September/October 2020 Issue

Also in this issue: Applicability of the “Competitive and Bargaining Reasons” Exception to Wisconsin’s Public Records Law     |     Michael May Joins Boardman Clark

Get the Lead Out, the Sequel New DNR Private Lead Service Line Replacement Program and Updates on PSC Financial Assistance Programs

Jared Walker Smith | 09.25.20

Municipalities and water utilities should start getting ready to get the lead out in 2021. The Wisconsin Department of Natural Resources (DNR) is back offering a new Private Lead Service Line (LSL) Replacement Program, with full principal forgiveness, to assist municipalities in replacing private LSLs. And the Public Service Commission of Wisconsin (PSC) has issued new guidance that streamlines the application process for a PSC approved financial assistance program for utilities to provide ratepayer funded financing for the removal of private LSLs.

DNR Private Lead Service Line Replacement Program

The new DNR Program builds on the success of the prior 2‑year DNR Private LSL replacement program by offering at least 63 million dollars of new funding for eligible municipalities to replace private LSLs. A municipality is eligible for funding if its water utility reported to the PSC any private LSLs, galvanized pipes downstream of current or former lead lines, or ​“unknown may contain lead.” The funding is strictly principal forgiveness, meaning that municipalities will not have to conduct any bonding or retain bond counsel to take advantage of the DNR Program.

The DNR Program may be used for costs associated with replacing LSLs at residential properties, including multi-family and buildings containing both residential and commercial occupants, Pre-K-12 schools, licensed/​certified daycare centers, and other qualifying non-residential properties. Eligible costs include construction costs, up to $5,000 for engineering and administrative support for municipalities with fewer than 3,300 residents, and up to $5,000 for costs related to developing a mandatory replacement ordinance for all communities.

Unlike a PSC-approved financial assistance program, to qualify for funding a municipality does not have to require all residents to replace their lead service lines. The municipality also does not need its utility to have a PSC-approved financial assistance program for the municipality to qualify for DNR funding.

A municipality has two options for construction contracting to replace private LSLs. First, the municipality may bid a contract to complete all Program-funded replacements. This option will require compliance with Davis-Bacon and a solicitation of Disadvantaged Business Enterprises. Second, the municipality may develop a list of pre-qualified contractors with whom homeowners can contract directly.

There are limitations to eligibility: Funds may not be used to replace any public infrastructure, but all upstream public LSLs or lead pipes must be replaced at the same time. Regular Safe Drinking Water Loan Program funding may be used for public replacements. Funds are awarded to the municipality, not the water utility or directly to the homeowner. Funds may also not be used to replace any interior plumbing or fixtures.

The DNR is already accepting applications for funding for the 2021 construction season. To take full advantage of funding for the entire 2021 construction season, the DNR should receive applications no later than February 2021. And all applications for any part of the 2021 construction season must be received no later than June 30, 2021. While the DNR does not know how many years funding will be available, awarded funds may not be carried over into the following year and the municipality must reapply each year. Thus, while there is no benefit to overestimating the number of private LSLs that the municipality can replace in 2021, the municipality should be generous in its estimation and avoid underestimating its costs. Costs the municipality incurs that exceed its awarded funding will receive first priority for the 2022 Program year awards — but the municipality must carry the costs until that time.

More information is available on the DNR’s website, including a recording and slide show handout from the DNR’s September 2, 2020, workshop: https://​dnr​.wis​con​sin​.gov/​a​i​d​/​d​o​c​u​m​e​n​t​s​/​E​I​F​/​p​r​i​v​a​t​e​L​S​L​r​e​p​l​a​c​e​m​e​n​t​F​u​n​d​i​n​g​P​r​o​g​r​a​m​.html.

Updates to PSC Financial Assistance Program Applications

The PSC has created a new category of dockets, Application Filing Requirements or AFRs. In docket 5‑AFR-1600, PSC staff have proposed revised application requirements for private lead service line replacement financial assistance programs. The revised requirements renew focus on the financial aspects of the program and limit the level of detail on the actual construction work that will be done under the program. For example, the PSC is not requiring any environmental or archeological information.

The application requirements indicate the PSC approval only applies to financial assistance provided by the utility — not assistance provided by the municipality. Municipal assistance — including through the DNR Program — should not be addressed in the utility’s application.

While not addressed in the application requirements, recent PSC decisions have clarified two other issues. First, the Commission is not requiring utilities to require replacement of galvanized service lines in addition to service lines made out of lead. Second, the Commission has prohibited utilities from including a priority list for assistance, indicating that such a list could result in discrimination between customers within the same class. PSC staff has indicated that if a utility faces a budget shortfall due to higher-than expected requests for financial assistance, the utility must request a waiver or reconsideration of its approved program from the PSC.

While the draft Commission Order still requires Commission approval, the proposed application requirements are a big step towards reducing the burden on utilities to apply for approval of a financial assistance program. However, the PSC approved program still relies on rate-payer funding for private LSL replacement financial assistance. Since the DNR Program provides for funding for the full cost of private LSL replacement without any additional cost to residents or ratepayers, it is likely that few utilities will seek to implement a new PSC-approved program while DNR funding remains available.