Request driven by $200 million in capital investments for system upgrades; Existing system improvement surcharge lessens overall impact to customers
Charleston, W.Va. (April 30, 2018) – West Virginia American Water today filed an application with the Public Service Commission of West Virginia (PSC) to adjust its rates for water and wastewater service. The primary reason for the rate request is the approximately $200 million that the company will have invested in system improvements to replace and upgrade aging infrastructure since its last rate case.
The company is seeking a base water rate increase to produce additional revenues of $32.69 million per year or 24 percent. For the average residential customer, this amounts to $11.67 per month or $0.39 per day. While this increase represents the change from the current base rate to the proposed base rate, it is important to note that the current Distribution System Improvement Charge (DSIC) investment will be rolled into base rates and the surcharge will be reduced accordingly. With this change, customers will see less of an increase on their bills, with the actual impact being 21 percent – $10.22 per month or $0.34 per day. The company also requested an additional $0.22 million per year or 24 percent increase in wastewater rates.
The company’s ongoing infrastructure investments account for more than half of the requested increase and are necessary to maintain and improve water quality, service reliability, fire protection and customer service. Over the past few years, the company has tripled its water main replacement investment, significantly reducing its main replacement cycle from over 1,000 years to approximately 100 years.
Another driver is the continued decline in the number of customers and the amount of water customers use. Due to the region’s population loss, West Virginia American Water must recover its costs over fewer customers. Furthermore, consistent with national trends, customers are using 1.5 to 2 percent less water every year, which requires the company to recover its costs over fewer gallons sold.
According to West Virginia American Water President Brian Bruce, the company’s water system is one of the most complex, expansive and challenging to maintain systems in the country due to the state’s mountainous terrain and the rural nature of the areas it serves, which requires an enormous amount of infrastructure to serve relatively few customers per mile of main.
“The vast majority of the costs we incur to provide water service to our customers are fixed costs and do not vary with the volume of water we sell,” Bruce continued. “Unfortunately, these usage and population declines do not lessen the company’s need to renew and replace aging infrastructure and satisfy increasingly stringent drinking water regulations. This case demonstrates that we have been good stewards of our customers’ monthly water payments and have kept our operating expenses relatively flat for the past 10 years by working more efficiently, improving processes, utilizing technology, and leveraging economies of scale.”
Two other factors also mitigated the rate request in customers’ favor. The filing incorporates the recent federal corporate tax rate change from 35 percent down to 21 percent, which is estimated to provide a savings to customers. Also, the company has continued to exclude costs associated with the Freedom Industries chemical spill from rate requests.
In this filing, West Virginia American Water is proposing a new, proactive approach to addressing lead service lines as part of its commitment to maintain excellent water quality and protect customer health and safety.
The PSC will conduct an extensive review of the company’s rate application and will have up to 300 days to review the filing. Any new rates established by the PSC in this case would not be effective prior to February 28, 2019.
West Virginia American Water recognizes that some families face economic challenges and offers several targeted programs to help its most vulnerable customers. Residential customers have the option of paying bills under a budget billing plan to have predictable monthly payments and avoid seasonal spikes, and customers with past-due bills are offered flexible payment arrangements through installment agreements. The company also offers a reduced rate program that provides a 20 percent discount on residential water rates year round for low-income customers determined eligible by WVDHHR. Finally, the company helps fund the West Virginia Utility Assistance Program Dollar Energy Fund, through which eligible customers can receive one-time emergency grants applied directly to their water bills.
West Virginia American Water, a subsidiary of American Water (NYSE: AWK), is the largest investor-owned water utility in the state, providing high-quality and reliable water services to approximately 530,000 people. With a history dating back to 1886, American Water is the largest and most geographically diverse U.S. publicly traded water and wastewater utility company. The company employs more than 6,900 dedicated professionals who provide regulated and market-based drinking water, wastewater and other related services to an estimated 15 million people in 46 states and Ontario, Canada. American Water provides safe, clean, affordable and reliable water services to our customers to make sure we keep their lives flowing. For more information, visit amwater.com and follow American Water on Twitter, Facebook and LinkedIn.
