AN ACT Relating to domestic water suppliers; adding new sections to chapter 43.20 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds the best interest of the citizens of the state will be served if domestic water suppliers who fail to follow department regulations constituting a violation of health and safety standards adopted pursuant to RCW 43.20.050 remain in operation and continue providing water service, assuming a suitable replacement operator may be found and deficiencies corrected in an expeditious manner.

NEW SECTION. Sec. 2. (1) The department, upon a finding that a domestic water supplier has violated health and safety standards, shall issue an order to the operator directing that remedial action be taken to conform with such standards.

(2) If an operator fails to comply with the order issued pursuant to this section within ninety days, the department may proceed to bring an injunction to place the operation in receivership pursuant to sections 3 through 13 of this act.

NEW SECTION. Sec. 3. In order to facilitate continued operation of a domestic water system, the department may petition the superior court of the county in which the system is located, or the superior court of Thurston county, to appoint a receiver to assume operation until the system is brought into compliance. The current or former operator shall be made parties to any receivership proceeding instituted under this section.

NEW SECTION. Sec. 4. Upon appointment of a receiver or at such a time as is specified by the court, the current or former operator and the managing agent thereof, if any, shall be divested of possession and control of the water system in favor of the receiver who shall have full responsibility and authority to continue operation of the system. The receiver may perform all acts reasonably necessary to carry out the purposes of receivership, including but not limited to the following: To remedy violations of state and federal laws and regulations governing operation of the system; to hire, direct, manage, and discharge all consultants and employees, including the administrator of the system; to receive and expend in a prudent manner all revenues and financial resources of the system; and to make all repairs and replacements needed for health and safety, provided that expenditures for repairs or replacements in excess of five thousand dollars shall require approval of the court which shall expedite approval or disapproval for such expenditures. Revenues relating to services provided by the current or former operator, and available operating funds belonging to such operator, shall be under the control of the receiver to the extent necessary to satisfy facility debts incurred before the receiver's appointment. The receiver shall consult the court in cases of extraordinary or questionable debts incurred prior to his or her appointment and shall not have the power to close the system or sell any assets of the system without prior court approval. Priority shall be given to debts and expenditures directly related to providing water service.

NEW SECTION. Sec. 5. If the water system is providing service to customers, the receiver shall become the contractor for the duration of the receivership period and shall assume all reporting and other responsibilities required by applicable laws and regulations. The receiver shall be responsible for refund of rate payments in excess of costs for the receivership period.

NEW SECTION. Sec. 6. No seizure, foreclosure, or interference with water system revenues, supplies, real property, improvements or equipment is allowed for the duration of the receivership without prior approval of the court.

NEW SECTION. Sec. 7. A receivership shall terminate upon expiration of the term set by the court, unless extended or reinstated by the court, or upon possession and control of the water system by a licensed replacement operator, or upon order of the court. The receiver shall render to the court a full or partial accounting of acts performed or expenditures made during the receivership, if requested by the court. Nothing in this section relieves a court-appointed receiver from the responsibility of making all reports and certifications to the department required by law and regulation relating to the receiver's operation of the subject water system.

NEW SECTION. Sec. 8. At least sixty days prior to the effective date of any change of ownership, change of operating entity, or change of management of a water system, the current operating entity shall notify separately and in writing each customer of the system, of the proposed change. The notice shall include the identity of the proposed new owner, operating entity, or managing entity and the names, addresses, and telephone numbers of department personnel where comments regarding the change may be directed. If the proposed new owner, operating entity, or managing entity is a corporation, the notice shall include the names of all officers, the registered agent in the state of Washington, and all stockholders with a five percent or greater ownership interest. If the proposed new owner, operating entity, or managing entity is a partnership, the notice shall include the names of all general and limited partners.

NEW SECTION. Sec. 9. A petition for receivership shall include the names of one or more suitable candidates for receiver who have consented to assume operation of the water system. Candidates shall be drawn from a list of interested and qualified individuals to be maintained by the department. If a receiver is appointed, he or she may be drawn from the list or not; however, any appointee must have experience in the provision of water service and a history of satisfactory operation of a water system. Preference may be granted to individuals expressing an interest in permanent operation of the system.

NEW SECTION. Sec. 10. Upon receipt of a petition for receivership, the court shall set the matter for hearing within fourteen days. However, if the petition and verifying affidavit executed by an appropriate departmental official allege an immediate and serious danger to residents constituting an emergency, the court shall set the matter for hearing within three days and may appoint a receiver ex parte upon the strength of such petition and affidavit pending a full evidentiary hearing which shall be held within fourteen days after receipt of the petition.

NEW SECTION. Sec. 11. Upon agreement of the candidate selected by the court to the terms of receivership and any special instructions of the court, the court may appoint such person receiver of the water system if the court determines it is likely a permanent operator will soon be found and deficiencies will be corrected expeditiously without undue risk of harm to customers. A receiver shall be appointed for a term to be set by the court not to exceed one year; however, the term may be extended upon application to the court by agreement of the parties or for good cause shown.

NEW SECTION. Sec. 12. If a receiver is appointed, the court shall set reasonable compensation for the receiver to be paid from operating revenues of the water system and shall require the receiver to provide a surety bond in an amount determined by the court to insure satisfactory discharge of receivership duties and court instructions. The department may revise the water system's rate, consistent with rate principles contained in this chapter and rules adopted under this chapter, if revision is necessary to cover the receiver's compensation and other reasonable costs associated with the receivership and transition of control. Rate revision may also be granted if necessary to cover start-up costs and costs of repairs, replacements, and additional staff needed for customer health and safety, provided that the property and return on investment components of the rate shall be established for the receiver consistent with the reimbursement principles contained in this chapter. The department may also expedite the issuance of necessary licenses, contracts, and certifications, temporary or otherwise, necessary to carry out the purposes of receivership.

If the subject water system is owner-operated immediately prior to the receivership effective date or is lease-operated but the lease expires by its terms on or before the receivership effective date, the court shall establish reasonable rental payments to be made by the receiver to the owner for the duration of the receivership period. If the water system is lease-operated immediately prior to receivership, rental payments from the receiver to the owner shall be those specified in the existing lease. If the existing lease expires by its terms during the receivership period, the court shall establish reasonable rental payments for the remainder of the receivership period.

NEW SECTION. Sec. 13. A customer of a water supply system may bring an action for an injunction against the department or the water system operator to require compliance with the provisions of RCW 43.20.050, rules adopted pursuant to chapter 43.20 RCW, or the provisions of sections 3 through 12 of this act.

NEW SECTION. Sec. 14. Sections 1 through 13 of this act are each added to chapter 43.20 RCW.

NEW SECTION. Sec. 15. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 16. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.