© 2012 - Albers and Albers, All Rights Reserved1 CUSTOMER RULES & REGULATIONS: KEEPING UP WITH THE...

© 2012 - Albers and Albers, All Rights Reserved 1

CUSTOMER RULES & REGULATIONS:

KEEPING UP WITH THE LAW

Rural Community Conference

August 15, 2012


Presented by the Law Firm of

Prepared by:John B. AlbersEric J. LuckageAnita T. Doran

ALBERS & ALBERS 88 North Fifth Street

Columbus, Ohio 43215(614) 464-4414

[email protected]@[email protected]

WWW.ALBERSLAW.COM


The information contained in this presentation should not be considered legal advice. Please consult your

legal counsel to ensure compliance with the law.


1. SERVICE DISCONNECTION PROCEDURES, DUE PROCESS RIGHTS & RELATED ISSUES

• Everybody has to pay their bills – even public water and sewer providers!

• If no payment, provider has no choice but to terminate those services.

• However, customers are entitled to certain due process protections prior to termination of their water and sewer services.


DUE PROCESS REQUIREMENTS UNDER FEDERAL LAW

Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1 (U.S., 1978)

Supreme Court ruled that customers who have an entitlement to continued utility service as a result of state or local law, or by contract, are entitled to certain due process rights prior to the termination of their utility services.


DUE PROCESS REQUIREMENTS UNDER OHIO LAW

Midkiff. v. Athens County Regional Water District, 409 F.3d 758 (6th Cir., 2005).

• For Regional Districts, there is no state law which entitles customers to continued utility service under Chapter 6119.

• Therefore, the Court declined to extend the Craft ruling to Chapter 6119 Districts unless there is a contractual agreement between the District and Customer.

- Same for Counties and Municipalities?

- What constitutes a contractual agreement with a customer? A permit?

- What about tenants v. landlords? Notice to both?


DUE PROCESS NOTICE TO A LANDLORD, EXCEPTION

Fierro v. Greater Cincinnati Water Works, 2010-Ohio-4314 (1st Dist., 2010)

• Property owner alleged a due process violation based on insufficient notice of her tenant’s delinquent charges.

• Even with $40,000 in overdue charges, the Court here did not find a due process violation

- City ordinance gives a property owner the opportunity to provide GCWW with a second address so that the owner can receive a duplicate bill.

- Fierro failed to give GCWW an alternate address. • Court ruled that a property owner bears some burden to monitor a tenant's

activity, especially when the law makes the owner liable for the tenant's actions.


SUMMARY OF DUE PROCESS REQUIREMENTS PRIOR TO TERMINATION:

• Written notice.

• Notices must clearly and plainly

- Inform customer of opportunity to object to termination

- Identify the person(s) who will handle the complaint with their contact

information

• Provide opportunity to request a hearing in advance of the termination date.

• Employee or official responding to the customer must have authority to review the facts and take corrective action if needed.


DUE PROCESS = PROTECTION FOR THE PROVIDER:

• Avoids any later claim of lack of due process

• Opportunity to correct any errors

• Opportunity to hear other potentially relevant circumstances.

Bottom line: All governmental providers of utility services should adopt clear policies to insure that due process is provided prior to termination of services.


ADDITIONAL PROCEDURAL CONSIDERATIONS:

1. Who will preside at disconnection hearing?.

2. Who should hold the hearing (Manager, Board, Attorneys)?

3. Comply with public records requirements, but quasi-judicial hearing is not a public meeting and deliberations can held be in closed meeting.

4. Adhere to hearing formalities to avoid a new trial later under R.C. 2506.03.

5. Whether to establish a reconnection fee, and, if so, on what basis?

6. Special considerations for sewer disconnections only (where no water services are provided).


2. DEPOSITS, FINES AND PENALTIES

Service Deposits

• Consider whether to require from new Customers, and/or Customers with delinquency history.

• Think about how much of a deposit the Board would require. Other utility providers often use a 2 or 3 month's worth of average service fees as

the deposit amount.


ISSUES PRESENTED BY CUSTOMER’S BANKRUPTCY

Federal Bankruptcy Code provides that a public utility cannot alter, refuse, or discontinue service because of a bankruptcy filing or because of an unpaid pre-bankruptcy petition utility bill.

• Avoid violating a customer’s bankruptcy protection by separating pre-petition charges from charges for service after the filing.

• Penalties imposed for violation of the automatic stay!

• Utility service provider should take steps to avoid any collection attempts of pre-petition charges.


BANKRUPTCY CODE PROTECTION FOR UTILITY PROVIDER

• Utility may require "adequate assurance of payment.“

-Typically, cash deposit.

• No set formula for what is considered “adequate assurance” but a utility may require a deposit from “debtor customers”.

- Standard is generally what type of assurance is needed to protect a utility from an unreasonable risk of future loss.

• Separate “pre-petition” service charges from those incurred after filing.


3. INTEREST RATES/ PENALTIES/ LATE FEES AND FINES

When does an interest rate or other charge imposed as part of a late fee become a illegal penalty?

Recent case challenging a Regional District’s late fees as excessive

• Late fee based on 10% interest on total account balance (current and delinquent amounts). District won the case on procedural matters but case raised the issues:

- How interest is calculated?

- When does it become “clearly excessive” and “unrelated to the cost of providing service”? What are limits?

- What method is likely to withstand a legal challenge?

• Consider whether to institute escalating late fees!


4. ISSUES TO WORK THROUGH WITH COUNTY AUDITORS

CERTIFICATION OF DELINQUENCIES

• County Auditor can only change the tax duplicate one time per year

• No limit on how many times Auditor can accept the certification of delinquent water and sewer bills.

- Important distinction! Certification of the delinquent amount that creates the lien on the property versus the actual placement on

the tax duplicate.

• Develop a system with the Auditor.

- Arrange to certify delinquent balances on some periodic basis – ie, quarterly.


OTHER COUNTY AUDITOR ISSUES

• Special assessments are also sometimes confused with certifications of delinquent water and sewer bills.

- Educate the County Auditor’s office.

• County Auditor may fail to provide a “settlement report” showing the name and amounts included in the auditor’s payment.

- Insist on this report so that accurate billing information can be maintained.


5. HARDSHIP POLICY

• Not a change in the law, but recognition of changed economic times. Several clients have requested assistance in drafting a Hardship Policy to assist in determining how to address delinquent customer who is facing difficult life problems.

• Consider utility provider’s and customers economic circumstances.

• One option is to make no allowance for reduction of amounts due.

• Another option is for the Board to make reductions in certain “extreme hardship” situations.


Hardship Policy Guidelines

• Define what is a “hardship”

- Example: loss of employment, death of spouse, serious illness or any other unusual circumstance that the District deems as a hardship.

• Provide flexibility to reduce amounts owed.

-The Board can decide to forgive certain charges (ie., late fees), and not others, set a payment plan, or allow requests for the forgiveness of any charges.

- Stress that any action is discretionary.

• Set limit for submission of hardship request.

• Have written policy for Auditor.


6. REFUNDS and UNCLAIMED FUNDS

• Recently, issue raised as to whether moneys held in an inactive or closed account needed to be reported to the State as “unclaimed funds.”

- For our client, a regional water & sewer district, we determined that it did not have to submit an Unclaimed Funds Report.


7. PRIVACY RIGHTS - COMPLYING WITH “RED FLAGS RULE”

• “Red Flags Rule” was passed by the Federal Trade Commission based on the Fair and Accurate Credit Transaction Act of 2003 (FACTA) and finally became effective at the end of 2010.

• The Red Flags Rule requires many entities, including utility service providers, to implement a written Identity Theft Prevention Program designed to detect the warning signs of identity theft in their day-to-day operations.

- Applies to "financial institutions" and "creditors" that hold consumer accounts designed to permit multiple payments or transactions -- or any other account for which there reasonably foreseeable risk of identity theft.

• Idea is that businesses will be better equipped to spot suspicious patterns that may arise -- and take steps to prevent a red flag from escalating into a costly episode of identity theft.


Identity Theft Prevention Program Guidance

• Program must be designed to detect, prevent, and mitigate identity theft in connection with the opening of a covered account or any existing covered account.

• Program must contain ‘‘reasonable policies and procedures’’ to:

- Identify relevant Red Flags for covered accounts and incorporate into Program;

- Detect Red Flags that have been incorporated into the Program;

- Respond appropriately to any Red Flags that are detected to prevent and mitigate identity theft; and,

- Update Program periodically.

• See http://www.ftc.gov/bcp/edu/microsites/redflagsrule/index.shtml for more information.


7. PRIVACY RIGHTS (CONT’D) OHIO PRIVACY PROTECTION

• R.C. Chapter 1347 (Personal Information Systems Act or “PISA”) governs the maintenance of personal information systems by state and local agencies.

• PISA applies to those items to which the Ohio Public Records Act does not apply; that is, records that have been determined to be non-public, and items and information that are not “records” as defined by the Ohio Public Records Act.

• For most utility service providers, the records it maintains only include public information or are public records, such as the name of the property owner and address. Therefore, PISA may not apply.

• NOTE: PISA does apply to personnel files.


8. OTHER RECENT CASES

State ex rel. Voleck et al. v. Village of Powhatan Point, 2010-Ohio-5679 (Ohio, 2010).

• Supreme Court denied a writ of mandamus to compel the Village to provide “visually clean and chemically pure water” to village residents. The Village proved that it met the State EPA requirements for safe, potable water, but these residents wanted to hold it to a higher standard.

• The Court declined to issue a writ, in part, because mandamus case requires that the Court order the government to do something it is statutorily required to do, and here, the residents could not establish that there is requirement to provide “visually clean and chemically pure water.”


9. GROUNDWATER PROTECTION FOR YOUR CUSTOMER’S WATER IN OHIO’S NEW FRACKING ENVIRONMENT

• In 2010, Ohio voters approved an amendment to the Ohio Constitution (Art. 1, Section 19b) which created a constitutional right of property owner’s to “reasonable use of groundwater underlying their land or of the water in a lake or watercourse located on or flowing through or along their riparian land”.

• This was essentially the ruling in McNamara v. Rittman, 107 Ohio St.3d 243, 246-247; 838 N.E. 2d 640, 646 (2005) which first recognized a property owner’s groundwater use rights.


9. GROUNDWATER PROTECTION (CONT’D)

• Current required setbacks for oil and gas wells is 300 feet from private or public water walls and 50 feet from streams and lakes.

- OAC also prohibits “the movement of fluid containing any contaminant into an underground source of drinking water, if the presence of that contaminant

may cause an exceedance in the underground source of drinking water of any primary drinking water standard established under Chapter 3745-81 of the Administrative Code or may otherwise adversely affect the health of persons.” OAC 3745-34-07.

• RC 1509.17 of the Ohio Revised Code, all underground sources of drinking water must be isolated and protected from potential contamination when drilling oil, gas and brine wells in the state.



S.B. 315 - New Regulation for Oil & Gas Drilling including "Fracking”

• Passed in June, 2012; effective September 10, 2012.

• New Oil & Gas Permit Requirements - Legislation requires more information to be submitted with drilling permit applications including:

- Road Use Maintenance Agreements (“RUMAs”)

- Road Use Maintenance Affidavit (Good Faith Effort)

- Identification of the proposed source of surface or ground water

- Water well sampling in the neighboring area prior to drilling expands testing requirements to 1,500 feet and applies this standard to both urban and rural areas.



S.B. 315

• Disclosure of Chemical Used in Drilling- Upon well completion, the well owner must supply information regarding the amount of products, fluids, and substances used to facilitate drilling or stimulate the well. However, broad trade secret provision that exempts certain chemicals or materials.

• Despite these new public and private water protections from SB 315, conflicts are foreseeable in the use of groundwater and mineral rights – no cases yet, but they are sure to come!


QUESTIONS?

THINK OF ONE LATER? CONTACT US:

John B. AlbersEric J. LuckageAnita T. Doran

ALBERS & ALBERS 88 North Fifth Street

Columbus, Ohio 43215(614) 464-4414

WWW.ALBERSLAW.COM

mailto:[email protected]


ADDITIONAL MATERIALS PROVIDED

Albers Speech Handout, including:

Delinquent Water/Sewer Bill Collection Options

Water Service Termination Checklist

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