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The outdoor faucet was turned on today(45 degrees), shortly after we discovered a leak in the house. We're not sure if the faucet broke or the pipe fractured/burst. After pulling back the drywall we noticed that there is a copper wire in conduit bracketed to the water pipe at the faucet. Would it be safe to try to find the leak by turning the water back on, if we turn off the electricity?

I was under the impression that grounding to a water pipe occurred outside of the house, is that incorrect?

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It sounds like you've found a ground conductor. This would be a single conductor, usually a stranded wire made of copper or aluminum, clamped to the pipe. May or may not be in conduit. If you are able to follow the wire you may find it is used to bridge an electrical discontinuity in the plumbing (you'd see this across your main water meter) or to carry a ground connection to another piece of equipment (such as a telephone termination box).

For providing ground to your main service panel, the panel is usually connected to the water supply line if that pipe is metal. This is typically done inside the house, particularly on older houses. If your water supply line is plastic, you will have grounding via other means such as ground spikes driven down either outside or through your basement floor.

There's no likely danger from getting a ground conductor a little wet once or twice. If you've located the leak on a pipe and are just really narrowing down the exact location, leave the electricity on as long as you don't expect water to reach any electrical parts that carry a current - switches, outlets, lights, etc. You can touch a ground conductor, wet or dry, safely as long as you're not also touching a current-carrying conductor. You should NEVER be touching a live current-carrying conductor because you're often touching a ground (light housings, bathtubs, flooring), because current seeks ground, and because if the path to ground leads a lot of current through your body you will have a very bad day.

If I had a rough idea where the leak was, and didn't think there was serious risk of water leaking into or spraying a live electrical part, I'd probably leave the electricity on. Lower chance of banging into or tripping over something, which is good.

If you're not sure, get a non-contact voltage tester and you can check if there's live wiring near the pipe.

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In the UK, current regulations require all metallic pipework be connected electrically, this is called equipotential bonding.

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(images from electrician2hire)

By law, the connections must be labelled (typically with an embossed metal label)

enter image description here

I believe current regulations require this equipotential bonding in every room that has metal pipework. This helps guard against loss of earth bonding when a small section of copper pipe in between locations is replaced by plastic pipe. The clamps must be in a place where they can be inspected - which rules out hiding them under the floor or behind plasterboard (drywall.)

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What if all of the copper pipes in your bathroom are in places that cannot be inspected? Do you need to actually add an inspection place behind a removable tile or something like that, just for the bonding? (I’m not in the UK, just curious.) – Christopher Creutzig Dec 27 '13 at 16:04
@Christopher: I'm not an electrician and a copy of the relevant regulations costs £100 - and probably needs training to interpret correctly. From what I have read, if the supplementary bonding cannot be inspected, it must be tested electrically (<0.05 ohms) or result in a a class 2 notice on an inspection. So far as I know, most UK homes only get an electrical inspection after major electrical work. Also, I believe that if all circuits have RCD protection, supplementary bonding may be omitted. – RedGrittyBrick Dec 27 '13 at 21:05

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