LIC SERVICE C O ~ ~ I ~ S I O ~ OF WEST VIRGINIA CHARLESTON

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1 LIC SERVICE C O ~ ~ I ~ S I O ~ OF WEST VIRGINIA CHARLESTON At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 19th day of November CASE NO W-WI MARSHALL COUNTY PUBLIC SERVICE DISTRICT NO. 1 a public utility, Complainant, V. CITY OF MCMECHEN, a municipal corporation, Defendant. COMMISSION ORDER The Commission requires the City of McMechen to file justification for its municipal rate increase, tolls the running of the statutory suspension period, restyles this proceeding and refers this case to the Division of Administrative Law Judges. BACKGROUND On October 4, 2018, the City of McMechen (McMechen) adopted an Ordinance that increased the rates and charges to water customers of McMechen. The Ordinance was filed on October 9,2018 and was docketed as ORDW McMechen 18A. McMechen also filed an application for a certificate to construct additions and improvements to its existing waterworks system. The certificate application was docketed as Case No W-CN (Certificate Case). The Ordinance increased rates in two steps. Step I becomes effective November 18, 2018, and Step I1 will become effective on substantial completion of the project described in Case No W-CN. On October 22, 2018, Marshall County Public Service District No. 1 (Marshall County) filed a protest and motion to intervene in the Ordinance and the Certificate Case. Intervention in the Certificate Case was granted by an October 23,2018 Procedural Order.' On October 22, 201 8, Marshall County requested that the Commission review the proposed rate increase to determine if the proposed rate increase is legal or acceptable. Marshall County stated that it is a resale customer of McMechen. Marshall County alleges that the proposed resale rate in Step I1 of the Ordinance is unjust, unreasonable, 1 The Certificate Case has been referred to the ALJ Division with a decision due date of February 25,2019.

2 unjustly discriminatory, and does not appear to be cost-based. Marshall County explains that the resale rate under Step I1 nearly doubles the current tariff. On November 19, 201 8, Staff recommended that the Commission require McMechen to file a class cost of service study and toll the Commission decision due date. DISCUSSION Prior to Senate Bill 234 (effective June 12, 2016), a resale customer of a municipally operated utility, including water and sewer service, could request that the Commission initiate a municipal appeal of a municipal rate ordinance by alleging that the rates were discriminatory as between customers within and without the municipal boundaries. SB 234 amended W.Va. Code b(c) to limit petitions to open a municipal appeal to customers outside of the corporate limits who are served by a municipally owned electric or natural gas public utility. As a result, customers of municipal water and sewer utilities no longer possess the ability to petition the Commission to review alleged discriminatory rate ordinances. House Bill 3096 (effective July 7, 2017) modified W.Va. Code to reintroduce a means for a resale customer to seek review of municipal rates through a complaint process before the Commission. As modified, W.Va. Code (b) reads: (b) Any complaint filed with the commission by a resale or wholesale customer of a municipally owned water and/or sewer utility having less than four thousand five hundred customers or annual combined gross revenue of less than $3 million dollars concerning rates, fees or charges applicable to such resale or wholesale customer, shall be filed within thirty days of the enactment by the governing body of the political subdivision of an ordinance changing rates, fees or charges for such service. The commission shall resolve said complaint within 120 days of filing. The one hundred-twenty day period for resolution of the complaint may be tolled by the commission until the necessary information showing the basis of the rates, fees, charges and other information as the commission considers necessary is filed. Provided, the rates, fees and charges so fixed by the political subdivision providing separate or combined water and/or sewer services shall remain in full force and effect until set aside, altered or amended by the commission in an order to be followed in the future. Provided further, That the commission shall have no authority to order refunds for amounts collected during the pendency of the complaint proceeding unless the rates, fees, or charges so enacted by the governing body were enacted subject to refund under the provisions of subsections (d)(2) or (8) of section four-b of this article. 2

3 The Commission will evaluate Marshall County s request under W.Va. Code (b) and restyle this case by adding -WI to reflect the applicability of that code provision. Pursuant to W.Va. Code (b), the proposed rates and charges will go into effect as determined by the City municipal ordinance and will remain in effect until set aside, altered, or amended by Cornmission Order. To evaluate Marshall County s claim, the Commission requires more information than McMechen included in its October 9, 2018 ordinance filing. Because of the disparity among the rate increases applied to the various classes, the Commission will require McMechen to file its support for its ordinance rates in the form of a cost of service study, within thirty days of the date of this Order. Pursuant to W.Va. Code (b), the Commission will toll the running of the statutory 120 day period for resolution of the complaint accordingly. The Commission will refer this case to the Division of Administrative Law Judges for further proceedings. FINDINGS OF FACT 1. McMechen serves less than four thousand five hundred customers. McMechen Annual Report. 2. McMechen has annual gross revenue of less than $3 million. Id. 3. Marshall County was notified about a proposed Ordinance that nearly doubles the resale rate. October 22, Marshall County filing. November 8,20 18 McMechen filing, ORDW McMechen 18A. 4. McMechen s Ordinance is still under review by Commission Staff. ORDW McMechen 18A. CONCLUSIONS OF LAW 1. W.Va. Code (b) provides for a complaint proceeding before the Commission regarding proposed municipal rates that may be brought by a resale or wholesale customer of a municipal water and/or sewer utility. 2. The ordinance rates and charges will go into effect as stated in the ordinance and will remain in effect until set aside, altered, or amended by Commission Order. W.Va. Code (b).

4 3. The Cornmission may toll the running of the statutory 120-day period for resolution of the complaint pending the filing of necessary supporting information of a municipal ordinance. W.Va. Code $24-2-3(b). ORDER IT IS THEREFORE ORDERED that the City of McMechen is required to satisfy the formal complaint or make answer thereto, in writing, within ten days of the service upon it by certified mail of a copy of the formal complaint and a copy of this order in accordance with the provisions of Rule 7 of the Commission s Rules of Practice and Procedure, and after receipt thereof or default therein, the Commission will proceed to investigate the matters set forth in the formal complaint in such manner and by such means as may be deemed proper. IT IS FURTHER ORDERED that the running of the statutory 120-day period for resolution of the complaint is tolled for a period of thirty days resulting in a statutory decision date of March 2 1, IT IS FURTHER ORDERED that this proceeding be referred to the Division of Administrative Law Judges, and that the ALJ Division render its decision in this matter on or before February 20, IT IS FURTHER ORDERED that within thirty days of the date of this Order the City of McMechen shall file a cost of service study in support of its Municipal Ordinance. IT IS FURTHER ORDERED that Commission Staff shall submit its report on or before January 14,2019. IT IS FURTHER ORDERED that the foregoing decision due date will not be extended, except upon formal application to the Commission by the parties. IT IS FURTHER ORDERED that the case number is amended from Case No W-C to Case No W-WI. 4

5 IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of the formal complaint and a copy of this order on the Defendant by United States Certified Mail, return receipt requested, this order by electronic service on all parties of record who have an e-service agreement, and by United States First Class Mail on all parties of record who have not filed an e-service agreement, and on Commission Staff by hand delivery. A True Copy, Teste, Ingrid Ferrell Executive Secretary LFH/sc c 5