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Headline: Water fix?; ; utility watchdog opposes plan

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Publish Time: 11:45 p.m. Saturday

Intro text:

CHARLESTON, W.Va. -- West Virginia American Water has proposed spending more than $11 million to replace more than 240 water main pipes in Kanawha and Putnam counties.

The water company would pay for the projects through a quarterly surcharge tacked onto customers' bills. The utility has asked the state Public Service Commission to approve the new funding method -- called a Distribution System Improvement Charge.

The plan would spare customers from "sticker shock" -- large rate hikes every year and improve water service, the utility said. The revenue generated by the surcharge would go directly to replace aging water pipes -- some more than 70 years old.

"Delaying infrastructure replacement projects will actually result in more costly problems down the road," said Wayne Morgan, president of West Virginia American Water. "Making the improvements sooner rather than later will actually save the company, and our customers, money in the long term."

Not everyone is sold on the new approach.

The PSC's Consumer Advocate Division plans to oppose the water company's proposal, which shifts the risk of the company's investment in water system improvements from shareholders to customers, said Byron Harris, who heads to division.

"I don't think this is a good idea," Harris said. "If utilities had their way, they'd get all their costs back through an automatic surcharge. They want to mask their ever-increasing prices by doing it a little bit of the time." 

In March 2009, the PSC directed West Virginia American Water to come up with a new way to finance water projects.

Last December, the water company submitted just such a plan. In August, the PSC rolled the proposal into the water company's separate request to raise customers' water rates by 15 percent this year.

In its surcharge filing, West Virginia American Water included a "priority list" of 423 projects to replace water mains in 11 counties. Total price tag: $25.1 million.

About 57 percent of the projects -- 263,290 feet of water pipe -- would be in Kanawha and Putnam counties, and nearly half in the Charleston area. Huntington has the next highest share of water projects -- 12 percent.

"The reason so many of these projects are in the Charleston and Huntington areas is that the water infrastructure in these cities is among the oldest in the West Virginia American system," said Kelley Gillenwater, a company spokeswoman. "Also, most of our customers are in the Kanawha Valley and Huntington areas."

To pay for the improvements, West Virginia American Water has proposed raising customers' monthly bills by 78 cents a month at the start.

Any rate increases tied to the new funding program would be capped at 7.5 percent of the amount billed to customers. The surcharge would appear as a separate line item on customers' bills. 

Under the proposal, the water company would only recover the costs of new water mains after the utility completed the project. The PSC would review the increase, and the surcharge would not become effective for another 60 days. 

The program also would be subject to annual audits.

Morgan said the smaller rate increases would allow the company to postpone larger rate hike requests with the PSC.

"West Virginia American Water strives to keep rates as low as possible, but we also owe it our customers to maintain our water delivery system," Morgan said. "Gradual, quarterly rate increases should be easier on customers than the larger rate increases associated with less frequent general rate filings." 

A better-maintained water system would have fewer service interruptions and limit property damage from water main breaks, Morgan said. Also, new water mains would lead to improved water pressure and flow, he said.

"Having a [Distribution System Improvement Charge] program should accelerate the replacement West Virginia American Water's aging infrastructure," Morgan said.

The National Association of Regulatory Utility Commissioners has endorsed such programs.

Water utilities in several states outside West Virginia -- including Pennsylvania, Ohio, Delaware, California, Connecticut, Indiana, Illinois, Missouri and New York -- already use the alternative surcharge approach to pay for water system improvements.

West Virginia American's priority list also includes water main projects in Princeton, Montgomery, Weston, Gassaway, Bluefield, Bluestone, Madison, Salt Rock and Webster Springs. The company hopes to replace 482,000 feet of water pipe.

"As time goes by, additional projects will be identified and may take priority over others," Morgan said. "We expect to have to revise and update the list periodically."

Among the state's largest water providers, West Virginia American has the highest water rates, followed by Fairmont, Lewisburg and Grafton.

West Virginia American Water customers pay an average $48.36 for 4,500 gallons of water -- the typical amount a household might use in a month.

Reach Eric Eyre at erice...@wvgazette.com or 304-348-4869.