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.