No rate hike for Warm Springs sewer customers

Warm Springs sewer system customers won’t be seeing a rate increase or surcharge added to their bills any time soon, following an August 24 decision by the West Virginia Public Service Commission to deny the cost hikes.

The denial questioned figures used by the Warm Springs Public Service District as well as some of the expenditures that Warm Springs officials have approved.

Last November, Warm Springs officials asked the state agency, which oversees public utilities and their rates, for a 3% rate hike plus a temporary add-on charge.

The Warm Springs Public Service District serves 1,450 customers around the Berkeley Springs area and in Great Cacapon.

Late bond payments
State utility officials first denied the rate request in March, but Warm Springs officials appealed the decision.

Sewer system officials argued that shortfalls in revenue from the loss of up to 50 customers, and higher operational costs, had led the sewer district to miss several payments to bond holders.

The rate case file said that by June 2011, the department’s delinquency to the Municipal Bond Commission was $102,935, according to Warm Springs manager Rodney Hovermale.

Reasons for denial
In her decision, Administrative Law Judge Meyishi Pearl Blair pointed to several facts that influenced the denial of the rate hike.

She noted that 10 sewer customers and two county commissioners spoke against the rate hike during a June public hearing that was attended by about 40 sewer system customers.

In addition, state officials received seven letters and a petition with 63 signatures opposing the increase.

Judge Blair said the financial reports that Warm Springs officials used to show a revenue shortage hadn’t included a full year of income from the last rate increase – a 13.4% hike that took effect in December 2009.
The judge also highlighted the fiscal decisions of the sewer department as a source of trouble.

She cited the fact that Warm Springs officials had used a surplus of payroll money to fund pay raises for employees rather than reduce expenses, as was recommended by State Public Service Commission staff.

The judge said state commission staff also disagreed with some of Warm Springs’ calculations of debt service ratios and how much future payments on that debt might have to be.

“If the District’s position were to be adopted, as pointed out by Staff, the District’s customers will be paying more than $10,000 more in rates than would be necessary,” Blair said.

House expense unwarranted
The judge’s decision weighed in on several points of disagreement between Warm Springs officials and the state regulatory staff.

One was whether to consider $3,800 spent on a private residence owned by the sewer department as an operational cost.

Judge Blair said it was not, and noted that the house in question was purchased after a dispute over a right-of-way issue with the intention of being immediately resold.

“At this juncture, if allowed to expense the amount ($3,758), the rate payer will be incurring charges twice as it is already paying for the loan associated with the purchase of the house,” according to Blair’s ruling.

Judge Blair recommended that the sewer department review the asking price for the property and consider dropping the price, in light of the real estate market.

Another alternative, she said, was for the Warm Springs sewer system to use the property for its own offices, in lieu of paying rent to Town of Bath.