PROCEDURE II_._. filed a duly verified formal complaint against Opequon Public Service

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1 Entered : September 14 ~ 1989 CASE NOS PWD-C ROGER S. JOHNSON, JR., doing business as ROGER JOHNSON, INC., 532 West Stephen Street, Martinsburg, Berkeley County, v. OPEQUON PlJBLIC SERVICE DISTRICT, a public utility, Martinsburg, Berkel-ey County, Complainant, Defendant. CASE NO PWD-C BIJRDETTE PROPERTIES, INC., a corporation, 2406 Locust Lane, Millpoint, Martinsburg, Eerkeley County, v. OFEQUON PUBLIC SERVICE DISTRICT, a public utility, Complainant, Defendant. PROCEDURE II_._ On April 26, 1989, Roger S. Johnson, Jr., doing business as Roger Johnson, Inc., 532 West Stephen Street, Martinsburg, Berkeley County, filed a duly verified formal complaint against Opequon Public Service District, a public utility. This complaint case was docketed as Case NO PWD-C. On April 28, 1989, Burdette Properties, Inc,, a corporation, 2406 Locust Lane, Millpoint, Martinsburg, Berkeley County, filed a duly verified formal complaint against Opequon Public Service District, a public utility. This formal complaint was docketed as Case No PWD-C. PUeLlC SERVICE COMMISSION OF WEST VIRGINIA

2 Both of theses cases challenge the institution of an Opequon Public Service District policy which requires individual metering for all apartments within newly constructed multi-unit apartment buildings. Opequon Public Service District filed its responses to the respective complaints on May 4, By Order entered on June 27, 1989, both of these complaints were scheduled for hearing to be conducted in the Council Chambers, City Building, 232 North Queen Street, Martinsburg, West Virginia, on Friday, July 21, 1989, beginning at 9:30 a.m. The hearing commenced as scheduled. Appearances were made by Charles A. Kiser on behalf of Roger S. Johnson, Jr.; by Susan Stuckey Snowden on behalf of Burdette Properties, Inc.; by Hoy G. Shingleton, Jr., on behalf of Opequon Public Service District; and by Tom Sayre on behalf of Commission Staff. At the conclusion of the hearing, the parties had agreed to an expedited briefing schedule which provided for the submission of initial briefs on or before Friday, July 28, 1989, and the submission of reply briefs on or before Friday, August 4, Initial statements of position and briefs were filed on behalf of Roger S. Johnson, Jr., Burdette Properties, Inc., and Opequon Public Service District. No party filed reply briefs in the cases. EVIDENCE Testimony in this case was given by Roger Johnson of Roger Johnson, Inc.;. Edward Krueger, the prospective buyer of the apartment building being constructed by Mr. Johnson; Page Burdette, Vice President of Burdette Properties, Inc. ; Pascal C. DiMagno, of P.C. DiMagno Engineers and Surveyors, a firm which has been involved with the planning and development of the Burdette project; Betty Robinson, General Manager of Opequon Public Service District; John E. Myers, Board Member of Opequon Public Service District; Richard Beegle, Consulting Engineer for Opequon Public Service District; and Dina Foster, Staff Engineer. The basic facts in this case are not at issue. Roger S. Johnson, Jr. is a property developer doing business as Roger Johnson, Inc. Burdette Properties, Inc. is also in the business of developing and constructing rental properties such as apartment buildings, townhouses, condominiums and other forms of residential housing. Mr. Johnson is in the process of constructing a twelve-unit apartment building within the Opequon Public Service District's service area. (Tr., p. 11; Johnson Exh. No. 1). Burdette Properties, Inc. is currently constructing a two-story, eightunit apartment building within the service area of Opequon Public Service District. (Tr., pp ). Both Complainants have requested water service from Opequon Public Service District and have applied for service in their own name. Both Complainants have requested that their buildings be master metered and that bills be rendered for payment to the respective landlords or building owners. Both Complainants have been informed by the District that they would have to individually meter the apartments. (Johnson Exh. Nos. 2 and 3; Tr. pp , 45). OF WEST VIRGINIA - 2-

3 Opequon Public Service District has recently instituted a new policy which would prohibit the master metering of any multi-unit residential development projects. In the past, Opequon Public Service District had permitted the master metering of apartment buildings, trailer parks and other multi-unit residential dwellings within the District's service territory. However, at an August, 1988 board meeting, Opequon Public Service District adopted a new policy against master metering, believing that this measure would encourage water conservation by renters, and correct what the District believed was the unequal treatment of residential water users within the District. (Tr., pp ). Opequon Public Service District's existing rates and charges provide for the following monthly charges for water service. First Next Next Next Over 3,000 gals. used per month $2.915 per 1,000 gals. 10,000 gals. used per month $2.35 per 1,000 gals. 25,000 gals. used per month $1.70 per 1,000 gals. 15,000 gals. used per month $1.45 per 1,000 gals. 53,000 gals. used per month $1.05 per 1,000 gals. MINIMUM CHARGES (Residential, Commercial and Industrial Service) : 5/8 inch meter $ inch meter $ /2 inch meter $ inch meter $ inch meter $ inch meter $ inch meter $ (October 18, 1988 Order in Case No W-42A). Under the above charges, the District indicated that the average residential customer served by an individual meter pays an average of $12.90 per month for water service, while the District receives revenues of $6.19 per apartment per month at master metered apartments. If those same apartment dwellers were individually metered instead of master metered, the District had calculated that it would receive revenues averaging $11.51 per month from those same apartments. (Tr., p. 86; Johnson Cross-Examination Exh. No. 1). There is no question that the board's policy would generate additional revenues for the District. As required by the District, each apartment would be billed as a separate residential customer at the lower consumption block rates instead of being collectively billed as a single commercial customer at the higher consumption block rates. There is also no question that it would cost the developers more to individually meter these apartments, due to the additional cost of indoor and outdoor plumbing, increased metering cost and increased monthly bills. (Tr., pp , 20, 32-33, 45-46). Finally, pursuant to West VirRinia Code A-9, the landlords or property owners can be ultimately held liable for the unpaid bill of a tenant, even if the apartment building is individually metered. Since PU0LIC SERVICE COMMISSION OF WEST VIRGINIA -3-

4 they could be held responsible for the water bills, the prospective landlords or owners wished to be initially responsible for the water bill, and provide water service to the tenants as a part of their monthly rent. (Tr., pp , 37-38, 54-58). DISCUSSION Commission rules and regulations clearly allow for the provision of water service as requested by each Complainant. Specifically, each Complainant requested to receive water service at the apartment buildings as a master metered commercial customer, instead of the individual apartments being served as separate residential dwellings. Commission rules and regulations clearly allow water service to be provided to the apartment buildings in either manner. West Virginia Code specifically defines customer to "mean and include any person, firm, corporation, municipality, public service district or any other entity who purchases a product or the services of any utility, and shall include any such person, firm, corporation, municipality, public service district or any other entity who purchases such services or product for resale". More specifically, this Commission has determined that the term "customer", as defined in the West Virginia Code and the Commission's rules and regulations, refers to the person or entity whose name is on the bill and in whose name service is rendered. (See, Stephens v. Columbia Gas of West Virginia, Case No C; Hill v. Columbia Gas of West Virginia, Inc., Case No G-C, 68 ARPSCWV 2510 (March 19, 1981); Young v. The Chesapeake and Potomac Telephone Company of West Virginia, Case No T-C, 72 ARPSCWV 1569 (August 1, 1984); Pennzoil Company, Case No G-P, 72 ARPSCWV 2355 (December 11, 1984); Miller v. Equitable Gas Company, Case No G-C, 70 ARPSCW 612 (September 1, 1982)). Therefore, either the owner of a multi-unit apartment building or the individual residents of the apartments may choose to be the customer(s) of the District, depending on which party applies for service and agrees to be responsible for the bill. In the event that the owner of the multi-apartment building decides to furnish water to his tenants as a part of their monthly rent, then the landlord will be the customer of the District, and the water service will be classified as commercial service, as opposed to residential service. (See, Rule 4.14, Commission's Rules and Regulations for the Government of Water Utilities (Water Rules)). This Commission's policy has recognized that the cost of serving master metered, multi-occupancy buildings and trailer courts with a given number of units is not as great as serving the same number of individual houses or business units. Accordingly, the Commission has stricken down multiple occupancy clauses which would assess rates to the commercial account based upon the number of units within the building or trailer park. In summary, this Commission has applied a policy which would require that the master metered buildings be billed based upon the water consumed at the master meter, with minimum bills based upon the size of the meters. (See, Sugar Creek PSD, Case No W-19AY 67 ARPSCWV 1098 (September 18, 1979); Red Sulphur Public Service District, Case No W-MAY 71 ARPSCWV 2311 (April 12, 1984), 71 ARPSCWV 2316 (June 25, OF WEST VIRGINIA -4-

5 1984); Deckers Creek Public Service District, Case No S-CNY 71 ARPSCWV 2431 (December 16, 1983), 71 ARPSCWV 2453 (March 8, 1984)). While this Commission has adopted a general policy against master metering of multi-unit apartment buildings and commercial trailer courts by electric utilities, no such policy has been adopted by this Commission which would restrict the ability of landlords or trailer park owners to receive commercial water service at their trailer parks or apartment buildings by master meter. In response to certain standards adopted for electric utilities pursuant to Sections 113(a) and 115(d) of the Public Utility Regulatory Act of 1978 (PURPA), this Commission adopted rules and regulations which expressly prohibited the master metering of multi-unit residential buildings and required that the electric services be individually metered, rather than master metered, unless the utility, owner, designer or other interested party establishes by clear and convincing evidence that an exception is warranted. (See, General Order No. 205, Rule 3.4 of the Commission's Rules and Regulations for the Government of Electric Utilities; and AEabe Housing, Inc., Case No E-P, 71 ARPSCWV 1881 (September 20, 1983)). However, a proposal to impose similar restrictions on master metering by gas, water and sewer utilities was expressly removed from the Commission's finally adopted rules. (See, October 28, 1981 Memorandum Opinion and December 4, 1981 Commission Order Promulgating Rules Recommended in Hearing Examiner's Memorandum Opinion, General Order No. 205). Therefore, the master metering of apartment buildings for water service is still clearly permissible and consistent with the Commission's rules and regulations. Opequon PSD is attempting to rely upon dicta in other Commission orders to support its adopted policy against master metering at multi-unit apartment buildings. The Commission has had a long established policy encouraging separate meters and service lines for each customer of a public service district. (Wood, et al. v. Craigsville Public Service District, Case No W-C (January 27, 1987 Commission Order Modifying Hearing Examiner's Decision); Red Sulphur Public Service District, Case No W-19AY 71 ARPSCWV 2311 (April 12, 1984 Hearing Examiner's Decision), 71 ARPSCWV 2316 (June 25, 1984 Commission Order Affirming Hearing Examiner's Decision)). Further, in the Craigsville case, the Commission determined that separate homes, buildings or trailers on a single parcel of land must be served by separate service lines and meters, and the Commission prohibited the master metering of distinct residential customers. However, the District's reliance on the Craigsville decision in support of its policy is misplaced, since the Commission explicitly distinguished the prohibited residential master metering from the master metering of a commercial multi-unit dwelling or a commercial trailer park. (See, January 27, 1988 Craigsville Order, p. 6). Therefore, as long as the owner of the multiple unit apartment building seeks and obtains water service to the building as a commercial account, the metering of the multiple unit apartment building through a single master meter would be consistent with the Commission's policy requiring a separate meter for each customer. In that case, the owner of the building would be the utility's customer. PueLic SERVICE COMMISSION OF WEST VIRGINIA -5-

6 Since the requested master metering is clearly authorized by the Commission's rules and regulations, the sole issue presented by this complaint is whether the Opequon Public Service District has the authority to unilaterally determine that no Landlord can request service at a multi-unit building as a commercial customer. Since the District's actions would clearly eliminate a valid service option available to the customer under Rule 4.14, the District's action is contrary to an existing rule and regulation of the Public Service Commission. Therefore, the customer service option cannot be properly eliminated or modified unilaterally by the utility, without approval by the Commission, and the utility must seek permission to adopt alternate tariff rules and regulations pursuant to Rules 1.01 and 1.02 of the Commission's Water Rules before instituting the policy. Further, upon receipt of such a petition, the Commission may require that public notice be provided prior to adopting or rejecting the policy In the event that the District should file a request to eliminate the master metering of commercial multi-unit dwellings, the District would need to justify the adoption of its policy by showing that the continuation of commercial master metering places an undue hardship on the utility, or that the proposed rules and regulations would otherwise be in furtherance of the overall public interest. It may attempt to submit such a policy for prospective review and approval by the Commission, after sufficient public notice has been provided. This ALJ finds that it would be improper to sanction the District's policy at this time, or apply it retroactively to the Complainants. Even if the PSD's policy were being submitted for Commission approval in this case, the ALJ finds that the current record is not sufficient to establish a hardship or justification which supports the District's prohibition on the master metering of commercial apartment buildings. The mere fact that the monthly charges per apartment in a multi-unit building would be higher if the apartments were individually metered does not establish that the master metered rates are inequitable. Rates and charges set forth in an approved District tariff are presumed to be reasonable until modified by the Commission and, until modified, the ALJ most presume the revenues derived from the commercial account fairly reflect the cost of providing service to that account. If the District believes that its existing rate structure is inequitable, it may file a rate application and request that its rate structure be revised pursuant to a valid class cost of service study. In the District's last rate case, Case No W-42A, the Commission essentially applied a rate structure which had previously been developed by the District's consulting engineer and which had been adopted in the District's original certificate case. While the basic rate structure was undisturbed, the Staff modified the minimum bills for the various meter sizes to reflect standardized AWWA multipliers. As a result of this modification, the District's required monthly minimum charges for meters in excess of 3/4" diameter were lowered, and the District began recouping less revenues from commercial accounts. (Tr., pp ). While the District did not challenge Staff's recommended rate structure at the time, it now apparently believes that the adopted rate structure is inequitable. Since filed and adopted rates are presumed to be reasonable, the District OF WEST VIRGINIA -6-

7 , or Commission Staff would need to submit an alternate rate structure for consideration, with an accompanying cost of service study, to establish that the alternate rate structure is more equitable. The record in this case also does not establish that the elimination of master metering would necessarily promote needed water conservation, which was a second rationale cited by the District in adopting its policy. Traditionally, water usage at an apartment is not as high as at a single residence, since apartment dwellers may not wash cars, water lawns or wash clothes at the apartment. The amount of potential conservation has not been quantified or substantiated, and it has not been shown that this policy is complemented by other available conservation measures. In fact, the District's data showed that apartment dwellers used less water than home owners. Therefore, it is apparent that water conservation is only a secondary factor, and the District's primary justification for its master metering policy is to receive additional revenues from the respective apartments. Further, a landlord may choose to keep water service in the landlord's name even if the apartments are individually metered, for the reasons observed by the Complainants. As long as the water service is paid by the landlord, no potential conservation incentive would flow to the tenant as a result of the policy. Finally, the ALJ notes that the District did solicit an informal opinion from the PSD Division concerning whether it could unilaterally adopt a policy prohibiting the master metering of multi-unit apartment buildings and trailer parks. The response received by the District indicated that it had the latitude to implement whatever policy it desires. While the Commission's General Counsel correctly observed that the Commission has a policy in favor of requiring separate meters for individual customers, he failed to observe that the Commission's rules and regulations allow the owners of multi-unit apartment buildings to opt to be served as a commercial account, and that prior Commission orders have provided that such commercial service is to be billed to the landlord based upon the consumption registered at the master meter. (See, Tr., pp ; February 17, 1989 Letter from General Counsel Richard E. Hitt, attached to District's May 4, 1989 Answer). While the Staff distanced itself from that informal opinion at the hearing and took a position in favor of the master metering, it appears that this formal dispute could have been avoided by proper research and reference to the Commission's Rules and Regulations and applicable case law when the matter was initially posed to the PSD Division on an informal basis. FINDINGS OF FACT 1. In August of 1988, the Opequon Public Service District board unilaterally adopted a policy which prohibited the master metering of all newly constructed multi-unit apartment dwellings and trailer parks. (Tr., pp ). 2. Both Complainants are contractors who have requested that water service be provided to a twelve-unit apartment building and an eight-unit apartment building by master meter, with the respective building owners to OF WEST VIRGINIA -7-

8 be billed and held responsible for paying for all water used at the master meter. (Tr., pp. 11, 43-44; Johnson Exh. No. 1). 3. Both Complainants have been denied service by master meter, based upon the stated board policy, and have been informed that service would only be provided to the apartments if the apartments are individually metered. (Tr., pp , 45; Johnson Exh. Nos. 2 and 3). 4. Opequon Public Service District has not received Commission approval prior to the implementation of its policy. CONCLUSION OF LAW 1. The Commission has determined that the utility's "customer" is the person or entity whose name is on the bill and in whose name service is rendered. (See, Stephens v. Columbia Gas of West Virginia, Case No C; Hill v. Columbia Gas of West Virginia, Inc., Case No G-C, 68 ARPSCWV 2510 (March 19, 1981); Young v. The Chesapeake and Patomac Telephone Company of West Virginia, Case No T-Cy 72 ARPSCWV 1569 (August 1, 1984); Pennzoil Com an, Case No G-P, 72 ARPSCWV 2355 (December 11, 1984); Miller v. Equitable Gas Company, Case No G-C, 70 ARPSCW 612 (September 1, 1982)). Therefore, either the owner of a multi-unit apartment building or the individual residents of the apartments may choose to be the customer(s) of the District, depending on which party applies for service and agrees to be responsible for the bill. 2. Rule 4.14 of the Commission's Rules and Regulations for the Government of Water Utilities provides that the owners of multi-unit apartment buildings may opt to receive water service as commercial customers whenever the owner undertakes to provide water service to tenants as a part of their monthly rent, and agrees to receive water service in the owner's name. 3. This Commission has long recognized that multi-unit apartment buildings and commercial trailer courts may be served as master-metered commercial accounts, and they are to be assessed charges based upon the water consumed at the master meter, with minimum bills based on the size of the meters. (See, Supar Creek PSD, Case No W-l9A, 67 ARPSCWV 1098 (September 18, 1979; Red Sulphur Public Service District, Case No W-MA, 71 ARPSCW 2311 (April 12, 1984), 71 ARPSCWV 2316 June 25, 1984); Deckers Creek Public Service District, Case No S-CN, 71 ARPSCWV 2431 (December 16, 1983), 71 ARPSCWV 2453 (March 8, 1984)). 4. A proposal to generally prohibit or limit the master metering of water, gas and sewer service of multi-unit residential buildings was expressly struck down by the Commission. (See, October 28, 1981 Memorandum Opinion and December 4, 1981 Commission Order Promulgating Rules Recommended in Hearing Examiner's Memorandum Opinion, General Order No. 205). Therefore, in the absence of an express order to the contrary, OF WEST VIRGINIA -8-

9 owners of commercial apartment buildings may opt to receive service by master meter. 5. While the Commission has prohibited the master metering of distinct residential customers, recognizing that the Commission's Rules and Regulations require that each customer requires separate meters and service lines, it expressly distinguished the prohibited residential master metering from the permissible master metering of commercial multiunit apartment buildings or commercial trailer parks. (Wood, et al. v. Craigsville PSD, Case No W-C (January 27, 1989) Commission Order Modifying Hearing Examiner's Decision)). Under the permissible master metering, the master meter would serve a single commercial customer and would not violate Commission Rules. 6. The District's attempt to prohibit the master metering of a multi-unit apartment building is contrary to Rule 4.14 of the Commission's Water Rules, as well as long standing Commission policy. Therefore, prior to eliminating this commercial service option, Opequon Public Service District must seek a waiver of the Commission's Water Rules, pursuant to Rule 1.01 or Since the District's policy against master metering has not been approved by the Commission, its application to the Complainants is premature. Therefore, they are entitled to request and receive commercial water service at their respective multi-unit apartment buildings through a master meter. ORDER IT IS, THEREFORE, ORDERED that the Opequon Public Service District is hereby directed to provide water service to the Complainants' multi-unit apartment buildings by master metered commercial accounts, as requested by the Complainants. IT IS FURTHER ORDERED that the Executive Secretary of the Commission shall serve a copy of this order upon all parties to this proceeding by United States First Class Mail and upon commission Staff by hand delivery. Leave is hereby granted to the parties to file written exceptions supported by a brief with the Executive Secretary of the Commission within fifteen (15) days of the date this order is mailed. If exceptions are filed, the parties filing exceptions shall certify to the Executive Secretary that all parties of record have been served said exceptions. If no exceptions are so filed this order shall become the order of the Commission, without further action or order, five (5) days following the expiration of the aforesaid fifteen (15) day time period, unless it is ordered stayed or postponed by the Commission. Any party may request waiver of the right to file exceptions to an Administrative Law Judge's Order by filing an appropriate petition in writing with the Secretary. No such waiver will be effective until approved by order of the Commission, nor shall any such waiver operate to OF WEST VIRGINIA -9-

10 make any Administrative Law Judge's Order or Decision the order of the Commission sooner than five (5) days after approval of such waiver by the Commission. RFW:dfs Robert F. Williams Administrative Law Judge PueLIc SERVICE COMMISSION OF WEST VIRGINIA - 10-