Pu6Lic Service Commission Of West Virginia

Transcription

1 Pu6Lic Service Commission Of West Virginia 201 Brooks Street, P. 0. Box 812 Charleston, West Virginia Phone: (304) FAX: (304) September 14, 2009 Paula J. Teter, President Whitmer Water Association, Inc. POBox 23 Whitmer, WV RE: Case No W-SCN Whitmer Water Association, Inc. Dear Ms. Teter: Pursuant to Rule 2 of the Commission s Rules of Practice and Procedure, we are enclosing a copy of the Staff memorandum in this matter. If you wish to respond to the enclosed Staff memorandum, you may do so in writing, within 5 days, unless directed otherwise, of this date. Your failwe to respond in writing to the utility s answer, Staffs recomniendations, or other documents may result in a decision in your case based on your original filing and the other documents in the case file, without further hearing or notice. If you have provided an address you will automatically receive notifications as documents are filed in this proceeding. The notifications allow recipients to view a document within an hour from the time the filing is processed. If you have not provided your address, please send an to shayne@psc.state.wv.us and state the case number in the subject field. SSIcg Enc.

2 FINAL JOINT STAFF MEMORANDUM TO: SANDRA SQUIRE DATE: September 14,2009 Executive Secretary FROM: RE: WENDY BRASWELL Staff Attorney CASE NO W-SCN WHITMER WATER ASSOCIATION On July 6, 2009, Whitmer Water Association (Association) filed its application for a certificate of convenience and necessity to construct approximately 49,000 linear feet of waterlines, a new water treatment plant, a 105,000 gallon water storage tank, a pressure reducing station and radio telemetry to serve approximately 125 existing and new customers, as required by W. Vu. Code The West Virginia Infrastructure and Jobs Development Council (Infrastructure Council) previously approved this proposed project. The Association proposes to finance the project, at a proposed cost of $3,335,7 10, through a Small Cities Block Grant (SCB Grant) in the amount of $1,070,710, an Infrastructure Council loan in the amount of $740,000, and a Water Development Authority (WDA) Grant Anticipation Note in the amount of $1,525,000. The Association filed documents with its application including a Rule 42 Exhibit and 1 19 executed user agreements. This case will proceed on an expedited time line, although it would normally proceed on the statutory time line established for Infrastructure Council approved projects, pursuant to K Vu. Code l(e). Through General Order , the Commission established an expedited review process for projects proceeding with stimulus funding provided under the A medca~recove~~~~~reinves~men~ac~ocf-2~2q~~~hea-ssocia~i~n~is-i cooperating with the Bureau for Public Health (BPH) to make this project a stimulus project and receive stimulus funding. On April 22, 2009, Commission Staff received a draft commitment letter from BPH for a $2,200,300 loan with a -5% interest rate for a term of 38 years, which represents approximately 70% debt forgiveness and reflects an annual administrative fee of 0.25% for the amount of the loan to be repaid. This matter has not been referred to the Division of Administrative Law Judges. Technical Staff, including Karen Buckley and Pamela Latocha of the Commission s -U_tiliti es-division_ancl Janathan_F_o_wler-ofe-C ommission~s-engtineering--d i-vision, ~ documented final recommendations in this matter through the attached memorandum,

3 ~~ making ~ ~~~~~ ~~ Case No W-SCN September 14,2009 Page 2 (Engineering Review) The Association currently owns and operates a small public water system thirty-five customers in the Randolph County community of Whitmer. The existing one hundred year old system, which was recently renovated in-part (See Case No W-CN) provides service to only the central, most densely populated portion of this small rural community. This proposed project will extend service into the currently unserved outlying areas of the community. The Association is now able to utilize adequate water sources, following completion of a new well in 2003, but its water sources, including two natural springs, are high in objectionable contaminants (iron, manganese, arsenic, etc.) Unfortunately, the Association s treatment of its water sources is limited to disinfection with chlorine bleach, and is deemed inadequate by the Bureau for Public Health (BPH). Consequently, the Association s system has been subject to a Boil Water Advisory for over ten years. The water quality also suffers from secondary contaminants such as iron and manganese and the level of arsenic. Therefore, Technical Staff concluded the Association s water is not potable, as that term is understood to mean water which is safe and palatable for human consumption. (See the Commission s Water Rules, 150CSR7 at paragraphs 5.9.a. and 5.9.b.).As the project will also extend water service and provide water for fire protection to approximately 125 new customers in the vicinity of Whitmer and along the Harrnan-to-Whitmer road, the project will result in the opportunity for future growth and will ultimately improve the quality of life for the system s customers by providing ample amounts of good quality water. In conclusion, Technical Staff opined that the project will benefit the general public as well as the system s customers, the project necessary. ~~ This project represents Phase I1 of overall construction and upgrades to improve the Associations s system and includes construction of a new water treatment plant, 105,000 gallon water storage tank, a pressure reducing station and radio telemetry, and approximately 9.2 miles of new water lines and appurtenances to serve approximately 125 new customers residing in the rural areas outside of Whitmer, as more filly described in Engineering Review section of the attached memorandum,

4 Case No W-SCN September 14,2009 Page 3 As more fully described in the Engineering Review, Engineering Staff developed a reasonable Estimated Project Budget for Phase 11, this project, of $3,765,000, and determined that future operations and maintenance (O&M) costs should total an estimated $41,000 per year. Engineering Staff made minor adjustments to the proposed O&M budget. After review of the project budget and estimated costs, Engineering Staff noted as follows: the estimated cost per customer of $23,704 is somewhat high but not unreasonable for a project including construction of a new long-life treatment facility, particularly in light of the percentage of grant funding; the customer density of 13.6 customers per mile is acceptable; and the total engineeringkechnical services fees and design fees fall within the customary range for recent, comparable projects. Engineering Staff opined that the Association has applied for all necessary permits, that the project plans and specifications are not in conflict with the engineering requirements embodied in the Commission s Rules and Regulations for the Government of Water Utilities (Water Rules). The Bureau for Public Health issued a Permit to Construct for these facilities on March 14, In consideration of the overall status of the project, the Certificate of Convenience and Necessity, should such be issued by this Commission, contingent upon the Association s receipt of all necessary federal, state and local permits and approvals for the proposed construction. In summary, Engineering Staff thoroughly reviewed this project, concluded that it is a necessary project and recommended that the certificate application be granted. (Financial review) Financial Staff fully documented review through the financial review section of the attached memorandum and its attachments, including (Attachment 1) the Association s Current Tariff, (Attachment 2) the Staff Recommended Tariff, and (Attachment 3) the cash flow analysis reflecting per books and pro forma operations. On July 22, 2009, the Association filed a revised Notice of Filing in which the Association notified Staff that the Bureau of Public Health (BPH) had received provided stimulus funding for the project. Staffs review ofthe filing indicates the Association s project has been approved by the West Virginia Infrastructure and Jobs Development Council (WVIJDC) and as revised is estimated to cost approximately $3,335,710. The stimulus funding was provided in the form of a binding offer for a loan of approximately $2,265,000 to the Association, in two separate - - loan packages, as follows: (l)a Drinking Water Treatment Fund Loan (DWTRF) through the American Recovery and Reinvestment Acct (ARRA) in the amount of $1,895,000, requiring no annual debt service, equating to 100% loan forgiveness; and (2) a DWTRF Base Program loan in the amount of $370,000, at 0% over a term of 30 years, which equates to an annual

5 ~~ ~~ The Case No W-SCN September 14,2009 Page 4 debt service payment in the amount of $12,333 plus a 10% reserve requirement of $1,233. Staff has also included a depreciation/renewal and replacement reserve equal to 2.5% of operating revenues. The Association will fund remaining project costs through a Small Cities Block Grant in the amount of $1,500,000. The funding commitment letters from WVBPH and the Small Cities Block Grant have been filed. Financial Staff made adjustments to the Association s O&M budgets, as recommended by Engineering Staff, and as reflected in the attached Memorandum and supporting Attachments. Staff is unable to base the Association s rates on the rate block structure requested by the Association, because the Association s requested rate blocks structure is differently reflect the Association s tariff and the filing lacks the required support of a class cost of service study. In the absence of a class cost of service study, Staff has no alternative but to recommend an across the board increase to the current and believes a 13 1% increase to rates and charges over the current tariff rates would be sufficient to cover the O&M expenses and debt related to this project. As reflected in Attachments 2 and Attachment 3, the Staff Recommended rates will result in a minimum bill of $27.75 based on 3,000 gallons used per month and an average bill of $41.63 based on 4,500 gallons. The Staff Recommended rates will generate annual operating revenues of $56,203 at proforma and provide a surplus of approximately $248 and debt coverage of %. Financial Staff concluded that the project, as revised is financially feasible. Thus, after full review, Engineering Staff and Financial Staff determined the project is technically and financially feasible and this certificate application should be granted. Association filed this application for a certificate of convenience and necessity to construct approximately 49,000 hear feet of waterlines, a new water treatment plant, a 105,000 gallon water storage tank, a pressure reducing station and radio telemetry to serve approximately 125 existing and new customers, as required by W. Va. Code After throughly reviewing engineering and financial documents filed within this case and considering the public need for the project, Staff recommends that the certificate be granted to the Association, subject to certain conditions, as follows: 1. That the Association be granted a Certificate of Convenience and Necessity construct approximately 49,000 linear feet ofwaterlines, anew water treatment plant, a 105,000 ~- gallon water storage tank, a pressure reducing station and radio telemetry to serve approximately 125 existing and new customers, at a cost of $3,335,710; 2. That the Association be granted consent and approval for the financing of the project,

6 Case No W-SCN September 14,2009 Page 5 as listed DWTRF ARRA Loan (10 yrs, 0%, 100% forgiveness) DWTRF Base Program Loan (30 yrs, 0%) Small Cities Block Grant Total $1,895,000 $ 370,000 $1, $3,335, This project has been approved by the Infrastructure Council. If there are any changes in the plans or scope of the project of such magnitude as to require the approval of the WV Bureau for Public Health, the Association must seek Commission approval of such changes. Further, if there are changes in the rates to be charged associated with the project the Association must also seek Commission approval of such changes. Finally, provided proj ect-related rates remain unchanged, it is not necessary for the Association to seek further Commission approval of changes in project costs or financing. However, under such circumstances Staff recommends that the Association should be required to file an affidavit executed by its accountant verifying that its rates and charges are not affected. That a 13 1 % across the board increase to the Association s current rates and charges as well as the Staff Recommended Tariff shown on Attachment 2; That the Association s level of operations reflect Staff recommendations, as shown on Staffs Recommended Cash Flow Analysis, included as Attachment 3; ~~ ~~ ~ ~~~ The Association shall file a copy of the engineer s certified tabulation of bids for all contracts or vendor bids associated with this project within ten days of the bid opening date(s); The Association shall file copies of the fully executed Certificate of Substantial Completion for all contracts or vendor bids associated with this project within ten days of issuance of such documents; and The - Association must return to the Commission for a general rate review within eighteen (18) months of completion of this project. -~ WSBIs Attachment I & cws 1,[,,&. H:\wbrashvell\WPdocs\ (Whitmer Water Assoc CN)\final memo SCN memo wpd

7 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA DATE: September 9, 2009 FINAL INTERNAL MEMORANDUM TO: FROM: Wendy Braswell, Staff Attorney Legal Division Karen L. Buckley, Utilities Analyst I1 kl43 Pamela D. Latocha, Utilities Analyst I1 Utilities Division Jonathan Fowler, P.E. Engineering Division SUBJECT: Case No W-SCN Whitmer Water Association Final Memo On July 6, 2009, and revised on July 22, 2009, Whitmer Water Association (Association) filed an application for a certificate of convenience and necessity to construct a new water treatment plant and expand its water distribution system (Phase 2). This project has been approved by the West Virginia Infrastructure and Jobs Development Council in Project No. 2004W-785 and is estimated to cost $3,335,710. The project is to receive stimulus funding through the American Recovery and Reinvestment Act of Staff notes the Commission; in General Order gave Commission Staff the task of expediting the review of cases which have been given stimulus funding under the American Recovery and Reinvestment Act of ENGINEERING REVIEW The Whitmer Water Association presently owns and operates a small public water system (originally built circa 1907) serving thirty-five (35) customers in the Randolph County community of Whitmer. The existing system, which was recently ( ) renovated in-part (See Case No W-CN) provides service to only the central, most densely populated portion of this small rural community; the outlying rural areas are not now served but, the proposed project will extend service - into t h ~ s ~ ~ u t l ~ - i n- g - a ~ ~ ~ s ~ ~ ~ ~ ~ The present sources of water consist of two old, natural springs which have been in use for decades, two inadequate, unused wells and a recently (2003) constructed, successful well. Although the quantity of raw water now available is

8 Wendy Braswell Case No W-SCN September 9, 2009 Page 2 adequate (since completion of the new well) the source is high in objectionable contaminants (iron, manganese, arsenic, etc.) and requires treatment if it is to provide potable water of good quality. At the present time the treatment being provided, consisting of only disinfection with chlorine bleach - having insufficient contact time - is deemed by the Bureau for Public Health (BuPH) to be inadequate consequently, this water system has been under a Boil Water Advisory for over ten (1 0) years. Accordingly, the BuPH has assigned this project that agency s highest priority for funding with federal ARRA (stimulus) money. Need-for Project As previously mentioned, the existing water system, although it received some upgrades in 2008, provides a quality of service which is inadequate under the rules and regulations of both the BuPH and the Commission. The water is not properly disinfected, contains low levels of arsenic and the system is continuously under a Boil Water Advisory. Further, the aesthetic quality of the water is poor due to secondary contaminants such as iron and manganese and the level of arsenic, although below the action level now, may requires treatment in the future if the groundwater source degrades over time. These factors, taken together, lead Staff to the opinion that the service is inadequate and the water is not potable, as that term is understood to mean water which is safe and palatable for human consumption. (See the Commission s Water Rules, 150CSR7 at paragraphs 5.9.a. and 5.9.b.). Accordingly, it is Staffs opinion that this utility is operating in violation the Commission s Water Rules (1 50CSR7) and the BuPH water quality requirements. These long-term, documented water quality violations will be corrected by the pr oposedproj eclw hick ill-cons truclanew-frlmti on-p lant-tcpr oper lftrea-and-- disinfect the water and to remove the objectionable secondary contaminants of iron and manganese; the new plant will also allow for removal of the low levels of arsenic present in the source water if that becomes an issue in the future. The project will also extend water service and provide water for fire protection to approximately 135 new customers in the vicinity of Whitmer and along the Harman-to-Whitmer road in the communities of Job (north of Whitmer), Horton and Little Italy (both south of Whitmer). Public water service will improve the area s viability for future growth, increase opportunities for development and will ultimately improve the quality of life for the system s customers by providing ample amounts of good quality water. Consequently, Staff opines that the present project will benefit the general public as well as the system s customers and that the project is therefore necessary.

9 Wendy Braswell Case No W-SCN September 9,2009 Page 3 Scope of Project The instant project represents the second and final phase of the project to improve and expand the Whitmer Water System; phase I was approved in a previous case ( W-CN) with that construction work having been substantially complete as of August 26,2008 at a total cost of $429,290. Phase I involved the replacement of about 5,000 feet of water mains in the community of Whitmer, installed fire hydrants on the new lines and installed meters and services for all of the system s thirty-seven existing customers. The instant project (Phase 11) will complete the work started in Phase I by constructing a new water treatment plant, a new storage tank and by installing about 9.2 miles of new water lines and appurtenances to serve approximately 125 new customers residing in the rural areas outside of Whitmer. Key items of construction for this phase include the following; A new water treatment plant having a design capacity of fifty gallons per minute. This plant will provide for removal of the objectionable iron and manganese present in the groundwater which will supply this facility. (A new water supply well was constructed in 2003 in order to improve the quantity and reliability of the Association s raw water supply and to provide a source of water for this plant however, the well contains objectionable levels of metals.) The plant will include dual manganese-greensand pressure filters, chemical feed systems, a high-service pump system with radio-telemetry control, a backwash holding/decant system, an office/control/laboratory area and all necessary electrical, mechanical, and piping, control and other systems needed for a fully functional treatment plant. Approximately 48,700 feet of various sizes (2 thru 8 diameter) of new water lines including road crossings and stream crossings as needed. Thirty two new water main valves, fourteen new fire hydrants, nine new blowoff fixtures, five air release assemblies, four sample taps, one pressure reducing station and approximately new servicedmeter settings with associated utility service lines. The applicant filed 1 19 executed user agreements with the application and reports that six additional users have indicated that they will accept water service for a total of 125 new users. See Footnote No. 1, above.

10 ~~ ~~ - Wendy Braswell Case No W-SCN September 9, 2009 Page 4 0 One new water storage tank with a nominal capacity of 105,000 gallons complete with access roadway, concrete foundation, radio telemetry level control system and associated work. 0 Various items of surface and roadway restoration, reseeding, etc. as needed for a compete project. Project Cost and Budaet The project is presently estimated to cost $3,765,000 (both phases) with a construction cost estimated at about $2,963,000 (including contingency for both phases). Based upon information filed by the applicant and data presented in the applicant s latest Infrastructure and Jobs Development Council (IJDC) application (IJDC No. 2004W-785), Staff has developed the following budget summary which is subject to change based upon the final bid costs and similar items which are either not known or which may vary from the figures available at the present. Estimated Project Budget (Both Phases) Construction Cost (Both Phases) Planning & Engineering Legal Fees Administrative Costs Financing Costs Lands & Rights mect Contingency Total: (Both Phases) $2,963, ,000 15,000 81,000 14,000 17, ,000 ~~~~~~ $3,765,0003 Staff notes that this project has not actually been bid and that the project cost is based entirely upon estimated construction costs. Once bids are actually received it is likely that the project cost will change. In the event that the project cost increases, then additional funding must be secured or, the project scope will need to be revised to accommodate the new project budget. Therefore, we strongly advise the applicant to plan for the likelihood of increased construction costs. Phase 1 has been completed at a total cost of $429,290 leaving a balance of $3,335,710 for Phase 2 per the current filing.

11 ~ ~- ~~~ 65_0_shoul~~ereducedto~$50fc""f^f^lreduction$5 ~~ Wendy Braswell Case No W-SCN September 9, 2009 Page 5 The total cost of planning, engineering design, engineering sub-consultants (surveys, geotechnical engineering, etc.) and project inspection services for this project is approximately 13.7% of the total project cost. Based upon similar types of projects and our experience, Staff opines that the engineering fees are within the customary range for recent, comparable projects. The estimated construction cost, on a per customer basis, is approximately $23,704 per customer which staff opines to be high but; we note that this cost includes the cost for a new, long-life treatment facility which will serve the area for decades with little new capital investment. Further, the fact that this project is largely funded by state and federal grants which do not have to be repaid is a large factor in favor of the project with the loan amount being only $2,960 per new customer -which is very good in today's project finance market. Customer density per mile of new water main is about 13.6 customers per mile which is considered to be moderate but, acceptable in today's lower-density-project development environment. O&M Cost Estimates The applicant and their engineer have determined that overall operations and maintenance (O&M) costs for the entire utility operations, after the project, will be an estimated $4 1,000 per year. Based upon our review of the information provided by the applicant, Staff believes that this amount represents a sufficient but, not excessive, estimation of the actual O&M cost adjustments for the proposed project. In addition, the Staff Engineer has reviewed and adjusted certain per-books expense items related to non-recurring costs. Based on our review and our experience, it is the Engineer's professional judgment that Account 640 should be reduced to $1,000 and Account 74 below the levels shown in the 2008 Annual report. We have passed this opinion along to the Financial Analyst assigned to this matter for consideration during their review and analysis of the project's finances. (See also the Financial Review section of this memorandum.) Staff cautions the Association that estimating the actual level of O&M costs for any new project, especially for a project as such as this one, is not an exact science. The actual O&M may vary either up or down from these estimates. Accordingly, we strongly recommend that the utility carefully track the actual costs to operate this project and be prepared to adjust rates should actual costs exceed the estimated costs by a significant margin.

12 ~ whickwas-issuedmarch Wendy Braswell Case No W-SCN September 9,2009 Page 6 Design Review Engineering Staff has completed a review of the plans and other technical documents provided by the applicant and find no apparent conflicts with the Commission s current edition of the Rules for the Government of Water Utilities (1 50CSR7). The specific documents reviewed were as follows: Engineering Report for a Proposed Potable Water Treatment Plant and Distribution System (Phase B) for the Whitmer Water Association, Inc. Randolph County, West Virginia prepared by Homer Brothers Engineers, Inc. and dated Revised June 30,2009. Bid documents & technical specifications entitled Proposal and Contract Specijkations for the Whitmer Waterline Extension Project Randolph County, West Virginia consisting of one bound volume, prepared by Horner Brothers Engineers, Inc. and dated June Engineering plans consisting of a cover sheet and thirty-three (33) sheets of drawings, with the cover sheet being dated June 30, 2009 and signed by Paul A. Homer, 111, P.E. (WV Reg. No ), prepared by Homer Brothers Engineers, Inc. Bid documents & technical specifications entitled Proposal and Contract Specijkations for the Whitmer Waterline Association Water Treatment Plant Randolph County, West Virginia consisting of one bound volume, prepared by -Gannett-Fl eming~inc-,-and-date-cljanuary Engineering plans consisting of a cover sheet and thirty-five (35) sheets of drawings, with the cover sheet being dated September 2006 and signed by John L. Schaude, 111, P.E. (WV Reg. No ), prepared by Gannett Fleming, Inc. Staff also notes that the W.Va. Bureau for Public Health, Environmental Engineering Division has also reviewed the project plans and specifications and has issued a Permit to Construct for these facilities; such permit being number 17,426 14,,_2007. ~-

13 Wendy Braswell Case No W-SCN September 9, 2009 Page 7 Consequently, Engineerllig Staff w 11 recommend contingent approval of I le project without specifically approving the project plans and specifications. The Association is also reminded that any significant changes in the project design or scope will require reopening of this case in order to allow for Technical Staffs further review and commentary and to secure the approval of such revisions by the Commission. Status of Permits The Association and their consulting engineer have done a very good job of obtaining permits and approvals necessary for the construction of this project, as evidenced by information filed with the application. Based upon Staffs review of this filing, our knowledge of similar projects and the permit process for such projects and upon our discussions with the applicant and their professional consultants we opine that this case is sufficiently mature, with respect to permits and approvals, so as to allow for action by this Commission. In consideration of the overall status of the prqject, Engineering Staff recommends that th-e Certificate of Convenience and Necessity, should such be issued by this Commission, contingent upon the Association s receipt of all necessary federal, state and local permits and approvals for the proposed construction. Copies of the permits and approvals which have not already been filed with this Commission should be forwarded immediately upon the Association s receipt of such documents. Construction should not begin until such time as all lands and rights-of-way, all permits and approvals or clearances and a Certificate of Convenience and Necessity have been issued. FINANCIAL REVIEW The Association initially estimated the project to cost $3,765,000. It stated in 2008 it used $429,290 of the $1,500,000 Small Cities Block Grant money to construct Phase 1 of the project which was the replacement of all of its existing waterlines. Therefore, this submittal is for Phase 2 of the project, totaling $3,335,710. It was proposed that the project will be financed with a West Virginia Infrastructure and Jobs Development Council (WVIJDC) loan of $740,000 and a Water Development Authority Grant Anticipation Note of $1,525,000, and the rest of the Small Cities ~ _ ~ _ ~ Block Grant money of $1,070,

14 ~ - Wendy Braswell Case No W-SCN September 9, 2009 Page 8 On July 22, 2009, the Association filed a revised Notice of Filing in which the District notified Staff that it had received stimulus funding through the Bureau of Public Health (BPH). Staffs review of the filing indicates the Association s project has been approved by the West Virginia Infrastructure and Jobs Development Council (WVIJDC) and as revised is estimated to cost approximately $3,335,710. The BPH provided a binding offer for a loan of approximately $2,265,000 to the Association. The loan was broken down into two separate loans. The first part was a Drinking Water Treatment Fund Loan (DWTRF) through the American Recovery and Reinvestment Acct (ARRA) in the amount of $1,895,000 and the second part of the loan was through its DWTRF Base Program in the amount of $370,000. The $1,895,000 loan requires no annual debt service which equates to 100% forgiveness for the loan. The $370,000 loan has terms of 0% at 30 years which equates to an annual debt service payment in the amount of $12,33 3 plus a 10% reserve requirement of $1,23 3, Staff has also included a depreciationhenewal and replacement reserve equal to 2.5% of operating revenues. Finally the Association s project will be funded with its Small Cities Block Grant (SCBG) in the amount of $1,500,000. As noted before, the remaining funding from SCBG is $1,070,7 10. The funding commitment letters from WVBPH and the SCBG has been filed. According to the Rule 42-Exhibit based on the year ended December 31, 2008, the Operation & Maintenance expenses are expected to increase by $36,080 to a proforma level of $41,000 as a result of the Project. The Staff Engineer reviewed this and found it acceptable (see generally the Engineering review). Staff has adjusted per books O&M expenses per engineering recommendations (see Engineering review). Thus the total amount attributable to the project for O&M, debt service and the resewe-accounts-will-be-$.%o,~l5. -~ ~ ~~~ ~ The Association is proposing to increase rates as a result of the project. In its filing, the Association has modified its rate structure and has proposed a minimum bill of $ based upon 3,000 gallons. Staff notes that it cannot change the rate structure of the tariff without justification through a class cost of service study. Consequently, without a class cost of service study, Staff has no alternative but to recommend an across the board increase to the current rates and charges. Staff has determined a 13 1% increase to rates and charges over the current tariff rates would be sufficient to cover the O&M expenses and debt related to this project. The Staff Recommended rates will result in a minimum bill of $27.75 based on 3,000 gallons used per month and an average bill of $41.63 based on 4,500 gallons. The Staff Recommended rates will generate annual operating revenues of $56,203 at proforma and provide a surplus

15 Wendy Braswell Case No W-SCN September 9, 2009 Page 9 of approximately $248 and debt coverage of %. Thus, the project is financially feasible and should be approved. Staff has included as Attachment 1 the Association s Current Tariff and as Attachment 2 the Staff Recommended Tariff and Attachment 3 the cash flow analysis reflecting per books and pro forma operations as discussed above. Staff also recommends the Association be required to return to the Commission for a general rate review within eighteen (1 8) months of completion of this project. RECOMMENDATIONS Staff recommends, pursuant to West Virginia Code $ , that Whitmer Water Association s application for a Certificate of Convenience for the project described above and in the amount of $3,335,7 10, be approved. Approval of the certificate application includes: Project financing consisting of the following: DWTRF ARRA Loan (10 yrs, 0%, 100% forgiveness) $1,895,000 DWTFW Base Program Loan (30 yrs, 0%) $ 370,000 Small Cities Block Grant $1,070,7 10 Total $ This project has been approved by the WVIJDC. Staff recommends that if there are any changes in the plans or scope of the project of such magnitude as to require the approval of the WV Bureau for Public- - Health the Association must seek Commission approval of such changes. Further Staff recommends that if there are changes in the rates to be charged associated with the project the District must also seek Commission approval of such changes. Finally, provided project-related rates remain unchanged, it is not necessary for the District to seek further Commission approval of changes in project costs or financing. However, under such circumstances Staff recommends that the District should be required to file an affidavit executed by its accountant verifying that its rates and charges are not affected. 3. A 13 1% across the board increase to the Association s current rates and charges as well as the Staff Recommended Tariff shown on Attachment 2.

16 Wendy Braswell Case No W-SCN September 9,2009 Page The level of operations as shown on Staffs Recommended Cash Flow Analysis, included as Attachment 3, The Association shall file a copy of the engineer s certified tabulation of bids for all contracts or vendor bids associated with this project within ten days of the bid opening date(s). The Association shall file copies of the fully executed Certificate of Substantial Completion for all contracts or vendor bids associated with this project within ten days of issuance of such documents. Staff recommends that the Association be required to return to the Commission for a general rate review within eighteen (1 8) months of completion of this project. Attachments KLB :PDL: JAF :tt G:\Section\WASTEWATER\Case Processing\Analysts\Buckley, Karen\ W-SCN Whrtmerfin f (2).doc

17 ~ ~ Whitmer Water Association Case No W-SCN Current Tariff Attachment 1 Page 1 of2 APPLICABILITY Applicable within the entire territory served. AVAILABILITY Available for general domestic, commercial, industrial and sale for resale water service. RATES (customers with metered water supply) First 3,000 gallons used per month $4.00 per 1,000 gallons Over 3,000 gallons used per month $4.00 per 1,000 gallons MINIMUM CHARGE No bill will be rendered for less than $12.00 per month. TAP FEE The following charge is to be made whenever the utility installs a new tap to serve an applicant. A tap of $ will be charged to customers applying for service before construction is completed adjacent to the customers premises in connection with a certificate proceeding before the Commission. This pre-construction tap fee will be invalid after the c o m p l e t i ~ ~ ~ t ~ d j a c e n t t o p t h ~ p ~ ~ ~ ~ L J ~ ~ applicant s premises that is associated with a certificate proceeding. A tap fee of $ will be charged to all customers who apply for service outside of a certificate proceeding before the Commission for each new tap to the system. _ ~ - RECONNECTION $20;00 To be charged whenever the supply of water is turned off for violation of rules, non-payment of bills, or fraudulent use of water

18 Attachment 1 Page 2 of 2 Whitmer Water Association Case No W-SCN Current Tariff (continued) DELAYED PAYMENT PENALTY The above schedule is net. On all accounts not paid in full when due, 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. RETURNED CHECK CHARGE A service charge equal to the actual bank fee assessed to the Association or a maximum of $25.00 will be imposed upon any customer whose check for payment of charges is returned by their bank due to insufficient funds.

19 Attachment 2 Page 1 of2 Whitmer Water Association Case No W-SCN Staff Recommended Tariff APPLICABILITY Applicable within the entire territory served. AVAILABILITY Available for general domestic, commercial, industrial and sale for resale water service. (I) (I) RATES (customers with metered water supply) First 3,000 gallons used per month $9.25 per 1,000 gallons Over 3,000 gallons used per month $9.25 per 1,000 gallons MINIMUM CHARGE No bill will be rendered for less than $27.75 per month. TAP FEE The following charges are to be made whenever the utility installs a new tap to serve an applicant. A tap of $ will be charged to customers applying for service before construction is completed adjacent to the customers premises in connection with a certificate proceeding before the Commission. This pre-construction tap fee will be invalzltftrthe completmfcomtmctioradj-zcrnt- to- the applicant s premises that is associated with a certificate proceeding. A tap fee of $ will be charged to all customers who apply for service outside of a certificate proceeding before the Commission for each new tap to the system. RECONNECTION A 2 & Q O - ~- To be charged whenever the supply of water is turned off for violation of rules, non-payment of bills, or fraudulent use of water -

20 Attachment 2 Page 2 of 2 Whitmer Water Association Case No W-SCN Staff Recommended Tariff (continued) DELAYED PAYMENT PENALTY The above schedule is net. On all accounts not paid in full when due, ten percent (1 0%) 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. RETURNED CHECK CHARGE A service charge equal to the actual bank fee assessed to the Association or a maximum of $25.00 will be imposed upon any customer whose check for payment of charges is returned by their bank due to insufficient funds. (I) Indicates increase

21 WHITMER WATER ASSOCIATION CASH FLOW ANALYSIS YEAR ENDING DECEMBER 3 1,2008 AVAILABLE CASH Operating Income Other Income PRO PER BOOKS FORMA ADJ ADJ $ $ 5,461 50, Attachment 3 PRO FORMA & STAFF REC $ 56, Total Available Cash 5,477 50,742 56,2 19 CASH REOUIREMENTS Operating Expenses 0 t her Tax e s 4,920 36, ,000 0 Total Cash Requirements Before Debt Service 4,920 36, OOO Cash Available for Debt Service (A) ,662 DEBT SERVICE REOUIREMENTS DWTRFLoan (B) 12,333 12,333 Sub-Total 0 12,333 12,333 Debt Reserve 1,233 1,233 Total Debt Service Requirement 0 14,835 14,97 1 Surplus/Deficit 557 (173) 248 Percent Coverage (A)/(B) % _. -