West Virginia American Water receives approval of 2021 distribution system improvement charge

CHARLESTON, WV (WOAY) – In an order entered this week, the Public Service Commission of West Virginia (PSC) approved West Virginia American Water’s request for its 2021 infrastructure replacement program, referred to as a Distribution System Improvement Charge (DSIC).

The program and its associated surcharge mechanism allow the company to receive more timely cost recovery of certain infrastructure investments deemed just, reasonable, and in the public interest, which in turn enables the company to accelerate its infrastructure replacement and reliability program.

“The State of West Virginia’s infrastructure recently received a ‘D’ grade from the American Society of Civil Engineers. The purpose of a DSIC is to address the national challenge of aging water infrastructure by directing additional investment to areas where improvements are most needed,” said Robert Burton, president of West Virginia American Water. “The PSC acknowledged the accelerated investments we’ve made since incorporating this surcharge in 2017 and recognized that the approved investment is a significant priority and in the best interest of customers.”

The approved DSIC, effective January 1, 2021, includes $41.3 million in system-wide upgrades that West Virginia American Water will make in 2021. The improvements include $18.0 million to replace or upgrade more than 30 miles of water mains; $4.3 million to replace service lines and fire hydrants; $5.6 million for replacement of meters; $2.2 million for pumping equipment; and $11.2 million for investment in troubled water systems.

Accordingly, customers will pay a 6.60 percent surcharge on their monthly bills (approximately $3.58 for the average residential customer) to help fund these projects. Most customers will see a prorated amount on their first 2021 bill, depending on their meter reading and billing schedule.

Following the Tax Cuts and Jobs Act of 2017, West Virginia American Water offset the 2019 DSIC surcharge for customers by using the company’s excess deferred tax amortization toward the infrastructure replacement program. Customer DSIC rates were partially offset by this amortization in 2020 and will continue to be partially offset in 2021. This method provided customers with a savings of $2.2 million in 2019, $1.5 million in 2020 and $333,000 in 2021.

The DSIC program includes multiple consumer protections, such as annual reconciliations, annual and cumulative caps and earnings limits. The surcharge is calculated each year based on annual capital investments made between rate cases and rolled into the company’s rates in a future rate case.