July 12, 2005
RATE DISCRIMINATION BY MUNICIPAL WATER UTILITIES
By: Kevin E. McCarthy, Principal Analyst
You asked whether state or federal law precludes a municipal water utility from charging higher rates in a neighboring town than it charges its own residents.
It does not appear that any state or federal law precludes a municipal water utility from charging higher rates in a neighboring town than it charges its own residents, and several Connecticut utilities do so. For example, the New Britain water department imposes a 70% surcharge on its Farmington and Newington customers, and Meriden imposes a 50% surcharge on its Cheshire and Wallingford customers. In addition, the Metropolitan District Commission imposes a surcharge for customers in non-member towns that varies by the size of the meter. In addition, customers in Farmington and Glastonbury pay an additional surcharge to recover the costs of major capital improvements such as water main extensions and pump stations.
However, under CGS Sec. 12-76, the rates charged by municipal utility affect how land it acquired before 1978 outside of its borders is taxed. Such land is tax-exempt if the residents in the town where it is located have the right to use the water provided by the utility on the same terms as the host municipality, and actually use the water. On the other hand, if the residents of the town where the land is located either do not have access to the water on the same terms or do not use the water, the land is subject to taxation as though it was improved farmland.