The Energy and Utilities Board has turned down a challenge from Penobsquis residents to set their own water rates. (CBC)

Penobsquis residents fighting new fees to use a local water system have had their challenge turned down by the New Brunswick Energy and Utilities Board.

The Energy and Utilities Board ruled on Wednesday that the regulator does not have jurisdiction to regulate water rates for people living in the southern New Brunswick community.

A group of families living in Penobsquis appealed to the EUB in September after they were told they would have to pay $400 a year for water from a new municipal-type system.

The provincial government built the system after the families' wells went dry, a problem that many of them believe was caused by the nearby Potash Corp. mine. The Sussex Corner village council was given control of the water system and decided to charge the $400 fee to the Penobsquis residents.

Michel DesNeiges, a lawyer who appeared before the EUB on the families behalf, said his case was based on wording in the provincial act governing the regulator which states the board has authority over public utilities that distribute water.

"There's a reason for it being there, and they have to respond to this type of situation," DesNeiges said.

"If not it is just words that mean absolutely nothing. It's a right that we give to New Brunswickers and we take it away at the same time."

DesNeiges also argued that the Penobsquis residents are having the fee imposed by a group of elected officials that they do not represent them.

"In terms of democracy, if you will, the residents of Penobsquis don't have a council that they can address their water issues with," he said.

"They have to go to another community that is not their own. So there has to be oversight of the management of water in this type of a context."

The Energy and Utilities Board ruled it does not have authority in the Penobsquis case because the village of Sussex Corner is not legally a public utility.

When the residents first filed their complaint to the EUB, they hoped the regulatory board would give them the ability to set their own water rates.