Utility Watchdog Highlights Legal Cost Of Water Pollution

Who should bear the cost burden when a water utility is sued over pollution? A recent saga featuring Carolina Water Service raises this question.

“A utility with a history of environmental violations plans to bill its customers for legal expenses to defend a lawsuit that it lost over sewage the company released into the lower Saluda River. Instead of charging its owners those legal expenses, Carolina Water Service will raise water and sewer rates on up to 28,000 customers, according to the S.C. Office of Regulatory Staff,” The State of Columbia, SC, reported.

“Carolina Water is a privately owned utility that serves parts of Columbia, Rock Hill, Anderson and other communities. Regulatory Staff officials said the utility's legal expenses approached $1 million, most spent defending a lawsuit, filed under the Clean Water Act, by the Congaree Riverkeeper over the utility's pollution of the Saluda River,” the report said.

Carolina Water Service lost the case.

Now, state regulators are allowing higher water and sewer rates for Carolina Water customers. Regulators are also allowing the utility’s owners a 10.5 percent profit, the report said.

“Carolina Water said the 10.5 percent profit is not guaranteed. In addition to legal costs, the rate increase includes money to fix a leaky sewage basin at the utility's Friarsgate wastewater plant in Irmo,” the report said.

Officials with the S.C. Office of Regulatory Staff were critical of how the circumstances played out. This office is charged with representing the public interest of South Carolina in utility regulation for the major utility industries.

"We don't think that ratepayers should be liable for that type of expense,'' said Dawn Hipp, an official with Regulatory Staff.

Office of Regulatory Staff acting director Nanette Edwards said the PSC's decision "gives a green light to passing litigation costs to ratepayers where the utility failed to comply with the law, was sued and then lost the litigation.”

Carolina Water’s Robert Yanity spoke on behalf of the utility.

"The [Public Service Commission] has long held that prudently incurred legal expenses are recoverable by utilities,'' Yanity said in a written statement. "Like any business, utilities may experience litigation costs associated with their business operations. ... Carolina Water Service incurred legal expenses to defend and protect the interests of the company and its customers.”

Researchers say water may become unaffordable for one-third of U.S. households in the next four years.