Chief Sponsor: Kim F. Coleman

Senate Sponsor: Ralph Okerlund


8     Committee Note:
9          The Natural Resources, Agriculture, and Environment Interim Committee
10     recommended this bill.
11          The Legislative Water Development Commission recommended this bill.
12               Membership:     13 legislators     10 non-legislators
13               Legislative Vote:     8 voting for     0 voting against     5 absent
14     General Description:
15          This bill regulates municipalities that provide water to customers outside respective
16     political boundaries.
17     Highlighted Provisions:
18          This bill:
19          ▸     defines terms;
20          ▸     describes the process by which a municipality may provide water to customers
21     outside the municipality's political boundary;
22          ▸     states that a municipality may not sell the municipality's waterworks, in whole or in
23     part, except as provided in statute;
24          ▸     creates reporting requirements; and
25          ▸     makes technical changes.
26     Money Appropriated in this Bill:
27          None

28     Other Special Clauses:
29          This bill provides a special effective date.
30     Utah Code Sections Affected:
31     AMENDS:
32          10-7-14, Utah Code Annotated 1953
33          10-8-14, as last amended by Laws of Utah 2016, Chapter 419
34          10-8-22, Utah Code Annotated 1953
35     ENACTS:
36          73-5-16, Utah Code Annotated 1953

38     Be it enacted by the Legislature of the state of Utah:
39          Section 1. Section 10-7-14 is amended to read:
40          10-7-14. Rules and regulations for use of water.
41          (1) As used in this section:
42          (a) "Designated water service area" means the area defined by a municipality in
43     accordance with the Utah Constitution, Article XI, Section 6, Subsection (1)(c).
44          (b) "Retail customer" means an end user:
45          (i) who receives culinary water directly from a municipality's waterworks system; and
46          (ii) whom the municipality described in Subsection (1)(b)(i) bills for water service.
47          (c) (i) "Waterworks system" means municipally owned collection, treatment, storage,
48     and distribution facilities for culinary or irrigation water, including any pipe, hydrant, or
49     appurtenance to a pipe or hydrant.
50          (ii) "Waterworks system" does not include a water right or a source of supply such as a
51     well, spring, stream, or share in a mutual irrigation company.
52          (2) [Every city and town] A municipality may enact ordinances, rules and regulations
53     for the management and conduct of the waterworks system owned or controlled by it.
54          (3) A municipality that provides water to a retail customer outside of the municipality's
55     boundary shall:
56          (a) create and maintain a map showing:
57          (i) the municipality's designated water service area; and
58          (ii) each area outside the municipality's designated water service area where a retail

59     customer receives water service from the municipality;
60          (b) transmit a copy of the map described in Subsection (3)(a) to the state engineer;
61          (c) if the municipality has more than 500 retail customers, post the map described in
62     Subsection (3)(a) on the municipality's website;
63          (d) define, by ordinance, the area included in the municipality's designated water
64     service area;
65          (e) adopt, by ordinance, any municipality rule or regulation applicable to the
66     municipality's designated water service area or to a retail customer located outside of the
67     municipality's designated water service area; and
68          (f) adopt, by ordinance, reasonable water rates for retail customers in the municipality's
69     designated water service area, in accordance with Section 10-8-22.
70          (4) Within the municipality's designated water service area, a municipality shall:
71          (a) provide service to all retail customers in a manner consistent with principles of
72     equal protection; and
73          (b) apply restrictions on water use to all retail customers in times of anticipated or
74     actual water shortages in a manner consistent with principles of equal protection.
75          (5) Nothing in this section:
76          (a) prohibits a municipality from enacting a service restriction or other restriction:
77          (i) affecting:
78          (A) a localized area; or
79          (B) the municipality's entire designated water service area; and
80          (ii) (A) based on an operational or maintenance need;
81          (B) based on an emergency situation; or
82          (C) to address a health, safety, or general welfare need;
83          (b) expands or diminishes the ability of a municipality to enter into a contract to supply
84     water outside of the municipality's designated water service area; or
85          (c) alters the authorities or definitions described in Title 19, Chapter 4, Safe Drinking
86     Water Act.
87          (6) A municipality may not sell or convey an interest, in part or in whole, of the
88     municipality's waterworks system, except to a public entity as defined in Section 73-1-4.
89          Section 2. Section 10-8-14 is amended to read:

90          10-8-14. Utility and telecommunications services -- Service beyond municipal
91     limits -- Retainage -- Notice of service and agreement.
92          (1) As used in this section, "public telecommunications service facilities" means the
93     same as that term is defined in Section 10-18-102.
94          (2) A municipality may:
95          (a) construct, maintain, and operate waterworks, sewer collection, sewer treatment
96     systems, gas works, electric light works, telecommunications lines, cable television lines,
97     public transportation systems , or public telecommunications service facilities ;
98          (b) authorize the construction, maintenance and operation of the works or systems
99     listed in Subsection (2)(a) by others;
100          (c) purchase or lease the works or systems listed in Subsection (2)(a) from any person
101     or corporation; and
102          (d) sell and deliver the surplus product or service capacity of any works or system
103     listed in Subsection (2)(a), not required by the municipality or the municipality's inhabitants, to
104     others beyond the limits of the municipality, except the sale and delivery of:
105          (i) retail electricity beyond the municipal boundary is governed by Subsections (3)
106     through (8); [and]
107          (ii) cable television services or public telecommunications services is governed by
108     Subsection (12)[.]; and
109          (iii) water is governed by Sections 10-7-14 and 10-8-22.
110          (3) If any payment on a contract with a private person, firm, or corporation to construct
111     waterworks, sewer collection, sewer treatment systems, gas works, electric works,
112     telecommunications lines, cable television lines, public transportation systems , or public
113     telecommunications service facilities is retained or withheld, it shall be retained or withheld
114     and released as provided in Section 13-8-5.
115          (4) (a) Except as provided in Subsection (4)(b), (6), or (10), a municipality may not sell
116     or deliver the electricity produced or distributed by [its] the municipality's electric works
117     constructed, maintained, or operated in accordance with Subsection (2) to a retail customer
118     located beyond [its] the municipality's municipal boundary.
119          (b) A municipality that provides retail electric service to a customer beyond [its] the
120     municipality's municipal boundary on or before June 15, 2013, may continue to serve that

121     customer if:
122          (i) on or before December 15, 2013, the municipality provides the electrical
123     corporation, as defined in Section 54-2-1, that is obligated by [its] the municipality's certificate
124     of public convenience and necessity to serve the customer with an accurate and complete
125     verified written notice described in Subsection (4)(c) that identifies each customer served by
126     the municipality beyond [its] the municipality's municipal boundary;
127          (ii) no later than June 15, 2014, the municipality enters into a written filing agreement
128     for the provision of electric service with the electrical corporation; and
129          (iii) the Public Service Commission approves the written filing agreement in
130     accordance with Section 54-4-40.
131          (c) The municipality shall include in the written notice required in Subsection (4)(b)(i)
132     for each customer:
133          (i) the customer's meter number;
134          (ii) the location of the customer's meter by street address, global positioning system
135     coordinates, metes and bounds description, or other similar method of meter location;
136          (iii) the customer's class of service; and
137          (iv) a representation that the customer was receiving service from the municipality on
138     or before June 15, 2013.
139          (5) The written filing agreement entered into in accordance with Subsection (4)(b)(ii)
140     shall require the following:
141          (a) The municipality shall provide electric service to a customer identified in
142     accordance with Subsection (4)(b)(i) unless the municipality and the electrical corporation
143     subsequently agree in writing that the electrical corporation will provide electric service to the
144     customer.
145          (b) If a customer who is located outside the municipal boundary and who is not
146     identified in accordance with Subsection (4)(b)(i) requests service from the municipality after
147     June 15, 2013, the municipality may not provide that customer electric service unless the
148     municipality submits a request to and enters into a written agreement with the electric
149     corporation in accordance with Subsection (6).
150          (6) (a) A municipality may submit to the electrical corporation a request to provide
151     electric service to an electric customer described in Subsection (5)(b).

152          (b) If a municipality submits a request, the electrical corporation shall respond to the
153     request within 60 days.
154          (c) If the electrical corporation agrees to allow the municipality to provide electric
155     service to the customer:
156          (i) the electrical corporation and the municipality shall enter into a written agreement;
157          (ii) the municipality shall agree in the written agreement to subsequently transfer
158     service to the customer described in Subsection (5)(b) if the electrical corporation notifies, in
159     writing, the municipality that the electrical corporation has installed a facility capable of
160     providing electric service to the customer; and
161          (iii) the municipality may provide the service if:
162          (A) except as provided in Subsection (6)(c)(iii)(B), the Public Service Commission
163     approves the agreement in accordance with Section 54-4-40; or
164          (B) for an electrical cooperative that meets the requirements of Subsection 54-7-12(7),
165     the governing board of the electrical cooperative approves the agreement.
166          (d) The municipality or the electrical corporation may terminate the agreement for the
167     provision of electric service if the Public Service Commission imposes a condition authorized
168     in Section 54-4-40 that is a material change to the agreement.
169          (7) If the municipality and electrical corporation make a transfer described in
170     Subsection (6)(c)(ii):
171          (a) (i) the municipality shall transfer the electric service customer to the electrical
172     corporation; and
173          (ii) the electrical corporation shall provide electric service to the customer; and
174          (b) the municipality shall transfer a facility in accordance with and for the value as
175     provided in Section 10-2-421.
176          (8) (a) In accordance with Subsection (8)(b), the municipality shall establish a
177     reasonable mechanism for resolving potential future complaints by an electric customer located
178     outside [its] the municipality's municipal boundary.
179          (b) The mechanism shall require:
180          (i) that the rates and conditions of service for a customer outside the municipality's
181     boundary are at least as favorable as the rates and conditions of service for a similarly situated
182     customer within the municipality's boundary; and

183          (ii) if the municipality provides a general rebate, refund, or other payment to a
184     customer located within the municipality's boundary, that the municipality also provide the
185     same general rebate, refund, or other payment to a similarly situated customer located outside
186     the municipality's boundary.
187          (9) The municipality is relieved of any obligation to transfer a customer described in
188     Subsection (5)(b) or facility used to serve the customer in accordance with Subsection (6)(c)(ii)
189     if the municipality annexes the property on which the customer is being served.
190          (10) (a) A municipality may provide electric service outside of [its] the municipality's
191     municipal boundary to a facility that is solely owned and operated by the municipality for
192     municipal service.
193          (b) A municipality's provision of electric service to a facility that is solely owned and
194     operated by the municipality does not expand the municipality's electric service area.
195          (11) Nothing in this section expands or diminishes the ability of a municipality to enter
196     into a wholesale electrical sales contract with another municipality that serves electric
197     customers to sell and deliver wholesale electricity to the other municipality.
198          (12) A municipality's actions under this section related to works or systems involving
199     public telecommunications services or cable television services are subject to the requirements
200     of Chapter 18, Municipal Cable Television and Public Telecommunications Services Act.
201          Section 3. Section 10-8-22 is amended to read:
202          10-8-22. Water rates.
203          (1) As used in this section:
204          (a) "Designated water service area" means the area defined by a municipality in
205     accordance with the Utah Constitution, Article XI, Section 6, Subsection (1)(c).
206          (b) "Large municipal drinking water system" means a municipally owned and operated
207     drinking water system serving a population of 10,000 or more.
208          (c) "Retail customer" means an end user:
209          (i) who receives culinary water directly from a municipality's waterworks system; and
210          (ii) whom the municipality described in Subsection (1)(c)(i) bills for water service.
211          (2) [They may] A municipality shall fix the rates to be paid for the use of water
212     furnished by the [city] municipality.
213          (3) The setting of municipal water rates is a legislative act.

214          (4) Within the municipality's designated water service area, a municipality shall:
215          (a) establish, by ordinance, reasonable rates for the services provided to the
216     municipality's retail customers;
217          (b) use the same method of providing notice to all retail customers of proposed rate
218     changes; and
219          (c) allow all retail customers the same opportunity to appear and participate in a public
220     meeting addressing water rates.
221          (5) (a) A municipality may establish different rates for different classifications of retail
222     customers within the municipality's designated water service area, if the rates and
223     classifications have a reasonable basis.
224          (b) A reasonable basis for charging different rates for different classifications may
225     include, among other things, a situation in which:
226          (i) there is a difference in the cost of providing service to a particular classification;
227          (ii) one classification bears more risk in relation to a system operation or obligation;
228          (iii) retail customers in one classification invested or contributed to acquire a water
229     source or supply or build or maintain a system differently than retail customers in another
230     classification;
231          (iv) the needs or conditions of one classification:
232          (A) are distinguishable from the needs or conditions of another classification; and
233          (B) based on economic, public policy, or other identifiable elements, support a
234     different rate; or
235          (v) there is a differential between the classifications based on a cost of service standard
236     or a generally accepted rate setting method, including a standard or method the American
237     Water Works Association establishes.
238          (c) An adjustment based solely on the fact that a particular classification of retail
239     customers is located either inside or outside of the municipality's corporate boundary is not a
240     reasonable basis.
241          (6) (a) If more than 10% of the retail customers within a large municipal drinking water
242     system's designated water service area are located outside of the municipality's corporate
243     boundary, the municipality shall:
244          (i) post on the municipality's website the rates assessed to retail customers within the

245     designated water service area; and
246          (ii) establish an advisory board to make recommendations to the municipal legislative
247     body regarding water rates, capital projects, and other water service standards.
248          (b) In establishing an advisory board described in Subsection (6)(a)(ii), a municipality
249     shall:
250          (i) if more than 10% but no more than 30% of the municipality's retail customers
251     receive service outside the municipality's municipal boundary, ensure that at least 20% of the
252     advisory board's members represent the municipality's retail customers receiving service
253     outside the municipality's municipal boundary;
254          (ii) if more than 30% of the municipality's retail customers receive service outside of
255     the municipality's municipal boundary, ensure that at least 40% of the advisory board's
256     members represent the municipality's retail customers receiving service outside of the
257     municipality's municipal boundary; and
258          (iii) in appointing board members who represent retail customers receiving service
259     outside of the municipality's municipal boundary, as required in Subsections (6)(b)(i) and (ii),
260     solicit recommendations from each municipality and county outside of the municipality's
261     municipal boundary whose residents are retail customers within the municipality's designated
262     water service area.
263          (7) A municipality that supplies water outside of the municipality's designated water
264     service area shall supply the water only by contract and shall include in the contract the terms
265     and conditions under which the contract can be terminated.
266          (8) A municipality shall:
267          (a) notify the director of the Division of Drinking Water of a contract the municipality
268     enters into with a person outside of the municipality's designated water service area, including
269     the name and contact information of the person named in each contract; and
270          (b) each year, provide any supplementing or new information regarding a contract
271     described in Subsection (8)(a), including whether there is no new information to provide at that
272     time.
273          Section 4. Section 73-5-16 is enacted to read:
274          73-5-16. State engineer to publish maps.
275          The state engineer shall publish conspicuously on the state engineer's website a map a

276     municipality submits in accordance with Subsection 10-7-14(3)(a).
277          Section 5. Delayed effective date.
278          This bill takes effect on January 1, 2021, if the amendment to the Utah Constitution
279     proposed by H.J.R. 1, Proposal to Amend Utah Constitution - Municipal Water Resources,
280     2019 General Session, passes the Legislature and is approved by a majority of those voting on
281     it at the next regular general election.