PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON. Issued: September 30, 1999 RECOMMENDED DECISION

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1 EREQ. Fay? _...- PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON alj wpd Issued: September 30, 1999 CASE NO S-CN CREITZ SEWAGE COMPANY, INC., a corporation, Petersburg, Grant County. Application for a certificate of convenience and necessity to operate and maintain a sewer utility, and for determination and approval of rates. RECOMMENDED DECISION On March 30, 1999, Creitz Village Sewage Company, Inc. (Applicant), by counsel Leonard Knee, of Bowles Rice McDavid Graff & Love (Bowles), filed with the Public Service Commission (Commission), pursuant to W.Va. Code , an application for a certificate of convenience and necessity to operate a private sewer utility in Grant County, and for approval of rates. The Applicant stated that it wished to continue service to approximately thirty-five homes in the Creitz Village Subdivision pursuant to DEP Permit No. WVG550140, and no construction was needed. The Applicant was incorporated in 1996 and has been providing sewer service without charge. It asked that Commission Staff recommend an appropriate rate. On March 30, 1999, the Commission directed the Applicant to publish a Notice of Filing, which provided that, if no protest was filed within thirty 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 April 12, 1999, William Ayers filed a letter, with two attached deeds, dated March 15, 1996, which he stated should be considered before a decision was made.

2 On April 16, 1999, the Applicant filed an affidavit establishing that the Notice of Filing had been published on April 6, 1999, in the Grant Countv Press. On April 28, 1999, Staff Attorney C. Terry Owen filed an Initial Joint Staff Memorandum, which included the following discussion: The Application indicates that, according to deed covenants, the homeowners in the Creitz Village Subdivision are responsible for the maintenance of the sewerage collection system and stabilization pond. However, a deed conveying certain tracts of land, including the sewage lagoon, nine building lots, and all streets, roads and alleys in the subdivision to Creitz Sewage Company, Inc., was executed on March 15, In that Deed, part of the consideration given by Creitz [I Sewer Company, Inc., was its agreement to assume any and all responsibility for road maintenance and operation of the lagoon. This information came fiorn a resident in what could be construed as a protest to the granting of the application. He stated that Staff would file its final recommendation upon completion of its investigation. On May 3, 1999, the Commission, by Order, referred this matter to the Division of Administrative Law Judges (ALJ Division) for decision on or before October 26, On May 7, 1999, the undersigned ALJ issued a Procedural Order requiring Commission Staff to file its final report no later than July 2, On June 15, 1999, Mr. Owen filed a Final Joint Staff Memorandum, with attached memorandum fiorn David Wansley, Utilities Division, stating that Technical Staff was recommending a rate of $4.54 per M. Gallons of water used, which would produce $8,58 1 in annual revenues. Since Staff recommended expenses of $8,178, the rates would produce an estimated $402 in surplus to apply towards future capital investments. Mr. Owen stated that no protests had been filed in response to publication of the Notice of Filing. Further, no costs associated with road maintenance had been included in Staffs calculations; Mr. Owen recommended that the Applicant be instructed that utility revenue should not be spent on non-utility functions. He further pointed out that, while the Applicant referred to itself as a private utility in the documents it had filed, under W.Va. Code g24-2-1, it is a public utility. Staff recommended that the certificate be granted. On June 22, 1999, Mr. Knee filed a letter protesting the Staff-recommended rate. He stated that representatives of the Applicant would meet with Mr. Wansley to further review the expenses and financial information. On June 30, 1999, the undersigned ALJ issued a Procedural Order that determined that Mr. Ayers letter could not be considered a proper protest, but further notification of the Applicant s customers would be necessary, since the Notice of Filing had simply notified the public that the Applicant had requested that the Commission make an appropriate rate recommendation *.... ~ 2

3 Accordingly, Staff and the Applicant were required to notify the undersigned ALJ no later than July 13, 1999, if they had agreed upon an appropriate rate at that time. On July 2, 1999, Staff Attorney Cecelia G. Jarrell filed a Final Joint Staff Memorandum, with attached memorandum from Audra L. Blackwell, Engineer-in-Training 11, Engineering Division. Ms. Blackwell stated that the Applicant had submitted a copy of DEP Permit No. W VO , permitting the Applicant to install, operate, and maintain a disposal system or part thereof, for direct discharge of treated sewage into the waters of the State. She stated that operating expenses have averaged $1800, which she found to be reasonable. Ms. Blackwell reported that, while the Applicant does not currently have a licensed operator, the sole operator of the system, Roger Secrist, has received assistance on an as-needed basis from the operators of Grant County Water Treatment Plant, and Mr. Secrist has applied for an operator-in-training certificate and intends to become fully certified. She concluded that the project clearly shows necessity and that her review of the project s plans has revealed no obvious conflicts with the Commission s rules and regulations. She recommended that the certificate of convenience and necessity be granted. On July 9, 1999, Mr. Knee filed a letter stating that, in discussions with Staff, Staff had agreed that expenses for labor should be increased in order to set the rate. On July 13, 1999, Mr. Owen filed a memorandum, with an attached agreement between him and Mr. Knee, and a memorandum from Mr. Wansley. Mi-. Owen explained that Staff and the Applicant were in agreement that the Applicant s annual operating revenue should be increased by $1, in order to reflect increased costs of labor associated with unusual circumstances concerning the operation of the Applicant s facility. Accordingly, Staffs recalculated rate was $5.11 per thousand gallons of water used. On July 15, 1999, the undersigned ALJ issued a Procedural Order requiring that the Applicant either publish a Notice of Proposed Rate or have delivered to each potential customer a copy of the notice. On August 9, 1999, the Applicant, by counsel, filed an affidavit establishing publication of the Notice of Proposed Rate in the Grant Countv Press on July 27 and August 3, On August 10, 1999, Michael and Gail Shockey, HC 33, Box 3541-A, Dorcas, West Virginia 26847, filed a protest, stating that the application was illegal. There was an agreement made by the seller of the lots in Creitz Village and the maint[en]ance of the sewer lagoon. Attached was an Order issued On February 27, 1996, by the Circuit Court of Grant County, West Virginia, in Case No. 96-C-3 (Court Order), wherein the Court approved an agreement for the sale of the property that included the sewer system, which was then owned by a legally incompetent individual. The Court stated that the buyer agreed to assume responsibility for the sewer lagoon at the Creitz Village Subdivision. On August 13, 1999, the undersigned ALJ issued a Procedural Order that determined that, having reviewed the protest, along with the deeds submitted by Mr. Ayers, she would consider the 3

4 I.. protest as alleging that the seller of the lots had agreed not to charge the buyers for sewage collection and treatment and that, therefore, the users of the system should not be charged any rates for sewer service. A hearing was scheduled for August 3 1,1999, to which the Shockeys were ordered to bring any agreement in support of their claim. It was stated that evidence would be accepted on whether there was such an agreement, and, if there was, whether it should not be enforced as contrary to public policy. An expedited transcript was ordered. It was also noted that, while the application was filed in the name of Creitz Village Sewage Company, Inc., the articles of incorporation and the certificate of incorporation, as well as one of the deeds filed, referred to Creitz Sewage Company, Inc. It was stated that the Applicant should file an explanation or a request for amendment of the style of this matter as soon as possible. On August 23, 1999, Mr. Knee filed a motion for continuance of the hearing, and requested that the hearing be rescheduled for September 2 or September 6, On August 25, 1999, Mr. Knee filed a letter clarifying that the correct incorporated name of the Applicant is Creitz Sewage Company, Inc. On August 25, 1999, the undeisigned ALJ issued a Procedural Order modifying the style of this case to reflect the correct incorporated name and rescheduling this matter for hearing at 9:30 a.m. on September 2, 1999, in the Lower Conference Room, Grant County Courthouse, 5 Highland Avenue, Petersburg, West Virginia. On August 27, 1999, Mr. Owen filed a Second Final Joint Staff Memorandum, stating that he had contacted John G. Ours, the attorney who had drafted the deed that included the statement that the grantee agreed to assume the responsibility of the grantor for the operation and maintenance and ownership of the sewer lagoon at Creitz Village Subdivision[,] and Mr. Ours had stated in an affidavit, which was attached, that at the time of preparation of the deed there had been no contemplation that the lagoon would continue to be operated at no cost to residents of the Creitz Village Subdivision. Hearing was held as scheduled. Mr. Owen appeared on behalf of Commission Staff and Robert L. Burns, of Bowles, appeared on behalf of the Applicant, accompanied by Mr. Secrist, President of the Applicant. The Shockeys appeared and Gail Shockey was granted intervenor status. (Tr. 40). Ms. Shockey testified that her protest was based on the Court Order the Shockeys had filed with their protest, arguing that, under the order, the owner of the lagoon would be responsible for all maintenance of it. She stated her view that, because of the Court Order, the users of the sewer system should not have to pay anything. (Tr. 4-5). On the record Ms. Shockey asked counsel some It was noted that the Shockeys should notify her immediately if their protest had been misconstrued. 4

5 .. questions, and further questions were asked and answered off the record. (See Tr ). Mr. Burns clarified on the record that, if the certificate was granted, the Applicant would be the responsible party for the operation of the system, consistent with the pertinent deed filed by Mr. Ayers and the Court Order. (Tr. 16). Kenneth Hines, an early resident of Creitz Village Subdivision, expressed support for the application after he was assured that the holder of the certificate would be obligated to maintain the system. (Tr ). Referring to when the subdivision was built, he testified that nothing had been said on whether or not the residents would ever have to pay for sewer service. (Tr. 23). Mr. Shockey also testified that, while he had been promised hookup onto the system for free, nothing had been said about whether the service would be free. (Tr ). Ms. Shockey finally stated that she was not against paying her share, and reiterated that her protest had been based exclusively on the Court Order. (Tr. 32,35). At the end of the hearing the record indicated that Ms. Shockey was accepting that the certificate should be granted and the rate approved. (Tr. 37). Because the conflict in this matter had been resolved, the order of expedition of the transcript was Withdrawn. (Tr. 40). The transcript was filed September 16, On September 24, 1999, Mr. Owen filed a Fourth Final Joint Staff Memorandum, correcting the proposed tariff by adding a leak adjustment rate, as required by Rule of the Commission s Rules and Regulations for the Government of Sewer Utilities. DISCUSSION The record supports that the application should be granted and the rate that was agreed upon by Staff and the Applicant should be approved, because it is reasonable. Contrary to Ms. Shockey s initial contention, it is not contrary to the legal documents filed in this matter for the Applicant to charge the users of the Creitz Village sewage system a fair rate for sewage collection and treatment, and the evidence submitted at hearing was clear that no promise was made to those users that they would never have to pay for sewage service.2 FINDINGS OF FACT 1. On March 30, 1999, Creitz Sewage Company, Inc., filed with the Commission an application for a certificate of convenience and necessity to operate a sewer utility in Grant County, and for approval of rates. The Applicant stated that it wished to continue service to approximately *Accordingly, there is no issue in this matter whether any such agreement would be contrary to public policy. 5

6 hrty-five homes in the Creitz Village Subdivision pursuant to DEP Permit No. WVG550140, and no construction was needed. (See application; August 25, 1999 filing). 2. A Notice of Filing was published on April 6, 1999, in the Grant County Press, and no protest was filed. The notice stated that the Applicant had requested that the Commission make an appropriate rate recommendation. (See affidavit of publication filed April 16, 1999). 3. On December 24, 1998, a DEP Permit No. WVO was issued to install, operate, and maintain the Creitz Village sewage system. (See Final Joint Staff Memorandum filed July 2, 1999; July 14, 1999 filing). 4. Technical Staff of the Commission concluded that the operating costs have been reasonable; the project is needed; and the plans are apparently consistent with the Commission s rules and regulations. Staff recommended that the certificate be granted. (See Final Joint Staff Memorandum filed July 2, 1999). 5. The Applicant and Commission Staff agreed that an appropriate rate for the Applicant to charge is $5.11 per thousand gallons of water used. (See memorandum filed July 13, 1999). 6. A Notice of the Proposed Rate was published on July 27 and August 3, 1999, in the Grant County Press, and a protest was filed by Michael and Gail Shockey, who asserted that there had been an agreement between the seller and buyers of the lots of the Creitz Village Subdivision that the buyers would not be charged for sewage collection and treatment. (See protest filed August 10, 1999; August 13, 1999 Procedural Order). 7. At hearing, Ms. Shockey clarified that her protest had been based exclusively on a February 27, 1996 Order of the Circuit Court of Grant County, West Virginia, which approved an agreement whereunder the buyer agreed to assume any and all responsibility... in regard to... ownership of the sewer lagoon at Creitz Village Subdivision[.] Later she stated that she was willing to pay her share. (See Tr. 4-5; 32,35-37). 8. No promise was made to the residents who were users of the Creitz Village sewer system that they would not ever have to pay for sewer service. (See Tr. 23; ). 9. Staff calculated a leak adjustment rate of $0.34 per thousandgallons. (See Fourth Final Joint Staff Memorandum filed September 24, 1999). CONCLUSION OF LAW 1. It is appropriate to grant the application, pursuant to W.Va. Code , 6

7 2. Because the seller of the lots of Creitz Village made no promise to the buyers of lots in Creitz Village that they would not ever have to pay for sewer service, and it is not contrary to the legal documents filed in this matter for the users of the Creitz Village sewage system to be charged a reasonable rate for sewage collection and treatment, and because the rate of $5.11 per thousand gallons of water used is a reasonable rate, that rate will be approved. The leak adjustment rate of $0.34 per thousand gallons is also appropriate. The Staff-recommended tariff will be approved, as provided in Appendix A hereto. ORDER IT IS, THEREFORE, ORDERED that the application for a certificate of convenience and necessity filed on March 30, 1999, as amended on August 25, 1999, to operate and maintain a sewer utility, be granted. IT IS FURTHER ORDERED that the rates and charges contained in the Approved Tariff, attached hereto as Appendix A, be approved, to become effective on the date that this order becomes fmal. IT IS FURTHER ORDERED that Creitz Sewage Company, Inc., file with the Commission's Tariff Office an original and five (5) copies of the approved tariff within thty (3 0) days after the date that this decision becomes fmal. IT IS FURTHER ORDERED that this matter be removed from the Commission's docket of open cases. IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of this order upon Commission Staff 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 Executive Secretary within fifteen (15) days of the date this order is mailed. If exceptions are filed, the parties filing exceptions shall certiq 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 M e r 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 Admintstrative Law Judge's Order by filing an appropriate petition in Writing with the Executive Secretary. No such waiver will 7

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9 , ' 1.. APPENDIX A APPLICABILITY Applicable in entire service area. CREITZ VILLAGE SEWER SERVICE CASE NO S-CN APPROVED RATES AVAILABILITY OF SERVICE Available for general domestic, commercial and industrial service. RATES $5.11 per 1,000 gallons of water used. MINIMUM BILL $10.22 per month based on 2,000 or less gallons usage. DELAYED PAYMENT PENALTY The above tariff is net. On all current usage billings not paid within twenty (20) days, ten percent (10%) will be added to the net current amount unpaid. This delayed payment penalty is not interest and is to be collected only once for each bill where it is appropriate. INCREMENTAL LEAK ADJUSTMENT $0.34 per M. gal. To be used when the bill reflects unusual consumption which can be attributed to eligible leakage on customer's side of the meter. This rate is used to calculate consumption above customer's historical average usage.