Is That Regulation Affordable? If It’s Under the Safe Drinking Water Act, It Better Be

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You open your mailbox. There’s your monthly water bill. Inside, you notice it’s gone up nearly $500—but your use hasn’t changed. How could this be? And maybe more important, can you afford it?

This is an essential question, concludes the Sacramento Superior Court. So essential that it must be considered when enacting standards under California’s Safe Drinking Water Act. The regulation in question, a primary drinking water standard for hexavalent chromium, was enacted in 2014 and set the maximum contaminant level—or MCL—at 10 parts per billion. The rulemaking was controversial, with more than 18,000 comments received, many of which asserted the level was too low to be “economically feasible.”

Under the Act, MCLs must be “as close as feasible” to public health goals, but must also consider the “technological and economic feasibility of compliance.” (Health & Safety Code, § 116365 (a), (b).) No published appellate decisions have addressed how this balancing shakes out, and thus there is little guidance on what must be considered when deciding an appropriate level or what these terms mean. The statute provides some specifics: The State Water Resources Control Board—the agency now tasked with establishing maximum levels—must consider the costs of compliance, including “the cost per customer and aggregate cost of compliance.” (§ 116365 (b)(3).)

While the agency did estimate the cost of compliance on a per-customer basis—for some, water bills were estimated to increase over $5,000 in a year—the agency did not consider whether it was economically feasible to saddle users with this drastic rate hike. The court held that this was an error. In its view, estimating the cost was not enough; the agency then needed to consider whether the rate increases were economically feasible (i.e., affordable). Understandably, the court was concerned that this number was big—in the court’s words: “so big that it appears, on its face, to be economically unfeasible for many people.”

It should be noted that the majority of water users would not have faced drastic rate climbs; those from large water districts would have seen modest increases. The court’s decision therefore suggests that, when setting maximum contaminant levels, the State Board must consider economic impacts on small water systems or districts, whose smaller-user base make costly upgrades more expensive on a per-user basis.

Because the State Board failed to assess whether users could afford the rate increases, the court ordered it to begin anew. And while the decision lacks the precedential impact of a published appellate opinion, because the agency opted not to appeal, it may likely serve as precedent for any future regulations under the Safe Drinking Water Act—the agency simply may not want to risk another regulation being overturned on similar grounds.

State Board staff must now scrap the drinking water standard from the Code of Regulations by August 15; the Office of Administrative Law will then review, with an anticipated effective date in late September.

The court’s judgment, order, and peremptory writ can be found here.

For more information, or to discuss how this decision might impact future rulemakings, please contact Ed Casey or Max Rollens.