COM/HMD/tcg * DRAFT H-8

9/7/00

Decision DRAFT DECISION OF COMMISSIONER DUQUE
(Mailed 8/8/2000)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Investigation on the Commission's own motion into whether existing standards policies of the Commission regarding drinking water quality adequately protect the public health and safety with respect to contaminants such as Volatile Organic Compounds, Perchlorate, MTBE, and whether those Standards and policies are being Uniformly compiled with by Commission regulated utilities.

Investigation 98-03-013 (Filed March 12, 1998)

FINAL OPINION RESOLVING

SUBSTANTIVE WATER QUALITY ISSUES

TABLE OF CONTENTS

Title Page

FINAL OPINION 2

I. Summary 2

II. Procedural History 6

III. Motion to Retroactively File Water Division Reports 9

IV. Applicable Drinking Water Quality Regulation 9

A. Agency Responsibilities 11

B. Setting Maximum Contaminant Levels 13

C. Action Levels 17

D. Public Health Goals 18

E. Testing for Known Contaminants 20

F. Detection of New Contaminants 22

G. Follow-Up After Detection of Contamination 25

H. Customer Notification 26

I. Temporary Excursions Above Standards 27

J. Enforcement of Standards 28

K. Discussion 30

V. Further Rulemaking Proceeding 33

A. Discussion 37

VI. Regulated Utility Compliance With Applicable Water Quality Regulation 37

A. Staff Analysis of Respondents' Compliance Reports 38

1. What Contaminants Did You Test for and When? 39

2. How Did You Know What to Test for? 43

3. What were the Standards (MCLs) for Each Contaminant? 43

4. What Entity/Company Performs Sample Taking? 44

5. What Entity/Company Performs Your Required Testing? 45

6. How Did You Test for Each of These Contaminants? 46

7. What Reports Did You (or a Contractor) Create and to
Whom Were They Sent? 47

8. List Each Failure by Type of Test, Date of Test, District
and Location. What Tests, if any, Indicated Failure to
Meet Standards in Effect at the Time of the Tests? List
Each Failure by Type of Test, Date of Test, District and Location, Standard Applicable at the Time, Results of
the Tests, and Corrective Action Taken. 48

TABLE OF CONTENTS

(Cont'd)

Title Page

9. What Reports (if any) Indicating You Did Not Meet Standards Were Not Filed Correctly or in a Timely
Manner (List Reports)? 51

10. What Did You Do if the Levels Exceeded Standards? 52

11. What Information Did You Provide the Customers
and When? 53

12. Did You Take any Actions that Were Not Specifically Required by DHS in Testing or Treating the Water or Notifying the Public? 53

B. Additional Scoping Memo Inquiries 54

C. Discussion 57

VII. Further Reporting By Alco Water Company 59

A. Discussion 59

VIII. Comments on Draft Decision 60

A. Second Round of Comments 62

B. Third Round of Comments 63

Findings of Fact 64

Conclusions of Law 67

FINAL ORDER 68

FINAL OPINION

I. Summary

This proceeding was instituted after numerous civil lawsuits were filed in Los Angeles and Sacramento alleging drinking water delivered by water utilities caused death and personal injury to customers. Even though civil lawsuits naming certain regulated water utilities as defendants prompted the investigation in this proceeding, the Commission did not name as respondents just those entities.

The Order Instituting Investigation (OII) of March 12, 1998 instituting this proceeding directed all regulated Class A and B water utilities¹ (respondents) to file compliance reports comprised of water quality information including test results and any follow-up procedures performed over the past 25 years. The Commission ordered its Water Division (WD) to review the compliance filings, file a written report on their review and indicate whether additional compliance filings were warranted or additional issues, questions and recommendations should be considered in this proceeding. The Commission directed numerous questions to the Department of Health Services (DHS) and invited that agency to participate in this proceeding.

In addition, the Commission asked WD, the California Water Association (CWA), DHS and any other interested parties to address five issues regarding drinking water regulatory policy and the adequacy of remedies for noncompliance. Thus, this investigation is intended to provide an industry-wide status of drinking water quality regulation and compliance by all large and medium-sized regulated water utilities. By ordering this investigation of the majority of regulated water utilities, the Commission sought to ascertain whether any potential physical or economic harm to regulated water utility customers and ratepayers exists and to minimize or avoid any such harm in the future.

On December 4, 1998 two motions were filed challenging the Commission's jurisdiction to conduct this proceeding. One motion was filed by the following three law firms participating jointly as one party in this proceeding: Engstrom, Lipscomb and Lack, Girardi and Keese, and Dewitt, Algorri and Algorri (EL&L). The other motion was filed by Rose, Klein and Marias (RK&M). Both parties filed replies to the responses to their motions.

The moving parties alleged that this Commission has no subject matter jurisdiction to pursue the inquiries it ordered in this proceeding regarding safe drinking water distributed by regulated Class A and B water utilities. EL&L requests that the Commission limit this investigation to rates related to the cost of utility improvements required to comply with state and federal drinking water quality standards. RK&M requested that this investigation be abandoned in its entirety. Seven parties in this proceeding opposed the two motions.² They contended that the Commission has subject matter jurisdiction with DHS over the quality of drinking water provided by regulated utilities.

On June 10, 1999, the Commission issued D.99-06-054 which resolved the allegations. This decision found that the Commission's cost setting and regulating role is inextricably bound to the quality of water provided by the regulated utilities. It discussed the authority and responsibilities of both this Commission and DHS, and demonstrated how the two are intertwined with and complementary to each other. The decision provided a full discussion of the history of this authority. Finally, it makes clear that this investigation is only a starting point, with possible consideration of enforcement actions or new standard setting being matters for the future.

EL&L filed a timely application for rehearing, alleging that specific findings of fact and conclusions of law relating to the finding of jurisdiction were in error. The California Water Association, a party in the OII, filed a response in opposition to this application for rehearing. On September 16, 1999 the Commission issued Decision 99-09-073 denying rehearing, but adopting several clarifying modifications to D.99-06-054. It further noted that it "is essential that D.99-06-054 be read in conjunction with the OII in order to get the most complete and accurate view of the Commission's authority..." (D.99-09-073, mimeo., at 5-6). No party filed an appeal of the Commission's decisions regarding jurisdiction.

Subsequent motions to compel discovery filed by California American Water Company and Citizens Utilities Company of California and motions to withdraw filed by EL&L and RK&M are resolved in a separate opinion.

Returning now to the inquiry into water quality, in response to the order instituting this proceeding, respondents filed detailed compliance reports. CWA, interested parties, the Commission Ratepayer Representation Branch (RRB, staff) and DHS filed comments on the utility compliance reports and replies to each others' comments. In addition, the order asked all parties to specify the contaminants alleged to cause physical harm and directed specific questions to various parties in the Scoping Memo in an effort to narrow any dispute in this proceeding. As explained below, parties representing plaintiffs in pending civil lawsuits did not answer questions posed in the Scoping Memo. Staff, respondents, DHS, CWA and one party representing potentially responsible defendants in pending civil lawsuits filed responses to the questions.

The inquiry in this proceeding can be divided into two broad categories: (1) whether current water quality regulation adequately protects the public health, and (2) whether respondent utilities are (and for the past 25 years have been) complying with existing drinking water quality regulation.

There is no dispute that existing water quality regulation by DHS adequately protects public health. However, numerous parties and DHS offer suggestions for improvement of existing Commission regulation of water quality which warrant workshops and, if necessary, a further rulemaking proceeding.

After review of regulated water utility compliance reports and the comments and replies of all parties, we conclude that the record of regulated water utility compliance with state and federal water quality regulation requires no further inquiry or evidentiary hearings, except for one utility, Alco Water Company. DHS and RRB have reviewed all other parties' objections to these reports and confirm respondents' representations that they have satisfactorily complied with applicable state and federal drinking water quality regulation, with the exception that a court matter involving DHS and Alco Water Company is pending. This opinion is final as to matters of DHS regulation and respondent compliance with this regulation.

As to compliance with Commission decisions and orders regarding correction and prevention of water quality problems, staff believes that several utilities provided vague and incomplete information regarding whether they have complied with all Commission orders during the past 25 years. Staff may pursue complete answers to this question in the new OIR/OII herein ordered or separately as these companies request rate relief in the future.

In accordance with our findings and conclusions herein, we continue to exercise our jurisdiction. We order preparation of a separate combined rulemaking/investigation proceeding to evaluate recommended changes and additions to Commission water quality regulatory policy and rules governing water quality customer complaints.