May 2016, Vol. 71 No. 5
Newsline
West Virginia Water Utility Files Infrastructure Replacement Program
West Virginia American Water filed an application with the Public Service Commission of West Virginia (PSC) pursuing approval of an Infrastructure Replacement Program (IRP). An IRP is used to address the national challenge of aging infrastructure by directing additional investment to areas where improvements are needed.
The company is pursuing cost recovery on $32.5 million of its planned $107 million of capital investments in 2016 and 2017 via the proposed IRP, with a separate charge placed on customer bills starting Jan. 1, 2017. If approved, the charge would be calculated as a percentage of the monthly bill, meaning an increase of 1.9 percent or $0.89 per month for the standard residential customer utilizing 3,204 gallons.
The IRP application is modeled after a statue enacted by the West Virginia Legislature in 2015 authorizing the PSC to approve expedited cost recovery of natural gas utility infrastructure projects deemed just, reasonable and in the best interest of the public. This type of recovery mechanism would permit West Virginia American Water to fast-track its water main replacement plans.
According to West Virginia American Water President Jeffrey McIntyre, pre-approved infrastructure replacement programs are recommended by the National Association of Regulatory Commissioners as regulatory practices for water utilities and are currently in place in a number of states.
“We believe the accelerated infrastructure investment proposed in the IRP will strengthen our water system and, over time, create real operational efficiencies and reduce costs long-term for our customers,” McIntyre said.
The proposed plan revolves around seven facility categories including water mains, meters, valves, hydrants, and particular plant, tank and booster station investments in an effort to invest in reinforcing, strengthening and providing resilience to the transmission and distribution system.
The filing outlines the specifics of West Virginia American Water’s plan to invest $16.5 million and includes a comprehensive list of specific infrastructure replacement programs which includes the replacement of more than 22 miles of water main in 2016, as well as hydrants, valves manholes, services and other qualifying projects.
In addition, the proposal includes various protections for consumers counting annual reconciliations, annual caps, cumulative caps and earnings limits. The program’s charges would be calculated annually until the time they are bundled into West Virginia American Water’s rates.
McIntyre explained that an IRP allows for an up-front regulatory review of the company’s proposed infrastructure replacement projects for each calendar year, and then provides a way for customers benefitting from these investments to make small payments each month toward the investments.
“The true benefit of an IRP to our customers is the elimination of large, cyclical rate increases that reflect cost recovery of multiple years of company investments all at one time,” McIntyre said.
In February 2016, the PSC issued a rate order acknowledging its previous use of a historic test year ineffectively sustained West Virginia American Water’s rate base due to a blend of circumstances unique to the company, to which end PSC authorized a rate adjustment to the account for the $150 million the company invested in the time period between its last rate case and the effective date of new rates. Additionally, the order extended the invitation for West Virginia American Water to seek an IRP in a separate filing as a means to convalesce investments in a timely manner, with the goal of positioning the company to continue maintaining and replacing facilities, maintaining and improving service, and securing the capital needed to fulfill its public service mission.
West Virginia American Water recognized the economic challenges faced by some families and offers two assistance programs for their ratepayers struggling to make ends meet. The company also helps fund the West Virginia Utility Assistance Program Dollar Energy Fund, which allows eligible customers the opportunity of one grant per year, per household applied to their water bill. In addition, the utility offers a Special Reduced Rate Residential Service program, providing a 20 percent discount on residential water rates year round for low-income customers whose eligibility is determined by the West Virginia Department of Health and Human Resources.
West Virginia American Water’s IRP application will be reviewed by the PSC, keeping in mind the company’s request for an issued order within a six-month period. www.amwater.com/wvaw/.
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