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Bill would raise water rates $51 million, PSC says

CHARLESTON, W.Va. -- A bill to help shore up finances at cash-strapped municipalities and public service districts could raise rates by more than $51 million for some 400,000 households across the state, commissioners with the Public Service Commission told state lawmakers Monday.

The Senate Judiciary Committee had a hearing on House Bill 4601, which changes funding guidelines and rate procedures for publicly-owned water and sewer utilities.

The bill would require municipal utilities and public service districts to create and maintain a new working capital fund equal to one-eighth of their projected operating and maintenance expenses. It would also allow water and sewer rates to be adjusted annually to account for increases in the Consumer Price Index and electricity and fuel costs.

The proposal would also allow public service districts and municipalities to start charging new rates before they are reviewed by the PSC.

The state Rural Water Association and Municipal League support the bill, saying it will ease financial concerns at municipalities and PSDs.

Commissioners at the PSC, however, think the bill will lead to substantial rate increases and prevent them from adequately protecting consumers in rate cases.

"Our view of the bill is that it would have a significant and arbitrary rate increase for all of the sewer and water PSDs and municipalities," Commissioner Ryan Palmer said. "We have significant concerns first and foremost because of the rate impact on these PSDs and these municipalities."

He said the working capital fund requirement alone could force PSDs and municipalities to immediately raise rates by 10 to 12 percent.

"Based on our calculations, this could preliminarily increase rates over $51 million for those over 400,000 households around the state," Palmer said.

"It's a pretty significant rate increase with no review of the record or the looking at the nitty-gritty of whether this money is warranted or not," he said.

PSC Chairman Michael Albert e-mailed senators early Monday urging them to vote against the legislation.  

In the e-mail, which was obtained by the Daily Mail, Albert said the bill could impose arbitrary requirements on the rate-setting process that would force the commission to increase rates above the level that it had already determined was necessary to cover the cash requirements of publicly-owned utilities.

"These requirements are inconsistent with the statutory requirement that the Commission assure that rates are just and reasonable and based primarily on costs," Albert said.

Palmer said size of utility operations varies greatly across the state. Some have new equipment and systems, others have old ones.

He said applying arbitrary requirements statewide would mean the PSC would be less able to take a utility's individual characteristics into account when setting rates.

"This (bill) is sort of a broad-based approach," Palmer said. "We think 'one-size-fits-all' regulation doesn't work. Each district has different needs that need to be reviewed by staff and evaluated before we can make that determination.

Amy Swann, executive director at the West Virginia Rural Water Association, said the bill's purpose was to give public service districts and municipalities flexibility in developing adequate rates.

"The current statutory regulatory scheme isn't working -- it just simply isn't working," she said. "There are too many utilities that are simply lurching from crisis to crisis, whether it's infrastructure failure, bond payments... they just go from crisis to crisis."

Palmer said the commission, through its rate process, provides utilities with rates that are adequate to meet their working capital requirements. He acknowledged, though, that the local utilities often believe their rates are not enough.

"They feel that sometimes that their pants are cut a little too short," Palmer said. "We do not agree, but they feel that is the case. We do take our responsibility of looking after ratepayers' money seriously."

Some senators seemed to be open to improving the rate-setting system, though they did not think the current bill was the best way to do it.

"I'm not sure that this is the answer, but I don't think that (the PSC's) process is the answer either," said Sen. Greg Tucker, D-Nicholas. "I do think this is an issue that needs to be studied by the Legislature."

Judiciary Committee Chairman Corey Palumbo, D-Kanawha, decided to refer the bill to a special subcommittee for further consideration. He appointed Senators Mike Hall, R-Putnam; Art Kirkendoll, D-Logan; and Bill Cole, R-Mercer, to serve on the subcommittee.

Contact writer Jared Hunt at business@dailymailwv.com or 304-348-4836.


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