Utility Billing Procedures

Deposits

RCW 35.21.217(1) provides cities and towns with the ability to require a deposit to guarantee payments. While not all utilities do so, most at least reserve the option in case a high risk of delinquency arises. Note, according to a 1997 AGO memorandum, a municipal utility does not have to pay interest on a utility deposit.

The amounts and logistics for deposit requirements vary from jurisdiction to jurisdiction. Some may be a set dollar amount, while others may vary depending on the monthly bill amount. Generally, deposits are exempt or returned if good payment history is established.

Despite best efforts, utility deposits may remain unclaimed after a number of months or years. According to RCW 63.30.040(12), a utility deposit is presumed abandoned if it is still unclaimed one year after the deposit becomes payable. The Department of Revenue has outlined provisions for local governments to follow in the Unclaimed Property Section's Guide for Local Governments.

Combined Utility Accounts and Allocation of Payments

Most jurisdictions which provide more than one utility service combine all utilities into one bill, itemizing each utility amount. Because the most effective tool for collection of delinquent water and sewer accounts is the ability to shut off water service, many cities have provisions in their utility billing ordinances that establish the order in which payments will be applied, with the most current water billing as the last priority.

For example, West Richland allocates payments as A.) penalties, B.) irrigation, C.) stormwater, D.) garbage, E.) sewer, then F.) water. This allows a water utility delinquency to be established more quickly with customers who chronically underpay their total utility bill or do not pay that portion of a combined utility billing with which they may have a disagreement. In addition, such prioritization helps to clarify amounts owed in case of a billing dispute.

Electronic Payments through Third Party Vendors

Electronic payments through online portals are becoming an increasingly popular option for managing customer payments. While this type of system can provide for more efficient payment procedures, note that they are often provided by a third party and may include significant transaction charges. We recommend doing your own research before choosing a product that is best for you.

Billing Adjustments

In situations of leakage or other errors, if a customer is overcharged they are entitled to the amount overcharged plus interest on the amount collected in error. In our opinion, the statute of limitations applicable to refunding water service overpayments, whether due to a billing error, meter reading error, or a faulty water meter, is three years from discovery of the error by the customer or from when notified of the error by the city.

If a claim for a refund is then made within that three-year period, it appears, based on Western Lumber. v. Aberdeen, 10 Wn. App. 325 (1973), that the entire overcharged amount is then owed. However, these matters should be discussed with legal counsel before a refund is calculated. If a utility discovers that it has been undercharging a customer, the utility can, and should, require the customer to render the amount of any underpayment. MRSC takes the position that the six-year statute of limitation for actions upon an account receivable in RCW 4.16.040(2) would apply to underpayment of a utility bill.

Water Leak Adjustments

For water utilities, a common issue is leakage. Maintenance and repair of water lines on private property is the responsibility of the private landowner, as is any water lost due to leaks or breakage. However, many utilities will adjust a high bill due to leakage if the customer had no knowledge of the leak and agrees to fix it promptly.

In the interest of the local government, it may be prudent to set specific limitations on these adjustments, such as a maximum adjustment amount or a limit on the number of months back that an adjustment can be made. Some municipalities also limit the number of times that an adjustment can be made due to leaky pipes. West Richland offers a good example of various limitations.

Meter Failure

Since meters can, and do, occasionally fail, it is important to establish payment procedures when a meter reading cannot be used. A common practice is to charge based on an average of the previous year’s readings (see West Richland).

Billing Notifications for Owners and Tenants

Owner/tenant issues are an important consideration in utility billing, particularly in the collection of payments on a delinquent utility accounts. In the context of billing procedures, the main statutory requirement is regarding notifications. RCW 35.21.217(2) (cities) and RCW 57.08.081(7) (water-sewer districts) allow utility providers to send duplicate bills and notice of delinquency to both owners and tenants if they choose, but they must provide notice of delinquency, and also duplicate bills in the case of water and sewer districts, if the owner has requested such notifications in writing.

If duplicate bills or delinquency notifications are sent to property owners, the statutes also require utilities to inform tenants that these notifications have been provided to their landlords.

Budget Payment Plan

Under RCW 35.21.300(4) all municipal utilities must offer residential customers the option of a budget billing or equal payment plan. The statute also provides that a plan must be offered to low income customers eligible under the state's program for Low Income Home Energy Assistance (LIHEAP).

Budget payment plans typically compute the monthly bill based on the average use for the past six or 12 months. At the end of every budget payment period, the bill is adjusted so that the customer pays the full amount due for the previous six or 12 months, then a new average is computed for the ensuing budget payment period.

Notice of Delinquency Procedures

A customer must be given adequate notice of the delinquency and an opportunity to bring the account current before attempting other collection methods, such as shutting off a utility for nonpayment.

It is very important for a city to establish a step-by-step process prior to service termination and apply this process to all customers in a consistent, rigorous, and timely manner. The U.S. Supreme Court decision in Memphis Light, Gas and Water Division v. Craft, 56 L. Ed. 2d 30 (1978) indicated that due process considerations require that certain notice procedures must be satisfied before utility service may be terminated. The following checklist should help guarantee that all necessary procedural requirements are met:

• Clearly identify billing and due dates on the utility bill.
• Note on the utility bill or in a customer letter that charges remaining unpaid after a specified number of days of the billing or due date (30 days is the average used by cities) will be considered delinquent and subject to interest and penalties;
• The method used for computation of penalties should also be shown on the utility bill if space allows;
• The order of payment applicability (see Combined Utility Accounts and Allocation of Payments) should be stated clearly in the utility's policies and on the utility bill if space allows;
• Provide notice that if delinquent charges are not paid within a specified number of days from the due date (10 days is the average), water service will be discontinued and shut off at the meter (also identify pertinent municipal code or ordinance provisions);
• Mail notice of delinquency as soon as an account becomes delinquent;
• Include in the notice a statement of the utility's procedures regarding termination of service, including notice of hearing rights, deferred or budget payment availability, penalties, interest, and any additional charges for reestablishing service.
• Notify delinquent customers that termination of service does not relieve them of the obligation to pay all outstanding bills and charges;
• Customers should also be notified that before service can be resumed, all outstanding bills and charges, including a water turn on charge, must be brought current and that an additional deposit may be required.

Policies regarding all unpaid utility bills may not be waived arbitrarily or applied in a discriminatory manner, but must be applied equally to all customers. Policies may be adopted which allow delinquencies to be paid over time, and if the necessary terms and conditions for repayment can be agreed upon, utility service can be restarted. This option must be available to all similarly-situated customers.

Penalties and Interest

Public utilities can and should charge interest on delinquent account balances. For certain types of utility service, state law sets specific limitations on the rate of interest utilities may charge (see below).

A local government may also establish penalties for certain things such as late payments, returned checks, shutoffs, and reconnection services. Except for a few statutory limitations (see below) local governments are allowed to establish their own policy on penalties, but as a general rule the extra charges should reflect the added costs to the agency.

Statutory Interest Rate and Penalty Limitations

• City sewer – 8% maximum per year. (RCW 35.67.200)
• County sewer and water, and aquifer protection districts – Fixed at 8% per year. Penalties of not more than 10% of amount due. (RCW 36.94.150)
• Solid waste disposal district - Interest rate equal to the interest rate for delinquent property taxes. (RCW 36.58.140)
• County stormwater - 8% maximum or county can pass ordinance for up to 12% per year. (RCW 36.89.065)
• Water-sewer districts – Interest and penalties cannot exceed the prime lending rate of the district's bank plus four percentage points per year. (RCW 57.08.081(3))
• Irrigation districts - Maximum of 12% per year. (RCW 87.03.445(6))

Utility Discounts and Financial Assistance Programs

Most utilities offer some type of discount or financial assistance to customers that may not be able to afford their full utility bills. See our Utility Discounts and Financial Assistance Programs page for more information.

Examples and Resources

Utility Billing Code Provisions

• Bremerton Municipal Code Ch. 15.07
• Cathlamet Municipal Code Ch. 13.15
• Fircrest Municipal Code Ch. 17.04
• Port Angeles Municipal Code Ch. 13.16
• West Richland Municipal Code Ch. 13.90

Key Statutes

• Ch. 35.92 RCW - Municipal Utilities (Specifically authority to operate utility - RCW 35.92.010, 35.92.020, and 35.92.050)
• Ch. 36.89 RCW - County - Storm water control facilities
• Ch. 36.94 RCW - Sewerage, Water and Drainage Systems (Authority for county to operate)
• Ch. 54.16 RCW - Public Utility Districts - Powers
• Ch. 57.08 RCW - Water-Sewer Districts - Powers
• Ch. 87.03 RCW - Irrigation Districts – Generally