04.09.2020

In continuing response to the COVID-19 pandemic, Governor Gavin Newsom issued Executive Order N-42-20 (the “Executive Order”) on April 2, 2020, indefinitely restricting the ability of water systems to shut off residential service and service to qualifying small businesses, namely those in critical infrastructure sectors.

Residential Service Shut off Restrictions

Under the wording of the Executive Order, both water systems subject to Health and Safety Code §116908 and §116910’s shut off restrictions and water systems not subject to these restrictions shall not discontinue residential water service for non-payment.

What this means for service providers – including counties, cities, special districts, mutual water companies and investor-owned water utilities – is that all water systems are prohibited from shutting off residential water service to customers for non-payment. Furthermore, this restriction on water shut offs is retroactive, requiring that any residential services already discontinued for non-payment since March 4, 2020 be restored.

Previous water shut off protections – such as the Water Shutoff Protection Act of 2018 – have limited shut-off restrictions to providers with over 200 service connections. This Executive Order, on the other hand, applies to all water systems. With a focus on customer protection, water systems both large and small are subject to this moratorium on residential service shut offs as well as the mandate to restore any residential services discontinued since March 4, 2020.

The residential services protected by this order are the same as those defined in Health and Safety Code §116902(c), including: (i) single-family residences, (ii) multifamily residences, (iii) mobile homes, including, but not limited to, mobile homes in mobile-home parks, and/or (iv) farmworker housing.

Shut Offs for Small Businesses in the Critical Infrastructure Sector

Whereas water service providers should have little trouble determining their residential service customers, the restrictions placed on shut offs for small businesses are a little murkier. In order for a business to qualify for the  Executive Order’s protections, it must (a) qualify as a small business under the federal Small Business Administration’s size standards set forth in 13 C.F.R. 121.201; and (b) be designated as part of the critical infrastructure sector by the State Public Health Officer.

This two-prong analysis may make determining which small business customers are protected by the Executive Order a difficult task, especially with the recent designation changes in response to COVID-19. In any case, service providers should take care in assessing whether prospective customers are protected under this part prior to any service shut-offs.

State Water Board Best Practices and Guidelines

The Executive Order mandates that the State Water Board establish best practices, guidelines, or both to be implemented during the COVID-19 emergency. While the Executive Order gives no timeframe for when these guidelines will be supplied, it is noted that they should: (i) address non-payment or reduced payments; (ii) promote and ensure continuity of service by water systems; and (iii) provide measures such as the sharing of supplies, equipment, and staffing to relieve water systems under financial distress.

Until the State Water Board releases its guidelines and best practices, however, nothing in the Executive Order limits the obligation of customers to continue payments for services or the ability of service providers to continue charging customers for the services provided. No waiver of late fees or collection practices has been implemented with the signing of the Executive Order.  Accordingly, so long as service providers adhere to the restrictions on service shut-offs, they may continue their standard practices in such areas.

Although the future response by the State Water Board is uncertain, for now the Executive Order appears not to preclude a service provider from seeking collection for services that were not paid for as a result of this Executive Order.

These AALRR publications are intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR presentation/publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.

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