Statute(s) interpreted
Statutory authority and explanation of agency authority
This rule is authorized under ss.
196.02 (1) and
(3),
196.12,
196.49,
227.11 and
281.346(8), Stats. Section
227.11, Stats., authorizes state agencies to promulgate administrative rules. Section
196.02 (1), Stats., authorizes the Public Service Commission (Commission) to do all things necessary and convenient to its jurisdiction. Section
196.02 (3), Stats., grants the Commission specific authority to promulgate rules. Section
196.12 authorizes the Commission to require utilities to report financial information, which includes expenditures on water conservation programs. Section
196.49 (3) authorizes the Commission to adopt rules regarding utility construction projects. Section
281.346 (8), Stats., directs
the Commission to work in cooperation with the Departments of Natural Resources (DNR) and Commerce to develop and implement a statewide water conservation and efficiency program, including requirements for water public utilities.
Related statute or rule
The DNR and the Commission have overlapping jurisdiction for water conservation programs.
Chapter
NR 852 establishes a statewide water conservation program for all water users, including water public utilities. This program is implemented by the DNR and contains mandatory requirements for some water users, including water utilities in the Great Lakes watershed, as well as voluntary elements for other water users statewide. The DNR's regulatory authority extends beyond water public utilities to include any system that provides water for public use such as schools, mobile home parks, co-ops, and private wells that serve multiple homes or businesses. The Commission's authority is limited to water public utilities as defined under s.
196.01 (5) (a), Stats.
The DNR and the Commission also have overlapping jurisdiction in reviewing plans for the modification, extension, or construction of water public utility facilities. The DNR's regulatory authority is generally related to its role in protecting public health, while the Commission's authority is related to its role in regulating utilities generally. Under ch.
NR 108, the DNR reviews any water utility extensions or alterations which may affect the quality or quantity of water delivered by an existing community water system, including wellhead protection plans for new wells serving municipal water systems. The Commission has the authority under s.
196.49, Stats., and ch.
PSC 184, to review water public utility construction for public convenience and necessity. Utilities cannot proceed with construction unless the DNR approves the project and the Commission issues a certificate of public convenience and necessity. Further, s.
196.025 (2m), Stats., establishes a consultation process for the DNR and the Commission to cooperate on projects that require an environmental assessment or an environmental impact statement under s.
1.11, Stats.
Summary and analysis of the rule
The Commission regulates approximately 585 water public utilities, including several private water utilities and municipal combined water and sewer utilities. The Commission does not regulate municipally-owned sewer utilities. The proposed changes to chs.
PSC 184 and
185 are intended to clarify the Commission's water conservation and construction requirements for water public utilities and to ensure that the Commission's rules are consistent with, but do not duplicate, DNR's programs. The proposed rules do all of the following:
1) Add definitions for commonly used terms.
2) Adopt a standardized water audit methodology and water loss reporting requirement for water utilities.
3) Establish criteria for voluntary utility-financed water conservation programs.
4) Establish or clarify requirements related to water supply shortages and service interruptions.
5) Update and clarify the Commission's rules and procedures for approving water utility construction projects.
Water Utility Construction – Chapter PSC 184
The Commission reviews and approves major utility construction projects to evaluate their impact on ratepayers. The proposed rule reorganizes, updates, and clarifies requirements for water utility construction authorization under ch.
PSC 184. The proposed changes are intended to simplify the rules regarding review of construction projects by identifying the types of projects that require commission approval and listing the types of projects that are categorically exempt from review, such as
de minimus cost projects, water main replacements, water meter replacement, routine maintenance, and repair.
The proposed rule identifies when a water utility is required to obtain Commission authorization before serving a new city, village or town. Under current practice, a water utility does not seek Commission authorization before it serves in a new township unless the township is already served by another water utility. This rule requires a water utility to receive Commission authorization before serving a new city, village or town, whether or not another utility is already serving the municipality.
The proposed rule requires a person to seek Commission authorization before deregulating utility sewer facilities.
The proposed rule codifies the information that must be included in the utility construction application. Among other specified requirements, a water utility will be required to provide information on any action the utility took, such as water conservation or water loss reduction measures, to mitigate the need for new construction.
The proposed rule increases the Commission's review time period from 60 days to 90 days for construction investigations that do not require a hearing to reflect the fact that projects require more time for approval. Finally, the proposed rule ensures coordination between the DNR and the PSC for projects that require an environmental impact statement or environmental analysis, as required by s.
196.025 (2m), Stats.
Water Conservation and Efficiency – Chapter PSC 185
The proposed rules amend or add a number of water conservation and efficiency provisions in chapter PSC 185, relating to water utility service rules.
DEFINITIONS
The proposed rules include several new definitions for water public utilities. Definitions for utility classes are incorporated, based on the number of customer connections. Class AB utilities have 4,000 or more connections, Class C utilities have between 1,000 and 4,000 connections, and Class D utilities have fewer than 1,000 connections. These are not new definitions; the Commission uses these definitions for annual reporting and rate case processing, but the definitions are not included in a rule. The proposed rules also establish definitions for various customer classes used in water utility tariffs, including residential, commercial, industrial, public authority, non-residential, and irrigation-only customers. Several other commonly-used terms are also defined in the proposed rules.
WATER AUDITS AND WATER LOSS
Excessive water losses negatively affect utility finances because a water utility must purchase electricity and chemicals to produce the water but some of that water is lost before it can be sold to customers. These necessary costs are passed on to all utility customers. Moreover, excessive water loss often indicates a need for capital improvements to replace aging water mains and other infrastructure. Finally, by reducing water losses, a utility can delay the need for additional wells to meet growing demand.
The Commission currently requires water utilities to report annually the amount of water pumped, the amount of water sold, the amount of water lost in the distribution system through leaks and losses, the amount of water used within the system for utility purposes (e.g., hydrant and main flushing), and “unaccounted for" water. The Commission uses this information to benchmark performance and ensure that utilities are operating efficiently. The proposed rule standardizes the method that utilities use to conduct an annual system-wide water audit and specifies how this information is to be reported to the commission.
Current rules require water utilities to report water pumpage, sales, and some losses. However, the rules rely on the term “unaccounted for water" to measure losses from a utility system. This term is vague and its usage in the water utility industry is being phased out in favor of a more robust definition of water loss. Under the new definition, water loss includes any water that is pumped and treated to drinking water standards but that is not sold to utility customers due to leaks, theft, metering errors, and other factors. This rule adopts this new definition, which is consistent with the water audit methodology adopted by the American Water Works Association (AWWA).
Under existing rules, water utilities with excessive system losses or unaccounted for water are required to identify the reasons for the losses and submit a corrective action plan to the Commission. Under the proposed rules, utilities would still be required to identify the reasons for the losses and submit a corrective action plan to the Commission. However, the proposed rule changes the criteria that the Commission would use to determine excessive water loss. Under the proposed rules, Class AB and Class C utilities would be required to submit a correction action plan if their water loss exceeds 15% of the water entering the distribution system and Class D utilities would be required to submit a plan if their water loss exceeds 25%. The proposed rules also allow the Commission to require a water utility to conduct a leak detection survey of their entire distribution system if the utility's water loss exceeds the water loss standard for three consecutive years.
VOLUNTARY WATER CONSERVATION PROGRAMS
A number of Wisconsin water utilities have implemented water conservation programs to reduce customer demand. There are a variety of reasons why a utility would want to implement a water conservation program, including limitations on existing wells and supply, rapidly growing demand, excessive outdoor water use in the summer, and new regulatory requirements, such as the Great Lakes Compact. There is no statewide funding equivalent to the Focus on Energy program for water conservation. These utilities have requested that the Commission approve the use of ratepayer funds to pay for these programs on a case-by-case basis. In previous individual rate case decisions, the Commission has established guidelines for utilities to follow when considering a water conservation program. The proposed rule codifies these guidelines, providing clear and consistent guidance to utilities who wish to offer customer incentives, such as toilet rebates. In addition, the proposed rule assists the Commission in evaluating whether a proposed conservation program is cost-effective and in the public interest.
The proposed rule does not establish any mandatory water conservation requirements. Rather, the rule sets up a procedure for utilities who wish to recover the costs of voluntary water conservation efforts through water rates. The proposed rule also requires utilities to report on conservation-related expenditures and program outcomes annually.
EMERGENCY OPERATIONS, INTERRUPTION OF SERVICE AND WATER SUPPLY SHORTAGES
The proposed rule would consolidate and update existing requirements in ch.
PSC 185, related to providing a continuous and adequate water supply, procedures for interruption of service, and emergency operations.
The proposed rules create a new section to address a water supply shortage, which a utility may declare if the utility cannot adequately meet customer demand due to drought, insufficient source supply or excessive demand. Under the proposed rule, a water utility may adopt a water supply shortage curtailment plan and file it with the Commission. If a water utility has not adopted a plan, the proposed rule identifies a utility's responsibilities if facing a water supply shortage and permits temporary curtailments to customers other than essential use customers, such as hospitals. However, even essential use customers may face a curtailment if the utility receives prior Commission authorization.
WATER RATES AND BILL INFORMATION
The proposed rules require a water utility to adopt general service rates that reflect the cost of service for each customer class and that include a fixed and a variable charge. Also, the Commission may approve rates that promote efficient water use.
Under the proposed rules, a water utility that calculates usage in units of cubic feet shall provide customers consumption information in gallons, or a formula for converting usage from cubic feet to gallons.
Summary of and preliminary comparison with existing or proposed federal regulation
Rates and service rules for water public utilities are the exclusive jurisdiction of the States. There are no existing or proposed federal regulations pertaining to water quantity or water conservation that affect water public utilities. However, water public utilities must comply with regulations promulgated under the federal Safe Drinking Water Act, which may include conditions or restrictions on system design and construction to protect public health and ensure safe drinking water. The Great Lakes Compact, an interstate compact ratified by the U.S. Congress, applies to water public utilities that withdraw surface or groundwater from the Lake Michigan and Lake Superior watersheds.
Comparison with rules in adjacent states
All eight Great Lakes States (New York, Pennsylvania, Ohio, Indiana, Illinois, Wisconsin, Michigan, and Minnesota) are party to the Great Lakes Compact, which requires each state to do all of the following:
1. Adopt a mandatory or voluntary water conservation program.
2. Regulate withdrawals from the Great Lakes watershed, both groundwater and surface water.
3. Prohibit the diversion of water from the Great Lakes watershed, with some limited exceptions.
Specifically, the Great Lakes Compact required each state to implement a water conservation and efficiency program by December 2010, including state-specific water conservation and efficiency goals and objectives and either voluntary or mandatory conservation requirements for water users. The Wisconsin DNR has adopted administrative rules to implement the Compact in chs.
NR 850,
NR 852,
NR 856, and
NR 860.
Because water utility regulation is a state matter, each state regulates its water public utilities differently. The Commission has the most comprehensive jurisdiction over both municipal and privately-owned water utilities in the upper Great Lakes region. State commission jurisdiction in the surrounding states varies from partial regulation of regional and privately-owned systems to a completely deregulated water industry. Some of the surrounding states have enacted more comprehensive water conservation programs than Wisconsin. The requirements in the surrounding states are described below.
Minnesota:
Neither municipal nor investor-owned water utilities are subject to Minnesota Public Utilities Commission oversight. Instead, rates and charges are subject to the oversight of the local municipal or regional governing body. Nonetheless, Minnesota statutes require each water utility serving more than 1,000 people to adopt a water rate structure by 2013 that promotes conservation, including seasonal rates, time of use rates, water budget rates, excess use rates, or inclining block rates. Water utilities are also required to provide educational information about water conservation to their customers. The Minnesota DNR also recommends that utilities meter all customer usage and conduct a water audit, and implement a leak detection and repair program if unaccounted for water is greater than 10 percent of pumpage.
Illinois:
The Illinois Commerce Commission (ICC) regulates investor-owned utilities, including 33 water, 5 sewer, and 14 combined water and sewer utilities. Municipally owned utilities are not regulated by the ICC. Communities that are served by Lake Michigan, including the City of Chicago and many suburbs, are subject to special requirements known as the Lake Michigan Water Allocation Program, which authorizes the Illinois DNR to manage the allocation of water among regional organizations and municipalities. These requirements include water conservation as a condition of their allocation permit and are intended to fulfill the state's requirement under a U.S. Supreme Court Decree. The requirements include metering for all new construction and remodeling; reducing unaccounted-for water to less than 8 percent of annual pumpage; establishing ordinances for water-saving fixtures; adopting water rate structures based on metered usage and which discourage excessive use; and restricting non-essential outdoor usage.
Iowa:
The Iowa Utilities Board regulates investor-owned water utilities but not municipally owned water utilities. The Iowa DNR may, in any permit granted to a community public water supply, include conditions requiring water conservation practices and require emergency conservation practices after notification by the department. Generally, water conservation practices are not required, although individual permits may have conservation requirements added to them by the state.
Michigan:
The Michigan Public Service Commission does not regulate water utilities. Michigan does not have other water conservation requirements for public water utilities outside of its responsibilities under the Great Lakes Compact.
Indiana:
The Indiana Utility Regulatory Commission (IURC) regulates the rates, terms, and conditions of service for both municipal- and investor-owned water and wastewater utilities. However, all municipal utilities and investor-owned wastewater utilities serving fewer than 300 customers can opt out of IURC regulation. Indiana does not have other water conservation requirements for public water utilities outside of its responsibilities under the Great Lakes Compact.
Small Business Impact
The proposed rules will not affect small businesses. The s.
227.114 (12), Stats., definition of “small business" states that to be considered a small business, the business must not be dominant in its field. Most water and sewer utilities are publicly owned and are not businesses. Further, water utilities and municipal combined water and sewer utilities are monopolies in their service territories, and therefore dominant in their markets.
Initial regulatory flexibility analysis
This rule will not affect small businesses. The Wis. Stat. section 227.114 (12) definition of “small business" states that to be considered a small business, the business must not be dominant in its field. The vast majority of water and combined water and sewer utilities are publicly owned and are not businesses. Further, since water utilities and combined water and sewer utilities are monopolies in their service territories, they are dominant in their fields.
Fiscal Estimate
There are no long-term fiscal impacts on state or local governments. However, some municipal water utilities may see a small reduction in costs as a result of the proposed streamlining of construction rules. Additional fiscal information is as follows:
State fiscal effect
None.
Local fiscal effect
Increase costs - Mandatory
Increase Revenues - Mandatory
Types of local governmental units affected: Others - Public Water Utilities
Assumptions used in arriving at fiscal estimate
State Fiscal Effects
There are no estimated state fiscal effects from the proposed changes to administrative rules for water utilities under PSC 184 and 185.
The proposed changes primarily implement water conservation and efficiency measures, as directed under Wisconsin State Statute s.
281.346 (8), in a way that is consistent with PSC's current authority under Chapter
196, Wis. Stats. The proposed revisions clarify current rule requiring water utilities to minimize water losses by specifying the timeline and method for measuring water loss, establish a water loss threshold above which a utility must submit a water loss control plan to the Commission, and require water utilities to establish uniform or inclining volumetric rates for residential customers that reflect the cost of service for this customer class. Also, the proposed rules allow a water utility to implement a voluntary water conservation program that includes customer rebates or other financial incentives to customers after the utility has received Commission approval.
In addition, the proposed changes renumber rules on adequacy of water supply, emergency operations and interruption of service; clarify current rule by specifying steps utilities must take to prevent and minimize interruptions; and require utilities notify the Commission after an emergency curtailment of service. The proposed changes simplify rules regarding review of construction projects, for example, by identifying projects explicitly exempt from review, and the proposed changes increase the typical construction project review period, from 60 days to 90 days.
The proposed change to establish class-based volumetric rates has no state fiscal effect. Water utilities routinely request the Commission review rate changes, and this change is not expected to increase the Commission's workload.
The revisions regarding water loss reporting also have no state fiscal effect. Commission staff currently track and analyze water loss as reported by utilities in their annual reports, but these data have been inconsistent. The rules would improve reporting consistency by adopting current water industry standards, practices, and terminology as recommended by the American Water Works Association (AWWA). The new reporting requirements and control plans will streamline analysis of utility water loss and reduce the need for Commission action addressing water loss. Potential Commission review of voluntary water conservation programs will be new workload for state staff, but the workload is not expected to be significant such that it cannot be absorbed within current operations.
Commission review of reports from water utilities on emergency interruptions in water service will also not result in a net change to state staff workload. Workload associated with review of reports is offset by saved workload in investigating service interruptions after complaints have been filed with the Commission.
And finally, proposed changes that exempt some construction projects from review and increase the review period may reduce overall Commission review time and allow staff to focus on larger and more significant projects that have an impact on ratepayers. Under the proposed changes, the Commission will also review more applications for utilities to serve municipalities; but this increase in the number of reviews may not entirely offset the savings due to review exemptions.
Local Fiscal Effects
Some local governments will have increased costs in the short term under the proposed rules, but these costs are anticipated to be offset in the long term through reduced operating costs and reduced infrastructure needs through water loss control and water conservation savings. If needed, local governments could offset increased costs in the short term through increased water rates.
All but six of the over 580 water utilities in the State of Wisconsin are municipally owned; and the local government costs are costs to municipal water utilities for complying with the proposed rules. Most of the proposed rule changes reflect currently accepted best practices for utilities. However, the proposed rules requiring water loss control plans and leak detection surveys may result in new costs in the short term for water utilities. It is estimated that 15% to 20% of municipal water utilities have water loss levels that would require development of a water loss control plan and, potentially, a leak detection survey. These are new activities required under the proposed rule, and the potential cost for these activities is not known at this time. However these costs would be offset in the long term through water conservation savings, i.e. avoidance of the cost to develop new water resources. In the short term, water utilities could offset increased costs through water rates.
Some municipal water utilities may see a small reduction in costs from the proposed changes to construction review rules. Utilities will avoid future costs of Commission review for construction projects that will be exempt from review under the proposed rules. Also, by increasing Commission review time for construction projects, Commission staff will have more time to communicate issues to utilities which will help municipal utilities avoid costs from a denial of a construction project. However, these potential savings will be offset somewhat by the requirement that a utility may not serve a new municipality without Commission authorization.
Fiscal Effects for Small Businesses
The proposed rules may benefit small businesses. The proposed rule allowing utilities to implement water conservation incentive programs, with Commission approval, will benefit small businesses that choose to adopt conservation measures. The proposed rule changes regarding service curtailments may also be beneficial by avoiding unplanned interruptions of service that can be costly to small businesses.
Long-range fiscal implications
By implementing water conservation measures, the proposed rules will reduce costs in the long term not only for consumers, but also for the Commission and water utilities. Water conservation reduces water demand and the need to develop new water resources and to make capital investments in expensive wells, storage, and other facilities. Development of new water resources increases the cost of water service, resulting in increasing costs to ratepayers, and development of new water resources often requires new construction which requires Commission review, creating costs for water utilities and the Commission. Any reduction in the amount of new water resource development needed in Wisconsin results in reduced long-term costs and will help mitigate future water rate increases.
Contact Person
Questions regarding this matter, including small business questions, should be directed to Jeff Ripp, Water Conservation Coordinator, at (608) 267-9813 or
jeffrey.ripp@wisconsin.gov.
Media questions should be directed to Matt Pagel, Interim Director of Public Affairs, at (608) 266-9600. Hearing- or speech-impaired individuals may also use the Commission's TTY number: If calling from Wisconsin, (800) 251-8345; if calling from outside Wisconsin, (608) 267-1479.
