I’ve never had a tenant pay for back flow testing. Maybe I’m missing the boat, but I view it as a infrastructure for the home. If the water main needs repairing you wouldn’t charge the tenant for repair because they’re responsible for water utilities. Look at it from a different angle, if the tenant is responsible for keeping the yard clean, but a tree falls through no fault of the tenant, would you expect the tenant to have the tree cleaned up? It’s just a cost of owning a rental.
I've never had or even heard of this. Is your area a high contamination area for water? Are there filters in place? Could just be another reason for the utilities company to make $ off of you.
If it is a residential home and not called out as a tenant specific responsibility it is more than likely an owner operating expense.
Something to consider, do you really want to make a tenant mad over $35 / year if it is not clear in the lease and was not explained before signing.
In commercial leases, back flow testing usually falls into a tenant specific responsibility or is treated as a CAM. Though, again it depends on what is in the lease agreement.