Careful with RT, they are not always a reputable source. They've done good work covering the NSA leaks and issues, but that's mainly because it fits their existing anti-US slant.
Being required to hook up to water/sewer systems was originally legislated in support of public health and sanitation, as prior to most people being the sewer system, a large amount of waste entered the water system. Requiring people to hook up to the sewer reduced this, and thus reduced risk of diseases like dysentery and Cholera. Is is possible that the lady in question may have created a system that used her waste safely, for instance feeding it into a compost system. But the local government probably has no way to test her system's efficacy in a cost effective way, and if everyone did it with variable levels of competency, it could post a public health risk. Even if she isn't a public health risk herself, they have to enforce the law to prevent it becoming a bigger issue in the future as more people try to go "off the grid".