Inquiry of the Week (11/23/98)

Question:

What factors can a city consider when setting water utility rates?

Answer:

The primary state statute that applies to this subject is RCW 35.92.010. This statute actually gives very broad flexibility to a city in regard to setting water rates for its customers.

First of all, this statute provides broad authority to a city to construct and operate a water utility system. It also provides that the city has full power to regulate and control the use of water and the distribution and price charged for the water service. The statute does indicate that the rates charged must be uniform for the same class of customers or service.

In regard to classifying customers, the statute gives great discretion to the city council to consider any matter which presents a reasonable difference as a ground for distinction. The statute lists of number of examples such as difference in cost of service to various customers, location of the customers within and without the city, difference in cost of maintenance and repair, different character of service and a number of others which I will not list here. The statute clearly says the city may consider any or all of the factors listed in establishing classifications. Clearly a city has great latitude in establishing classifications of customers for the water utility and then establishing rates for the different classifications.

It is important to note that the statute does provide one limitation on the discretion of the city to establish rates for water use. RCW 35.92.010 specifically provides that no rate shall be charged that is less than the cost of the water and service to the class of customers served.

Your primary focus is apparently establishing rates and charges for the water utility. However, note that RCW 35.67.020 is a very similar statute which applies to a city sewer utility service. Much of the language in RCW 35.67.020 is identical or nearly identical to that in RCW 35.92.010 for water service and the city also has great flexibility is classifying customers and setting rates for the sewer utility.