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
2
TABLE OF CONTENTS
I. / HISTORY OF THE PROCEEDING / ...... / 1II. / 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
ii
- 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:
- Pennsylvania-American Water Company (PAWC or Company):
Susan Simms Marsh, Esquire
Anthony C. DeCusatis, Esquire
Brooke E. McGlinn, Esquire
- 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
- 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.