Although one in seven domestic water supply systems in Utah are privately owned and operated, they are characteristically small with 94 percent serving populations of less than 1,000. Per capita costs of service vary greatly but become relatively high for locations that are remote, where terrain and climate are extreme, where scale economies are absent, and where materials and skills for system repair and replacement are not locally available. Statistics indicate that the incidence of water quality violations relate strongly to system size. Yet corrections are often more difficult to achieve because well trained and full time operators cannot be justified. Private water purveyors in Utah operate as 1) customer (mutually) owned nonprofit systems, and 2) investor owned companies selling domestic water for profit and thus regulated by the Public Service Commission (PSC) as private utilities. Kinds of problems experienced bear a relation to company origin and demographic dynamics. Many of the older private systems are appendages to, or outgrowths of, mutually owned irrigation companies. Their problems generally relate to urbanization and annexation processes. Newer systems are commonly creatures of land development activities that have taken place in more remote areas with appealing natural landscapes and/or recreational attractions. Their problems relate largely to upfront decisions and disclosure about plans for perpetual operation and unrealistic budgeting and financing to provide quality service. Private water companies are confronted with some discouragements and disadvantages not experienced by their public counterparts in Utah. 1) The justification required to get approval for rate increases through the PSC is tedious and costly. The process is geared to regulation of large electrical, gas, oil, and telephone utilities. 2) Private systems are ineligible for the government grants and low interest loan programs that are commonly available to public water systems. Thus, they experience higher costs for capital improvements. 3) Private water companies are subjected to more stringent proff-of-use requirements in obtaining and maintaining their water rights. The State Engineer is less liberal in granting private entities the acquisition and maintenance of water rights to provide for future needs. 4) Private systems are subject to property and income taxes. The property taxes can be substantial because domestic water water systems are capital intensive. 5) There is a prevailing perception among the Utah populace that least cost service is better assured through public ownership and management. Taken together, these factors tend to discourage the operation of private systems and hasten their conversion (or sale) to public entities. In view of the small number of investor owned water companies operating in Utah and their characteristically small size, PSC needs to streamline its regulatory procedures or let the needed consumer protections be provided within the framework of county government.
Bagley, Jay M. and Haws, Frank W., "Problems of Small Privately Operated Water Companies in Utah" (1985). Reports. Paper 627.