FISCAL NOTE

Date Requested: February 17, 2016
Time Requested: 03:46 PM
Agency: Public Service Commission
CBD Number: Version: Bill Number: Resolution Number:
2689 Introduced HB4584
CBD Subject: Public Service Commission


FUND(S):

8623

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.


This bill would require the Public Service Commission, and likely also political subdivisions, to perform various evaluations and studies of new infrastructure added by water and sewer utilities in all rate cases involving costs for new infrastructure. It is not possible to determine with certainty the number of cases per year that would be impacted by the bill, but preliminary estimates based on recent experience indicate at least 19 per year involving public service districts, and up to 33 per year if the bill applies to municipalities, which is unclear. With estimated additional costs to the Commission of up to $1,500 per case, the added annual expense to the Commission would be approximately $28,500 - $49,500 in connection with the further studies that would be required. Political subdivisions likely would incur additional costs as well associated with the same types of studies needed to pursue certificate and/or rate filings.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 16,500 49,500 49,500
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):


This bill would require the Public Service Commission to perform various evaluations and studies of new infrastructure added by water and sewer utilities, including engineering and financial analyses, in all rate cases involving costs for new infrastructure, in order to determine (i) whether the project would benefit only new customers, and if so, (ii) differentiated rates based on geographical location or in-service date. It is not possible to determine with certainty how many cases could be affected, but Commission estimates at least 19 – 33 per year, with the higher end of the range dependent upon whether the bill also applies to municipalities, which is unclear. The Commission estimates the costs of those additional studies and analyses to be up to $1,500 per case, as further explained below. Political subdivisions likely also would experience additional costs associated with the needed studies in order to make certificate or rate-case filings.



Memorandum


This bill would require the Public Service Commission to perform various evaluations and studies of new infrastructure added by water and sewer utilities, and depending on the results, potentially to separate cost of service and rate design between customers served by new facilities and pre-existing customers. The requirement for rate differentials based on the geographic location of new customers, the dates customers began service, and the future needs of existing customers thereby appears to mandate complex and potentially expensive cost of service studies in all rate cases involving costs for new infrastructure. It is not possible to determine with certainty the number of proceedings that could be affected. Based on recent experience, however, the Commission estimates at least 19 cases per year involving public service districts, and up to 14 additional cases per year involving municipalities; it is unclear whether the bill would apply to the latter. The Commission’s preliminary estimates indicate additional costs of up to $1,500 per case in future certificate and rate cases where this departure from single-tariff pricing is required. That amount is associated with the further evaluations and studies, including engineering and financial analyses, that would be necessary. More specifically, the Commission estimates at least two additional person-days would be required to evaluate infrastructure additions to determine if they were necessary to serve new customers or pre-existing customers. In addition, the Commission estimates that at least five additional person-days would be required for engineering and financial analyses required to determine costs of service separated geographically or by service date. Political subdivisions also likely would incur additional costs to properly evaluate separate cost of service justification and quantification under the provisions of the introduced version. In preparing certificate filings and rate cases, the Commission anticipates that those entities would require consultants or internal experts to separately evaluate infrastructure additions and, where applicable, prepare separated costs of service, either geographically or by service date.



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