UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
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Date Signed: December 16, 2003
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 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 wawter system to qualify under the terms
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 insure 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.
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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 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 of 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 business 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 submeter), would then be considered to be operating a fully regulated public water
system, even though there has 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.
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:
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
1 H. Rep. 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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full SDWA regulation.
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.
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 building 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
EPA's approach in previous memoranda may have created a disincentive to water
conservation, which can undermine water quality over the long term.
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 Section 1401, hence States and EPA would retain the abiltiy to
take corrective actions 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
2 H. Rep. 104-632 at 55 (1996)
3 H. Rep. 104-632 (104th Cong., 2d Sess.)at 55 and 134 (1996).
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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.
In making a determination, the Primacy Agency should consider if the property has
certain characteristics, such as 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 billings systems (RUBS) 4 and other
allocation billing systems. Some commenters suggested that EPA should include this type of
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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billing in the revised policy because it would have no negative effect on water quality. Other
comments encouraged EPA to exclude RUBS, stating that RUBS may not result in water
conseravation, 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.
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. I appreciate your efforts in working with States to
foster water conservation while ensuring protection of public health. If you have further
questions about this issue, please contact Cynthia C. Dougherty, Director of the Office of
Ground Water and Drinking Water, at (202) 564-3750.
cc: EPA Regional Water Division Directors
State Drinking Water Directors
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