H. B. 2565


(By Delegates Amores, Faircloth,
Compton and Cann)


[Introduced March 17, 1997; referred to the

Committee on the Judiciary.]



A BILL to amend and reenact sections one and seven, article two, chapter twenty-four of the code of West Virginia, one thousand nine hundred thirty-one, as amended; and to further amend and reenact said article by adding thereto a new section, designated section seven-a, all relating to giving the public service commission jurisdiction over sewer systems servicing one or more persons or firms other than the owner of the sewer system; creating the small public utility customer protection act; and allowing the public service commission to order acquisition of small water, sewer and gas utilities under certain circumstances affecting the quality of service to customers.

Be it enacted by the Legislature of West Virginia:
That sections one and seven, article two, chapter twenty-four of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and that said article be further amended by adding thereto a new section, designated seven-a, to read as follows:
ARTICLE 2. POWERS AND DUTIES OF PUBLIC SERVICE COMMISSION.
§24-2-1. Jurisdiction of commission; waiver of jurisdiction.
The jurisdiction of the commission shall extend to all public utilities in this state, and shall include any utility engaged in any of the following public services:
Common carriage of passengers or goods, whether by air, railroad, street railroad, motor or otherwise, by express or otherwise, by land, water or air, whether wholly or partly by land, water or air; transportation of oil, gas or water by pipeline; transportation of coal and its derivatives and all mixtures and combinations thereof with other substances by pipeline; sleeping car or parlor car services; transmission of messages by telephone, telegraph or radio; generation and transmission of electrical energy by hydroelectric or other utilities for service to the public, whether directly or through a distributing utility; supplying water, gas or electricity, by municipalities or others; sewer systems servicing twenty-five one or more persons or firms other than the owner of the sewer systems; any public service district created under the provisions of article thirteen-a, chapter sixteen of this code; toll bridges, wharves, ferries; solid waste facilities; and any other public service: Provided, That natural gas producers who provide natural gas service to not more than twenty-five residential customers are exempt from the jurisdiction of the commission with regard to the provisions of such the residential service: Provided, however, That upon request of any of the customers of such the natural gas producers, the commission may, upon good cause being shown, exercise such authority as the commission may deem determine appropriate over the operation, rates and charges of such the producer and for such the length of time as the commission may consider to be proper: Provided further, That the jurisdiction the commission may exercise over the rates and charges of municipally operated public utilities is limited to that authority granted the commission in section four-b of this article: And provided further, That the decision-making authority granted to the commission in sections four and four-a of this article shall, in respect to an application filed by a public service district, be delegated to a single hearing examiner appointed from the commission staff, which hearing examiner shall be authorized to carry out all decision-making duties assigned to the commission by said the sections, and to issue orders having the full force and effect of orders of the commission.
The commission may, upon application, waive its jurisdiction and allow a utility operating in an adjoining state to provide service in West Virginia when:
(1) An area of West Virginia cannot be practicably and economically served by a utility licensed to operate within the state of West Virginia;
(2) Said The area can be provided with utility service by a utility which operates in a state adjoining West Virginia;
(3) The utility operating in the adjoining state is regulated by a regulatory agency or commission of the adjoining state; and
(4) The number of customers to be served is not substantial.
The rates the out-of-state utility charges West Virginia customers shall be the same as the rate the utility is duly authorized to charge in the adjoining jurisdiction.
The commission, in the case of any such utility, may revoke its waiver of jurisdiction for good cause.
§24-2-7. Unreasonable, etc., regulations, practices and services; receivership; procedures respecting receivership; appointment and compensation of receiver; liquidation.
(a) Whenever, under the provisions of this chapter, the commission shall find any regulations, measurements, practices, acts or services to be unjust, unreasonable, insufficient or unjustly discriminatory, or otherwise in violation of any provisions of this chapter, or shall find that any service is inadequate, or that any service which is demanded cannot be reasonably obtained, the commission shall determine and declare, and by order fix reasonable measurements, regulations, acts, practices or services, to be furnished, imposed, observed and followed in the state in lieu of those found to be unjust, unreasonable, insufficient, or unjustly discriminatory, inadequate or otherwise in violation of this chapter, and shall make such the other order respecting the same as shall be just and reasonable.
(b) If the public service commission shall determine that any utility is unable or unwilling to adequately serve its customers or has been actually or effectively abandoned by its owners, or that its management is grossly and willfully inefficient, irresponsible or unresponsive to the needs of its customers, the commission may petition to the circuit court of any county wherein the utility does business for an order attaching the assets of the utility and placing such the utility under the sole control and responsibility of a receiver: Provided, That nothing contained in this section may be construed to prevent the public service commission from exercising the powers provided to it in section seven-a of this article. If the court determines that the petition is proper in all respects and finds, after a hearing thereon, that the allegations contained in the petition are true, it shall grant the same and shall order that the utility be placed in receivership. The court, in its discretion and in consideration of the recommendation of the commission, shall appoint a receiver who shall be a responsible individual, partnership or corporation knowledgeable in public utility affairs and who shall maintain control and responsibility for the running and management of the affairs of such the utility. In so doing, the receiver shall operate the utility so as to preserve the assets of the utility and to serve the best interests of its customers. The receiver shall be compensated from the assets of said the utility in an amount to be determined by the court.
Control of and responsibility for said the utility shall remain in the receiver until the same can, in the best interest of the customers, be returned to the owners, transferred to other owners or assumed by another utility or public service corporation: Provided, That if the court after hearing, determines that control of and responsibility for the affairs of the utility should not, in the best interests of its customers, be returned to the legal owners thereof, the receiver shall proceed to liquidate the assets of such the utility in the manner provided by law.
The laws generally applicable to receivership shall govern receiverships created pursuant to this section.
§24-2-7a. Small public utility customer protection act; definitions; acquisition of small water, sewer and gas utilities.
(a) As used in this section, the following words and phrases have the following meanings:
(1) "Capable public utility" means a public utility which regularly provides the same type of service as the small water utility, the small sewer utility or the small gas utility to one thousand five hundred or more customer connections, regardless of whether or not it is proximate, which is not an affiliate of the small water utility, the small sewer utility or the small gas utility and which provides adequate, efficient, safe and reasonable service. A public utility which would otherwise be a capable public utility except for the fact that it has fewer than one thousand five hundred customer connections may elect to be a capable public utility for the purposes of this section regardless of the number of its customer connections and regardless of whether or not it is proximate to the small sewer utility, the small water utility or the small gas utility to be acquired.
(2) "Small sewer utility" means a public utility which regularly provides sewer service to five hundred or fewer customer connections.
(3) "Small water utility" means a public utility which regularly provides water service to five hundred or fewer customer connections.
(4) "Small gas utility" means a public utility which regularly provides gas service to five hundred or fewer customers.
(b) The public service commission may order a capable public utility to acquire a small water, sewer or gas utility if the public service commission, after providing notice and an opportunity to be heard, determines:
(1) That the small water, sewer or gas utility is in violation of applicable state or federal law or regulatory standards, which affect the health, safety, adequacy, efficiency or reasonableness of the service provided by the small water, sewer or gas utility;
(2) That the small water, sewer or gas utility has failed to comply with applicable federal or state laws or directives related to the health, safety, adequacy, efficiency or reasonableness of service within the period of time set forth by the law or directive. A finding that a utility has failed to comply with a law or directive may be based upon, but is not limited to, the availability of water, the potability of water, the palatability of water or the provision of water at adequate volume and pressure, the ability to meet established wastewater discharge limitations, unacceptable levels of inflow and infiltration or the availability of natural gas at adequate volume and pressure;
(3) That the small water, sewer or gas utility cannot reasonably be expected to furnish and maintain healthy, adequate, efficient, safe and reasonable service and facilities in the future;
(4) That alternatives to acquisition have been considered in accordance with subsection (e) of this section and have been determined by the public service commission to be impractical or not economically feasible;
(5) That the acquiring capable public utility is financially, managerially and technically capable of acquiring and operating the small water, sewer or gas utility in compliance with applicable federal and state statutory and regulatory standards; and
(6) That the rates charged by the acquiring capable public utility to its preacquisition customers will not increase unreasonably because of the acquisition.
(c) In making a determination pursuant to subsection (b) of this section, the public service commission shall consider:
(1) The financial, managerial and technical ability of the small water, sewer or gas utility;
(2) The financial, managerial and technical ability of all proximate public utilities providing the same type of service;
(3) The expenditures which may be necessary to make improvements to the small water, sewer or gas utility to assure compliance with applicable federal or state statutory and regulatory standards concerning the health, adequacy, efficiency, safety or reasonableness of utility service;
(4) The expansion of the franchise area of the acquiring capable public utility so as to include the service area of the small water, sewer or gas utility to be acquired;
(5) The opinion and advice, if any, of the division of environmental protection and division of health as to what steps may be necessary to assure compliance with applicable federal and state statutory or regulatory standards concerning the health, adequacy, efficiency, safety or reasonableness of utility service;
(6) Any other matters which may be relevant including continued complaints from customers regarding quality of service.
(d) The division of environmental protection or the division of health may petition the public service commission, asking the public service commission to initiate the process of acquisition as set forth in this section. The public service commission may also, upon petition from the consumer advocate division or upon its own motion, initiate the process of acquisition as set forth in this section.
(e) Before the public service commission may order the acquisition of a small water, sewer or gas utility, it shall discuss the petition with the small water, sewer or gas utility. The public service commission, by order, shall give the utility a reasonable opportunity, of not less than sixty days nor more than one hundred twenty days, to investigate alternatives to acquisition, including, but not limited to:
(1) Reorganization of the small water, sewer or gas utility under new management;
(2) Entering into a contract with another public utility or service company to operate the small water, sewer or gas utility;
(3) Appointment of a receiver to assure the provision of adequate, efficient, safe and reasonable service and facilities to the public;
(4) Merger of the small water, sewer or gas utility with one or more other public utilities;
(5) Acquisition of the small water, sewer or gas utility by a capable public utility through an agreement entered into voluntarily by the small water, sewer or gas utility and a capable public utility.
(f) Subsequent to the determinations pursuant to subsection (b) of this section, the public service commission may issue an order for the acquisition of the small water, sewer or gas utility by a capable public utility. If necessary, the order shall provide for the expansion of the service area of the acquiring capable public utility.
(g) The price for the acquisition of the small water, sewer or gas utility shall be determined by agreement between the small water, sewer or gas utility and the acquiring capable public utility, subject to a determination by the public service commission that the price is reasonable. If the small water, sewer or gas utility and the acquiring capable public utility are unable to agree on the acquisition price or the public service commission disapproves an agreed upon acquisition price, the public service commission shall issue an order directing the acquiring capable public utility to acquire the small water, sewer or gas utility and for the small water, sewer or gas utility to sell at a price to be determined by the public service commission following a full hearing. Factors to be considered in determining price may include, but are not limited to: 1) The number of customers served by the small public utility; 2) the cost of connecting the two systems, if necessary; 3) the financial profile of the small public utility; 4) the condition of the production or treatment facilities and distribution or collection system of the small public utility; 5) the economic profile of the community served by the small public utility; and 6) the value or benefits the small public utility brings to the customers of the acquiring capable public utility. The right of eminent domain does not apply to the acquisition of a public utility by another public utility pursuant to this legislation. An order issued by the public service commission hereunder is appealable to the circuit court presiding in the county wherein either utility is located.
(h) The public service commission may, in its discretion and for a reasonable period of time after the date of acquisition, allow the acquiring capable public utility to charge and collect rates from the customers of the acquired small water, sewer or gas utility pursuant to a separate rate, approved by the public service commission.
(i) The public service commission may, in its discretion, appoint a receiver to protect the interests of the customers of the small water, sewer or gas utility. Any appointment shall be by order of the public service commission, which order shall specify the duties and responsibilities of the receiver.
(j) The public service commission shall serve the notice required in this section upon the small water, sewer or gas utility affected, the consumer advocate division of the public service commission, the division of environmental protection, the division of health, all proximate capable public utilities providing the same type of service as the small water, sewer or gas utility, and all municipalities served by the small water, sewer or gas utility. The public service commission shall order the affected small water, sewer or gas utility to provide notice to its customers of its water, sewer or gas services of the initiation of proceedings under this section by publication of a Class II legal advertisement in accordance with chapter fifty-nine, article three, section one of this code.
(k) The public service commission has the burden of establishing a prima facie case that the acquisition of the small water, sewer or gas utility would be in the public interest and in compliance with the provisions of this section. Once the public service commission determines that a prima facie case has been established:
(1) The small water, sewer or gas utility has the burden of proving its ability to render healthy, adequate, efficient, safe and reasonable service at just and reasonable rates; and
(2) A proximate and capable public utility providing the same type of service as the small water, sewer or gas utility has the opportunity and burden of proving they are financially, managerially or technically incapable of acquiring and operating the small water, sewer or gas utility.
(l) Any capable public utility ordered by the public service commission to acquire a small water, sewer or gas utility shall, prior to acquisition, submit to the public service commission for approval a plan, including a timetable, project scope, and estimate of costs for bringing the small water, sewer or gas utility into compliance with applicable federal and state statutory and regulatory standards within one hundred twenty days of the public service commission's order of acquisition. The plan for improvements shall incorporate the preapplication format required by the West Virginia infrastructure and jobs development council. The timetable contained in the plan may not extend for a period greater than two years. The capable public utility shall also provide a copy of the plan to the division of environmental protection, division of health and other state or local agency as the public service commission may direct. The division of environmental protection and the division of health have thirty days to comment on the plan. The public service commission shall consider any comments submitted by the division of environmental protection and the division of health and shall issue an order approving or disapproving the plan within ninety days. The public service commission shall propose a rule subject to legislative approval which provides an accelerated method for allowing immediate increases in operation and maintenance expenses for purposes of making immediate and necessary repairs. The repairs may be of an interim nature as identified by the capable public utility: Provided, That nothing in this section precludes the issuance of a certificate of convenience and necessity when applicable.
(m) The acquiring capable public utility shall receive priority recommendation from the West Virginia infrastructure and jobs development council for infrastructure fund assistance for the purpose of preparing the plan for improvements pursuant to the requirements of this section and applicable state statutes and regulations. Additional acquisition incentives that the public service commission may consider, may include, but are not limited to:
(1) An acquisition adjustment which would be amortized as an expense over a ten-year period;
(2) Deferral of acquisition improvement costs where the costs are of too great a magnitude to be absorbed by ratepayers at one time; and
(3) A plant improvement surcharge to be imposed on customers of the acquired utility; or
(4) Use of an operating ratio as an interim measure for setting rates where little or no rate base exists for the acquired utility.
(n) Upon approval by the public service commission of a plan for improvements submitted pursuant to the requirements of this section and the acquisition of a small water, sewer or gas utility by a capable public utility, the acquiring capable public utility may not be held liable for any penalties beyond the aggregate amount of fifty thousand dollars, including a maximum amount of five thousand dollars per incident, if the cause of those penalties is proximately related to identified violations of applicable federal or state statutes or regulations by the small water, sewer or gas utility prior to acquisition and during the period of time in which the plan for improvements is being developed. The provisions of this subsection do not apply:
(1) Beyond the end of the timetable in the plan for improvements;
(2) Whenever the acquiring capable public utility is not in compliance with the plan for improvements; or
(3) If, within thirty days of having received notice of the proposed plan for improvements, the division of environmental protection or the division of health submits written objections to the public service commission and those objections are not withdrawn.
(o) Upon approval by the public service commission of a plan for improvements submitted pursuant to the requirements of this section, and the acquisition of a small water, sewer or gas utility by a capable public utility, the acquiring capable public utility which had notice of the plan may not be subject to any enforcement actions by state or local agencies, within the framework of applicable federal or state regulations, if the basis of the enforcement action is proximately related to identified violations of applicable statutes or regulations by the small water, sewer or gas utility. The provisions of this subsection do not apply:
(1) Beyond the end of the timetable in the plan for improvements;
(2) Whenever the acquiring capable public utility is not in compliance with the plan for improvements;
(3) If, within thirty days of having received notice of the proposed plan for improvements, the division of environmental protection or the division of health submitted written objections to the public service commission and those objections are not withdrawn; or
(4) To emergency interim actions for the protection of public health under the applicable jurisdictions of the public service commission or the division of environmental protection or any state or local division of health, including, but not limited to, the ordering of boil-water advisories or other water supply warnings, of emergency treatment or of temporary, alternate supplies of water.
(p) Upon approval by the public service commission of a plan for improvements submitted pursuant to the requirements of this section and the acquisition of a small water or sewer utility by a capable public utility, the acquiring public utility shall own the small water or sewer utility. The acquiring capable public utility shall receive priority for grant and loan programs under the review of the West Virginia infrastructure and jobs development council, including priority for infrastructure fund grants and loans, within the framework of applicable federal and state statutes and regulations, for the purpose of implementation of the plans for improvements. The public service commission may, additionally, determine that the acquiring capable public utility is eligible for other financial incentives as set forth in this section.


NOTE: The purpose of this bill is to allow the public service commission to order acquisition of small water, sewer and gas utilities where it is warranted, for the purpose of protection of the customers, to give the public service commission jurisdiction over sewer systems serving one or more customers other than the owner of the sewer system, and to provide that receivership authority does not prevent the authority to order acquisition.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.