WVAW shareholders need to accept responsibility for their role in water contamination

On July 28, Tom White, an attorney with the WV PSC’s Consumer Advocate Division (CAD) filed a motion to compel WV American Water to answer questions about its emergency planning at the time of the Jan. 9 water system contamination.  This motion contains the following passage:

CAD is not interested in punishing WV A WC or re-litigating any prior cases surrounding the intake or the Elk River plant site. CAD is interested in what steps the Company took to anticipate, prepare, and plan for the possibility of such a contamination event which is directly relevant to how the Company reacted to the spill.Why does this matter? In its last rate case (Case No. l2-1649-W-42T), WVA WC agreed to stay out until at least 2015. Parent company American Water Work’s first quarter SEC 10Q filing (p. 23 attached, Ex. B) indicates that WV A WC has spent $5.9 million in spill remediation costs. If the Company took little or no steps to anticipate and plan for such a catastrophe it suggests that the Company was taking a risk that such a spill would never happen. CAD suggests that is the type of risk that should be borne by shareholders, not ratepayers. In other words, this is the type of risk-taking that is an “unreasonable practice,” and ratepayers should not be asked to pay for it. If the point of this General Investigation is to determine whether the Company acted reasonably, CAD will almost certainly be precluded from revisiting that question in the upcoming rate case. [emphasis mine]

Mr. White refers to the $5.9 million cost that WVAW’s parent company American Water Works identified as the first quarter damage to the company done by the Jan. 9 spill in its Form 10-K filing that the company made with the SEC.  American Water Works’ second quarter 10-K has raised that total cost to $10.9 million.

Note the bolded section of Mr. White’s statement above.  If WVAW (and its parent American Water Works) had no plan for how to deal with contamination of its water intake in Charleston, then the company (and its owners, its shareholders) was betting that it wouldn’t need to take costly steps to prevent it from devastating its water system and poisoning its customers.  WVAW’s customers were not in a position to make that decision about accepting that risk.  The managers of the company and its shareholders were in that position.

I agree with Mr. White that the shareholders made a decision to ignore the recommendations of the WV Bureau for Public Health, whose 2002 source water assessment report found WVAW’s system “highly susceptible” to contamination and recommended that the company develop a source water protection plan.   WVAW’s customers had no part in that decision to ignore the Bureau for Public Health.

WVAW, in its next rate case, will certainly try to recover some or all of that cost, which now stands at $10.9 million, from its customers.  As Mr. White says, the PSC needs to determine the extent of the risk that WVAW’s shareholders pushed off onto their customers, so that the PSC can determine how much of the cost of the disaster must be paid by rate payers and how much should be accepted as the shareholders’ responsibility.  Considering that rate payers had no part in the decision, its clear that they should not have to pay for the costs of WVAW’s mistakes.

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