West Virginia American Water Granted 4.4 Percent Rate Increase by Public Service Commission

FromPress Release
West Virginia American Water Granted 4.4 Percent Rate Increase by Public Service Commission

CHARLESTON, WV. - The Public Service Commission of West Virginia approved new rates yesterday for West Virginia American Water customers, reaching a decision on a rate increase request the company filed in June 2010. The new rates, which were granted at a 4.445 percent increase, took effect today.

The decision grants West Virginia American Water an overall increase of $5.1 million in annual revenue ? less than one third of the company’s requested $15.6 million.

“While we respect the PSC’s authority in this matter and understand the pressure the agency is under to keep utility rates low in light of current economic conditions, this approved rate structure will not allow sufficient revenue to recover increased operating costs, will hinder our ability to attract capital investment, will not allow us to undertake necessary infrastructure maintenance and improvement projects, and will ultimately make it difficult for us to maintain our current level of service to our customers,” said Wayne Morgan, president of West Virginia American Water. “Investment in a reliable water supply not only can create jobs, it also greatly contributes to the economic well-being of a community.”

The PSC order acknowledges that the water industry is considered to be the most capital intensive of all utility sectors. However, even with thegranted increase, water will remain one of the lowest utility costs a resident pays at about a penny per gallon. As a result of yesterday’s rate order, the average monthly residential customer’s bill will increase by $1.76 to an average of $41.41 per month based on the average monthly usage of 3,554 gallons per household.

The PSC’s order also denied the company’s request for a Distribution System Improvement Charge (DSIC) ? a program that would allow for rate adjustments, outside of general rate proceedings, for non-revenue producing investments to replace aging infrastructure. Instead, it allows for an alternative accounting device referred to as AFFAC, which is designed to include certain costs related to infrastructure investments in the next general rate proceeding.

“We are disappointed that the commission chose not to approve the company's request for a DSIC program, which has been recognized as a best practice  nationally by regulators,” Morgan said. “This decision makes it difficult for West Virginia American Water to replace aging infrastructure particularly our 3,600 miles of pipe, which have an average useful life of 100 years, for which the company’s current rates only allow for replacementevery 600 years.”

The primary driver in this rate increase request was $50.1 million the company invested in necessary improvements to water treatment plants and distribution systems in 2008 and 2009 ? years that were not included in the previous rate case. Other drivers include higher costs associated withproviding service, such as increased capital costs and higher energy costs.

Morgan said the company works to operate efficiently and control operating expenses while balancing the need for ongoing capital investment to meet increasing state and federal requirements and maintain and replace aging infrastructure. Customers may contact West Virginia American Water’s customer service center toll free at 1-800-685-8660 with additional questions.

West Virginia American Water, a wholly owned subsidiary of American Water (NYSE: AWK), is the largest publicly traded water utility in the state, providing high-quality and reliable water services to approximately 600,000 people.  Founded in 1886, American Water is the largest publicly traded U.S. water and wastewater utility company.  With headquarters in Voorhees, N.J., the company employs more than 7,000 dedicated professionals who provide drinking water, wastewater and other related services to approximately 15 million people in more than 30 states, as well as parts of Canada. More information can be found by visiting www.amwater.com. In 2011, American Water is celebrating its 125th anniversary with a yearlong campaign to promote water efficiency and the importance of protecting water from source to tap. To learn more, visit www.amwater125.com.

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