SCC hears opinions on surcharge plan

Posted on Thursday, March 19, 2015 at 9:20 am

By Sarah Vogelsong / CP Reporter

Caroline County joined with eight other respondents at a public hearing before the State Corporation Commission March 10 in Richmond to argue against a proposal that would allow water and wastewater utilities to levy a surcharge on customers.

The proposal, brought by Virginia American Water Company, Aqua Virginia, and Massanutten Public Service Corporation, is called a rulemaking, and would set a regulatory framework for water and wastewater companies to apply to the SCC to be allowed to impose a water and wastewater infrastructure service charge (WWISC).

The WWISC, Timothy Biller, an attorney for the water companies, argued March 10, is a “logical way to meet a significant need for replacing aging infrastructure.”

Under current SCC regulations, water and wastewater utilities are prohibited from levying such a surcharge on customers. The only way for these companies, whose revenues are monitored and limited by the Commission, to increase the funds to which they have access is to file a petition with the SCC to raise rates. These cases, called base rate cases, typically take up to a year to pass review and include various stages of public input, including public hearings like the one held March 10 and the opportunity for citizens to file written testimony with the Commission.

The water companies’ petition would permit utilities to draw up a “WWISC plan” for the replacement of infrastructure. An attached “WWISC rider” would set the charges that customers would pay to the company to help it recover the costs of its investment.

Describing these costs as “very necessary to protect all of the customers and the safety of the utility systems,” Biller argued that “if a utility were only allowed to recover the cost of infrastructure replacement programs through a base rate, there is a very high likelihood that this would lead to a large increase in rates at a single point in time and could in addition potentially lead to higher costs” because of the need to engage in “expensive” base rate cases more often.

Complicating the case, however, is a question of jurisdiction that dominated much of the more than six-hour hearing March 10.

That question concerns whether the SCC has the authority under the Virginia Code to establish such a regulatory framework, or whether that authority belongs to the General Assembly.

The water and wastewater companies claimed March 10 that the Virginia Code contains no language that limits the SCC’s authority to set up a framework for such a surcharge. In support, Biller cited the Commission’s 1998 approval of “a substantially similar charge” levied by the Roanoke Gas Company.

Other precedent invoked throughout the hearing was the Steps to Advance Virginia’s Energy Plan (SAVE) Act passed by the General Assembly in 2010, which allows natural gas companies to recover certain infrastructure improvement costs.

Caroline County attorney Ann Neil Cosby, who was also representing the Massanutten Property Association and a group calling themselves the Concerned Ratepayers in the Eastern District, argued that the SCC does not have the authority to allow utilities to establish a service charge outside the base rate.

Noting that the SCC can only regulate utilities according to criteria established by the General Assembly, Cosby stated that it if the legislature “had wanted water and wastewater companies to be included in the SAVE Act or to enact separate single-issue ratemaking legislation for the benefit of utilities other than natural gas companies, it could have done so.”

“Clearly it did not,” she pointed out. She further argued that the passage of the SAVE Act indicates that the SCC does not automatically have the authority to permit such charges, since if it does, this legislation would be “redundant.”

Roderick Williams, an attorney representing the Frederick County Board of Supervisors, argued that by approaching the SCC and not the General Assembly to establish the regulatory framework for an infrastructure charge, the water and wastewater companies were attempting to “short-circuit” the process.

Fred Ochsenhirt of the SCC stated that a staff review had concluded that the Commission does have the authority to set up such a framework, but that additional safeguards would have to be built into that framework to ensure that customers were protected.

One significant staff recommendation concerns review of the WWISC plans. While the water and wastewater companies’ proposal includes a public hearing at the initial petition for a WWISC plan and rider, updates to the rider in subsequent years would be subject only to an internal administrative review and would not require a public hearing for approval. Stating that “annual tariff updates should not be an administrative function,” Scott Armstrong, a manager with the SCC’s Division of Utility Accounting and Finance, said that Commission staff were worried that this process “would result in rate increases beyond the public eye.”

The utility companies, however, said that the SCC would be able to set limits on the rider during the initial review, and that overall, “the cost under the WWISC plan will be subject to more, not less, review by the Commission.”

Other staff recommendations included more specific and detailed documentation of infrastructure improvements to be undertaken and the adjustment of WWISC riders depending on the particular cost of service to an area, as Aqua Virginia, for example, divides customers into different rate tiers.

Seven public witnesses, including Western Caroline Supervisor Jeff Black, spoke at the hearing in opposition to the proposal.

Although Biller had earlier contended that “it is beyond the scope of this proceeding to analyze rate design or rate impacts for any specific company or to discuss a particular company’s rate increase history,” the majority of public witnesses expressed the belief that this history was related to the issue at hand.

“For us it is a rate case,” said Catherine Neelley of Palmyra.

Black, also citing the “massive increase in the rates” that Caroline’s Lake Land’Or community has seen over the past 10 years, objected to the surcharge on the ground that residents would be paying more money to repair systems outside of the county, many located hundreds of miles away.

The March 10 hearing is only one step in the process toward a decision in the case. Hearing Examiner Alexander Skarpin, who presided over the proceedings, will review the testimony and post-hearing briefs from all participating attorneys. Skarpin will then make a recommendation to the SCC, which will have final say on the matter.

The surcharge case is one of two concerning water and wastewater that Caroline County is currently fighting. The other, filed by Aqua Virginia this past August, relates to a proposed rate increase that will affect an estimated 6,000 people in Caroline.

Two hearings were to be held on the proposed rate increase at the Community Services Center in Caroline March 18 at 2 p.m. and 7 p.m. and a third hearing is set for the Tyler Building in Richmond March 24 at 10 a.m. Any citizen who wishes to speak on the issue and has not already filed as a respondent in the case may do so.

 

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