Water and wastewater utilities-both municipal-owned and investor owned- are subject to regulatory agency dictates, policies, rule makings and adjudications. While in many states municipal -owned utility rates may not be set by a utility commission, all rates of all water and wastewater utilities indirectly become regulated by actions of USEPA and state environmental agencies. For example, when USEPA establishes MCL standards or treatment techniques, compliance by utilities imposes costs which must be recovered in rates charged the users of water and wastewater service.
In the case of water utilities, compliance costs often are driven by contamination to sources of water supply caused by polluters. However, utilities and their customers are charged with the financial burden of removing such contamination in order to use the source of supply. In other words, regulatory compliance imposes both operating and capital costs on utilities for both monitoring and treatment. Pursuing the causes of contamination, however, may not be simple. In one case, a group of water systems sued a manufacturer of a herbicide to recover costs to monitor and remove the herbicide from their source of supply. The court dismissed the case, finding that the utilities had not sought relief from the MCL for the herbicide and had not exhausted their administrative remedies. (Iberville Parish Water Works District No. 3 v. Novartis Crop Protection Inc., 48 ERC 1905 (U.S.Dist Ct., S.Dist Ala.1999)).
Are there limitations on regulatory authority over water and wastewater utilities? Frequently, when court challenges to an agency rule are initiated, courts defer to the agency itself, citing alleged agency "expertise" or the agency's "primary jurisdiction" over the subject matter. However, experience indicates that such claims of "expertise" can be misplaced.
Sometimes, however, challenge to regulation can be successful. For example, in one case a federal court of appeals held that regional water supply utility did not have to comply with USPEPA's filtration requirement because the rule would impose costs substantially in excess of benefits , given that less costly alternatives were available to provide safe water. Thus, the court, appropriately, became the regulator of the regulators in this case. (U.S. v. Massachusetts Water Resources Authority, 256 F.3d 36 (1st Cir, 2001)).
We live in a highly regulated culture. A possible risk is that regulatory agencies may have agendas to take actions which Congress or state legislatures have declined to approve or are unable to approve. Administrative agencies have only delegated power. However, at times their action may approach what Justice Cardozo once called the tendency of a principle to extend itself to the limit of its logic.
In a real way, the utilities themselves become regulators of the regulators by pursing administrative and judicial remedies for relief from rules which may impose unreasonable costs upon the utilities and their customers.
Fresh water is essential for life and commerce. However, its scarcity is resulting in increased regulation of water resources and their corollary, wastewater. This blog will discuss developments in such regulation. It will be my clepsydra measured by the flow of water law.
Sunday, June 12, 2011
Saturday, May 28, 2011
WATER USE LOWER, WATER RATES HIGHER?
One of the current "hot" topics in the drinking water industry is the declining water use that many water utilities are experiencing. (For example, see Hunter, et al "Declining Residential Water Use Presents Challenges, Opportunities," AWWA Outflow, May, 2011, pp. 18-20).
"Cause" for declining water use is attributed to federal law (Energy Policy and Conservation Act of 1992 and Energy Independence and Security Act of 2007), which has resulted in efficiency standards for fixtures and appliances such as toilets, faucets, showers, dishwashers and washing machines. Other presumed causes include declining number of occupants per residential unit, conservation programs and rate increases. Two other potential causes are foreclosures translating into empty homes and older water meters which do not fully register use.
While reductions in water use can result in reductions to certain utility operating costs, obviously not all costs of service are variable. Water utilities may have incurred substantial fixed costs for infrastructure, which as time goes by must be replaced and upgraded. Further, a decline in usage does not necessarily translate into a comparable, if any, decline in demand. Treatment, storage and distribution assets must be able to satisfy peak demand periods.
Two other factors should be considered. New regulatory requirements continue to impose increased operating and infrastructure costs on water utilities, which in turn create higher costs of service to be recovered in rates. Further, water utilities may have incurred financing costs for current facilities, which costs must be recovered in rates and paid.
The paradox, therefore, is that a decline in customer usage does not necessarily correlate with a corresponding decline in customer water bills. Even if some costs of service are mitigated, other costs continue or may even increase. Neither utilities nor their customers should assume that water use efficiency means rate relief. An efficient utility will carefully monitor its revenue requirements, adjust rates to fully recover costs of service, and keep customers informed.
"Cause" for declining water use is attributed to federal law (Energy Policy and Conservation Act of 1992 and Energy Independence and Security Act of 2007), which has resulted in efficiency standards for fixtures and appliances such as toilets, faucets, showers, dishwashers and washing machines. Other presumed causes include declining number of occupants per residential unit, conservation programs and rate increases. Two other potential causes are foreclosures translating into empty homes and older water meters which do not fully register use.
While reductions in water use can result in reductions to certain utility operating costs, obviously not all costs of service are variable. Water utilities may have incurred substantial fixed costs for infrastructure, which as time goes by must be replaced and upgraded. Further, a decline in usage does not necessarily translate into a comparable, if any, decline in demand. Treatment, storage and distribution assets must be able to satisfy peak demand periods.
Two other factors should be considered. New regulatory requirements continue to impose increased operating and infrastructure costs on water utilities, which in turn create higher costs of service to be recovered in rates. Further, water utilities may have incurred financing costs for current facilities, which costs must be recovered in rates and paid.
The paradox, therefore, is that a decline in customer usage does not necessarily correlate with a corresponding decline in customer water bills. Even if some costs of service are mitigated, other costs continue or may even increase. Neither utilities nor their customers should assume that water use efficiency means rate relief. An efficient utility will carefully monitor its revenue requirements, adjust rates to fully recover costs of service, and keep customers informed.
Tuesday, May 17, 2011
SEWAGE: POWER FROM THE PEOPLE
In the quest for alternative sources of energy, domestic wastewater-human sewage-is becoming an electricity magnet for researchers. In particular, gases and other waste products extracted from the wastewater treatment processes are being studied as means to generate electricity--by inclusion in fuel cells, by turning generators, etc. The objective is not confined to powering a treatment plant, but extends to adding electricity to the grid.
Even the mere flow in sewers is being looked at for production of hydro power. One inventor has come up with the idea of placing a small generator in a house sewer pipe. When a toilet is flushed, electricity would be generated to light the house or television set. However, such a concept may be practicable only during television commercial breaks or Super Bowl half time.
One researcher has estimated that one gallon of wastewater contains enough energy to light up a 100 watt bulb for 5 minutes. Unfortunately, federal law will prohibit production of 100 watt light bulbs after 2011.
Waste to energy is not a new idea. In the frontier west. pioneer homesteaders heated and cooked by burning buffalo chips. I recall a grade school science experiment by which electricity was produced from a potato. Now that the federal government wants to prohibit or limit the serving of potatoes in government subsidized school lunch programs, perhaps potatoes could be used to generate electricity for the grid instead of the griddle.
Using wastewater as an energy source perhaps should be tempered by some reality. It takes energy to build and operate a wastewater treatment plant and tributary sewer mains. Perhaps a more efficient wastewater energy source is the old fashioned outhouse. It requires minimal energy to build. While it does not generate electricity, it also does not use electricity. By saving electricity, it reduces demand on the grid. Has technology gone full circle?
Even the mere flow in sewers is being looked at for production of hydro power. One inventor has come up with the idea of placing a small generator in a house sewer pipe. When a toilet is flushed, electricity would be generated to light the house or television set. However, such a concept may be practicable only during television commercial breaks or Super Bowl half time.
One researcher has estimated that one gallon of wastewater contains enough energy to light up a 100 watt bulb for 5 minutes. Unfortunately, federal law will prohibit production of 100 watt light bulbs after 2011.
Waste to energy is not a new idea. In the frontier west. pioneer homesteaders heated and cooked by burning buffalo chips. I recall a grade school science experiment by which electricity was produced from a potato. Now that the federal government wants to prohibit or limit the serving of potatoes in government subsidized school lunch programs, perhaps potatoes could be used to generate electricity for the grid instead of the griddle.
Using wastewater as an energy source perhaps should be tempered by some reality. It takes energy to build and operate a wastewater treatment plant and tributary sewer mains. Perhaps a more efficient wastewater energy source is the old fashioned outhouse. It requires minimal energy to build. While it does not generate electricity, it also does not use electricity. By saving electricity, it reduces demand on the grid. Has technology gone full circle?
Tuesday, May 10, 2011
DO "INSIDE-OUTSIDE" RATE DIFFERENTIALS CONSTITUTE UNFAIR DISCRIMINATION?
Many municipal-owned water and wastewater utilities have maintained "inside-outside" rate differentials. In such situations, customers of such systems located outside of municipal boundaries are charged higher rates than rates charged municipal residents of the same class. Often the outside rates are a multiple of the inside rates.
Such inside-outside rate differentials clearly constitute discrimination, which can be justified only if the costs to serve outside customers are shown to be higher than the costs to serve inside customers of the same class. Rate differentials can be supported only by cost of service studies. See Massachusetts Municipal Wholesale Electric Company v. City of Springfield, 726 N.E.2d 973 (Mass. App. 2000); Village of Niles v. City of Chicago, 558 N.E.2d 1324 (Ill. App.1990). "[A}though not obligated to serve non-residents in the absence of a contractual relationship, a municipality is prohibited from discriminating unreasonably in rates or manner of service when it elects to serve non-residents." Schroeder v City of Grayville, 520 N.E.2d 1032 (Ill. App. 1988).
However, at least two cases have held that the burden of proof is on the outside customer to show that the rates charged it do not reasonably reflect actual costs of service. See City of Novi V. City of Detroit, 446 N.W.2d 118 (Mich. 1989; Farley Neighborhood Association v. Speedway, 765 N.E.2d 1226 (Ind. 2002).
Some conclusions may follow:
1. Water and wastewater rates, and their design, should be based upon full cost of service studies-regardless whether inside or outside rates.
2. In setting rates, applicable rate-making principles should be followed per the law, bond ordinances and AWWA manuals.
3. Outside customers may have the burden to prove their rates are unreasonable, which effort may involve costly litigation and expert witnesses.
Such inside-outside rate differentials clearly constitute discrimination, which can be justified only if the costs to serve outside customers are shown to be higher than the costs to serve inside customers of the same class. Rate differentials can be supported only by cost of service studies. See Massachusetts Municipal Wholesale Electric Company v. City of Springfield, 726 N.E.2d 973 (Mass. App. 2000); Village of Niles v. City of Chicago, 558 N.E.2d 1324 (Ill. App.1990). "[A}though not obligated to serve non-residents in the absence of a contractual relationship, a municipality is prohibited from discriminating unreasonably in rates or manner of service when it elects to serve non-residents." Schroeder v City of Grayville, 520 N.E.2d 1032 (Ill. App. 1988).
However, at least two cases have held that the burden of proof is on the outside customer to show that the rates charged it do not reasonably reflect actual costs of service. See City of Novi V. City of Detroit, 446 N.W.2d 118 (Mich. 1989; Farley Neighborhood Association v. Speedway, 765 N.E.2d 1226 (Ind. 2002).
Some conclusions may follow:
1. Water and wastewater rates, and their design, should be based upon full cost of service studies-regardless whether inside or outside rates.
2. In setting rates, applicable rate-making principles should be followed per the law, bond ordinances and AWWA manuals.
3. Outside customers may have the burden to prove their rates are unreasonable, which effort may involve costly litigation and expert witnesses.
Tuesday, April 26, 2011
IT'S NOT YOUR ANCESTOR'S CESSPOOL
Some travelers claim that one does not visit England for the food-unless one craves porridge, baked beans on toast, or mystery sausage. On our recent London excursion, we were surprised to discover a television series called "Britain's Best Dish." In our excitement, we immediately switched off Coronation Street for what could become a replacement for Masterpiece Theatre. We were delighted, if not shocked, to see just folk competing to produce attractive, innovative and edible starters, main dishes and puddings. ( For non-anglophiles, puddings are desserts-not sure why they are not called "finishers" to balance with starters.)
But, television can be a many splendored thing. After "Best Dish", we watched a new series called "Filthy Cities". Appropriately, the first program was about London.
The focus was on London in medieval times-somewhat disappointing for our current visit and our appetite for a "best dish." Medieval times in in London, of course, were not romantic, as some novels may portray. They were times of polluted drinking water, no safe wastewater disposal and disease. Indeed, the plague killed about one half of London's population. Garbage, human and animal waste layered the streets with a muck that required boots to navigate or were tossed into the Thames, which also served as a source of drinking water. The images of filth in a filthy medieval city were horrific. No wonder the average life expectancy was about 35 years.
We may feel that some of our cities still are "dirty." However, we are fortunate today to live in a culture that both values and enables safe drinking water and safe wastewater disposal-made possible by innovative engineering advancements created from the necessity to extricate society from its filth. Also bear in mind that safe drinking water and safe wastewater disposal are removed from medieval times by only the last 100 years or so.
But, television can be a many splendored thing. After "Best Dish", we watched a new series called "Filthy Cities". Appropriately, the first program was about London.
The focus was on London in medieval times-somewhat disappointing for our current visit and our appetite for a "best dish." Medieval times in in London, of course, were not romantic, as some novels may portray. They were times of polluted drinking water, no safe wastewater disposal and disease. Indeed, the plague killed about one half of London's population. Garbage, human and animal waste layered the streets with a muck that required boots to navigate or were tossed into the Thames, which also served as a source of drinking water. The images of filth in a filthy medieval city were horrific. No wonder the average life expectancy was about 35 years.
We may feel that some of our cities still are "dirty." However, we are fortunate today to live in a culture that both values and enables safe drinking water and safe wastewater disposal-made possible by innovative engineering advancements created from the necessity to extricate society from its filth. Also bear in mind that safe drinking water and safe wastewater disposal are removed from medieval times by only the last 100 years or so.
Tuesday, March 15, 2011
PROVIDERS OF RELIABLE WATER SERVICE
When we turn on a faucet, we expect a strong flow of clear, safe water. We understand that such water is delivered to our faucet through a system of underground pipes and some kind of treatment facility. Reliable, safe water service, however, requires more than unseen infrastructure. Behind that infrastructure are numerous unseen men and women who design, install, operate and maintain the pipes, pumps and treatment facilities that make reliable water service possible. Perhaps we tend to take these people for granted much as we may take good water service for granted.
I want to highlight four of these people. I have worked extensively with each through my career and have learned much from each of them.
Bill was a civil engineer and head of a one hundred year old engineering firm. He worked at a roll top desk from 1880, and his office had the aura of time standing still to match. However, Bill was an expert in water system design. He designed water facilities for major cities as well as small communities. He lectured on water issues not only in the united States but internationally as well. Bill also was an expert on ratemaking. In one of my trials, he deftly explained complex rate concepts to the judge in an understandable manner.
Bob also was a civil engineer, but he followed a different path that led him to becoming president of a large investor-owned water utility. Bob took great pride in the quality of the utility's operations and the quality of the water it provided. His water earned several taste awards. Bob worked hard to foster and maintain good relations with the communities he served. For example, in one rate case field hearing held by the regulatory agency to hear customer concerns, no customers even attended. Bob also successfully sought to bring his good water service to nearby communities whose own water systems had become inadequate or unreliable. Indeed, one of his pipe lines is some 30 miles in length.
Phil was the general manager of a regional water supply public agency. During his long career with his agency, he facilitated expansion of the water treatment facilities, development of a new source of supply, computerized operations to generate operational efficiencies, and maintained water quality that met applicable standards. Phil had great faith in people, and he managed his small staff consistent with that faith.
Ed was an accountant for a large investor-owned water utility having systems in several states. He developed financial and accounting statements to show cost of service requirements for rate cases as well as for operations. To be able to provide reliable and efficient water service, a utility must have an understanding of its costs to provide such service and its corresponding revenue requirements. Ed had an uncanny ability to grasp the meat of an economic or financial issue and to demonstrate solutions through his accounting statements and testimony.
What do these men all have in common? They dedicated their careers to providing safe, reliable water service. They were gentlemen, who treated others with respect. They have passed but are not forgotten.
I want to highlight four of these people. I have worked extensively with each through my career and have learned much from each of them.
Bill was a civil engineer and head of a one hundred year old engineering firm. He worked at a roll top desk from 1880, and his office had the aura of time standing still to match. However, Bill was an expert in water system design. He designed water facilities for major cities as well as small communities. He lectured on water issues not only in the united States but internationally as well. Bill also was an expert on ratemaking. In one of my trials, he deftly explained complex rate concepts to the judge in an understandable manner.
Bob also was a civil engineer, but he followed a different path that led him to becoming president of a large investor-owned water utility. Bob took great pride in the quality of the utility's operations and the quality of the water it provided. His water earned several taste awards. Bob worked hard to foster and maintain good relations with the communities he served. For example, in one rate case field hearing held by the regulatory agency to hear customer concerns, no customers even attended. Bob also successfully sought to bring his good water service to nearby communities whose own water systems had become inadequate or unreliable. Indeed, one of his pipe lines is some 30 miles in length.
Phil was the general manager of a regional water supply public agency. During his long career with his agency, he facilitated expansion of the water treatment facilities, development of a new source of supply, computerized operations to generate operational efficiencies, and maintained water quality that met applicable standards. Phil had great faith in people, and he managed his small staff consistent with that faith.
Ed was an accountant for a large investor-owned water utility having systems in several states. He developed financial and accounting statements to show cost of service requirements for rate cases as well as for operations. To be able to provide reliable and efficient water service, a utility must have an understanding of its costs to provide such service and its corresponding revenue requirements. Ed had an uncanny ability to grasp the meat of an economic or financial issue and to demonstrate solutions through his accounting statements and testimony.
What do these men all have in common? They dedicated their careers to providing safe, reliable water service. They were gentlemen, who treated others with respect. They have passed but are not forgotten.
Tuesday, March 1, 2011
FISHING IN RIVERS IN THE SKY
We are familiar with the "usual suspects" which have become our sources of water supply-surface waters such as lakes and rivers and ground waters of various depths. Currently, science appears to be focusing on "rivers in the sky"--atmospheric bands of water vapor which induce or affect water supply, flooding and the earth's water cycle when they drop their moisture load.
"Like freight trains loaded with water vapor, atmospheric rivers are long, narrow bands whose winds funnel huge amounts of moisture through the sky." (Science News, February 26, 2011, p.20). These rivers can discharge large quantities of rain or snow.
The sky rivers appear to arise due to temperature differences between the tropics and the poles, especially in winter. A strong temperature difference can cause low pressure storms to spin off, with winds within such storms creating an atmospheric river. (Science News, p.21).
It appears that research is being directed toward predictability of such rivers as well as a better understanding of their cause and nature. No doubt, there is concern not only as to flooding effects, but also the potential for replenishment of surface water sources of supply for water service. For further information on NOAA research studies, see www.esrl.noaa.gov/psd/atmrivers
"Like freight trains loaded with water vapor, atmospheric rivers are long, narrow bands whose winds funnel huge amounts of moisture through the sky." (Science News, February 26, 2011, p.20). These rivers can discharge large quantities of rain or snow.
The sky rivers appear to arise due to temperature differences between the tropics and the poles, especially in winter. A strong temperature difference can cause low pressure storms to spin off, with winds within such storms creating an atmospheric river. (Science News, p.21).
It appears that research is being directed toward predictability of such rivers as well as a better understanding of their cause and nature. No doubt, there is concern not only as to flooding effects, but also the potential for replenishment of surface water sources of supply for water service. For further information on NOAA research studies, see www.esrl.noaa.gov/psd/atmrivers
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