CONSUMER ADVOCATE DIVISION STATE OF WEST VIRGINIA

PUBLIC SERVICE COMMISSION 700 Union Building

723 Kanawha Boulevard, East Charleston, West Virginia 25301

(304) 558-0526

December 16,2015

Ingrid Ferrell Executive Secretary Public Service Commission of West Virginia 201 Brooks Street Charleston, West Virginia 25301

RE: WEST VIRGINIA-AMERICAN WATER COMPANY CASE NO. 15-0676-W-42T: 15-0675-8-42T

Dear Ms. Ferrell:

Enclosed please find the original and twelve (12) copies of the Consumer Advocate Division S (CAD) Initial Brief in the above case. Copies have been served upon all parties of record.

Sincerely,

Tom White Deputy Consumer Advocate State Bar No. 6393

Enclosures

cc: Parties of record

AN EQUAL OPPORTUNITY EMPLOYER

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

CHARLESTON

WEST VIRGINIA-AMERICAN WATER Rule 42T application to increase rates and charges.

CASE NO. 15-0676-W-42T & 15-0675-8-42T

CONSUMER ADVOCATE DIVISION’S INITIAL BRIEF

I. INTRODUCTION

The Company has repeatedly stated that this case is primarily about infrastructure -

presumably in an effort to justify to the Commission and its customers that a rate increase

is necessary to avoid the consequences of failing infrastructure: no water or water that

must be boiled. While the CAD believes infrastructure is important, it is troubled by a

company where one in four customers, by its own survey results, is drinking bottled

water. The CAD is troubled by the Company embarking upon an accelerated smart meter

replacement program at a cost of $17 million (as compared to an historic test year request

of less than $19 million). No cost benefit analysis was performed before beginning the

meter replacements, and the Fayetteville pilot program is not even complete and available

for analysis. The public outcry in opposition to this program was dramatic - which

Company President McIntyre dismissed out of hand when testifying in hearings. The

CAD is troubled when a $20 million line extension is made to a water system serving

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1,000 customers when certainly it would be less expensive to build a small water plant

and staff it.

The Company also complains about its earned return, but does not qualify that it’s

complaining about its GAAP return - not its regulatory return. By factoring into earnings

(or out of expenses) previous expense disallowances in rates, as well as the extraordinary

expenses in its test year financials, its return is quite another picture than what it paints.

Even inore troubling is that the Company’s rates for the typical residential customer

usage are the highest in the state by orders of magnitude. Compared to the nation, West

Virginia has the highest unemployment rate and its median income is third from the

bottom. This is not a state that can absorb such a dramatic rate increase as that proposed

by WVAWC.

11. BACKGROUND AND PROCEDURAL HISTORY

In this case, the Company is asking the Commission to set rates based upon a

Fully Forecasted Future Test Year (FFFTY) which includes projected costs through 2017.

The Company bases its request for this extraordinary rate treatment on the regulatory lag

in recovering approximately $1 50 million in plant capital investment it represents will be

made by the time new rates go into effect in March 2016. The CAD is opposed to a

FFFTY (as well as the Bridge filing). It allows recovery of expenses the Company has

not made or has not been approved. Moreover, the Company will be under no obligation

to make such estimated expenditures (through 20 17), nor will the Commission have any

opportunity to true-up actual to estimated expenditures, The Company’s request is for a

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of the traditional Historical Test Year (HTY) case.

The Company’s revised HTY revenue requirement of approximately $19 million

is excessive based upon established regulatory principals, and this is the consensus of all

intervenors. The revised revenue requirement of the Company, the CAD and Staff are set

The greatest vi

out in Table 1 below: Table 1.

Rate Base ( H W

Rate of Return (HTY)

Net Op. Income required (HTY)

Rev. Deficiency (HTY) Addendum 1- 1.5 to 2-29-16

FTY 12 months ended 2-28- 17

Total

Company (Revised)

$504.8 million

7.68%

$38.8 million

$18.85 million

$9.59 million

$3.63 million

$32.07 million

FGce between

CAD 9% ROE

~

$479.6 million

6.93%

$33.2 million

$1.83 million

.e CAD’S and

CAD 10% ROE

F479.6 million

1.36%

35.3 million

$5.11 million

Staff (Revisec

1490.8 millior

7.16%

$35.1 million

$10.96 million

aff‘s revenue recommendatior

depreciation expense.

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In the interest of brevity, the CAD adopts the procedural history set forth in the

Commission’s Order dated August 18, 20 15.

111. OPERATING INCOME

A. Declining Usage

One of the most controversial issues in this case is the Company’s request for an

attrition allowance of $2 million’ to compensate the Company for future declining

residential water consumption. There is only one problem with the request: metered

sales to residential customers increased by 26.79 million gallons in 2014 and metered

sales to residential customers were virtually unchanged from 2012 to 2014, hovering

around 6.5 billion gallon^.^ Staffs witness Mr. Fowler suggested at hearing that to the

extent there is any discernible trend of declining usage over the past ten years, it appears

to have ceased, or leveled off, and now the trend appears to be increasing con~umption.~

Witness Fowler:

My analysis indicates that the average residential usage has begun to trend upward having achieved a minimum in late 2013 or early 2014. This is in direct contrast with the Company’s prediction that residential usage continues to de~rease .~

Adjustment G-18 ($2,042,031) I

’ Direct Testimony of Ralph Smith, page 43, table showing annual usage in Kgallons (Kgallons are units of 1000 gallons) 2012 usage of 6.800 million, 2013 usage of 6.484 million, 2014 usage of 6.81 1 million. ’ Fowler direct pp. 4-8, and exhibits JMF 1,2,3.

Direct Testimony of Jonathan Fowler, page 4, lines 6-9. 4

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Witness Fowler provided additional evidence that the trend of increased residential

consumption continues into 2015.5 Company witnesses Messrs. McIntyre and Tomac

could not deny that according to the Company’s own annual report metered gallons sold

to residential customers show a slight increase from 2013 (6.484 billion gallons) to 2014

(6.5 1 1 billion gallons).6 This increase occurred during the Freedom Industries chemical

spill when 300,000 customers could not use the water for an extended period of time,

which should have, all things being equal, caused unusually low water consumption.

Even if residential water consumption were declining in this case, which clearly it

is not, the Company ignores the fact that past declining residential consumption is

captured in each and every rate case as the revenue requirement is spread over historic

sales to set rates. The Company discussion of “declining usage” would be more relevant

if there were long periods of time between its rate cases. The Company’s current Rule 42

filing is the eighth request for increased rates since 2000.7 Each time the Company’s

revenues are determined in a rate case those revenues incorporate changes in residential

customer usage in setting new rates.

For this reason the Company’s evidence of usage trends is completely misleading

for ratemaking purposes. Company witness Roach testified about a simple regression

analysis that shows residential consumption declining over a 10 year period.8 While that

Direct Testimony of Jonathan Fowler, Exhibit JMFJ: “Average Annual Residential Usage”. CAD Cross 6. Case No. 01-0236-W-42T, Case No. 03-0353-W-42T, Case No. 04-0373-W-42T, Case No. 07-099X-W-42T, Case

No. OX-0900-W-42T, Case No. 10-0920-W-42T, Case No. 12-1649-W-42T, and the current Case No. 15-0674-W- 42T.

Roach direct p. 7 and GPR 2. 8

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analysis may be of anecdotal interest, declining consumption for the past eight years has

already been captured in current rates.

Moreover, witness Roach's testimony9 shows WV with the lowest rate of decline

In response to questions from Commissioner in the region over the last ten years.

McCabe:"

Q: I just look at this and say - I think to myself, I know this is an issue and I know it's important, but the relative importance of' it is when we had the [least] last decline in the states around us, and the least decline of all the states that have system of American Water in those states, all but one - I'm looking at the relative importance of it.

A: Well, I don't think you can use this chart to measure the relative importance of it, because that (sic) a lot of it has to do with particular other factors that are going on for that particular utility. What I can tell you is, is that in each one of these jurisdictions, declining use is the major issue that we address and we put in each one of ow rate cases in each one of those affiliate jurisdictions. . .

Finally, the Company's proposed attrition adjustment violates numerous

ratemaking principles. CAD Witness Smith described these regulatory violations:

Matching princiole. The declining usage adjustment violates the matching

principle because it:

. . .effectively, substituting the test year average residential customer usage with an estimate of future average usage for a period that is 24 months beyond the test year." Known and Measuarable change. CAD witness Smith:

Estimating the volume of sales after the test year is speculative and thus the proposed adjustment is not known and are not measurable."

' Roach direct at 8 and Exhibit GPR-3. Oct. 28,2015 p. 192, line 9. Ralph Smith Direct Testimony, page 45, lines 16-18 Ralph Smith Direct Testimony, page 44, line 4.

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Used and useful. Mr. Smith also expressed a concern with the used and useful

principle because the Company is asking residential customers to pay for water that they

are not using.

In addition, witness Smith testified that allowing a declining usage adjustment

would be a notable departure from prior Commission pre~edent : ’~ As noted by the

Commission in its March 25,2009 Order in Case No. 08-0900-W-42T, at p. 59:

The Commission is not persuaded to depart froin its prior practice of not granting such revenue reductions that (i) are not known and measurable and (ii) violate the matching principal.

The $2 million adjustment for declining consumption should be rejected.

B. Consolidated Tax Adjustment

In its original filing in this case, Company proposed using a Consolidated Tax

Adjustment (CTA) for calculating Federal Income Tax Expense (FIT) for ratemaking. In

its rebuttal, it proposed using the Parent Company Loss (PCLA) calculation, citing the

Commission’s recent APCo Order (APCo Case).I4 The CAD specifically opposes the

PCLA in this case because the Company did not take advantage of bonus depreciation, to

the detriment of ratepayers. This distinguishes the Commission’s use of the PCLA in the

APCo Case from the Company’s proposal here. This is discussed in greater detail, below.

The Company’s original filing April 30, 2015 applied a 32.03% effective FIT

expense, using the Commission’s approach in the WVAWC 2010 rate case order. The

Smith direct at 45. CaseNo. 14-1152.

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Company calculated the effective applied rate for each year 2010-2014 using taxable

income/(loss) of each subsidiary. The Company then made three adjustments that

eliminated (i) tax over book depreciation; (ii) deductions related to the Capitalized

Repairs Deduction, and (iii) tax losses of other regulated subsidiaries.”

On May 26,2015, the Commission issued its final Order in the APCo Case which

modified its approach to the CTA by abandoning the “effective tax rate” method in favor

of the PCLA.I6 In the Company’s rebuttal testimony, witness Meyers testified in support

of a PCL calculation, which shows an FIT expense of $8.4 m i l l i ~ n . ’ ~

CAD witness Smith offered an “effective rate” CTS adjustment using 28.91%

based on tax years 2010-2014 consistent with Commission precedent in prior WVAWC

cases. Witness Smith made adjustments the Company’s CTA by eliminating the

Company’s trending adjustment and the excluding losses from other regulated

nfiliutes.‘*

Witness Smith’s calculation does not follow the Commission’s recent APCo

decision. He distinguishes his CTA calculation from APCo’s because WVAWC’s

parent, American Water Works Company, Inc., (AWW or Service Company) opted out

of bonus tax depreciation - including WV bonus tax depreciation - froin 2011-2013 in

order to preserve its parent net operating loss (NOL) ~arryfonvard.’~ This had the effect

(Nevirauskas direct, p. 11). l6 APCo Case Order at 66-68.

Exhibit CRM-I, p. 2, line 57. Smith direct, p. 54, line 4 top . 57, line 9. Id. at 54.

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of reducing the Company’s bonus tax depreciation for those years and thus the

Company’s Accumulated Deferred Income Tax balance, an offset to rate base.

The consequences of the parent company decision of the parent company decision not to allow the utility, WVAWC, to claim a tax deduction for bonus depreciation in 201 1 and 2013 is that, other things being equal, WVAWC’s ADIT balance is lower and its net rate base is higher. . . The impact of the parent company’s decision to have WVAWC opt out of bonus depreciation in 2011 and 2013 based on concerns over items such as the parent company charitable contributions, carry-forward, and NOL, would be for WVAWC to have a lower amount of ADIT, a lower rate base deduclion for ADIT, and a higher net rate base, which is detrimental to ratepayers.20 (emphasis added).

In his rebuttal, Company witness Meyers did not dispute witness Smith’s testimony, but

rather criticized it by attempting to shift the burden of proof of justifying the AWW

decisions to not allow WVAWC to take obvious tax deductions such as bonus tax

depreciation in 201 1 and 2013 that had clearly been taken by other West Virginia utilities

such as APCo.

Q: West Virginia-American at all, or de minimis impact, let’s say, either one?

Do you think that it’s possible for there to have been no impact on

A: No, I think the impact would be substantial. And I understand there’s been some testimony by the Company’s witness Carl Meyers, that this would have no impact on West Virginia-American and I think that’s just flat out wrong. Again, the tax law in this area and how this interacts with the normalization requirements, it’s not - it’s a bit muddled at this point because there have been a series of private letter rulings that say different things. . .21

Smith direct testimony, p. 54, line 21 top. 55, line 5 . TR- Oct. 29,2015 at 46, line 16 to 47, line 2.

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With all due respect, letting a parent company's concern about preserving charitable

deductions results in a failure by the regulated utility to take 201 1 and 2013 bonus tax

depreciation has the "tail wagging the dog" and West Virginia ratepayers need to be

protected from paying higher rates from those parent company tax decisions. Because of

tax normalization concerns, the not-taken 201 1 and 2013 bonus tax depreciation cannot

be imputed to WVAWC, but one remedy that is available to the Commission to protect

West Virginia ratepayer in this case is to continue to use a CTA, similar to past WVAWC

cases.

In the APCo case, APCo/WPCo claimed all available tax deductions in each year

including bonus tax depreciation.22 At hearing, Mr. Meyers testified that the result of

waiving bonus tax depreciation for those years had no effect on WVAWC ratepayers:

Q: And by waving that bonus depreciation, what we call ADIT that the Company could benefit from, is less than it otherwise would have been. Is that a fair statement?

A: I don't believe so, because the electing bonus depreciation in those specific years would generate a net operating loss, which would offset any deferred tax liability generated by the bonus depreciation. (TR - Oct. 28, 2015, p. 228, line 23 top . 229, line 5.)

Witness Meyers is American Water's tax director. He offered rebuttal testimony

contesting, among other things, the CAD'S CTS effective rate calculation. What he did

not do was offer any testimony demonstrating that the Company's decision regarding

bonus tax depreciation did not negatively affect WV ratepayers.

Smith direct, p. 54, line 9-10 22

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The CAD believes its proposal should be adopted until the Company’s takes full

advantage of WV bonus tax depreciation that should have inured to the benefit of WV

ratepayers.

C. Payroll Expense Adjustments

1. Affiliate (parent) Annual Incentive Compensation (AIP)

The CAD recoinmends an adjustment to partially disallow the Annual Incentive

Compensation (AIP) award by WVAWC’s parent, AWW. This adjustment represents

55% of the total potential award, and this portion of the AIP related only to financial

metrics, not customer service metrics. The CAD’S position is that the Company’s

shareholders - not ratepayers - should be responsible for funding incentive compensation

for AWW that is predicated solely upon the financial goals of AWW, with no

corresponding direct benefit to WV ratepayers. CAD witness Smith’s recommendation

for this disallowance is based on the Company’s own incentive plan formula.

The 20 14 AIP brochurez3 provides that a pre-determined financial threshold for

AWW’s financial performance must be met in order for any AIP funding to be awarded

to employees.24 Even if all non-financial goals of the Company are met in any given year,

no award can be made unless the Company’s financial performance meets the

threshold.25 This clearly reveals the AWW priorities of financial performance over

performance related to customer service and reliability. This policy is not a benefit to

WVAWC’s customers. Rather, these financial goals serve only the parent AWW and its

RCS-~ ,p . 11, line 5. Tr. Oct. 30, 2015, p. 74 (Mount). Id. at 14-15

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shareholders. Thus, 55% of the Service Company’s AIP charged to WVAWC should be

disallowed. The CAD’S position is more generous than the Commission’s award in the

last fully litigated rate case. In that case the Commission split the WV incentive pay

evenly between ratepayers and shareholders and denied altogether the AIP for Service

Company employees.26

Company witness Mount confirmed27 the testimony of CAD witness Smith’s

testimony that any award of AIP is predicated upon whether AWW meets both its

financial and non-financial goals. In other words, if the financial metrics are not met,

there will be no incentive awarded to employees regardless of the performance on the

non-financial metrics. The non-financial operational goals consist of environmental

compliance, safety, customer satisfaction, customer service quality.28

In the recent APCo rate casez9 the commission allowed all incentive awards in

rates, but noted there was some evidence in the record to support the proposition that

incentive pay (Service Company and direct employees) can provide some ultimate

benefit to ratepayers3’ and approved incentive pay for both the Service Company and

APCo employees. Nevertheless, it still split restrictive stock between customers and

shareholders. In this case, the Company provided no evidence whatsoever that the 55%

financial award by the AIP benefits WV ratepayers. Moreover, the WV economy and the

26 WVAWC Case No. 10-0920-W42T, pp. 39-40,43. 27 Tr. Oct. 30,2015, p. 73 (Mount); RCS-D, p. 76-77, line 5.

inadvertently used the term “Non-Operational Metric.” He apparently meant to say “Non-Financial” metric. The incentive plans for 2013 and 2014 are included in his testimony in response to CAD 1-E-005. The language varies a hit in each.

Case No. 14-1 152-E-42T, Order May 26,2015. Id. At 76.

Tr. Oct. 30,2015, p. 73 (Mount); RCS-D, p. 76-77 line 15. CAD notes that at p. 76, line 15, Mr. Smith 28

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Company’s ratepayers simply cannot afford to support such expenses in rates, as

demonstrated by CAD’S Exhibits at hearing3’ Therefore, 55% AIP award should he

disallowed in rates and borne by shareholders.

2. Affiliate Stock-Based Compensation Exmnse

The CAD recommends disallowance of all stock-based compensation expense

which provides no benefit to ratepayers. The plan provides that the value of an

employee’s stock option award depends entirely on AWW’s financial performance. This

was confirmed by Company witness Mount.32 Witness Mount acknowledged during

cross examination that no matter how well the Company’s employees achieve internal

performance goals, stock-based compensation is tied entirely to the value of the

Company’s stock, such that if that stock becomes less valuable, so does the eventual

value of the employee’s award.33 This incentive compensation benefits only

shareholders; the Company’s provided no evidence otherwise. Accordingly, the CAD

recommends removal of stock-based compensation per CAD witness Smith’s direct

testimony (Exhibit RAS-D) at 78-79 and his adjustment C-16.

3. WVAWC Labor Expense:

In her direct testimony, CAD witness Akers makes three adjustments to WVAWC

labor expense for Base Wages, Overtime, and Incentive Pay in the total amount of

($1,082,539). They are shown at Ex. SOA-1, p. 3 of her testimony and are in turn

reflected in Mr. Smith’s testimony at p. 64 and his adjustment C-6.

See CAD Cross 9(a), 9(h) and 9(c), which demonstrate respectively flat median income nationally; West Virginia 3 1

third from the bottom in median income; and WV with the highest unemployment rate nationally. 32 Tr. Oct. 30,2015, p, 76 (Mount); RCS-D, p. 79-80.

Tr. Oct. 30, 2015, p, 76 to top of p. 77 (Mount); RCS-D, p. 80, lines 14-15. 33

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For the base wage adjustment witness Akers accepts the Company’s 2014 and

2015 adjustments for pay increase for the Company’s three groups of employees (Union,

Non-Union Hourly and Non-Union Salary) as known and measurable. She does not

accept the 2016 Company’s proposed pay increases for Plumbers and Pipefitters for the

Oak Hill and PrincetodBluefield districts (contracts expire August 3 1, 2016 and

September 1, 2016, respectively), and the Utility Workers of America for the Kanawha

district (contract expires April 26, 2016).34 This represents a disallowance of $222,703.35

The contracts are treated differently. The Huntington contract has been renegotiated and

the union increase is known. For the other contracts, the contracts have not expired or

been renegotiated, and the increase is not known.

Company witness Tomac testified36 that even though the contracts have not been

renegotiated, these unions have the right to renegotiate or extend the contracts for an

additional year period at a 2.25% wage increase. Witness Toinac argued the 2.25%

increase should be allowed at a i n i n i r n ~ i n . ~ ~

The CAD rejected the Company’s argument because the increase - if any - for

2106 is still not known. The company did not provide the contract nor introduce when

the 2.25% increase would be implemented in 2016. Neither the timing of the

renegotiation of the contract nor when the 2.25% increase would be implemented is

known. The proposed union pay increases for 2016 are only speculative. Staff witness

Company response to CAD Data Request No. E-9, cited is Exhibit SOA-D, p 5 FN 4. Exhibit SOA-D pp. 3-5.

Hearing transcript from October 30, 2015, questioning of CAD witness Akers, page 248

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36 Tomac Direct Exhibit J-T at page 45. 37

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Kellmeyer agreed with witness Akers during the hearings,38 stating that she does not

believe the 2.25% is known.39

The CAD urges the Commission to reject this adjustment by the Company in the

amount of $222,703: it is not known and measureable. Witness Akers did allow the wage

increase for the Huntington district (Local 537) because the contract was signed in March

2015 and will be in effect through calendar year 2016.

The second base wage adjustment witness Akers made was to add back Spill

related overtime costs that the Company had removed4’ from its Historic Test Year

overtime expense. Her adjustment increases HTY Overtime expense in the amount of

$225,686:4’

Removing the Spill-related overtime expenses from the test year resulted in artificially lowering test year expenses and, correspondingly, inflating the going level adjustment for overtime expenses.

CAD witness Akers examined the WVAWC payroll adjustment in detail, including

WVAWC‘s treatment of test year overtime related to the Freedom Industries chemical

spill. The CAD has concluded that WVWAC’s request for “going level” overtime

expense was too high. There are different ways of arriving at that conclusion, and

determining how to correct it. One way (which CAD decided upon) is to remove the

excessive TY overtime related to the spill. Another way would have been to go

employee-by-employee and remove the TY overtime hours equivalent to the excessive

November 2,2015. Hearing transcript from November 2, 2015, questioning of Staff witness Kellmeyer, page 80.

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‘’ The Company stated that is deferring spill-related costs to another proceeding. 4’ Exhibit SOA at p. 3. p. 7, lines 16-18:

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TY overtime that was related to the spill. That second approach would have been

complicated and time consuming. The end result conclusion is the same: WVAWC’s

requested payroll expense for overtime is too high, and the CAD adjustment reduces that

to a level that is representative of normal, ongoing conditions, which do not include

substantial amounts of overtime being incurred each year for a major chemical spill.

Creating an increase in pro forma overtime labor of$735,267 for a total of $2,273,728 in

“going level” overtime (versus the test year recorded amount) is excessive. In the test

year, overtime was unusually high because of the $225,686 of overtime payroll expense

related to the spill. That unusually high level of test year overtime, and specifically the

amount related to the chemical spill, should not be expected to continue would continue.

The pro forma overtime amount that is allowed for ratemaking should not be

substantially larger than the test year amount which included the $225,686 of payroll

overtime expense related to the chemical spill. The rebuttal of Company witness Tomac

attempts to rationalize how “removing” the test year spill overtime somehow adequately

addressed that item in arriving at WVAWC’s total requested payroll cost. However, the

CAD’S analysis revealed that the company is requesting $735,267 for going level

overtime. That includes a $509,581 increase over the test year recorded overtime plus the

$225,686 test year overtime for the Chemical Spill which the Company “removed” by

subtracting it from the test year recorded amount. The problem with WVWAC’s

adjustment is when subtracting the spill related overtime from the from the test year

recorded amount and compare the “going level” with the lower test year recorded

amount, it effectively puts the $225,686 response back into the Company’s requested pro

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forma level of requested payroll expense. In other words, to not remove the test year

overtime for the chemical spill as the CAD has done would be like baking into the “going

level” all of the test year spill related OT payroll expense of the $225,686, and then some

additional amounts (a $509,581 increase) on top of that. The Company’s requested total

overtime payroll of $725,267 is excessive. The CAD’S removal of the $225,686 of payroll

overtime expense related to the chemical spill from recommended payroll cost is

appropriate and should be adopted by the Commission in order to reflect a total

reasonable amount of going forward payroll expense that does not bake into the revenue

requirement the test year chemical spill related overtime expense, since that is not

recurring.

Ms. Akers final adjustment was to use the Company’s formula for Annual

Incentive Plan compensation discussed above by CAD witness Smith, and to disallow all

Stock Option expenses. The result is an adjustment allowing 45% of the test year AIP

expense in the amount of $86,220, a decrease of $166,574 from the tests year level of

$252,794. This is similar to and consistent with Mr. Smith’s treatment for the Service

Company and results in a variance from the Company of ($596,53 1) shown on Ex. SOA-

1, P. 3.

The Commission stated in the Company’s last litigated rate case in 2010, and was

cited by Ms. Akers at p. 12 of her testimony:

As the Commission has stated in prior orders, incentive compensation packages provide benefits to both shareholders and indirectly to ratepayers through reduced costs over time. . . Absent other specific proof about the extent to which these programs actually lower the cost of service, as long as the amount appears reasonable, and because shareholders and ratepayers

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benefit from incentive compensation, the Commission will divide the cost of that burden equally by including one-half of the cost of WVAWC incentive compensation in its expense calculation as the Commission did in the APCo case. Case No, 10-0920, pp. 39-40.

In this case, the CAD rejects the Company’s inclusion of 100% of incentive based upon

the Company’s own AIP manual. This compensation should be apportioned between

shareholders and ratepayers as described herein, which is entirely reasonable.

D. Miscellaneous Operating Expense Adjustments

The CAD proposes several operating expense adjustments that should be adopted

by the Commission. They are shown on witness Smith’s Schedule C:

1. C-2 - At p. 46 Mr. Smith reverses the Company’s adjustment for reduced power and chemical expense related to the Company’s declining consumption, increasing O&M expense by $142,339. While CAD is not conceding declining consumption, the Company’s adjustment was inconsistent.

2. C-4 - At pp. 58-61, Mr. Smith reduces going level expense for Insurance Other than Group by $188,226 to adjust for the most recent three year average instead of 2012, 2013 and the 12 months ended March 31, 2015, which was abnormally high.

3. C-5 - At pp. 61-64, Mr. Smith reduces rate case expense of $861,850 by $198,000 to remove Service Company charges and estimated expense. Spread over 5 years the adjustment is $39,600. At p. 62, line 7, he notes the Company’s request is more than double the rate case expense in the last two rate case filings.

4. C-10 - At pp. 66-67, Mr. Smith removes $2.452 million in expected plan participant contributions for Post-retirement Benefits Other than Pension (PBOP). He did this because these are benefits that participants pay for and not ratepayers or the Company.

5 . C-12 - At pp. 68-69, Mr. Smith decreases utility regulatory assessment by $15,075 to reflect a more recent assessment rate from June 2015 rather than June 20 14.

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6. C-13 - At p. 69, Mr. Smith adjusts Income Tax expense to recognize interest synchronization for weighted cost of debt to adjusted rate base.

7. C-14 - At pp. 71-73, Mr. Smith removes $148,490 in miscellaneous affiliate expenses related to the Service Company that are inappropriate for ratemaking. These include advertising, dues, community relations and other expenses.

8. C-17 - And at p. 82, Mr. Smith removes some officer expenses that are not necessary for the provision of utility service.

RATE BASE

The principle rate base issues are cash working capital and property taxes.

A. Property Tax Lag Days

In its calculation of property taxes the Company plainly disregards the 609-day

service period to payment lag approved by the Commission in the APCo Case.42 The

Company seems to have adopted a service period based entirely on its Fiscal Year

arguing that it is actually leading property tax payments.43 WV Code § 11-5-3 Definitions

states that the “Tax Year” for public utilities is the calendar year beginning January 1 .44

The Company did not dispute that the first half of property tax paid Sept. 1, 2016

and the second paid March I , 2017 was for property that was used and useful on the

January 1, 2014 assessment day. Company witness Tomac testified that this was

accurate:

Q: Okay. And it says in the case, ‘in the case of public service business assessed pursuant to Chapter 11-6-1 of this chapter, the calendar year beginning on January 1’‘ assessment date; right, that’s the tax year?

42 Case No. 14-1 152-E-42T. 41 Tomac direct, p, 26, lines 18-23, Ex. JST-4 44 See CAD Cross 8.

19

A: That’s correct.

Q: So do you agree with me that for utility property that was used and useful on the January lS‘, 2014 assessment day, that the first half of your property taxes are due September Is’, 2016?

A: taxes in February of ’ 14 also. We pay them twice a year.

Q: l s t , 2014, the second of this property tax is due March I”, 2017?

A; Yes. That’s correct.45

They’re due that way, but we unfortunately have to pay property

And the second half, for property that’s used and useful on January

The CAD asked the same question of the Company’s lead-lag consultant Harold

Walker:46

A: The date that you’re using does not reconcile with the actual tax bills in the Company filing. In the Company’s filing, there were 2014 taxes. There’s actual tax bills in there, if you look at them. . . The valuation was as of July lS‘, 2014, the service period from the tax bill is July 1, 2014 to June 30,2015. . .

The CAD did look at the Company’s filed workpapers for property taxes, which

do not support the Company’s position as shown in Table 2:47

Table 2.

Assessmennaluation Year 2015 Assessment Notice Received 0712014 Valuation Based on Operations of Calendar Year 2013 Return Filed 0512014 Bills Due (Install 1 = Install 2) 9/20 15 & 3/20 16 Assessment $243,132,900 Total Annual Tax Liability $6,384,434

TI. Oct. 27, 2015 at 233 referencing CAD Cross 8, the Definitions section fiom West Virginia’s property tax 45

code for the term “tax year.” 46 TI. October 28, 2015 at 247, line 14.

Workpaper-Statement G, Adjustment 56, Page 1 of 1. 47

20

The CAD suggests that the key entry is ‘Valuation Based on Operations of the Calendar

Year,’ and that is 2013, which appears more in line with the CAD and Staffs

recommendation of 5 1 1 and 609 payment lag days re~pectively.~’

B. Cash Working Capital Non-cash Items

The Company has included a number of non-cash items in its Cash Working

Capital calculation in rate base, The most salient are depreciation expense and

Accumulated Deferred Income Taxes. These two provisions in Statement of Cash Flows

are sources of cash and not actual cash expenses intended to keep the doors open.49 The

Company argues that this money was expensed a long time ago so the Company should

get a return on it today even though no money is actually spent.50

The CAD does not agree with this position. WVAWC does not cut a check for

depreciation or ADIT; no money goes out the door. The Company’s position is that all

revenue billed to ratepayers is subject to some sort of lag and thus proper for inclusion in

cash working capitaL5’ This position falls squarely in line CAD witness Smith’s

argument: depreciation and ADIT are “sources” of cash and not a ‘‘use’’ of cash, and thus

not appropriate for inclusion in Cash Working CapitaLs2 It is functionally the same thing

as earning a return on revenues as opposed to investments.

The CAD notes that the terms ‘lead’ and ‘lag’ are sometimes used interchangeably depending on the witness, or

Smith direct at 27, In. 7-15. See e.g. Harold Walker, TROct. 28, at 241, In 25 to 242 In 12. See, APCo Order, Case No. 14-1 152-E-42T, May 26, 2015 at p. 3 1. Smith direct, p. 27, In. 13.

48

the Order under discussion. 49

50

51

52

21

C. Interest Payment Lag

Interest payments on short and long term debt are a cash expenditure. The interest

payments should be reflected in the lead-lag study. WVAWC's larger affiliate,

Pennsylvania American Water Company's rate case filing excerpts (see Exhibit LA-6)

illustrate the proper way to reflect the interest payment lag for cash working capital

purposes. As shown on Exhibit LA-1, Schedule B-1, page 4, the annual synchronized

interest amounts for short-term and long-term debt should be reflected in the current

WVAWC case using a 15.2 day payment lag for interest on short-term debt and a 91.3-

day payment lag for interest on long-term debt. Exhibit LA-1, Schedule B-1, page 1, lines

41 through 43 show the CWC impact from the net interest payment lag.

D. Using Adjusted Amounts of Expense in the Cash Working Capital Determination

WVAWC's proposed Cash Working Capital allowance is based on test year

recorded book amounts. WVAWC failed to adjust its expenses to remove abnormal and

nonrecurring items that are not being reflected for ratemaking purposes, or to coordinate

the CWC determination with the cash operating expenses that are being reflected for

ratemaking purposes. The CAD'S proposal uses the adjusted levels of cash expenditures

to compute the CWC allowance. The CAD recommends that the Commission use

adjusted cash expenses (and not unadjusted test year amounts) for computing CWC in

this case. The CADS presentation of the CWC allowance on Exhibit LA-1, Schedule B-

1, uses the adjusted cash expenditures to compute the CWC allowance.

22

E. Affiliated Service Company Payment Lag

In a previous WVAWC rate case, Case No. 08-0900-W-42T, which used a 2007

test year, the Company performed a leadilag study to calculate the cash working capital

requirement which produced a Company-proposed amount of negative cash working

capital of approximately $258,000. The Commission’s Order in that case made a further

reduction of $3 12,000 (i.e., increased the negative CWC amount by $3 12,000) to reflect a

payroll-type lag for American Water Works Service Company (“AWWSC”) charges to

WVAWC in place of the prepayment assumption that WVAWC had reflected for that

item in its lead-lag study. The result was a negative CWC allowance in rate base of

$570,000. The CAD made a similar adjustment, to use a 12-day payment lag for

affiliated service company charges to WVAWC in WVAWC’s next rate case, Case No.

10-0920-W-42T. In the current rate case, WVAWC proposes a huge positive cash

working capital amount of approximately $1 1 million in rate base, as shown in its filing

at Company Schedule HW- 1. Among other things, the Company failed to reflect the

Commission-ordered adjustment for the affiliated service company lag in its lead-lag

study. The Company’s lead-lag study in the current case utilized a prepayment for the

affiliated service company management fee charges. The Company’s failure to reflect

this Commission-ordered adjustment has resulted in an overstatement of CWC. The

CAD recommends that a payroll-type lag be applied to these affiliated service company

charges in the current case, similar to the Commission’s decisions in the prior WVAWC

rate cases cited above, and similar to how this lag is treated for CWC purposes in the

Pennsylvania American Water rate cases (as documented in Exhibit LA-6).

23

V. RATE OF RETURN

The rate of return should not include flotation costs in the cost of equity. The

Commission in the last WVAWC rate cases3 rejected the Company's Risk Premium

method because it incorporated many non-utility companies which included flotation

costs. Company witness Vander Weide's risk premium analysis in this case uses flotation

costss4 as well as the S&P SO0.55 For this reason, the CAD position is that the upper

range of the Risk Premium approach should be rejected.

Witness. Vander Weide also recommended a S percent allowance for flotation cost in

his DCF ca lcu la t i~n .~~ His testimony is that flotation costs should be allowed even if the

Company hasn't issued any equity in the test year.57 This is not consistent with past

Commission practice and should be rejected.

VI. DISTRIBUTION SYSTEM INFRASTRUCTURE CHARGE

The CAD opposed a Distribution System Infrastructure Charge (DSIC) in every

WVAWC case where it was raised. It opposes a DISC now. There are two problems

with implementing a DSIC: (1) it has not been legislatively authorized as the SB 390

filings were for natural gas utilities; and (2) WVAWC did not request nor gave notice of

a DSIC filing in this case. For these reasons, WVAWC cannot be authorized to

WVAWC, Case No. 10-0920-W-42T, Order April 18,201 1, at 20,

Ex. JVW-1, Schedule 4, Ex-Post.

53

"See , Ex. JVW-I, Schedule 3-5 notes, Ex-Ante.

56 JVW-D at 26, In 14. 57 Id. at 27,28.

55

24

implement a DSIC in this proceeding. As discussed at the hearing by CAD witness

Smith?

..... the CAD’s legal position is, and this is coming from (its) counsel, is that a DSIC was not noticed in this case and has not been authorized for West Virginia-American Water Company in the legislature. And my understanding is that the CAD’s position is that they’re legally opposed to having a DSIC in this case. Since the concept was put out there in the Staffs testimony, we felt that it was important to address some ratepayer safeguard provisions that are found in other DSIC’s from other jurisdictions, just to make sure that that was in the record, that ratepayer protections are needed. But as I understand it, the CAD’s legal position is that there should be no DSIC in this case.

The proposed DSIC became an issue only in Staff witness Eads testimony. The CAD’s

position is that while the Commission is legally prohibited from allowing a DSIC in this

case, consideration of a DSIC may be an appropriate consideration in future proceedings.

Should the Commission approve a DSIC pursuant to a legislative mandate in a future

case, the CAD’s position is that two elements must be addressed that are absent in Staffs

proposal: first, a recognition that the investment recovered in a DSIC has less risk than in

an HTY filing which must be recognized in the DSIC by a reduced return on equity; and

second, customer protections must be included in a DSIC to balance customer interests

with the allowance such an extraordinary ratemaking mechanism.

Below are several consumer protections that the CAD believes are essential to

achieve just and reasonable rate adjustments under a DSIC mechanism. As CAD

witness Smith testified, some of these mechanisms were introduced in a recent Arizona

58 Tr. Nov. 29,2015, p. 23, line 4 (Smith).

25

case involving Arizona Water Company, where many such safeguards were appr~ved.’~

The proposed customer protections include, but are not limited to:

1. The DSIC should be limited to non-revenue producing, non-expense reducing infrastructure improvement projects. The DSIC focus should be principally on main replacement, which the Company has stated are now on a nearly 400-year replacement cycle.

2. The DSIC would recover utility plant investment that represents expenditures made by the Company to maintain or improve existing customer service and system reliability, integrity and safety. Eligible plant additions are limited to replacement projects. The costs of extending facilities or capacity to serve new custoiners are not eligible for DSIC recovery (this would be a revenue-producing investment).

3. The DSIC recovery is for a distribution system improvement that satisfies at least one of the following criteria:

a. water utility plant assets have remained in service beyond their useful service lives (based upon that system’s authorized utility plant depreciation rates) and are in need of replacement due to being worn out or in a deteriorating condition through no fault of the Company;

b. the project must be a distribution system improvement with assets to be classified in the following plant categories:

c. Transmission and Distribution Mains;

d. fire Mains;

e. Services, including Service Connections; or

f. Valves and Valve Structures.

Some of the provisions listed below were also incorporated in whole or in part in

the Arizona case, and should be included in any DSIC authorized by the Commission:

This case was overturned by the A2 Court of Appeals on Aug. 18,2015 (Case Nos. 1 CA-CC-130002, CA-CC- 14-0001). The decision was overturned because the A 2 Corporations Commission is a constitutional office, with constitutional mandates, including the requirement to “ascertain the fair value of property,” i.e. rate base, every single time it sets rates. That does not happen with a DSIC; it only happens every five years or so, when the Company is supposed to come in and reset everything to zero.

59

26

1, The DSIC should be filed on an annual basis for plant added in the prior year; there must be a true-up of the DSIC.

2. Certain metrics such as the Gross Revenue Conversion Factor, income tax rates, and depreciation rates should be those approved in the most recent rate case decision.

3. Supporting data must be filed and should include, among other things: most recent balance sheet; income statement; earnings test schedule; rate review schedule; revenue requirement schedule; schedule showing number of customers by meter size to be served, gallons sold and calculation of surcharge designed to collect costs 50150 through fixed surcharge and volumetric charge; schedule showing current rate base approved in most recent rate case with adjustments to reflect inclusion of completed and in-service DSIC facilities; CWIP ledger; schedule showing typical bill analysis.

4. The DSIC should be a separate line item on customer bills and the water utility should be required twice yearly to include a bill insert explaining the DSIC surcharge and the Company's progress with new infrastructure replacement.

5. The DSIC should be reset to zero and list of completed and in-service DSIC eligible plant additions reset to none on effective date of each new base rate decision.

6. A DSIC filing should not be allowed for any year in which the achieved rate of return exceeds authorized rate of return.

7. The amount to be collected by each DSIC filing should be a) capped annually at 5% (five percent) of the revenue requirement authorized in the most recent base rate case; and limited to 7.5% (seven and a half percent) on cumulative DSIC increases between rate cases.6o

8. No DSIC filing should be made during the same calendar year as a base rate filing.

9. The Company may make its initial DSIC filing no earlier than 12 months after entry of a final order in a base rate case. Any subsequent DSIC filing shall be made within sixty (60) days of the previous twelve (12)-month DSIC surcharge

The lack of a cumulative limit is believed to be a particular flaw of the Arizona SIB, and is remedied in the CAD 60

proposal presented herein by applying a cumulative limit of 7.5%.

27

period. months and no more than three filings between rate case decisions.6’

There should be no more than one (1) DSIC filing every twelve

Mr. Smith further recommends the DSIC be reset to zero every three years with

the filing of a required base rates case.

There may be some advantages of a DSIC over a Bridge or FFFTY. In a DSIC the

Company’s investment can be monitored and trued-up on an annual basis. The Company

would be required to file at least a five year plan of infrastructure investment, which

would require the Company to explain how it intends to maintain its system. This ensures

that the Company’s proposed projects are vetted before any investment is made. It would

also ensure ratepayers would not be charged for estimated or projected investments that

never materialize. With the requisite legislative authority and customer protections a

DSIC may serve a legitimate regulatory purpose.

Over the last twenty years, WVAWC has spent more than a half billion dollars on

plant without a corresponding increase in the Company’s performance metrics. The CAD

is also concerned about this increased burden placed on ratepayers as a result of the plant

investment. In comparison to the tremendous increase in plant, the Company has had a

relatively small increase in customers. As a result the cost of WIS per customer has

more than doubled, i.e., from $1,772 of plant investment for every customer in 1996 to

$3,928 of plant investment for every customer in 2014 as shown in Table 3:

For WVAWC’s initial infrastructure surcharge, the CAD recommends a limit of no more than three infrastructure filings, between rate cases. This limit should not be an issue for WVAWC, which has typically filed base rate cases every two to three years.

61

28

Table 3

West Virginin American Water

Comparison of Total Dollars Recovered: 1996,2014 Proposed Based on Plant Balnncts Deeemkr31, 1996 and Derrmkr31,2014

Commission Order WVAW Proposed FYE Variance: 2014 FYE 12/31/1996 12/31/2014 less 1996

Utility Plant in Service $ 237,883,864 $ 664,299,149 '$ 426,415,285 lxss: Depreciation Reserve 44,537,224 96,3 11,781 ' 51,780,563 Equal: Net Plant 198,346,640 567,981,362 ' 369,634,722

Number ofcustomers

Utility Plant per Cbstomer

134,215 169,117 ' 34,902

1,772 '$ 3,928 '$ 2,156

source:

1996 Data from Mike MajorasDirect Tesiieony, Appendix A, sheet 13 of 14: Exhibil 1. PSC Case No. 98-0985-W-D

2014 Data from Spanos Depreciafion Sudy. page V I 4

Calculated numkrs: Depreciation Reserve, Years to Recover, Utility Piant per Cutomei

Every dollar added to UPIS is paid by ratepayers in subsequent years through

depreciation expense. Every dollar added to UPIS increases rates to pay for the

Company's return on investment. The costs to ratepayers without concomitant

demonstrable system improvements argue for a conservative approach to increasing the

Company's rates.

In terms of the benefits that accrued to ratepayers as a result of the Company's

investment in plant, Staff witness Jonathan Fowler provided testimony on the Company's

performance on several quality measures. He cited statistics from a 2008 study

29

conducted by EarthTech Consultants and concluded that not much has changed62. He

provided statistics from 2014:

1. The number of leakdbreaks repaired increased 20% over the previous year or about four to five times the trend reported in the 2007 study.

2. The current main replacement rate is approximately one-third of one percent and current annual spending on main replacement is about $4.425 million.

3. Small diameter mains have a very high failure rate of nearly 300 leakdbreaks per 100 miles per year as compared to the national average of 21-25 breaks per 100 miles per year.

4. Of the smaller mains, cast iron mains have 367 leaksibreaks per 100 miles per year.

UPIS has increased by $273 million since 2008 yet the statistics cited by Mr.

Fowler fail to show any system improvement. In fact, the study shows system

declination. If no positive system change results from spending $273 million, what

change can result from spending another $12 million in a DISC?

CAD is at a loss to explain the Company’s dismal performance on these measures.

It does not appear that the half billion dollars spent in system improvement in the last

twenty years is improving infrastructure. Perhaps the Company practice of capitalizing

and not expensing most 0 & M expenses as discussed in the testimony of the Advocates

for Safe Water (ASW) witness Fred Stottlemeyer is contributing to this dislocation. ASW

witness Stottlemeyer discussed the merits of the Company’s planned capital expenditure

of $20 million on the Weston-Webster Springs project to benefit 1000 customers. Or

Direct Testimony of Jonathan M. Fowler at 8-1 0. 62

30

even worse, perhaps the Company simply has a business model that does not work: a

central plant piping water over hundreds of miles of pipe.

The ASW provided testimony63 that the Company is capitalizing O&M expense.

The Company threshold for capitalizing an expense is $1,400 dollars. For the gas

companies, according to Mr. McIntyre? the threshold for capitalizing repairs is $3,000.64

Because the Company's threshold is so low, most leak repairs would qualify as a capital

expenditure.

The Company has a strong incentive to capitalize and not expense repairs. If the

Company expenses the repair, it is charged against current income, and the expense may

fall in a period that is not a test year. If the repair is capitalized the Company recovers

every dollar of the repair expense (which currently includes an additional 25%65 for

estimated net salvage) plusthe Company earns a return on the investment (the Company

is proposing a ROI of 7.68% in its the Rule 42 application). If the Company spends one

dollar on a repair and capitalizes it, the company collects over time that expense (through

depreciation) plus a return. This is an incentive to capitalize repairs and not expense

them.

VII. CONCLUSION

Whatever the Company is attempting to accomplish in operating its utility business is

lost on its customers. Company President McIntyre testified that twenty-five percent of

Exhibit FDS-D. Tr. October 27,2015 at 66, lines 1-3 (Mclntyre). 64

"Table 1 , Comparison ofTotal Dollars Recorded, Future accruals for net salvage of $164,859,972 /original cost of plan1 of$657,526,162.

31

its customers are drinking bottled water following the chemical Despite spending

half a billion dollars over the last twenty years for infrastructure improvements, the

Company has seen no improvements in its service metrics. Regarding the $17 million

meter replacement program, the Company never completed the 20 10 pilot program in

Fayetteville, analyzed the results nor undertook a cost benefit analysis for the Company-

wide roll out of the program. Moreover, the Company continues to march forward with

investing in the meter replacement program public despite outcry in opposition to the

program from the ASW, CAD, and the City of Charleston. When asked about the

Gazette article67 where such outcry was lodged, President McIntyre attempted to

minimize the opposition by stating:

I see an individual person in this article, a couple of people, actually, in this article, that are making those comments.68

The Company also repeatedly bemoans its earned return on equity being lower

than its authorized return. However, it only discusses its GAAP return not its regulatory

return. This is a critical distinction as described in the direct testimony of CAD witness

Smith:

One of the concerns about such calculations, which are typically presented by utilities to claim that their recorded per-book earnings have been below their authorized return, is that it is not an apples-to-apples comparison. A utility’s revenue requirement is determined differently than per books earnings. One reason is that typically the Commission disallows Company expense recovery for a variety of reasons: the expense was not ordinary and necessary; the investment was not used and useful; and the expense did not benefit ratepayers, to name a few. Second, between rate cases, a utility’s

“Tr. October 27,2015 at 80 In 12 through 81 in 1 (McIntyre). CAD Cross 3. Tr. October 27 at 45 In 12.

67

68

32

expenses can experience variations: actual expenses can vary from amounts that the Company has budgeted; to the extent expenses come in higher than expected, that can reduce the amount of Operating Income the Company would otherwise be expecting. For example, the Company’s response to CAD 2 A-012 contains an Attachment for 2014 results, which shows that Contracted Services Expense was budgeted at $964,000 but actual expenses were $3.972 million. Whether this expense is recoverable in rates does not change the per books impact on the Company’s earnings. Another example is Uncollectibles Expense that was budgeted at $1.108 million, but actual Uncollectibles Expense recorded on the Company’s books for 2014 was $3.791 million. The variances in those two accounts alone represent actual 2014 expenses above the Company’s budgeted amounts by $5.69 million, and contributed to the Company’s Operating Income for 2014 being approximately $8.735 million or 24 percent under-budget. This is a risk of doing business, and is not because of the Commission’s regulatory treatment of the Company. In addition, the Company includes expenses in the per books earnings calculation that have been expressly rejected by the Commission, so the earned return is misleading. The Commission has an established Rule 42T procedure for utility‘s requesting a change in rates. That should be 2used to determine the Company’s revenue requirement and adjust the Company’s rates for water utility service in the current rate case. 69 (emphasis added).

Company witness Tomac did not dispute that the earned return included booked expenses

that are not authorized in rates because they are not necessary for the provision of utility

service. 70 So while the company claims their financial condition is “dire,”7’ the truth is

that its position is not so dire. Certainly the Company’s position does not warrant the

extraordinarily ratemaking treatment requested in this case.

The CAD’S recommended increase in rates of $1.8 million is imminently

reasonable in light of the evidence in this case.

RCS-D at 6 - 8 (Smith). 69

70

71 TR-Oct. 27,p. 219, line 15, top. 220, line 14. TR-Oct. 27, p. 217, line 2.

33

Respectfully submitted

WV-BarNo. 11756

34

PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

CHARLESTON

WEST VIRGINIA-AMERICAN WATER COMPANY CASE NO. 15-0676-W-42T 15-0675-8-42T

CERTIFICATE OF SERVICE

1, Tom White, counsel for the Consumer Advocate Division of the Public Service

Commission of West Virginia, certify that I have served a copy of the foregoing Consumer

Advocate Division’s (CAD) Initial Briefupon all counsel of record by mailing a true copy thereof

by First Class, United States Mail, postage prepaid.

Tom White State Bar No. 6393 Tom White State Bar No. 6393

DATED: December 16.2015