Collecting Delinquent Water Bills and Terminating Service

Many cities and towns operate their own public utilities, including water service. Unfortunately, sometimes utility customers do not pay their bills. What can be done to collect unpaid accounts and, more specifically, when can water service be terminated?

The relationship between a city or town and its utility customers is contractual. If utility service is provided, and a customer does not pay for the service, there is a breach of contract. What then?

A number of approaches are available:

• Obviously, the customer can, and should, be “reminded” of the overdue payment and perhaps the reminder will result in a payment. A late fee can be imposed and interest charged on the unpaid and overdue account, and this might have the desired effect of securing payment.
• The utility may contract with a collection agency to obtain payment. (However, before a collection agency’s services can be used, the customer must be advised both of the existence of the debt and that the debt may be assigned to a collection agency for collection if it is not paid, and at least 30 days must elapse from the time notice was attempted until the agency can begin its efforts. RCW 19.16.500.)
• The city or town may also file a lawsuit to obtain collection. The lawsuit could be handled in small claims court, without a lawyer, or in district court.
• If the property is to be sold, the city or town may be able to obtain payment from the seller at closing if it has utility liens against property that is sold and the procedures in chapter 60.80 RCW are followed.

Then there's another option that’s available, a rather effective one: terminate the customer’s water service for the nonpayment. State law provides for liens for unpaid utility bills. For water service (and also electricity), though, the lien for a delinquent utility account is not a true "lien," since it cannot be enforced by foreclosure against the property involved. Rather, the lien can be enforced only by the cutting off service until the delinquent and unpaid charges are paid. See RCW 35.21.290, .300. The statutes provide that this "lien" shall only be for four months' charges past due. Thus, after a delinquent water (or electric) utility customer has paid for four months past due, service must be restored even if a delinquency remains.

If a city or town intends to terminate service for nonpayment, it must provide the utility customer procedural protections so that the customer's due process rights are not violated. The procedural requirements to follow prior to cutting off utility services are:

• The city must give written notice to the customer prior to termination of utility service.
• The written notice must clearly and in layman's terms inform the customer of the available opportunities to present his or her objections to the bill to the city or town, and identify the telephone number, address, and department of the person who will handle the complaint. The opportunity for this informal hearing must be available in advance of the termination date.
• The city or town employee responding to the customer communication outlined in the written notice must have the authority to review the facts and files, to correct any errors in the billings, and to arrange for credit terms.

If these steps are followed and payment is not made, the city may terminate service. If payment is made after termination, the “lien” no longer applies and service can be reconnected, although a reconnection charge can be imposed. Termination and reconnection of service does not preclude the city or town from seeking payment for amounts due past the last four months; however, for those amounts, there is no longer authority to terminate service.

Special considerations may apply if there is a landlord-tenant relationship involved. For more information, see the blog article Utility Billing and Termination in the Landlord/Tenant Context."

The policies that a utility establishes to address delinquent accounts should be formally adopted - ideally by ordinance adopted by the city or town council - and made publicly available.