wa-law.org > bill > 2025-26 > HB 1906 > Substitute Bill
The legislature finds that water systems provide a critical utility service to the residents of Washington state, and due to scale economies, generally function as a natural monopoly in a given area.
The legislature finds that the utilities and transportation commission, the regulating agency responsible for approving water system rate changes and ensuring adequate consumer protections, does not have specific statutory standards to guide its review and approval of proposed water system rate changes.
The legislature finds that water systems are subject to a number of public health standards and requirements from the department of health that require comprehensive planning and capital investments to ensure that residents have continuous access to safe drinking water. The costs of these critical investments are reflected in rate changes in order to provide a reasonable rate of return and keep a water company in business. However, planning materials and information supporting capital investments are not currently required to be shared with the utilities and transportation commission.
The legislature further finds the current rate setting process does not provide the utilities and transportation commission sufficient structure or guidance to determine whether capital improvement costs included in a proposed water rate change are prudently incurred and will result in rates that are just, fair, reasonable, and sufficient. Likewise, the water system ratepayers subject to the change are not provided sufficient notice of planned system investments and their anticipated impacts on rates, which can lead to sudden and significant rate increases.
The legislature intends to provide additional structure and guidance to the water system rate setting process in order to enable the utilities and transportation commission to effectively regulate in this area as a consumer protection agency. The legislature also intends to increase notice and transparency to consumers about water companies' planned investments and their impacts by leveraging the existing planning process required for safe drinking water standards.
In fulfilling its responsibilities under this subsection, the state board may create ad hoc committees or other such committees of limited duration as necessary.
In order to protect public health, the state board shall:
Adopt rules for group A public water systems, as defined in RCW 70A.125.010, necessary to assure safe and reliable public drinking water and to protect the public health. Such rules shall establish requirements regarding:
The design and construction of public water system facilities, including proper sizing of pipes and storage for the number and type of customers;
Drinking water quality standards, monitoring requirements, and laboratory certification requirements;
Public water system management and reporting requirements;
Public water system planning and emergency response requirements;
Public water system operation and maintenance requirements;
Water quality, reliability, and management of existing but inadequate public water systems; and
Quality standards for the source or supply, or both source and supply, of water for bottled water plants;
Adopt rules as necessary for group B public water systems, as defined in RCW 70A.125.010. The rules shall, at a minimum, establish requirements regarding the initial design and construction of a public water system. The state board rules may waive some or all requirements for group B public water systems with fewer than five connections;
Adopt rules and standards for prevention, control, and abatement of health hazards and nuisances related to the disposal of human and animal excreta and animal remains;
Adopt rules controlling public health related to environmental conditions including but not limited to heating, lighting, ventilation, sanitary facilities, and cleanliness in public facilities including but not limited to food service establishments, schools, recreational facilities, and transient accommodations;
Adopt rules for the imposition and use of isolation and quarantine;
Adopt rules for the prevention and control of infectious and noninfectious diseases, including food and vector borne illness, and rules governing the receipt and conveyance of remains of deceased persons, and such other sanitary matters as may best be controlled by universal rule; and
Adopt rules for accessing existing databases for the purposes of performing health related research.
The state board shall adopt rules for the design, construction, installation, operation, and maintenance of those on‑site sewage systems with design flows of less than three thousand five hundred gallons per day.
The state board may delegate any of its rule-adopting authority to the secretary and rescind such delegated authority.
All local boards of health, health authorities and officials, officers of state institutions, police officers, sheriffs, constables, and all other officers and employees of the state, or any county, city, or township thereof, shall enforce all rules adopted by the state board . In the event of failure or refusal on the part of any member of such boards or any other official or person mentioned in this section to so act, he or she shall be subject to a fine of not less than fifty dollars, upon first conviction, and not less than one hundred dollars upon second conviction.
The state board may advise the secretary on health policy issues pertaining to the department of health and the state.
The state board must allow the owner or operator of a water system to have their water samples checked by the jurisdictional health department without the requirement of hiring or contracting for services with a satellite management agency, as defined in WAC 246-294-010 as it existed as of January 1, 2025.
In approving the water system plan of a public water system, the department shall ensure that : (a) Water service to be provided by the system under the plan for any new industrial, commercial, or residential use is consistent with the requirements of any comprehensive plans or development regulations adopted under chapter 36.70A RCW or any other applicable comprehensive plan, land use plan, or development regulation adopted by a city, town, or county for the service area; and (b) the plan submitted includes all capital improvement projects necessary for the system for at least the next 10 years. The department may require a public water system to update its water system plan on an interval of less than 10 years and may exempt public water systems owned and operated by a special purpose district from the requirement to include all capital improvement projects in their water system plan.
A municipal water supplier, as defined in RCW 90.03.015, has a duty to provide retail water service within its retail service area if: (a) Its service can be available in a timely and reasonable manner; (b) the municipal water supplier has sufficient water rights to provide the service; (c) the municipal water supplier has sufficient capacity to serve the water in a safe and reliable manner as determined by the department of health; and (d) it is consistent with the requirements of any comprehensive plans or development regulations adopted under chapter 36.70A RCW or any other applicable comprehensive plan, land use plan, or development regulation adopted by a city, town, or county for the service area and, for water service by the water utility of a city or town, with the utility service extension ordinances of the city or town.
No public service company shall sell, lease, assign or otherwise dispose of the whole or any part of its franchises, properties or facilities whatsoever, which are necessary or useful in the performance of its duties to the public, and no public service company shall, by any means whatsoever, directly or indirectly, merge or consolidate any of its franchises, properties or facilities with any other public service company, without having secured from the commission an order authorizing it to do so. The commission shall not approve any transaction under this section that would result in a person, directly or indirectly, acquiring a controlling interest in a gas, water, or electrical company without a finding that the transaction would provide a net benefit to the customers of the company. Prior to approving any transaction under this section that would result in a change of a controlling interest in a water company, the commission shall verify that the company has provided notification to the county in which any water system of the company is located, any water district or public utility district operating water systems within such county, any adjacent water systems, and customers of the company and provided the customers with a right of first refusal to purchase the water system.
This section shall not apply to any sale, lease, assignment or other disposal of such franchises, properties or facilities to a special purpose district as defined in RCW 36.96.010, city, county, or town.
In determining the rates to be charged by each water company subject to its jurisdiction, the commission :
Must adopt rules that establish a structure for incorporating the allowable cost of capital in the determination of rates or charges under this chapter that:
Establishes a return on equity ceiling and total rate of return ceiling of seven percent, respectively;
Requires a detailed analysis and justification for any proposed return on equity or total rate of return greater than five percent;
Accounts for any federal, state, or other external funding sources for system improvements;
Requires all capital improvement projects to be included in the water system plan approved by the department of health and provides for a waiver process for emergency improvements that are necessary for public health and safety;
Considers the extent to which the water company provided notice of planned capital projects to consumers and the impact of the projects on rates;
Promotes rate smoothing and the avoidance of excessive or sudden rate changes;
Requires that, for a consolidated system, any capital improvement costs that are attributable to one system that exceed the capital improvement costs of a dissimilar system within the consolidated system by more than five percent may not be included in single tariff pricing for the entire consolidated system; and
Considers the extent to which a public water system that is owned and operated by a special purpose district is able to comply with the planning requirements given the size and capability restraints of the system; and
May provide for the funding of a reserve account exclusively for the purpose of making capital improvements approved by the department of health as a part of a long-range plan, or required by the department to assure compliance with federal or state drinking water regulations, or to perform construction or maintenance required by the department of ecology to secure safety to life and property under RCW 43.21A.064(2). Expenditures from the fund shall be subject to prior approval by the commission, and shall be treated for rate-making purposes as customer contributions.