Water system rates

AN ACT Relating to increasing transparency and consumer 1
protection in water system rates; amending RCW 43.20.050, 43.20.260, 2
80.12.020, and 80.28.022; and creating a new section.3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
NEW SECTION. Sec. 1. (1) The legislature finds that water 5
systems provide a critical utility service to the residents of 6
Washington state, and due to scale economies, generally function as a 7
natural monopoly in a given area.8
(2) The legislature finds that the utilities and transportation 9
commission, the regulating agency responsible for approving water 10
system rate changes and ensuring adequate consumer protections, does 11
not have specific statutory standards to guide its review and 12
approval of proposed water system rate changes. 13
(3) The legislature finds that water systems are subject to a 14
number of public health standards and requirements from the 15
department of health that require comprehensive planning and capital 16
investments to ensure that residents have continuous access to safe 17
drinking water. The costs of these critical investments are reflected 18
in rate changes in order to provide a reasonable rate of return and 19
keep a water company in business. However, planning materials and 20
H-1137.2
HOUSE BILL 1906
State of Washington 69th Legislature 2025 Regular Session
By Representatives Tharinger, Shavers, Parshley, and Hill
Read first time 02/10/25. Referred to Committee on Environment &
Energy.
p. 1 HB 1906
information supporting capital investments are not currently required 1
to be shared with the utilities and transportation commission.2
(4) The legislature further finds the current rate setting 3
process does not provide the utilities and transportation commission 4
sufficient structure or guidance to determine whether capital 5
improvement costs included in a proposed water rate change are 6
prudently incurred and will result in rates that are just, fair, 7
reasonable, and sufficient. Likewise, the water system ratepayers 8
subject to the change are not provided sufficient notice of planned 9
system investments and their anticipated impacts on rates, which can 10
lead to sudden and significant rate increases. 11
(5) The legislature intends to provide additional structure and 12
guidance to the water system rate setting process in order to enable 13
the utilities and transportation commission to effectively regulate 14
in this area as a consumer protection agency. The legislature also 15
intends to increase notice and transparency to consumers about water 16
companies' planned investments and their impacts by leveraging the 17
existing planning process required for safe drinking water standards.18
Sec. 2. RCW 43.20.050 and 2021 c 65 s 37 are each amended to 19
read as follows: 20
(1) The state board ((of health )) shall provide a forum for the 21
development of public health policy in Washington state. It is 22
authorized to recommend to the secretary means for obtaining 23
appropriate citizen and professional involvement in all public health 24
policy formulation and other matters related to the powers and duties 25
of the department. It is further empowered to hold hearings and 26
explore ways to improve the health status of the citizenry.27
In fulfilling its responsibilities under this subsection, the 28
state board may create ad hoc committees or other such committees of 29
limited duration as necessary. 30
(2) In order to protect public health, the state board ((of 31
health)) shall: 32
(a) Adopt rules for group A public water systems, as defined in 33
RCW 70A.125.010, necessary to assure safe and reliable public 34
drinking water and to protect the public health. Such rules shall 35
establish requirements regarding: 36
(i) The design and construction of public water system 37
facilities, including proper sizing of pipes and storage for the 38
number and type of customers; 39
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(ii) Drinking water quality standards, monitoring requirements, 1
and laboratory certification requirements; 2
(iii) Public water system management and reporting requirements;3
(iv) Public water system planning and emergency response 4
requirements; 5
(v) Public water system operation and maintenance requirements;6
(vi) Water quality, reliability, and management of existing but 7
inadequate public water systems; and 8
(vii) Quality standards for the source or supply, or both source 9
and supply, of water for bottled water plants; 10
(b) Adopt rules as necessary for group B public water systems, as 11
defined in RCW 70A.125.010. The rules shall, at a minimum, establish 12
requirements regarding the initial design and construction of a 13
public water system. The state board ((of health )) rules may waive 14
some or all requirements for group B public water systems with fewer 15
than five connections; 16
(c) Adopt rules and standards for prevention, control, and 17
abatement of health hazards and nuisances related to the disposal of 18
human and animal excreta and animal remains; 19
(d) Adopt rules controlling public health related to 20
environmental conditions including but not limited to heating, 21
lighting, ventilation, sanitary facilities, and cleanliness in public 22
facilities including but not limited to food service establishments, 23
schools, recreational facilities, and transient accommodations;24
(e) Adopt rules for the imposition and use of isolation and 25
quarantine; 26
(f) Adopt rules for the prevention and control of infectious and 27
noninfectious diseases, including food and vector borne illness, and 28
rules governing the receipt and conveyance of remains of deceased 29
persons, and such other sanitary matters as may best be controlled by 30
universal rule; and 31
(g) Adopt rules for accessing existing databases for the purposes 32
of performing health related research. 33
(3) The state board shall adopt rules for the design, 34
construction, installation, operation, and maintenance of those 35
on-site sewage systems with design flows of less than three thousand 36
five hundred gallons per day. 37
(4) The state board may delegate any of its rule-adopting 38
authority to the secretary and rescind such delegated authority.39
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(5) All local boards of health, health authorities and officials, 1
officers of state institutions, police officers, sheriffs, 2
constables, and all other officers and employees of the state, or any 3
county, city, or township thereof, shall enforce all rules adopted by 4
the state board ((of health)). In the event of failure or refusal on 5
the part of any member of such boards or any other official or person 6
mentioned in this section to so act, he or she shall be subject to a 7
fine of not less than fifty dollars, upon first conviction, and not 8
less than one hundred dollars upon second conviction.9
(6) The state board may advise the secretary on health policy 10
issues pertaining to the department of health and the state.11
(7) The state board must allow the owner or operator of a water 12
system to have their water samples checked by the jurisdictional 13
health department without the requirement of hiring or contracting 14
for services with a satellite management agency, as defined in WAC 15
246-294-010 as it existed as of January 1, 2025.16
Sec. 3. RCW 43.20.260 and 2003 1st sp.s. c 5 s 8 are each 17
amended to read as follows: 18
(1) In approving the water system plan of a public water system, 19
the department shall ensure that ((water)): (a) Water service to be 20
provided by the system under the plan for any new industrial, 21
commercial, or residential use is consistent with the requirements of 22
any comprehensive plans or development regulations adopted under 23
chapter 36.70A RCW or any other applicable comprehensive plan, land 24
use plan, or development regulation adopted by a city, town, or 25
county for the service area ; (b) the plan submitted includes all 26
capital improvement projects necessary for the system for at least 27
the next 10 years; and (c) each public water system submits a current 28
water system plan at least every three years. 29
(2) A municipal water supplier, as defined in RCW 90.03.015, has 30
a duty to provide retail water service within its retail service area 31
if: (((1))) (a) Its service can be available in a timely and 32
reasonable manner; (((2))) (b) the municipal water supplier has 33
sufficient water rights to provide the service; (((3))) (c) the 34
municipal water supplier has sufficient capacity to serve the water 35
in a safe and reliable manner as determined by the department of 36
health; and (((4))) (d) it is consistent with the requirements of any 37
comprehensive plans or development regulations adopted under chapter 38
36.70A RCW or any other applicable comprehensive plan, land use plan, 39
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or development regulation adopted by a city, town, or county for the 1
service area and, for water service by the water utility of a city or 2
town, with the utility service extension ordinances of the city or 3
town. 4
Sec. 4. RCW 80.12.020 and 2009 c 24 s 3 are each amended to read 5
as follows: 6
(1) No public service company shall sell, lease, assign or 7
otherwise dispose of the whole or any part of its franchises, 8
properties or facilities whatsoever, which are necessary or useful in 9
the performance of its duties to the public, and no public service 10
company shall, by any means whatsoever, directly or indirectly, merge 11
or consolidate any of its franchises, properties or facilities with 12
any other public service company, without having secured from the 13
commission an order authorizing it to do so. The commission shall not 14
approve any transaction under this section that would result in a 15
person, directly or indirectly, acquiring a controlling interest in a 16
gas, water, or electrical company without a finding that the 17
transaction would provide a net benefit to the customers of the 18
company. Prior to approving any transaction under this section that 19
would result in a change of a controlling interest in a water 20
company, the commission shall verify that the company has provided 21
notification to the customers of the company and provided the 22
customers with a right of first refusal to purchase the water system.23
(2) This section shall not apply to any sale, lease, assignment 24
or other disposal of such franchises, properties or facilities to a 25
special purpose district as defined in RCW 36.96.010, city, county, 26
or town. 27
Sec. 5. RCW 80.28.022 and 1991 c 150 s 1 are each amended to 28
read as follows: 29
In determining the rates to be charged by each water company 30
subject to its jurisdiction, the commission ((may)):31
(1) Must adopt rules that establish a structure for incorporating 32
the allowable cost of capital in the determination of rates or 33
charges under this chapter that:34
(a) Establishes a return on equity ceiling and total rate of 35
return ceiling of seven percent, respectively;36
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(b) Requires a detailed analysis and justification for any 1
proposed return on equity or total rate of return greater than five 2
percent;3
(c) Accounts for any federal, state, or other external funding 4
sources for system improvements;5
(d) Requires all capital improvement projects to be included in 6
the water system plan approved by the department of health and 7
provides for a waiver process for emergency improvements that are 8
necessary for public health and safety;9
(e) Considers the extent to which the water company provided 10
notice of planned capital projects to consumers and the impact of the 11
projects on rates;12
(f) Promotes rate smoothing and the avoidance of excessive or 13
sudden rate changes; and14
(g) Requires that, for a consolidated system, any capital 15
improvement costs that are attributable to one system that exceed the 16
capital improvement costs of a dissimilar system within the 17
consolidated system by more than five percent may not be included in 18
single tariff pricing for the entire consolidated system;19
(2) May provide for the funding of a reserve account exclusively 20
for the purpose of making capital improvements approved by the 21
department of health as a part of a long-range plan, or required by 22
the department to assure compliance with federal or state drinking 23
water regulations, or to perform construction or maintenance required 24
by the department of ecology to secure safety to life and property 25
under RCW 43.21A.064(2). Expenditures from the fund shall be subject 26
to prior approval by the commission, and shall be treated for rate-27
making purposes as customer contributions. 28
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