Pennsylvania
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
Pennsylvania Public Utility Commission : R-2013-2355276
Office of Consumer Advocate : C-2013-2362470
Office of Small Business Advocate : C-2013-2364641
Brian L. Casper : C-2013-2364664
Dawn B. Spielvogel : C-2013-2364692
Robert Redinger : C-2013-2364773
Rita Sherman : C-2013-2366095
Guy & Nedra Visconti : C-2013-2367036
Russell Vankoughnet : C-2013-2367041
Doris Miller : C-2013-2369063
Jon & Dorothy Pichelman : C-2013-2369095
Jane Neufeld : C-2013-2369464
Georgia L. Dicko : C-2013-2369925
Carly J. Dunn : C-2013-2370649
William B. Kazimer : C-2013-2372396
S. Stockton Alloway : C-2013-2366239
Thad Shirey : C-2013-2372641
Paul Trizonis : C-2013-2379466
:
v. :
:
Pennsylvania-American Water Company :
RECOMMENDED DECISION
Before
Angela T. Jones
Darlene D Heep
Administrative Law Judges
TABLE OF CONTENTS
|I. |HISTORY OF THE PROCEEDING |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |1 |
| | |. . . | |
|II. |DESCRIPTION OF THE COMPANY |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |7 |
| | |. . . | |
|III. |PUBLIC INPUT HEARINGS |. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .|8 |
| | |. . . | |
| |A. Public Input Hearing Pittsburgh |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|9 |
| | |. . | |
| |B. Public Input Hearing Washington County |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|9 |
| | |. . | |
| |C. Public Input Hearing Camp Hill |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|12 |
| | |. . | |
| |D. Public Input Hearing Scranton |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|12 |
| | |. . | |
| |E. Public Input Hearing Stroudsburg |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|14 |
| | |. . | |
| |F. Public Input Hearing Reading |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|15 |
| | |. . | |
| |G. Public Input Hearing East Fallowfield |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|16 |
| | |. . | |
|IV. |TERMS AND CONDITIONS OF THE PROPOSED SETTLEMENT |. . . . . . . . . . . . . |19 |
| |A. Principal Terms |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|19 |
| | |. . . . | |
| |B. Public Interest Considerations |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|25 |
| | |. . . | |
| |C. Additional Terms and Conditions |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|26 |
| | |. . . | |
|V. |DISCUSSION |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|26 |
| | |. . . . | |
| |A. Applicable Law |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|26 |
| | |. . . . | |
| |B. Analysis |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|29 |
| | |. . . . . | |
| |1. Whether PAWC Current Rates Should be Increased |. . . . . . . . . . . . . . . . . . . .|29 |
| | |. | |
| |2. Consideration of Joint Settlement |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |31 |
| | |. . . | |
| |a. Comments in Opposition | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |32 |
| | |. . . | |
| |(1) Alloway Objection |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |32 |
| | |. . . | |
| |(2) Kazimer Objection |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |35 |
| | |. . . | |
| |(3) Shirey Objection |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |36 |
| | |. . . | |
| |b. Comments in Support |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|36 |
| | |. . . | |
| |(1) PAWC |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|37 |
| | |. . . . | |
| |(2) I&E |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|37 |
| | |. . . . | |
| |(3) OCA |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|38 |
| | |. . . . | |
| |(4) OSBA |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|39 |
| | |. . . . | |
| |(5) CEO |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|39 |
| | |. . . . | |
| |(6) PAWLUG |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |40 |
| | |. . . . | |
| |(7) Inactive Participants |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |40 |
| | |. . . | |
| |c. Statements in Non-Opposition |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|41 |
| | |. . | |
| |(1) PWSA |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|41 |
| | |. . . . | |
| |(2) Active Pro-Se Complainants |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|42 |
| | |. . | |
| |(3) U.S. Steel Corporation |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|43 |
| | |. . | |
| |d. Additional Considerations |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|44 |
| | |. . | |
| |(1) Semi-Annual Information Sessions for Coatesville Service Issues |. . . . |44 |
| |(2) Amity Township Public Fire Hydrants |. . . . . . . . . . . . . . . . . . . . . . . .|44 |
| | |. | |
| |(3) Changes to Commission Approved Settlements |. . . . . . . . . . . . . . . . . .|45 |
| |3. Disposition |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |47 |
| | |. . . . . | |
|VI. |CONCLUSIONS OF LAW |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |47 |
| | |. . . . | |
|VII. |ORDER |. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .|48 |
| | |. . . . . | |
APPENDIX
I. HISTORY OF THE PROCEEDING
On April 30, 2013, Pennsylvania American Water Company (PAWC or Company) filed with the Pennsylvania Public Utility Commission (PUC or Commission) Supplement No. 279 to Tariff Water – Pa. P.U.C. No. 4 and Original Tariff Wastewater Pa. P.U.C. No. 15 to request approval of changes in water and wastewater rates based upon a net overall operating revenue increase of approximately $58.6 million per year or 10.1% over the amount of annual revenues at present rates. The tariffs were to become effective June 29, 2013.
A Joint Settlement was reached prior to the technical evidence hearing. This Recommended Decision approves the Joint Settlement with suggested modifications. The suggested modifications are not recommended to modify the Joint Settlement. We are in no way recommending that the Joint Settlement be modified. Rather, we are offering ideas that PAWC may consider when implementing the Joint Settlement.
This matter was filed pursuant to Act 11, 66 Pa.C.S. § 1311(c) which was enacted on February 14, 2012.[1] Act 11 enabled a water and wastewater operation under a single corporate entity to request in a rate filing allocation of a portion of the wastewater cost of service to the entire water and wastewater customer base. PAWC proposed approximately $9.1 million of the wastewater cost of service to be allocated to the entire water and wastewater customer base.
The Office of Consumer Advocate (OCA) filed a formal complaint and Public Statement on May 9, 2013. On May 20, 2013, the Office of Small Business Advocate (OSBA) filed a formal complaint along with a Public Statement. The Commission’s Bureau of Investigation and Enforcement (I&E) entered a formal appearance on May 22, 2013.
On June 13, 2013, the Commission suspended the effective date of the tariffs until January 29, 2014 or until the Commission rules otherwise. The Commission also assigned Administrative Law Judges (ALJs) Angela T. Jones and Darlene Davis Heep to hold a hearing and prepare a Recommended Decision for the Commission’s review and approval. Particularly, the ALJs were directed to institute an investigation to:
1) determine the lawfulness, justness, and reasonableness of the rates, rules, and regulations contained in the proposed Supplement No. 279 to Tariff Water-Pa. P.U.C. No. 4 and the proposed Original Tariff Wastewater-Pa. P.U.C. No. 15.
2) consider the lawfulness, justness, and reasonableness of the Respondent’s existing rates, rules, and regulations, culminating in a Recommended Decision. Pennsylvania Public Utility Commission v. Pennsylvania-American Water Company, Docket Number R-2013-2355276, (Order, June 13, 2013).
On June 13, 2013, PAWC filed revised tariffs for water and wastewater services to go into effect on January 29, 2014, which is the end of the suspension period for the Commission’s investigation.
Motions to Intervene were filed by the Commission on Economic Opportunity (CEO), U.S. Steel Corporation, the Pittsburgh Water and Sewer Authority (PWSA), and the Pennsylvania American Water Large Users Group (PAWLUG). All Motions to Intervene were unopposed and granted.
There are 15 pro se complainants.[2]
A prehearing conference convened on June 27, 2013. The following parties were present and participated at the prehearing conference in Philadelphia or telephonically from Harrisburg:
1. Pennsylvania-American Water Company (PAWC or Company):
Susan Simms Marsh, Esquire
Anthony C. DeCusatis, Esquire
Brooke E. McGlinn, Esquire
2. Bureau of Investigation and Enforcement (I&E):
Allison C. Kaster, Esquire
Heidi Wushinske, Esquire
3. Office of Consumer Advocate (OCA)
Christine Maloni Hoover, Esquire
Candis Tunilo, Esquire
Brandon Pierce, Esquire
4. Office of Small Business Advocate (OSBA)
Elizabeth Rose Triscari, Esquire
5. United States Steel Corporation (US Steel)
Barry A. Naum, Esquire
6. Commission on Economic Opportunity (CEO)
Joseph L. Vullo, Esquire
7. Pittsburgh Water and Sewer Authority (PWSA)
Thomas T. Niesen, Esquire
Charles E Thomas, III, Esquire
8. Pro se complainants:
Doris Miller (C-2013-2369063)
Jane Neufeld (C-2013-2369464)
The above listed parties are active parties. All other complainants are inactive participants as defined in the July 2, 2013, Prehearing Conference Order #3.
During the Prehearing Conference, Public Input Hearings were discussed and a schedule was set for hearings and formal testimony by the parties. The Public Input Hearings were as follows:
1. Pittsburgh, July 22, 2013, Shaler Villa Volunteer Fire Company, 6:30 p.m.;
2. Washington, July 23, 2013, Washington County Fair and Expo Center, 1:00 p.m.;
3. Camp Hill, July 31, 2013; Camp Hill Borough Building, 6:00 p.m.;
4. Scranton, August 6, 2013, Scranton State Office Building B3, 1:00 p.m.;
5. Stroudsburg, August 6, 2013; Stroudsburg , August 6, Area School District Auditorium, 6:30 p.m.;
6. Reading, August 7, 2013, Exeter Community Library, 1:30 p.m.; and
7. West Chester, August 8, 2013, East Fallowfield Township Building, 1:30 p.m.
Hearings to take technical evidence were scheduled to be held from Monday, September 16 through Friday, September 20, 2013 in Harrisburg at the Keystone Building.
On July 9, 2013, PAWLUG filed a Petition to Intervene. PAWLUG stated that it contacted the active parties represented by counsel and there was no opposition to the intervention of the group. PAWLUG also indicated that it desired to be an active participant in this proceeding.[3]
On Monday, September 16, 2013, the Administrative Law Judges were notified that a settlement in principle was reached between all parties represented by counsel. On October 18, 2013, a Joint Petition for Settlement (Joint Settlement) was filed by PAWC, BI&E, OCA, OSBA, CEO and PAWLUG. Also on October 18, 2013, Active Participant PWSA filed a Statement in non-opposition and a Request to the Commission discussed herein. Active Participants and pro se Complainants Jane E. Neufeld and Doris Miller submitted statements that they do not oppose the Joint Settlement on October 18, 2013. On October 24, 2013, U.S. Steel filed its letter in non-opposition to the Joint Settlement.
The Settling Parties have stipulated to the filed written testimony and agreed to admit this testimony and accompanied exhibits without objection. A Motion for Admission of Testimony and Exhibits was submitted on October 18, 2013. The following testimony and exhibits are admitted:
PAWC
PAWC Stmt. No. 1 (Nevirauskas with Schedules RPN-1 through RPN-4, Exhibits 3-A, 3-B, 3-C)
PAWC Stmt. No. 1-R (Nevirauskas with Schedule 1 (RPN-1R), Schedule 2 (RPN-2R), Schedule 3 (RPN-3R Confidential), Exhibit 3-A revised)
PAWC Stmt. No. 2 (Tambini)
PAWC Stmt. No. 2-R (Tambini with Schedules SJT-1, SJT-2)
PAWC Stmt. No. 3 (Kaufman)
PAWC Stmt. No. 3-R (Kaufman with Exhibits DRK-1, DRK-2)
PAWC Stmt. No. 4 (Cox with Exhibits 3-A, 3-B, 3-C)
PAWC Stmt. No. 4-R (Cox with Schedules JRC-1 through JRC-4)
PAWC Stmt. No. 5 (Lontz with Exhibits 3-A, 3-C)
PAWC Stmt. No. 5-R (Lontz with Schedules 1 through 3)
PAWC Stmt. No. 6 (Hunnell with Exhibits 3-A, 3-B)
PAWC Stmt. No. 7 (Witman with Exhibits 3-A, 3-B)
PAWC Stmt. No. 8 (Grundusky with Exhibit 3-C)
PAWC Stmt. No. 9 (Naumick with Exhibits No. 9-1 through 9-4)
PAWC Stmt. No. 10 (Spanos with Exhibits 10-A through 10-I)
PAWC Stmt. No. 11 (Herbert with Exhibits 11-A, 11-B)
PAWC Stmt. No. 11-R (Herbert with Exhibits 11-R-1 through 11-R-5)
PAWC Stmt. No. 12 (Moul with Exhibit 12-A)
PAWC Stmt. No. 12-R (Moul with Exhibits 12-B through 12-E)
PAWC Stmt. No. 13-R (Warren)
CEO
CEO Stmt. No. 1 (Brady)
OCA
OCA Stmt. No. 1 (Smith with Attachment RCS-1, Exhibits LA-1 through LA-10 with LA-6 through LA-10 Confidential)
OCA Stmt. No.1S (Smith with Exhibits LA-11 through LA-14)
OCA Stmt. No. 2 (King with Attachments A, B, Exhibits CWK-1 through CWK-3)
OCA Stmt. No. 2S (King with Exhibit CWK-SR1)
OCA Stmt. No. 3 (Rubin with Appendix A, Schedules SJR-1 through SJR-14)
OCA Stmt. No. 3S (Rubin with Schedule SJR-S1)
OCA Stmt. No. 4 (Fought with Appendix A, Exhibits TLF-1 through TLF-7 (a-i))
OCA Stmt. No. 4S (Fought with Exhibits TLF-8a, TLF-8b, TLF-9)
OSBA
OSBA Stmt. No. 1 (Kalcic with Appendix, Schedules BK-1 through BK-6)
OSBA Stmt. No. 2 (Kalcic)
I&E
I&E Stmt. No. 1 (Sears with I&E Exhibit No. 1)
I&E Stmt. No. 1-SR (Sears with I&E Exhibit No. 1-SR)
I&E Stmt. No. 2 (Boyd with I&E Exhibit No. 2)
I&E Stmt. No. 2-SR (Boyd with I&E Exhibit No. 2-SR)
I&E Stmt. No. 3 (Kubas with I&E Exhibit No. 3)
I&E Stmt. No. 3-SR (Kubas with I&E Exhibit No. 3-SR)
I&E Stmt. No. 4 (Cline with I&E Exhibit No. 4)
I&E Stmt. No. 4-SR (Cline with I&E Exhibit No. 4-SR)
PAWLUG
No Statements/Exhibits
PWSA
PWSA Stmt. No. 1 (Good)
PWSA Stmt. No. 1-SR (Good)
Non-signatory, pro se inactive parties were notified of the settlement by a letter from the OCA. In that letter, parties were notified that access to the Joint Settlement was provided through a website. The letter also included a form with which these inactive participants could indicate whether they accepted the settlement, opposed the settlement or had no position.
The following inactive participant chose to support the Joint Settlement by joining it:
Dawn Spielvogel C-2013-2364692.
The following inactive participants chose to oppose the Joint Settlement:
S. Stockton Alloway C-2013-2366239;
William Kazimer C-2013-2372396; and
Thad Shirey C-2013-2372641.
The record was closed on October 28, 2013, when the position letters of the inactive participants were due. On October 30, 2013, PAWC filed a Motion for Leave to Respond to the Non-Opposition and Request of PWSA. By Order dated October 31, 2013, the ALJs acknowledged that the record closed on October 28, 2013 and denied PAWC’s Motion. This matter is now ripe for recommended decision.
II. DESCRIPTION OF THE COMPANY
PAWC provides water service to over 641,000 customers. PAWC serves all or portions of the following 36 counties: Adams, Allegheny, Armstrong, Beaver, Berks, Bucks, Butler, Centre, Chester, Clarion, Clearfield, Clinton, Columbia, Cumberland, Dauphin, Fayette, Indiana, Jefferson, Lackawanna, Lancaster, Lawrence, Lebanon, Luzerne, McKean, Monroe, Montgomery, Northampton, Northumberland, Pike, Schuylkill, Susquehanna, Union, Washington, Warren, Wayne and York. PAWC provides wastewater service to the following counties totaling over 17,000 customers: Chester, Clarion, Monroe, Pike and Washington.
PAWC is an investor-owned water company and a subsidiary of American Water Works Company, Inc. (AWW). In February of 1989, the then-existing Pennsylvania American Water Company merged with and into Western Pennsylvania Water Company and the surviving Corporation is what is now PAWC. PAWC is individually owned by AWW.
Relevant to this proceeding Act 11 of 2012 made two substantive changes to Chapter 13 of the Public Utility Code at Sections 1311(c) and (e).[4] Specifically, these sections state,
§ 1311. Valuation of and return on the property of a public utility.
* * *
(c) Segregation of property. --When any public utility furnishes more than one of the different types of utility service, the commission shall segregate the property used and useful in furnishing each type of such service, and shall not consider the property of such public utility as a unit in determining the value of the rate base of such public utility for the purpose of fixing base rates. A utility that provides water and wastewater service shall be exempt from this subsection upon petition of a utility to combine water and wastewater revenue requirements. The commission when setting base rates, after notice and an opportunity to be heard, may allocate a portion of the wastewater revenue requirement to the combined water and wastewater customer base if in the public interest.
* * *
(e) Definition. --As used in this section, the term "utility that provides both water and wastewater service" shall include separate companies that individually provide water or wastewater service so long as the companies are wholly owned by a common parent company.
66 Pa.C.S. § 1311(c) and (e) (Emphasis added to show changes made through Act 11 of 2012).
The Commission’s Implementation of Act 11 of 2012, Final Order (Implementation Order), concluded, “Section 1311(e) of the Public Utility Code applies to utilities that provide water and wastewater service as individually separate companies if wholly owned by a parent company.” Docket M-2012-2293611, entered August 2, 2012 at 9. PAWC has employed the changes made by Act 11 of 2012 and the Commission’s guidance in interpreting Sections 1311(c) and (e) of the Public Utility Code in this rate proceeding. This is a case of first impression.
III. PUBLIC INPUT HEARINGS
Consistent with the policy of the Commission to “allow an opportunity for the complete airing of concerns expressed or issues raised by consumers” where “substantial public interest in a rate proceeding has been shown,” public input hearings were held. See 52 Pa.Code § 69.321. During the Prehearing Conference, the OCA proposed seven (7) public input hearings in various areas served by PAWC. (Tr. 16-19). Neither PAWC nor any other active party objected to holding these public input sessions. The locations of the public input hearings were determined by the assessments of OCA of the public interest expressed.
In various locations serviced by PAWC, more than 60 people testified, resulting in a transcript of 509 pages. Summaries of the testimony follow:
A. Public Input Hearing Pittsburgh
The first of seven public input hearings was held by ALJ Conrad Johnson on July 22, 2013, at the Shaler Vista Volunteer Fire Department in Pittsburgh, Pennsylvania. The hearing was scheduled to begin at 6:30. Judge Johnson waited until 6:45 to begin, however, because there were reported traffic problems on the route and bridge to the hearing site. Following introductory statements from the parties present, no one from the public elected to testify at this hearing.
B. Public Input Hearing Washington County
The second public input hearing was held by ALJ Jeffrey Watson on Tuesday, July 23, 2013, in Washington County at the Washington County Fair and Expo Center in Washington, Pennsylvania at 1:00 p.m. Twenty-five (25) people testified.
Much of the testimony at this hearing included requests that PAWC extend water service to various communities in that area. People spoke of contaminated water, lack of water service for fire departments and wells that were no longer in use.
First to speak was Elizabeth Cowden (Tr. 80-85), a Supervisor in Cecil Township. She stated that the community is fast growing and that many of the areas do not but would like to have water service. She asserted that many of the private wells are contaminated (Tr. 85). She also noted that there have been several complaints about a $13.75 service charge for water because no one knows why it is charged.
Jennifer Nagy of McDonald would like public water brought to her community. She was troubled that there is no fire hydrant for the houses in the area. She is also concerned about Marcellus Shale Drilling and the possible effect on well water currently used by residents. (Tr. 88).
Gary Naeser would like public water and wondered why PAWC has not run water service to him when he lives just three-quarters of a mile from the City of Washington where PAWC water service is provided. The only water supplied currently is a spring that serves two households. He and his neighbor purchase drinking water because the spring has E. coli. (Tr. 90-92).
W. David Montz is the Municipal Manager of Green Tree Borough. He stated that there are water line breaks in his community that cause flooding and other property damage. Although PAWC has been responsive in providing insurance information and is extremely cooperative with the community, he believed that PAWC should increase its replacement of water lines so that line breaks are alleviated. (Tr. 94-97).
Paula Ferry (Tr. 98-102), is a resident of Washington, Pennsylvania and would like public water. She is nearly 63 years old and discussed the hardships of living without public water service; that is, (1) not being able to have more than one faucet on at a time; (2) purchasing water; (3) often replacing plumbing fixtures; and (4) during an electric power outage no water at all. She has had electric power outages for up to 33 hours. She was also concerned about the impending gas drilling and the effect on the well water now available to her. (Tr. 102).
Bill Forrest is a resident of McDonald, PA and would like water service brought to his part of Baker Road. (Tr. 104). He stated that there are already water lines near his home to which service could connect. He and others currently rely on well water; however, his neighbors have recently had their water tested and it was found that the water did not meet Pennsylvania standards for potable water. (Tr. 105). He also stated that there has a been a lot of development since the lines were initially placed and he would like the Commission to require PAWC to provide water to residents on Baker Road using current population information. (Tr. 106).
Rodell Lewis (Tr. 108-112), stated that she was asking for public water on behalf of herself and other elderly in the area. She also noted that when the electricity goes off, they are unable to get water or flush toilets. (Tr. 109). She doesn’t understand why her area can’t have water when there is a twelve inch line down the main road near her residence. (Tr. 110).
Kim Staub (Tr. 112-118), is a resident of McDonald, PA and spoke on behalf of 32 homeowners on Walnut Road in Mount Pleasant Township in Washington, PA to request public water. According to her, those homes currently have wells or a spring system as the water source but during the last three years some of the water supply has been “compromised.” (Tr. 114).
Dawn Fiori testified next and is a resident of McDonald. (Tr. 118-120). She is concerned about the drilling in her area and the long-term safety of the water supply. She asked for public water for the 30-some homes in the area.
Mary Sally of Carnegie, PA testified (Tr. 120-126), as Director of Programs at the Dollar Energy Fund, which is a non-profit organization with a mission to improve the quality of life of households experiencing hardship by providing utility assistance and other services. Twenty-two years ago, PAWC partnered with the Fund to begin a low-income assistance program known as H2O, Help to Others. She noted that PAWC agreed to provide that assistance without a mandate from the Commission. She further stated that to date, H2O has distributed more than $2.8 million to over 14,000 households to allow them to maintain or restore water service. She believed it is inevitable that water rates will rise but that PAWC has served as a good corporate citizen with its low-income assistance program.
James Piatt (Tr. 127-132), is from Avelia, PA. He would like public water for his area. He stated he is unable to drink the water now available and that water also caused his plumbing fixtures to deteriorate and left residue in his sinks and commodes. (Tr. 130). He is senior citizen and stated that the Veteran’s Administration tested his water and found Legionella (Piatt Exhibit 3). He said Penn State also tested his water (Piatt Exhibit 1), and found it hard and undrinkable and therefore he uses bottled water all of the time. He, like others, has no water when the electric power goes out.
Ralph Ciotti (Tr. 133-137), is retired and lives in Canonsburg, PA. He has experienced the same concerns with wells as previously noted by other speakers. He was informed by PAWC that it would cost $227,000 to install a main. Another issue he raised was that there are no fire hydrants less than a half mile away from his neighborhood. His neighbor’s barn was struck by lightning and burned to the ground before enough water could be brought to the area. He would like public water.
Chief Stush Sadowski, Sr. of the Lawrence Volunteer Fire Department testified. (Tr. 138-142). He is the owner of the barn that burned. He has a well which often runs dry. (Tr. 141). The $225,000 mentioned by Mr. Ciotti is for 2,500 feet of water line. He stated that the water lines are like a puzzle, in some places and not in other. From a fire safety standpoint, he noted, if any of the houses catch on fire there would be a serious problem. One truck pumps only about 1,000 feet so there would be a need for at least three trucks. Adding to safety concerns, volunteer fire departments have limited manpower.
Frank Samarin of King Road in Cecil Township would like PAWC to provide water to his street and community. (Tr. 145). He also submitted documents showing a request for public water that he made in 2001. (Tr. 146-147; Samarin Exhibit 1).
Patricia Lovelace then spoke on behalf of the H2O Program at Conservation Consultants. She reiterated that PAWC provides financial assistance in the form of grants and discount programs. She also noted that discount plumbing repairs are made available. (Tr. 150).
Alan Gould spoke on behalf of the Jefferson Township Planning Commission and asked for a sewer line connection under Tariff Rule 27. (Tr. 152-155). He stated that throughout the years there have been efforts to provide water to the various communities but the cost to homeowners has been prohibitive. (Tr. 155).
Patty Lawrence also testified on behalf of the Planning Commission of Jefferson Township and the Municipal Authority for Jefferson Township in support of a water line extension to the community. She introduced a letter from the Jefferson Township Board of Supervisors in support of extending water service to their area. (Lawrence Exhibit 2). She also presented a letter from the Township Fire Department (Lawrence Exhibit 1) which stated that there currently is insufficient water to support effective fire-fighting. (Tr. 157). The Fire Department, like the Jefferson Township Board of Supervisors, asked that the request for a rate increase be denied until there is an extension. (Id.)
Dan Green of McDonald also asked that PAWC extend water service to his area. (Tr. 161-162)
Michelle Zirngibl and Roberta Pochiba of Canonsburg also requested an extension of water service to their area. They noted the lack of water to address fire emergencies and contamination of some of the current drinking water sources. (Tr. 165).
Deborah Waller, Fire Marshall for the Township of Upper St. Clair, testified that PAWC is a valued public citizen and provides safe and reliable water and service for the fire department and the citizens of the area. (Tr. 179-182).
John Adams testified that he appreciates the PAWC service and he would like it extended to others. (Tr. 182-193).
David Hulick of Burgettstown would also like water extended to his area. (Tr. 194).
Michael Hider of Washington also requested the extension of public water to his community. (Tr. 202-204).
C. Public Input Hearing Camp Hill
This was the third public input hearing and was held in Camp Hill, Pennsylvania by Chief Judge Charles Rainey at the Camp Hill Borough Building at 6:00 p.m. on July 31, 2013. Three (3) people testified.
Phillip Volmer was first to speak. (Tr. 22). He is retired. He objected to PAWC’s Petition and rate increase, particularly the shifting of a portion of the wastewater cost of service to the entire customer base. He thought it unfair, particularly because the Borough handles the sewer system in Camp Hill and PAWC is not involved. He objected that a customer such as he will have to pay for the sewer system of others and get nothing while continuing to have to pay a sewer bill to the Borough.
Next to speak was John M. Eby of Mechanicsburg. (Tr. 222-225). He appeared on behalf of the Yellow Breeches Watershed Association. He stated that PAWC regularly provides support in the form of funding, volunteers and public information such as handouts. The organization received an environmental grant from PAWC to cover the costs of two colorimeters used by stream monitoring volunteers and assistance with youth sojourns. The company also provided financial and volunteer support for an on-stream cleanup day. In summary, he has found the company to be a valuable and viable partner in efforts of the organization.
Mr. D. Wintermeyer (Tr. 225), spoke next. He stated that he was a formal complainant. The record, however, does not show that he filed a formal Complaint, and therefore, he is not a formal complainant for purposes of these proceedings.[5] He believed that the Company has a monopoly in violation of the U.S. Constitution and federal antitrust laws. He also stated that the rate increase was unnecessary. The relief he sought was that the Commission stop issuing permits to PAWC. (Tr. 227).
D. Public Input Hearing Scranton
The Public Input Hearing in Scranton, Pennsylvania was the fourth. It was held at 1:00 p.m. in the Scranton State Office Building in Scranton, Pa. Eleven (11) witnesses testified. There was generally opposition to any increase. Also, most obtained sewer service from Scranton and objected to having part of their payments for PAWC water service directed to the costs of PAWC wastewater service that they did not receive and from which they would not benefit.
State Representative Kevin Haggerty of the 112th District testified first. He stated that his office has received hundreds of calls about the rate increase. His concern was about the across the board nature of the rate increase. He is worried that families who have the lowest incomes in the state and those on fixed income cannot afford the rate increase. His area has one of the highest unemployment rates in the state. He noted that the county is raising taxes 120% and the city is raising taxes 123% and that another $75 for PAWC services on top of that is too much. He sought assistance from PAWC for low-income families and suggested developing a rate formula for low income areas. (Tr. 248-250).
Next was State Representative Martin Flynn from the 113th District. He too noted that this was a depressed area upon which the economy had taken its toll. Many citizens are reduced to part-time employment with no health insurance and are facing foreclosure. He acknowledged that infrastructure work is needed but lamented how the costs for that infrastructure appear to be passed on to the customer while the Company has increased profits, dividends and bonuses. (Tr. 254). He submitted that based on the public reports of company profits, PAWC could pay for the improvements using other capital methods, particularly from the increased profits of the Company.
David Dobrzyn of Scranton (Tr. 256) stated that Scranton has its own sewer service. He pays a bill to the Scranton Sewer Authority of about $35 per month and the people of Scranton should not have to subsidize the sewer service of others who choose to live in remote areas. (Tr. 257).
Next to testify was Michael Golya of Jefferson Township. (Tr. 261-263). Although he acknowledged that the service provided by PAWC was an improvement over the previous water supplier, he was concerned that the PUC granted an increase of 200% for water service only two years ago and now the PUC is considering another increase. He also asked that the PUC set benchmarks in terms of improvements for the customers if an increase is granted.
Karen Golya, Michael Golya’s wife (Tr. 263-266), estimated that about half of the people affected by the increase in her township were retired and living on a fixed income. Due to increased local taxes and the Scranton wastewater system bill, she wondered whether they will be forced out of their home if the increases continue.
Sally Miller of Scranton stated that she is retired as are an estimated ¾ of the people in the area. She wondered how they can afford to live if the rates keep increasing.
Carl Wegforth is President of the Dunmore Historical Society and appreciated the community efforts of PAWC. He stated that his organization received a $2,000 grant from PAWC for wetland plants. The Company also assisted in opening the Dunmore Number 1 reservoir as part of a nature trail. (Tr. 268-269).
Next was Jim Wilson of Scranton (Tr. 272-273), who stated that he is paying more for water and sewer than property and school taxes combined. He believed the increase sought is unaffordable. He also noted that he already pays a sewer bill to Scranton, which has increased.
Tom Welby of Scranton spoke (Tr. 274-275) as Chief of Staff for State Representative Marty Flynn. After reviewing the PAWC financial report, he concluded that the PAWC has an untapped financial resource, particularly the maintenance contracts that are offered to customers for water sources outside of their homes. He stated that the current level of subscription for that service is 3%. He asked that the Commission look at that program as a possible revenue stream for the Company.
Hurlow Rolands of West Scranton stated (Tr. 275-278), that he should not have to pay to relieve others of their sewer service costs. He noted that Scranton is a distressed city and that many of the other areas that will be subsidized are affluent areas, with property and homes twice the value of those who live in Scranton.
Brian Shiner of Kingston contended (Tr. 278-280), that while PAWC seeks the increase for capital repairs and infrastructure, in 2008, people in Pennsylvania voted on a $400 million dollar bond issue for just that purpose. PAWC has participated in related funding programs. He stated that in 2011 PAWC asked for and received a rate increase and now the Company is seeking another increase. He also believed that in light of the salaries paid to outgoing and current executives, the increase requested is unwarranted.
E. Public Input Hearing Stroudsburg
This public input hearing was the fifth. It was held at 6:30 p.m. at the Stroudsburg Area School District Auditorium in Stroudsburg, Pennsylvania. Five (5) people testified. Clarification of the increase and the effects of the increase upon the customers were core themes.
The first person to testify was Peter Derrenbacher (Tr. 302-304), of Bushkill, PA. He lives in a community called Saw Creek Estates, about 2,700 households. He stated that in 2012, PAWC rates increased approximately 33 % for his community. He contended that the rates are too high and questioned whether the increase is going into investment of the parent company, AWW.
Next was Patrick Briegal (Tr. 304-307), who spoke as the Community Manager for Blue Mountain Lake Club in Stroudsburg. He noted that the proposed rate increase was based on the average use of 3,960 gallons per month. He asked that the Commission consider how the increase would affect those who use less water. He also noted that the active settlement from the last rate case included a schedule of rates until 2017 and hoped that this rate proceeding would not result in duplicate interim increases. He also contended that residential customers cannot pay the current rates let alone an increase.
Next to testify was Susan Macovsky (Tr. 308-312), a resident of East Stroudsburg. She stated that the current bills issued by PAWC, and other utilities, are unclear. She would like a bill that explains the various charges and abbreviations used by the Company.
Peter Burgess of Bushkill (Tr. 312-317), testified. He believed that if PAWC is improving their productivity and performance, the consumer cost should become lower. He further believed that water should not be a profit center.
Formal Complainant Jane Neufeld (Tr. 318-328), of Dingman’s Ferry testified. She acknowledged that PAWC had purchased the previous water supplier and made improvements and that a rate increase was to be expected. But she also wanted the Commission to be aware that one rate is not appropriate for all communities. She pointed out that unlike most PAWC customers, some in her area have a winter rate and summer rate and that the proposed increase could result in some in her area paying 200% of their current rate.
F. Public Input Hearing Reading
The sixth Public Input Hearing was held in Reading Pennsylvania at the Exeter Community Library on Wednesday, August 7, 2013 at 1:30 p.m. Ten (10) persons testified. While there was civic organization support for the Company, many opposed the rate increase and some raised service issues and suggestions. Several also voiced that they should not have to pay for wastewater service for others provided by PAWC when they already pay for wastewater service provided by the local government.
First to speak was Thomas Gombar (Tr. 350), District Director for State Senator Judy Schwank. He stated that the Senator is concerned that PAWC was granted a rate increase only two years ago. She believed that another increase by PAWC, along with increases in other utilities and necessities, will impact significantly the senior citizens and other people on fixed income. She also asserted that the rate increase for small businesses and industrial customers will put them at a competitive disadvantage. She believed that the Company is entitled to reasonable rates but that the rate increase as proposed was beyond reasonable and asked that the Commission render a just, reasonable and fair decision.
Amity Township Manager Charles Lyon (Tr. 351), testified at the direction of the Township Board of Supervisors. He stated that given the economy and loss of revenue and the inflation rate, an 11% increase is inconsistent with the realities of the current state of affairs. Amity Township operates wastewater treatment plant. Customers pay a flat fee of $90 per quarter for wastewater services. (Tr. 357). Because the township usually works with a 3% directive for wastewater treatment, he cannot understand why PAWC needs 11%. (Tr. 353).
He also challenged the required hydrant agreements with PAWC. He illustrated this issue as follows: Amity Township currently pays approximately $70,000 in hydrant fees. (Tr. 356). A new restaurant opened in the township and PAWC stated that it would not turn on a nearby fire hydrant unless the township entered into a hydrant agreement. PAWC represented that it was a requirement of the tariff. He asked the PUC to review that the part of the tariff that compels townships to enter into such agreements (Tr. 355), particularly the indemnification/hold harmless requirements. (Tr. 359).
Patricia O’Brien Pieja is a retired resident of Reading and questioned the company’s use of and method of determining that a typical family used 3,960 gallons per month. She stated that she and her husband never use that much per month. She also questioned why a rate increase was needed to cover system improvements when that would be covered by the distribution improvement charge allowed. (Tr. 361). She also objected to having to contribute to the cost of PAWC sewage service for others when she and others receive and pay for sewage service provided by Reading. Regarding billing issues, she noted that a decrease in her usage has in the past resulted in an increase in her bill from PAWC. (Tr. 364). She wants the PUC to deny the rate increase given the company’s publically available growth and profit margins.
Robert Collins (Tr. 367-368), of Reading stated that he would like the company to be more what he termed as pro-consumer. He noted that other utilities assist customers in obtaining energy efficient appliances or provide energy audits and that PAWC simply distributes flyers regarding consumption. He would like the company to work more with consumers on reducing consumption.
Steve Rimby (Tr. 369-373), is also a Reading resident and an energy auditor who spoke as a private citizen. He stated that he uses less than the “average” customer amount noted by PAWC in its filings and would like the increase to be based solely on the amount of water that one uses. He also raised a billing issue, questioning how his water usage can be the exact same amount “to the penny” month after month, particularly when there were two estimated bills and two actual bills. (Tr. 372). He did compliment the company on its responses to problems with the water or PAWC facilities. He simply believes that the charge is too high and that an increase of 11% is too excessive.
Ken Pitts (Tr. 374), of Fleetwood is Director of Facilities for Exeter Township School District. While he understands the need for increases, he believes that the increase sought by PAWC is excessive. He also stated that there is a calcium build-up in the back-flow preventers for the schools and that if the increase goes towards reducing the calcium in the water, the schools system could see some value in it. The District currently spend $1,500 to $7,000 per back flow preventer for repairs that are needed due to calcium in the water provided by PAWC. (Tr. 376-378).[6]
Marchall Azrael is also a Reading resident and questioned the salaries of the company executives and asked the percentage of the increase from Pennsylvania residents that would be used in Pennsylvania as opposed to somewhere else within the parent company system. He also noted that he already pays Exeter Township for wastewater services and questioned why he should pay for someone else’s provided by PAWC. (Tr. 382). He also could not understand why there was a connection charge when he and others are already connected to the company services.
William Kazimer is a formal complainant (C-2013-2372396) and lives in Eaglesville. He provided a copy of a document represented as the PAWC rate history. (Kazimer Exhibit 1). He noted that the PUC approved rate increases in 2009 and 2011 and that the increase sought was a lot of money for the unemployed and underemployed in this economy. He also stated that he doesn’t want money that he pays for water service steered to wastewater when Pennsylvania American provides no wastewater service to him. (Tr. 388). He also doesn’t want any money paid to PAWC to go to the parent company. (Tr. 388). He contended that there was no benefit to the public of passing wastewater costs to water customers.
G. Public Input Hearing East Fallowfield
The final Public Input Hearing was held on August 8, 2013, at 1:30 p.m. in East Fallowfield Township at the East Fallowfield Township Building. Eleven (11) people testified. Except for the fire chief, all testimony was in opposition to the increase. There were also service issues presented, such as odor and discolored water. Customer relations and communications problems were also raised.
Testimony began with the area’s State Senator, Andrew Dinniman. (Tr. 418-427). He stated that residents in his district had already had significant increases in their water rates, maintaining that the rate PAWC seeks in these proceedings is 62% higher than that charged when the company took over in 2007. He believes that it is too high of an increase for an area that is not as well to do as others and is just beginning to recover. He fears that many in his area will lose their homes after the rate increase due to PAWC liens. He supports the reduction in wastewater rates for Coatesville area customers, stating that the reduction is deserved because there was a 500% increase in wastewater rates since 2008.
He also stated that improvements PAWC proclaims were not that effective in that there remain problems with odor from PAWC facilities and the water provided is often discolored.
He also contended that in addition to customers having difficulty obtaining information when there is a billing discrepancy, there are issues with respect to PAWC’s dealing with local government. Some of the local governments buy the water in bulk from PAWC and then distribute it to their residents. He contends that PAWC does not promptly respond to calls and that the people at PAWC “don’t have the same level of respect given to our public officials, given to our residents that other utilities have given us.” (Tr. 425).
Also, Senator Dinniman wants to be sure that the money that PAWC received from the Commonwealth, $9.9 million low interest loan from the Pennsylvania Infrastructure Authority to upgrade the Rock Run water treatment center, is taken into consideration when determining the rate. Finally, the Senator considers the 11% overall rate of return to be too much considering that the expected and traditional rate of return is about 8.68%. He calculates that the difference is equal to $47 million and that it is a sum that could be used to reduce water and wastewater bills.
James Jackson (Tr. 429-447), then presented what he states is a petition of 100 residents of Valley Township against the increase. (Jackson Exhibit 3). He represented that the residents there would like to disconnect from PAWC services and return to septic tanks and wells because of the financial burden. (Tr. 430).
He also stated that some homeowners appear to be charged inconsistently along social, economic and other demographics. He objects to any inequitable billing. He contended that the old communities[7] pay $220 per quarter and the new communities pay $179 per quarter for the first 10,000 gallons plus $11.20 per thousand gallons. (Tr. 432). He further contends that low and fixed-income people generally are on the flat rate. He stated that the increase will result in liens placed on homes and a continued struggle for the significant population of senior citizens in the area.
South Coatesville Borough vice president of the council, Sylvia Washington, spoke next. South Coatesville owns its sewer plant and also provides sewer services to neighboring Modena. The Borough has not increased the sewer rates since 1995. She stated that although PAWC upgraded its plant, the community still has problems with odors from the plant and the color of the water, which is rusty, brownish or, orange. (Tr. 455). She noted that the Borough operates its own treatment plant and does not have those problems.
Ms. Washington also noted that PAWC is remiss in providing notice about PAWC activity that involves tearing up the streets. The local government is left wondering what repairs are taking place, how they will affect water pressure, etc. (Tr. 451). As a retired school district employee living on a fixed income, she cannot see any justification for the increase.
Renee Carey, Councilwoman for the Borough of South Coatesville also spoke. (Tr. 456). She also stated that there was a pungent odor coming from the PAWC water treatment plant (Tr. 461) and that the plant operated by the township does not have an odor. A church located next to the plant has had to end events because of the odor. Also, the color of the water is a dark brown. She also mentioned that there is no communication about repair of the roads following PAWC work rending the roadways. (Tr. 464). She also stated that when the roads are repaired by PAWC, it is substandard work. (Tr. 459).
Corie Freeman of Valley Township testified. He lives in a 55 or older community. He protested that he is unable to obtain answers about the rates or the services. Also, he does not like the flat rate system because he does not want to pay for water that he does not use. He also has an orange residue from his water and at times there is an odor. (Tr. 468). He simply would like the Company to provide information about the quantity of water and wastewater he uses on a monthly basis. (Tr. 469).
Parkesburg, PA resident Stockton Alloway next testified. Mr. Alloway filed a formal complaint, Docket No. C-2013-2366239. He is retired. He testified that the wastewater bill is too high. (See Alloway Exhibit 1, 7-10; Alloway Exhibit 2). He contended that as a single person, because he is not metered, he is charged for more waste than he can produce. (See Alloway Exhibit 3). He also notes that while PAWC references typical household usage in discussing its rate request, as a single person, he does not use nearly that much and therefore should not have to pay the same rate or amount per month. (Tr. 475, Alloway Exhibit 4; Alloway Exhibit 5). He would like PAWC to use a sliding scale based upon the number of people living in a dwelling if the Company will not have metered rates. (Tr. 477).
Valley Township Supervisor and Coatesville resident Yolanda Beattie testified. She noted that the PUC gave PAWC a sewer rate increase in 2011. The Township purchases bulk water from PAWC and therefore when PAWC raises its rates, it has to increase the bills sent to residents. She stated that while PAWC is quick to charge the Township when it pays late for PAWC services, when the Townships contacts or needs information from PAWC, the Company does not provide direct answers. Customer Service is not helpful. (Tr. 484). She also questioned the size of the Company’s profit and whether it was necessary.
Next to testify was Reverend Patsy Ray of Coatesville. (Tr. 491-498). She opposes the increase. She also stated that the streets are badly repaved after PAWC pipework and that inadequate notice is given of these projects. She also stated that there is a strong smell coming from the PAWC plant and that the water is discolored. She further stated that she is using more water than necessary because she has to let the water run longer in order to have water that is not discolored.
Next to speak was James Lentz. (Tr. 498-501). He is the interim fire chief and emergency management coordinator of Coatesville. He testified that PAWC has replaced 40 fire hydrants and made other improvements in the system, including putting in thousands of feet of pipes to make the system work. He also stated that PAWC has been cooperative in training and has provided prompt service and quickly gotten back to him to resolve issues.
Kirby Hudson testified next. (Tr. 501-504). He is the City manager of Coatesville. He wanted to reiterate the problem with the streets. He stated that the utility companies, including PAWC, dig up the streets and then make a poor job of the repairs. (Tr. 502). He offered that if there is a rate increase, PAWC should use some of the funds to pave the whole street and not just place patches where PAWC work is done.
Next was David Collins, President of the Coatesville City Council. (Tr. 504-509). He stated when he moved to Coatesville from Western New York he was shocked to find out that water rates were so much higher. He also stated that many people in Coatesville are on fixed income or retired or senior citizens and that the increases proposed are unaffordable. He noted as well that PAWC does a poor job of repaving streets after they are excavated and does not provide adequate or advance notice of the work. He stated that when the work is completed, the repairs to the street are patchwork and the street markings are not painted properly.
IV. TERMS AND CONDITIONS OF THE JOINT SETTLEMENT
A. Principal Terms
1. The Settlement consists of the following terms and conditions:
a) Upon the Commission’s approval of this Settlement, but no earlier than January 1, 2014 (see 1.d. below), PAWC will be permitted to charge the rates for water service set forth in the proposed Tariff Supplement annexed hereto as Appendix A and the rates for wastewater service set forth in the proposed Original Tariff annexed hereto as Appendix B (hereafter, the Settlement Rates). The Settlement Rates are designed to produce additional annual operating revenue of $26 million, as shown on the proof of revenues annexed hereto as Appendix C. The Water Tariff Supplement set forth in Appendix A and the Wastewater Original Tariff set forth in Appendix B have been reviewed by the Joint Petitioners and comply with the terms of the Settlement. The Settlement Rates are designed to produce approximately $604.6 million in total annual combined water and wastewater revenue (including Other Revenue) as shown in Appendix C, Schedule A, column 8.
b) The Joint Petitioners agree that the Company’s originally filed pro forma present rate revenue level has been used to establish the Settlement Rates. The Joint Petitioners specifically agree that this provision is for the purposes of settlement for this case only and is not determinative of any party’s position in future cases.
c) The Commission previously approved wastewater rate increases to become effective on January 1, 2011, 2012, 2013, and 2014 for the Company’s Coatesville wastewater operations (Docket No. R-2010-2166212), Claysville wastewater operations (Docket No. R-2010-2166210) and Northeast wastewater operations (Docket No. R-2010-2166214), as part of a rate phase-in. The rates to become effective on January 1, 2014 were to remain in effect through the years 2014, 2015, and 2016. On January 1, 2017, the aforementioned wastewater rates were to be reduced to those in effect on January 1, 2013. As a result of the combination of the water and wastewater revenue requirements reflected in the Settlement, water customers will be allocated $7.8 million of the deferred increases to the Coatesville, Claysville and Northeast wastewater customers, to be recovered by an increase in the water revenue requirement of $2.6 million per year in each of the years 2014, 2015, and 2016. On January 1, 2017, Zone 1 water rates will be reduced by the following amounts to remove that $2.6 million from rates: (i) $0.0073 per 100 gallons for the Residential customer class; (2) $0.0035 per 100 gallons for the Commercial customer class; and (3) $0.0054 per 100 gallons for the Other Public Authority customer class. Additionally, as part of this Settlement, the previously-approved wastewater rate increases noted in this subsection scheduled to take effect on January 1, 2014 for Coatesville, Claysville and Northeast will not occur.
d) The Joint Petitioners agree to exercise their best efforts to obtain approval of this Settlement by the Commission on or before December 19, 2013, and the implementation of the Settlement Rates on January 1, 2014. Upon the entry of a Commission Order approving this Joint Petition, the Company will be permitted to file a tariff supplement for water service, in the form attached hereto as Appendix A, and a tariff for wastewater service, in the form attached hereto as Appendix B, to become effective upon less than statutory notice on January 1, 2014.
e) PAWC will not file for another general rate increase under Section 1308(d) of the Public Utility Code for its water operations, Pocono wastewater operations, Clarion wastewater operations or Clean Treatment wastewater operations prior to March 31, 2016.[8] However, if a legislative body or administrative agency, including the Commission, orders or enacts fundamental changes in policy or statutes which directly and substantially affect the Company’s rates, this Settlement shall not prevent the Company from filing tariffs or tariff supplements to the extent necessitated by such action.
f) The Joint Petitioners acknowledge and agree that the Company will use the depreciation rates set forth in PAWC Exhibit Nos. 10-C, 10-F and 10-I to calculate the depreciation expense it records on its regulated books of account. This provision is included solely for the purpose of recording annual and accrued depreciation in PAWC’s regulated books of account and is not determinative of depreciation rates or depreciation expense for future ratemaking purposes.
g) The Joint Petitioners agree that the Settlement Rates reflect the amortizations set forth in Appendix D to the Joint Petition, which includes amortizations of the acquisition adjustments that PAWC recorded in connection with its acquisition of the water utility assets of the Lake Spangenberg Water Company, Ha Ra Corporation (Fernwood Community Water System), Olwen Heights Water Service Company, Inc., North Fayette County Municipal Authority, Wildcat Park Corporation and Indian Rocks Property Owners Association, Inc. The parties agree that a ten (10) year amortization period shall be employed for settlement purposes. All parties retain their right to review and make recommendations regarding ratemaking treatment to be accorded the Company’s pending acquisition of the Paint Township Municipal Water Authority in PAWC’s next base rate proceeding.
h) As part of the comprehensive Settlement of this case, the Joint Petitioners agree that, for purposes of determining the revenue requirement in this case, all capitalized repairs deductions claimed on a tax return have been normalized for ratemaking purposes and the appropriate related amount of tax effect of those deductions has been reflected as Accumulated Deferred Income Taxes as a reduction to PAWC’s rate base.
i) The low income customer charge discount for water customers will be increased from 65% to 80%, as reflected in the Settlement Rates.
j) The Company’s annual contribution to its hardship grant program will be increased from its current level of $250,000 to $300,000 and, in accordance with current practice, such contribution will be recorded as a “below the line” expense and will not be claimed by PAWC for recovery in its rates. This term of the Settlement is set forth for information purposes, and the Commission’s approval of this term is not requested.
k) With regard to service-related issues and concerns expressed at the public input hearings held in Exeter Township (Reading) and East Fallowfield Township (Coatesville):
1) The Company has already taken the action summarized in Appendix E-1 annexed hereto with respect to the single service-related concern expressed at the Exeter Township (Reading) public input hearing;
2) The Company has already taken the action summarized in Appendix E-2 annexed hereto with respect to service-related issues and concerns expressed at the East Fallowfield Township (Coatesville) public input hearing and agrees to take such appropriate further action as summarized in Appendix E-3;
3) The Company agrees to conduct semi-annual information sessions for customers of its Coatesville water and wastewater operations, in the manner more fully set forth in Appendix E-3 annexed hereto.
l) The Company agrees to invest $10 million to construct water main extensions under and pursuant to Rule 27.1(F) of its water tariff, which authorizes main extensions to be installed without customer contributions subject to Commission approval in order to address health and safety concerns. The Company’s investment will be used to install the water main extensions identified in Appendix F annexed hereto. If the $10 million investment to which the Company is committing is not fully expended on the aforementioned main extensions, the Company will work with the OCA and other interested parties to identify such additional main extensions in Washington County that satisfy the criteria of Tariff Rule 27.1(F) and will use such remaining committed investment to construct such main extensions under and pursuant to Tariff Rule 27.1. With respect to the foregoing commitments, the following terms and conditions also apply:
1) The Company and the OCA will work together to establish a reasonable timeframe for the completion of the projects that are within the scope of the Company’s committed investment once the specifications for such projects are known;
1) The Company shall apply least-cost principles in designing and constructing the main extensions that are within the scope of its commitments in this Settlement;
2) The Commission’s approval of this Joint Petition will constitute the approval required under Tariff Rule 27.1(F) to construct the projects identified in Appendix F. Based upon the Commission’s approval of the construction of the main extensions identified in Appendix F, the Joint Petitioners agree not to contest the inclusion in rate base of the capital costs associated with the construction of those extensions.
3) PAWC agrees to continue to use its best efforts to apply for grants from applicable local municipalities and to receive contributions from other sources, such as from Marcellus Shale drilling companies, in order to mitigate the cost for the main extension projects identified in Appendix F. To the extent any grants are received, they will not diminish the Company’s commitment to invest $10 million for main extensions that meet the criteria of Tariff Rule 27.1(F) but, instead, will enable the Company to fund additional projects under Tariff Rule 27.1(F).
4) The Joint Petitioners agree that the provisions set forth in this subparagraph l. and Appendix F are not precedential as to conditions that might validate the application of Tariff Rule 27.1(F) in the future and shall not be cited as such in any subsequent proceeding.
m) The Company agrees to work with I&E, OCA and OSBA to refine its existing process for systematic evaluation of main extension requests to ameliorate, by the application of Tariff Rule 27.1(F), documented health and safety problems that exist within its service territory because of the inadequate quantity or quality of property owners’ individual well water supplies.
n) As part of this Settlement, the Company has agreed to provide the Commission’s Bureau of Technical Utility Services (“TUS”), the I&E, OCA and OSBA, on or before April 30, 2014, an update to PAWC Exhibit No. 3-C, pages 3-10, which will include actual plant additions and retirements by month for the twelve months ending December 31, 2013. On or before October 31, 2014, PAWC will update Exhibit No. 3-C, page 3-10 for the twelve months ending June 30, 2014. In PAWC’s next base rate proceeding, the Company will prepare and submit a comparison of its actual expenses and rate base additions for the twelve months ended December 31, 2014 to its projections in this case. However, it is recognized by the Joint Petitioners that this is a black box settlement that is a compromise of the Joint Petitioners’ positions on various issues.
o) The Company will not implement a Distribution System Improvement Charge (DSIC) during the calendar year ending December 31, 2014. The first DSIC in 2015 will be effective no earlier than April 1, 2015 based on DSIC-eligible expenditures during January and February 2015. In any event, the Company will not begin to impose a DSIC until the balances of DSIC-eligible accounts, net of plant funded with customer advances and customer contributions, exceed the December 31, 2014 levels of investment in plant additions projected by PAWC in this case. This provision relates solely to the calculation of DSIC during the time that the Settlement Rates are in effect and is not determinative for future ratemaking purposes of the projected plant additions to be included in rate base in a fully projected future test year filing.
p) The Settlement Rates set forth in Appendix A reflect the Joint Petitioners’ agreement with regard to water rate structure, rate design and the distribution of the increase in revenues in this case, as follows:[9]
1) The Rate Zone 1 5/8-inch customer charge for all customer classes except Industrial and Other Water Utilities will be $15.00 per month. The same percentage increase as that for 5/8 inch meters will be applied to the customer charges for all other meter sizes and classes of customers in Rate Zone 1.
1) Rate Zones 36, 43, 45, 48 and 49 are being consolidated with Rate Zone 1 under the Settlement Rates.
2) For Rate Zone 40, the OCA’s proposal as set forth in OCA Statement No. 3 (page 34) has been adopted with one modification, which establishes a consumption charge of $0.5350 per hundred gallons.
3) For Rate Zone 41, the customer charges have been equalized with Rate Zone 1 and the residential usage charge will be $0.7100 per 100 gallons.
4) For Rate Zone 44, the OCA’s proposal as set forth in OCA Statement No. 3 (pages 36-37) has been adopted.
5) For Rate Zone 46 Winter, the I&E’s proposal as set forth in I&E Statement No. 4 (pages 53-55) has been adopted with one modification, which establishes a consumption charge of $0.7100 per hundred gallons after meters are installed.
6) For Rate Zone 46 Summer, the BI&E’s proposal as set forth in BI&E Statement No. 4 (pages 53-55) has been adopted with one modification, which establishes a consumption charge of $0.7100 per hundred gallons after meters are installed.
7) For Rate Zone 47, the customer charges have been equalized with Rate Zone 1. The residential usage charge for the first usage block will be $0.6200 per 100 gallons. The residential usage charge for the second usage block will be $0.5000 per 100 gallons.
q) The Settlement Rates set forth in Appendix B reflect the Joint Petitioners’ agreement with regard to wastewater rate structure, rate design and the distribution of the increase in revenues in this case. A description of the impact of the Settlement Rates on an average Residential class customer in each of the Company’s wastewater operations is set forth below.[10]
1) Coatesville: Under the Settlement Rates, an average residential customer’s monthly bill will decrease by 13.3% to $58.50. There will be no change in the existing rates for the Commercial, Industrial and Municipal customer classes.[11]
2) Claysville: Under the Settlement Rates, an average residential customer’s monthly bill will decrease by 36.0% to $58.50. The rates for the Commercial and Municipal customer classes will be the same as the existing Coatesville wastewater operation’s rates for those classes. (There are no Industrial customers on the Claysville wastewater system.)
3) Northeast: Under the Settlement Rates, an average residential customer’s monthly bill will remain at $58.50 because the Settlement Rates are the same as the existing rates for Northeast.
4) Clarion: The Company’s proposed rates as set forth on PAWC Exhibit No. 11-B, Schedule 14, are the Settlement Rates. The Settlement Rates will result in an average residential customer monthly bill of $47.63, or an increase over existing rates of 36.9%.
5) Pocono: Customers will be converted from flat rates to metered rates. The Settlement Rates for Pocono are the same as the Settlement Rates for Clarion. An average residential customer’s monthly bill will decrease by 6.6% to $47.63.
6) Clean Treatment: An average residential customer’s monthly bill will decrease by 13.97% to $58.50. The rates for the Commercial customer class will be the same as the existing Coatesville wastewater operation’s rates for that class. (There are no Municipal or Industrial customers on the Clean Treatment wastewater system.)
7) Combined Water and Wastewater Revenue Requirement: Pursuant to Section 1311(c) of the Public Utility Code and the Commission’s Implementation Order in Docket No. R-2013-23565276, under the Settlement Rates a portion of the wastewater revenue requirement totaling $5,411,134 is being allocated to water customers, as shown in Appendix G (see column 10, line 34).
B. Public Interest Considerations
The Joint Petitioners have each prepared, and attach to this Joint Petition, Statements in Support identified as Appendices H through M, respectively, setting forth the bases upon which they believe that the Settlement, including the Settlement Rates, is fair, just, reasonable, non-discriminatory, lawful and in the public interest.
The Joint Petitioners submit that the Settlement is in the public interest for the following additional reasons:
a) The Settlement provides for an increase in annual operating revenues of $26 million, or approximately 4.5%, in lieu of the $58.6 million, or approximately 10.1%, increase originally requested.
b) Acceptance of the Settlement will avoid the necessity of further administrative and possible appellate proceedings at substantial cost to the Joint Petitioners, other parties, and the Company’s customers.
c) The Settlement Rates will allocate the agreed upon combined water and wastewater revenue requirement to each rate zone and customer class in a manner that is reasonable in light of the rate structure/cost of service positions of all parties.
d) The Settlement implements Section 1311(c) of the Public Utility Code in a manner that is fair to all customers. The Settlement avoids wastewater rate increases scheduled for January 1, 2014, and results in wastewater rates that are substantially lower than they would have been under stand-alone wastewater revenue requirement calculations. This is achieved by increasing Zone 1 water rates by less than 1%.
Additional Terms and Conditions
This Settlement is proposed by the Joint Petitioners to settle the instant case and is made without any admission against, or prejudice to, any position which any Joint Petitioner might adopt during subsequent litigation, including further litigation of this case. This Settlement is conditioned upon the Commission’s approval of the terms and conditions contained herein without modification. If the Commission should disapprove the Settlement or modify the terms and conditions herein, this Settlement may be withdrawn upon written notice to the Commission and all active parties within three business days following entry of the Commission’s Order by any of the Joint Petitioners and, in such event, shall be of no force and effect. In the event that the Commission disapproves the Settlement or the Company or any other Joint Petitioner elects to withdraw as provided above, the Joint Petitioners reserve their respective rights to fully litigate this case, including but not limited to presentation of witnesses, cross-examination and legal argument through submission of Briefs, Exceptions and Replies to Exceptions. The Joint Petition does not establish precedent and neither the Joint Petition nor Commission approval of the Joint Petition shall be cited in other proceedings. Joint Petitioners agree that, while the Settlement, upon Commission approval without modification, will be enforceable according to its terms, the Joint Petition does not expressly or implicitly represent approval of any specific claim or claims made in this proceeding and agree not to contend otherwise in any other proceeding.
If the ALJs, in their Recommended Decision, recommend that the Commission adopt the Settlement as herein proposed, the Joint Petitioners agree to waive the filing of Exceptions. However, the Joint Petitioners do not waive their rights to file Exceptions with respect to any modifications to the terms and conditions of this Settlement, or any additional matters proposed by the ALJs in their Recommended Decision. The Joint Petitioners also reserve the right to file Replies to any Exceptions that may be filed.
V. DISCUSSION
A. Applicable Law
The purpose of this investigation is to establish rates for PAWC customers which are “just and reasonable” pursuant to Section 1301 of the Public Utility Code, 66 Pa.C.S. § 1301.
A public utility seeking a general rate increase is entitled to an opportunity to earn a fair rate of return on the value of the property dedicated to public service. Pennsylvania Gas and Water Co. v. Pa. Pub. Util. Comm’n, 341 A.2d 239 (Pa. Cmwlth. 1975). In determining what constitutes a fair rate of return, the Commission is guided by the criteria set forth in Bluefield Water Works and Improvement Co. v. Public Service Comm’n of West Virginia, 262 U.S. 679 (1923) and Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (1944). In Bluefield the United States Supreme Court stated:
A public utility is entitled to such rates as will permit it to earn a return on the value of the property which it employs for the convenience of the public equal to that generally being made at the same time and in the same general part of the country on investments in other business undertakings which are attended by corresponding risks and uncertainties; but it has no constitutional right to profits such as are realized or anticipated in highly profitable enterprises or speculative ventures. The return should be reasonably sufficient to assure confidence in the financial soundness of the utility and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties. A rate of return may be too high or too low by changes affecting opportunities for investment, the money market and business conditions generally.
Bluefield Water Works and Improvement Co. v. Public Service Comm’n of West Virginia, 262 U.S. 679, 692-3 (1923).
In analyzing a proposed general rate increase, the Commission determines a rate of return to be applied to a rate base measured by the aggregate value of all the utility’s property used and useful in the public service. In determining a proper rate of return, the Commission calculates the utility’s capital structure and the cost of the different types of capital during the period in issue. The Commission has wide discretion, because of its administrative expertise, in determining the cost of capital. Equitable Gas Co. v. Pa. Pub. Util. Comm’n, 405 A.2d 1055 (Pa. Cmwlth. 1979).
Commission policy promotes settlements, 52 Pa.Code § 5.231. Settlements lessen the time and expense the parties must expend litigating a case and at the same time conserve administrative hearing resources. The Commission has indicated that settlement results are often preferable to those achieved at the conclusion of a fully litigated proceeding. 52 Pa.Code § 69.401. Rate cases are expensive to litigate and the cost of such litigation at a reasonable level is an operating expense recovered in the rates approved by the Commission. This means that a settlement, which allows the parties to avoid the substantial costs of preparing and serving testimony and the cross-examination of witnesses in lengthy hearings, the preparation and service of briefs, reply briefs, exceptions and reply exceptions, together with the briefs and reply briefs necessitated by any appeal of the Commission’s decision, yields significant expense savings for the company’s customers. That is one reason why settlements are encouraged by long-standing Commission policy.
In order to accept a settlement, the Commission must determine that the proposed terms and conditions are in the public interest. Pa. Pub. Util. Comm’n v. York Water Co., Docket No. R-00049165, (Commission Opinion and Order entered October 4, 2004); Pa. Pub. Util. Comm’n v. C. S. Water and Sewer Assoc., 74 Pa. P.U.C. 767 (1991).
This recommendation is prepared for the Commission to act in accordance with Section 1308(d) of the Public Utility Code, which states in pertinent part,
Whenever there is filed with the commission by any public utility … any tariff stating a new rate which constitutes a general rate increase, the commission shall promptly enter into an investigation and analysis of said tariff filing and may by order setting forth its reasons therefore, upon complaint or upon its own motion, upon reasonable notice, enter upon a hearing concerning the lawfulness of such rate, and the commission may, at any time by vote of a majority of members of the commission serving in accordance with law, permit such tariff to become effective, except that absent such order such tariff shall be suspended for a period not to exceed seven month from the time such rate would otherwise become effective. Before the expiration of such seven-month period, a majority of members of the commission serving in accordance with law, acting unanimously, shall make a final decision and order, setting forth its reasons therefore, granting or denying, in whole or in part, the general rate increase requested.
66 Pa.C.S. § 1308(d).
Pursuant to Section 315(a),
§ 315. Burden of proof
(a) Reasonableness of rates.-In any proceeding upon the motion of the commission, involving any proposed or existing rate of any public utility, or in any proceedings upon complaint involving any proposed increase in rates, the burden of proof to show that the rate involved is just and reasonable shall be upon the public utility. The commission shall give to the hearing and decision of any such proceeding preference over all other proceedings, and decide the same as speedily as possible.
66 Pa.C.S. § 315(a). Consequently in this proceeding, PAWC has the burden to prove that the rate increase it has proposed through the Joint Settlement is just and reasonable. The burden for the increase of rates is attributed solely to PAWC through Section 315(a) of the Public Utility Code. It then must be determined whether the settlement is in the public interest.
B. Analysis
The first question to ask prior to considering the Joint Settlement is whether the utility, PAWC, has satisfied its burden to show that it is just and reasonable to increase the rates proposed. The second question is whether the Joint Settlement is in the public interest.
1. Whether PAWC Current Rates Should be Increased
Section 315 of the Public Utility Code places the burden of a proposed increase in existing rates on the public utility providing the service. (See supra at 27.) In this case, PAWC must show that it is just and reasonable to increase its rates.
PAWC stated that it is “constructing a new wastewater treatment plant in its Clarion wastewater operations as required by the terms of a Department of Environmental Protection (DEP) Consent Order and Agreement addressing system conditions that existed prior to PAWC’s 2008 acquisition of the assets of the Clarion Area Authority. (Joint Settlement Appendix H, PAWC Stmt. in Support at 3, ¶ 4, citing PAWC Stmt. No. 3, at 20-23.) “The new plant is projected to cost approximately $22 million.” (Id.) PAWC will need an increase in existing revenue to comply with the DEP Consent Order and Agreement.
PAWC has also stated that the Company continues to experience “a decline in residential consumption of 1,032 gallons or 2.20% per year.” (PAWC Stmt. No. 1 at 14.) This rate of decline averaged over the residential customer base is about 2.8 gallons less usage per day per residential account. (Id.) The Company attributes the decline to water efficient plumbing fixtures and water-efficient appliances; and thus, does not foresee the decline ceasing in the future. The Company also attributed decline in water usage to emphases on and promotion of conservation and environmental protection to natural resources. (Id.) The Company calculated the decline in usage and its impact on revenue at its present rates resulted in over a $5.5 million deficit. (PAWC Exhibit 3-A, at 18.) The decline in use, if all other things are equal, of water service would result in a decline in revenue to cover operational expenses since the last rate increase.
The parent company of PAWC, AWW, has several information technology systems which are used by its subsidiaries that have become antiquated and reached or soon to reach their useful life. (See, PAWC Stmt. No.1 at 15-17). The benefits the Company will achieve in replacing these systems are to:
1) Promotion of operating excellence, efficiency and economies of scale;
2) Enhancement of the customer experience; and
3) An increase in employee effectiveness and satisfaction.
(Id. at 15-16). A review of the existing technology concluded that the existing systems were not integrated and had limited automation and functionality. (Id. at 17). AWW allocated 20.73% of the budgeted amount for the technology system upgrade or $66.4 million with an estimated service life of ten years. (Id. at 23, 25). PAWC proposed to depreciate the technology systems asset at 10% since the estimate service life is ten years. All of the allocated costs of the technology system upgrade are being included in the rate base. (Id. at 25). This expense added to the rate base is reason to obtain increased revenue; and thus, increase rates.
A rate increase is needed, states the Company, because although it has reduced its operating expenses, there is declining residential consumption, resulting in reduced billing, and at the same time a growth in need for substantial improvements to provide safe and adequate service. The Company’s projected overall return on equity for the twelve months ending December 31, 2014, is only 7.31% with a return on common equity of 8.64%. (PAWC Stmt. No. 1 at 6). With the increase provided for in this settlement, PAWC states that it can make improvements in the system, invest in facilities and replace aging infrastructure. Among such projects, the Company will replace or upgrade 71,600 water meters, install 12,358 water service lines and 440 wastewater laterals and replace 168 miles of water main and 1.34 miles of wastewater main. (PAWC Stmt. in Support at 5).
It is compelling that while the litigated positions of the opposing active parties made some adjustments to some of the expenditures advocated by the Company, no party asserted that the expenses did not provide rationale to increase rates. Rather, the dispute was over the quantity of the increase (with the opposing active parties concluding the quantity should be less than that proposed by PAWC).
Based on the evidence provided in this proceeding, we find that PAWC has sustained its burden of proof in demonstrating that an increase in rates is warranted. We find that the adjustments advocated by the opposing active parties is a tacit assent that there is a need to increase the existing rates of the Company.
We now address whether the Joint Settlement which provides the quantity of the increase and how the increase is allocated across the customer base as well as other service and quality issues, is in the public interest.
2. Consideration of Joint Settlement
We now address the second question: whether the Joint Settlement is in the public interest. As I&E notes in its Statement in Support of the Joint Settlement, this is a “black box” settlement and therefore, “unless specifically addressed, the Joint Settlement does not reflect agreement upon individual issues.” (I&E St. at 6). I&E further asserts that, “Line by line identification and ultimate resolution of each and every revenue related issue in the proceeding is not necessary to find that the Settlement is in the public interest…” Id.
We agree. Further, the Commission endorses such black box settlements. Chairman Powelson has stated that such settlements are “an integral component of the process of delivering timely and cost effective regulation.” Id. Citing Pennsylvania Public Utility Commission v. Wellsboro Company, Docket No. R-2010-2172662, Pennsylvania Public Utility Commission v. Citizens Electric Company of Lewisburg, PA, Docket No. R-2010-2172665. Statement of Commissioner Robert F. Powelson (January 31, 2011). The Joint Settlement is taken as presented. Consequently, whether the Joint Settlement is in the public interest and will be discussed in view of the Statements in Support and Opposition submitted by the parties the record.
a. Comments in Opposition
(1) Alloway Objection
Pro se Complainant S. Stockton Alloway filed his formal Complaint on May 9. 2013, at Docket No. C-2013-2366239. Mr. Alloway complained about the wastewater service of PAWC which he receives as a customer of the Coatesville service area on an unmetered basis. Mr. Alloway stated that his rate is unfair because he is single and does not use as much water as a typical residential customer. Consequently, Mr. Alloway believes he is not discharging as much wastewater into the PAWC collection system as a typical residential customer, and thus, concluded that he should not pay as much as other residential unmetered customers. Mr. Alloway stated, “PAW[C] needs first, to find out how many people occupy a house. Then use a sliding scale to determine a flat rate for a sewage bill.” Alloway formal Complaint, at 3, ¶4. Mr. Alloway participated in this proceeding as an inactive participant.
Mr. Alloway filed Objections to the Joint Settlement by letter dated October 21, 2013. He objected to the Joint Settlement because it does not modify the use of flat rate for billed wastewater service in his service territory. Mr. Alloway suggested that the existing tariffed flat rate be modified by a sliding scale according to the quantity of occupants at a particular service address so that single-person households do not pay the same amount as a household of three or more. Mr. Alloway implied that the flat rate billing is unfair to single family customers. Mr. Alloway further objected to the use of a single “typical user” estimate in ratemaking calculations because it results in single people, such as him, paying the same amount as a family that uses much more water. (Alloway Stmt. in Opposition at 2).[12]
It is well established that tariff provisions that have been properly submitted to and approved by the Commission are prima facie reasonable. Zucker v. Pa. Pub. Util. Comm’n, 401 A.2d 1377 (Pa. Cmwlth. Ct. 1979), Shenango Township Board of Supervisors v. Pa. Pub. Util. Comm’n, 686 A.2d 910, 914 (Pa. Cmwlth. Ct. 1996), Kossman v. Pa. Pub. Util. Comm’n, 694 A.2d 1147, 1151 (Pa. Cmwlth. Ct. 1997). Mr. Alloway therefore carries a very heavy burden to prove that the tariff provisions in effect or to be approved in the Joint Settlement are unreasonable. Brockway Glass Co. v. Pa. Pub. Util. Comm’n, 437 A.2d 1067 (Pa. Cmwlth. Ct. 1981).
The current tariff was approved by the Commission without the sliding scale and Mr. Alloway has provided nothing to support a finding that it was unreasonable. As far as the Settlement tariff provisions, Mr. Alloway has presented no evidence to show that implementation absent a sliding scale is in any way unreasonable. Consequently, there is no basis upon which to deny the Petition for Approval of the Joint Settlement.
Moreover, one of the standard principles of rate design is to recover costs on an equitable basis by customer class. Lloyd v. Pa. Pub. Util. Comm’n, 904 A.2d 1010, 1015-16 (Pa.Cmwlth. 2006); see also, James Bonbright, Principles of Public Utility Rates, at 291, 295-96 (1st printing, 1961). As a practical matter, rates are not designed for each individual customer, but by customer class.
As stated above, Mr. Alloway receives wastewater service from PAWC in Zone 1, as a customer of the Coatesville service area on an “unmetered” basis. He requests PAWC to change his rate to a sliding scale based on the quantity of occupants at the service address. There are several issues with Mr. Alloway’s suggestion.
First, rates are designed to recover costs equitably by customer class and not for individual customers. Second, it would be impracticable to establish a billing criteria as Mr. Alloway suggested. If the number of residents is to be established as a billing basis, it would be difficult to administer because the number of people living in a residence is changeable. For example, there is a problem monitoring the number of students who are at home part of the year. Number of residents in a household is not a standard rate design criteria and is not included in the approved tariff for PAWC. Third, there is no record of the actual volume that Mr. Alloway uses and therefore, no basis for establishing his individual share of the cost of service. For example, should his bill be 90% of the average residential customer, 80% or some other discount and what should the criteria be for establishing such a discount.
The Joint Settlement Petition provides for a subsidy to the wastewater customers in the magnitude of $5,410,115 annually for the next three years. The total annual wastewater cost of service is $21,734,396. (Appendix G, Exhibit No. 11-R-5 of the Settlement Petition). As a result, Mr. Alloway and other wastewater customers will receive a discount of approximately 25%. {100% x ($5,410,115 / $21,734,396)}
Review of Tariff Supplement No. 15 from the Joint Settlement indicates that Mr. Alloway’s flat rate would be $58.50 per month effective January 1, 2014. The monthly bill based on the Joint Settlement for PAWC’s average residential metered customer using 3,946 gallons would be $58.32 which is essentially the same. (Service Charge $7.50 plus Usage Charge $12.88 x 3.946 thousand gallons.) It appears that the unmetered rate is based on the average residential metered customer and is a reasonable basis to develop the unmetered rate since actual usage is unknown.
Without the transfer of wastewater costs to water customers, the flat rate for wastewater service would be approximately $73.00 per month, comparable to the unmetered rate of $71.94 as set forth in Supplement No. 6 scheduled to be effective January 1, 2013. The rate in Supplement No. 6 of $71.94 was approved by the Commission in the 2010 rate case. Under the Joint Settlement, Mr. Alloway will pay $58.50 per month effective January 1, 2014. This is a significant change in rates that benefits him and other wastewater customers. If Mr. Alloway qualifies for the low income residential rate, he would receive a 15% discount, or a monthly bill of $49.73 an additional reduction of $8.78, which would increase his benefit in changed rates.
(2) Kazimer Objection
Pro Se Complainant William Kazimer filed a formal Complaint on July 8, 2013, at Docket No. C-2013-2372396. Mr. Kazimer participated in this proceeding as an inactive Complainant. Mr. Kazimer opposed the Joint Settlement by letter dated October 27, 2013. In Mr. Kazimer’s formal Complaint and in his comments to the Joint Settlement he comments that PAWC’s rate increase request is excessive considering the economy and the struggle of the Company’s customers financially. Mr. Kazimer requests that the Commission vote no increase at all to PAWC’s rates.
We acknowledge that the American economy has caused most citizens to struggle financially. However, we have concluded that PAWC has met its burden to show that a rate increase for the services it provides to its ratepayers in the Company’s service territories is just, needed and reasonable. (See supra V.B.1 at 29-31). Moreover, we have concluded that the rate increase among other things contained in the Joint Settlement is in the public interest. (See infra at V.B.3). We do not find the comments presented by Mr. Kazimer persuasive or effective to rebut the proof PAWC has provided for the rate increase. Consequently, Mr. Kazimer’s comments are unsuccessful in changing our conclusion that the rate increase of approximately 4.5% as presented in the Joint Settlement is needed, just, reasonable and in the public interest.
(3) Shirey Objection
Mr. Thad Shirey filed his formal Complaint against the proposed rate increase by PAWC on July 8, 2013, at Docket No. C-2013-2372641. Mr. Shirey stated in his formal Complaint, “We are a retired couple on a fixed income.” (Docket No. C-2013-2372641, at 3 ¶5). Mr. Shirey indicates that he receives water service from PAWC and requested the Commission not increase his water rates. (Id. at 3 ¶6). Mr. Shirey filed his letter in opposition to the Joint Settlement timely for the letter was postmarked October 26, 2013.[13] Mr. Shirey does not provide any comment with his opposition.
We direct Mr. Shirey to our response made to Mr. Kazimer’s comments above. Again, we find that PAWC has sustained its burden to prove there is a need for a rate increase. We do not find Mr. Shirey’s comments persuasive and conclude that rate increase proposed by the Joint Settlement is just, reasonable and in the public interest.[14]
There was no active party in opposition to the Joint Settlement.
b. Statements in Support
Parties commenting were in favor of the settlement for the following reasons:
(1) PAWC
PAWC states that the Joint Settlement is in the public interest because it allows the Company to consolidate water and wastewater operations as authorized by Act 11 and yet reduce the increase in rates to 4.5% as opposed to the initially requested 10.1%. (PAWC Stmt. in Support at 2, 7). PAWC also contends that the compromise method of passing some wastewater charges to water customers results in moderation of the rates of wastewater customers while having only a negligible effect upon the rates of water customers. (Id. at 2-3, 9). Noted is that some wastewater rates will decrease and the allocation of wastewater cost to water customers will result in increasing the average customer bill in Rate Zone I by about only $0.69 per month, with a reduction of that charge in 2017. (Id. at 3, Appendix A). The revenue from the water customers for wastewater services will support large project plant improvements as well as construction of the new wastewater plant in Clarion with a 28% rather than a 98% increase in rates for Clarion wastewater customers. (Id. at 3, 5).
The Company notes other benefits to the Joint Settlement. The terms gradually unify customer charges and rates across the different rate divisions. (Id. at 6). There is an increase in contributions to the Dollar Energy Fund to assist low-income and needy customers and an increase in the low-income discount for the monthly water customer charge. (Id.) The Joint Settlement also addresses and resolves many of the customer service issues raised during the public input hearings. (more infra, OCA Stmt. in Support, Appendix E).
(2) I&E
I&E reiterates many of the reasons stated by the Company. It adds that the proposal to collect wastewater revenues from water customers is in the public interest in that by spreading the costs among water customers, wastewater customers in Coatesville, Claysville and Northeast wastewater service territories will not experience the substantial rate increase already approved by the Commission. (I&E Stmt. in Support at 9). The rate increase authorized in those proceedings - Coatesville (R-2010-2166212), Claysville (R-2010-2166210) and Northeast (R-2010 2162140) - will not go into effect and the settlement will reduce Zone 1 water rates by $2.6 million in 2017. (Id. at 10).
I&E also states that the Settlement “satisfies all applicable legal standards and results in terms that are preferable to those that may have been achieved at the end of a fully litigated proceeding.” (Id. at 5) I&E highlights revenue allocation and rate design portions of the settlement as just, reasonable, non-discriminatory and, where measures will be taken to close the rate gap among customer zones, compliant with the concept of gradualism. (Id. at 14-22). I&E acknowledges that only 2.7% of PAWC water customers are also PAWC wastewater customers and that the remaining 87.3% pay wastewater bills or septic service elsewhere. I&E posits, however, that the settlement is in the best interest of the public because it results in a moderated cost shift to water users while maintaining reasonable rates for wastewater customers. (Id. at 21-22).
(3) OCA
OCA notes that instead of shifting $9.1 million of the wastewater cost of service to water customers as originally requested only $5.4 million is shifted in the Joint Settlement. (OCA Stmt. in Support at 4). It emphasizes that settlement revenue is 44% of that originally sought and that the settlement amount includes $2.6 million in annual revenue already approved by the Commission for upgrades of the Coatesville (R-2010-2166212), Claysville (R-2010-2166210) and Northeast (R-2010 2162140) wastewater service. In these cases, the Commission approved increases in rates through 2017. Under this Joint Settlement, those increases will not go into effect. It is OCA’s position that the allocation of combined water and wastewater revenue provided for in the settlement results in a reasonable rate structure and cost of service for the various rate zones and customer classes and eliminates the rate shock that the wastewater customers of Coatesville, Claysville and Northeast would have experienced. (OCA Stmt. in Support at 4, 6).
Also, in exchange for PAWC using the FPFTY in these proceedings, the Company is required under the settlement to provide a report of actual plant additions and retirements in April 2014 and in October 2014. (Id. at 5). This is in addition to the obligatory comparison in its next base rate case of actual expenses and rate base additions to its projections in this case. The Company has also agreed not to implement a DSIC during the year ending December 31, 2014, and compromised on its acquisition adjustments and amortizations with respect to income off-setting. (Id. at 5-6). OCA also finds in the public interest that PAWC will not file for certain additional rates increases before March 31, 2016.[15] (Id. at 7). OCA also believes that the rates and costs of service reached in the settlement balances the needs of the Company with rates more in line with the service of each class and is a more fairly distributed costs of service for wastewater services. (Id. at 8).
OCA also places importance on the public benefit of the Main Extensions in which PAWC will invest to address lack of public water and health and safety issues in various communities, particularly Washington County, a need reflected in testimony during public input hearings and by OCA experts. (Id. at 9). OCA also highlights that PAWC has begun and will continue to address Coatesville service, odor and water quality issues and concerns brought out during the public input hearings in West Chester. (Id. at 10).
(4) OSBA
OSBA did not object to a shift of wastewater revenue requirements to water customers. In the settlement, PAWC has reduced its original wastewater revenue requirement, thus reducing the amount of the shift to water customers. OSBA finds this reduction of benefit to its constituency because ultimately the total amount shifted to commercial customers is not much more than the amount recommended by its expert witness. (OSBA Stmt. in Support at 4). It finds this a reasonable compromise, eliminating the risk of litigation. (Id. at 5).
(5) CEO
CEO, an advocate for the low-income population of the Luzerne County, supports the settlement as advantages to all low-income customers and in the public interest in general. The settlement increases funding for the PAWC hardship grant program from $250,000 to $300,000 annually, which will provide assistance to more people. Additionally, under the Joint Settlement, the low-income customer charge discount for water customers will increase from 65% to 80%, further meeting the needs of low-income customers. (CEO Stmt. at 2).
(6) PAWLUG
PAWLUG finds the Joint Settlement to be a reasonable compromise of all parties in light of the risks and expense of litigation.
(7) Inactive Participants
Pro Se Complainant Dawn Spielvogel filed a formal Complaint against the PAWC’s proposed rate increase on May 20, 2013 at Docket No. C-2013-2364692. Ms. Spielvogel indicated on her formal Complaint that she was complaining about water service. Her request for relief was to hold a public hearing in Butler, Pennsylvania. Consistent with our Order #3 dated July 2, 2013, Ms. Spielvogel participated in this proceeding as an inactive participant.
On October 18, 2013, all inactive participants were sent a letter to provide the following information:
(1) announce that the active participants reached a settlement;
(2) instruct the active participants on how to obtain access to the Joint Settlement on the Internet or where to call to get a hard copy if they did not have Internet access;
(3) instruct the active participants on where they could call to have any questions about the Joint Settlement answered; and
(4) instruct the active participants on the options they had at their discretion to indicate their position in this proceeding to the presiding officers.
By letter dated October 20, 2013, Ms. Spielvogel indicated that she read the Joint Settlement and desired to join in the settlement.
c. Statements of Non-Opposition
(1) PWSA
PWSA filed a statement of non-opposition to the Joint Settlement on October 18, 2013. PWSA stated specifically that it, “does not oppose the proposed allocation of $5.4 million of wastewater revenue requirement to water customers as identified [in the Joint Settlement].” (PWSA Stmt. of Non-Opposition, at 2-3, ¶ 5).
We find the non-opposition of PWSA compelling. PWSA is allocated costs of the wastewater service as part of the rate increase that it is knowingly not opposing. This revelation alone is evidence that an industrial customer of PAWC that receives only water service from the Company finds the resolution to pay a portion of the wastewater service palatable considering the totality of the resolution for this proceeding through the Joint Settlement.
PWSA also requested that PAWC, “provide a message printed directly on customer bills clearly identifying the portion of [the customer’s] water rate that is used to pay [its] wastewater revenue requirement in other parts of PAWC’s service [territory].” (PWSA Stmt. of Non-Opposition, at 3, ¶ 5). PWSA contends by providing the message no separate calculation of the wastewater revenue requirement would be needed since the statement would communicate certain cents per 100 gallons of water usage was billed for the purpose of wastewater cost recovery in the service territory of PAWC. PWSA contended that the billed message would be a significant benefit to PAWC’s customers enabling them to see and understand the portion of their water service rate that subsidized cost for wastewater service in PAWC’s service territory. PWSA advocated that transparency or the free flow of information by utilities, which is what the request is intended to promote, are recognized by the Commission as beneficial. (PWSA Stmt. of Non-Opposition, at 3-4, ¶ 8 (citations omitted)).
It is understood that PWSA’s intent through its request is to help the water customer understand and stay current of that portion of the bill that is charged for wastewater service to customers within PAWC’s service territory. We agree that the free flow of information by utilities is beneficial to the ratepayer. We also agree that the ratepayer should be informed. However, the method requested by PWSA to provide this information to the ratepayer seems burdensome on the utility. The same information can be conveyed through a different means that does not require the printing of the information on each bill for each water customer. This information can be posted on PAWC’s website with a calculator or table for each customer class to enable the customer to find out the portion of the bill that was charged to recover the wastewater revenue requirement. The bill can have the website link so that ratepayers can obtain more detailed information about the bill. Thus, the information is at one central place that is easier and less costly for the Company to maintain accuracy and relevance rather than the requested method by PWSA.
While we are suggesting this method as a means to obtain the same information that we acknowledged is beneficial to the ratepayer, we are not recommending that the Joint Settlement be modified to direct the Company to implement this method. We find the method suggested and our alternative method does not warrant modification of the Joint Settlement. We find that the advantages yielded to the public through the Joint Settlement outweigh the usefulness of providing a particular means by which the portion that a water ratepayer pays toward the wastewater service in PAWC’s service territory once the proposed rates become effective. However, we do believe the Company should be held accountable to provide a means for its water ratepayers to determine what portion of the rates billed is due to the cost recovery of wastewater service in PAWC’s service territory.
(2) Active Pro-se Complainants
Doris Miller and Jane Neufeld are active pro-se Complainants in this proceeding. Both Ms. Miller and Ms. Neufeld are solely residential water customers of PAWC; they do not receive wastewater service from PAWC. (See, respectively, formal complaint at Docket No. C-2013-2369063 filed June 12, 2013, at 3, ¶ 4; and Docket No. C-2013-2369464 filed June 14, 2013, at 3, ¶ 4). As active pro-se Complainants these individuals were privy to the negotiations and the terms of the Joint Settlement. On October 18, 2013, both Ms. Miller and Ms. Neufeld sent electronic mail to the presiding officers stating that they did not object to the Joint Settlement.[16]
It is compelling to us that these pro se Complainants chose not to oppose a settlement that imposes as a portion of the residential water service, an allocation of the cost of wastewater service. The non-opposition of residential customers that are active participants to the proceeding and thus, represented their interests during the negotiations for settlement, is a persuasive fact toward concluding that Joint Settlement is reasonable to the residential customer that solely receives water service from PAWC.
(3) U.S. Steel Corporation
On October 23, 2013, U.S. Steel filed a statement not opposing the Joint Settlement.
Based on the above, there is a public interest served in increasing the rates as set forth in the compromise. This will result in plant updates and new major service projects and will allow the PAWC to maintain and improve its facilities. During the public input hearing, many customers disputed that it was in the public interest to require water-only customers to pay for part of the wastewater service supplied to others, particularly when these water-only customers pay wastewater bills to another entity or incur septic system expenses. However, active parties who represent the interests of these members of the public have acceded to the settlement terms and contend that it is in the public interest to pass moderate increases to water-only customers for the greater public good of reasonable wastewater rates and wastewater plant improvements. In the absence of evidence contrary to that assertion and in light of the Commission’s favorable view of settlements, the statements in support establish a public interest in accepting the Joint Settlement as presented. Also persuasive is that active pro se complainants who are water-only customers do not object to the Joint Settlement which requires them to contribute to wastewater costs.
d. Additional Considerations
1) Semi-Annual Information Sessions for Coatesville Service Issues
The Joint Settlement at paragraph 8.k.(3) and Appendix E-3 addresses the method that will be used to address service issues in the following areas: City of Coatesville, the Borough of Parkesburg, East Fallowfield Township, Highland Township, West Caln Township, West Sadsbury Township, Valley Township, Caln Township, West Brandywine Township, and Sadsbury Township.
We suggest that PAWC consider future implementation of the semi-annual information sessions through live-streaming. We believe this method of communicating the information session provides an alternative to working individuals and families that may not otherwise have a means to attend the information sessions and obtain the information firsthand. Again, while we are making this suggestion we are by no means recommending modification of the Joint Settlement to incorporate this method for the information sessions. We do not find that this alternative means to communicate the information from the sessions regarding service issues warrants modification of the Joint Settlement. We find that the advantages yielded to the public through the Joint Settlement outweigh the suggestion we have provided as a means to produce the information sessions. However, we do believe that perhaps more effective dissemination of information and overall participation may be achieved through the alternative medium suggested.
(2) Amity Township Public Fire Hydrants
As noted supra at 16, Amity Township Manager Charles Lyon questioned the PAWC practice of requiring the Township to pay public fire hydrant fees as well as sign documents indemnifying the PAWC when there is use of those hydrants. This is not a subject of the Joint Settlement and does appear to be a service or safety issue that requires immediate attention.
Moreover, if indeed a matter of the PAWC tariff, then a Commission approved tariff has the force and effect of law and is binding on both the utility and its customers. Brockway Glass Co. v. Pa. Pub. Util. Comm’n., 437 A.2d 1067 (Pa. Cmwlth. 1981) (Brockway Glass); see also, Behrend v. Bell Telephone Co., 363 A.2d 1152 (Pa. Super. 1976). The burden is then upon the party questioning the tariff to show why it is inadequate or unreasonable.
The record here is incomplete and insufficient for Amity Township to fulfill such a burden. Therefore, it is recommended that a formal complaint form be sent to Amity Township as an opportunity to pursue the concerns formally in a separate proceeding.
(3) Changes to Commission Approved Settlements
The previously Commission-approved wastewater rate increases that were to become effective on January 1, 2014, and remain in effect for a three-year period or through December 31, 2016, for Coatesville wastewater operations (Docket No. R-2010-2166212); Claysville wastewater operations (Docket No. R-2010-2166210); and Northeast wastewater operations (Docket No. R-2010-2166214) will not occur. (Joint Settlement at 6, ¶ 8.c.). We note that this Joint Settlement overrules a directive by the Commission.
The 2010 rate cases for Coatesville, Claysville and Northeast wastewater operations, directed that the shortfall of revenue for wastewater service, $7,795,270, be recovered in the remaining three years in increments as follows beginning on January 1, 2014: (1) $2,598,424 in 2014; (2) 2,598,423 in 2015; and (3) 2,598,423 in 2016 for a total of 7,795,270 by December 31, 2016. These amounts were deferred collections over the three year period to avoid rate shock by the wastewater customers of these operations. See, Pa. Pub. Util. Comm’n v. Pennsylvania-American Water Company, Coatesville Wastewater Operations, (2010 Coatesville rate case) Docket No. R-2010-2166212, Order entered December 16, 2010, adopting Recommended Decision, at 10, ¶1; Pa. Pub. Util. Comm’n v. Pennsylvania-American Water Company, Claysville Wastewater Operations, (2010 Claysville rate case) Docket No. R-2010-2166210, Order entered December 16, 2010, adopting Recommended Decision, at 7, ¶ 1; Pa. Pub. Util. Comm’n v. Pennsylvania-American Water Company, Northeast Wastewater Operations, (2010 Northeast rate case) Docket No. R-2010-2166214, Opinion and Order at 7, ¶ 1. The transfer of the shortfall of wastewater revenue to water customers is presented in Appendix 1, attached. The schedule shows a breakdown of the annual transfer of $2,598,424 deferred from the 2010 rate case plus the annual shortfall transfer in revenue of $2,811,691 from this 2013 rate case over the three year recovery period for a total annual transfer of $5,410,115 for the three years from 2014 through 2016.
We note that when Act 11 went into effect on April 16, 2012, the relevant statutes for ratemaking changed; notably sections 315(e), 1311(c) and (e), and the addition of subchapter B of Chapter 13 the Public Utility Code. 66 Pa.C.S. §§ 315(e), 1311(c) and (e), 1350 et seq. In the 2010 Coatesville rate case, the 2010 Claysville rate case and the 2010 Northeast rate case, the following language of the settlements was approved by the Commission,
PAWC will not file for another general wastewater rate increase for the [respectively named] Wastewater Operations under Section 1308(d) of the Public Utility Code prior to March 31, 2016. However, if a legislative body or administrative agency, including the Commission, orders or enacts fundamental changes in policy or statutes which directly and substantially affect PAWC’s rates, then the Settlement shall not prevent PAWC from filing tariff supplements to the extent necessitated by such action.
2010 Coatesville rate case, Recommended Decision, at 7, ¶ 2; 2010 Claysville rate case, Recommended Decision, at 5, ¶ 2; and 2010 Northeast rate case, Recommended Decision, at 5-6, ¶ 2 (Emphasis added). As abovementioned notable changes to the Commission’s statute concerning ratemaking were made and became effective in April 2012. These changes invoked the provision cited above in the settlement reached in these 2010 rate cases. The plain reading of this provision results in the discretion of PAWC to seek changes in what was agreed and approved in the 2010 rate cases.
This Joint Settlement has allocated the total of $7,795,270 or $7.8 million over the next three years to the water customer base instead of requiring the wastewater customers to pay for the shortfall as directed by the aforementioned Commission orders in the 2010 rate cases. We do not find overruling the abovementioned approved Commission orders illegal or unreasonable in this instance. Moreover, we find that this change is in compliance with Section 1311(c) and (e) of the Public Utility Code. 66 Pa.C.S. §§ 1311(c) and (e).
3. Disposition
After considering the Joint Petition for Settlement, including the reduction in the proposed rates, the Company’s additional contribution to the hardship grant program, the stay out provision, the agreement by the Company to install mains with Company tariff rule 12.7, the Company’s responses to service issues in around Coatesville predominantly raised during the East Fallowfield public input hearing, the changes in rate design and structure, and the savings achieved through settlement rather than fully litigating and briefing contested issues, it is our opinion that the Joint Settlement is fair, reasonable, just and in the public interest. Accordingly, we recommend that the Joint Settlement submitted in this proceeding be approved.
VI. CONCLUSIONS OF LAW
1. The Commission has jurisdiction over the subject matter and parties to this proceeding.
2. PAWC has met its burden of proof to show that the rates, rules and regulations in the settlement are lawful, just and reasonable.
3. To determine whether a settlement should be approved, the Commission must decide whether the settlement promotes the public interest. Pa. Pub. Util. Comm’n v. C. S. Water & Sewer Assoc., 74 Pa.PUC 767 (1991); Pa. Pub. Util. Comm’n v. Philadelphia Electric Co., 60 Pa.PUC 1 (1985).
4. The settlement rates, terms and conditions contained in the Joint Petition for Settlement of rate investigation at Docket No. R-2013-2355276 submitted by the Pennsylvania-American Water Company, the Office of Consumer Advocate, the Office of Small Business Advocate, the Commission on Economic Opportunity, the Bureau of Investigation and Enforcement, and Pennsylvania American Water Large Users Group are just, reasonable and in the public interest.
5. The Joint Petition for Settlement of the rate investigation at Docket No. R-2013-2355276, submitted by Pennsylvania-American Water Company, the Office of Consumer Advocate, the Office of Small Business Advocate, the Commission on Economic Opportunity, the Bureau of Investigation and Enforcement and Pennsylvania American Water Large Users Group, promotes the public interest and therefore should be approved as submitted, without modification.
6. The Commission is required to provide due process to the parties that participated by formal complaint or intervention. When parties are afforded notice and an opportunity to be heard, the Commission requirement to provide due process is satisfied. Schneider v. Pa. Pub. Util. Comm’n, 83 Pa.Cmwlth. 306, 479 A.2d 10 (1984).
7. Pennsylvania-American Water Company has complied with Sections 1311(c) and (e) and the Implementation of Act 11 of 2012, Docket M-2012-2293611, Final Order entered August 2, 2012.
VII. ORDER
THEREFORE,
IT IS RECOMMENDED:
1. That the Joint Petition for Settlement of the rates investigation, including all appendices, be admitted into the record of the proceeding;
2. That the rates, terms and conditions contained in the Joint Petition of Settlement of the rates investigation at Docket No. R-2013-2355376, submitted by Pennsylvania-American Water Company, the Office of Consumer Advocate, the Office of Small Business Advocate, the Commission on Economic Opportunity, the Bureau of Investigation and Enforcement and Pennsylvania American Water Large Users Group be approved and adopted without modification;
3. That the Commission find the Settlement Rates to be just and reasonable and grant the Company permission to file the Water Tariff Supplement attached hereto as Appendix A and Wastewater Tariff attached hereto as Appendix B to become effective on one day’s notice after entry of the Commission’s Order approving the Joint Settlement for service rendered on and after January 1, 2014, which increase the Company’s rates so as to produce an increase in annual operating combined water and wastewater revenues of $26 million in lieu of the $58.6 million originally requested and that produce approximately $604.6 million in total annual combined water and wastewater revenue (including Other Water Revenues) as shown in Appendix C, Schedule A, column 8;
4. That the Motion for Admission of Testimony and Exhibits filed by Pennsylvania-American Water Company, the Bureau of Investigation and Enforcement, Office of Consumer Advocate, Office of Small Business Advocate, Commission on Economic Opportunity, and Pittsburgh Water & Sewer Authority is granted;
5. That the following formal Complaints are deemed satisfied: Office of Consumer Advocate (C-2013-2262470), Office of Small Business Advocate (C-2013-2364641), Doris Miller (C-2013-2369063), Dawn B. Spielvogel (C-2013-2364692) and Jane Neufeld (C-2013-2369464) and marked closed;
6. That the following formal Complaints are dismissed: Brian L. Casper (C-2013-2364664), Robert Redinger (C-2013-2364773), Rita Sherman (C-2013-2366095), Guy & Nedra Visconti (C-2013-2367036), Russell Vankoughnet (C-2013-2367041), Jon & Dorothy Pichelman (C-2013-2369095), Georgia L. Dicko (C-2013-2369925), Carly J. Dunn (C-2013-2370649), William B. Kazimer (C-2013-2372396), S. Stockton Alloway (C-2013-2366239), Thad Shirey (C-2013-2372641), and Paul Trizonis (C-2013-2379466) and marked closed;
7. That a formal complaint form be mailed to Amity Township Board of Supervisors:
Attention: Mr. Charles Lyon, Township Manager
Amity Township Municipal Offices
2004 Weavertown Road
Douglassville, PA 19518
8. That upon acceptance and approval by the Commission of the tariff supplement filed by Pennsylvania-American Water Company consistent with this Order, this proceeding shall be marked closed.
Date: November 5, 2013 /s/
Angela T. Jones
Administrative Law Judge
/s/
Darlene D. Heep
Administrative Law Judge
APPENDIX 1
|Pennsylvania American Water Company | | | | |
|Docket No. R-2013-2355276 | | | | | |
|Transfer of Wastewater Costs to Water Customers as Proposed in The Joint Settlement Petition |
| | | |Rate Case | |Rate Case* | |Amount | |
| | | |$ | |$ | |$ | |
| |2014 | | 2,598,424 | | 2,811,691 | | 5,410,115 |*** |
| | | | | | | | | |
| |2015 | | 2,598,423 | | 2,811,691 | | 5,410,114 |*** |
| | | | | | | | | |
| |2016 | | 2,598,423 | | 2,811,691 | | 5,410,114 |*** |
| | | | | | | | | |
| |Total | | 7,795,270 | ** | 8,435,073 | | 16,230,343 | |
| | | | | | | | | |
| | |*Annual short-fall between cost of service and proposed settlement revenue from |
| | |wastewater operations for 2013 rate case to be transferred to water customers. |
| | | | | | | | | |
| | |**Total transfer of 2010 rate case. 2010 settlement provided that the short-fall is |
| | |to be recovered over 2014, 2015 and 2016. This was deferred to avoid rate shock |
| | | | | | | | | |
| | |***Annual transfer | | | | | |
| | | | | | | | | |
| | |Note: The total 2010 rate case transfer of $7,795,270 is not directly comparable |
| | |to the annual transfer of $5,410,114. The $5,410,115 is comprised of the annual |
| | |2010 rate case. | | | | | |
-----------------------
[1] Although Act 11 of 2012 was enacted on February 14, 2012, it did not become effective until 60 days afterwards or April 16, 2012.
[2] An Order Consolidating S. Stockton Alloway v. Pennsylvania American Water Company, C-2013-2366239, with this rate case proceeding was issued on July 11, 2013.
[3] In Order #7, dated September 23, 2013, the ALJs acknowledged the active status of PAWLUG, and thus granted the intervention of the group.
[4] Act 11 of 2012 also changed Section 315(e) of the Public Utility Code. 66 Pa.C.S. § 315(e). That change concerned the use of the future test year and permitted use of a fully projected future test year. While PAWC made use of this change and proposed expenses regarding a fully projected future test year, the Joint Settlement allows for the Commission to provide further guidance in the use of the fully projected future test year rather than to adopt as precedent the methods used by PAWC in implementing this measure.
[5] Mr. Wintermeyer filed formal Complaints in PAWC proceedings in 2011 (C-2011- 2250134) and 2009 (C-2009-2116452).
[6] PAWC representatives have since met with Mr. Pitts and addressed his concerns about the pipe fixtures. Joint Petition for Settlement, Appendix E-1.
[7] The older communities in Valley Township referenced are Coatesville Heights, Quiet Village and Hayti (Hati), a cognomen for the area.
[8] As a result of settlements in previous proceedings, PAWC already is prohibited from requesting an increase in base rates prior to March 31, 2016, for its wastewater operations in Claysville (Docket No. R-2010-2166210), Coatesville (Docket No. R-2010-2166212), and Northeast (Docket No. R-2010-2166214), except under extraordinary circumstances.
[9] Subparagraphs (1)-(8) provide a general description of the water rate structure and water rate design incorporated in the Settlement Rates. While every effort has been made to ensure that the description is accurate, if any inconsistency exists between such description and the rates set forth in Appendix A to the Joint Settlement, the latter shall take precedence.
[10] If any inconsistency exists between the information provided in subparagraphs (1)-(7) and the rates set forth in Appendix B to the Joint Settlement, the latter shall take precedence.
[11] As explained in paragraph 1.c., supra, under the terms of the Joint Settlement, the scheduled January 1, 2014 increase in the rates of all customers of the Coatesville, Claysville and Northeast wastewater operations will not occur.
[12] A similar argument was made by Mr. Alloway in S. Stockton Alloway v. Pennsylvania-American Water Company, 2012 Pa. PUC LEXIS 1094 (Pa. PUC 2012). That action was dismissed after hearing and a determination that Mr. Alloway had not met his burden of proof.
[13] By Order #7 dated September 23, 2013, and OCA letter dated October 18, 2013, comments by inactive Complainants were to be postmarked no later than October 28, 2013.
[14] Objections filed by Complainants Rita Sherman at Docket No. C-2013-2366095 and Robert Redinger at Docket No. C-2013-2364773 were postmarked after October 28, 2013. The OCA letter providing all inactive participants with instruction to comment on the Joint Settlement stated, “any comments regarding the Settlement… must [be]…postmarked no later than October 28, 2013.” (OCA letter dated October 18, 2013, 1 of 6). We find these objections untimely and they are not addressed.
[15] If PAWC would file for a rate increase on April 1, 2016, and the Commission ordered an investigation, the implementation of the increase could occur no earlier than November 2016. The settlement proposes to implement these rates on January 1, 2014. From January 2014 to November 2016 is almost 3 years.
[16] The presiding officers filed the statements of Ms. Miller and Ms. Neufeld with the Secretary’s Bureau on October 21, 2013.
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- pennsylvania department of education employment
- university of pennsylvania finance depart
- pennsylvania education certification test
- pennsylvania bureau of workers compe
- university of pennsylvania finance program
- pennsylvania department of education certification
- pennsylvania teacher certification website
- pennsylvania department of ed
- pennsylvania teacher licensure
- pennsylvania education department
- pennsylvania department of education website
- pennsylvania licensure board