PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON. Entered: December 18,20 18 RECOMMENDED DECISION

Transcription

1 CASE NO PWD- 19A PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON Entered: December 18,20 18 BOOM-RALEIGH PUBLIC SERVICE DISTRICT, a public utility. Rule 19A application to increase water rates and charges. RECOMMENDED DECISION This Order adopts the Staff-recommended rates. On January 31, 2018, the Boone-Raleigh Public Service District (Utility) filed an application to increase its rates. The application was filed in response to certain formal complaints filed against the Utility by the Town of Whitesville, the Whitesville Fire Department, and the Water Development Authority (WDA). The Complainants alleged that the Utility was unable to provide consistent service and that multiple water outages in a single twenty-four hour period were common. They alleged that the Utility allowed its water storage to be completely depleted, placing the community at grave risk in the event of fire. They also alleged that the Utility was significantly in arrearage on its bond obligations. They alleged that the Utility had inadequate rates. The Utility requested emergency interim rate relief. On April 6,20 18, WDA petitioned to intervene in the proceeding. Given that the Utility was delinquent in filing its 2016 and 2017 Annual Reports and that such reports are critical in the Commission s review of the Utility s rates, the Commission issued an Order on April 16, requiring that the Utility file its Annual Reports as soon as possible. The Commission indicated that it would hold the rate case in abeyance until the Annual Reports were filed. The Commission also granted WDA s petition to intervene. + The Utility filed its delinquent 2016 Annual Report on April 4, 2018, and its delinquent Annual Report on May 1 1, On June 14, 201 8, the Cornmission referred the matter requiring a decision on or before January 30, Staff, upon investigation, found that the Utility made significant improvement after the complaints were filed. There were still serious concerns including that the treatment plant was operating twenty-four hours a day. The raw water source is designed in such a way that when the river is high that the intake does not function. Staff did report a significant change in Board members which Staff believed was a good thing since Staff believed the system was poorly managed for years.

2 By Interim Recornmended Decision issued July 3, 2018, the Commission approved an emergency interim rate increase of 34.75% above rates as existing prior to the fi1in.g of the case. The Commission required the Utility to publish notice of its emergency interim rates in both Boone and Raleigh Counties. Publication was to occur no later than seven days after the date of the Order and the Utility was to file affidavits of publication immediately upon receipt. The Recommended Decision became final on July 23, The Utility filed its interim water tariff on August 16, The Utility never filed affidavits of publication indicating that the notice required by the Commission was published in either Boone or Raleigh County.2 On September 12, 20 18, Staff issued its Final Rate Recommendation. Staff recommended rates that would generate an increase in the Utility s water revenues of 43.45% over the revenue generated under the rates that existed prior to the proceeding. This amounts to $79,633 in revenue annually. The Staff-recommended Step 1 rates will generate revenue increase of 6.45% compared to the interim rates or $15,934. The Step 1 rates would be in effect for a period of one year and then they would be reduced. The reduced rates would be 4.52% lower than the Step 1 rates. By Procedural Order issued September 18, 2018, the Utility and WDA were granted an opportunity to object to the Staff-recommended rates and other recommendations. The Utility was also required to publish notice of the Staff-recommended rates in both Raleigh and Boone Counties. On September 26, 2018, WDA indicated that it had no objections to the rates and saw no benefit in a hearing. W A did express concern that revenue produced by the increase actually be spent on the water system. WDA indicated that it was essential for proper record-keeping to be instituted and monitored and that the Utility s water and sewer revenue and expenses not be comingled. WDA also expressed concern given that the Staff reported severe physical plant and operating problems of the Utility, mostly resulting from years of neglect by the former board and management of the Utility. WDA reported that the Utility continued to have regular water outages and that its unaccounted water rate may be as high as 75%. WDA recommended that the Order require the Utility to report within sixty days plans to improve its physical plant and address its operational issues. On October 3 1, 20 18, the Utility filed an affidavit of publication indicating that it properly published notice of the Staff-recommended rates in both Raleigh and Fayette Co~nties.~ FINDINGS OF FACT 1. In response to formal complaints filed against the Utility by the Town of Whitesville, the Town of Whitesville Fire Department and the WDA, the Utility filed an application to increase its rates on January 31, (See filing and also see Case Nos PS WD-C; I PWD-C; and PSWD-C). 2 The Utility obviously did not comply with the Order. 3 It should be noted that the Utility has yet filed proper affidavits in the parallel sewer case. 2

3 2. The case was significantly delayed given that the Utility was delinquent in its 2016 and 20 I7 Annual Reports, which were necessary for the processing of the rate application. (See Commission Order issued June 14,2018 and Case No PWD-SC and Case No PWD-SC). 3. Interim recommended rates were granted to the Utility on July 3, 2018 increasing the Utility s rates by 34.75%. (See Interim Recommended Decision issued July 3,2018). 4. Although the Utility was ordered to publish notice of its emergency interim rate increase, it did not do so. (See Interim Recommended Decision issued July 3, 2018 and file generally). 5. The Utility was warned that it should not ignore Commission Orders and warned that failing to properly publish notice of the Staff-recommended rates would result in the Utility s rates not being raised and the Utility being ordered to rehnd all monies collected in excess of its original tariff approved in interim rates. (See Procedural Order issued September 18,20 18). 6. On September 12, 20 18, Staff recommended rates that would increase the Utility s revenue 43.45% over the revenue generated under the rates as existing prior to the proceeding. The Staff-Recommended Step One rates would generate an additional 6.54% compared to the interim rates. The Step One rates would be in effect for a period of one year and then reduced. The reduced rates would be 4.52% lower than the Step One rates. (See Staff filing of September 12,2018). 7. The Utility was ordered to publish notice of the Staff-recommended rates in both Raleigh and Boone Counties. (See Procedural Order issued September 18, 20 18). 8. On October 31, 2018, the Utility filed publication affidavits indicating that it properly published the notice required by the Commission s September 18, 2018 Order. (See affidavits). 9. There have been no protests filed in response to the publication notice. (See file general 1 y ). 10. The Utility and WDA were given an opportunity to object to the Staffrecommended rates and other recommendations. (See Procedural Order issued September 1 8, 20 18). 11. generally). The Utility did not object to the Staff recommendations or Staff rates. (See file 12. WDA did not object to the Staff-recommended rates. WDA did express concerns with the ongoing operation of the Utility. (See WDA filing of September 26, 2018). 3

4 13. The Utility s annual water operating revenue for the fiscal year ending June 30, 2017, was $183,294. (See Staff Rule 42 Exhibit filed September 12,2018). 14. The Utility provides water service to 479 customers. (Id.). 15. The Utility s last increase in water rates became effective after November 20, (Id.; See also Case No PWD-CN). 16. For the test year, the Utility reported $198,135 of operation and maintenance expense, $9,728 of taxes other than income and a debt service requirement of $26,38 1. (See Staff Rule 42 Exhibit filed September 12,201 8). 17. The test year cash flow deficit of the Utility was $63,693. (u.). 18. Payroll increased for the Utility after the test year. (Id.). 19. Power costs for electricity increased significantly after the test year. (Id.). 20. Staff calculated the adjusted cash flow deficit of the Utility at $76,014 before any consideration of Senate Bill 234 money. (Id.). 21. Staff-recommended Step One rates would generate revenue that was 43.45% over revenue generated under the Utility s rates prior to this case or an additional $79,633. The revenue is an increase of 6.45% compared to interim rates or $1 5,934. (Id.). 22. That level of revenue would be sufficient to cover the Utility s operation and maintenance expenses of $210,049, taxes other than income of $10,135, debt service requirements of $26,38 1, funding of $1,706 related to Senate Bill 234 and funding of $10,196 to pay on the Internal Revenue Service arrearage. It also results in a remaining cash surplus of $4,496, which is sufficient to cover the four-year average of net plant additions. (Id.). 23. The resulting debt service coverage from the Staff-recommended Step One rates is %. (u.). 24. Staff analyzed the non-restricted cash accounts excluding the redewal and replacement reserve required by the bond agreement and calculated the appropriate level of reserve required by Senate Bill 234 and General Order (Id.). 25. Given that the Utility s daily balance in its unrestricted accounts for a three-month period is approximately $50,806, Staff calculated that an additional $1,706 would be required for the Senate Bill 234 reserve. (Id.). 26. The Utility owes an arrearage to the Internal Revenue Service of approximately $34,391 as of June 12, The Utility has since made payments of $18,992 on the arrearage and has requested that the IRS waive penalties. Staff calculated the remaining tax arrearage to the 4

5 Internal Revenue Service of $15,399, which assumed that the Internal Revenue Service would waive penalties. Staff allocated the IRS debt between the water and sewer operations and provided $10,196 a year in revenue to pay on the Internal Revenue Service arrearage. (IcJ,). 27. Staff recommended that the Utility be required to set aside 3.89% of all revenue collected to pay on the tax arrearage. (Id.). 28. Staff recommended Step Two rates to be effective a year after the Step One rates went into effect, which decreased the rates by 4.52% or $1 1, 175. (M.). 29. The Step Two rates would cover the Utility s operating requirements, debt service requirements and provide a surplus of $4,511. That would result in a debt service coverage of 117.1%. (Id.). CONCLUSIONS OF LAW 1. Staff-recommended rates are reasonable, just, based primarily upon the cost of providing service, and comply with Senate Bill 234 and other legal requirements. 2. The Staff-recommended rates should be adopted for use by the Utility. ORDER IT IS, THEREFORE, ORDERED that the Staff-recommended Step One rates attached as Exhibit A be, and hereby are, approved for use by the Utility for all bills rendered on and after the date that this becomes a Final Order of the Commission for a period of twelve months. Boone- Raleigh Public Service District shall file an original and six copies of the appropriate tariff with the Commission within thirty days. IT IS FURTHER ORDERED that the Staff-recommended Step Two rates attached as Exhibit B be, and hereby are, approved for use upon the expiration of the Step One rates (twelve months after the date that this Order becomes a Final Order of the Commission). The Boone- Raleigh Public Service District shall file an appropriate tariff and six copies with the Commission within thirty days of the date this Order becomes a Final Order of the Commission. 5 IT IS FURTHER ORDERED that the Boone-Raleigh Public Service District set aside 3.89% of all water revenue collections, including late payment penalties but excluding return check charges, disconnect, reconnect, administrative fees and tap fees and deposit that amount monthly into a separate bank account which is to be used exclusively to eliminate the arrearage on its payroll taxes. The Boone-Raleigh Public Service District shall file monthly statements with the Cornmission detailing for each month the total amount of the applicable collections, the total amount segregated and the total amount paid on its tax arrearage. The Boone-Raleigh Public Service District shall continue to make these filings until all of its payroll tax arrearages have been paid off in full. 5

6 IT IS FURTHER ORDERED that the Boone-Raleigh Public Service District avoid comingling its water and sewer revenue. Water and sewer revenue and expenses shall be tracked separately. The Boone-Raleigh Public Service District shall only expend revenue produced by the water rates on its water system. IT IS FURTHER ORDERED that the Boone-Raleigh Public Service District file quarterly reports with the Commission on the number, duration and cause of its water outages. The reports shall also report its unaccounted-for water losses. The quarterly report shall be filed for a period of three years from the date this Order becomes final. If the reported unaccounted-for water losses exceed 25%, Boone-Raleigh Public Service District shall also report to the Commission its plans to improve the unaccounted for water rate. If the Utility reports more than one significant water outage a month, it shall also develop and report on a plan to improve its water system to avoid frequent water outages. IT IS FURTHER ORDERED that the matter be removed from the open docket. The Executive Secretary is ordered to serve this Order upon the Commission and its Staff by hand delivery, upon all parties of record who have filed an e-service agreement with the Commission by electronic service and upon all other parties by United States Certified Mail, return receipt requested. Leave is granted to the parties to file written exceptions supported by a brief with the Executive Secretary of the Cornmission within fifteen days of the date of this Order. If exceptions are filed, the parties filing exceptions shall certify that all parties of record have been served the exceptions. If no exceptions are filed, this Order shall become the Order of the Commission, without further action or order, five days following the expiration of the fifieen day time period, unless it is ordered stayed by the Commission. Any party may request waiver of the right to file exceptions by filing an appropriate petition in writing with the Executive Secretary. No such waiver, however, will be effective until approved by order of the Commission. KAG:lc ab Chief Administrative Law Judge 6

7 APPENDIX A Page 1 of 2 BOONE-RALEIGH PUBLIC SERVICE DISTRICT-WATER CASE NO PWD- 19A STAFF-ECOMMENDED RATES-STEP 1 Effective for all bills rendered for a period of 12 months on and after the date the order becomes final APPLICABILITY Applicable within entire territory served METERED RATE Usage charge $ per 1,000 gallons MINIMUM CHARGE No bill will be rendered for less than the following based on meter size: 5/8 -inch meter 3/4 -inch meter 1 -inch meter 1-1/2 -inch meter 2 -inch meter 3 -inch meter 4 -inchmeter 6 -inch meter $ per month $ per month $ per month $ 165 $4 per month $ per month $ per month $ per month $1, per month 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. TAP FEE The following charges are to be made whenever the utility installs a new tap to serve an applicant: 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 violations of rules, nonpayment of bills, or fraudulent use of water. I

8 APPENDIX A Page 2 of 2 LEAK ADJUSTMENT $2.24 per 1,000 gallons is to be used when the bill reflects unusual consumption which can be attributed to eligible leakage on the customer s side of the meter. This rate shall be applied to all such consumption above the customer s historical average usage. MUNICIPAL EXCISE TAX SURCHARGE The municipality listed below, having imposed public utility tax computed on the basis of two percent or revenues from water sales by Boone Raleigh Public Service District water utility within the corporate limits of such municipalities, shall be billed as a surcharge to the customers receiving service within said corporate limits. The water utility is required to collect the utility tax pursuant to West Virginia Code a. Customers receiving water service within the corporate limits of the specified municipality shall pay a surcharge based on the following surcharge rates: Municipality B Town of Whitesville Surcharge Rate - Two percent (2%) of the gross amount billed =TURNED CHECK CHARGE A service charge equal to the actual bank fee assessed to the District up to a maximum of $15.00 will be imposed upon any customer whose check for payment of charges is returned by their bank due to insufficient funds.

9 APPENDIX B Page 1 of2 BOONE-RALEIGH PUBLIC SERVICE DISTRICT-WATER CASE NO PWD- 19A STAFF-RECOMMENDED RATES-STEP 2 Effective for all bills rendered after a period of 12 months on and after the date the order becomes final APPLICABILITY Applicable within entire territory served METERED RATE Usage charge $10.56 per 1,000 gallons ~INIMUM CHARGE No bill will be rendered for less than the following based on meter size: 5/8 -inch meter 3/4 -inch meter 1 -inchmeter 1-1 /2 -inch meter 2 -inch meter 3 -inchmeter 4 -inch meter 6 -inch meter $ per month $ per month $ per month $ per month $ per month $ per month $ per month $1, per month 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. 1 TAP FEE The following charges are to be made whenever the utility installs a new tap to serve an applicant: 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 violations of rules, nonpayment of bills, or fraudulent use of water. If mblic Service Commission

10 APPENDIX B Page 2 of 2 LEAK ADJUSTMENT $2.24 per 1,000 gallons is to be used when the bill reflects unusual consumption which can be attributed to eligible leakage on the customer s side of the meter. This rate shall be applied to all such consumption above the customer s historical average usage. MUNICIPAL EXCISE TAX SURCHARGE The municipality listed below, having imposed public utility tax computed on the basis of two percent or revenues from water sales by Boone Raleigh Public Service District water utility within the corporate limits of such municipalities, shall be billed as a surcharge to the customers receiving service within said corporate limits. The water utility is required to collect the utility tax pursuant to West Virginia Code $8-13-5a. Customers receiving water service within the corporate limits of the specified municipality shall pay a surcharge based on the following surcharge rates: Municipality B Town of Whitesville Surcharge Rate - Two percent (2%) of the gross amount billed RETURNED CHECK CHARGE A service charge equal to the actual bank fee assessed to the District up to 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.