Policy Issue 1: Consolidation of Water Utilities

Policy Issue 1: Consolidation of Water Utilities

The water sector faces a number of challenges, but these challenges are much more pronounced in small utilities that produce only thousand gallons per day. Although only a small fraction of the U.S. population is served by small systems, we have way too many small systems that making sure they collectively serve their customers well should be a high priority for EPA and the water sector. Nearly 90% of the U.S. water utility systems serve less than 10,000 people and more than half serve less than 500 people. Small utilities also have a smaller user base to charge and are thus vulnerable to shocks such as population loss, changes in the local economy, or weather patterns.  Small utilities have trouble hiring and retaining qualified operators, have few resources to improve their overall infrastructure, and are more likely to experience water quality violations. EPA is using new authority granted by the Congress to target those utilities with persistent water quality issues.

America’s Water Infrastructure Act

The America’s Water infrastructure Act of 2018 included significant changes to the Safe Drinking Water Act. Among the major changes that relate to consolidation include:

  • Subsection 1414(h) – Consolidation Incentive – was amended to require that EPA issue a regulation which authorizes primacy agencies to mandate restructuring assessments for public water systems (PWSs) which frequently violate health-based standards, and which have unsuccessfully attempted, or which are unable to attempt, feasible and affordable actions to comply and must describe liability protection for a compliant PWS which is consolidating with an assessed PWS.
  • Section 1413 requirements for primary enforcement responsibility were amended to include the new mandatory assessment authority. As a result, all primacy agencies will need to update their primacy status to meet the new requirement.

As a result of AWIA, the following changes are now in effect:

  • Primacy agencies also may provide enforcement relief under a contract for managerial or administrative functions.
  • Assessments must be tailored and should not be “overly burdensome”
  • Primacy agencies, EPA, approved third parties, or the PWS under assessment may conduct the assessments
  • Restructuring plans are eligible for DWSRF Funding
  • Primacy agencies may offer liability protection to a “non-responsible system” under an approved restructuring plan
  • EPA must publish a regulation for SDWA 1414(h) by October 2020

Because AWIA also changed primacy requirements, all state, local and Tribal primacy agencies must revise their primacy status and resubmit applications to the EPA for review and approval.

Proposed plan

In response to the AWIA mandate, EPA is developing the Water System Restructuring Rule, which will include both the consolidation incentive provisions under Subsection1414(h), and the primacy requirements under Section 1413, of the SDWA.

The rule, currently in development, will define valid water system restructuring plans and mandatory restructuring assessments, and clarify when a plan must be based on an assessment. In addition, the rule will clarify when a primacy agency may provide enforcement relief and liability protection for water systems under a restructuring plan, describe how the assessments must be tailored to the water system, and define what it means for an assessment to not be “overly burdensome.”

Figure 1. Water Systems Restructuring Rule Pyramid. Source: EPA.

Figure 1 shows a schematic of PWSs that are most likely to be targeted under this proposed rule. EPA estimates that more than 60 percent of PWSs have no health-based violations (as opposed to administrative and notification violations) in the last 10 years and display no signs of deterioration. A smaller group of PWSs are approaching regulatory limits (e.g., permitted system capacity), or have recorded health-based violations in previous years, but are currently operating well. The proposed rule is highly unlikely to target these two groups of water systems.

The next category of systems is those that recorded health-based violations in the past 12 months. As of FY 2017, an estimated 3,508 systems met this criterion. The EPA estimates that such systems might be considered candidates for restructuring assessments if underlying causes are not addressed. Finally, there is a set of water systems that are “persistently” in violation. As of FY 2017, 740 systems met this criterion and the EPA considers them to be “very likely” candidates for restructuring assessments. EPA does not define the term “persistent violators” nor is it commonly used in EPA documents and databases, so it is unclear at what stage of non-compliance is a system considered to be persistently in violation.