West Virginia American Water has informed Charleston City Council and other local governments that it wants to place an extra surcharge on customer’s monthly bills in the near future.
Jeffrey McIntyre, the president of West Virginia American Water, sent a letter to the city council members and local government officials throughout the company’s service area this month stating the company intends to file a case with the Public Service Commission that would allow the utility to place a separate charge on customers to cover future infrastructure projects.
The company’s interest in filing the surcharge case with the Public Service Commission, the state agency that regulates utilities, comes less than two months after the PSC approved a 15 percent revenue increase for the company, which equals an additional $18.2 million annually.
In that case, the PSC staff initially had suggested that the commissioners should approve an infrastructure surcharge along with the company’s rate increase, but after further review, the staff members retreated from that recommendation because they believed it would open any PSC order on the increase up to legal challenges.
As a result, the commission told American Water that it should file another case if the company’s executives really wanted to place a surcharge on customers.
“The commission will direct [American Water] to seek authorization for an [Infrastructure Replacement Plan] Surcharge mechanism, if it chooses to do so, in a separate proceeding,” the commissioners wrote.
American Water is wasting no time in following that advice.
Laura Jordan, the company’s spokeswoman, said American Water, the largest water utility in the state, plans to have the surcharge case submitted to the PSC in the near future, though she couldn’t specify when that would be.
Jordan couldn’t confirm how much money American Water would seek to collect from its customers in the upcoming surcharge case, but in his letter to government officials, McIntyre stated that the company plans to spend at least $52 million in 2016 on large infrastructure projects.
That total includes $3.4 million for large water mains in South Charleston, Sissonville and Kanawha City; $9.45 million for water tanks that supply parts of Boone County, Lincoln County, Putnam County and the western part of Kanawha County; and $1.5 million for upgrades to American Water’s treatment plant in Fayette County.
During hearings last fall, members of the public and groups intervening in American Water’s rate case criticized the company’s spending decisions, including plans to spend $17 million for automated meters instead of water mains. Those groups included the Advocates for a Safe Water System, of which Charleston City Councilwoman Karan Ireland takes part as a member of the group’s steering committee.
“I knew it was a possibility that they would come back for the surcharge, but I am surprised that it is so soon,” Ireland said. “It kind of shows a tone-deafness on their part. Ratepayers are still worrying about the rate increase they already received.”
In recent months, the Advocates for a Safe Water System have promoted a study by Food and Water Watch, a national group that focuses on health and environmental issues, which showed that American Water’s Kanawha Valley system was one of the 10 most expensive water utilities in the country according to customer surveys.
In his letter, McIntyre said the PSC’s decision in February to give the company an $18.2 million boost in revenue “reflects a thorough, deliberate approach to balance the interests” customers, the economy and the company.”
That order also gave the American Water’s shareholders a 9.75 percent rate of return on their investments with the company.
While the Charleston City Council has been informed about the company’s plans, members of the Kanawha County Commission said they had been unaware that American Water was planning to file another case to increase customers’ rates.
Commissioner Dave Hardy and Commission President Kent Carper said they hope to discuss American Water’s plan at the next commission meeting, and both suggested that the county would seek in intervene in any upcoming surcharge case. Both the county and the city intervened in the 2015 rate case.
“I think we have a duty to intervene and speak on behalf of our tax paying public,” Hardy said. “At some point, the shareholders of the water company need to bear some of the burden here.”
Carper said he wasn’t surprised by American Water’s plans to ask for a surcharge, but he said the PSC needs to do more to vet the number of rate increases that utilities are receiving for gas, water and electric service.
“They have to have to have a reasonable rate of return. I understand that,” Carper said. “The question is, what is reasonable?”