West Virginia Takes Initiative to Address its Distressed and Failing Water and Wastewater Systems

By Xixi Zheng, Water Policy Intern

Across the US, states are struggling to support small water and wastewater systems - and West Virginia is not unique. The 2020 Report Card for West Virginia’s Infrastructure published by the American Society of Civil Engineers - the oldest national engineering society in the US - gave the state a “D” grade. This grade suggests that, on average, the infrastructure of water and wastewater utilities in West Virginia needs improvements, which also has implications for water quality. Another study done by the Natural Resources Defense Council, Coming Clean, and the Environmental Justice Health Alliance in 2019 found that “378 of roughly 448 active utilities between 2016 and 2019 had at one point violated the federal Safe Drinking Water Act of 1974 [and] reported more than 912,000 West Virginians at one point in those three years drank unsafe water.”

This connection between failing infrastructure and water quality recently came to a head in the Page-Kincaid Public Service District (PSD), serving a population of 650 in Fayette County, West Virginia. Years of poor water quality due to failing infrastructure and poor management left the residents of the Page-Kincaid PSD without a stable and reliable water source, forcing many to face constant Boil Water Advisory notices and increasing water utility rates and rely on bottled water to meet daily needs, from drinking water to bathing and washing clothes.

Due to the mounting customer dissatisfaction combined with the continued inability of the Page-Kincaid water system to meet water utility regulation standards, the system was placed under investigation by the West Virginia Public Service Commission (PSC) on May 20, 2020. This action was implemented after negotiations for West Virginia American Water (WVAM) to acquire Page-Kincaid’s water system had fallen apart. During the investigation, the PSC re-initiated talks between the two parties, and Page-Kincaid’s water system was ultimately acquired by WVAM in September 2020. By December 2020, all Page-Kincaid residents were supplied by WVAM.

Page-Kincaid’s successful acquisition process was the result of Senate Bill 739 that was passed on March 7, 2020 - referred to as the Distressed and Failing Utilities Improvement Act or Chapter 24 Article 2H. The bill states a need for a “comprehensive plan to confront the financial, organizational, and regulatory challenges faced by water and wastewater utilities in the state to ensure that all citizens of West Virginia have access to safe drinking water and adequate and safe wastewater treatment.” This legislation requires the monitoring of the service quality of all active community water and wastewater systems in the state and takes proactive measures to combat subpar water service to the population.

The agency that will play the most significant role under this new law is the West Virginia PSC. The role of the PSC is to regulate public utilities within its state, such as a utility’s rates and services. But, under the bill, the West Virginia PSC will oversee the evaluations of water utilities and their improvement process. Each year, the PSC will be tasked to review the active water utilities in West Virginia and create a list of those that are not meeting regulatory standards as well as review petitions from individuals to investigate their water utility. The PSC must then contact these utilities and determine what type of assistance they need in order to improve their conditions.

The contacted utilities are classified into two groups:

(1) Distressed utility: A distressed water or wastewater utility is defined as one that is continuously failing to meet the regulatory standards set by the Bureau of Public Health, the Environmental Protection Agency, or the commission itself and cannot, in a timely manner, comply with the regulatory orders of these organizations. A water utility can also meet conditions of a distressed utility if they are no longer able to “provide adequate, efficient, safe, and reasonable utility services” to its customers or is suffering from financial problems that make it difficult for the utility to operate legally.
(2) Failing water or wastewater utility: A failing utility is one that meets the conditions of a distressed utility and has not improved its operating conditions and services even with outside assistance.

Although slightly different, both failing and distressed utilities cannot provide the best quality water and service to their customers and are in need of improvements financially, managerially, or in technical ability. After a utility is identified as either distressed or failing, the PSC will determine the best course of action. This may mean facilitating rate changes, providing opportunities for grants and loans, or overseeing the acquisition of a distressed or failing utility by another one.

Furthermore, the bill details the proceeding of acquisitions and lists a number of cost recovery mechanisms to incentivize other utilities to participate in an acquisition of a distressed or failing utility. Especially for the utilities in West Virginia that are old and geographically separated from each other, acquiring a utility is often costly; new pipes need to be laid down and failing infrastructure needs to be fixed or replaced. However, acquisitions are beneficial to the utilities and their customers in the long run because consolidated utilities can streamline the processes of their systems to increase the standard of water delivered to their customers, which is the ultimate goal of the new bill.

The Distressed and Failing Utilities Improvement Act has set forth a concise plan for the PSC to address the myriad of problems plaguing water and wastewater utilities in West Virginia. This legislation is a step forward for the state to improve its quality of water and service to customers, and also demonstrate leadership on an issue that utilities across the US are facing. The implementation of this bill represents a turning point for water utilities in West Virginia and can be a model for other states going forward.