of it into grocery store shopping bags, which client staff helped to carry in. Perry Mason eat your heart out--now that was dramatic!

THROUGH THE LOOKING GLASS

Perception....it's all about perception. A few years ago, a water company client filed with the utilities regulatory commission for a very substantial rate increase. It was an inflationary economic period, and operating expenses had increased to a point where revenue hardly covered them and yielded no appreciable return. The numbers clearly seemed to justify the requested rate relief.

The commission, however, denied any increase in rates whatsoever. In a subsequent meeting with staff of the commission, the company was told that rate relief had been denied because of perceived poor quality of service. The company had not addressed or overcome a perception that it was not providing good service.

Perception--how customers and regulators perceive their service provider--obviously is important. In reality, however, in this context perception is not what a customer sees, but rather what a customer believes he or she sees.

So, in a proceeding for a rate increase, if a customer perceives that a utility provides poor service or has rates higher than prevail in another community, the customer likely will object to the proposed rate increase. However, that perception or belief may be based upon historical data, not current service, or a misunderstanding how rates are set elsewhere.

How does a utility overcome erroneous perceptions? Certainly, not by deferring needed rate increases and then proposing a huge increase; not by deferring maintenance or needed upgrades, thereby reducing service quality; and not by ignoring customer complaints and concerns. And certainly not by lack of employee supervision. In another rate proceeding, a customer testified that he saw a group of the water utility's service men spending a long time at a local donut shop instead of working in the field. The work break may have been legitimate, but it created a negative perception-the belief that service was being ignored.

If quality of service has improved, customers must be informed of this. If new investment in infrastructure or additional operating staff was required to make the improvement, then the utility must say so. If cost increases are driven by more investment in plant or personnel, or by more stringent environmental rules, or by price increases in chemicals or electricity, the customers should be told this. If a utility's rates are higher than those of a nearby utility, customers should be informed of differences between the systems that lead to rate differences.

Interestingly, another water utility client had a much different experience with customer perception when it proposed a rate increase to the regulatory commission. At an evening hearing in the community for the purpose of receiving public comment, no customer appeared. The utility had met with, and informed, municipal officials, the press and customers as to the need for rate relief prior to filing for the rate increase. The public, and ultimately the regulators, correctly perceived and believed that rate relief was reasonable.

THE COURAGE OF DECISIONS

Recently, I came across this Chinese proverb:

"A wise man makes his own decisions; an ignorant man follows public opinion."

Over the years of my practice, I have seen both municipal-owned and investor-owned water and wastewater utilities which have declined, or deferred, to make needed rate increase decisions.

Proper rate-making principles require that rates be set to recover the full costs of service to serve the different classes of users receiving service.

Obviously, most customers generally do not favor rate increases. Public opinion frequently is that any proposed increase in rates is to be opposed, no matter what the causes may be for the increase. In response, frequently utility management-whether a city council or corporate board of directors-seeks ways to appease that public opinion by declining or postponing a rate increase decision.

Increases in costs of service can be driven by various factors, including increases in operating cost, particularly for labor, chemicals, and energy; debt service and reserve requirements; increasing environmental regulatory expense, such as compliance with new standards and testing demands; and infrastructure replacement or upgrade projects.

Given such cost drivers, how do some utility managements avoid charging rates sufficient to recover increased costs of service? Sometimes, municipal utilities have used general municipal funds or reserve funds to subsidize increased operating costs or have deferred maintenance or infrastructure projects. At times, investor utilities have deferred filing with their regulatory commission for rate increases, absorbing the resulting lower earnings or also deferring maintenance or infrastructure projects.

Such decision inaction in response to perceived public opinion can adversely affect the financial health of the utility and its quality of service. Further, when management may finally decide to raise rates, an increase of huge proportions may be required-an unpopular step to say the least. I have seen rate increases of 100% proposed because management deferred making rational cost of service decisions in the ordinary course of operations.

A wise utility management will make its own rate decisions based on cost of service principles and at regular intervals, such as every two or three years. Such a rate protocol facilitates the utility's financial health and ability to provide good service and mitigates impacts on customers.

USEPA ANNOUNCES NEW DRINKING WATER REGULATORY "STRATEGY"

This month, USEPA announced what it characterizes as a new regulatory strategy for drinking water. It will focus on four points:

1. Address potential contaminants as groups of similar contaminants, rather than one at a time.

2. Foster development of new, efficient drinking water treatment technologies.

3. Use regulatory authority under multiple statutes to protect drinking water sources of supply. Examples of such statutes include the Federal Insecticide, Fungicide, Rodenticide Act and the Toxic Substance Control Act.

4. Partner with the states to share more complete data from monitoring at public water supplies.

Some contaminants in drinking water are naturally occurring, such as iron, manganese and radium found in ground water. Other contaminants may be pollutants discharged to ground water or surface water by human activities, such as pesticides and fertilizer nitrates. Disinfection by-products are the result of chlorination at a treatment facility.

The federal Safe Drinking Water Act, administered by USEPA, places on water utilities the burden to remove contaminants from drinking water sources of supply even if they are caused by polluters' discharge to ground water or surface water. For example, utilities must remove nitrates in river water supplies although caused by fertilizer runoff from farm fields.

The necessity to treat water to remove contaminants caused by others, of course, imposes additional costs on water utilities--costs which ultimately must be paid by customers in higher rates. Most of USEPA's new "strategy" would seem to be things that it should have been doing all along. However, perhaps the most encouraging point is its proposal to use its authority under other statutes to possibly control contamination caused by others.

DIFFERENT CASE, DIFFERENT RESULT ?

While some have said that the Law is a seamless web, at times it may look like a seemless web. In my post for January 17, 2010, I discussed a recent opinion of the Illinois Appellate Court for the Second District in The Village of Deerfield v. Commonwealth Edison Company. That case involved claims for recovery of damages allegedly resulting from power outages. The Court applied the doctrine of primary jurisdiction to refer the issues of quality of service to the Illinois Commerce Commission, while retaining jurisdiction over the damage claims which were stayed pending the Commission adjudication of the service issues.

Now, the Illinois Appellate Court for the First District has declined to follow the Deerfield decision in a similar case and has reached an apparent different conclusion. Sheffler v. Commonwealth Edison Company, No. 1-09-0849 (1st Dist. February 26, 2010).

Residents sued for damages allegedly resulting from power outages during storms. They alleged, among other things, that Edison failed to have infrastructure to prevent controllable outages and failed to respond on a timely manner to outages. They recited alleged damages such as spoiled food and water damage to walls, furniture, appliances, etc.

The Court noted that the Illinois Commerce Commission has general supervision over regulated public utilities and exclusive jurisdiction over claims that rates are excessive or unjustly discriminatory. The Court then found that the complaint seeks an adjudication of Edison's level of service and response to outages, issues properly within Commission, not Court, jurisdiction. The Court said that the complaint pertains to rates because it concerns claims that Edison allegedly provided inadequate or unreliable service, that the level of service and restoration efforts were substandard. The Court noted that rates were involved because the Commission could find that the rates were excessive for the service provided or may need to be increased to provide levels of service sought by the complainants.

The Court expressly declined to follow the Second District Appellate Court in the Deerfield case for the reason that it found, in Sheffler, that the complaint implicates rates, which are within the exclusive jurisdiction of the Commission. Thus, the Court upheld dismissal of the court case.

Generally, the decisions of one District Appellate Court are not binding on an Appellate Court in another District. At some point in time, the Illinois Supreme Court may have the opportunity to resolve differing Appellate Court decisions.

However, one may question whether the different conclusions reached in the Deerfield and Sheffler cases actually are a difference. In either case, the matter is to be referred to the Commerce Commission for adjudication of service issues. If the Commission were to find that service is satisfactory or conclude the service claims were without merit, claims for damages likely would be moot in either case, assuming the Commission decision would be upheld on any appeal.

Public Utilities Law Lite

The practice of public utilities law is serious business, involving elements of accounting and engineering as well as some unique legal principles. Some observers may even find water law to be rather "dry." However, to the contrary, i would like to share some lighter moments from my experience.

My first trial experience occurred as a young associate brief case carrier for my senior partner in a case involving zoning for a large water storage tank. During the hearings, he kept interrupting the judge. Finally, the judge said: "one more interruption, and I will hold you in contempt and send you to jail." My partner turned to me and exclaimed: "take over."

The local manager of a wastewater utility client was very proud of his treatment plant and the sludge it produced. One day, he came to my office with a potato that had been grown using the dried sludge as fertilizer. It was huge and weighed two pounds on the mailroom scale. It fed a family of four.

On another occasion, the manager guided me on a tour of his treatment plant. He showed me a forest of tomato plants growing in the sludge drying beds. He explained to a wide-eyed greenhorn that tomato seeds are a complete pass-through.

I was involved in a hotly contested rate hearing for a water utility. During the testimony of my client's witnesses, the hearing officer was writing feverishly on his legal pad. I felt warm and fuzzy inside, thinking we were getting our points across. During a break, I passed by the hearing officer's desk, and could not help noticing his legal pad. All I saw was a page of doodles.

I was arguing an appeal before the Appellate Court in a case involving whether the treated effluent from a wastewater treatment facility was polluting a small creek. It is common for justices to interrupt counsel with probing questions, which sometimes derail the attorney's arguments. On this occasion, I was rolling along when suddenly one of the justices interrupted me. "How did the creek get its name?", he asked. We speculated on that for several minutes before I could get back to my issues. (We won the appeal, with the name still unsettled).

In rate cases, I always like to spend time with my witnesses preparing for the hearings. A group of witnesses from outside the state flew into Illinois for this purpose. As I patiently waited for them in a hotel conference room, I learned that they instead immediately had gone to their rooms to watch the day's episode of "General Hospital."

Early in my career, I learned a very important legal principle: never visit a wastewater treatment facility in a wool suit. I always like to see a facility that is the subject of a proceeding, as it aids in understanding the facts and issues. In my first case involving wastewater, I made such a visit. Unfortunately, all my suits were made of wool. The manager of the facility opined that a well run plant smells "earthy." I was not prepared to be that "earthy" and retired my wool suit.

TO LITIGATE OR TO SETTLE, THAT IS THE QUESTION

In my prior post, I discussed a challenge facing a utility's lawyer in litigation- whether to cross-examine an adverse witness. Along similar lines, water and wastewater utilities may confront a question whether to defend claims filed against them by environmental agencies or to challenge the application of rules deemed unreasonable.

When a utility is sued by an agency for alleged non-compliance with a rule or standard, frequently there is a temptation to settle the litigation. Settlement is sought not necessarily because of admission. Rather, settlement likely may be rationalized based on the costs of litigation. However, in disregarding possible defenses or alternative remedies, a utility may actually wind up incurring greater costs for penalties and for installation of new facilities which are not necessarily needed or cost effective.

For example, some courts have held that rules and standards are arbitrary and unreasonable where not sufficiently specific or where enacted without regard to scientific data. In one case, the Illinois Supreme Court held that a state rule revision regarding wastewater water quality and effluent standards for bacteria was arbitrary and capricious. The Court stated that the state agency's action had no appreciable scientific support, and that the agency had ignored scientific testimony and had made only a limited examination of any health risks of its rules revision. (People v. Pollution Control Board, 103 Ill.2d 441 (1984)).

In another case, a wastewater utility was accused of violating operation and maintenance standards because a portion of the treatment facility went out of service due to ice breakage. The court reversed a finding of violation by the state agency. It stated that the evidence was insufficient to support a finding of violation, and that there was no evidence that any mechanical breakdown had ant adverse environmental impact. (Citizens Utilities Company of Illinois v. Pollution Control Board, 127 Ill. App.3d 504 (3rd Dist. 1984)).

Courts also have held that environmental regulations must be premised upon economic accountability based upon cost/ benefit analysis. (see Citizens Utilities Company of Illinois v. Pollution Control Board, 134 Ill. App. 3d 111 (3rd Dist. 1985); Citizens Utilities Company of Illinois v. Pollution Control Board, 216 Ill. App. 3d 629 (3rd Dist. 1991)).

Apart from defending claims or challenging regulations in court litigation, utilities may have options before federal and state administrative agencies. Under various provisions of the federal Safe Drinking water Act and the federal Clean Water Act, and comparable state statutes, utilities may seek variances, exemptions, general rules revisions, permit revisions, site specific
standards and adjusted standards. At least one court has acknowledged the importance of such options. Where improvements to a wastewater treatment facility would be a needless expenditure if a pending change in the standards were allowed, then compliance with the then current more stringent standard should be stayed. (See Citizens Utilities Company of Illinois v. Pollution Control Board, 152 Ill. App. 3d (3rd Dist. 1987)).

Customers of water and wastewater utilities will bear, in rates, the reasonable costs of environmental compliance. These costs are part of the costs of service. As more and more regulations and standards are established, more and costs will be incurred; and as more and more compliance litigation is initiated, more and more costs will be incurred. Utilities will have the responsibility to their customers and shareholders to balance unquestioned compliance with rational challenge and affordability. Intelligent decisions must be based upon a complete understanding of each situation: the applicable regulations, the reasonableness of the regulations, the underlying facts, the available alternatives and remedies, and the costs and benefits of any course of action.

TO QUESTION OR NOT TO QUESTION, THAT IS THE QUESTION

In litigation, it is tempting for a lawyer to cross-examine with vigor any witness who opposes the position of the lawyer's client. However, the challenge is to know when to cross-examine and when simply to keep quiet and to resist the urge to talk. I have some examples of this challenge from my own experience.

In a contested rate hearing, a customer of a water utility appeared to testify about the quality of water. The customer produced a glass jar allegedly containing a "sample" of the utility's water taken from the customer's faucet. The contents of the jar were cloudy and colorful. Cross-examination of the witness yielded the fact that the water had been collected in a mayonnaise jar which had not been sanitized.

In another case, a wastewater utility was accused of polluting the "stream" into which its treated effluent was discharged. The stream was a low flow, intermittent stream-meaning that unless it rained, the only flow was the discharged treated effluent. A witness for the state EPA testified that the utility's discharge was polluting the stream.

On cross-examination, the witness admitted that he never had walked the stream, and that he did not know that he took his samples downstream of the point where two storm water runoff tributaries and several large storm water drains entered the stream. Subsequent samples of these storm water sources disclosed much higher levels of contaminants than were contained in the effluent leaving the treatment facility. Thus, cross-examination was able to discredit the entire testimony of the witness due to his sampling errors.

On the other hand, I am reminded of one of my most unusual ratemaking hearings. Again, at issue was the quality of water service provided by a utility client. Several customers spoke, complaining that iron in the water was staining their laundry. Finally, a woman testified, holding up her new bra purchased that day and an older one washed in water provided by the utility. Both bras were offered as exhibits, and closer inspection invited. At the close of her speech, she threw the older bra into my face, and clutching her new one, she ran off. After I regained my composure, my only question was whether she wanted the old bra back. No, she gasped. Cross-examination was over.

POP QUIZ: HOW WELL DO YOU KNOW THE CONSTITUTION?

I save everything, it seems! Recently, I unearthed a copy of the final exam I gave my law school class in Constitutional Law in May, 1975. One of the questions still seems timely 35 years later. I reproduce it below. How would you answer the question? Hint: identify the issues and the arguments on both sides of the issues.

A Presidential commission on natural resources conducted a study which concluded that the nation's available water supply is limited, and unless water conservation is practiced, will be exhausted as early as within 15 years in some parts of the country. The commission noted that sources of water supply vary across the country and include wells, lakes, rivers, surface water retention ponds, and oceans. It found that although some water suppliers attempted to impose water conservation, generally such efforts were not successful and there was no consistency through the country. The commission recognized, however, that to be effective, conservation has to be observed by the ultimate user of the water.

Reacting to the commission's report, Congress passed, and the President signed, the Water Conservation Act. The Act established a federal Water Conservation Board (WCB) to develop for all water suppliers uniform national rates and rules for water service which would impose water conservation. Subsequently, the WCB promulgated graduated rates which increase as usage increases. For example, for the first 1,000 gallons of water used per month, the rate was $2, and for the next 1,000 gallons, the rate was $3. The WCB also developed rules to conserve water, such as a ban on sprinkling, car washing, and non-recycling swimming pools. If any water supplier failed to adopt or enforce the rates and rules developed by the WCB, the Act imposed a 20 per cent tax on the gross earnings of the supplier.

The Village of Leaky Pipe owns and operates its own municipal water supply system to provide water service to its residents. It obtains the water from large wells. The Village refused to adopt the WCB rates and rules, and the federal government assessed the 20 per cent tax. The Village sued to enjoin collection of the tax, but was unsuccessful in the lower courts. The United States Supreme Court agrees to hear the appeal. What ruling and why?

HANDSHAKE MISTAKE: THE IMPORTANCE OF WRITTEN CONTRACTS

In a "comic" strip several years ago, Lucy promised Charlie Brown to stop pulling the football away when he tried to place kick it. They shook hands on the promise. But, when he ran up to the football, she again pulled it away, and he went flying. When he complained to her, she said that a woman's handshake is not legally binding.

Utility systems operate by many contracts-with customers, vendors, construction contractors, engineers, developers, consultants, accountants, attorneys, other utilities, etc. Often times, these contracts are oral-a handshake, if you will-or if in writing, the writing is sketchy or incomplete.

Oral agreements may be workable as long as no dispute arises. However, many different kinds of disputes can arise over the terms of an oral agreement, such as price, completion date, performance standards, etc.

If a contract is not in writing, or the writing is incomplete, any dispute is a ticket to the courthouse. There, the terms of the agreement-if in fact the court concludes an agreement exists-will be determined by a judge or jury, not by the parties to the contract.

The purpose of a written contract is to fully state the intent of the parties. In such a case, any dispute will be resolved in court by review solely of the "four corners" of the document. External evidence of the parties' intent-extrinsic or parol evidence-is not to be presented.

As the Illinois Supreme Court has stated, "an agreement, when reduced to writing, must be presumed to speak the intention of the parties who signed it. It speaks for itself, and the intention which with it was executed must be determined from the language used. It is not to be changed by extrinsic evidence." Air Safety, Inc. v. Teachers Realty Corp, 706 N.E. 2d 882, 884 (1999).

However, if a contract is oral, or incomplete or ambiguous if written, extrinsic evidence generally is allowed to be presented by witnesses, prior conversations, documents, etc. J & B Steel Contractors, Inc. v. C. Iber & Sons, Inc., 642 N.E. 2d 1215, 1217 (1994). In other words, a he said/she said situation arises. The risks of such litigation and uncertainty of outcome are apparent.

What conclusions follow?

1. Water and wastewater utilities should reduce agreements to writing.

2. Written agreements should contain accurately all terms and conditions intended by the parties in unambiguous language.

3. If a written agreement is prepared by the other party, the utility should carefully read and understand all terms. This is true particularly for the so-called "boiler plate" provisions.

4. The agreement should be signed by representatives of all parties with evidence of their authority to sign.

5. The agreement should contain an "integration clause" to the effect that the contract contains the full agreement of the parties.

6. At least non-routine or complex agreements should be crafted or reviewed by counsel.

WASTEWATER DISPOSAL FOR A SIMPLER LIFE

In today's complex worldwind, we often reflect upon the "good old days," days that seem to have been of a more "simple life." At times, this seems to be true even for the apparently more mundane world of wastewater disposal. Today, thanks to the federal Clean Water Act and related regulations, there is constant concern with such subjects as biological demand, suspended solids, ammonia-nitrogen, inflow-infiltration, heavy metals, pharmaceuticals, pre-treatment, advanced treatment, etc.

When my parents had their cottage in Indiana (see my post of January 21, 2010), we did not have "indoor plumbing." Yes, we had an outhouse. It was a small, narrow structure on a small, narrow terrace below the house. It was painted white (by me) and had a tiny glass window high up the back wall for light. It was a two holer. As a kid, I long wondered why two holes--who would want to share such a private moment? From a more technical standpoint, I supposed that maybe the intent was that users would alternate so as to spread the joy. However, people tend to be creatures of habit, sitting in the same seat on a commuter train, for example.

Regardless, as a user, I did not have that much joy. I always feared that some sort of creature, a fecal gremlin, would bite my bottom. Even above ground, the inside of the outhouse always housed vicious-looking spiders waiting to pounce on me in an unguarded moment. At night, it was even more scarey. One had to bring a lantern or flashlight, stumbling over tree roots along the path and wondering who or what would be waiting for me in the dark inside.

On a more positive note, one could sit inside, prop open the door, and view the lake. Oh look, there goes Mr. Nelson in his 12 foot rowboat powered by a 5 horsepower Sea King motor putting by until seaweed killed his progress right opposite my door. "Hi" he yelled. So much for the pastoral.

Maybe the "simple life" was not all that simple.

Obviously, today outhouses a more a curiosity than a necessity. Some persons have collected outhouses much as persons have collected stamps or coins. Others have written photogenic books about them.

A few years ago, my wife and I bought an outhouse door from a shop in Kentucky. It was painted blue, had all the hardware, and had a quarter moon cutout near the top. The door sold immediately in my wife's booth at a Wisconsin antique center. If an outhouse door is an antique, what does that make me? I am flushed with answers.

REFUSAL TO EXTEND MUNICIPAL WATER SYSTEM UPHELD

A federal appeals court has upheld a refusal by a village to extend its municipal water system to one of its subdivisions served by an investor owned water company. Srail v. Village of Lisle, Nos. 08-3206 and 09-1049 Cons. (December 7, 2009 Ct. App. 7th Cir.)

The complaint alleged, among other things, that the village violated the equal protection clause of the 14th Amendment of the U.S. Constitution by refusing to extend its water system into plaintiffs' residential subdivision. That subdivision is served, and has been served for many years, by Illinois American Water Company and its predecessors, an investor owned public utility company.

The federal District Court held for the village as to the equal protection claim and declined to consider a state court claim. The 7th Circuit Court of Appeals affirmed.

In considering the alleged discrimination claim, the Court of Appeals found that plaintiffs were not part of a suspect class and that no fundamental right was violated. The Court cited two cases: there is no positive entitlement to fire protection. Jackson v. Byrne, 738 F.2d 1443,1446 (7th Cir. 1984); the right to continued municipal water service is not a fundamental right. Magnuson v. City of Hickory Hills, 933 F.2d 562, 567 (7th Cir. 1991). Therefore, the Court concluded, the standard for review of the District Court decision is whether the village's action has a rational basis.

The Court found that the village's decisions to extend its water system to subdivisions in the village is based upon individual circumstances, such as groundwater contamination and profitability of serving a particular subdivision. Apparently none of the subdivisions to which the village had extended its systems was being served by an investor-owned water company. In the instant case, the Court found that the village determined there was not enough interest to justify the cost that would have to be incurred to extend its water system. The decision had a rational basis according to the Court.

Absent special circumstances such as a provision in a franchise agreement, in many states including Illinois a municipality is free to invade the service territory of an investor owned water public utility. Such an invasion could be by means of condemnation or by constructing a duplicate system and competing for customers. However, as one may suspect, any such municipal decision would have economic impacts not only on the municipality but also on the customers it seeks to acquire. Ultimately, those customers will have to bear, in rates or otherwise, the burden of the capital costs incurred by the municipality's action.

Interestingly, one other consideration is relevant: the ongoing trend toward privatization of municipal water systems by investor owned water companies, varying from outright acquisition to management or operating contracts. Again, economic considerations are an important factor.

FRESH WATER: ARE THE OLD GREEN PUMPS DISAPPEARING?

In 1950, my parents purchased a cottage on a small Indiana lake. The house dated to the beginning of the 20th century; and both it and its contents were about as "shabby chic" as possible. An endearing feature was the kitchen. At the old sink was a hand pump. It had been painted green ages ago, but the paint had worn off on the handle due to what must have been thousands of pumps over the years. The pump sat on a well pipe that invaded the kitchen floor. The water was wonderful-cold, crisp and endless- all for a push on the handle. The green hand pump and its water became a central feature of every visit to the cottage, and more satisfying than a fudgesicle from the Royal Blue grocery on a steamy summer day.

After my parents passed away, and before I could secure and sell the cottage, it was vandalized extensively, doors and windows broken, furnishings smashed or stolen. But in all that chaos, the old green hand pump stood like a timeless sentinel, producing wonderful, cold, crisp and endless water.

In the world today, the green hand pumps and the fresh water they make available are becoming scarce commodities, as demand seems to be running away from supply. In the United States, aquifers and water bodies are being depleted in quantity or quality by irrigation, urbanization, mining for natural gas and coal, etc.

Internationally, many countries do not have adequate supplies of safe, fresh water. Water For People is an organization that assists people in developing countries by supporting locally sustainable drinking water resources and sanitation facilities. It estimates that, world-wide, 884 million people do not have safe drinking water; 2.5 billion are without adequate sanitation facilities; and each day 6,000 people, mostly children, die from water related illness.

In the United States, as well as in other countries, there is a growing awareness of the imperative need to conserve fresh water resources. We can expect expanded governmental regulation of water appliance and plumbing related efficiencies; restrictions on water use; higher rates for water and wastewater service; rate structures which discourage demand; and reuse or recycling of wastewater for domestic use. These and other measures are being developed and imposed so as to conserve water and help assure that old green hand pumps continue to flow.

Claims For Damages Allegedly Resulting From Utility Service

A recent Illinois Appellate Court decision has addressed claims for civil damages alleged to result from electric utility service outages. The Village of Deerfield v. Commonwealth Edison Company, No. 2-08-0917 (Ill. App. 2d Dist. December 15, 2009).
This decision should be of interest to both investor-owned and municipal-owned water and wastewater utilities.

The Village's complaint, in separate counts, alleged that outages in electric service resulted from breaches of duties under the utility's franchise agreement with the Village and under the state Public Utilities Act. The complaint sought recovery of civil damages for damages allegedly suffered by residents during outages, such as spoiled food, purchase of generators and sump pumps, temporary housing, and extra policing.

The Appellate Court first resolved a jurisdictional issue. The utility is regulated by the Illinois Commerce Commission, which has exclusive jurisdiction over allegations of excessive rates or unjust rate discrimination. THe Court concluded that the circuit court has jurisdiction over the claims at issue because they allege deficient performance, not excessive or discriminatory rates. It said that the question of jurisdiction turns on the nature of the relief sought--in this case, claims for ordinary civil damages.

However, the Court held that the doctrine of primary jurisdiction should apply. This doctrine is applicable when a regulatory administrative agency has expertise to resolve certain issues or when there is a need for uniform administrative standards. Noting that both reasons applied here, the Court said that the circuit court should defer to the Illinois Commerce Commission to consider issues related to quality of service, given the technical nature of the data involved. Under primary jurisdiction, the court proceeding is stayed pending the Commission's action.

The Appellate Court then addressed the question whether the damages sought are recoverable under the Moorman doctrine. In Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 91 (1982), the Illinois Supreme Court held a "plaintiff cannot recover for solely economic loss under the tort theories of strict liability, negligence and innocent misrepresentation." Thus, this doctrine bars " ' damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits-without any claim of personal injury or damage to property.' " 91 Ill.2d at 82.

In the Deerfield case, the Appellate Court held that the Moorman economic loss rule barred the claims for the costs of temporary housing and purchase of back-up generators and battery-operated sump pumps because they were purely economic losses. However, the Court stated that the rule did not bar claims for lost perishable inventory due to outages or the costs of clean-up and mold remediation due to flooded basements, as actual physical damage to property was alleged.

Damage claims against regulated water and wastewater utilities, related to service issues, likely would be treated in a manner similar to the Deerfield decision: application of the primary jurisdiction and Moorman doctrines. Unregulated municipal utilities would face service issues damage claims fully in the circuit court, which can become a complex evidentiary matter for any trial judge or jury. Presumably, the Moorman doctrine still would apply to these utilities.

SAFE DRINKING WATER: A BEGINNING

There is an old saying that "you never miss the water until the well goes dry." In the United States, we take for granted today that when we open a faucet safe drinking water will flow. However, until about one hundred years ago, that was not always the case.

In the Winter 2010 issue of The Bent, a magazine of Tau Beta Pi, the national engineering honor society, of which I am a member, Trudy E. Bell offers insight into the origins of modern water purification. (Bell, "Engineers and Enteric Fever:Designing Against Disease," p. 13, et seq.)

Typhoid fever was prevalent in this country in the late 1800s. In 1908, Whipple, a consulting engineer, wrote that "infected water probably caused more typhoid fever than all other causes combined." (Bell, p.14) During 1890-92, approximately 4,500 people died from typhoid fever in Chicago, and the number of cases is estimated at approximately 50,000. Comparable rates were experienced in several other cities. (Bell, p.15)

Typhoid fever is caused by a bacteria of the salmonella family. It results from human ingestion of fecal matter from infected humans. At the time, public water supplies were taken without treatment from lakes and streams to which raw sewage was discharged.

Two engineering discoveries in that period enabled purification of drinking water: first the discovery that intermittent slow-sand filtration both clarified water and removed 99% of bacteria in water. The second discovery, a few short years later, was chlorination, a process to disinfect water quickly adopted by public water supplies and still commonly in use today. (Bell, p. 15-17)

After these discoveries, Whipple wrote in 1921 that "the typhoid fever death rates [in cities] are becoming so low that they can no longer be regarded as sufficient to measure the healthfulness of a water supply." (Bell, p.17)

Today, water utility systems, as well as wastewater utility systems, use a variety of filtration and disinfection methodologies to treat drinking water and discharges of wastewater. Further, Congress has intervened with two major legislative actions to facilitate safe water: the federal Safe Drinking Water Act (42 U.S.C. 300f, et seq.) and the federal Clean Water Act (33 U.S.C. 1251, et seq.) These statutes impose legal compliance requirements on water and wastewater utility systems respectively.

NO SUCH THING AS FREE WATER

In the frontier days of the United States, perhaps drinking water really was "free". One can picture from movie westerns a mountain man fur trader or cowboy dipping a tin cup in a mountain stream without apparent ill effects. Today, however, the notion that fresh water is "free" and that there should be no charge for it is a total misconception. The fact is that none of the water we drink or use in commercial activities or use to fight fires is free.

Public utility water and wastewater systems, whether municipal, investor-owned or non-profit, all provide a service to their users. In the case of drinking water, they withdraw raw water from the ground or a surface water source (lake or river), treat the water to remove contaminants, and deliver safe water in volumes and pressures to satisfy demands of homes and businesses. In the case of wastewater, they collect, treat and discharge sewage.

All aspects of water service and wastewater service impose costs which must be recovered in the prices of these services. If these costs are not recovered in the price of service, the service provider will not be long in business or is subsidizing service from a source other than the service users.

Accordingly, as a general principle of law, water utilities are entitled to recover their reasonable costs of service. And they should do so in their rates charged users. However, not all utilities necessarily do this, for political or other reasons. That can lead to infrastructure and other deficiencies or cross-subsidization by other customers. (More on that another time).

Therefore, the common misconception that water is free because it in the ground or a water body should be corrected by the understanding that a user should and must pay for the costs of service. Even someone who drills a water well or buys a bottle of water pays a price for the costs incurred. THere is no such thing as free water.