EPA ruling on water billing: a victory for property owners: on Aug. 28, 2003, EPA published a draft notice of a memorandum which in effect would exempt property owners who bill back water charges (submetered or RUBS) from the SDWA.

After a long uphill battle, the apartment industry is on the verge of victory on the important issue of water billing. The U.S. Environmental Protection Agency (EPA) has long maintained that the definition of "sale" of water in the 1974 Safe Drinking Water Act (SDWA) applies to all properties that charge separately for water even if those properties purchase "finished" water from a public water system (PWS).

This interpretation has resulted in apartment properties being considered as PWS's subject to specific performance standards, including requirements for periodic water quality monitoring (testing) and site supervision by a "certified water operator."

On Aug. 28, 2003, EPA published a draft notice of a memorandum which in effect would exempt property owners who bill back water charges (submetered or RUBS) from the SDWA.

Summary

Under SDWA Section 1411, the national primary drinking water regulations apply to public water systems that have their own water source, treat or "sell" water. EPA staff and program managers have previously issued memoranda stating that any building or property owner who meets the definition of a PWS and receives water from a regulated public water system, but bills [residents] separately for this water, is "selling" the water and therefore is independently subject to SDWA's drinking water requirements. As a way to promote full cost and conservation pricing to achieve water conservation, the EPA now proposes to change its interpretation of Section 1411 as it applies to a limited aspect of submetering and direct billing of residential [residents].

EPA believes this change in interpretation would not adversely affect public health protection for consumers served by these submetered systems.

If the revised policy is made final, the following statement will be announced by EPA Assistant Administrator for Water, G. Tracy Mehan III, to the Regional Administrators.

Draft

Water conservation is an integral part of watershed protection, particularly in arid and drought-stricken areas. In recent speeches, I have called for full cost and conservation pricing to achieve water conservation. The use of water meters by which to measure consumption is a necessary prerequisite to using these price mechanisms.

For those 15 percent of Americans who live in apartments, submeters are needed if their water consumption is to be linked to prices. Throughout the country, submetering of apartment buildings has been found to be an effective but little-used tool to support water conservation.

Some owners of multifamily housing, however, have expressed concern that, under EPK's current policy, the installation of submeters subjects them to the full regulatory requirements of the Safe Drinking Water Act (SDWA). In 1996, Congress also expressed concern about EPA's policy in this specific situation, and, in response, EPA agreed to reconsider the matter and issue further guidance. This memorandum represents the promised further guidance on this issue and sets out a revised policy with respect to residential properties such as apartment buildings that submeter for water.

Under the revised policy, a property owner who had not previously been (or would not be) subject to SDWA national primary drinking water regulations through SDWA section 1411, and who installs submeters to accurately track usage of water by [residents] on his or her property, will not then be subject to SDWA regulations solely as a result of taking the action to submeter and bill. The water being provided would already meet drinking water standards because the water would be coming from a regulated public water system.

Background

Section 1401 of SDWA defines a public water system (PWS) as a system that provides water through pipes or other constructed conveyances to the public for human consumption, if the system has at least 15 service connections or regularly serves at least 25 people. Under SDWA Section 1411, the SDWA national primary drinking water regulations apply to PWS's that have their own water source, treat or "sell" water. EPA staff and program managers have issued several memoranda stating that any building or property owner who meets the definition of a PWS and receives water from a regulated public water system without adding further treatment, but bills [residents] separately for this water, is "selling" the water and therefore is independently subject to SDWA's drinking water requirements.

Today's memorandum reflects a change in EPA's interpretation of Section 1411 as it applies in the specific context of submetering and direct billing of [residents].

The EPA memoranda referenced above were based on a single statement in the 1974 legislative history for the SDWA in which Congress explained its intent in enacting Section 1411. In that legislative history, the Committee report states that it "intends to exempt businesses which merely store and distribute water provided by others, unless that business sells water as a separate item or bills separately for water it provides."

Under EPA's interpretation to date, an apartment building or similar residential property that is exempt under Section 1411 but that merely installs a submeter and bills the [residents] for the water, or simply begins billing [residents] (even without a submeter), would become a fully regulated public water system, even though there had been no other change relevant to the delivery or potential health concerns associated with the water. This application of the legislative history has been cited as a discouragement to submetering and, as a result, to water conservation measures.

After further review, we no longer believe that Congress intended the legislative history to be applied in this manner for the following reasons:

* The legislative history from 1974 does not specifically address the submetering of apartment buildings for water conservation purposes. Rather, the legislative history was one Committee's attempt to explain broadly what the term "selling" water in Section 1411 might mean. The statute itself does not define the term "selling" or suggest an interpretation that any billing of water would automatically trigger full SDWA regulation.

* A Congressional committee expressed its concern that this application of SDWA might discourage the practice of submetering, as owners of a multifamily housing property (e.g., apartment buildings and/or complexes, mobile home parks) would become subject to national primary drinking water regulations if they billed separately for water. Congress asked that EPA review its guidance on this matter to prevent unnecessary requirements that do not further public health protection and that might inhibit water conservation efforts.

* EPA's approach in previous memoranda--simply applying the concept of "sell" to every billing transaction--may have created a disincentive to water conservation, which can undermine water quality over the long term.

* Finally, it makes no sense, as a matter of statutory interpretation, health protection or SDWA implementation policy, to subject an entity to the full suite of SDWA requirements simply as a result of a decision about who sends a water bill, especially when the water is already coming from a regulated public water system. As a result, we no longer consider that the blanket approach to defining "sell" as meaning any type of billing in any circumstance is appropriate.

Consistent with Congressional requests to reconsider this matter, we now believe that, if a property owner, who had not previously been (or would not be) subject to PWS national primary drinking water regulations, installs submeters to accurately track usage of water by residential [residents] on his or her property, that owner should not then be subject to regulations solely as a result of taking the action to submeter and bill. Likewise, a property owner who does not submeter, but charges [residents] for water based on a ratio utility billing or other apportioning system, would also remain exempt from full SDWA requirements.

The addition of a submeter, or direct billing, should not in any way change the public health protections provided to water consumers on the property, as they are still subject to plumbing codes and provided water from a PWS that is fully regulated by SDWA. The PWS providing water to the property is still responsible for providing public notification under 40 CFR 141.201(c) (or approved State equivalent) to consumers and making "good faith" efforts to provide the [residents] with the annual Consumer Confidence Reports under 40 CFR 141.155(b). A submetered property would still be considered a PWS under SDWA section 1401, hence States and EPA would retain the ability to take corrective action under SDWA's emergency powers authority (section 1431) if public health risks arise.

Although EPA is not requiring that submetered systems be tracked, each state has flexibility to determine whether, and how, to best track multifamily residential properties that submeter. For example, in Alabama, the state defines a submetered property as a "segmented public water system" and requires that it have access to a certified operator. Texas requires that submetered properties allow access to the property by the public water system providing water register with the Texas Commission on Environmental Quality and follow regulations for submetering. Other states may place submetered properties under the jurisdiction of public utility commissions.

While submetering and billing for water usage may positively induce water conservation actions, states may still want to take other steps to ensure that apartment owners convert to water efficient fixtures and appliances. For example, Texas requires that apartment buildings have water-efficient plumbing fixtures and appliances as a condition of approval of a submetered billing system.

This memorandum clarifies EPA's policy change and reconfirms our strong interest in advocating water conservation. Any previous EPA statements or policy memoranda on this issue are superceded by this memorandum.

RELATED ARTICLE: Request for industry comments.

EPA is accepting comments on this submetering policy submitted on or before Oct. 27, 2003. While comments will be accepted on any portion of the draft revised policy, EPA would specifically appreciate comments on the following issues:

1. Should the parent public water system be required to have access to submetered properties for the purposes of monitoring, inspection, repair, etc., to assure compliance with SDWA?

2. Are there public health risks raised by this submetering policy that EPA has not taken into consideration?

3. Should EPA maintain the [imitation of the draft revised policy to residential properties such as apartment buildings, or is it appropriate to extend the SDWA exemption for submetering to other property types?

4. Does data exist that indicates submetering may present a disincentive to landlords to convert to water efficient fixtures and appliances, or could this approach impact other methods that promote water conservation?

You may submit comments electronically, by mail or through hand delivery/courier. To ensure proper receipt by EPA, identify the appropriate docket identification number in the subject line On the first page of your comment. Please ensure that your comments are submitted within the specified comment period. Comments received after the close of the comment period will be marked "late." EPA is not required to consider these late comments, however, late comments may be considered if time permits.

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