CHARLESTON, W.Va. -- The average West Virginia American Water residential customer in most places would see his or her bill go up by nearly $3 under a proposed agreement between the utility and the state Public Service Commission.The agreement, announced Tuesday, would increase water rates by 7.1 percent for about 181,000 customers. It was reached after negotiations between West Virginia American Water, PSC staff and the PSC Consumer Advocate Division.The three-member PSC must decide whether to accept the agreement by Oct. 11."We have approved it. We think it is a fair and reasonable settlement in the public interest," said Tom White, a lawyer for the PSC Consumer Advocate Division.According to the company, the bill for an average customer using 3,315 gallons of water a month would rise from $39.11 to $41.88.West Virginia American Water originally asked for a 19.7 percent increase in water rates, which would have come to $24.1 million annually. Tuesday's agreement would bring in $8.1 million a year for the water company.West Virginia American Water says the main factor in its rate increase requests is $85 million in improvements since 2009, including "upgrades to the distribution system, water treatment facilities, storage tanks, pumping stations and computer systems.""This agreement is based on extensive negotiations and substantial compromises by all parties as a way to expedite and simplify the resolution of this case," Jeff McIntyre, president of West Virginia American Water, said in a news release. "We, along with the other parties involved, hope that the commission will accept this stipulation as a fair and reasonable resolution with the best interest of our customers at its core."Under the agreement reached Tuesday, Fayetteville residents would see an additional increase to help pay for repairs to the local sewage-treatment system that West Virginia American Water acquired in 2008.Last December, West Virginia American Water asked for an increase of $476,000 in annual charges for sewer services provided to about 1,100 customers in Fayetteville. Under the agreement reached Tuesday, that increase was reduced to $337,412.The Fayette County sewer system is the only one operated by West Virginia American Water. Local municipalities operate all the other sewer systems in the company's area.Tuesday's joint stipulation modifies the company's original proposal by shifting $231,151 in proposed Fayette County sewer system costs to the company's other customers -- a move that upset at least one of those customers.Lee Feinberg, a lawyer who represents Huntington-based West Virginia Steel, questioned the proposed sewer assessment.Feinberg said he did not want his objections to block the general rate-increase agreement reached between the parties. "But we want to intervene in the sewer case to oppose the recommendation that [Fayette County sewer costs] get shifted to water customers."If approved, that proposed shift of sewer costs, Feinberg warned, could be used to facilitate similar shifts in the future.Rod P. Nevirauskas, director of rates and regulations for West Virginia American Water, said the average customer would pay less than $1 a year for the Fayette County sewer system work. Industrial customers would pay a total of about $12,000 a year, he said."West Virginia Steel would pay a small part of that," Nevirauskas said.The Utility Workers Union of America, a union that represents West Virginia American workers, also is filing an appeal to Tuesday's agreement.PSC Chairman Michael Albert said the UWUA has until July 27 to file its legal briefs.Gregory Lanham, president of the UWUA's Huntington district, who testified before the PSC on Monday, complained that West Virginia American Water dropped the number of its employees from 316 to 260 in recent years.Lanham and other union members testified employees have become backed up on their work and that the company is not assigning them efficiently to jobs that need to be done.During his testimony on Tuesday, Nevirauskas said the company has "not done an analysis of the cost of the union's objections and requests."Scott Strauss, a lawyer representing the UWUA, stressed that the union's recommendations for staffing and work practices were not addressed in the joint stipulation released on Tuesday.West Virginia American Water has about 171,000 paying customers in 19 counties, including: Boone, Braxton, Cabell, Clay, Fayette, Harrison, Jackson, Kanawha, Lewis, Lincoln, Logan, Mason, Mercer, Putnam, Raleigh, Roane, Summers, Wayne and Webster counties.In all, the utility provides water to about 581,000 West Virginians -- about one-third of the Mountain State's population.Reach Paul J. Nyden at firstname.lastname@example.org or 304-348-5164.