SOUTH CHARLESTON v. PUBLIC SERVICE COM'N

• Decision Date: 12 March 1999
• Docket Number: No. 25333.,25333.
• Citation: 514 S.E.2d 622,204 W.Va. 566
• Court: West Virginia Supreme Court
• Parties: CITY OF SOUTH CHARLESTON, Appellant, v. The WEST VIRGINIA PUBLIC SERVICE COMMISSION and Green Valley Community Public Service District, Appellees.

514 S.E.2d 622

204 W.Va. 566

CITY OF SOUTH CHARLESTON, Appellant, v. The WEST VIRGINIA PUBLIC SERVICE COMMISSION and Green Valley Community Public Service District, Appellees.

No. 25333.

Supreme Court of Appeals of West Virginia.

Submitted January 12, 1999.

Decided March 12, 1999.

Amy J. Haynie, Esq., South Charleston, West Virginia, T.D. Kauffelt, Esq., Kauffelt & Kauffelt, Charleston, West Virginia, Attorneys for Appellant.

James V. Kelsh, Esq., Charleston, West Virginia, Attorney for Appellee Public Service Commission.

Robert R. Rodecker, Esq., Charleston, West Virginia, Attorney for Appellee Green Valley Service District.

James W. Withrow, Vaughn & Withrow, Charleston, West Virginia, Attorney for Amicus Curiae West Virginia Municipal League, Inc.

PER CURIAM:

The City of South Charleston ("City") appeals a final order of the Public Service Commission ("Commission") dated May 21, 1998. The Commission's order requires the City to continue to provide billing, collection and maintenance services for the sewage system of the Green Valley Community Public Service District ("District"). The Commission's order additionally alters the rates and charges for the City's residential, commercial and industrial customers. The City alleges on appeal that the Commission committed two errors: (1) that the Commission exceeded its jurisdiction when it required the City to continue to provide billing, collection and maintenance services to the District's customers after the service contract between the City and the District expired; and (2) that the Commission exceeded its jurisdiction by altering the sewage rates of the City's residential, industrial and commercial customers when no customer affected by those rates filed a timely protest. Following our review of the record, we find no error and affirm the final order of the Commission.

I. Facts and Background

The City of South Charleston operates a sewage collection and treatment system. The Green Valley Service District is a public service district located outside of the City limits of the City of South Charleston. On September 4, 1979, the City and the District entered into a contract whereby the City would provide the transportation and treatment of the District's sewage, and perform the billing, collection and maintenance services related to the operation of the District's sewage system. The contract stated that it would remain in effect for 40 years, and did not have a fixed rate, but provided that the services would be performed on a cost-of-service basis. The contract was filed with the Commission, but was never formally reviewed and approved by the Commission.

A new contract was entered into between the City and the District on September 30, 1982. This second contract was similar to the 1979 contract, with two exceptions: the term of the contract was for only 15 years, and a fixed rate was established at $1.57 per thousand gallons of wastewater. This contract was not submitted to the Commission for its approval.¹

In November of 1995 the City notified the District that it did not intend to renew the contract upon its termination in 1997. The City did indicate that it would be willing to continue to transport and treat the District's sewage after the expiration of the contract but the City stated that it would cease to provide billing, collection and maintenance services to the District.

During the summer of 1996, the City began negotiating with the District, regarding the City's potential acquisition of the District's sewage system. On December 17, 1996, the City and the District filed a notice seeking the consent of the Commission for the City's acquisition of the system. However, on February 11, 1997, the City notified the Commission that the City no longer wished to acquire the District's system. The City apparently took this action without notifying the District.

On August 7, 1997, the City adopted an ordinance establishing a transportation and treatment rate of $1.71 per thousand gallons for customers of the District. This rate was to become effective on October 1,1997.

On August 27, 1997, the District filed a complaint against the City with the Commission.² The District stated in the complaint that after the City announced it would no longer provide the billing, collection and maintenance services for the District's customers, the District had attempted to secure a contractor to provide those services. However, the District had ceased trying to obtain a contractor when the City indicated that it wished to acquire the District's system. The District renewed its efforts to locate a contractor only after the City withdrew its request for the consent of the Commission to acquire the system. In the complaint, the District requested that the Commission exercise its regulatory authority and order the City to continue to provide billing, collection and maintenance services until another solution could be found.

On September 5, 1997, the District filed a second complaint against the City with the Commission.³ In this complaint, the District argued that the 1979 contract, which had a term of 40 years, was still in effect. The District further alleged that the proposed rate of $1.71 per thousand gallons was arbitrary and discriminatory because the City had changed its proposed sewer rate within 6 months from $1.45 to $1.71 per thousand gallons,⁴ without performing any cost of service study.⁵ The District argued that the new rate had been adopted without Commission approval, and was contrary to both the 1979 and 1982 contracts.⁶

Also on September 5, 1997, the District filed a petition with the Commission pursuant to W.Va.Code, 24-2-4b(c)(2) [1994], alleging rate discrimination. The District argued that the new rate was established without a class cost of service study and without proper notice pursuant to W.Va.Code, 24-2-4b [1994]. The District alleged that without a cost of service study the new rate would discriminate against the District's customers in favor of the "customers located within the city limits[.]"

The three actions were consolidated and the matter was heard by an administrative law judge ("ALJ"). During the hearing before the ALJ, evidence was offered by the Staff of the Commission and by the District regarding the rates for the District and for the City's residential and industrial customers. Evidence was also offered by the District, tending to show that the District did not have the facilities and staff necessary to perform those tasks that the City sought to discontinue. A recommended decision was rendered on March 13, 1998 and both parties filed exceptions to the recommended order with the Commission.⁷ The recommended decision would have permitted the City to discontinue providing billing, collection and maintenance services to the District. The recommended decision also established a new rate for all of the City's residential, commercial and industrial customers.

Following a review of the case, the Commission refused to adopt portions of the recommended order. Instead, the Commission ordered the City to continue to provide billing, collection and maintenance services to the District in addition to the treatment and transportation of the District's wastewater. The Commission's order set the rate for the District's customers at $2.59 per thousand gallons of wastewater and changed the sewage rates for the City's residential, commercial and industrial customers. The City appealed this order to this Court pursuant to W. Va. Code, 24-5-1 [1979].⁸

II. Discussion

We set forth the standard of review of an order of the Commission in Syllabus Point 1 of Central West Virginia Refuse, Inc. v. Public Service Commission, 190 W.Va. 416, 438 S.E.2d 596 (1993), where we held:

The detailed standard for our review of an order of the Public Service Commission contained in Syllabus Point 2 of Monongahela Power Co. v. Public Service Commission, 166 W.Va. 423, 276 S.E.2d 179 (1981), may be summarized as follows: (1) whether the Commission exceeded its statutory jurisdiction and powers; (2) whether there is adequate evidence to support the Commission's findings; and, (3) whether the substantive result of the Commission's order is proper.

With this standard in mind, we consider the City's two arguments.

A. Services

The City argues that the Commission exceeded its jurisdiction by ordering the City to continue to provide billing, collection and maintenance services to the District. The City contends that because the billing, collection and maintenance services were provided to the District pursuant to a contract that has expired, the Commission does not have the authority to order the City to continue to provide these services. Conversely, both the Commission and the District argue that the Commission does have the authority to order the City to continue to provide these services.

In W.Va.Code, 24-1-1 [1986],⁹ the Legislature delegated to the Commission the "administrative supervision and regulation of all service rendered to the public throughout the whole of the State ." City of Benwood et al. v. Public Service Commission, 75 W.Va. 127, 129, 83 S.E. 295, 296 (1914). The Commission is authorized under W.Va.Code, 24-2-4b [1994] to regulate the rates and services provided by a municipality acting as a utility. As the Fourth Circuit Court of Appeals stated in City of Charleston v. Public Service Commission of West Virginia, 57 F.3d 385 (4th Cir. 1995):

The authority of the PSC to regulate the rates and practices of West Virginia municipalities, when acting as utilities, has existed at least since 1914. The specific power of the PSC to regulate the extension and termination of service by a public utility to its customers is also well established.

57 F.3d at 393 (Citations omitted.)

This Court has recognized that the Commission "was created by the Legislature for the purpose of exercising regulatory authority over public utilities. Its function is...