Regulatory Burdens Killing Off Small Water Utilities

Regulatory burdens are contributing to the devastating financial conditions of many small water utilities. 

Look no further than Connecticut, where numerous small providers are on the brink of collapse. 

"Small water companies serving a few dozen homeowners in Connecticut communities are facing extinction," the Associated Press recently reported. "Across rural areas, hundreds of tiny water companies are showing their age." 

A top challenge for small providers is compliance with government rules. 

"An array of environmental regulations, record-keeping requirements, and decaying systems are forcing residents to give up their ownership and fold the community systems into large water companies," the report said. 

New Milford, a community of 15 homeowners, is one example. 

For nearly 50 years, New Milford "got by fine on three water wells, paying a reasonable price for a reliable supply. But about four years ago, the state took an interest, and that's when the trouble began," the report said, citing resident Mark Conrad.

New rules made it tough for the local company to stay afloat. 

"Regulations required hiring a certified operator, more water testing, and upgraded electrical systems. Now the community is being forced to buy water from a large regional water company with rates likely to rise by more than $200 per family per year, Conrad said. With the possibility of state fees, he fears the price for water could double," the report said.

In a March meeting of the National Association of Regulatory Utility Commissioners NARUC), government burdens on small water utilities were a key point of discussion. According to documents from the event, filling requirements are tough on these small utilities. It can be time-consuming and expensive to meet all the requirements. 

The problem is a key issue for the National Association of Water Companies as well. 

Regulatory models often "work for large companies and those safeguards are necessary," the group said in a blog post. But "many small regulated water utilities are missing out on the regulatory process either because it is too expensive or too onerous. This ultimately leads to under-investment, losses in reliability, and threats to environmental compliance." 

For more policy news, check out Water Online's Regulations & Legislation Solution Center.

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