PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

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1 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 19'h day of November CASE NO S-C-WI ANCOCK COUNTY PUBLIC SERVICE DISTRTCT a public utility, Complainant, V. CITY OF NEW CUMBERLAND, a municipal corporation, Defendant. COMMISSION ORDER The Commission requires the City of New Cumberland to respond to the Petition of Hancock County Public Service District regarding justification for its 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 1, 20 18, the City of New Cumberland (New Cumberland) adopted an ordinance that increased the rates and charges to sewer customers of New Cumberland to become effective on November 27, This filing was docketed as ORDS New Cumberland 18A, filed October 9, On October 22, 20 18, Hancock County Public Service District (Hancock County) filed a complaint against New Cumberland. Hancock County stated that it was a resale customer of New Cumberland pursuant to a Service Agreement (Agreement), dated July25, Section 3.02 of the Agreement states that the sewage charge shall be calculated for the service area based on water records at a rate of $3.00 per 1,000 gallons. Hancock County additionally stated that based on informal agreements entered into by the parties it was agreed to raise the sewage charge to $3.50 per 1,000 gallons. The Tomlinson Public Service District also filed a complaint against New Cumberland (Case No W-WI). Therein Tomlinson Public Service District raised issues regarding sufficiency of public notice. The ALJ Division should, if possible, co-ordinate the cases for administrative efficiency.

2 Hancock County stated that the New Cumberland ordinance increased the bulk rate treatment charge to $4.45 per 1,000 gallons and a resale charge of $3.80 per 4,000 gallons. Hancock County alleges that New Cumberland breached the terms of the Agreement by increasing rates without the consent of Hancock County. Hancock County requested that the Commission: (i) deny the proposed rate increase as set forth in New Cumberland s ordinance and (ii) order that New Cumberland comply with the terms and conditions of the July 25,2002 Agreement. On November 19, 20 18, Commission Staff requested that the Commission require New Cumberland to file a class cost of service study and that the Cornmission toll the 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, removing the ability of resale customers to petition the Commission for review of 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 4,500 customers or annual combined gross revenue of less than $3 million concerning rates, fees, or charges applicable to such resale or wholesale customer shall be filed within 30 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 120 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, That 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, however, That the commission shall have no authority to order refunds for amounts collected 2

3 during the pendency of the complaint proceeding unless the rates, fees, or charges so enacted by the governing body were enacted subject to refbnd under the provisions of b(d)(2) or $24-2-4b(g) of this code. The complaint describes a rate increase to Hancock County resulting from New Cumberland increasing its tariff rates through a municipal ordinance. In that respect, this complaint may be subject to W.Va. Code Under that Code section, the proposed rates and charges will go into effect as determined by New Cumberland municipal ordinance and will remain in effect until set aside, altered, or amended by Commission order. The complaint, however, also argues that the rate paid by Hancock County is controlled by the Agreement between the parties. If that is the case, and if the increase was implemented other than as allowed by the contract, increased rates paid by Hancock County may be subject to refund. The Hancock County request to set aside the municipal rate should be denied. If the rate is governed by W.Va. Code , the Commission does not have authority to set the rate aside or order refunds. If the rate is governed by the contract, overpayments may be subject to refund. The Commission will refer this case to the Division of Administrative Law Judges (ALJ) for fbrther proceedings. The ALJ should make the threshold determination of the appropriate legal means for modifying the rate, if appropriate. Because this case may be subject to W.Va. Code , we follow the 120-day deadline, subject to the tolling described below, as set forth by the Code. To evaluate Hancock County s claim, the Cornmission requires more information than New Cumberland included in its October 9, 2018 ordinance filing. Because of the relatively across-the-board increase and the limited adjustments, a class cost of service study is not necessary. The Commission will require New Cumberland to file additional support for its ordinance rates within thirty days of the date of this Order. In this filing, at a minimum, New Cumberland should: 1. Provide the detail of its total outstanding debt and debt service requirements, including reserve fund payments, if any are required, and an explanation of how combined Water and Wastewater debt is assigned or allocated between its water and sewer utility operations; 2. Provide an explanation of the basis for its determination of the reasonableness and need for the cash surplus, including annual Renewal and Replacement Reserve

4 hnds, reflected on the Statement of Cash Flows filed as justification for its Rate Ordinance; Provide a current balance sheet, and identify the cash reserves that it has accumulated in compliance with W.Va. Code $ (k); Using plant balances from its 2017 Annual Report, provide a schedule showing the composite depreciation rate applied to each depreciable account (net of Contributions in Aid of Construction). This calculation should support the depreciation expense of $67,330 reported on the Income Statement in the Annual Report; Explain why it believes that its approximate across-the-board increase, rather than a disproportionate (by class of customers) increase is reasonable. Pursuant to W.Va. Code (b), the Commission will toll the running of the statutory 120-day period for resolution of the complaint for thirty days to allow for the above filings by New Cumberland. We will restyle this case by adding -WI to reflect the scope of this case as possibly also including a complaint by a wholesale customer against a municipal utility. FINDINGS OF FACT 1. New Cumberland serves less than four thousand five hundred customers. New Cumberland Annual Report. 2. New Cumberland has annual revenues of less than $3 million. a. 3. New Cumberland has not filed sufficient support for the rates, fees, and charges in its municipal ordinance to facilitate Commission evaluation of this complaint. CONCLUSIONS OF LAW 1. W.Va. Code (b) provides for a complaint proceeding before the Commission regarding municipal rates that may be brought by a resale or wholesale customer of a municipal water and/or sewer utility. 2. The October 9, 2018 ordinance filing by New Cumberland did not include the necessary information showing the basis of the rates, fees, and charges in its municipal ordinance to allow the Commission to evaluate Hancock County s complaint. 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 (b). 4

5 4. The ordinance rates and charges will go into effect for all service rendered on and after November 27, 2018, as noticed by New Cumberland, and will remain in effect until set aside, altered, or amended by Commission Order. W.Va. Code (b). ORDER IT IS THEREFORE ORDERED that the City of New Cumberland 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 within thirty days of the date of this Order the City of New Cumberland shall file further support of its municipal ordinance as described herein. IT IS FURTHER ORDERED that the ordinance rates and charges may go into effect for all service rendered on and after the end of the noticed effective date, November 27, 2018, and will remain in effect until set aside, altered, or amended by Commission Order. W.Va. Code (b). 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 21,2019. IT IS FURTHER ORDERED that Commission Staff shall submit its report on or before January 10,2019. IT IS FURTHER ORDERED that Hancock County Public Service District shall submit its response to the information filed by the City of New Cumberland and Commission Staff and all other support for its position on the appropriate resale rate on or before January 17, IT IS FURTHER ORDERED that the decision due date will not be extended, except upon formal application to the Commission by the parties. 5

6 IT IS FURTHER ORDERED that the case number is amended to Case No S-C-WI from Case No S-C. 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 LFWsc c

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

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 201 8. CASE NO. 18-1376-W-WI