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. 

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. 

Multi-Year Rate Plans. Beginning January 1, 2027, every general rate case filing of a water company may include a proposal for a multiyear rate plan (MYRP). The UTC may by order after an adjudicative proceeding, approve, approve with conditions, or reject, a MYRP proposal made by a water company, an alternative proposal made by one or more parties, or any combination of these. The UTC's consideration of a proposal for a MYRP is subject to the same standards as other related filings, including the public interest and fair, just, reasonable, and sufficient rates. The UTC may approve, disapprove, or approve with modifications any proposal to recover from ratepayers up to 5 percent of the total UTC revenue requirement for each year of a MYRP for tariffs that reduce the water burden of low-income residential customers. 

If it approves a MYRP, the UTC must approve rates separately for the initial rate year, the second rate year, and, if applicable, the third and fourth rate years. The UTC must ascertain and determine the fair value for rate-making purposes of the property of a water company that has filed a MYRP that is or will be used and useful for service in Washington by or during each rate year for the MYRP. The UTC may order refunds to customers if property expected to be used and useful by the rate effective date when the UTC approved the MYRP is in fact not used and useful by such a date.

PRO: The origin of this bill is there are literally thousands of very old water systems around the state that are managed or in some cases mismanaged and need to be sold. They need to be managed by a bigger water company and that requires improvements. As that transition takes place, this bill improves the notice to consumers so that they know what their options are in terms of who the future owner is. Over the past few decades Thurston PUD has assumed ownership of over 260 small water systems, many that needed to be rebuilt for customers who need safe, clean drinking water. We strongly support the notification requirements.

OTHER: We were part of the origin story of this legislation. We bought a water system that was in need of significant repair that cost quite a bit of money. Ratepayers had to bear the costs of these improvements up front. We think this legislation will help inform users what those costs will be when the system is sold. We are also supportive of an amendment that would be forward looking on future expected costs. We are supportive of the striking amendment and will be asking for further clarification around the rate making process at UTC.

PRO: Bill Clarke, WA PUD Association; Kevin Van De Wege, Thurston PUD.

The committee recommended a different version of the bill than what was heard.  PRO: The changes made to this bill are good changes. There have been many water systems that have failed and private owners purchase those systems to fix them. Fixing reservoirs and water mains, and meeting Department of Health standards is expensive. Thousands of systems across the state are old and need to be acquired so that they can be improved to prevent failure. If private water systems fail, they are often acquired by a county. Then counties often request funding from the state to make improvements. Acquisition allows for larger entities to make capital improvements to provide cleaner water, such as PFAS filtering. There have been shocking rate increases so that owners can meet those standards. 

PRO: Bill Clarke, WA PUD Association; Charlie Brown, NW Natural; Kevin Van De Wege, Thurston PUD; Christine Brewer, Washington Water Service.