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PUBLIC SERVICE COMMISSION

OF WEST VIRGINIA

CHARLESTON

CASE NO. 04-0095-WS-S-CN

CITY OF CHARLES TOWN SEWER DEPARTMENT

_____________________________________________________________

BRIEF OF CITY OF CHARLES TOWN

______________________________________________________________

Filed by:

Hoy G. Shingleton, Jr.,

Law Offices of Hoy Shingleton, L.C.

Attorney for the City of Charles Town

115 Aikens Center, Suite 24

Martinsburg, West Virginia 25401

304-262-4773

Dated: September 9, 2004

TABLE OF CONTENTS

Page No.

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. CHARLES TOWN SHOULD BE ISSUED A CERTIFICATE

OF CONVENIENCE AND NECESSITY TO MAKE

THE PROPOSED IMPROVEMENTS TO ITS WASTE

WATER TREATMENT PLANT . . . . . . . . . . . . . . . . . . . . . . . 9

B. CHARLES TOWN OBJECTS TO STAFF'S PROPOSAL

THAT THE AMENDMENT TO THE 1988 SEWER SERVICE

AGREEMENT BE APPROVED FOR A PERIOD OF NOT

MORE THAN ONE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..10

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..11

INTRODUCTION

The City of Charles Town. ("Charles Town") filed an application for a certificate of convenience and necessity with the Public Service Commission (the "PSC") to make improvements to Charles Town's Waste Water Treatment Plant (the "Charles Town Plant").

The Charles Town Plant treats sewerage generated by customers of the sewerage system owned by Charles Town as well as the sewerage systems owned by the Corporation of Ranson ("Ranson") and the Jefferson County Public Service District ("JCPSD"). The three utilities have been operating their sewerage systems, with all sewerage treated at the Charles Town Plant, pursuant to a 1988 Sewer Service Agreement (the "Agreement").

In its original application Charles Town intended to increase the capacity of its treatment plant from 1,200,000 gpd to 1,700,000 gpd by construction of an effluent line from the treatment plant to the Shenandoah River. At the present time the treated effluent from the Charles Town Plant discharges to Evitt's Run.

After the application was filed Charles Town was notified by the West Virginia Division of Environmental Protection ("DEP") that, as a result of a change in interpretation of regulations by DEP, Charles Town would not gain any additional capacity by diverting the discharge of effluent from Evitt's Run to the Shenandoah River. DEP also required the installation of additional blowers and a digester to the existing treatment plant. As a result of these required changes by DEP Charles Town contacted VIEW Engineering, which had been retained by Charles Town as project engineer, to revise the construction plans. Those plans were completed in late May, 2004, and Charles Town then amended its application with the PSC.

As a result of legislative changes made in the 2004 general regular session of the Legislature, and as a result of further modification of the interpretation of the regulations by DEP, Charles Town was notified by DEP in early August, 2004, that the effluent discharge line to the Shenandoah River would no longer be required. The proposed plant modifications of additional blowers and a digester would allow capacity to be increased to 1,700,000 gpd while still discharging treated effluent to Evitt's Run. This reduction in scope of the project led Charles Town to file a second amendment to its application, eliminating the effluent line to the Shenandoah River.

By Orders entered by the PSC, Jefferson County PSD, the Corporation of Ranson, Huntfield, L.C. (a large developer within the corporate limits of Charles Town) and Mr. Paul Burke were granted Intervenor status.

FACTS

Charles Town is a certificated utility, authorized by the PSC to operate a 1,200,000 mgd waste water treatment plant in Jefferson County, West Virginia. Jefferson County has recently experienced an increase in the rate of growth in its population, driven by its proximity to the greater Washington/Baltimore metropolitan area.

In December, 2003, the Corporation of Ranson was notified that several projects submitted to the West Virginia Bureau of Health for approval of sewer line extensions within Ranson would not be approved by the Bureau of Health until issues relating to capacity at the Charles Town Plant were resolved. On February 10, 2004, Charles Town was informed by a letter from DEP and the Bureau of Health that the Charles Town Plant was deemed to be treating an average of 1,050,000 gpd and would have additional capacity of only 150,000 gpd before further expansion was required.

Evidence at the hearing clearly showed a demand for additional capacity far exceeding the 150,000 gallons of remaining capacity at the plant. City Manager Jane Arnett testified that, since February 10, 2004, approximately 30,000 - 35,000 gallons of additional capacity had been permitted in the form of additional sewer connection. She also testified that, for safety reasons Charles Town wanted to retain a buffer of 20,000 gpd at the treatment plant. Thus, as of August 24, 2004 (the hearing date) there remained only approximately 95,000 - 100,000 gallons of capacity at the existing plant. Assuming 180 gallons of consumption for an equivalent dwelling unit ("EDU"), ( a standard used to define the average consumption of a single family residence), there remains enough capacity in the existing plant for slightly more than 500 additional EDUs.

Several exhibits were introduced indicating the potential for growth within the service area of the Charles Town Plant. Charles Town Exhibit 2 showed a potential future demand of over 10,500 EDUs. JCPSD Exhibit 1 showed a potential demand of over 9,900 EDUs. Ranson Exhibit 1 showed a total potential demand solely within the corporate limits of Ranson of over 3,300 EDUs. Burke Exhibit 3 showed development projects of over 3,100 EDUs have received either preliminary plat approval or final plat approval by the various planning boards within Jefferson County having jurisdiction over those projects. A proposed increase in capacity of 500,000 gpd will result in the ability to treat sewerage from 2,778 additional EDUs. Even Mr. Burke, who has objected to the granting of a certificate to Charles Town, concedes by his own exhibit that the remaining capacity at the treatment plant, coupled with an increase in capacity by construction of this project, will be consumed by projects which have already received either preliminary or final plat approval! The evidence clearly shows the necessity for this project.

This project will not require a rate increase for the Charles Town customers nor will it require a rate increase for customers of either Ranson or JCPSD. The total project budget is $2,500,000.00.

This includes, in addition to constructions cost contingencies contained within the itemized construction costs, a general project contingency of $510,000.00. The annual debt service for revenue bonds to be issued by Charles Town with a twenty year maturity and an average interest rate of 5.5% is $203,300.00 per year. Pursuant to a proposed amendment to the 1988 Sewer Service Agreement. Charles Town will issue $2,500,000.00 of revenue bonds, to be paid by the three utilities as follows:

• For every additional EDU connected to the collection system using the treatment plant after the issuance of the proposed debt the three utilities will contribute the sum of $6.10 per month to a fund to be used for payment of principal and interest of the bonds.

• The utilities have entered into an agreement to assess a capacity improvement fee of $1,127.00 per equivalent dwelling unit upon all new customers using the Charles Town Plant. Charles Town has adopted its fee by ordinance. Ranson has adopted the capacity improvement fee by ordinance along with a general rate increase. JCPSD has filed an application with the PSC to approve the capacity improvement fee (Case No. 03-1490-T-PC). The Administrative Law Judge in that case recommended approval of the fee; however, Staff of the Commission appealed the ruling of the ALJ and the matter is presently pending before the Commission. The Commission recently issued an Order approving a similar capacity improvement fee for the Berkeley County Public Service Sewer District and it is anticipated by Charles Town that the fee will be approved for use by JCPSD. Capacity improvement fees collected by the three utilities shall be used to pay principal on the revenue bonds. The bonds to be issued by Charles Town shall be fully callable without any penalties. Witnesses for Charles Town testified that it was the intent of Charles Town to pay principal of the bonds from capacity improvement fees as quickly as those fees are generated by new growth. John Kunkle, a Certified Public Accountant testifying on behalf of Charles Town, testified that the bonds would be paid in full in slightly less than ten years at an assumed consumption of 225 EDUs per year and in less than five years at an assumed rate of growth of 500 EDUs per year (see Charles Town Exhibit 12).

• Charles Town has negotiated a proposed Debt Service Guarantee Agreement with Huntfield, L.C. ("Huntfield"). Huntfield is a large development within the corporate limits of Charles Town that at completion is expected to contain approximately 3,200 homes together with approximately 200,000 square feet of retail and commercial space. Contained within the Huntfield project will also be the new South Jefferson High School and land for an additional middle school. Pursuant to the proposed Guarantee Agreement Huntfield will pay to Charles Town any shortage in debt service not realized from payments to be made pursuant to Paragraphs A and B above. Huntfield's guarantee will be secured by an Irrevocable Letter of Credit to be issued by M & T Mortgage Corporation.

From a technical standpoint, the addition of the blowers and the digester will greatly enhance the operating efficiency of the existing plant. As a result of the installation of the improvements the total pounds of pollutants to be discharged into the receiving stream will decrease even though the capacity of the Plant will increase by 500,000 gpd! No evidence was introduced at the hearing to contradict these facts.

In the Joint Final Staff Memorandum, Staff recommended approval of the project,

the proposed financing and the proposed agreements, subject to the following conditions:

1. Charles Town must receive from DEP a new NPDES Permit Modification establishing new discharge criteria for the Plant.

2. Receipt by the Commission from M & T Mortgage Corporation of a revised Commitment Letter to provide an irrevocable $700,000.00 Letter of Credit to Charles Town to secure Huntfield's obligations under the Debt Service Guarantee Agreement (the original letter filed with the Commission was for an Irrevocable Letter of Credit of $1,700,000.00. Because of the reduced cost of the project the amount of the letter of credit has been reduced).

3. Staff also recommended approval of the proposed revision to the 1988 Sewer Service Agreement only for a limited period of up to one year or until a sewer resale rate is implemented by the City of Charles Town.

ARGUMENT

A. CHARLES TOWN SHOULD BE

ISSUED A CERTIFICATE OF CONVENIENCE AND

NECESSITY TO MAKE THE PROPOSED IMPROVEMENTS

TO ITS WASTE WATER TREATMENT PLANT The facts in this case prove, without any contradiction by any party (including Mr. Burke), the need for this project. By Mr. Burke's own admission, the remaining capacity at the treatment plant, combined with the increase in capacity which will result from the proposed improvements, will be consumed by projects which have already received either preliminary plat approval or final plat approval from the various planning commissions operating within the Charles Town Plant service area. Additional enlargements of the Charles Town Plant will be necessary in the future. However, this application is only for an increase in capacity of 500,000 gpd.

The proposed improvements will be financed in a manner which will not require any rate increase for the customers of any of the three utilities. Moreover, the proposed improvements will result in an improvement of water quality in the receiving stream, Evitt's Run. Thus, Charles Town has met its burden of proof that the project is convenient to the public.

B. CHARLES TOWN OBJECTS TO STAFF'S PROPOSAL

THAT THE AMENDMENT TO THE 1988 SEWER

SERVICE AGREEMENT BE APPROVED FOR A PERIOD OF NOT

MORE THAN ONE YEAR

Charles Town is sensitive to Staff's concerns regarding the 1988 Sewer Service Agreement and the proposed amendment to that agreement. The original agreement, and the amendment, are an attempt by the three utilities to deal with situations as they exist in Jefferson County. Although the terms of the agreement may be unorthodox to the Staff and may in fact be unique to similar operational situations within in other parts of West Virginia, the parties have lived under this agreement for sixteen years. Revenue bonds have been issued by all three utilities based upon the existence of this agreement. Although all three of the parties have expressed frustration with the agreement, Charles Town believes the parties will continue to work toward solutions beneficial to all parties to the agreement. However, the imposition of a one year deadline may do more harm than good.

Charles Town believes that no language should be contained within the Order concerning such a deadline. The Commission has the inherent power, at any time, to open a general investigation on its own motion to look into any matters concerning public utilities in West Virginia, including the 1988 Agreement and the proposed amendment. If the Court is of the opinion that some type of language should be included in an Order granting a certificate to Charles Town, the Order should state the proposed amendment is approved, subject to continuing jurisdiction by the Commission.

CONCLUSION

For the reasons stated herein, the Commission should grant a certificate of convenience and necessity to Charles Town to make improvements to its Charles Town waste water treatment plant.

Respectfully Submitted,

City of Charles Town

By Counsel

___________________________________________

Hoy G. Shingleton, Jr. WVSB #3378

Law Offices of Hoy Shingleton, L.C.

115 Aikens Center, Suite 24

Martinsburg, West Virginia 25401

304-262-4773

shinglet@adelphia.net

September 9, 2004

CERTIFICATE OF SERVICE

I, Hoy G. Shingleton, Jr., counsel for the City of Charles Town, do hereby certify that a

copy of the foregoing Brief of the City of Charles Town has been served upon the following by first class mail, postage prepaid, this 9^th day of September, 2004:

Ron E. Robertson, Jr., Staff Attorney

Public Service Commission of WV

201 Brooks Street

Charleston, West Virginia 25323

James V. Kelsh, Esq.

Law Offices of Robert R. Rodecker

Attorney for Jefferson County Public Service District

300 Summers Street Suite 1230

Charleston, West Virginia 25337

Mr. Paul Burke

PO Box 1320

Shepherdstown, WV 25443

Georgiana M. Pardo, Esq.

Counsel for Huntfield, L. C.

44084 Riverside Parkway, Suite 300

Leesburg, VA 21076-5102

David C. Glover, Esq.

Counsel for City of Ranson

Waters, Warner & Harris, PLLC

PO Box 1716

Clarksburg, WV 26302-1716

___________________________________

HOY G. SHINGLETON, JR.