The opinion
IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
FILED
January 2025 Term
May 23, 2025
released at 3:00 p.m.
C. CASEY FORBES, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
No. 24-637
HUNTINGTON SANITARY BOARD,
Petitioner,
v.
PUBLIC SERVICE COMMISSION OF WEST VIRGINIA and HUBBARD HEIGHTS
SUBDIVISION ASSOCIATION, et al.,
Respondents.
Appeal from the Public Service Commission of West Virginia
Case No. 23-0010-S-DU
AFFIRMED
Submitted: March 18, 2025
Filed: May 23, 2025
Ancil Ramey, Esq. Jessica M. Lane, Esq.
Steptoe & Johnson PLLC Susan M. Stewart, Esq.
Huntington, West Virginia Public Service Commission of West
Todd M. Swanson, Esq. Virginia
Steptoe & Johnson PLLC Charleston, West Virginia
Charleston, West Virginia Counsel for Respondent Public Service
Counsel for Petitioner Commission
Robert R. Rodecker, Esq.
John R. McGhee, Jr., Esq.
Cynthia L. Wilson, Esq.
Kay Casto & Chaney PLLC
Charleston, West Virginia
Counsel for Amicus Curiae
City of Elkins and Town of Harman
F. Paul Calamita, Esq.
AQUALAW PLC
Richmond, Virginia
Counsel for Amicus Curiae
West Virginia Municipal Water Quality
Association
JUSTICE WALKER delivered the Opinion of the Court.
JUSTICE TRUMP deeming himself disqualified did not participate in the decision.
JUDGE DYER sitting by temporary assignment.
SYLLABUS BY THE COURT
1. “‘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.’ Syl. Pt. 1, Cent. W. Va. Refuse,
Inc. v. Pub. Serv. Comm’n of W. Va., 190 W.Va. 416, 438 S.E.2d 596 (1993).” Syllabus
Point 2, Sierra Club v. Pub. Serv. Comm’n of West Virginia, 241 W. Va. 600, 827 S.E.2d
224 (2019).
2. “The Public Service Commission of West Virginia has no jurisdiction
and no power or authority except as conferred on it by statute and necessary implications
therefrom, and its power is confined to the regulation of public utilities. It has no inherent
power or authority.” Syllabus Point 2, Wilhite v. Pub. Serv. Comm’n, 150 W. Va. 747, 149
S.E.2d 273 (1966).
3. “Where the transmission line of a public utility has been used directly
to serve retail rural consumers over a long period of time, such use constitutes a dedication
of that line to the public service and such facility will continue to be so dedicated and the
owner thereof will continue to operate as a public utility unless and until permission is
i
obtained from the Public Service Commission to terminate such status.” Syllabus Point 3,
Boggs v. Pub. Serv. Comm’n, 154 W. Va. 146, 174 S.E.2d 331 (1970).
4. “Jurisdiction of the Public Service Commission over a public utility
will not be considered to be terminated unless the action of the Commission and the
circumstances surrounding the case demonstrate clearly and unequivocally its intent to
relinquish such jurisdiction.” Syllabus Point 1, Boggs v. Pub. Serv. Comm’n, 154 W. Va.
146, 174 S.E.2d 331 (1970).
5. “The mere failure of a public utility to invoke the jurisdiction or the
regulatory power of the Public Service Commission for a long period of time, or the mere
failure of the Commission affirmatively to assert in any manner its jurisdiction with respect
to the public service rendered does not divest the utility of its original status as a public
utility.” Syllabus Point 4, Boggs v. Pub. Serv. Comm’n, 154 W. Va. 146, 174 S.E.2d 331
(1970).
6. “‘The principle is well established by the decisions of this Court that
an order of the public service commission based upon its finding of facts will not be
disturbed unless such finding is contrary to the evidence, or is without evidence to support
it, or is arbitrary, or results from a misapplication of legal principles.’ United Fuel Gas
Company v. Public Service Commission, 143 W.Va. 33 [99 S.E.2d 1 (1957)].” Syllabus
Point 5, Boggs v. Pub. Serv. Comm’n, 154 W. Va. 146, 174 S.E.2d 331 (1970).
ii
WALKER, Justice:
The Distressed and Failing Utilities Act1 directs the Public Service
Commission of West Virginia (PSC) to remediate struggling utilities such as sewer districts.
The sewer system of Hubbard Heights subdivision in Wayne County is one such failing
utility, and Petitioner Huntington Sanitary Board (HSB) was designated by the PSC as the
most suitable capable proximate utility (CPU) to acquire and resume its operations under
West Virginia Code § 24-2H-7(a) (2020). On appeal of the PSC’s order to that effect, HSB
argues that the PSC lacks jurisdiction over this small failing utility because its customer
base fell below twenty-five, the threshold for PSC jurisdiction under West Virginia Code §
24-2-1(a)(8) (2023). HSB also challenges its designation as the most suitable CPU, citing
logistical and financial concerns. Because we find that the PSC appropriately exercised
continuing jurisdiction over Hubbard Heights and that it gave reasoned consideration to all
statutory requirements before ordering HSB to acquire this failing utility, we affirm.2
I. FACTUAL AND PROCEDURAL BACKGROUND
Hubbard Heights is a subdivision located in Wayne County. Its sewer system
consists of septic tanks at each residence that feed into the main sewer, eventually feeding
1
W. Va. Code §§ 24-2H-1 to -9.
2
The Court would like to acknowledge the participation in this case of the City of
Elkins, Town of Harman, and Municipal Water Quality Association, who filed briefs in
support of Petitioner. The Court has considered the arguments presented in conjunction
with the parties’ arguments.
1
into three treatment lagoons. In 2001, the Hubbard Heights Homeowners Association
(HOA) applied to become a sewer utility regulated by the PSC, which certificate of
convenience and necessity was granted in 2002. At the time of application, the Hubbard
Heights sewer utility was servicing twenty-seven customers. But by 2011, the HOA
stopped filing its annual reports with the PSC and the PSC initiated several proceedings
against it for failure to file its annual reports and assessed fees that were never paid. The
HOA filed a joint petition with West Virginia American Water Company for approval to
terminate water services for non-payment of sewer bills in 2013, but never filed a request
for dissolution with the PSC. The HOA was administratively dissolved as an entity by the
West Virginia Secretary of State in 2014.
In response to growing concerns with West Virginia’s water and wastewater
utilities, the West Virginia Legislature passed the Distressed and Failing Utilities Act in
2020, aimed at permitting advanced corrective measures for those utilities unable to
“adequately serve customers and maintain regulatory compliance.”3 In 2023, former HOA
president Tim Dillon filed a petition4 with the PSC under West Virginia Code § 24-2H-6 to
have the Hubbard Heights sewer system declared a failing or distressed utility for purposes
of invoking the remedies available under the Act to correct the conditions of the utility.
3
W. Va. Code § 24-2H-2(f).
4
Evidence was adduced below that a manager with the PSC contacted Mr. Dillon
to inform him of the new enactment and directing him to file the petition. While helpful
for context, it has no bearing on this Court’s analysis of the relevant statutes.
2
PSC staff investigated the sewer system and served discovery on Mr. Dillon, who had little
information regarding the utility’s operations, or, rather, lack thereof. The Town of Ceredo,
the North Wayne Public Service District, Kenova Municipal Sewer, Spring Valley Public
Service District, West Virginia American Water Company, and HSB were added as
respondent utilities consistent with West Virginia Code § 24-2H-6(a).5 A public hearing
was held on July 25, 2023, and a supplemental evidentiary hearing followed in February
2024. No party contested that the Hubbard Heights sewer system met the statutory
definition of a failing utility6 for purposes of reaching the Act’s corrective measures, but
5
In relation to the public hearing procedure upon the filing of a petition, the statute
requires, in relevant part, that the PSC “include, as additional parties, any capable
proximate public and private utilities that may be able to acquire the utility.”
6
Under West Virginia Code § 24-2H-5(a), the PSC determines whether a utility
meets the definition of a “distressed” or “failing” utility as defined in West Virginia Code
§ 24-2H-3 and accounts for the following considerations before remedies attendant to that
classification are warranted:
(a) In determining whether a utility is distressed or failing, the
commission shall consider the following factors:
(1) The financial, managerial, and technical ability of the utility;
(2) The level of expenditures necessary to make improvements to the
water or wastewater utility to assure compliance with applicable statutory
and regulatory standards concerning the adequacy, efficiency, safety, or
reasonableness of utility service and the impact of those expenditures on
customer rates;
(3) The opinion and advice, if any, of the Department of
Environmental Protection and the Bureau for Public Health as to steps that
may be necessary to assure compliance with applicable statutory or
regulatory standards concerning the adequacy, efficiency, safety, or
reasonableness of utility service;
3
the Administrative Law Judge’s recommended decision and the PSC’s order adopting that
recommendation contain extensive findings that the collection and treatment infrastructure
of Hubbard Heights is “completely dilapidated,” has no operations or staff maintaining the
utility, is in danger of collapse, and poses a threat of sewage leaking into water wells,
presenting a risk to community health.
The chief concern of the PSC in conducting the evidentiary hearings was to
ascertain the extent of the problem as far as it impacted potential solutions. Once it
concluded that acquisition was the most appropriate solution given the total absence of
HOA operations and management, the PSC next determined which respondent utility was
the most suitable CPU to acquire the Hubbard Heights sewer system and bring it into
compliance. In short, no respondent utilities were willing to do so in light of the financial
and logistical behemoth posed by the project and the potential for inherited liability.
Finding that HSB is the largest sewer utility in West Virginia, is located in close proximity
to Hubbard Heights (albeit not within Huntington city limits), and is the most financially
and operationally capable of absorbing the impact of the project, the ALJ designated it as
(4) The status of the utility’s bond payments and other financial
obligations;
(5) The status and result of any corrective measures previously put
into place under § 24-2H-7 of this code; and
(6) Any other relevant matter.
4
the most suitable CPU to address Hubbard Heights’s sewer deficiencies.
HSB filed exceptions with the PSC arguing that the PSC lacked jurisdiction
over the Hubbard Heights sewer system and that the ALJ did not consider proximity,
financial impact, lack of available funding, and the existence of acceptable alternatives to
acquisition. The PSC rejected those exceptions and adopted the ALJ’s recommendation
designating HSB as the appropriate CPU. HSB appeals from that order, reasserting that
the PSC lacked jurisdiction over Hubbard Heights and did not comply with the Act when
ordering it to acquire the Hubbard Heights sewer system and resume its operations.
II. STANDARD OF REVIEW
Appeals from orders of the Public Service Commission are reviewed under
the following deferential standard:
“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.” Syl.
Pt. 1, Cent. W. Va. Refuse, Inc. v. Pub. Serv. Comm’n of W. Va.,
190 W.Va. 416, 438 S.E.2d 596 (1993).[7]
7
Syl. Pt. 2, Sierra Club v. Pub. Serv. Comm’n of W. Va., 241 W. Va. 600, 827 S.E.2d
224 (2019).
5
With that standard in mind, we turn to the parties’ arguments.
III. ANALYSIS
HSB argues on appeal that, because the Hubbard Heights’s sewer system’s
customer count currently is below the twenty-five customers required to come within the
PSC’s jurisdiction, the PSC had no authority to order its acquisition under the Act.
Alternatively, HSB argues that the PSC’s order fails to consider various aspects required
by West Virginia Code § 24-2H-5(b) in designating it as the most suitable CPU and should
be reversed and remanded for compliance with the statute. We address the threshold issue
of jurisdiction before turning to the PSC’s statutory analysis.
A. Jurisdiction under West Virginia Code § 24-2-1(a)(8)
Regarding jurisdiction of the PSC, we have recognized that “[t]he Public
Service Commission of West Virginia has no jurisdiction and no power or authority except
as conferred on it by statute and necessary implications therefrom, and its power is confined
to the regulation of public utilities. It has no inherent power or authority.”8 In 2002, the
Hubbard Heights sewer system had twenty-seven customers, and the PSC granted the
HOA’s application and exercised jurisdiction over the utility pursuant to West Virginia
Code § 24-2-1(a)(8), which provides that “the jurisdiction of the commission extends to all
public utilities in this state and includes any utility engaged in any of the following public
8
Syl. Pt. 2, Wilhite v. Pub. Serv. Comm’n, 150 W. Va. 747, 149 S.E.2d 273 (1966).
6
services: . . . sewer systems servicing 25 or more persons or firms other than the owner of
the sewer systems.”
HSB does not contest the original exercise of jurisdiction, but disputes that
the PSC may continue to assert jurisdiction on the basis of a 2002 assessment of customers
when the evidence in the underlying proceeding is that, of the 27 customers assessed in
2002, at least five Hubbard Heights residents have installed home aeration units, others are
no longer connected to the sewer system at all, and the utility does not charge any fees.
HSB further asserts that the PSC had an obligation to reassess the basis of its jurisdiction
because the Act was not effective until 2020 and involves an adjudicatory function that this
Court has specified as serving a different purpose than the general, regulatory functions of
the PSC. The PSC responds that its jurisdiction, once established, is not intermittent and
cannot be constantly reassessed based on fluctuating numbers of customers. Upon review
of this Court’s jurisprudence on the continuing nature of PSC jurisdiction, we agree that
the PSC has jurisdiction over the Hubbard Heights sewer system.
To stage the jurisdictional analysis, we first establish that this is a matter of
continuing jurisdiction and readily distinguish the cases relied on by HSB to demonstrate
that Hubbard Heights’s customer count alone is dipositive. Those cases,
Broadmoor/Timberline Apartments v. Public Service Commission9 and Schoolcraft v.
9
180 W. Va. 387, 376 S.E.2d 593 (1988).
7
Tuel,10 were decided in the context of an initial exercise of jurisdiction to bring the utility
within the gambit of the PSC’s regulatory authority. They have no bearing on the analysis
here where it is undisputed that the Hubbard Heights sewer system, in the past, has been
appropriately regulated by the PSC as a public utility.
Our analysis of the PSC’s continuing jurisdiction over a public utility is
guided by the syllabus of Boggs v. Public Service Commission.11 In Boggs, this Court was
asked to examine the continuing jurisdiction of the PSC in the context of a natural gas
transmission line that was initially owned by a public utility but was later transferred to a
private owner.12 There, this Court found that because the line had been dedicated to the
public service, it continued to be regulated by the PSC because the operator had not
obtained permission to divest itself of “public utility” status:
Where the transmission line of a public utility has been
used directly to serve retail rural consumers over a long period
of time, such use constitutes a dedication of that line to the
public service and such facility will continue to be so dedicated
and the owner thereof will continue to operate as a public
utility unless and until permission is obtained from the Public
Service Commission to terminate such status.[13]
More broadly, Boggs held that “[j]urisdiction of the Public Service Commission over a
10
Case No. 13-0140-S-C (Comm’n Order, March 19, 2013).
11
154 W. Va. 146, 174 S.E.2d 331 (1970).
12
Id. at 147-48, 174 S.E.2d at 333.
13
Id. at Syl. Pt. 3.
8
public utility will not be considered to be terminated unless the action of the Commission
and the circumstances surrounding the case demonstrate clearly and unequivocally its
intent to relinquish such jurisdiction.”14
From our review of the record, we observe that Hubbard Heights never
sought to be divested of its status as a public utility. Similarly, we see no clear and
unequivocal intent on behalf of the PSC to relinquish jurisdiction over Hubbard Heights.
While HSB argues that the 2002 customer count is stale and that the PSC has neglected
active regulation of Hubbard Heights since the limited interaction of granting the certificate
of convenience and necessity, Syllabus Point 4 of Boggs instructs that
[t]he mere failure of a public utility to invoke the
jurisdiction or the regulatory power of the Public Service
Commission for a long period of time, or the mere failure of
the Commission affirmatively to assert in any manner its
jurisdiction with respect to the public service rendered does not
divest the utility of its original status as a public utility.[15]
Rather than squarely address the syllabus points in Boggs that were recently
applied by this Court in Equitrans, L.P. v. Public Service Commission of West Virginia,16
HSB relies on a presumptive requirement that the PSC reexamine the basis of its
jurisdiction upon undertaking any adjudicatory function. And, more particularly, HSB
14
Id. at Syl. Pt. 1.
15
Id. at Syl. Pt. 4.
16
247 W. Va. 646, 885 S.E.2d 584 (2022).
9
argues that the PSC had an obligation to reassess Hubbard Height’s 2002 customer count
before acting upon authority the Legislature did not vest it with until passage of the Act in
2020.
HSB contends that our decision in Broadmoor stands for the proposition that
“[the PSC’s jurisdiction] must exist when the PSC exercises jurisdiction to satisfy that
jurisdictional prerequisite.”17 While perhaps true outside of the regulatory context, we find
no such support in that case to demand a customer recount for purposes of the PSC’s
jurisdiction here. There, the PSC had previously determined that it had no jurisdiction over
Broadmoor based on a customer count of less than twenty-five and the PSC maintained
that finding in a subsequent complaint.18 Having no initial regulatory jurisdiction over
Broadmoor, the issue on appeal was the PSC’s subsequent exercise of jurisdiction where
Broadmoor’s sewer lines were potentially affected.19 But the PSC’s exercise of
jurisdiction, which this Court affirmed, was over the City of Morgantown (a public
utility).20 The order was not directed at Broadmoor—over which it had no jurisdiction—
but rather required the City to acquire Broadmoor’s sewer lines consistent with the ALJ
finding that Broadmoor “unlawfully interposed itself between the city and its sewer
17
Supra n.9.
18
Broadmoor, 180 W. Va. at 389-90, 376 S.E.2d at 595-96.
19
Id.
20
Id. at 391, 376 S.E.2d at 597.
10
customers.”21 So, as discussed above, Broadmoor’s relevance is limited to the
acknowledgement that the PSC has no initial jurisdiction over sewer utilities with fewer
than twenty-five customers, a fact no one disputes. We disagree that it requires that the
PSC revisit its initial jurisdiction inquiry under West Virginia Code § 24-2-1 to reevaluate
Hubbard Heights’s customer count upon each exercise of regulatory authority.
In rejecting the assertion that the PSC’s jurisdiction is intermittent and its
continuing authority dependent on customer counts, we acknowledge that this Court
distinguished regulatory and adjudicatory functions in State ex rel. Public Service
Commission v. Fayetteville,22 and that we reexamined a public utility’s customer count in
analyzing jurisdiction for rate making regulation in Pool v. Greater Harrison County Public
Service District.23 But neither Fayetteville nor Pool is applicable in determining the PSC’s
jurisdiction over Hubbard Heights.24
In Fayetteville, the Court analyzed an exemption for municipalities from PSC
regulation in the context of rate approval that the municipality argued exempted it from all
21
Id. at 390, 376 S.E.2d at 596.
22
212 W. Va. 427, 573 S.E.2d 338 (2002).
23
241 W. Va. 233, 241 S.E.2d 14 (2018).
24
At oral argument, HSB conceded that the PSC’s jurisdiction over it was not in
dispute, and neither the briefing nor the record is sufficiently developed for this Court to
conduct a sua sponte analysis of the PSC’s jurisdiction over HSB in this context. See infra
n.33.
11
attendant rate and charge disputes within the broader statutory scheme.25 Stressing that
“[t]he PSC’s authority over rates and charges of municipalities . . . is expressly limited by
the statutory scheme[,]”26 and drawing a distinction between rate making functions and
adjudicatory functions, we concluded that the PSC maintained authority and jurisdiction
over the municipality in the exercise of its general powers:
The statute merely exempts municipalities from the rate
approval sections of 24-2-4 and 24-2-4a; it does not deprive the
PSC of jurisdiction over the municipality or eliminate the
PSC’s authority to otherwise address issues of the municipally
operated public utilities. The rate making functions, statutorily
limited with regard to municipalities, are not identical to the
adjudicatory functions.[27]
HSB posits that Fayetteville indicates that this Court views jurisdiction of the
PSC as dependent on the function it is performing, and that the PSC may have jurisdiction
in some respects (the authority to grant a certificate of convenience and necessity), but not
in others (imposing the drastic remedies under the Act). But HSB’s argument fails to
appreciate that those distinctions in function are relevant to jurisdiction only so far as the
Legislature has made them so by statute, which is not the case with the Act.
Likewise, in Pool, a customer’s complaint relating to rate hikes was
25
Fayetteville, 212 W. Va. at 433, 574 S.E.2d at 343.
26
Id.
27
Id. at 432-33, 573 S.E.2d at 343-44 (footnote omitted).
12
dismissed by the PSC upon a finding that it lacked jurisdiction over ratemaking for public
service districts with more than 4,500 customers, and she appealed that finding.28 This
Court was asked to “examine the PSC’s statutory jurisdiction over ratemaking by a public
service district, jurisdiction that hinges on the number of ‘customers’ served by the
district.”29 After concluding that the PSC’s method of counting sewer and water customers
was consistent with the relevant statutes, we affirmed the PSC’s determination that it did
not have jurisdiction over the public service district because the customer count exceeded
the statutory maximum of 4,500 customers.30 HSB argues that Pool demonstrates not only
the ability of the PSC to regularly evaluate customer counts before exercising jurisdiction,
but the requirement that it do so. We disagree.
Again, the circumstances of Pool extract it from the near presumption of
continuing jurisdiction in Boggs because it involves legislative action to specifically
deprive the PSC of jurisdiction it was otherwise previously exercising and would have
continued exercising but for that legislative action. As we explained in Pool, West Virginia
Code § 24-1-1(j) articulated a legislative finding that “larger public service districts are
‘most fairly and effectively regulated by the local governing body with respect to rates,
28
Pool, 241 W. Va. at 235, 821 S.E.2d at 16.
29
Id.
30
Id.
13
borrowing and capital projects[,]’”31 that prompted the Legislature to “adopt[] deregulation
measures to limit the PSC’s jurisdiction and to exempt large public service districts from
[PSC ratemaking approval].”32 Contrary to the scheme of deregulation and new statutory
limitations on jurisdiction that demanded this Court conduct a customer count to reevaluate
the PSC’s jurisdiction in Pool, the enactment at issue here expands the scope of the PSC’s
authority.
Both Fayetteville and Pool were decided in the context of the Legislature’s
explicit statutory limitations on the PSC’s jurisdiction, not under the continuing jurisdiction
analysis espoused in Boggs, and no such statutory limitations on jurisdiction exist within
the Act. So, even though the PSC’s authority under the Act did not exist until 2020, some
eighteen years after the PSC’s initial exercise of jurisdiction over Hubbard Heights, we
decline to abandon Boggs in favor of an overbroad and unfounded requirement that the
PSC reassess its initial jurisdiction over a public utility with every subsequent action of the
Legislature absent its direction to do so.
We understand that the PSC’s authority under the Act would be unfairly
categorized as simply regulatory and is immense, indeed. But we see nothing in that
enactment that requires the PSC to reevaluate the customer count underlying the basis of
31
Id. at 236, 821 S.E.2d at 17 (quoting W. Va. Code § 24-1-1(j)).
32
Id.
14
its initial jurisdiction over Hubbard Heights33 before it may exercise that immense power.
Moreover, where the basis of this enactment is to aid and address utilities that are failing
for, among other things, dropping customer counts,34 it would be contrary to its purpose to
require a reexamination of jurisdiction on the ground that the customer count had fallen so
as to deprive the public utility of the PSC’s assistance. In the absence of legislative
direction limiting the PSC’s continuing jurisdiction as far as the Act is concerned, we find
Boggs to be dispositive of the jurisdictional issue before us and affirm the PSC’s order in
that respect.
B. Compliance with the Act and Application of West Virginia Code § 24-2H-5(b)
HSB’s second assigned error is that the PSC erred as a matter of law in
compelling it to acquire the assets and resume operations of Hubbard Heights because its
order failed to comply with the Act. In an analysis of the PSC’s findings and compliance
with statutory enactments, we are mindful of our deferential vista in these matters:
“The principle is well established by the decisions of
this Court that an order of the public service commission based
upon its finding of facts will not be disturbed unless such
finding is contrary to the evidence, or is without evidence to
support it, or is arbitrary, or results from a misapplication of
33
In reaching this conclusion, we note that Hubbard Heights does not meet the
organizational or other criteria of those utilities over which the PSC exercises more limited
jurisdiction outlined in West Virginia Code § 24-2-1(b) and that the limitations of the PSC’s
jurisdiction with regard to those entities are not at issue in this case.
34
See W. Va. Code § 24-2H-2, containing the legislative findings prompting
adoption of the Act, lists at subsection (e) that “[m]any water and wastewater utilities have
experienced a loss of customers resulting from decline in populations served which has
created an additional rate burden on the remaining population.”
15
legal principles.” United Fuel Gas Company v. Public Service
Commission, 143 W.Va. 33 [99 S.E.2d 1 (1957)].[35]
In arguing that the PSC failed to comply with the Act’s requirements, HSB
contests its selection as the most suitable CPU for acquisition of Hubbard Heights under
West Virginia Code § 24-2H-7(a): “If the commission determines that the utility is a failing
utility, then the commission may order the acquisition of the failing utility by the most
suitable capable proximate water or wastewater utility, if there is more than one.” But its
argument is couched in terms of available alternatives to acquisition under West Virginia
Code § 24-2H-7(b) and its designation as a CPU, generally, under West Virginia Code §
24-2H-4(b).
1. Alternatives to Acquisition under West Virginia Code § 24-2H-7(b)
The Act requires the PSC to consider feasible alternatives prior to ordering
the acquisition of a failing utility, detailed in West Virginia Code § 24-2H-7(b), which
provides
Before the commission may designate a water or wastewater
utility as failing and order acquisition by a capable proximate
utility it shall determine whether there are any alternatives to
an ordered acquisition. If the commission determines that an
alternative to designating a utility as failing and ordering an
acquisition is reasonable and cost effective, it may order the
distressed utility and, if applicable to the alternative a capable
proximate utility, to implement the alternative. Commission
35
Syl. Pt. 5, Boggs, 154 W. Va. 146, 174 S.E.2d 331
16
staff shall work with the utility to implement the alternative, as
necessary. Alternatives that the commission may consider
include, but are not limited to, the following:
(1) Reorganization of the utility under new management or a
new board, subject to the approval of the applicable county
commission(s) or municipal government;
(2) Operation of the distressed utility by another public utility
or management or service company under a mutually agreed
arms-length contract;
(3) Appointment of a receiver to assure the provision of
adequate, efficient, safe and reasonable service and facilities to
the public pursuant to § 24-2-7(b) of this code;
(4) Merger of the water or wastewater utility with one or more
other public utilities, subject to the approval of the applicable
county commission(s) or municipal government;
(5) The acquisition of the distressed utility through a mutual
agreement made at arms-length; and
(6) Any viable alternative other than an ordered acquisition by
a capable proximate utility.
With respect to available alternatives to acquisition, HSB argues that the PSC
failed to consider the following alternatives: (1) a decentralized or packaged plant
constructed or operated by HSB or one of the other CPUs; (2) a new collection system
operated by North Wayne or Ceredo; and (3) installation of private aeration units on each
parcel. Importantly, the statute does not require that the PSC adopt an alternative merely
because it exists. The statute requires the PSC to consider whether there might be
alternatives to acquisition and provides that it may order some less drastic measure if it
finds an alternative both reasonable and cost effective.
17
So, the question before us in our deferential review is whether the PSC
considered the availability of alternatives to acquisition; the record reflects that it did, and
still found that acquisition was the most appropriate measure given the circumstances.
Specifically, the ALJ order adopted by the PSC analyzes each of the statutory alternatives
to acquisition, finding that Hubbard Heights’s status as a totally nonoperational entity with
little to no member involvement precluded those alternatives for lack of external resources
and personnel to correct the conditions of the existing Hubbard Heights sewer system
infrastructure and combat the health and environmental risks it poses.
The first two “alternatives” HSB argues should have been considered under
West Virginia Code § 24-2H-7(b) were proposed by PSC engineering staff as operational
alternatives to reviving the existing collection and treatment system, not alternatives to
acquisition. The PSC staff report containing those recommendations would have still
required that the selected CPU “own[], operate[], and maintain” the new collection system
or decentralized sewer treatment system. Further, the PSC directly analyzed the home
aeration unit (HAU) option. Evidence indicated that the HAU operational alternative was
not necessarily feasible because each homeowner would need to obtain a National Pollutant
Discharge Elimination System permit, each homeowner would be liable for all sewage,
and, when pushed onto the homeowners, still did not solve the sewage issue at hand with
the existing Hubbard Heights facility. Still, the PSC did not reject HAUs altogether. It
merely concluded that the burden could not be shifted onto the homeowners and would still
require CPU involvement. We thus find that the PSC complied with West Virginia Code §
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24-2H-7(b) in considering alternatives before ordering HSB’s acquisition of Hubbard
Heights.
2. “Most Suitable” Capable Proximate Utility
HSB next disputes that it is the most suitable CPU to take on acquisition of
Hubbard Heights because (1) other utilities have greater geographic proximity; (2) it has
no financial capacity to make the required $4 million capital investment; (3) the City of
Huntington was not added as a party, causing logistical difficulties with the acquisition;
and (4) the PSC generally failed to consider the criteria outlined in West Virginia Code §
24-2H-5(b).
The PSC recognizes before this Court, as it did below, that the primary issue
before it was not whether Hubbard Heights’s facilities were failing and in need of
acquisition by a CPU, but which CPU could do so when none were “willing to serve.”
Initially, we observe that West Virginia Code § 24-2H-7(a) contains no explicit statutory
criteria for the PSC to consider in determining the “most suitable” CPU for acquisition of
a failing utility where more than one CPU has been identified.36 It simply states that the
PSC “may order the acquisition of the failing utility by the most suitable capable proximate
36
For ease of reference, we refer to the other respondent utilities as CPUs even
though the record is not clear as to whether the PSC found that other respondent utilities
met the statutory criteria of a CPU or whether, of all CPUs, HSB was simply the most
suitable. Regardless, our analysis is not altered by it.
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water or wastewater utility, if there is more than one.”37 The statutory language gives the
PSC broad authority to compel acquisition of a failing utility by whatever CPU it finds to
be “most suitable” and pays no heed to willingness, closest in proximity, nor any other
criteria save the qualifications found in West Virginia Code 24-2H-5(b) for “capable
proximate utilities.” So we shift our analysis to the PSC’s consideration of HSB as a
qualifying CPU under the statutory criteria outlined in West Virginia Code § 24-2H-5(b),
which provides
In determining whether a utility is a capable proximate utility,
the commission shall consider the following factors:
(1) The financial, managerial, and technical ability of all
proximate public utilities providing the same type of
service;
(2) Expansion of the franchise or operating area of the
acquiring utility to include the service area of the distressed
utility;
(3) The financial, managerial, operational, and rate demands
that may result from the current proceeding and the
cumulative impact of other demands where the utility has
been identified as a capable proximate utility; and
(4) Eligibility of the capable proximate utility to receive state
grant funding and federal grant funding in a similar manner
as the distressed utility; and
(5) Any other relevant matter.
The selection of HSB as the most suitable capable proximate utility is
37
W. Va. Code § 24-2H-7(a).
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founded on the evidence presented that Hubbard Heights’s septic system is draining over
the bank, posing a threat to both local and downstream citizens, and so needs remediation.
The PSC determined that the cost of remediation would not be dependent on which CPU
acquired Hubbard Heights, but rather the remediation plan itself. Finally, the PSC
recognized that acquiring Hubbard Heights in its current organizational and operational
state would be a substantial burden on any of the potential CPUs. For that reason, much
of the PSC’s analysis of this statutory criteria is inherently comparative; a matter of which
entity is best able to bear the burden.
Relative to the financial ability of HSB, the PSC made findings consistent
with the evidence presented that HSB is larger than the other proximate utilities, has the
largest number of customers to spread the costs of the acquisition, and has annual revenue
of $16 million compared to a combined $4.6 million for the other proximate utilities. While
HSB disputes that the PSC could have considered the financial ability of HSB to undertake
the project when its exact cost is unknown, as noted above, the remediation plan is not
“set,” but the PSC heard general evidence of what the cost of the project could be. The
statute does not require the PSC to formulate a definitive plan of action with accompanying
fiscal note before acquisition is deemed appropriate; it requires only that the PSC consider
the potential financial impact. The PSC was within its authority to order HSB to work with
PSC staff to formulate a remediation plan, which, as the PSC notes, could include
“repairing and reactivating the existing collection system; interconnecting the Hubbard
Heights residences to the Huntington collection system; installing a package treatment
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plant; [or] other viable solutions.”
Managerially, HSB has seventy-five employees that include over forty field
workers compared to single-digit numbers of employees in other CPUs, providing more
administrative support and field personnel for the project. Operationally, the PSC
considered that the most likely solution would be to deliver sewer flow to Huntington
regardless of whether it was designated as the CPU to acquire Hubbard Heights, and that
HSB could provide both treatment and collection services. Moreover, the PSC heard
evidence that HSB has five resale customers who could share the cost of the project, four
of which are the other CPUs.
To expansion of the operating area, the PSC recognized that each of the CPUs
are proximately located to Hubbard Heights; in other words, Hubbard Heights is essentially
surrounded by sewer utilities. The ALJ found that HSB’s treatment plant was visible from
Hubbard Heights and closer than some of the other potential CPUs. Proximity is a
consideration, but it is not dispositive in the way HSB argues. CPUs, by definition, are
closely situated to the distressed or failing utility and there would be little need to enact the
statutory criteria found in West Virginia Code § 24-2H-5(b), if the only analysis necessary
is a geographical one.
As far as rate demands, in addition to noting the ability of HSB to spread
costs among its higher customer base in addition to its resale customers, the PSC also
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considered that HSB, unlike some other CPUs, can apply for and receive both state and
federal grants. The ALJ further directed PSC staff to assist HSB in identifying and pursuing
public funding for the project. While HSB takes issue with the practicalities of pushing
the costs of a multi-million-dollar project onto only twenty to thirty Hubbard Heights
customers, West Virginia Code § 24-2H-9 contemplates cost recovery mechanisms
imposed on both acquired and existing customers, and the PSC accounted for HSB’s
capability to further spread costs to the other respondent CPUs as HSB’s resale customers.
Finally, subsection (5) of West Virginia Code § 24-2H-5(b), provides that the
PSC shall consider “any other relevant matter[,]” which is the statutory catch-all to air
HSB’s grievances with its selection as the most suitable CPU to undertake acquisition of
the Hubbard Heights system in the absence of the City of Huntington as a party. HSB
argues that requiring it to take on acquisition of Hubbard Heights requires the participation
of the City of Huntington through its City Council to approve the capital investment, enact
a bond ordinance, and exercise eminent domain to obtain the property on which the
Hubbard Heights system is located, since the HOA does not own it, and, in any case, is a
nonexistent entity.
We agree that the statutory scheme, as demonstrated by this set of facts,
neglects to account for the nuances of organizational and logistical difficulties posed by
acquisition of a completely defunct utility by a municipality-owned utility. Still, it would
be inconsistent with the plain language and purpose of the Act to remove from CPU
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consideration all utilities subject to oversight by a public body, or to render defunct utilities
ineligible for aid for the reason of it being defunct under an enactment specifically designed
to remedy those circumstances. The PSC considered those difficulties associated with the
city’s approval and participation and still selected HSB as the most suitable CPU to acquire
Hubbard Heights with direction that PSC staff assist in navigating those difficulties. While
we appreciate the practical concerns HSB raised below, we do not see that the PSC’s
approach is disallowed by statute or that the statutory framework requires it to solve the
organizational and logistical difficulties of the project prior to ordering acquisition. The
PSC’s order gives detailed and reasoned analysis to each of the enumerated statutory
factors, and there is evidence to support its findings. Given the deferential standard of
review this Court affords to orders of the Public Service Commission, we affirm.
IV. CONCLUSION
For the foregoing reasons, we affirm the October 7, 2024 order of the Public
Service Commission.
Affirmed.
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