[Federal Register Volume 68, Number 246 (Tuesday, December 23, 2003)]
[Notices]
[Pages 74233-74235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31588]


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ENVIRONMENTAL PROTECTION AGENCY

[FRL-7601-7]


Applicability of the Safe Drinking Water Act to Submetered 
Properties Docket: OW-2003-0065

AGENCY: Environmental Protection Agency.

ACTION: Notice.

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SUMMARY: The Environmental Protection Agency (EPA) finalized a 
memorandum that outlined its revised policy regarding regulatory 
requirements under the Safe Drinking Water Act (SDWA) for submetered 
properties. The revised policy is shown in the SUPPLEMENTARY 
INFORMATION section of this notice, in its final memorandum form. Under 
SDWA section 1411, the national primary drinking water regulations 
apply to public water systems (PWS) that have their own water source, 
treat, or ``sell'' water. EPA staff and program managers have 
previously issued memoranda stating that any building or property owner 
who meets the definition of a PWS and receives water from a regulated 
public water system, but bills tenants separately for this water, is 
``selling'' the water and therefore is independently subject to SDWA's 
drinking water requirements. As a way to promote full cost and 
conservation pricing to achieve water conservation, the EPA is changing 
its interpretation of section 1411 as it applies to submetered 
properties. EPA believes that the addition of a submeter should not in 
any way change the quality of water provided to customers on these 
properties.
    In general, the scope of this policy is not intended to extend 
where the property in question has a large distribution system, serves 
a large population or serves a mixed (commercial/residential) 
population (e.g., many military installations/facilities or large 
mobile home parks).

DATES: EPA's revised policy, as described in the section I.A. 
memorandum, effective December 16, 2003.

ADDRESSES: Related documents, including EPA's response to public 
comments on the subject policy, can be accessed at the Water Docket in 
the EPA Docket Center, (EPA/DC) EPA West, Room B102, 1301 Constitution 
Ave., NW., Washington, DC. For more information, see section I..B.1 of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: For more information please contact 
Ronald Bergman by phone at 202-564-3823, or by e-mail at 
[email protected].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Final Revised Policy

    Today, EPA is publishing a memorandum revising current policy 
regarding regulatory requirements under the Safe Drinking Water Act 
(SDWA) of submetered properties. The memorandum changes EPA's 
interpretation of section 1411 as it applies in the specific context of 
submetering and direct billing of tenants. EPA published a proposed 
memo in the Federal Register on August 28, 2003 (68 FR 51777) and 
solicited public comments for 60 days. Comments were received from a 
variety of stakeholders, including State, county, and local 
governments, apartment building owners and associations, utility 
companies, and housing associations. Generally, commenters strongly 
supported the proposed policy and agreed that submetering promotes 
water conservation.
Memorandum
Subject: Applicability of the Safe Drinking Water Act to Submetered 
Properties.
From: G. Tracy Mehan III, Assistant Administrator.
To: Regional Administrators, Regions I-X.

    The purpose of this memorandum is to announce EPA's revised policy 
concerning the applicability of the Safe Drinking Water Act (SDWA) to 
submetered properties. Submetering, as applied in this policy, means a 
billing process by which a property owner (or association of property 
owners, in the case of co-ops or condominiums) bills tenants based on 
metered total water use; the property owner is then responsible for 
payment of a water bill from a public water system. Under the revised 
policy, a property owner who installs submeters to track usage of water 
by tenants on his or her property will not be subject to SDWA 
regulations solely as a result of taking the administrative act of 
submetering and billing. Property owners must receive all of their 
water from a regulated public water system to qualify under the terms

[[Page 74234]]

of this policy revision for submetered properties.
    EPA proposed the revised policy in the Federal Register on August 
28, 2003 (68 FR 51777) and requested public comment. In response, the 
Agency received strong support for the revised policy on submetering 
from a variety of stakeholders. In light of this response, and because 
a key objective of the Agency is to promote water efficiency and 
conservation, EPA has decided to change the policy for submetering.
    Throughout the country, submetering of apartment buildings has been 
found to be an effective but little-used tool to support water 
conservation. Water conservation is an integral part of watershed 
protection, particularly in arid and drought-stricken areas. In 
addition to helping reduce the risk of water shortages, water 
conservation also provides other important benefits. Water conservation 
helps ensure in-stream flows, thereby providing protection for 
ecosystems, which can become out of balance when demands stress water 
resources. Water conservation also helps reduce stress on water supply 
and wastewater infrastructure making them less prone to failure. 
Further, the use of submeters to measure water consumption is a 
necessary pre-requisite to achieving full-cost and conservation 
pricing.
Background
    Section 1401 of SDWA defines a public water system (PWS) as a 
system that provides water through pipes or other constructed 
conveyances to the public for human consumption, if the system has at 
least 15 service connections or regularly serves at least 25 people. 
Under SDWA section 1411, the SDWA national primary drinking water 
regulations apply to PWSs that have their own water source, treat, or 
``sell'' water. EPA staff and program managers had issued several 
memoranda stating that any building or property owner who met the 
definition of a PWS and received water from a regulated public water 
system without adding further treatment, but billed tenants separately 
for this water, would be considered to be ``selling'' the water and, 
therefore, would be independently subject to SDWA's drinking water 
requirements. Today's memorandum reflects a change in EPA's 
interpretation of section 1411 as it applies in the specific context of 
submetering.
    The EPA memoranda referenced above were based on a single statement 
in the 1974 legislative history for the SDWA in which Congress 
explained its intent in enacting section 1411. In that legislative 
history, the Committee report stated that it ``intends to exempt 
businesses which merely store and distribute water provided by others, 
unless that business sells water as a separate item or bills separately 
for water it provides.'' \1\ Under EPA's previous interpretation, an 
owner of an apartment building or similar property who is exempt under 
section 1411 but merely installed a submeter and billed the tenants for 
the water, or simply began billing tenants (even without a submeter), 
would then be considered to be operating a fully regulated public water 
system, even though there had been no other change relevant to the 
delivery or potential health concerns associated with the water. This 
application of the legislative history has been cited as a 
discouragement to submetering and, as a result, to water conservation 
measures.
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    \1\ H. Rept. 93-1185 (93rd Cong., 2nd Session), reprinted in A 
Legislative History of the Safe Drinking Water Act, Committee Print 
Serial 97-9 (1982) at 549.
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    After further review, we no longer believe that Congress originally 
intended the statute to be applied in this manner, or that it should 
continue to be the Agency's interpretation for the following reasons:
    [sbull] The legislative history from 1974 does not specifically 
address the submetering of apartment buildings or similar properties 
for water conservation purposes. Rather, the legislative history was 
one Committee's attempt to explain broadly what the term ``selling'' 
water in section 1411 might mean. The statute itself does not define 
the term ``selling'' or suggest an interpretation that any billing of 
water would automatically trigger full SDWA regulation.
    [sbull] Some owners of apartment buildings and other multifamily 
housing expressed concern that, under EPA's previous policy, the 
installation of submeters subjected them to the full regulatory 
requirements of the Safe Drinking Water Act (SDWA), comparable to the 
requirements imposed on water utilities.
    [sbull] In 1996, a Congressional committee expressed its concern 
that this application of SDWA might discourage the practice of 
submetering, as owners of a multifamily housing property (e.g., 
apartment buildings and/or complexes) would become subject to national 
primary drinking water regulations if they billed separately for water. 
Congress asked that EPA review its guidance on this matter to prevent 
unnecessary requirements that do not further public health protection 
and that might inhibit water conservation efforts.\2\ In response, EPA 
agreed to reconsider the matter and issue further guidance.\3\
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    \2\ H. Rept. 104-632 at 55 (1996).
    \3\ H. Rept. 104-632 (104th Cong., 2d Sess.) at 55 and 134 
(1996).
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    [sbull] EPA's approach in previous memoranda may have created a 
disincentive to water conservation, which can undermine water quality 
over the long term.
    [sbull] Simply applying the concept of ``sell'' to every billing 
transaction is not appropriate.
Revised Policy
    Consistent with Congressional requests to reconsider this matter, 
the Agency now believes that certain property owners, who had not 
previously been (or would not be) subject to SDWA's national primary 
drinking water regulations, and who install submeters to accurately 
track usage of water by tenants on his or her property, should not be 
subject to regulations solely as a result of taking the action to 
submeter and bill.
    The addition of a submeter should not in any way change the quality 
of water provided to customers on the property. A PWS that provides 
water to a property maintains responsibility for providing public 
notification under 40 CFR 141.201(c) (or approved State equivalent) to 
consumers. In addition, the PWS must make ``good faith'' efforts to 
provide the tenants with the annual Consumer Confidence Reports under 
40 CFR 141.155(b). A submetered property would still be considered a 
PWS under SDWA section 1401, hence States and EPA would retain the 
ability to take corrective action under SDWA's emergency powers 
authority (section 1431) if public health risks arise.
Scope of Revised Policy
    EPA received numerous comments asking that the revised policy be 
expanded beyond apartment buildings. EPA agrees that submetering to 
achieve water conservation may be appropriate for other property types, 
which share similar characteristics to an apartment building, and 
likewise should not be considered as ``selling'' under SDWA section 
1411, simply because a submeter is installed and the property owner 
begins direct billing for the water. This description is the basis for 
the definition of submetering. Determinations of whether billing for 
water is a ``sale'' for purposes of section 1411, and whether systems 
are `` submetering'' as that term is used in this policy, should be 
made by the Primacy Agency.

[[Page 74235]]

    In making a determination, the Primacy Agency should consider if 
the property has certain characteristics, such as a limited 
distribution system with no known backflow or cross connection issues; 
the majority of its plumbing is within a structure instead of 
underground; and property ownership is a single/individual (or 
association of property owners, in the case of co-ops or condominiums). 
Of course, for any system to be excluded under section 1411, it must 
receive all of its water from a regulated public water system.
    In general, the scope of this policy is not intended to extend 
where the property in question has a large distribution system, serves 
a large population or serves a mixed (commercial/residential) 
population (e.g., many military installations/facilities or large 
mobile home parks).
    Although EPA is not requiring that submetered systems be regulated, 
each State has the flexibility to determine whether, and how, to best 
track properties that submeter. For example, in Alabama, the State 
defines a submetered property as a ``segmented public water system'' 
and requires that it have access to a certified operator. Texas 
requires that submetered properties allow access to the property by the 
public water system that provides it with water, register with the 
Texas Commission on Environmental Quality, and follow regulations for 
submetering.
    While submetering and billing for water usage may positively induce 
water conservation actions, States may still want to take other steps 
to ensure that property owners and others convert to water efficient 
fixtures and appliances. For example, Texas requires that apartment 
buildings have water-efficient plumbing fixtures and appliances as a 
condition of approval of a submetered billing system.

Ratio Utility Billing Systems (RUBS) and Hybrid Billing Systems (HWH)

    Several commenters raised the issue of ratio utility billing 
systems (RUBS) \4\ and other allocation billing systems. Some 
commenters suggested that EPA should include this type of billing in 
the revised policy because it would have no negative effect on water 
quality. Other commenters encouraged EPA to exclude RUBS, stating that 
RUBS may not result in water conservation, and may, in fact, reduce 
incentives to install submeters and charge on the basis of actual water 
usage. Water savings, if any, from RUBS and hot water hybrid billing 
systems (HWH) are uncertain. At this time, EPA believes that RUBS or 
other allocation billing systems do not meet the definition of 
submetering, as used in this policy, and do not encourage water 
conservation. Therefore, a property using these billing systems is not 
addressed by this policy. Primacy Agencies will need to determine 
whether such properties are ``selling'' water within the meaning of 
SDWA section 1411.
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    \4\ A ratio utility billing system (RUBS) or an allocation 
formula, divides a property's water bill among its residents based 
on a ratio of floor space, number of occupants, or some other 
quantitative measure. With RUBS, a price signal based on actual use 
is not sent to the tenant as with submetering, and the amount of 
water saved by these systems is unclear. A hot water hybrid (HWH) 
billing system is a combination of submetering and allocation where 
hot water is submetered and a formula is applied to estimate the 
resident's total water use based on the volume of hot water metered. 
HWH systems provide more of a price signal than RUBS but less than 
that for submetering.
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    This memorandum clarifies EPA's policy change and reconfirms our 
strong interest in advocating water conservation. Any previous EPA 
statements or policy memoranda on this issue are superceded by this 
memorandum.

B. How Can I Get Copies of This Document and Other Related Information?

    1. Docket. EPA has established an official public docket for this 
action under Docket ID No. OW-2003-0065. The official public docket 
consists of the documents specifically referenced in this action, any 
public comments received, and other information related to this action. 
Although a part of the official docket, the public docket does not 
include Confidential Business Information (CBI) or other information 
whose disclosure is restricted by statute. The official public docket 
is the collection of materials that is available for public viewing at 
the Water Docket in the EPA Docket Center, (EPA/DC) EPA West, Room 
B102, 1301 Constitution Ave., NW., Washington, DC. The EPA Docket 
Center Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday 
through Friday, excluding legal holidays. The telephone number for the 
Public Reading Room is (202) 566-1744, and the telephone number for the 
Water Docket is (202) 566-2426.
    2. Electronic Access. You may access this Federal Register document 
electronically through the EPA Internet under the ``Federal Register'' 
listings at http://www.epa.gov/fedrgstr/. An electronic version of the 
public docket is available through EPA's electronic public docket and 
comment system, EPA Dockets. You may use EPA Dockets at http://www.epa.gov/edocket/ to view public comments, access the index listing 
of the contents of the official public docket, and to access those 
documents in the public docket that are available electronically. 
Although not all docket materials may be available electronically, you 
may still access any of the publicly available docket materials through 
the docket facility identified in section I.B.1. Once in the system, 
select ``search,'' then key in the appropriate docket identification 
number.

    Dated: December 17, 2003.
G. Tracy Mehan III,
Assistant Administrator, Office of Water.
[FR Doc. 03-31588 Filed 12-22-03; 8:45 am]
BILLING CODE 6560-50-P