Jefferson Utilities, through its founder and owner Lee Snyder, announced that it struck a deal to sell its water and sewer service operations for $30 million to West Virginia American Water, the state’s largest utility.
The buyout plan, which the West Virginia Public Service Commission must approve, would come with potentially a minimum $8 to $12 monthly increase in service rates for the average Jefferson Utilities customer. What customers ultimately pay depends on the amount of water they use.
The average Jefferson Utilities customer pays a water bill of about $58.43, the company reported.
“But how quickly that happens, it’ll be up to the [Public Service Commission],” said Robert Burton, president of WV American Water.
Attending a buyout announcement at Jefferson Utilities’ offices in Kearneysville, Burton said the rate increase for Jefferson Utilities customers would reflect a rate schedule the Public Service Commission has approved the WV American Water for its other customers in the state.
In February, the Public Service Commission approved an average “estimated” 8.33 percent as part of a “novel” rate increase for WV American Water’s residential water and wastewater customers. However, its Fayette County customers were informed to “expect to see an estimated 14.87 percent rate increase per month,” according to a press release on the company’s website.
“The aforementioned novel rate structure, which freezes rate impacts for low-income customers, will likely cause these average percent increases to rise in the final rate calculation,” the company added in its release.
Burton said a rate increase for Jefferson Utilities customers is a condition inseparably embedded into the overall purchase offer for Jefferson Utilities. He said the Public Service Commission will have to judge the proposed acquisition with the rate increase included.
Snyder said a rate increase would be reasonable considering that Jefferson Utilities has not adopted a rate increase for 12 years. He said a steady expansion of Jefferson Utilities’ customer base from development has allowed the utility to avoid asking the Public Service Commission for a rate increase.
“Fortunately, our income keeps growing because of growth,” he said. “Growth has allowed us to do what we’ve done.”
Snyder said applying for a rate increase approval can be disruptive and costly. “There’s a lot of pain that goes along with the rate increases because you fight and you fight and you spend a bunch of money at the PSC,” he said. “None of us … are looking forward to having that fight, so that’s why we haven’t filed for rate increases.”
“I think if we’ve had rate increases we would have been up where [WV American Water’s rates] are,” he added. “I think we would deserve that rate.”
Public Service Commission review
Burton said the Public Service Commission evaluates proposed utility acquisitions for whether they will benefit utility customers and whether the acquisitions comply with various state rules and regulations.
“We have a great working relationship with the PSC,” he said. “We expect that everything with the deal will go through to be approved, but obviously this is a process.”
Questions the Spirit sent to the Public Service Commission’s spokesperson last week about the agency’s process and criteria to evaluate proposed utility mergers and acquisitions had not yet been answered by this week’s press deadline on Tuesday.
Burton said the Public Service Commission could make a decision within four to nine months. But he said there is no set time frame for the agency to make a decision.
The commission will hold a public hearing and accept public comments before making a decision on WV American Water’s purchase proposal.
A letter explaining the acquisition was mailed to Jefferson Utilities customers last week, and the company’s Facebook page will also have updated information.
“We’ll be supplying our customers with a great deal of information,” reported Stephanie Reel, the general manager for Jefferson Utilities. “We’re going to be answering as many questions as possible. We’re going to be as transparent as we absolutely can be, because that’s what you deserve as customers.”
WV American Water representatives said a copy of the acquisition contract will be part of the public record with its application to the Public Service Commission.
Operating with 14 employees, Jefferson Utilities serves nearly 3,200 water and sewer customers across central and eastern Jefferson County, from Ranson to Kearneysville to Harpers Ferry to Shannondale. WV American Water’s purchase agreement includes buying the smaller Snyder-owned water and sewer utilities of Shenandoah Junction Public Sewer for a housing development in Shenandoah Junction; East Jefferson Sewer Services serving homes and businesses in the Harpers Ferry area; and Valley Water and Sewer Services serving Berkeley and Morgan counties.
All together, the four utility systems combined serve about 4,000 homes and businesses.
WV American Water has more than 300 employees across the state serving 560,000 people through 170,000 pipeline connections.
“We serve basically a third of the population of the state of West Virginia with water every single day,” Burton said.
WV American Water is a subsidiary of American Water, a publicly traded utility with 6,400 employees providing water and wastewater treatment services to more than 14 million people in 24 states.
“I’ve got hundreds of people I can contact for specific problems, for specific issues,” Burton said. “We can bring significant resources to bear from across the state if needed.”
As a publicly traded company on the New York Stock Exchange, American Water has access to the capital markets to support its improvements and expansions, he added.
Aiming for more customers
Purchasing Jefferson Utilities would be WV American Water’s first entry into the Eastern Panhandle.
Burton said the area’s growing residential and commercial development would provide WV American Water with an opportunity to serve more customers. “We’ll be looking for opportunities to keep expanding where there’s no water service,” he acknowledged.
Snyder pointed out that WV American Water’s current service areas generally do not have growing populations.
Burton said American Water is aware of the Public Service Commission case involving Jefferson Utilities’ proposal to acquire Cave Road Utilities, a private water and wastewater treatment system serving about 50 homes in the Cave Quarter subdivision off Old Cave Road south of Charles Town.
The case involves a protest from the Charles Town Utility Board that its projected future growth service area would be disrupted and undermined if Jefferson Utilities is allowed to take over Cave Road Utilities.
Cave Road Utilities lies in CTUB’s future water and wastewater treatment service area, according to CTUB officials. And CTUB officials view such a takeover by Jefferson Utilities as a foothold of infrastructure poised to serve the surrounding area as development occurs there.
CTUB officials maintain that Jefferson Utilities’ planned acquisition of Cave Road Utilities would hurt CTUB’s ability to expand its customers and revenues to achieve greater economies of scale. In addition, CTUB officials argue that they want to preserve the intended efficiency benefits from when CTUB acquiring the Ranson Sewer Department in 2018 and the Jefferson County Public Service District in 2019, steps the Public Service Commission approved.
Jefferson Utilities, and now WV American Water, argue that direct service competition—where both utilities could lay pipelines and infrastructure to the same developments—would create choices that would benefit utility customers.
A hearing in the case before the Public Service Commission is scheduled for Aug. 26.
Growth history of Jefferson Utilities
During the public announcement of American Water’s proposed acquisition, Snyder stepped through a chronological history of Jefferson Utilities’ expansions and improvements since it began 25 years ago. He said those system expansions and improvements have allowed various housing developments to occur.
“Our growth rate has been phenomenal from 162 customers in 1997 to over 3,900 today,” he said. “We improved a lot of people’s lives by improving their water service.”
Snyder said the sale of JUI to American Water will allow his utility’s work in fostering growth and development to continue. “I just turned 73 years old, and I’ve realized my own life is not going to be forever,” he said. “So I was looking for somebody to carry on our mission and keep this company going and doing what it’s done.”
Snyder said the first discussion with American Water about the possibility of selling Jefferson Utilities to the larger utility happened about a decade ago. Snyder and Burton said those discussions were revived a few months ago and led to the current proposed acquisition deal.
“I’ve often said that Jefferson Utilities was the microcosm of West Virginia American,” Snyder said. “We were doing here in Jefferson County what they had done on a big section of the southern part of the state.
“So we had a camaraderie in that respect.”
Charles Town Mayor Bob Trainor, who is currently serving as CTUB’s interim chairman while the city looks to hire a city manager, said he learned about the proposed acquisition when it was announced publicly. However, the city’s officials had heard some background chatter beforehand about the possibility, he said.
If Jefferson Utilities is sold, Snyder said he will work to position his construction firm, Snyder Environmental, to continue without him in the future. Now operating with about 100 employees, that company formed in 1979, and its first contract involved building a water treatment plant for Charles Town Races, he said.