Sewer and Stormwater

Does the PSC regulate sewer utilities?

While all Wisconsin water utilities are regulated, sewer utility regulation is primarily a voluntary decision on the part of the municipality. Investor-owned sewer utilities would be regulated, but none currently exist. Municipal sewerage systems (sanitary as well as storm water) do not fall within the definition of “public utility” under Wisconsin Statute § 196.01(5) and therefore do not require PSC approval when setting rates and rules. There are over 600 sewer operations in Wisconsin. Of these systems, the PSC currently regulates only three of them. These systems have elected to combine their water and sewer operations into a single public utility. For these systems, the PSC regulates rates and rules, practices and procedures, plant additions, and service quality, among other areas. The operation of the remaining unregulated sewer systems is the responsibility of the local governing body. This responsibility includes establishing sewer rates.

Although the PSC does not regulate most sewer systems, it has limited authority over municipal sanitary sewer issues. Pursuant to Wis. Stat. § 66.0821(5)(a), any user of a sewer system may file a complaint with the Commission concerning the rates, rules, or practices of the municipality. Upon receiving a complaint, the PSC reviews the reasonableness of the municipality's rates, rules, and practices. As these operations are not public utilities fully regulated by the PSC, it is the responsibility of the complainant to develop the basis for complaint. Generally, individual, informal complaints are reviewed by PSC staff, whereas more formal or legal questions are set for hearing, with parties developing a record in support of their individual positions. The Commission decides the issues based on the merits of the hearing record.

Map of Sewer Utilities Regulated by the PSC

Does the PSC have jurisdiction over municipal storm water charges?

The PSC has limited authority over municipal charges for storm water or surface water disposal. However, the PSC has authority pursuant to Wisconsin Statute § 66.0821(5)(a), to investigate the complaints of any user(s) of an unregulated sanitary or storm water operations once such rates and rules are established and placed into service. Commission staff may review complaints informally, or more formal or legal questions may be set for hearing, with parties developing a record in support of their positions.

Can a utility give customers credit for water used for lawn watering or otherwise not discharged to the sewer system?

Sewer utilities that are not regulated by the Public Service Commission (PSC) have several alternatives available to recognize water consumption which does not enter the sewer system. The most common methods used are:

1. Do not offer any sprinkling credit on sewer bills. This maintains a lower sewer rate throughout the year, since the water used is part of the volume factored in when designing new sewer rates.

2. Estimate the volume of sewage for the summer quarter based on an average winter quarter's water consumption. Bill the customer based on his or her actual metered water consumption, or the winter quarter(s) consumption, whichever is less.

3. Have a summer sewer volume rate that is lower than the winter volume rate.

4. Require a separate meter be installed to measure water which does not reach the sanitary sewer. (All sewer utilities regulated by the PSC are required to offer this option).

5. Direct meter sewer (applicable primarily in industrial applications).

6. A combination of the above methods.

All methods have sewer volume rates based on the concept of "billable units". If sewer charges are based on water usage with no adjustments, the number of units billed will be higher than the number of units that must be treated at the sewer plant. The resulting cost per unit is then lower. If credits are given, either through a second meter or a summer sprinkling credit, the number of billable units decrease and the cost per unit is then higher. All of the above options are in practice and are acceptable in the unregulated sewer industry (PSC does not set rates and rules). A municipality that allows billing only for volumes that enter the sewer, there are two metering ownership options available.

Water Utility Ownership of Meters

In this case, the water utility retains ownership of the sewer deduct meters and requires installation according to water utility specifications. The customer pays a charge for the additional meter each billing period as authorized by the PSC in Schedule Am-1. One advantage of this method is that the water utility controls the permanent location of the meter and remote register placements and determines appropriate repair and maintenance schedules. A disadvantage is the water utility's need to provide the financing to purchase and maintain the sewer deduct meters. The accounting of these meters would be the same as any other water meter that the water utility currently owns and maintains. Where the metering configuration would require the two water meter readings be added together for billing water, the PSC requires both meters be owned by the water utility.

Sewer Department Ownership of Meters

The water utility may sell meters to the sewer department, or the sewer department could buy meters directly from a vendor. The sewer department can then sell or rent meters to sewer customers. Under this option, all related costs such as testing and repairing these meters is handled by the sewer department, not the water utility. In this case, the sewer deduct meters are owned and recorded on the books of the sewer department, and it could recover its costs by implementing a sewer department charge. If the water utility purchases a specific lot of meters for the sewer department, the water utility could simply invoice the sewer department for the cost of the meters. Commission staff recommends the water utility not sell meters directly to the sewer customers, since this may be construed by sewer customers that the water utility is responsible for obtaining meter readings placed in inaccessible locations and other problems associated with the operation and maintenance of these meters.

Does the PSC have jurisdiction over damages resulting from sewer backups?

The PSC does not have jurisdiction over damages due to sewer backups. The party affected should try to work with the sewer utility/municipality to resolve the issue. If the party is unable to reach a satisfactory settlement with the sewer utility/municipality, the party may wish to consult with an attorney regarding possible legal remedies.

Who has ownership and maintenance responsibilities for sewer laterals?

The Public Service Commission (PSC) regulates only a small number of sewer systems and is not directly involved with setting rates or service rules for most systems in the state. Generally, the property owner or customer owns and maintains the service lateral all the way from the dwelling to the sewer utility’s main within the street. Unlike water utilities, where there is a clear demarcation of ownership at the curb stop located at or near the property line, no similar physical feature is typically present on a sewer lateral. Sewer laterals are also more prone to blockages. Making the customer responsible for the entire lateral provides the customer with an incentive to care for the operation and use of the lateral. It also prevents questions regarding who is responsible for roots and other issues occurring at, or near, the property line.

The disadvantage of making the customer responsible for the operation and use of the lateral is that it places the burden on the customer’s contractor for occasionally having to work in the public right of way which is generally best handled, from a safety standpoint, by the sewer utility or its contractor. Nonetheless, the vast majority of the over 600 sewer systems in the state make the property owner or customer responsible for ownership as well as maintenance of the sewer lateral. To provide for consistent and nondiscriminatory treatment of sewer customers, the PSC recommends utilities have a written policy statement or ordinance defining the ownership and maintenance responsibilities for sewer laterals.

What is an appropriate level for a sewer standby charge?

The PSC does not regulate most sewer systems in Wisconsin and does not have any direct jurisdiction over the sewer operations of unregulated systems. Accordingly, the rates, rules and practices established by these systems do not have to be approved by the PSC. However, the Commission does have authority pursuant to Wisconsin Statute § 66.0821(5)(a), to investigate complaints as to the reasonableness of rates, rules, and practices of unregulated sewer operations. As such, the PSC will only get involved upon receiving a complaint. Standby charges are allowed for municipalities operating a public utility under Wisconsin Statute § 66.0821(4)(b).

Recently PSC staff ruled on a complaint from a sewer customer about the reasonableness of a sewer standby charge being applied to his property by an unregulated sewer utility. The customer owned an uninhabited property which was in need of repairs, and the water was shut off. The customer was assessed a standby charge by the sewer utility which was established equal to the level of the full meter charge. The customer complained that the sewer standby fee was excessive. Commission staff determined that the sewer utility could assess a standby charge to this customer’s property. However, a standby sewer charge equal to the full meter charge is excessive. The PSC staff believes that a reasonable sewer standby charge should be one third to one half of the meter charge. This view is justified because standby customers are not using the utility service, but their property benefits from the improvement when the utility distribution system runs adjacent to it.

How should the municipality determine storm water charges?

The PSC does not prescribe a method of determining storm water charges. The municipality can determine storm water charges as long as the charges are not unreasonable or unjustly discriminatory. The most commonly used method to determine storm water charges is square feet of impervious surface area. Using aerial photography or field surveys, an average impervious area is established for residential lots. All residential lots are assumed to equal one equivalent residential unit (ERU). Nonresidential lots are assigned ERUs based on their individual impervious surface area divided by the square feet of impervious area in an average residential lot. Charges are calculated by multiplying the unit rate per ERU times the number of ERUs each lot represents.

Because all residents benefit from an adequate infrastructure to protect streets, parks, and private property from flooding, erosion, and stagnant water all residents should be required to participate in cost recovery. The fact that a particular property does not discharge to municipal storm or sewer infrastructure under most storm conditions is not ordinarily viewed as a basis for exemption from the charges.

Can a municipality form a storm water utility and bill for storm water charges?

Municipal law was amended in 1997 to allow municipalities an additional option to recover the capital and operational expenses of storm and surface water collection and treatment. Previously, most municipalities used general tax dollars to construct and operate storm and surface water infrastructure. In the 1997-98 legislative session Wisconsin Statute § 66.0821 was amended to explicitly allow the municipality to establish service charges to fund construction and operation of storm and surface water collection and treatment systems.

All municipalities address, in one form or another, the handling of storm and surface water. Federal and state law regarding storm water management requires some municipalities to obtain a storm water discharge permit. The permit defines the municipality’s responsibilities based on objectives intended to protect the quality of the receiving body of surface water. The Wisconsin Department of Natural Resources (DNR) is responsible for issuing storm water permits and does this permitting under Wisconsin Administrative Code § NR 216.

The federal and state law does not require a municipality to establish a storm water utility district or to develop a direct fee charging system. In fact, most municipalities administer their storm water collection program as part of their overall public works department with funding though general property taxes. However, with growing frequency, municipalities see the storm water utility district as an efficient way to address the enhanced requirements of the storm water permit. The ability to direct charge for capital and operational costs and shift the funding source away from the tax roll is an advantage for some municipalities.