Restructuring and 

Consolidation of Small 

Drinking Water 

Systems 

A Compendium of State 

Authorities, Statutes, and 

Regulations 
Office of Water (4606M) 

EPA 816-B-07-001 

October 2007 

www.epa.gov/safewater 

Printed on Recycled Paper
Table of Contents

Compendium.................................................................................................................... i

Introduction ......................................................................................................................ii 

List of Acronyms.............................................................................................................. v

Alaska ............................................................................................................................. 1 

Arizona............................................................................................................................ 2 

Arkansas ......................................................................................................................... 3 

California ......................................................................................................................... 4 

Colorado.......................................................................................................................... 5 

Connecticut ..................................................................................................................... 6 

Delaware ......................................................................................................................... 8 

Georgia ........................................................................................................................... 9 

Idaho ............................................................................................................................. 11 

Indiana .......................................................................................................................... 12 

Kansas .......................................................................................................................... 13 

Kentucky ....................................................................................................................... 15 

Louisiana....................................................................................................................... 17 

Maine ............................................................................................................................ 18 

Maryland ....................................................................................................................... 19 

Michigan........................................................................................................................ 20 

Mississippi..................................................................................................................... 21 

Missouri......................................................................................................................... 22 

Nevada.......................................................................................................................... 23 
New Hampshire............................................................................................................. 24 

New Jersey ................................................................................................................... 26

New Mexico................................................................................................................... 28

New York....................................................................................................................... 30 

Oregon .......................................................................................................................... 31 

Pennsylvania................................................................................................................. 32

Rhode Island ................................................................................................................. 34

South Carolina .............................................................................................................. 36 

Texas ............................................................................................................................ 37 

Vermont......................................................................................................................... 39 

Virginia .......................................................................................................................... 40 

Washington ................................................................................................................... 43

West Virginia ................................................................................................................. 45 

Wyoming ....................................................................................................................... 46 

Appendix A: Links to State Statutes and Regulations ................................................... 47 

Appendix B: Listing of Common Authority, Statue, and/or Regulation Elements........... 50 
i

The Compendium 

This document contains information on restructuring and consolidation authorities for 

public drinking water systems. It provides an individual summary for each state by 

listing available statutes, regulations, or policies that encourage or require consolidation 

or restructuring of drinking water systems. Information or requirements contained in 

documents incorporated by reference into state regulations (e.g., “Ten State 

Standards,” manuals of recommended standards for wastewater treatment plants, 

public water supply systems, and other water-based facilities written by the Great 

Lakes-Upper Mississippi River Board of State Sanitary Engineers), are not included. 

This document is intended as a starting point for public drinking water systems pursuing 

information on restructuring and consolidation. During its development, the 

Environmental Protection Agency (EPA) strived to collect the most current information 

through coordination and consultation with states. EPA recognizes that information may 

change over time and recommends that drinking water systems contact their state 

directly to make sure they understand any applicable requirements. 

This Compendium consists of three sections for your use and reference. 

The first section of this document, the main body, summarizes state-specific 

restructuring information as provided by the state regulatory agency. Additional 

information was obtained from two EPA publications (State Strategies to Assist Public 

Water Systems in Acquiring and Maintaining Technical, Managerial, and Financial 

Capacity [EPA 816-R-01-019, July 2001] and State Programs to Ensure Demonstration 

of Technical, Managerial, and Financial Capacity of New Water Systems [EPA 

816-R-01-018, July 2001]). 

The remaining two sections consist of user friendly appendices: 

Appendix A includes internet links to statutory or regulatory provisions for each listed 

state. 

Appendix B includes a list of the common authority, statutory, and regulatory elements 

used by the states as of December 2006. 
ii 

Introduction 

If you are reading this document, perhaps you manage or regulate one of the more than 

50,000 small community water systems in the United States and its territories. Maybe 

you provide technical assistance, training, or other services to these systems. You 

might even work for a local, state, or federal regulatory or financial agency. 

No matter what you do, you probably know of small systems that provide excellent 

drinking water at a reasonable cost. You probably also know of small systems that are 

struggling to maintain operations. They, too, want to provide good service and safe 

water to drink. Unfortunately, some of these systems are physically run-down or exhibit 

poor source water quality. Most of these type systems service customers who cannot 

afford big rate increases to address or correct these issues. You may also know of 

systems that are operating with no immediate problems, but are concerned about their 

ability to continue providing the best possible service. 

Systems that are having problems now, or those that are worried about the future, may 

need to evaluate all options available to them. These options may include restructuring 

of system/management operations, utilization of appropriate technology, financial 

assistance (grants or loans), training, and technical assistance. Most systems will 

probably find they need some combination of these options to resolve these issues. 

Drinking water systems, especially those small systems which serve 3,300 or fewer 

customers, face a wide array of challenges in providing safe, reliable, and affordable 

drinking water to their customers. These challenges include adapting to new regulatory 

standards, the need to upgrade or replace aging infrastructure, source water availability 

and protection issues, and increasing budgetary constraints. 

 

Changes to the operational, managerial, or institutional structure of a water system, 

commonly referred to as “restructuring,” can offer several effective options to address 

these challenges. Restructuring options can range from relatively minor changes in a 

system’s procurement processes to transferring ownership of a system through 

consolidation or regionalization (see Diagram #1). 

Each water system is unique in its own way, resulting in no “one-size-fits-all” 

restructuring solutions. It is important for states and water systems to work together to 

choose a restructuring strategy that will be most appropriate to meet the system’s 

needs. The spectrum of restructuring options represents a broad, flexible array of 

solutions that could address the challenges faced by systems and improve the 

technical, managerial, and financial capabilities of most water systems. 
iii

Restructuring can improve capacity in a number of important ways: 

Technical capacity improvements can include increasing access to higher 

quality/quantity source water; sharing, upgrading, or building new infrastructure; 

developing more efficient treatment technologies; and opening access to a 

certified operator and additional expertise. 

Managerial capacity improvements can include increasing expertise in water 

system planning/operations and enhancing systems’ financial, accounting, and 

asset management practices. 

Financial capacity improvements can include reducing costs, achieving greater 

economies of scale through shared services, and increasing systems access to 

funds through new partnerships. In addition, systems that consider consolidation 

or restructuring may receive preferential treatment in loan or grant programs 

(e.g., higher priority for Drinking Water State Revolving Fund [DWSRF] loans). 

Restructuring can be an effective means to help small water systems achieve and 

maintain technical, managerial, and financial capacity, and to reduce the oversight and 

resources that states need to devote to these systems. One key mechanism that a 

state can use to consider and promote the use of restructuring activities is its water 

system capacity development program. States enact statutes or regulations that require 

new systems to demonstrate their need to exist or their inability to connect to a nearby 

existing system. A few other states require existing systems to act as mentors to new 

systems or takeover new systems that cannot consistently demonstrate adequate 

capacity. 

Diagram #1: The Restructuring Spectrum 
iv 

In addition to state capacity development programs, some state primacy agencies have 

promoted restructuring activities through collaboration between other state agencies 

such as the public utility or public service commissions. Examples of these 

relationships can be found throughout Appendix B. 
v

Acronyms 

CPCN Certificate of Public Convenience and Necessity 

CWS Community Water System 

DWSRF Drinking Water State Revolving Fund 

PWS Public Water System 

SDWA Safe Drinking Water Act 

STP Single Tariff Pricing 

TMF Technical, Managerial, and Financial 

1

I. Overview of State Restructuring and Consolidation Efforts 

The Regulatory Commission of Alaska (RCA) can order public systems with conduits, 

pipes, pipelines, mains, or other distribution or transmission facilities to allow other 

public systems to use these facilities when public convenience and necessity require it. 

Use must not result in substantial injury to the owner or in substantial detriment to the 

provided service. The user must pay for any necessary modifications or additions and 

may be required to pay reasonable compensation for use of the facilities. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. The Regulatory Commission of Alaska 

B. Alaska Department of Natural Resources 

C. Alaska Department of Health and Human Services 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agencies involved with these initiatives, 

as listed above. 

Alaska
2

I. Overview of State Restructuring and Consolidation Efforts 

Arizona Statute provides the Public Service Commission (PSC) the regulatory power to 

order a public service corporation to make additions, improvements, or changes to an 

existing plant, and to construct new structures. If any ordered changes require joint 

action by two or more public service corporations, the corporations must share the cost 

of those changes (after notice from the PSC). If the corporations cannot agree upon an 

apportionment of the costs, the PSC can order the corporations to pay at a proportion 

determined by the PSC. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Arizona Public Service Commission 

B. Arizona Department of Natural Resources 

III. Additional Information on Restructuring and Consolidation 

In accordance with Arizona Revised Statute 49-357, the Department of Environmental 

Quality (DEQ) may allow water systems to cooperate in testing and monitoring for water 

contaminants if the DEQ determines that the water systems are located in the same 

general area and the area is hydrologically connected.

Arizona 
3

I. Overview of State Restructuring and Consolidation Efforts

The Division of Health of the Arkansas Department of Health and Human Services 

(DHHS) encourages regionalization, consolidation and interconnection in several ways. 

First, as part of their New System Capacity Development Strategy, all new systems are 

required to submit an engineering report detailing all available options for a new system. 

 Those with new sources are required to evaluate all contiguous existing public water 

systems (PWSs) to determine if interconnection is the best option. For existing 

systems, all PWSs seeking non-private funding of construction projects must be 

reviewed by the Water and Wastewater Advisory Committee. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Division of Health of the Arkansas Department of Health and Human Services 

III. Additional Information on Restructuring and Consolidation 

Applicants must show through an engineering review and cost review that 

interconnection with an existing PWS is not the best option. Those seeking Drinking 

Water State Revolving Funds (DWSRF) funds are priority ranked for available loan 

monies if they are interconnecting, consolidating or regionalizing systems that lack 

technical, managerial or financial (TMF) capacity.

Arkansas 
4

I. Overview of State Restructuring and Consolidation Efforts 

In reference to submittals for operation permits, any new system applying for operation 

within the State of California must submit a technical evaluation including a 

characterization of water quality and an evaluation of the feasibility of consolidation. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. California Department of Health 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 
5

I. Overview of State Restructuring and Consolidation Efforts 

Technical assistance providers are normally asked to provide information to Public 

Water Systems on such topics as consolidation, restructuring, shared staffing 

arrangements, rate structure, and budgeting. These actions are part of an effort to 

provide systems with methods of lowering costs by sharing or partnering with other 

systems. Evaluation of consolidation alternatives are considered during the 

development of preliminary engineering reports required for DWSRF loans. 

II. State Agencies Directly Involved with Restructuring and Consolidation

 Efforts 

A. Colorado Department of Health and Environment - Water Quality Control Division 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 

Colorado 
6

I. Overview of State Restructuring and Consolidation Efforts 

Small water systems (serving 1,000 people or fewer or 250 service connections or 

fewer) must obtain a certificate of public convenience and necessity (CPCN) from the 

Department of Public Utility Control (DPUC) prior to any construction or expansion. 

These requirements do not apply to water systems owned and operated by 

municipalities, municipal districts, regional water authorities, and nonprofit corporations 

working on behalf of the municipalities for the purpose of providing water to an elderly 

housing project. The DPUC, in coordination with the Department of Public Health 

(DPH), will not issue a CPCN unless it determines that no feasible interconnection with 

an existing system is available. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Connecticut Department of Environmental Protection 

B. Connecticut Department of Public Health 

C. Connecticut Department of Public Utility Control 

III. Additional Information on Restructuring and Consolidation 

In certain circumstances, the DPUC, the DPH, a municipality served by a water 

company, or an organization representing 20 percent of the water system’s customers 

can petition the court for attachment of the assets of the company and to place the 

company in receivership. Reasons for the petition include failure to provide water for at 

least five days in the preceding three months, noncompliance with water quality 

standards, gross mismanagement causing inadequate service, and an unwillingness or 

inability to provide adequate service. The receiver can petition the court for 

compensatory damages to be paid by any director, officer, or manager for willful 

misconduct or misappropriation of the system’s assets or income. 

The DPUC, DPH, and when necessary, the Department of Environmental Protection 

(DEP), can hold a hearing (after public notice) to determine appropriate actions for 

systems that do not possess the economic viability (based on performance measures of 

the system, including financial stability, physical condition and capacity, and managerial 

expertise) to provide safe and adequate drinking water (Connecticut DPUC State 

Statutes §16-262n). Acquisition of the system can be one of the appropriate actions. 

The DPUC must conduct this hearing upon request from a water company wanting to 

cease operations. 

If the DPUC determines (in consultation with appropriate agencies) that acquisition is 

Connecticut 
7

necessary and reasonable, the DPUC will order the acquisition by the most suitable 

public or private entity. The acquiring entity can recover the costs of acquisition and 

improvements through rates and can impose a rate surcharge to recover on a current 

basis all costs of the acquisition and necessary improvements. The surcharge can be 

imposed on the customers of the acquired and the acquiring company, revised 

quarterly, and “designed to recover 100% of the revenues to provide a net after-tax 

return on investment” (Connecticut DPUC State Statutes §16-262o). Also, 

compensation can be provided to the acquiring company. 

The revenues and expenses incurred by systems providing satellite management 

services (including operation, maintenance, administration, repairs, monitoring, 

reporting, billing, training, and the purchase of supplies and equipment) can be excluded 

from the rate review process. The DPUC can also provide a premium rate of return for 

systems voluntarily acquiring other systems or ordered to acquire other systems. 
8

 Delaware 

 

I. Overview of State Restructuring and Consolidation Efforts 

The Delaware Division of Public Health (DPH) encourages consolidation, especially 

among PWSs experiencing compliance and operational problems. Through 

consolidation, some systems can increase their TMF capacity. 

The Delaware DPH also promotes consolidation through its DWSRF loan program. A 

system applying for a DWSRF loan will receive additional points on its application 

towards its priority ranking if it has explored consolidation.

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Delaware Division of Public Health 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 
9

 

Georgia 

I. Overview of State Restructuring and Consolidation Efforts 

Since adoption in the 1970s, The Georgia Rules for Safe Drinking Water, Chapter 391-

3-5, have required privately owned community water systems (CWSs) to provide a 

mechanism to assure the continuity of service, such as a third party trustee. In some 

cases, CWS owners have entered into trust agreements with the local government in 

which the system is located. In other cases, the CWS owners have used nongovernment trustees. 

Since January 1, 1998 several new rules became effective relating to the permitting of 

new privately owned PWSs and CWSs. These require, among other things such as the 

development of business plans, that the applicant: 1) evaluate the possibility of 

connecting to an existing local government owned and operated PWS, certifying to the 

Georgia Environmental Protection Division (EPD) the reasons why the system cannot 

connect to the existing system if such a decision is made; 2) provide written certification 

from the local government in which the system is located that the local government is in 

concurrence with the development of the privately owned CWS; 3) provide a back-up 

water source; and 4) execute a trust indenture or other legal agreement with the local 

government in which the system is located, unless documentation is provided by the 

local government certifying that it has no desire to act in this capacity (applies to CWSs 

only). 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Georgia Environmental Protection Division 
10

III. Additional Information on Restructuring and Consolidation 

Whenever possible, EPD encourages consolidation of a water system with a nearby 

local government owned water system or water authority. If formal enforcement action 

is taken on a private water system, EPD may offer lower penalties if the water system 

agrees to connect to a local government owned water system or water authority within a 

reasonable period of time. These water systems have among the best track records for 

compliance and customer service, are generally larger systems, and have the TMF 

resources to provide safe, reliable drinking water on a consistent basis. As of June 30, 

2005, a total of 217 privately owned and operated PWSs have consolidated with a 

nearby government owned PWS. The figure below displays the number of 

consolidations in Georgia each year since 1998, and indicates that an average of 27 

water systems each year have successfully consolidated with a local government 

owned PWS or water authority. 

Number of Consolidated Water Systems 

Georgia EPD is expecting these numbers to increase in the near future as a result of 

increased financial and managerial burdens associated with complying with the recently 

enacted regulations. 

29

35

22

49

10

26

20 23

0

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003 2004 2005
11

 

I. Overview of State Restructuring and Consolidation Efforts 

The Idaho Department of Environment Quality (DEQ) requires new systems to 

investigate the feasibility of obtaining water service from an established PWS. If 

existing water service is available, but an owner elects to proceed with an independent 

system, the owner must explain why this choice is in the public interest in terms of 

environmental protection, affordability to water users, and protection of public health. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Idaho Department of Environmental Quality 

B. Idaho Public Utility Commission 

III. Additional Information on Restructuring and Consolidation 

The Public Utility Commission (PUC) can deny a certificate to a small water company if 

it is shown that there is no need for the service or that another company whether 

municipal, cooperative, or investor-owned, is willing and able to provide similar or better 

service. A small water company is a water corporation that provides service to fewer 

than 300 people or proposes initially to do so, or that does not have, and does not 

anticipate having, more than $50,000 annual gross revenues from water operations. 

The PUC cannot deny a certificate to a municipal corporation, or a mutual nonprofit or 

cooperative gas, electrical, water, or telephone corporation, or any other public utility 

organized and operated at cost and not for profit (Idaho Statutes Title 61-104).
12

I. Overview of State Restructuring and Consolidation Efforts 

A new PWS planning to provide service in a municipality with an existing PWS must 

secure consent from the Indiana Utility Regulatory Commission (IURC). The 

Commission must hold a public hearing and, if warranted, issue a declaration that it is of 

the public’s convenience and necessity to allow the second PWS to provide service. 

Municipalities operating water systems do not have to secure such declaration. A 

municipality may own, lease, acquire, or construct a system within the corporate 

boundaries of the municipality, and within a radius of six (6) miles from those 

boundaries or any place within the county in which the municipality is located, without 

the consent of any agency other than the municipal legislative body (IC 8-1.5-2-3). 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Indiana Utility Regulatory Commission 

B. Indiana Department of Environmental Management 

III. Additional Information on Restructuring and Consolidation 

In 2001, the state indicated that the Indiana Department of Environmental Management 

(DEM) may develop a program that will require or encourage the consolidation of 

systems incapable of maintaining adequate capacity. The DEM is considering requiring 

PWSs that have successfully mitigated similar issues to provide technical assistance to 

problem systems, and provide them with mentoring opportunities. 

 

In addition, a new system must submit a Water System Management Plan that includes 

an assessment of consolidation or interconnection with other systems including a cost 

and benefit comparison.

Indiana 
13

I. Overview of State Restructuring and Consolidation Efforts 

The State of Kansas has a long history of encouraging local units of government to 

cooperate for their mutual benefit. Subsequent to the Interlocal Cooperation Act (the 

Act) passed in 1957, the Kansas Legislature has enacted legislation specifically directed 

at helping public water supply systems improve efficiency through voluntary interlocal 

cooperation. The following Kansas statutes provide the framework for cooperation 

among local units of government ranging from joint powers agreements to consolidation 

and acquisition. 

The Interlocal Cooperation Act (K.S.A. 12-2901 et seq.), passed in 1957, provides a 

framework that enables local units of government to work together. Eligible participants 

include school districts, townships, cities, rural water districts and other governmental 

units. The Act can be used for a variety of projects including public water supply 

development. Three water supply systems benefiting a total of 11 CWSs have been 

formed under this Act. 

K.S.A. 82a-637 et seq., passed in 1969, establishes the procedures required for 

Acquisition of a Rural Water District by a City. A rural water district with service 

territory within the 3 mile radius of a city of the first class may petition to transfer assets 

and property to the city. In return the city shall operate the rural water district 

properties as part of the municipal functions of the city. The Statute also establishes 

the procedures for resolving any outstanding debt obligations of the rural water district. 

 The petition to transfer assets and property must be signed by two-thirds of the rural 

water district members.

The Public Wholesale Water Supply District Act (K.S.A. 19-3545 et seq.), passed 

in 1977, applies to municipalities, quasi-municipalities or political subdivisions of the 

state or any agency or instrumentality of the state or of the United States. Privately 

owned water distribution companies may also participate. The function of a public 

wholesale water supply district is to secure a source of water and treatment facilities on 

a scale larger than is feasible for public water suppliers acting alone, and to sell such 

water at wholesale to the participating public water supply systems. Kansas has 11 

active public wholesale water supply districts, consisting of 102 PWSs that serve an 

approximate population of 126,000 people. 

Kansas
14

K.S.A 65-163d et seq., passed in 1994, establishes the Drinking Water State 

Revolving Loan Fund. This statute requires the Kansas Department of Health and 

Environment (KDHE) to encourage regional cooperation. KDHE meets this 

requirement by awarding additional points for regional projects in the loan program 

priority ranking system. Four projects, benefiting 16 water systems have qualified for 

the additional points. One loan project consolidated 11 mobile home parks into one 

rural water district. 

K.S.A. 82a-650 et seq., passed during the 2005 Legislative Session, establishes the 

procedures for Acquisition of a Rural Water District by another Rural Water 

District. This Statute allows 2 or more rural water district boards to enter into an 

agreement to merge into a single district. Notice of the intent to merge must be 

provided to the rural water district members and notice must be published in the local 

newspaper. Members have 60 days to submit a written petition signed by at least 10 

percent of the members to request an election regarding the merger. If no petition is 

submitted the merger does not require a vote. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Kansas Department of Health and Environment 

B. Kansas Water Office 

III. Additional Information on Restructuring and Consolidation 

In addition to the above statutes KDHE encourages interlocal cooperation by providing 

financial assistance for regional public water supply planning. The KDHE Capacity 

Development Program provides 50/50 cost-share funding to study the feasibility of 

developing regional public water supply systems. The Kansas Water Office (KWO) also 

participates in regional planning efforts focused on specific areas of the state. 
15

I. Overview of State Restructuring and Consolidation Efforts 

Kentucky has numerous statutory and regulatory provisions regarding acquisition, 

voluntary and involuntary mergers, and consolidation of water systems. Since Oct. 1, 

1999, Kentucky Division of Water (KDOW) has had statutory authority under Kentucky 

Revised Statutes (KRS) 151.634 to approve or refuse plans for all new water systems 

based on their ability to demonstrate TMF capability of meeting the requirements of the 

Safe Drinking Water Act (SDWA). Many new systems must also be approved by the 

Public Service Commission (PSC), which regulates water districts, combined water, 

gas, or sewer districts and water commissions. Excluded from PSC authority are joint 

commissions such as water commissions, cities, and water districts that jointly 

purchase, construct, extend, improve, and operate water supply sources, which require 

only KDOW approval. 

New water districts that must secure approval from the PSC, must find that the service 

area of the new system cannot be served by an existing system. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Kentucky Division of Water 

B. Kentucky Public Service Commission 

III. Additional Information on Restructuring and Consolidation 

The KDOW has statutory authority to promulgate regulations as necessary to administer 

the capacity development program. Capacity of a water system is the system’s ability to 

achieve and maintain TMF capacity. Promulgation of these regulations will strengthen 

the KDOW capacity development program as it assists water systems with capacity 

issues and provides them with options for restructuring or consolidation.

Kentucky 
16

The PSC can acquire a system if it is expedient to do so. The PSC can purchase it, 

“and pay for it in the same manner as provided for the original construction and 

improvement; or may pay for it in whole or in part out of any surplus funds in 

possession, receipt or anticipation of receipt by the commission” (KRS Chapter 74.100 

[1]). The PSC can order necessary improvements that will be paid for by an 

assessment against the land or from the general fund of the water district. 

In addition, the PSC is authorized to initiate and carry out feasibility studies to determine 

the possibility of merging water districts or merging water associations into water 

districts. Upon completion of the study, and after a public hearing, the PSC can order 

the merging of water districts or associations into a single water district, and make any 

additional orders in connection with rates and charges. All of the commissioners from 

the merged district continue to serve until the expiration of their terms, at which time 

new commissioners are appointed. Secured debts continue to be paid under the terms 

and conditions of the outstanding obligations. 

Water districts can also voluntarily merge by a majority vote of the membership of each 

board of each water district that is subject to the merger. Board members must serve 

for at least one year after the PSC’s approval of the merger. All of the assets and 

liabilities are merged and the title to all real property owned by the separate districts is 

vested in the resulting district. Bonded obligations continue until retired. 

One provision that may discourage the consolidation of small water systems is that the 

PSC provides an expedited rate increase process for systems with 500 or fewer 

customers or $300,000 or less gross annual revenue. The shortened procedure 

minimizes the need for formal hearings, reduces filing requirements, and may decrease 

the time before the PSC renders a decision. 
17

Louisiana

I. Overview of State Restructuring and Consolidation Efforts 

The Department of Health and Hospitals’ (DHH) State Health Officer can bring a civil 

action against a PWS to carry out the provisions of the state statutes and regulations. 

The court can, acting on its own, or upon application of the state health officer, appoint 

a receiver to collect the assets of the system if: 

• The system has been abandoned or service has ceased; 

• The operator of the system has failed or refused to comply with administrative 

orders; or, 

• Circumstances necessitate the appointment of a receiver based on the state’s 

rules. 

The court, upon a showing by the system owner or operator of good cause, can 

dissolve the receivership. The PSC recognized that some small water systems are 

facing significant financial and operational obstacles, and acknowledged that these 

systems are not always easily acquired by larger systems. Therefore, flexible 

enforcement of PSC’s rules and streamlined economic regulations for small systems 

(e.g., expedited rate-making), may be necessary to keep these small systems viable. 

These PSC actions may be a disincentive for consolidation or restructuring. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

C. Louisiana Department of Health and Hospitals 

D. Louisiana Public Service Commission 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agencies involved with these initiatives, 

as listed above. 

Louisiana 
18

I. Overview of State Restructuring and Consolidation Efforts 

The State Drinking Water Program (DWP) has been and will continue to be committed 

to locating and disseminating independent research which provides information 

regarding the benefits and shortcomings of consolidation. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Maine Department of Health, Drinking Water Program 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 

Maine 
19

I. Overview of State Restructuring and Consolidation Efforts 

The Maryland Department of the Environment (MDE) encourages consolidation, 

especially among PWS experiencing compliance and operational problems. MDE views 

consolidation as a form of assistance in increasing a system’s TMF capacity. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

 A. Maryland Department of the Environment 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 
20

 

I. Overview of State Restructuring and Consolidation Efforts 

As part of its new system approval process, the Department of Environmental Quality 

(DEQ) requires new privately owned Community Water Systems (CWS) to submit proof 

of refusal to accept ownership or operational responsibility from the governing body of a 

city, county, village, township, or other governmental entity where the new system 

would be located. In addition, the owner of the privately owned CWS must stipulate 

(prior to the DEQ issuing a permit) to transfer the ownership and operation of the 

system to a governing body of a city, village, or township, or its designated public entity, 

if connection to the publicly-owned system becomes practicable. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Michigan Department of Environmental Quality 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above.

Michigan 
21

I. Overview of State Restructuring and Consolidation Efforts 

The Public Supply Commission (PSC) of Mississippi can petition the Chancery Court in 

the county where the system is doing business to attach the assets of a privately owned 

water system and appoint a receiver. Petition can be made when the PSC determines 

that the system is unable or unwilling to adequately serve its customers; has been 

actually or effectively abandoned by its owner; or has management that is grossly 

inefficient, irresponsible, or unresponsive to the needs of its customers. 

The court-appointed receiver must operate the water system so as to preserve the 

assets and to serve the best interests of the customers. Control of and responsibility for 

the water system remains with the receiver until the court determines that it is in the 

best interests of the customers for the system be returned to the owner, transferred to 

another owner, or assumed by another water system or public service corporation. 

If the court determines that control of and responsibility for the system should not be 

returned to the legal owner, the receiver is authorized to liquidate the system’s assets. 

The receiver is required to give preference for any transfer of ownership to any 

municipality within the county or to the governing authorities of the county where the 

system is located (provided the county has a population of 35,000-40,000 people). 

Preference requires the receiver to manage and operate the system for two years 

before a sale or transfer can occur. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Public Supply Commission of Mississippi 

B. Mississippi Department of Health 

III. Additional Information on Restructuring and Consolidation 

The Department of Health (DOH) encourages systems with inadequate capacity to form 

cooperative arrangements, including physical consolidation and administrative mergers. 

This can be done by increasing the number of enforcement actions, imposing 

administrative penalties on systems that serve customers in excess of their approved 

design capacity, and by reviewing plans and specifications. 
22

I. Overview of State Restructuring and Consolidation Efforts 

Missouri Revised Statutes (MRS) stipulate that the Public Service Commission (PSC) 

can petition a Circuit Court for an order to attach the assets and appoint a receiver of a 

small water system (serving less than 1,000 people) that is unable or unwilling to 

provide safe and adequate service, has abandoned or effectively abandoned its 

business, or has defaulted on any financial obligation owed to a unit of state 

government. 

The receiver must operate the system in the best interests of the customers and 

must attempt to preserve the assets of the system until further notice from the 

court. The court after a hearing, must determine whether to return control and 

responsibility of the system back to its owners or order the receiver to liquidate the 

assets of the system. (MRS § 393.145)

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Missouri Public Service Commission 

B. Missouri Department of Natural Resources - Public Drinking Water Program 

III. Additional Information on Restructuring and Consolidation 

The state indicated that the Department of Natural Resources’ (DNR) Public Drinking 

Water Program (PDWP) may use future set-asides to support the regionalization and 

consolidation of existing systems in areas where systems have compliance problems.
23

 

I. Overview of State Restructuring and Consolidation Efforts 

If the Public Utility Commission (PUC) determines (after notice and hearing) that a water 

system is unable to provide reasonably continuous and adequate service, the PUC can 

file a petition in court for the appointment of a receiver. Water systems excluded from 

this process are those that provide service in an area where water service is not 

available from a public system, cooperative corporation and association, or political 

subdivision. Any selected receiver has all general powers appointed to a receiver (e.g., 

to conduct business, contract, sell or transfer assets, etc.) and can file for bankruptcy. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Nevada Public Utility Commission 

III. Additional Information on Restructuring and Consolidation 

Customers of a water system regulated by a board of county commissioners can ask 

the board to review the adequacy of service to determine whether a receiver should be 

appointed. Board regulated systems are not regulated by the PUC, operated by political 

subdivision, or nonprofit association in which the rights and interests of all its members 

are equal. If the board determines a receiver is appropriate, the procedure, and the 

powers and duties of the receiver, are the same as stated above. 

In order to receive a permit to begin operation, publicly owned systems must include as 

part of their permit application a plan to operate the system if the system is declared 

bankrupt or is placed in receivership.
24

I. Overview of State Restructuring and Consolidation Efforts 

Under New Hampshire’s Administrative Rules (NHAR), ENV-WS 372, Design Standards 

for Small Public Water Systems, new small water systems that serve a population of 25-

1,000 people and do not provide street hydrant fire protection must submit the following 

for approval by the Department of Environmental Services (DES): 

• Concept letter, including location map, proposed service area, and justification 

for creation of the new water system; 

• Well siting report, for approval of well location, yield and water quality of the 

proposed source; 

• Business plan, for documentation of the proposed managerial and financial 

capacity for operation of the new system; and, 

• Design plans, for approval of proposed pumping, treatment, storage, and 

distribution facilities. 

Under State Statute RSA 485:4, DES has the authority to investigate public water 

supplies and to require improvements to protect the public health. Under this same 

statute, DES is required to conduct a preliminary investigation when 10 or more people 

report water quality or quantity concerns for a particular water system. If, as a result of 

the investigation, DES concludes that a significant health or safety risk exists, the 

Department must perform an analysis of alternatives and may order an extension or 

consolidation of water supplies. If the Department determines that an extension of 

water service from an existing PWS is the most feasible and cost-effective alternative, 

that the extension is consistent with municipal master planning, rules, and policy, and 

that the existing PWS has adequate capacity to serve the problem area, the DES can 

order an existing system to allow the connection. 

In addition, under RSA 374:47, the New Hampshire Public Utility Commission (PUC) 

may appoint a receiver, or direct its staff to take temporary action to assure continued 

service, when the PUC finds that a PWS (regulated by the Commission and having 

gross annual revenues of less than $2,000,000), is failing to provide adequate and 

reasonable service and that the failure presents a serious and imminent threat to the 

health of the community. 
25

II. State Agencies Directly Involved with Restructuring and Consolidation

 Efforts 

A. New Hampshire Department of Environmental Services 

B. New Hampshire Public Utility Commission 

III. Additional Information on Restructuring and Consolidation 

The PUC can also appoint a receiver or direct its staff to take temporary action if, after 

notice and hearing, the PUC finds that a regulated system is consistently failing to 

provide adequate and reasonable service. The PUC staff or the appointed receiver 

have the authority to access and manage all system assets and records, expend 

existing revenues, and commit additional resources to provide an acceptable level of 

service. 

New Hampshire’s Capacity Assurance Rules (Env-Ws 363) require that water systems 

with significant outstanding deficiencies develop a business plan and implement the 

plan once approved by DES. Often, systems with significant deficiencies will seek to 

connect to an existing water system, contract with professional water system operators, 

or to sell the water system to a reputable private water company. 

In 2003, the New Hampshire adopted a grant program to encourage interconnection of 

PWSs to resolve problems with inadequate drinking water quantity or quality. This 

program provides 25 percent reimbursement of preliminary engineering, design, and 

construction of piping, pump stations and a portion of treatment facilities necessary for 

these interconnections. This program and other incentives to encourage regionalization 

of public water supplies were the result of a joint study conducted in 2001 by DES and 

PUC titled, Regulatory Barriers to Water Supply Regional Cooperation and 

Conservation in New Hampshire.
26

I. Overview of State Restructuring and Consolidation Efforts 

Through an administrative hearing process, the Department of Environmental Protection 

(DEP) and the Board of Public Utilities (BPU) can take actions (including acquisitions) 

and require expenditures (including acquisition costs) to make necessary improvements 

at small water systems (non-governmental systems serving fewer than 1,000 people) 

that are in noncompliance with water quality regulations or that have failed to comply 

with an order of the DEP. At the hearing, DEP must issue an Administrative Consent 

Order that: 

• Sets forth a schedule for compliance for the acquiring entity; 

• Stipulates that the acquiring entity is not liable for any fines and penalties 

resulting from the violations that caused the acquisition (NJ Statute §58:11-63.2 

for specific rules applying to the release of liability from the discharge of 

hazardous substances); 

• Provides for the immediate inclusion in the rates of the acquiring entity the 

anticipated costs of necessary improvements; 

• Authorizes the acquiring entity to commence eminent domain proceedings; 

• Revokes the franchise of the acquired entity; and, 

• Renders the owner or operator of the acquired entity unfit to hold any other water 

franchise. 

Compensation of the “commercially reasonable value” is provided either by agreement 

of the two parties or by the power of eminent domain (NJ Statute §58:11-60 2b). Upon 

payment of compensation, the acquiring entity obtains title to the assets free of all liens, 

claims, judgments, fines, penalties, and outstanding taxes; monies are to be deposited 

in escrow to cover these outstanding debts. 

II. State Agencies Directly Involved with Restructuring and Consolidation

 Efforts 

A. New Jersey Department of Environmental Protection 

B. New Jersey Board of Public Utilities 
27

III. Additional Information on Restructuring and Consolidation

Costs of acquisition and costs of improvements are eligible for state financing and 

expedited loan procedures. The acquiring entity can impose a different rate for the 

customers of the acquired system for use of the services of the acquiring system. 

Failure to comply with a DEP order for acquisition or a DEP order to be acquired can 

result in the imposition of penalties not to exceed $50,000 per day. In addition, the BPU 

can impose a penalty of $100 per day for every day a public system fails to comply with 

an order of the BPU. The DEP or the BPU can also file a civil action for other relief 

including a temporary or permanent injunction and litigation costs. 
28

I. Overview of State Restructuring and Consolidation Efforts 

The Drinking Water Bureau (DWB) of the New Mexico Environment Department 

(NMED) has SDWA primacy and is the regulatory authority over PWSs. DWB staff 

provides a certain amount of TMF assistance to PWSs. The DWB also has multiple 

contract assistance providers that are very active assessing system capacity and 

providing TMF assistance to improve or change the way systems are managed. In 

addition to direct assistance, the DWB staff and its contractors deliver a considerable 

amount of training on a variety of regulatory TMF topics across the state. 

The DWB has adopted regulations that require regionalization and capacity to be 

evaluated for new systems. Specifically, regulations require new systems to submit 

additional information for projects involving the construction of a new PWS and 

documents demonstrating that the PWS has sufficient TMF capacity, such as ownership 

accountability, staffing and organization, revenue sufficiency, credit worthiness and 

fiscal management. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. New Mexico Environment Department 

B. New Mexico Finance Authority 

III. Additional Information on Restructuring and Consolidation 

Components of DWB’s water system restructuring policy encourage and support 

regionalization efforts by: 

• Providing direct assistance for ongoing regionalization efforts through the DWB’s 

Managerial and Financial capacity assistance contractor or the DWB staff. The 

DWB tries to provide assistance to approximately 3 regionalization groups at any 

one time. In selecting regionalization groups to assist, the DWB considers such 

factors as willingness to proceed by the participating systems and capacity 

improvements resulting from the regionalization;
29

• Providing or participating in workshops on regionalization; and, 

• Coordinating with other programs and state agencies involved in regionalization 

efforts. 

Requests for funding from the DWSRF get higher priority on the Comprehensive Priority 

List for projects that have a regionalization component. 

In New Mexico, the Sanitary Projects Act (SPA) governs the formation of Mutual 

Domestic Water Consumer Associations (MDWCA). There are approximately 250 of 

these water systems in the State. They are considered public entities. Under the 2006 

revisions to the SPA a new MDWCA cannot be formed if it is adjacent to a municipal 

water system or Water and Sanitation District that is able to provide water to the 

proposed service area of the new system at or below the cost of the new system. 

The merging of two or more water systems may require approval by the Public 

Regulation Commission (PRC) if one of the water systems falls under their jurisdiction 

(i.e. is a privately owned system) and is not being condemned. The PRC review is 

guided by the principle that the merger must be in the public interest. The statutes 

regulating PRC water utility authority can be found in the Public Utilities Act, Chapter 62 

NMSA 1978 (Articles 6 and 9). 

The PRC is also authorized to “commence an action in the district court... for the 

appointment of a receiver to assume possession of its property and to operate its 

system” if it determines that “a public utility is unable or unwilling to adequately service 

its customers or has been actually or effectively abandoned.” Under the SPA, the 

NMED is empowered to “appoint and delegate authority to a representative to oversee 

operation of the association for a specified period.” In addition, it gives NMED the 

authority after a public hearing to “intervene in the operation and management with full 

powers, including the power to set and collect assessments from members of the 

association, to set and collect service charges and use the same for the proper 

operation and management of the association.” Such powers given to the PRC and to 

the NMED would only be invoked as a last resort after other attempts to work with a 

system to correct significant deficiencies. If invoked by NMED, as a matter of policy 

DWB would not be the entity to operate and manage the system, as DWB has 

regulatory oversight over all PWSs.
30

 

I. Overview of State Restructuring and Consolidation Efforts 

The State’s Capacity Enhancement Working Group recommended to the Department of 

Health (DOH) that it should review the law that encourages the merger of school 

districts to collect information for ideas on how to encourage cooperative arrangements 

among water systems; provide systems with grants or low interest loans for the 

planning, legal, and engineering activities involved in restructuring; and more actively 

encourage the formation of cooperatives. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. New York Department of Health 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 

New York 
31

I. Overview of State Restructuring and Consolidation Efforts 

In accordance with Oregon Revised Statutes (ORS), counties, in developing water 

service plans, should encourage small water systems to combine management 

functions and consolidate where possible. In addition, the many different types of water 

entities in Oregon (domestic water supply districts, people’s utilities districts, water 

authorities or joint water and sanitary authorities, and water control and improvement 

districts) can enter into cooperative agreements with each other and can merge and 

consolidate. Mergers, consolidations, and annexations must be approved by the 

governing body of the districts and in general, the rights, responsibilities, obligations, 

and liabilities of the districts survive the merger, consolidation, or annexation and flow to 

the newly created entity. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Oregon Department of Human Services 

III. Additional Information on Restructuring and Consolidation 

A people’s utilities district is a body of government that may consist of a territory within 

one or more counties and may consist of one or more cities, or a portion of a city, with 

or without an unincorporated territory. A people’s utilities district provides utility 

services, usually electricity and water, and is formed to allow the public local ownership 

and control of their utility. 

Where encouragement to consolidate is not effective and where immediate action is 

necessary to protect public health, the Director of Human Services can request an 

action (prior administrative procedures are not required) compelling the water supplier 

to cease and desist operation or to make improvements that are necessary to remove 

an existing or potential public health hazard. This request for action is through the 

District Attorney of the county where a system is located. If the system does not 

comply, the court can appoint a special master to operate the system. 

The Special Master can use funds owed the system by customers or other revenue due 

to the system to make the necessary improvements. The Special Master can also sell 

the system as required by the court. 
32

 

I. Overview of State Restructuring and Consolidation Efforts 

Title 52 Pennsylvania Code (PC) Chapter ' 69.701 discusses the viability of small water 

systems and lists some of the objectives of the PUC and the Department of 

Environmental Protection (DEP) as Asubstantially restrict[ing] the number of nonviable 

drinking water systems by discouraging the creation of new nonviable small systems, 

and at the same time, encourag[ing] the restructuring of existing nonviable small 

systems@ (Title 52 PC Chapter ' 69.701[a][3]). Title 52 PC '3.501, provides filing 

requirements to obtain a certificate of public convenience from the PUC. These 

requirements include, among other things, (a) the filing of a business plan, (b) a full 

description of the proposed facilities, (c) a map of the proposed service area, (d) a 

proposed initial tariff of rates, proposed rules and conditions of service, and (e) proof of 

compliance with applicable design, construction and operations standards of DEP or the 

county health department. 

To meet these goals the PUC provides acquisition incentives, among other things, and 

facilitates the rate process to aid in the provision of financial assistance from 

PENNVEST (the state=s finance authority) to projects that incorporate or encourage 

comprehensive planning and restructuring. The PUC has statutory authority to order, 

under appropriate circumstances, the acquisition of a small, noncompliant water system 

by a larger system that is capable of providing safe and adequate service to all 

ratepayers. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Pennsylvania Public Utility Commission 

B. Pennsylvania Department of Environmental Protection

Pennsylvania 
33

III. Additional Information on Restructuring and Consolidation 

To be eligible for the incentives, an acquisition must: serve the general public interest, 

be conducted through arms-length negotiations, leave the acquiring system with 

adequate TMF capabilities, and provide the acquired system=s rate payers with 

improved service within a reasonable period of time. In addition, the acquired system 

must be non-viable: in violation of a PUC statute or regulation, have failed to comply 

with a DEP order, and serve fewer than 3,300 customers. The purchase price of the 

acquisition must be fair and reasonable. 

Acquisition incentives include additional rate of return basis points, the inclusion of 

reasonable excess acquisition costs in the rate base of the acquiring entity and 

amortization over 10 years, and a phased-in rate recovery for improvement costs. 

Additional surcharges are allowed to offset various operating costs (state tax 

adjustment, distribution system improvement, purchase power, and purchase water). 

The PUC encourages Single Tariff Pricing (STP) as an appropriate tool to facilitate 

regionalization. 

The PUC allows short form (abbreviated) rate filing procedures for water systems with 

less than $250,000 in annual operating revenues. The PUC also provides technical 

assistance for small systems to file a rate case, allows small systems the opportunity to 

use an operating ratio methodology as a rate base substitute for determining rates, 

allows the establishment of an emergency fund for small systems and encourages 

mediations and settlements to avoid the high cost of litigation.
34

I. Overview of State Restructuring and Consolidation Efforts 

In the Public Water Supplies Systems Act (PWSSA) of 1995, Rhode Island declared 

that, “economy and efficiency dictate the desirability to combine small public water 

supply systems with other public water supply systems” (Rhode Island General Laws § 

46-30-2 [5]). The State of Rhode Island General Laws §46-30-2 provides water 

suppliers the authority to petition an adjacent supplier for the purpose of merging or 

annexing. 

Merger and annexation cannot occur without consent and must be accomplished 

through an “economically fair method” (Rhode Island General Laws § 46-30-2 [6]ii). 

Consent must be granted by the governing board of each entity. In the case of a 

municipally owned system, a vote of the majority of the entire town or city council is 

required and, in the case of a private supplier, consent is required of the owner of the 

facilities in question and the governing board of the petitioned governing agency. The 

annexing system must fairly and equitably allocate capital, and management and 

operational expenses to the annexed system (or new customers). All user charges, 

fees, or rates imposed as a result of the merger are subject to the approval of the PUC. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Rhode Island Public Utility Commission 

III. Additional Information on Restructuring and Consolidation 

The annexing system may also impose an annexation fee (not subject to PUC approval) 

that can be no less than ten percent (10%) of the pre-annexation rate and no more than 

one hundred percent (100%) of the pre-annexation rate. The annexation fee must be 

terminated when “the contractual obligation for amortizing the upgrading of the system 

petitioning annexation has been discharged or no later than thirty (30) years from the 

date of financing said improvements, whichever comes first” (Rhode Island General 

Laws § 46-30-4 [c]).
35

Upon the merger, the annexing system must agree to accept, and the annexed system 

must agree to transfer, all of the rights and benefits accrued through federal assistance 

or funding. In addition, the annexed system must disclose all obligations, liabilities, and 

pending lawsuits. The merger does not discharge, impair, or alter any contract 

obligations or existing bargaining units, and does not release the annexed system or its 

officers from any suit, action, or other proceeding lawfully commenced in relation to the 

discharge of official duties.
36

 

I. Overview of State Restructuring and Consolidation Efforts 

The South Carolina Department of Health and Environmental Control (DHEC) can 

petition the State’s Administrative Law Court to appoint a receiver for a system whose 

owner is recalcitrant towards regulatory requirements; if the system is privately owned, 

the Public Service Commission (PSC) may also be involved in this process. A relatively 

new agency in South Carolina, the Office of Regulatory Staff (ORS) represents the 

consumers in such actions and will petition the PSC to allow use of the system owner’s 

bond with the PSC to be liquidated to fund the system’s operations interim period 

between receivership designation and new owner designation. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. South Carolina Department of Health and Environmental Control 

B. South Carolina Public Service Commission 

C. South Carolina Office of Regulatory Staff 

III. Additional Information on Restructuring and Consolidation 

In addition to current state statutes, DHEC encourages water systems to utilize 

economies of scale by assigning a higher ranking on the DWSRF project priority list to 

projects involving consolidation or regionalization. To encourage a viable system to 

take over a non-viable system, the DWSRF program offers a one percent (1%) capacity 

development rate to fund system upgrades and improvements. 

The DHEC can use its technical assistance funds to help systems move toward 

consolidating services. In 2007, South Carolina is funding an evaluation of 11 municipal 

water systems in two adjacent counties to determine how to proceed with a 

consolidation plan that will improve their TMF capacities. The Low Country Council of 

Governments (LCCOG) is participating in this project; it was initiated by an Economic 

Council of States (ECOS) grant.

 

South Carolina 
37

I. Overview of State Restructuring and Consolidation Efforts 

The Texas Health and Safety Code (THSC) §341.0315, requires the Texas Commission 

on Environmental Quality (TCEQ) formerly the Texas Natural Resources Conservation 

Commission to “encourage and promote the development and use of regional and area 

wide drinking water supply systems” (THSC §341.0315[b]). To help meet that end, the 

TCEQ requires anyone wishing to construct a new system within a municipality or within 

one-half mile of a district or political subdivision providing the same service, to prove 

that an application for service was made to the provider and that all of the provider’s 

requirements for service were satisfied. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Texas Commission on Environmental Quality 

III. Additional Information on Restructuring and Consolidation 

The TCEQ can ask the State Attorney General to bring suit in state court for the 

appointment of a receiver to collect the assets and operate and maintain the water 

system when a system, among other things: 

• Violates a final order of the TCEQ or allows any property owned or controlled by 

it to be used in violation of a final order of the Commission; 

• Fails to provide adequate service or notice of public health hazards; 

• Fails to maintain facilities such that a potential public health hazard may result; 

or, 

• Displays a pattern of hostility toward or repeatedly fails to respond to the TCEQ 

or its customers. 

The court can also appoint a receiver if it is necessary to collect fees, penalties, or 

interest.
38

The receiver can apply to transfer the required CPCN and can seek to acquire, sell, or 

otherwise dispose of the system’s facilities. The court, after a showing of good cause 

by the system, can dissolve the receivership and return the assets to the system. 

The TCEQ can also appoint a temporary manager for the same reasons as requesting 

an appointment of a receiver, or when the system has been referred to the State 

Attorney General for the appointment of a receiver. The TCEQ must provide the system 

with notice and an opportunity for a hearing unless an emergency situation exists, in 

which case no hearing is required. 

The TCEQ can also take a water system under its supervision for gross and continuing 

mismanagement or for noncompliance with statutes, regulations, or TCEQ orders. The 

supervised system may have additional management and reporting requirements; may 

be required to secure TCEQ approval prior to any investment, acceptance of debt, 

hiring, declaration of dividends, or liquidation of assets; and may be required to place 

funds in an account to be used by TCEQ for system expenses.
39

I. Overview of State Restructuring and Consolidation Efforts 

The State of Vermont Water Supply Division (VWSD) intends to contract with third party 

providers to identify opportunities for physical or operational consolidation of water 

systems and the advantages and disadvantages of consolidation. Small CWSs and 

schools will be evaluated. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. State of Vermont Water Supply Division 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 
40

I. Overview of State Restructuring and Consolidation Efforts 

In Virginia, both the State Board of Health (BOH) and State Corporation Commission 

(SCC) have receivership statutes. 

Under Va. Code §56-265.13:6.1, the SCC can appoint a receiver to operate a small 

water system (defined as having a gross annual operating revenue of less than 

$1,000,000 or owned by the property owners’ association of the subdivision served by 

the public system), which is unable or unwilling to provide adequate service to its 

customers upon the petition of two-thirds of the affected customers, water system staff, 

or the BOH. Inadequate service includes: 

• Failure to supply water service to a majority of the consumers for five days or 

more during the preceding three months for reasons within the control of the 

water and sewer system; 

• Certification by the DOH that the system has not met, and is unwilling to take 

action to meet department standards; 

• Gross mismanagement; or, 

• Failure to comply with a SCC order to provide adequate service. 

The receiver is authorized to take possession of the assets of the system and operate 

them in the best interest of the customers, make application to the SCC for temporary 

and permanent rate increases, and change the system’s rules and regulations. Control 

of and responsibility for the system remains with the receiver until the SCC determines 

that the system can be returned to the original owners, transferred to new owners, or 

liquidated, whichever is in the best interest of the customers.
41

The State Health Commissioner can petition the circuit court for the appointment of a 

receiver when the Commissioner finds that the waterworks is unable or unwilling to 

provide adequate and safe service for any of the following reasons: 

• The waterworks, (a system that serves piped water for drinking or domestic use 

to at least 15 public connections or an average of 25 individuals, for at least 60 

days a year), can no longer be depended upon to furnish pure water; 

• The waterworks has inadequate capacity to furnish pure water to its customers; 

• The owner has failed to comply with an order issued by the Commissioner; 

• The owner has abandoned the system and has discontinued supplying pure 

water to his customers; 

• The owner is subject to a forfeiture order pursuant to Va. Code §32.1-174.1; or, 

• The Commissioner has issued an emergency order because there is an 

imminent danger to the public health and welfare resulting from the operation of 

the waterworks or the source of the water supply. 

The court, after notice and hearing, will grant the petition if it finds that one or more of 

the above conditions exist, that the conditions will not be remedied, and that the health 

and welfare of the customers will not be protected unless the court appoints a receiver. 

The powers and duties of the receiver are similar to those of a receiver appointed by the 

SCC; however, this receiver is an officer of the court and does not have specific 

authority (unless directed or granted by the court) to petition the SCC for temporary or 

permanent rate increases. The receivership can be terminated by the court on the 

motion of the Commissioner, the receiver, or the owner, and upon a finding that the 

conditions initiating the petition for the appointment of a receiver have been eliminated 

or resolved. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Virginia State Board of Health 

B. Virginia State Corporation Commission 
42

III. Additional Information on Restructuring and Consolidation 

In addition to the appointment of a receiver, Virginia water systems can be forced to 

interconnect by the Virginia General Assembly. The General Assembly reserves the 

right to provide for connecting any public service corporation, with other companies of 

the like character, at such point as may seem proper. The SCC may also require a 

water system to “transfer” to another water system whenever required to protect public 

health, welfare, or safety (VA Code § 56-249.1). The transferring public system is 

compensated at a rate fixed by the SCC. 

Systems wanting to transfer assets or control must secure the approval of the SCC prior 

to acquisition or disposal of control. It is the responsibility of each company to file for 

approval, and the application must contain verified signatures of individuals representing 

all parties. Systems in this case refer to companies or government entities (excluding 

municipalities), that serve as public service companies to provide water or sewage 

treatment services to the public, as established under Va. Code § 56-232A.
43

 

I. Overview of State Restructuring and Consolidation Efforts 

Washington State recognizes the importance of restructuring/consolidation and how it 

contributes to the state’s capacity development strategy (restructuring an existing 

system that is having problems may be the only way to ensure that a system ultimately 

achieves and maintains compliance with drinking water regulations). 

Washington incorporated restructuring/consolidation of existing PWSs into its overall 

program with the adoption of the Public Water System Coordination Act (PWSCA) of 

1977 (Chapter 70.116, Revised Code of Washington). The foundation of this act is a 

process whereby systems identify existing and future service areas. The Coordination 

Act, by identifying service areas and directing water systems seeking restructuring and 

new water applicants to existing water systems for service, helps prevent the creation of 

new isolated systems within the service area of existing water system. Another critical 

function of the act is to ensure systems in a specific geographic region adopt consistent 

minimum design standards, which makes future restructuring efforts more efficient. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Washington State Department of Health 

III. Additional Information on Restructuring and Consolidation 

The PWSCA was amended in 1991 to include the satellite management program to 

address requests for water service that cannot be accommodated by a direct 

connection to an existing water system. Washington approves Satellite Management 

Agencies (SMAs) that own or operate more than one PWS in specifically designated 

service areas (generally but not always county-wide). Newly-proposed systems, 

outside a water system’s existing or future service area, must be owned or operated by 

an approved SMA. If no SMA is available to provide service, the new system is 

obligated to receive SMA service in the future if it has problems.

Washington 
44

In Washington, funding plays a crucial role in achieving successful restructuring efforts. 

As in many states, restructuring/consolidation projects are eligible to receive loans from 

the state’s DWSRF. In addition, in 2003, the Washington state legislature allocated $4 

million to create a Water System Acquisition and Rehabilitation Program (WSARP) to 

provide grants to allow municipal water systems to acquire and rehabilitate systems with 

water quality problems that pose a public health risk. The legislature allocated an 

additional $2 million for the program in 2005. 

Lastly, when a system is unwilling or unable to achieve compliance and where voluntary 

restructuring/consolidation efforts are not available, Washington State has a 

receivership law that allows the state to petition the court to take temporary control of a 

failing water system and direct that system to a receiver. Receivers have broad 

authority to operate and maintain the system, make needed system improvements, 

impose reasonable assessments on water system customers, and receive reasonable 

compensation for the cost of provide service. Where no receiver is available, the local 

county is the receiver of last resort. Systems placed under receivership are generally 

operated for one year by the receiver. During this time, in addition to operating the 

system, the receiver assists the state and local government in developing a disposition 

plan for the system that examines the options for long term operation of the system.
45

 

I. Overview of State Restructuring and Consolidation Efforts 

The West Virginia Bureau of Public Health (BPH) assists PWSs in the development of 

partnerships by encouraging consolidation or merger options through funding 

infrastructure improvement projects (e.g., DWSRF) and through compliance or 

enforcement actions. The Public Service Commission (PSC) of West Virginia will use 

its authority to help systems pursue consolidation. In areas with economic and 

demographic challenges, the BPH will develop incentives for satellite management or 

other types of regionalization. All West Virginia drinking water projects using any state 

agency funding (including DWSRF) are reviewed and approved by the West Virginia 

Infrastructure and Jobs Development Council (IJDC). The IJDC approval process 

includes reviewing all viable alternatives, including consolidation. Any project where 

consolidation is a viable alternative is referred to the IJDC Consolidation Committee. 

The BPH and PSC are Consolidation Committee voting members. When the 

Consolidation Committee and IJDC determine consolidation is the most viable, cost 

effective alternative, only this alternative will be approved for funding. 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. West Virginia Bureau of Public Health 

B. Public Service Commission of West Virginia 

C. West Virginia Infrastructure and Jobs Development Council 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agencies involved with these initiatives, 

as listed above. 

West Virginia 
46

I. Overview of State Restructuring and Consolidation Efforts 

Section 236 of Wyoming’s Public Service Commission’s Rules (PWSCR) requires that 

utilities such as water systems that interfere or may interfere with one another 

coordinate and take steps to eliminate the interference. (Interference is not defined in 

the PWSCR.) If the interference is caused by a new system, the owner of the new 

system must pay for the correction and mitigation of any interference. The rules require 

systems in “close proximity” of each other, to coordinate in the planning stage to 

minimize interference or the potential for interference (Wyoming Chapter II General 

Regulations §236[c]). 

II. State Agencies Directly Involved with Restructuring and Consolidation 

Efforts 

A. Wyoming Public Service Commission 

III. Additional Information on Restructuring and Consolidation 

For further information, please contact the state agency involved with these initiatives, 

as listed above. 
47

Appendix A: Links to State Statutes and Regulations

Information included in the table represents information provided by each state. For additional information, please contact your state 

State State Statutes State Regulations 

AK http://www.legis.state.ak.us/cgi-bin/folioisa.dll/stattx01/query=[g

roup+chapter4205!3A]/doc/{@1}/hits_only?

http://www.state.ak.us/rca/regs/AS42.05.htm

AZ http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title

=40

http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title

=49

CT http://www.dpuc.state.ct.us/DPUCinfo.nsf/DPUC%20State%20

Statutes?OpenView&Start=1&Count=30&Expand=1#1

http://www.dpuc.state.ct.us/DPUCinfo.nsf/D

ons?OpenView&Start=1&Count=30&Expand

GA http://www.gaepd.org/Documents/rules_exist.html http://www.gaepd.org/Documents/rules_exisID http://www2.state.id.us/adm/adminrules/rule

df

http://www2.state.id.us/adm/adminrules/rule

df

IN http://www.ai.org/legislative/ic/code/title8/ar1/index.htmlKY http://www.lrc.state.ky.us/krs/074-00/chapter.htm

http://www.lrc.state.ky.us/kar/title807.htm

LA http://www.legis.state.la.us/lss/lss.asp?doc=98560MI http://www.state.mi.us/orr/emi/admincode.asp?AdminCode=De

partment&Dpt=EQ&Level_1=Water+Division

MS http://198.187.128.12/mississippi/lpext.dll?f=templates&fn=fsmain.htm&2.0MO http://www.moga.state.mo.us/STATUTES/C393.HTMNV http://www.leg.state.nv.us/NRS/NRS704.html#NRS704Sec6676

http://www.leg.state.nv.us/NRS/NRS-
48

State State Statutes State Regulations 

704.html#NRS704Sec6265

http://www.leg.state.nv.us/NRS/NRS704.html#NRS704Sec6674http://www.leg.state.nv.us/NAC/NAC445A.html#NAC445ASec5921

NH http://www.gencourt.state.nh.us/rsa/html/NHTOC/NHTOCXXXIV-374.htm

http://www.gencourt.state.nh.us/rsa/html/NHTOC/NHTOC-L485.htm

http://www.des.state.nh.us/rules/env-ws372.pdf

NJ http://lis.njleg.state.nj.us/cgibin/om_isapi.dll?clientID=120388&Depth=2&depth=2&expandh

eadings=on&headingswithhits=on&hitsperheading=on&infobase=statutes.nfo&record={17676}&softpage=Doc_Frame_PG42

NY http://www.health.state.ny.us/nysdoh/water/

mUnofficial version of Subpart 5-1. Currently in tbeing updated to reflect recent regulatory chanand rad rules).

OR http://www.leg.state.or.us/ors/448.html

http://www.leg.state.or.us/ors/198.htmlhttp://www.leg.state.or.us/ors/264.htmlhttp://www.leg.state.or.us/ors/448.html

PA http://www.pacode.com/secure/data/052/chapter69/chap69toc.

html

http://www.dep.state.pa.us/dep/deputate/wa

M_TAO/Finan_Tech_Asst.htm
49

State State Statutes State Regulations 

http://www.puc.pa.us

RI http://www.rilin.state.ri.us/Statutes/TITLE46/46-30/46-30-

2.HTM

SC http://www.scstatehouse.net/code/t58c005.htmTX http://info.sos.state.tx.us/pls/pub/readtac$ext.ViewTAC?tac_vie

w=5&ti=30&pt=1&ch=291&sch=J&rl=Y

http://www.legis.state.tx.us/

VA http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+TOC

http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+32.1-174

http://www.state.va.us/scc/division/pua/filech

WA http://www.leg.wa.gov/RCW/index.cfm?fuseaction=chapterdige

st&chapter=70.116

http://www.leg.wa.gov/RCW/index.cfm?fuseaction=section&se

ction=70.119A.060

http://www.leg.wa.gov/RCW/index.cfm?fuseaction=section&se

ction=80.28.275

http://www.leg.wa.gov/RCW/index.cfm?fuseaction=section&se

ction=80.28.040

http://www.leg.wa.gov/wac/index.cfm?fuseaction=title&title=24

6

WY http://soswy.state.wy.us/RULES/1201.pdf
50

Appendix B: Listing of Common Authority, Statute, and/or Regulation Ele

Information included in the table represents information provided by each state. For additional information, please contact your state 

Common Authority, Statute, and/or Regulation Elements 

 AK AR AZ CA CT ID IN KS KY LA MI MS MO NV NH NM NJ NY OR PA RI SC 

State Requires Acquired System to Give Consent for Mergers or Acquisitions X X X X XState Requires Acquiring System to Give Consent to Accept Consolidation or Restructuring Xi X X Xii X X XAcquiring System Allowed to Impose a Surcharge, Additional Fee, Compensation, Etc. X X X X XPSC or PUC Provides Expedited Rate Making Procedures for Consolidating Systems X X X XAcquiring System Assumes Liabilities or Obligations of Acquired System X X X X State Can Attach Assets, Appoint a Receiver, Order a Takeover or Merger X X X X X X X X Xiii X X Consolidating Systems Eligible for Additional Grants or Loans, or Receive Preferred Status for Financial Assistance Programs X Xv X X X X X X X State Can Order Improvements, Changes, or Additions to Consolidating Systems X X X X New Systems Must Prove Need for Service, Existing Systems Must Prove Need for Extensions X X X X X X X New Systems Must Submit Regionalization or Consolidation Studies or Assessments X X X X 
51

i. When required by public convenience and necessity, the Alaska PUC can order a public system to allow another p

facilities.

ii. The New Hampshire DES can order an existing system to allow a deficient system to interconnect, if after complain

determines that a significant health or safety risk exists and that the extension of water service from an existing PWand cost-effective alternative to alleviate the risk. 

iii. The Oregon courts can appoint a special master to operate a water system under certain circumstances. iv. The Texas TCEQ can ask the State Attorney General to appoint a temporary manager, and can place the system u

v. The Arizona DEQ is authorized to allow systems to share monitoring and analytical costs. vi. New water systems must either be owned or operated by a designated satellite system or show that a satellite man

available. The new system must also show that it has sufficient management and financial resources to provide sa