Date Requested: February 24, 2015
Time Requested: 01:44 PM
Agency: Public Service Commission
CBD Number: Version: Bill Number: Resolution Number:
3142 Introduced HB2908
CBD Subject: Public Service Com.


FUND(S):



Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    N/A



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    N/A



Memorandum


    This legislation will require that the Commission set separate rates for new customers so that costs of infrastructure installed to provide service to new customers are entirely funded by only those new customers. While the direct assignment of incremental costs to new customers may sound attractive to existing customers, it is not necessarily reasonable. New facilities may serve duel purposes, including providing capacity for new customers and reliability or improved service for existing customers. Although it is not possible to specifically quantify the increased costs associated with future rate and certificate cases, there is a strong likelihood that this statute will result in increased costs for operations of the Public Service Commission because of the complexities that will result in those cases.
    
    This statute will likely eliminate some water expansion projects from consideration if the incremental cost of expanding a system results in rates to new customers that will cause those customers to forego public water supply, thereby making expansion into new service areas financially unattractive for developers and prohibitively costly for the limited customer base to be served.
    
    Sewer expansion projects will have additional problems. Under this legislation, if the Commission approved increased rates to cover incremental expansion costs, the higher rates would apply only to new customers, who may not even be represented in the proceedings affecting them. This potential discrimination against new customers will increase the legal uncertainty and cost of future certificate proceedings. If the Commission approved such expansion projects and incremental rates, the unserved customers within an area that can be served by the new project would be required to connect to the new system(s) and would have no choice but to pay what could be significantly higher rates because of the law that requires customers to pay for sewer service, where available. Wading through the impacts and cost/benefit analysis of incremental rate requirements in sewer project certificate cases could increase the time and expense of future case processing.
    
    A second set of problems will be created in future rate cases where the older gathering, distribution and transmission facilities serving pre-existing customers (legacy facilities) are being replaced. Historical ratemaking would require that the entire customer base, including customers served on recently expanded facilities, continue to pay a rate that provides cash to help offset the cost of replacing the legacy systems serving pre-existing customers. Since that model may be arguably discriminatory under the incremental ratemaking approach of the proposed legislation, future rate cases could require increased time and expense.
    
    



    Person submitting Fiscal Note: Cheryl Ranson
    Email Address: cranson@psc.state.wv.us