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Citizens’ Complaint about Water Pricing in Shenandoah Junction

 

IN THE ADMINSTRATIVE LAW COURT OF KEITH A. GEORGE

Date: May 6, 2002

 

CASE NO.  01-1603-W-PC-CN

 

JEFFERSON UTILITIES, INC.; SJPW, INC, and

SHENANDOAH JUNCTION PUBLIC WATER, INC. Application for certificate of convenience and necessity to transfer Shenandoah Junction Water System to Jefferson Utilities, Inc. ; for interim operating authority; to charge emergency. Interim, and permanent rates; to construct a main; and to enter into various agreements.

 

Howard G. James, PO Box 166, Shenandoah Junction, WV, 25442

George F. Nichols, PO Box 69, Shenandoah Junction, WV, 25442

Robert Lanham, PO Box 22, Shenandoah Junction, WV, 25442

Eleanor Ann Shirley, PO Box 176, Shenandoah Junction, 25442

Douglas Stolipher, 1602 Roper Road, Charles Town, 25414

 

`           EXCEPTION BRIEF BY SHENANDOAH JUNCTION PARTIES, LISTED ABOVE, TO JUDGE KEITH A. GEORGE’S RECOMMENDED DECISION

         ENTERED APRIL 24, 2002

 

Background: 

 

                 Shenandoah Junction is within in one quarter of a mile of the County’s only high school, a currently being constructed new middle school and proximate to several proposed, planned and in construction subdivisions, totaling 1000 homes.  Jefferson County is the third most rapidly growing county in West Virginia.

 

Shenandoah Junction Water Users are a small working and retired community of approximately 224 families.  These families, until the Public Service Commission (PSC) approved  a new water rate increase to a $30.00 minimum with a $4.96 charge per 1000 gallons, had been paying water rates of $3.00 per 1000 gallons with a $6.00 minimum every two months.  This interim rate of $4.96 has now been proposed to increase by the Recommended Decision to a Pre Project rate of $5.68 per 1000 gallons and a Post Project rate of $7.21 per 1000 gallons, with a 3000 minimum gallons bill each month.

 

The sharp rate increases were occasioned by two factors.  One is that Jefferson Utilities was operating at an annual deficit with respect to Shenandoah Junction of $31,844 with an annual revenue of $37,640. 

 

The second factor is that Jefferson Utilities, along with Shenandoah Junction Public Water (SJPW) and Shasta had agreed in a Land Sales Contract of 31 acres, with the Jefferson County School Board Authority, to provide water service from a water tank of 500.000 gallons capacity for increased water flow and pressure for the new schools fire suppression requirements.  This in turn required a new 12 inch main from the Burr Industrial Park to Shenandoah Junction.  It should be noted that the Shenandoah Water Users, at this time were satisfied with the water service and were not in any respect a party to this agreement.

 

Additionally, at TR 51 and TR 52, Lee Snyder of Jefferson Utilities stated that increased water potential to service new subdivisions would be built into the new 12 inch main to extend “future expansion” in “anticipation of growth”.  The additional growth factor was also noted by Judge Keith George when he commented on as EVIDENCE on RECOMMENDED DECISION page 5 last paragraph that, “The 12 inch main is sized for additional growth.”

 

Issues: The Shenandoah Junction Water Users have the following major concerns [ See Stolipher Exhibits No. 4 and No. 5] over Judge Keith George’s recommended water rate increases:

 

Why should Shenandoah Junction Water Users have their water rates unfairly and so sharply increased?

 

The Shenandoah Junction Water User families with a Public Service Commission (PSC) approved Post Project rate of $7.42 over the beginning of the year rate of $3.00 per 1000 gallons will result in an increase of 247 %.  This clearly is a rate that is being applied too fast.  Most importantly, the Post Project rate of $7.42 over the interim Pre Project rate of $5.68 is essentially representative of the share of the cost assigned to Shenandoah Junction Water Users for the new 12 inch water main which they do not require. 

 

Additionally, it should be noted that once a month billing vice bimonthly billing represents an increase for the minimum water user of $24.00 a month or an increase of 400%.

 

Should not the School Board/Seller pay for new water service?

 

JUI has also requested the PSC to approve a 12 inch water main from Bardane to the new ninth grade school which will be funded with a $305,000 bank loan.  The problem is that Shenandoah Junction does not need a 12 inch water main and should not be required by the PSC to bear any portion of the associated cost.  The water main is exclusively required by the school for fire protection, the cost should be borne by the School Board. 

 

Related to the question as to who should pay for New School water is the fact that  the New School thirty acre land Sales Contract  for $210,000.00 between Seller, Shasta Corporation owned by Herb Snyder, and the School Board included several commitments.  See Stolipher Exhibit N0. 2.  One was in regards to the Purchaser being able to obtain utilities.  Another contingency was in regards to the Purchaser being able to obtain “…an agreement for service from a water utility owning a water tank which shall have a capacity of at least five hundred thousand gallons of water [for fire protection] …”    The Shenandoah Junction Water Users were in no way a party to the school land sale and in no way benefited from this sale.  Consequently, the Shenandoah Junction Water Users, should now in no way be required by the PSC in a water rate increase to assist in paying for a contract contingency that did not include them as an interested Party.  It is of interest to note that the anticipated cost of the proposed 12 inch water main to provide the required fire protection at $305,000 far exceeds the land sale cost of $210,000

 

It should also be noted that the Sales Contract specified that the “…water service utility owning a water tank…” should provide the water service.  It is not believed that Jefferson Utilities Inc. does in fact at this time own the Bardane Water Tank located in Burr Industrial Park. 

 

Finally, the School Board Authority should have been made a party to the

water rate increase hearing as it was the school boards purchase of the land and negotiations with Shasta and Shenandoah Junction Public Water that resulted in the requirement for a 12 inch water main. 

 

Why such an over sized water main and why should future growth be subsidized by current water users?

 

Another, problem with the requirement for a 12 inch main is that the pipe is considerably oversized for even a new school situation.  JUI did not state to the PSC that JUI had earlier agreed to provide water to a nearby proposed Harvest Hill 392 home subdivision as well as a 192 home Daniel’s Forest subdivision with an eventual build-out in both subdivisions approaching 1000 homes.  Further, in the commitment of JUI to provide water service to Harvest Hill Subdivision, JUI stated that “The Shenandoah Junction System has ample pipe size and source capacity to serve the approximate 400 lots proposed for this project.”  See Stolipher Exhibit No. 3.  So the 12 inch water main as justified by JUI is apparently only a New School requirement.

 

Since the City of Charles Town is only requiring a 12 inch water main to service the new 3200 home Huntfield subdivision and several schools, the question again is how many new users are eventually planned beyond Harvest Hill, which does not need a 12 inch water main?  Further, should current customers of JUI/SJPW subsidize new subdivisions whose water service costs could and should be borne by the developers and the new occupants?  It should also be noted that the planned sale cost of new homes in Harvest Hill has been stated to be around $225,000 and the homes in Shenandoah Junction are estimated to have an average value of $85,000.  This is another point of unfairness under PSC regulations that requires current users to fund water service extensions

 

How much water service debt should the PSC endorse and should not water service in Jefferson be managed by the PSD? 

 

It is also noted that JUI does not own the Bardane Water Tank, and proposes to buy SJPW, where water treatment is currently uncertified,  for $1.00 with “…substantial debt obligations.”  The propriety of the PSC authorizing JUI to construct a 12 inch water main with the necessity for acquiring a $305,000 bank loan, in addition to servicing the current debt load for both JUI and SJPW is questionable.  Moreover, should JUI be approved to purchase the Bardane Water Tank, this would result in another substantial debt obligation by JUI of $300,000.00 Should the PSC permit a water service company to over-extend water services to the possible long term detriment of the entire County-wide public water system?

 

Additionally, Judge Keith George noted in the RECOMMENDED DECISION page 8 last paragraph that there was additional debt totaling $180,000 now owed by JUI to Shasta Corporation.  This debt was not considered in the RECOMMENDED DECISION and pending water rate increases.  Should this debt be approved as Capital Improvements the Shenandoah Junction would have their water rates raised again by approximately $5.00 per month

 

Related to the significant debt load for Jefferson Utilities discussed above is the possibility of new state-wide mandated additional water treatment filtration requirements.  These new costs are currently unknown, but could be expensive and another unscheduled debt burden for Jefferson Utilities and perhaps an additional cost to the already burdened water user. 

 

Moreover there are four other public water services owned by Jefferson Utilities that have serious debt and operational problems. This Court is aware of these problems in the PSC denial of Jefferson Utility Inc., CASE NO. 00-1492-W-PC of 2 July 2 2001, proposing to provide water service to Huntfield.  See Stolipher Exhibit No. 6.  Again the question is should not the public interest be protected in assuring that a privately owned public service company is on sound financial ground and will be able to provide utility service for the indefinite future?  Should not the PSC require the Jefferson County PSD to centrally manage and operate the entire public water system for Jefferson County for the benefit of all it’s citizens under some sort of combined Private, Municipal, and County owned water service facilities?

 

Where is the water?

 

Finally, the availability of ground water in this area of the County is questioned.  Currently, there is no water study available that would substantiate ground water resources and at what depth, or that would access the impact of growth and the associated lowering water table on the other 15,000 wells in the County.  The PSC should be apprised of ground water availability before approving the construction of a 12 inch water main along with the water to fill it up.  Should not ground water resource availability be considered when the PSC approves significant increases in ground water extraction and distribution requirements? 

 

Additionally, the Charles Town Water Service has considerable under utilized water distribution capacity that is upgradable to three times it’s current potential.   Charles Town can provide water service some twenty miles out.  Should not the PSC strongly consider more utilization of Charles Town’s river water instead of drilling  more ground water wells to meet rapidly expanding residential growth requirements?

 

Should not the PSC authorize new hook up or "Capacity Charges" as well as Two Tier Water Rates to cover the costs of water service extensions and unusual situations?

 

Municipalities in Jefferson County are authorized Capacity Charges for new water service hook ups and Private Water Service Utilities are not.  The unfairness of a small water service community such as Shenandoah Junction subsidizing expensive new home subdivisions should be obvious. The ability for a water service utility to pass on the costs of water service extensions is a reasonable cost to either the developer or home owner.  Why should a Private Water Service Utility not be authorized to charge water service hookups as a municipality is authorized to do?

 

Further, there are unusual situations where the PSC should consider a Two Tier Water Rate structure.  Clearly the New School should carry the burden of expenses related to the requirement for fire suppression and a 12 inch water main.  Also, there are other situations in Jefferson County, not related to this case where water service could be provided, with difficulty and increased costs.  The authorization of justified Two Tier Water Rate Structures would go a long ways towards providing communities satisfactory water services that are either lacking adequate ground water resources or experiencing poorly designed and/or managed systems.

 

Summary:

 

The entire debt load of JUI with respect to proposed Shenandoah Junction water rate increases needs to be reconsidered in total and not piecemeal by the PSC.  The position of the Shenandoah Junction Parties is that the $180.000 debt owed by JUI to Shenandoah Public Water and Shasta Corporation were essentially chargeables to operating expenses and a normal cost of doing business.  This debt should in no way be restructured as a Capital Improvement charge to be paid for by Shenandoah Junction Water Users in a subsequent water rate increase.

 

Shenandoah Junction Water Users were not a party to the land sale by Shasta Corporation and are satisfied with the current water service provided by JUI.  The requirements for a 12 inch water main were occasioned solely by the Land Sales Contract between Shasta Corporation and the School Board Authority and the desire of JUI to build additional potential into the pipeline to extend water service to new subdivisions.  Shenandoah Junction Water Users should only pay for the fair cost of water services currently being provided.

 

The provision of Jefferson County adequate water service by JUI to Shenandoah Junction and other private system water customers, at reasonable costs is a major problem.  This unsatisfactory situation could in large part be corrected by authorization of Capacity Charges and a Two Tier Water Rate Structure.

 

Additionally, the growing problem of potable water, as well as available ground water is a major problem due to land use and rapid growth.  Clearly the PSC should consider requiring the Jefferson County PSD to take on new responsibilities for central water management of all municipal, county and privately owned public water services. 

 

Recommendations:

 

That the PSC should fix the final Shenandoah Junction water rate increase at the current interim level of $4.96 per 1000 gallons with a $30.00 per month minimum. Further, that JUI be advised that the presented debt of $180,000, as a consequence of past operating expenses, between JUI, Shenandoah Public Water System and Shasta Corporation, is not chargeable as Capital Improvements and payable by increased customer water rate charges.

 

That the PSC authorize a JUI second tier water rate for the New School in consideration of required 12 inch main and fire suppression considerations not required by Shenandoah Junction. 

 

That the PSC mandate the Jefferson County PSD new responsibilities for central water management of all municipal, county and privately owned water services.

 

That the PSC authorize Private Water Company Capacity Hook Up Charges and Two Tier Water Rates for improving unusual water service situations.

 

Howard G. James                                                               George F. Nichols

PO Box, 166                                                     PO Box 69

Shenandoah Jct., WV, 25442                              Shenandoah Jct., WV, 25442

 

Robert Lanham                                                                  Eleanor Ann Shirley

PO Box 22                                                                         PO Box 176

Shenandoah Jct., WV, 25442                              Shenandoah Jct., WV, 25442

 

Douglas Stolipher

1602 Roper Road

Charles Town, WV, 25414