Opinion ID: 2585152
Heading Depth: 3
Heading Rank: 3

Heading: The PUC Has Undertaken the Ongoing Regulation of Drinking Water Quality

Text: As stated above, the PUC exercised its public health and safety authority over public utility water service on a case-by-case basis from 1912 to 1956 and adopted general order No. 103 in 1956. The PUC and DHS confirmed their partnership on water quality issues in a joint memorandum of understanding in 1987, which was updated in 1996. (Cal.P.U.C. Dec. No. 99-06-054, supra, 1999 Cal.P.U.C. Lexis 312 at p. 28, fn. 16.) It acknowledged their joint goal to ensure that California water companies regulated by PUC are economically maintaining safe and reliable water supplies. ( Id., 1999 Cal.P.U.C. Lexis 312 at p. 111.) The memorandum defined DHS's responsibility for identifying contaminants and the improvements necessary to provide safe water supplies, and for initiating enforcement actions under the state SDWA; the PUC retained responsibility for approving rate changes to finance improvements, for informing customers, and for monitoring non-SDWA water quality requirements. The two agencies agreed to work together and share information. ( Id, 1999 Cal.P.U.C. Lexis 312 at pp. 104-120.) In exercising its regulatory authority over water quality, the PUC has decided what constitutes adequate compliance with applicable water quality standards, whether any increased water treatment is justified in light of its impact on ratepayers, and what marginal increases in safety may be gained. (See, e.g., California-American Water Co. (1986) 20 Cal.P.U.C.2d 596 [PUC refused to authorize water utility to install water quality treatment facility, and instead ordered it to evaluate other, less costly alternatives]; San Gabriel Valley Water Co. (1998) Cal.P.U.C. Dec. No. 98-08-034 [1998 Cal.P.U.C. Lexis 575], 1998 WL 1813233 [PUC approved water utility's request for additional water quality treatment facilities, rejecting ratepayers' argument that new treatment plant should be allowed only when prescribed maximum contaminant levels exceed DHS standards].) The Court of Appeal below noted other actions by the PUC with respect to the quality of drinking water provided by public utilities: In 1983, it adopted a service improvement policy, requiring water utilities to identify the most cost-effective alternatives for dealing with water service problems, including contamination. In 1986, it issued guidelines for water quality improvement projects. In 1990, it issued a risk and return report, addressing the development of drinking water quality standards, new testing procedures, and application of drinking water standards to large and small water utilities. In 1994, it issued a decision concluding that drinking water quality standards would require investment of $50 million to $200 million in water treatment facilities over the next several years. In 1996, it authorized water utilities to establish accounts to record and recover expenses incurred in complying with EPA drinking water regulations and paying DHS testing and regulatory fees. In addition, the commission issued a series of individual rate decisions analyzing health standards and individual communities' abilities to absorb the costs of varying treatment levels. The PUC itself has stated: [T]he Commission's cost setting and regulating role is inextricably bound to the quality of water provided by the regulated utilities. (Cal. P.U.C. Dec. No. 99-09-073, supra, 1999 Cal.P.U.C. Lexis 594 at p. 9.) Most often, authorization for corrective or preventative water quality measures occurs in a rate case. (Cal.P.U.C. Dec. No. 99-06-054, supra, 1999 Cal.P.U.C. Lexis 312 at p. 31.) In reviewing a water utility's rate increase application, the PUC must review the reasonableness of the utility's proposed investment, its compliance with health department regulations, its implementation of previous PUC decisions affecting water quality, and its compliance with general order No. 103. (Cal.P.U.C. Dec. No. 99-06-054, supra, 1999 Cal.P.U.C. Lexis 312 at pp. 31-32.) Thus, in setting rates at affordable levels, the PUC must balance the quality and cost of water services. In its final opinion, the PUC explained the basis for its concurrent jurisdiction with the DHS over water quality safety: A jurisdictional structure that preserves the authority of both DHS and the [PUC] over the quality of water provided to residents and businesses by private water companies is consistent with the original intent of the 1911 Act giving the [PUC] authority over water issues. It remains crucial to the effective regulation of public utilities. The expertise of the [PUC], however, has always centered around the creation of financial and regulatory incentives that foster and support socially desired behavior from firms that operate in a marketplace characterized by limited competition. Thus, it is clearly reasonable that the Legislature continue to marshal the expertise of the [PUC] as well as the health-science expertise of DHS to support a public interest as critical as the quality of drinking water. (Cal.P.U.C. Dec. No. 00-11-014, supra, 2000 Cal.P.U.C. Lexis 722 at pp. 17-18.) As shown by the DHS's participation in the PUC's recent water quality investigation, the PUC and the DHS continue to work together to ensure that public water utilities provide safe and healthy water. Plaintiffs argue that their lawsuits should not be preempted because the PUC has deferred to the DHS to set and enforce water quality standards, has no expertise in water quality issues, and has focused on ratemaking. Our decision in Covalt leads us to a different estimation of PUC's regulatory involvement. In Covalt, notwithstanding the PUC's deference to the DHS's expertise on health issues, we concluded that the PUC had preemptively exercised its authority to adopt a policy on powerline EMF's. ( Covalt, supra, 13 Cal.4th at pp. 926-934, 946-947, 55 Cal. Rptr.2d 724, 920 P.2d 669.) The circumstances in that case involved a PUC investigation into the health effects of EMF emissions. The PUC had issued an interim opinion and order that summarized what had occurred during the investigation up to that point and the recommendations for further studies. In the interim opinion and order, the PUC recognized the DHS's expertise and concurrent jurisdiction in establishing EMF policy. ( Re Potential Health Effects of Electric and Magnetic Fields of Utility Facilities (1993) 52 Cal.P.U.C.2d 1, 8, 14-15, 1993 WL 561942.) We noted that, for the investigation, the PUC had asked DHS to assess the scientific evidence concerning the potential dangers of EMF's and had relied on the DHS witness in developing a policy on the potential health risks of EMF's from utility facilities. ( Id. at p. 8, 1993 WL 561942; Covalt, supra, 13 Cal.4th at p. 930, 55 Cal.Rptr.2d 724, 920 P.2d 669.) In determining the need for further research and education programs, the PUC found that the DHS was the appropriate agency to inform [it] as to the type of public health risk, if any, connected to EMF exposure and utility property or operations and to define the research needed to determine whether there is a clear cause and effect relationship between EMF from utility property and public health. ( Re Potential Health Effects of Electric and Magnetic Fields of Utility Facilities, supra, 52 Cal.P.U.C.2d at pp. 27-28, 1993 WL 561942.) Accordingly, DHS was designated as the EMF education and research program manager. ( Id. at pp. 15, 21, 30, 1993 WL 561942.) Its duties included implementing and coordinating statewide research and education programs, defining the needed research, developing educational information for distribution to utility customers, monitoring the quality of research and education, and providing an annual research report to PUC. ( Id at pp. 16, 22-23, 26, 28-30, 1993 WL 561942; see also Covalt, supra, 13 Cal.4th at pp. 932-933, 55 Cal.Rptr.2d 724, 920 P.2d 669.) It is true that the PUC's primary involvement with water quality has been in the context of ratemaking, determining which water quality improvements to authorize or mandate and their costs, and the necessary rate increases. However, in making those decisions, the PUC had to consider, as it did in Covalt, the health and safety of the service provided by the regulated utilities. Accordingly, we find that the PUC has exercised and continues to exercise its jurisdiction to regulate drinking water quality.