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elk river intake facility (copy)

The West Virginia American Water Co. intake facility on the Elk River.

West Virginia American Water’s request for additional tens of millions of dollars in a rate increase has drawn withering scrutiny from consumer advocate groups and the staff of the state Public Service Commission.

Briefs filed by parties recently in the rate hike case before the state’s utility regulators reflect a deepening fatigue with a long history of rate increases that have nearly doubled monthly rates for West Virginia American Water customers in the past 15 years.

Monthly rates have nearly doubled in the past 15 years for West Virginia American Water customers using 4,500 gallons of water, from $40.27 in 2006 to $78.11 in 2021.

Now the largest investor-owned utility in the state is asking for an additional $36.6 million in annual revenue for water operations from its roughly 167,000 customers across 19 counties. The company has acknowledged that, if approved, the proposal would raise rates 17.2%.

“Something has to give,” representatives of the Consumer Advocate Division, an independent arm of the Public Service Commission that represents the interests of utility customers, wrote in a brief filed last month arguing that most of West Virginia American Water’s requests would unfairly burden ratepayers. “WVAWC ratepayers cannot afford a continuation of these rate increases, with no end in sight.”

The Public Service Commission has yet to rule on West Virginia American Water’s request.

The Consumer Advocate Division noted that the anticipated rise above $90 a month in average monthly cost for using 4,500 gallons of water if the rate increase request is approved would place West Virginia American Water as the sixth-most expensive water utility among 365 statewide, per Public Service Commission data.

Commission staff advised the commission to reject “the vast majority of the requests put forth” by West Virginia American Water in a brief filed last month, proposing a much smaller water rate increase of $7.44 million and urging the agency to reject company-proposed tariff changes that consumer advocates say would unduly shift risks from the company’s investors to its customers.

Commission staff and the Consumer Advocate Division objected to the company’s use of an addendum period beyond the use of an average historical test year as the base for establishing new rates.

The company proposed that all projected investment through the end of a 14-month addendum period ending Feb. 28, 2022 be incorporated into base rates.

A test year gives a baseline for utility operations when rates are being set.

West Virginia American Water contended that limiting rate base recognition to investments during the historical test year ending Dec. 31, 2020 would “cripple the Company’s ability to invest and needlessly sacrifice the progress it has made” in recent years.

Commission staff acknowledged in case testimony that the company’s infrastructure improvement program has been effective in playing catch-up.

In testimony praising the program last year, members of the commission’s engineering and utilities divisions observed the company’s main line replacement cycle — the theoretical time to replace all the utility’s mains at the current replacement rate — is slightly less than 113 years.

In the early to mid-2000s, it was more than 400 years, according to commission staff.

Customers already are paying for roughly $10 million of the company’s proposed rate increase under the company’s current infrastructure improvement surcharge mechanism approved by the commission in 2016.

Jonathan Fowler, an engineer for the Public Service Commission, testified at the case’s evidentiary hearing in November that since the commission approved the annual infrastructure replacement surcharge, West Virginia American Water has made great strides in upgrading its infrastructure.

The company argued in a brief that opponents of its rate hike request displayed “almost a nostalgia” for a time when commission staff said the company had made suboptimal levels of investment.

But commission staff and the Consumer Advocate Division recommended that the commission reject the company’s requests for a revenue stabilization mechanism to respond to declining consumption and customer count: an annual customer credit or surcharge to align customer revenues with the revenue level established in the rate base case.

They recommended the agency reject West Virginia American Water’s proposal for an uncollectible expense rider that it said would address an increasing difficulty of defining expenses deemed uncollectible — meaning they will not be paid.

Consumer advocate groups also condemned West Virginia American Water’s request to recover costs related to its employee compensation packaging.

“Efficiency, productivity, and employee attrition levels greatly impact the level of rates customers ultimately pay,” the company said.

“The fact that the Company can, in the same brief, request an additional thirty-seven million dollars and say its primary goal is keeping rates low is comical,” commission staff wrote in a brief filed with the commission.

The Kanawha County Commission filed a brief highlighting Commission President Kent Carper’s testimony calling for at least a three-year-long moratorium on future base rate filings.

A base rate accounts for all utility service expenses, including operating and maintenance costs, taxes and depreciation.

Carper had noted that Appalachian Power recently agreed to a base rate moratorium until June 30, 2024.

The Consumer Advocate Division said recent rate cases in which the commission has allowed recovery of addendum period expenses had helped tilt the “regulatory playing field” too far in favor of West Virginia American Water.

The company defended its request in briefs filed with the commission, noting that it has invested more than $250 million in system upgrades since 2019.

“In weighing the evidence in this case, the Commission should focus on the kind of utility service it wants the Company to provide — safe, reliable, and able to serve as a solutions provider for water and wastewater service in the State — and then apply the regulatory constructs most beneficial to achieving that goal,” the company said in a reply brief filed Dec. 22.

West Virginia American Water’s current monthly bill of $78.11 for the average customer using 4,500 gallons of water is nearly double Kentucky American Water’s $41.74 bill for residential customers using 4,500 gallons.

West Virginia American Water spokeswoman Megan Hannah contended it was misleading and inaccurate to compare water rates across systems. Hannah noted that West Virginia American Water has nearly twice as many miles of water main lines and nearly 10 times as many water storage tanks in its distribution system along with a customer base of 167,000, about 45,000 more than Kentucky American Water’s.

“Quite simply, WVAW maintains double the amount of KYAW’s water main but does not have double the amount of customers,” Hannah said in an email, adding that differences in infrastructure, staffing and other costs of providing water in the “urban, flat lands of Lexington, Kentucky” is very different from providing service across West Virginia’s rural, mountainous terrain.

But ratepayer advocates are looking for a less rocky road, and in a brief filed with the commission, Consumer Advocate Division legal counsel John R. Auville and division Director Robert F. Williams contended that the agency had come to a fork in theirs.

“[T]he Commission is at a crossroads again in terms of what to do in this particular case,” Auville and Williams wrote. “Will the Commission continue to take the road preferred by the Company and continue to tilt the regulatory playing field in the Company’s favor, a road which has led to higher and higher water rates, with no apparent end in sight?”

Mike Tony covers energy and the environment. He can be reached at 304-348-1236 or mtony@hdmediallc.com. Follow @Mike__Tony on Twitter.

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