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2 utilities ask West Virginia regulators to change rate calculation policy

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CHARLESTON, West Virginia — Two utilities are seeking a change in the way state regulators determine the rates that customers should pay.

West Virginia American Water and Mountaineer Gas have asked the Public Service Commission to base rate calculations on a future test year, which is a utility's projected spending and income over the course of a year after a rate case is decided. The utilities requested the change in separate rate cases, The Charleston Gazette (http://bit.ly/1gj4xtT) reported.

The PSC currently reviews a historical test year, which is a utility's spending, income and investments for the year prior to a rate case being filed.

The existing system forces companies to play catch-up, said John Tomac, West Virginia American's rates and regulatory support manager.

"It never, ever gives us a chance to gain a fair rate of return," Tomac told the newspaper. "It's theoretically impossible to earn your rate of return with that treatment."

Tomac said the police change would reduce the number of rate cases filed by companies, along with the "rate shock" that many utility customers have when large rate increases are requested every two years.

Mountaineer Gas said in a filing with the PSC that its proposal seeks to more closely match the company's investments, expenses and revenues with the customer rates needed to support them.

The PSC's staff and Consumer Advocate Division oppose the proposed change. The staff has asked the PSC to deny Mountaineer Gas' request, arguing in a filing that the change effectively would shift the burden of proof to the staff "to show that the company's projections are inaccurate."

Under the proposed policy change, West Virginia American Water could receive $13.2 million more than it would have received under the existing policy. Mountaineer Gas could receive an additional $3 million, the newspaper said.

Other states allow utility companies seeking a rate increase to use forecasts of future test years, said James Van Nostrand, a West Virginia University law professor who studies utility regulation.

Van Nostrand said the decision to consider a future test year often depends on the commission itself and how "sophisticated" the staff is.

The PSC experimented with projected rate calculations in the 1980s but largely abandoned the practice in the 1990s, according to PSC documents.

Advocates for a Safe Water System opposes the policy change because of West Virginia American Water's "lack of transparency," said Cathy Kunkle, who represents the nonprofit group before the PSC.

Kunkle said she was unsure the PSC could handle such a policy shift.


Information from: The Charleston Gazette, http://www.wvgazette.com

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