Legal questions and allegations of uncovered debt persist in proposed sale of Fayette County public utilities

KANAWHA FALLS, WV (WOAY) – The proposed sale of three troubled Fayette County public service districts to West Virginia American Water is now being evaluated by the West Virginia Public Service Commission for approval, even as the board of one district continues to vehemently oppose the sale.

According to an objection and motion to dismiss filed this month, Public Service Commission legal staff argue that a county commission cannot sell a public service district without the approval of the district’s board.

West Virginia American Water and the Fayette County Commission filed a response, maintaining that the county commission can dissolve the Public Service District and sell the assets under state law.

According to case documents, the dissolution process would begin if the Public Service Commission approves the structure of the sale.

The Commission has not ruled one way or the other. Chairman Charlotte Lane told Newswatch that the commission is still evaluating the cases.

The Fayette County Commission has been negotiating the sale of Armstrong Creek PSD, Paige Kincaid PSD, and Kanawha Falls PSD to West Virginia American Water since the Public Service Commission labeled them as distressed utilities.

The Kanawha Falls Public Service District has opposed the sale from the beginning. Now that the agreement is public, Jonathan Grose, chairman of the Kanawha Falls Public Service District, says the terms of sale do not cover all of the outstanding debt.

“It’s going to be falling way short, into the multiple million dollars,” Grose said in an interview following the Fayette County Commission meeting on November 12. “Their disregard and inability to do the research before entering into an agreement and signing it could leave the listeners and the watchers holding the purse, ready to pay the two, three, three and a half million dollar deficit.”

County Commission President John Brenemen disagreed with Grose’s opinion. In a follow-up email to Newswatch, he said those debts are covered.

“The debt will be covered in the purchase price due to depreciation of various assets from the grants that were given,” he said.

In a second follow-up email several days later, Brenemen said the commission is confident all debts will be covered.

“There are contingencies within the Agreement that protect the County should the debts be more than the price, as well as State Code and the PSC,” Brenemen said.

You can read the full purchase agreement as filed with the Public Service Commission here:

The legality of the sale is also in question. Staff for the Public Service Commission filed an objection and motion to dismiss the application for the sale, arguing that the Fayette County Commission only has the authority to sell inactive districts.

“The Fayette County Commission has no statutory authority to unilaterally sell Public Service District assets,” the motion reads.

Staff say that West Virginia Code §16-13A-2 “gives the county commission broad authority” to make changes to public service districts. However, staff says the West Virginia Legislature never granted county commissions authority to sell the districts themselves.

Further, staff argue that the Fayette County Commission cannot sell property deeded to public service districts, since the county commission is not on the deeds.

You can read the objection and motion to dismiss here:

Shortly after the motion to dismiss the application was filed, Kanawha Falls Public Service District filed its own petition to intervene and protest of the sale.

In that motion, the public service district says it has consistently voted not to sell its sewer and water assets to West Virginia American Water and “will not work to facilitate of its water and sewer utility assets to [West Virginia American Water].

You can read Kanawha Falls’s petition here:

In an email, Fayette County Commission President John Brenemen maintained that the Kanawha Falls PSD board does not need to approve the sale.

“The Fayette County Commission does not believe that a PSD must approve the sale of the assets of a PSD, particularly when the PSD is being dissolved.  The full breadth of the County Commission’s position on this matter is on file with the PSC in the pending case,” he said.

That position is argued in the Fayette County Commission and West Virginia American Water’s response to the PSC legal staff’s motion to dismiss. Both requested that the Public Service Commission decide the legal issues so that the case can continue on its merits.

The response argues that the state legislature cannot be expected to “anticipate every situation” and explicitly lists the powers granted to county commissions.

“Statutes should not be so narrowly read as to preclude transaction solutions that both fit the circumstances presented and are not prohibited by statute,” the response reads. “The Transaction Structure is a well-considered, legally permissible mechanism to allow the County Commission to dissolve the Districts and entrust the Districts’ utility assets and public service obligations to a qualified utility provider, with every step of the process defined in advance and subject to the Commission’s prior approval.”

The response also says that the staff motion to dismiss does not adequately consider what a county commission should do when there is tension between the county commission and the public service district.

To resolve this, the applicants are asking for an “interim declaratory order” approving the transaction structure. When that happens, the Fayette County Commission will begin the dissolution process.

You can read the full response here:

The response notes that this case is nearly identical to a situation unfolding in Lincoln County. The Lincoln County Commission has voted to sell the Lincoln County PSD, while the PSD’s board is against the sale.

The Lincoln County PSD, similar to the Kanawha Falls PSD, has filed a petition to intervene and protest the sale.

The similarities continue. In Lincoln County, parties are questioning whether or not debt owed by the Public Service District is included in the purchase agreement. Thrasher Engineering has filed a petition to intervene, stating the Lincoln County PSD has outstanding charges for services totalling $432,500.

“Thrasher does not find such debt identified among the districts’ liens/encumberances, debts listed in the asset purchase agreement,” the petition reads.

All relevant documents to this story can be found here under case number 25-097-W-PC.

Micah Leith contributed to the reporting in this article.