OLR Bill Analysis
AN ACT CONCERNING THE DEPARTMENT OF PUBLIC HEALTH'S RECOMMENDATIONS REGARDING SAFE DRINKING WATER.
This bill makes various changes affecting public water systems and the oversight of small water companies. Among other things, the bill:
1. requires, by January 1, 2020, certain water companies to submit to the Department of Public Health (DPH) a fiscal and asset management plan for all capital assets of each of their small community public water systems serving 1,000 or fewer residents;
2. requires the DPH commissioner to publish on the department's website a schedule of civil penalties imposed under the safe drinking water statutes, rather than adopting them in regulations as under current law;
3. requires the DPH commissioner to notify the public at least six months before publishing the civil penalty schedule and hold a public hearing within 30 days after such notification;
4. establishes a process for placing certain small water companies in receivership if they (1) abandon operations or (2) fail to correct certain violations that pose an immediate threat to the quality and adequacy of a water supply source;
5. authorizes the DPH commissioner to appoint a temporary manager for a small water company that has abandoned operations or will be placed in receivership, after notifying the owner and providing an opportunity for a hearing; and
6. authorizes DPH to take certain actions in connection with an investigation of a small water company in receivership, such as issuing subpoenas and ordering the production of books, records, or documents.
The bill defines a “small water company” as a water company, other than a state agency, that (1) supplies water to less than 1,000 people or 250 consumers or (2) is not required to submit a water supply plan to DPH (e.g., contingency procedures for public drinking water supply emergencies).
The bill also makes minor and technical changes.
EFFECTIVE DATE: October 1, 2017
§ 1 — FISCAL AND ASSET MANAGEMENT PLANS
The bill requires each water company to prepare a fiscal and asset management plan for all capital assets of each of the company's small community water systems (i.e., those regularly serving between 25 and 1,000 year-round residents).
The fiscal and asset management plan must include:
1. a list of all capital assets of the small community water system;
2. the assets' (a) useful life, based on their current condition; (b) maintenance and service history; and (c) manufacturer's recommendation; and
3. the water company's plan for reconditioning, refurbishing, or replacing the assets.
The bill requires the water company to begin creating the plan by assessing its hydropneumatic pressure tanks as its initial priority.
Under the bill, as under existing law, “water company” means any individual, municipality, or entity that owns, maintains, operates, manages, controls, or employs any pond, lake, reservoir, well, stream, or distributing plan or system that supplies water to two or more consumers or to 25 or more people on a regular basis.
The bill requires water companies to complete the fiscal and asset management plan by January 1, 2020. But they must first complete an assessment review of the hydropneumatic pressure tanks at each of their small community water systems by May 1, 2018 on a form DPH prepares.
The bill also requires water companies to update the fiscal and asset management plan annually and make it available to DPH upon request.
The plan requirement does not apply to a water company that is (1) regulated by the Public Utilities Regulatory Authority, (2) required to submit a water supply plan to DPH, or (3) a state agency.
The bill deems the report requirement to relate to the purity and adequacy of water supplies for the purpose of imposing a penalty for violating statutory or regulatory requirements regarding public water supply purity, adequacy, or testing.
The bill authorizes the DPH Commissioner to adopt regulations to implement the fiscal and asset management plan requirement.
§ 2 — CIVIL PENALTIES
Publishing Civil Penalty Schedule (§ 2)
Current law requires the DPH commissioner to adopt regulations establishing a schedule of civil penalties that may be imposed against water companies for violation of state laws and regulations regarding the purity, adequacy, and testing of public water supplies.
The bill instead requires the commissioner to publish the civil penalty schedule on the department's website if the penalty for a violation has not been established by statute. The commissioner must do this annually, or when he deems it necessary in response to any guidelines or rules issued by the federal Environmental Protection Agency.
Notwithstanding the Uniform Administrative Procedure Act, the bill does not require the commissioner to adopt or revise any regulations for imposing these civil penalties.
Within six months before publishing the civil penalty schedule on the DPH website, the commissioner must publish a notice in the Connecticut Law Journal of his intention to do so. The notice must include the civil penalty schedule and the date the commissioner intends to hold a public hearing on the matter. He must hold the hearing within 30 days after publishing the notice.
Notice of Violations (§ 2)
By law, the DPH commissioner must notify a water company before imposing a civil penalty for failing to correct a violation within a specified date. He may do this by certified mail, return receipt requested, or personal service. The bill specifies that for the latter, the notification must be served to the address the water company filed with the department, or if the water company failed to do so, the company's last known address on file.
If the civil penalty is imposed for a continuing violation, the bill requires the notice to include the initial date the penalty is imposed. For an isolated violation, the notice must include the date for which it is imposed. By law, the notice must include additional information, such as a statement of the violation and the water company's right to a hearing.
Administrative Appeal (§ 2)
By law, a water company can contest the penalty by applying to the DPH commissioner for an administrative hearing under the Uniform Administrative Procedure Act within 20 days after receiving notice of the penalty. The bill requires the application to include a detailed statement of all the grounds for contesting the penalty.
Existing law, unchanged by the bill, requires the water company to send a copy of the application to the health director of the municipalities in which the violation occurred or that use the water that was the subject of the violation. A water company aggrieved by a DPH order may appeal to Superior Court.
§§ 3-13 — SMALL WATER COMPANY RECEIVERSHIP
Notice and Hearing Requirements (§ 4)
The bill authorizes the DPH commissioner to file a motion in Superior Court to appoint a receiver for a small water company.
The court must hold a hearing within 10 days after the date the motion is filed. The small water company owner or the owner's agent must be notified at least five days before the hearing date. DPH must also post the notice in conspicuous locations throughout the water company's distribution system for at least three days before the hearing date.
The bill also allows the court to appoint a receiver if DPH files an ex parte motion and the affidavits, testimony, or other evidence presented indicates that there is a reasonable likelihood a condition exists at the small water company that must be immediately remedied to ensure consumers' health, safety, and wellbeing.
Under the bill, the owner or the owner's agent must be served notice of the ex parte motion and order and the notice must be posted in a conspicuous place at the water company within 24 hours after the order is issued. (The bill does not specify who must notify the owner and post the notice.)
A hearing on the motion must be held within five days after the order is issued, unless the owner consents to a later hearing date.
The bill allows the owner to waive the above notice and hearing requirements.
Appointment of Receiver (§ 5)
The bill requires the court to grant a motion to appoint a receiver if it finds the small water company (1) abandoned operations or (2) failed to comply with an order to correct a violation of the public health or environment laws or statutes that poses an immediate threat to the quality and adequacy of a water supply source.
Under the bill, a small water company has “abandoned operations” if it fails to:
1. provide water to consumers for at least five days or has two or more service interruptions during the preceding three months;
2. meet statutory standards for public drinking water quality and quantity and such failure constitutes an immediate threat to the quality or adequacy of a water supply source;
3. have the financial, managerial, and technical resources needed to operate in a reliable and efficient manner and provide continuous, adequate service to consumers;
4. adequately maintain its facilities, resulting in a potential threat to the quality or adequacy of its public water supply; or
5. provide consumers adequate notice of a potential or actual public health threat.
Defense to a Receivership Motion (§ 6)
Under the bill, it is a sufficient defense to a motion to appoint a receiver if the (1) small water company owner did not have reasonable time to correct a violation in an order described above or (2) the violation listed in the motion does not exist.
Receiver's Powers (§ 7)
Under the bill, a receiver of a small water company must:
1. have the same powers operating the small water company as those of a receiver of a corporation (e.g., to prosecute civil actions; possess the company's books, papers, and property; and receive all evidence of the company's debt and property);
2. exercise powers to remedy the conditions that constituted grounds for appointing a receiver;
3. ensure (a) the availability and potability of water and (b) water that is provided to the water company's consumer's is at an adequate volume and pressure;
4. preserve the water company owner's assets and property; and
5. notify the water company's consumers of the receivership.
The bill specifies that the court may limit a receiver's powers to those necessary to solve a specific problem.
The bill authorizes the receiver to correct or eliminate any condition or violation that is prejudicial to the public health while remaining at the water company, provided the total cost of doing so does not exceed $3,000. If the receiver files a motion, the court may order expenditures exceeding this amount.
Under the bill, the receiver must, within 90 days after being appointed, take all necessary steps to stabilize the small water company's operation to ensure its consumers have available and potable water that is provided at an adequate volume and pressure.
Actions Filed Against a Small Water Company Under Receivership (§ 7)
Under the bill, any action filed against a water company under receivership must be transferred to the court supervising the receiver. A receiver's appointment must act as a stay of such actions until the court terminates the stay, or orders otherwise.
Leases, Mortgages, and Other Contracts (§ 8)
Under the bill, a receiver may not be required to honor a lease, mortgage, secured transaction, or other contract the small water company's owner entered into if, after a motion is made to the Superior Court, the court determines that the:
1. person seeking payment under the lease, mortgage, secured transaction, or contract was an owner or controlling stockholder of the company or an affiliate of such a person at the time the contract took effect or
2. related rental, price, or interest rate required to be paid was substantially in excess of a reasonable amount at the time the lease, mortgage, secured transaction, or contract was entered into.
In the case of the latter, the receiver may apply to the court to set a reasonable rental, price, or interest rate to be paid for the duration of the receivership. The receiver may do this if he or she possesses real estate or goods necessary for the small water company's continued operation and they are related to the above listed transactions that the receiver is permitted to avoid.
The bill requires the court to hold a hearing within 15 days after the receiver makes such a motion. Any known owners of property involved in the motion must be notified at least 10 days before the hearing.
Under the bill, if the receiver pays an amount the court determines is reasonable, it constitutes a defense to any action against the receiver for (1) payment or (2) possession of the goods, security interest, or real estate subject to the lease or mortgage involved in the motion. But payment does not relieve the small water company owner from any liability for the difference between the amount the receiver paid and the amount due under the lease, mortgage, secured transaction, or contract.
The bill does not apply to a lease, mortgage, secured transaction, or contract entered into with a state- or federally-regulated financial institution.
List of Qualified Receivers (§ 9)
The bill requires DPH to maintain and post on its website, a list of proposed interested and qualified receivers. The list must include individuals, corporations, associations, and partnerships with experience providing water service and a history of satisfactory water company operations.
The Superior Court may appoint anyone from the department's list to act as a receiver, but if the individual or entity declines, the court must appoint a receiver.
The bill prohibits a state employee, small water company owner, or person with a financial interest in the small water company to serve as its receiver. A person appointed as a receiver is prohibited from acquiring or having a current financial interest in the water company for up to five years after the date the receivership terminates.
The bill authorizes the court, at its discretion, to require the receiver to file a surety bond conditioned upon the receiver's faithful performance of his or her duties.
Removing a Receiver (§ 10)
The bill authorizes the court to remove a small water company receiver at any time. If the receiver is removed, declines to act, or dies, the court that made the appointment may fill the vacancy.
Under the bill, a small water company receiver is entitled to a reasonable receiver's fee the court determines. The receiver is liable only in his or her official capacity for injury to a person or property by reason of the small water company's conditions. The receiver is not personally liable, except for acts or omissions that constitute gross, willful, or wanton negligence.
Receivership Costs (§ 11)
The bill allows the receiver to pay the costs of operating the receivership by (1) using the rates collected from the small water company's consumers, and raising them if necessary; (2) selling or disposing of all or part of the company's real and personal property; or (3) both. The receiver may do this only if the Superior Court and DPH commissioner approve it.
The receivership costs include paying: (1) the receiver's service fees; (2) fees for attorneys, accountants, certified operators, engineers, or other provider of goods and services necessary to the receivership's operation; and (3) any other fees the court and DPH commissioner deem necessary.
Receiver's Filing Requirement (§ 12)
The bill requires a small water company receiver to quarterly sign, swear, and file with the Superior Court clerk a (1) full and detailed account of his or her actions as the receiver for the preceding three months and (2) statement of all court orders passed during the preceding three months and the small water company's present condition and prospects. The receiver must then cause a motion for a hearing and approval to be placed on the short calendar.
The bill requires the receiver to do this the first week of each January, April, July, and October.
Termination of Receivership (§ 13)
The bill authorizes the court to terminate a small water company's receivership and return the company to its owner if the receiver or owner files such a motion. The court must find that the small water company has been rehabilitated so that the violations or other conditions complained of no longer exist. In its termination order, the court must include terms it deems necessary to prevent these violations or conditions from recurring.
§ 14 — TEMPORARY MANAGERS
The bill allows the DPH commissioner to appoint a person by emergency order to temporarily manage and operate a small water company if:
1. the company has abandoned operations,
2. DPH has filed or is filing a motion in Superior Court to appoint a receiver, and
3. the company's owner has been notified and provided an opportunity for a hearing (notice is deemed adequate if mailed or hand-delivered to the company's last known address).
The bill specifies that appointing a temporary manager does not affect DPH's authority to pursue enforcement actions against a small water company.
Powers and Duties
The bill grants a temporary manager the powers and duties necessary to ensure the (1) small water company's continued operation, (2) availability and potability of water, and (3) provision of water to consumers at adequate volume and pressure. Specifically, these powers and duties include:
1. reading meters;
2. billing customers for water services;
3. collecting revenues;
4. disbursing funds;
5. increasing rates charged to consumers if the increase is necessary and approved by the DPH commissioner;
6. accessing all small water company components;
7. conducting water sampling;
8. making necessary repairs, determined in consultation with the DPH commissioner; and
9. performing other acts necessary to assure continuous and adequate water service as authorized by the commissioner.
The bill permits the DPH commissioner to require the temporary manager to file a surety bond conditioned upon the manager's faithful performance of his or her duties.
Term Limits and Compensation
Under the bill, the temporary manager must serve a one-year term unless:
1. the DPH commissioner specifies otherwise,
2. DPH or the temporary manager request an extension and the commissioner grants it,
3. the DPH commissioner discharges the temporary manager from his or her responsibilities, or
4. the Superior Court appoints a receiver.
Under the bill, the DPH commissioner must set the temporary manager's compensation at the time he or she is appointed. The temporary manager must be paid using the rates collected from the small water company's consumers.
The bill requires the temporary manager, within 60 days after being appointed, to provide the DPH commissioner an accounting of the small water company's assets and property.
Additionally, the temporary manager must report monthly to the DPH commissioner (1) an income statement for the relevant reporting period, (2) a summary of the small water company's activities, including all repairs made; and (3) any other information the commissioner deems necessary.
§ 15 — DPH INVESTIGATIONS, INQUIRIES, AND HEARINGS
The bill authorizes the DPH commissioner, or his agent authorized to conduct an inquiry, investigation, or hearing under the bill's provisions to inspect the premises of a small water company; issue subpoenas; order the production of books, records, or documents; and administer oaths and take testimony under oath.
If DPH orders a hearing, the commissioner or his agent may subpoena witnesses and require the production of records, papers, and documents pertaining to the inquiry. If a person disobeys the subpoena, refuses to answer pertinent questions, or fails to produce records and papers pursuant to the subpoena, the bill allows the commissioner or his agent to petition the Superior Court in Hartford to order the person to appear before the court and answer the questions or produce the documents.
Public Health Committee
Joint Favorable Substitute