Regulation of Public Water Systems. The State Board of Health adopts rules, administered by the Office of Drinking Water (ODW) under the Department of Health (DOH), that pertain to the operations of public water systems. Local governments are authorized to establish operating permit requirements for public water systems, provided these requirements receive approval from the DOH and lead to an enhanced level of service for the public water system.

ODW has received delegated primary authority from the United States Environmental Protection Agency to administer and enforce federal regulations for primary drinking water requirements from the federal Safe Drinking Water Act. ODW may impose penalties for noncompliance with public water system laws and regulations, and may direct water system owners and operators to resolve known or suspected public health threats. These regulations establish primary drinking water requirements for larger public water systems, known as group A public water systems. Group A public water systems are public water systems that:

• have 15 or more service connections;
• serve an average of 25 or more people per day for at least 60 days within a calendar year, regardless of the number of service connections; or
• serve 1000 or more people for two or more consecutive days.

Group B public water systems encompass all other public water systems. For group B public water systems, there is an additional requirement that the local operating permit requirements must be at least as strict as the state regulations. The rules set drinking water standards and requirements for monitoring, reporting, and responding to emergencies. 

Water System Rate Regulation. The Utilities and Transportation Commission (UTC) regulates the rates and charges of privately-owned water companies that serve more than 100 customers or have charges that exceed an average of $557 per customer per year. The UTC does not regulate the rates or services of city, town, or county water systems; public utility districts (PUDs); or cooperative or homeowners' associations. 

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Public water systems, prior to a change in ownership, must provide notification to:

• the county in which any water system is located;
• any water district or public utility district operating water systems within the county; and
• any adjacent public water systems.

For any change in ownership of a water system, customers must be notified of the acquisition by mail or public posting.

Group A public water systems must submit water system plans, small water system management plans, or engineering documents required by DOH.

Water System Rate Regulation. When determining the rates to be charged by each water company, the UTC must adopt rules that establish a structure for incorporating the allowable cost of capital in the determination of rates that:

• accounts for federal, state, or other external funding sources for system improvements;
• requires showing that the company is following its water system plan approved by DOH, and provides for a waiver process for emergency improvements;
• considers the extent to which the water company provided notice of planned improvements and rate impacts;
• promotes rate smoothing; and
• considers the extent to which a public water system is able to comply with planning requirements.

The UTC may not approve any transaction that would result in a person acquiring a controlling interest in a water company without finding that the transaction would provide a net benefit to customers of the company. Prior to approving any such transaction, the UTC must verify that the water company has provided the customers with 90 days notice of the acquisition as well as a good faith estimate of future capital improvements and water system rate changes. The notification must be provided to: 

• the customers of the company;
• the county in which any water system of the company is located;
• any water district or PUD operating water systems within such county; and
• any adjacent water system.