West Virginia American Water has made its annual request for an infrastructure improvement surcharge, part of the company’s proposal for a 22% increase in monthly rates for the average residential customer.
The company petitioned the state Public Service Commission last week to approve a surcharge of 1.87% of proposed water rates effective March 1, 2022, to cover an estimated $32.5 million investment next year in upgrading and replacing infrastructure.
The largest investor-owned water utility in West Virginia, the company filed rate requests with the state’s utility regulators in April seeking an additional $40.8 million in annual revenue for water and wastewater operations combined.
The company’s proposed base water rate increase is 19.7% above current rates, designed to cover $252 million in investments since its last base rate increase in 2019.
The average residential customer using 3,100 gallons per month would see a monthly increase of 22%, or $12.56, beginning in March, if the base rate case and newly specified infrastructure investment surcharge are approved as filed, according to company spokeswoman Megan Hannah.
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, according to the Public Service Commission.
The commission approved the infrastructure replacement surcharge mechanism, called a Distribution System Improvement Charge, in 2016. The mechanism has resulted in a $4.99 monthly increase for the average residential customer using 3,100 gallons per month since then.
“The annual infrastructure replacement program has given us the ability to make timely, necessary investments in our water systems to improve reliability while reducing long-term costs for our customers,” Rob Burton, president of West Virginia American Water, said in a news release.
But the Public Service Commission’s Consumer Advocate Division, an independent arm of the commission that represents the interests of utility customers, plans to intervene in the case, according to division director Robert Williams.
Williams expressed concern about the effects of the proposed 1.87% surcharge on customers, and has criticized West Virginia American for requesting a base rate increase even after recovering infrastructure replacement costs from the Distribution System Improvement Charge.
A base rate accounts for all utility service expenses, including operating and maintenance costs, taxes and depreciation.
Of the $252 million that West Virginia American reported investing in system improvements since its last rate increase, the Distribution System Improvement Charge has covered $79 million, according to the company.
West Virginia American’s 2022 infrastructure replacement plan includes $18.6 million to replace or upgrade almost 38 miles of water mains, $4.2 million to replace service lines and fire hydrants, $4.8 million to replace water meters, $2.5 million for additional storage tanks, $2.2 million for post-acquisition investment on troubled water systems and $200,000 for a booster station.
West Virginia American is not alone in relying on surcharges to pay for infrastructure upgrades. The Public Service Commission last week approved a request from Appalachian Power and Wheeling Power to add a surcharge resulting in an increase of 6.12% on the average residential customer’s monthly bill effective Sept. 1. That surcharge will provide $44.1 million to the electric utilities to cover base rate increases since their last base rate case.
In a statement Thursday, Appalachian Power spokesman Phil Moye said the company is evaluating the terms of the conditional order, which would require a three-year moratorium on base rate increase filings from the petitioners.
Utilities have argued that proposed infrastructure investment surcharges would bring rates into alignment with infrastructure upgrade costs more gradually than what the utilities would ask for in a base rate case.
Approved by the Legislature in 2015, Senate Bill 390 allowed the state’s natural gas utilities to recover costs of infrastructural replacements through surcharges, but water and electric utilities have sought and received approval to similarly recoup infrastructure investments since then.
But Williams views the increasing number of utility surcharges as onerous for both customers and his own five-person staff tasked with vetting them all.
“All these surcharges ... it is kind of like death by a thousand cuts,” Williams said.