PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON RECOMMENDED DECISION

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1 CHARLESTON FIN Entered: July 16, 1996 CASE NO S-CN SYLVAN GROVE WASTE TREATMENT, INC., a corporation, Alexandria, Virginia. Application for a certificate of convenience and necessity to provide sewer service to certain customers in the Inwood area of Berkeley County, and for approval of financing and rates and charges incidental thereto RECOMMENDED DECISION On December 21, 1995, Sylvan Grove Waste Treatment, Inc. (Sylvan Grove), P.O. Box 1677, Alexandria, Virginia, a corporation, filed with the Public Service Commission (Commission) a duly verified application for a certificate of convenience and necessity to provide sewer services to certain persons/and/or businesses located in the Inwood area of South Berkeley County. By its application Sylvan sought to provide service to those customers served or allegedly served by a system now operated by Knouse Foods Cooperative, Inc. (Knouse Foods), or by the County of Berkeley as the successor in title to Knouse Foods assets, without authority of any certificate of convenience and necessity. The application estimated the cost of the project to be $78,425 and requested approval of private financing for the project consisting of a ten-year note with interest only for the first four years at 7.5% per annum and principal and interest to be amortized over the last six years. Finally, Sylvan requested no increase in its rate, stating that it would charge the new customers the same rates as its present customers. By order of December 21, 1995, the Commission directed Sylvan Grove to publish the Notice of Filing, which provided that, if no substantial protests to the application were filed within thirty (30) days after the date of publication, the Commission might waive formal hearing and grant the application based upon its review of the evidence submitted with the application. On January 3, 1996, Sylvan Grove filed an affidavit of publication establishing that the notice of filing was published on December 27, 1995, in The Journal, published in Martinsburg, West Virginia. On January 12, 1996, W. Clyde and Ramona L. Pressley filed a protest, stating that they are owners of two homes in the Sylvan Grove Subdivision;

2 that the Sylvan Grove waste treatment facility was developed for the subdivision and not for future expansion beyond the subdivision s borders; that the developer has been shoddy in his workmanship of streets, lighting, and some houses, and has ignored complaints of the residents; and that there is evidence that the addition of further residences to the waste treatment system would create overload and, accordingly, jeopardize the best interests of the home owners in the subdivision, including lowering the value of their homes. On January 13, 1996, Donald D. Mathieux, also a resident of the Sylvan Grove Subdivision, filed an objection similar to that of the Pressleys, stating that the Sylvan Grove waste treatment facility was designed to serve three sections of the development; that the third section was redesigned to have more units; and that already a further complex of eighty-six townhouses is being served by the sewage treatment facility. He further stated that the facility is located within the subdivision and smells under certain conditions. On January 17, 1996, Staff Attorney J. Joseph Watkins filed the Initial Joint Staff Memorandum, stating that, upon completion of its investigation, Commission Staff would file its final recommendation. On January 18, 1996, James B. Rice filed a protest, which included the following: We have been told that the [waste treatment] facility is at its capacity and that in order to add more homes the facility would have to be enlarged. We live within feet of the facility and WILL NOT agree to the enlargement. They have a history of it overflowing. The facility used to have a buzzer that rang when it reached capacity. The buzzer rang so often that they removed it. We have seen them dumping sewage from trucks used to clean out septic tanks in the facility. The smell from the plant is overpowering in the summer and fall. Ask anyone who sits in our high school football stadium, which is within 200 ft., about the smell. On January 19, 1996, Edgar J. Mason filed a protest, stating that the Berkeley County Public Service Sewer District had announced a plan to expand into the area at issue in this matter by installing a package treatment plant at the end of the line now in place and that the plan of Sylvan Grove to run new lines through his community in the opposite direction would be a waste of money and counterproductive to the District s plans. Finally, on January 22, 1996, the Berkeley County Public Service Sewer District (District), by counsel George V. Piper, filed a protest, stating that Sylvan Grove is seeking to expand its public service area into the District s boundaries; that the District is pursuing a workable option to provide sewer service to the Knouse Foods customers under a Governor s Community Partnership Grant; and that there is no need to issue a certificate to Sylvan Grove to serve the same customers. The protest concluded that, since the District is the authorized entity to provide sewage service to the area and is in the process of doing so, the application of Sylvan Grove should be denied. 2

3 On January 22, 1996, the Commission, by Order, referred this matter to the Division of Administrative Law Judges (ALJ Division) for decision on or before July 19, On January 24, 1996, the Berkeley County Commission (County Commission), by counsel Norwood Bentley, filed a protest to the application, supporting the District in its position. The protest added that the County Commission had accepted a gift of the sewer system assets previously owned by Knouse Foods. On January 26, 1996, Kenneth W. Thompson filed a protest, also stating that the residents of Sylvan Grove Subdivision have experienced problems with the system since its institution. On February 6, 1996, William F. Rohrbaugh entered his appearance as counsel for the District. On February 8, 1996, Chris Dye, Vice-president of the Sylvan Grove Homeowners Association, filed a protest similar to the others but adding that all assets of Thomas H. Dameron, the developer of Sylvan Grove Subdivision, had been frozen by court order during the pendency of an investigation into whether Mr. Dameron, a lawyer, had stolen $3.5 million from clients he had represented in real estate settlements. On February 9, 1996, the undersigned ALJ issued a Procedural Order scheduling this matter for hearing on April 18, On March 12, 1996, the undersigned ALJ issued a Procedural Order requiring Sylvan Grove to cause to be published a Notice of Hearing that was attached to the order. On April 10, 1996, Sylvan Grove, by counsel Richard G. Gay, notified the Commission that Sylvan Grove had filed a Petition in Bankruptcy in the United States Bankruptcy Court for the Northern District of West Virginia. He requested a stay of these proceedings, pursuant to the automatic stay provisions of 11 U.S.C. 362(a) On April 10, 1996, Mr. Watkins filed a Further Joint Staff Memorandum, stating that, since Sylvan Grove was unable to move forward on this matter, Staff recommended that the hearing be canceled. Mr. Watkins stated that Staff would issue a further recommendation to determine whether this matter could be dismissed altogether. On April 12, 1996, the undersigned ALJ issued a Procedural Order canceling the hearing scheduled for April 18, 1996, noting that she had been advised that the notice of hearing had not been published. The order continued, Sylvan Grove is put on notice that this certificate application is a statutory due date proceeding. Pursuant to West Virginia Code , the Commission must either grant, deny or modify and grant the application within 270 days of the date of filing, or on or before September 16, Even if the bankruptcy proceeding stays the statutory review period for certificate proceedings, any proceeding filed by Berkeley County Public Service Sewer District 3

4 to serve the described area will not be stayed and will go forward. Further, Sylvan Grove should consider whether its proposal will meet the economic feasibility test, used by the Commission to review certificate applications, in light of the bankruptcy filing. On July 12, 1996, Mr. Watkins filed a Second Further Joint Staff Memorandum, with attachments, including a letter from Roger Schlossberg, Esq., stating that Mr. Gay was precluded by federal law from proceeding in this matter on behalf of Sylvan Grove due to the bankruptcy proceedings but that authority had been requested from the United States Bankruptcy Court for the Eastern District of Virginia, to which the bankruptcy case had been transferred, to permit Mr. Gay to participate in this matter. Mr. Watkins memorandum included the following discussion: 11 U.S.C. 362(b) (4) states the following: (b) the filing of a petition under section 301, 302, or 303 of this title,... does not operate as a stay... (4) under subsection (a) (1) of this section, of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit s police or regulatory power; A discussion of the applicability of such a stay to regulatory proceedings is the issue in Wengert Transportation, Inc. v. Crouse Cartage Company, Case No , United States Bankruptcy Court (N.D. Iowa, E.D., March 31, 1986), attached. I believe Wengert refutes the notion that an automatic stay applies in the present proceeding. West Virginia Code requires that if a decision is not rendered within a 270-day period, the Commission shall issue a certificate of convenience and necessity as applied for in the application. In other words, the certificate automatically issues. West Virginia Code (a) also notes, however, in establishing that public convenience and necessity do exist, the burden of proof shall be upon the applicant. As (1) numerous public protests have been filed in this case, thus necessitating a hearing, (2) Sylvan Grove has not supplemented its application on a post-bankruptcy filing basis to evidence its financial ability to operate the proposed addition, and (3) Sylvan Grove is apparently precluded from proceeding with its prosecution of this certificate application, Staff recommends the Commission deny and dismiss without prejudice this certificate application. Doing so will avoid the possibility of an automatic grant of the application pursuant to West Virginia Code More importantly, it will not prejudice Sylvan Grove as the certificate may be reapplied for in the future. 4

5 DISCUSSION Upon review of the Wengert Transportation decision, the undersigned ALJ agrees with Mr. Watkins that this Proceeding is not stayed pursuant to 11 U.S.C. 362(a). In Wengert Transportation, the debtor had filed with the Iowa Transportation Regulation Authority (TRA) an application for a certificate of convenience and necessity. The Bankruptcy Court ruled that, since 11 U.S.C. 362(a)(1) on its face stayed only the commencement or continuation... of a judicial, administration or other action or proceeding against the debtor[,] the provision would have no applicability because the action was commenced the debtor rather than against it. The Court further ruled that, even if the automatic stay provision were applicable to the TRA proceeding, the proceeding was not subject to the stay because of the exception of 11 U.S.C. 362(b) (4), because, while that provision must be narrowly construed to apply only to governmental actions protecting the public health and safety, the regulatory power involved in Wengert Transportation fulfilled that requirement. The Wengert Transportation decision also supports that it would be improper to rule that, because Sylvan Grove is involved in bankruptcy proceedings, it necessarily could not fulfill the Commission s economic feasibility test, for the Court noted that the debtor s financial fitness must be determined on the basis of its post-petition assets and liabilities as well as the debtor s track record since reorganization began. See Wengert Transportation, fn. 1. Accordingly, the Staff recommendation that the application be denied and dismissed without prejudice will be adopted. FINDINGS OF FACT 1. On December 21, 1995, Sylvan Grove Waste Treatment, Inc., filed a duly verified application for a certificate of convenience and necessity to provide sewer services to certain persons/and/or businesses located in the Inwood area of South Berkeley County. By its application Sylvan sought to provide service to those customers served or allegedly served by a system now operated by Knouse Foods Cooperative, Inc. (Knouse Foods), or by the County of Berkeley as the successor in title to Knouse Foods assets, without authority of any certificate of convenience and necessity. The application estimated the cost of the project to be $78,425 and requested approval of private financing for the project consisting of a ten-year note with interest only for the first four years at 7.5% per annum and principal and interest to be amortized over the last six years. Finally, Sylvan requested no increase in its rate, stating that it would charge the new customers the same rates as its present customers. (See application). 2. Various protests to the application were filed with the Commission. (See submissions of January 12, 19, 22, and 24, 1996). 3. Sylvan Grove filed a petition in bankruptcy in United States Bankruptcy Court and filed a request with the Commission that these proceedings be stayed, pursuant to the automatic stay provisions of 11 U.S.C. 362(a). (See April 10, 1996 submission). 5

6 4. Commission Staff, relying on the reasoning of Wengert Transportation, Inc. v. Crouse Cartage Company, Case No , United States Bankruptcy Court (N.D. Iowa, E.D., March 31, 1986), argued that the automatic stay provisions do not apply in this matter. Commission Staff recommended that the application be denied and dismissed without prejudice. (See Second Further Joint Staff Memorandum filed July 12, 1996, quoted supra). CONCLUSIONS OF LAW 1. The undersigned ALJ agrees with Commission Staff that the automatic stay provisions of 11 U.S.C. 632(a) have no applicability to the application for a certificate of convenience and necessity filed by Sylvan Grove, for the reasons given in Wengert Transportation, and discussed heretofore. 2. Because there is no time before the recommended decision due date of July 19, 1996, for Sylvan Grove to submit further information on its financial ability to operate the proposed addition and for a hearing to be held, which is required under W.Va. Code , it is appropriate to adopt the Staff s recommendation that the application be denied and dismissed without prejudice. ORDER IT IS, THEREFORE, ORDERED that the application for a certificate of convenience and necessity filed on December 21, 1995, by Sylvan Grove Waste Treatment, Inc., be denied and dismissed without prejudice. IT IS FURTHER ORDERED that this matter be removed from the Commission s docket of open cases. IT IS FURTHER ORDERED that the Acting Executive Secretary serve a copy of this order upon the Commission by hand delivery, and upon all parties of record by United States Certified Mail, return receipt requested. Leave is hereby granted to the parties to file written exceptions supported by a brief with the Acting Executive Secretary of the Commission within fifteen (15) days of the date this order is mailed. If exceptions are filed, the parties filing exceptions shall certify to the Executive Secretary that all parties of record have been served said exceptions. If no exceptions are so filed this order shall become the order of the Commission, without further action or order, five (5) days following the expiration of the aforesaid fifteen (15) day time period, unless it is ordered stayed or postponed by the Commission. Any party may request waiver of the right to file exceptions to an Administrative Law Judge s Order by filing an appropriate petition in writing with the Secretary. No such waiver will be effective until b

7 approved by order of the Commission, nor shall any such waiver operate to make any Administrative Law Judge's Order or Decision the order of the Commission sooner than five (5) days after approval of such waiver by the Commission. SA: s Sunya Anderson Administrative Law Judge OF WEST 7