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Kanawha Public Service District billing errors lead to charges

CHARLESTON, W.Va. - Faulty billing procedures at the Kanawha Public Service District will soon leave utility customers in East Bank and Cedar Grove with higher monthly bills.

From January 2010 to May 2012, an employee at Kanawha PSD under-billed East Bank and Cedar Grove for the amount of sewage processed by the PSD. The under-billing resulted in East Bank owing more than $47,000 and Cedar Grove owing more than $64,000.

At the same time, Kanawha PSD was over-billing the West Virginia Parkways Authority, which first caught the mistake in March 2012. The excess billing resulted in overpayment of about $40,000.

Neither East Bank nor Cedar Grove knew of the error until Kanawha PSD caught the problem last summer. The towns filed complaints with the state Public Service Commission and requested that they should not have to pay for the PSD's mistake, but to no avail.

Instead, a bargain agreement is in the final stages of approval by the PSC that will still force the towns to pay most, but not all, of the unbilled utility. Each town will have to tackle the repayment issue on its own.

"We don't have any choice," East Bank Mayor Chuck Blair said. "We figured we had to take what we can get."

Blair said the town would begin paying the Kanawha PSD $500 a month, which will result in a $1.28 increase to the current rate the town charges. The agreement was the result of negotiations, he said.

Across the river in Cedar Grove, Mayor James Hudnall said he feels the same as Blair.

"I just don't think it's fair," he said.

Hudnall said Cedar Grove would wait another month or so to see if Kanawha PSD will raise its rates. If there is a rate increase, Cedar Grove will increase the rate it bills customers at the same time so as not to create two different increases.

"What we're trying to do is not hit our customers twice," Hudnall said.

East Bank and Cedar Grove are the only two resale bulk customers of Kanawha PSD, meaning that those towns are charged as one unit for all the sewage that the PSD collects. Then, each town bills individual residents and businesses for water and sewer utilities, and the municipal governments are responsible for the maintenance of the system within town limits.

Kanawha PSD also has some individual domestic customers outside of the towns. Those customers were also under-billed, resulting in a collective deficit of $20,000.

The PSD began collecting the unbilled portion of those bills earlier this year and will "allow customers the same amount of time to repay the under-billing as the under-billing took to accrue."

For the West Virginia Parkways Authority, Kanawha PSD will refund the overpayment via credits on future bills to the authority.

Part of the issue with the billing is that while the towns were already being under-billed, Kanawha PSD raised the rate it charges both towns to $2.07 per 1,000 gallons from $1.85 per 1,000 gallons. The change happened in February 2011, and the PSD did not inform either town of the increase, though the Public Service Commission didn't require such action.

On top of all of the billing issues, Kanawha PSD began falling behind on its bond payments to the West Virginia Water Development Authority, resulting in the PSD racking up over $200,000 in missed payments.

The Water Development Authority is a lender to government entities, and manages loan money from state government agencies. The authority functions much like how a bank operates in the private sector.

Kanawha PSD began missing payments after it was formed in March 2012 by a merger of the Chelyan PSD with the Upper Kanawha Valley Public Service District Sewer Authority. Kanawha PSD inherited the bonds from the now-defunct utilities.

The Water Development Authority filed a complaint with the Public Service Commission last summer, fearing that Kanawha PSD would continue to miss payments after getting behind nearly $9,000 by August 2012 - just five months after the utility's creation. By January 2013, the deficiency had ballooned to just under $199,000.

"They must meet their operations and management expenses before they pay the lending institution," said Water Development Authority Executive Director Chris Jarrett. "Consequently, they got behind on their loan payments."

As part of the agreement reached through the West Virginia Public Service Commission, all money Kanawha PSD receives from East Bank and Cedar Grove will be put toward its bond debt.

But, even with the money obtained from Cedar Grove, East Bank and domestic customers, the Kanawha PSD still won't be able to meet its loan obligations, which may force another rate increase.

According to Public Service Commission documents, Kanawha PSD maintains that former billing clerk Donna Hively created the billing error. The PSD said that Hively under-billed Kanawha PSD customers and also changed the gallon usage numbers for East Bank and Cedar Grove.

Hively was terminated in August 2012 for "dereliction of (Hively's) duties."

As of March, the PSD had not taken legal action against Hively or filed a performance bond claim with the PSD's insurance provider in relation to Hively's employment.

In addition, Kanawha PSD stated that a computer issue at the time of the utility's creation also played a role in the incorrect billings. A new computer system was purchased that the PSD hopes will prevent such massive billing discrepancies in the future.

Kanawha PSD declined to comment for this story because the final agreement between the PSD, East Bank, Cedar Grove and the Water Development Authority is still pending before the Public Service Commission.

A PSD employee said that South Charleston lawyer H. Wyatt Hanna III could respond to inquiries, but Hanna did not respond to an interview request in time for publication.

But little can change the fact that customers in East Bank, Cedar Grove and elsewhere will still be paying for errors caused at Kanawha PSD for months and years to come.

"I don't want any hard feelings toward Chelyan . . . they're our neighbors," Blair said. "But I don't feel the residents of East Bank should have to pay for it."

Contact writer Matt Murphy at Matt.Murphy@dailymail.com or 304-348-4817.

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