The base rate for Aqua Virginia’s 2,300 Botetourt water customers probably won’t change, but the State Corporation Commission (SCC) still has to sign off on the agreement that leaves those rates alone— at least for now.

An SCC judge held two hearings Tuesday at Lord Botetourt High School where local customers had the opportunity to offer testimony about the proposed rate increases for the two different Aqua Virginia rate zones in Botetourt, and a proposed new infrastructure charge the company applied for.

The hearings were after deadline for The Herald, but County Administrator Gary Larrowe and County Attorney Michael Lockaby noted that the Botetourt Board of Supervisors’ intervention in the proposed rate increases— and the opposition from five other communities served by Aqua Virginia and the Virginia Attorney General’s office— resulted in an April 24 settlement over the base rate increase.

As Lockaby explained, the base rate will likely not increase. Instead, Aqua Virginia and the communities involved in opposing the rate increase to the SCC agreed that the newly implement federal tax law changes will afford the water/sewer company with the return on equity (ROE) it asked for in the base rate increase.

Customers who have paid the higher rates since Aqua Virginia filed for the rate increase last year will get refunds.

Lockaby explained that the proposed new water and wastewater infrastructure service charge (WWISC) is a different matter.

It’s still in litigation before the SCC. Lockaby said imposing a WWISC is new for Virginia.

Lockaby said in Virginia water and sewer rates for regulated utility companies are set in what are called base rate cases— such as the Aqua Virginia case.

WWISC, though, would be an additional charge on Botetourt customers.

“This is an entirely new concept in Virginia, and has not been tried in any state previously in exactly the way it is proposed here,” Lockaby said.

The premise is that Aqua has large amounts of infrastructure— predominantly mains, but also other things like hydrants, plants, pump stations and so forth— that are becoming old and reaching the end of their useful life. It has also not planned for continued upgrades to meet Virginia Department of Environmental Quality (DEQ) and the federal Environmental Protection Agency (EPA) regulatory requirements, Lockaby said.

As a result, Aqua wants to be able to raise its rates annually between base rate cases with abbreviated and cursory public and SCC review in order to immediately pass through the costs of dealing with these long-term issues.

Otherwise, so the argument goes, it would only be able to increase its charges to cover these costs the next time it filed a base rate case.

Lockaby said Aqua Virginia officials claim the company has not planned for these costs, and the costs and financing are too much for Aqua to sustain.

In its initial application, Aqua Virginia asked for a cap on the WWISC at 10 percent of the base rate charge. Its witnesses’ testimony at this point probably only supports 7.5 percent, Lockaby said.

But the company has not amended its original application, and their witnesses before the SCC have now testified in support of four separate WWISC plans and charge structures, “so we’re not sure what they want,” Lockaby said.

Lockaby said it is clear that Aqua Virginia wants at least the ability to add 7.5 percent per year, and possibly as much as 10 percent, based on these interim costs. These would be reviewed annually by the SCC in an abbreviated proceeding, in which Botetourt County would likely participate. Then at the next base rate case, these increases would be incorporated more or less automatically into the base rate.

Lockaby said that Aqua Virginia and another large statewide water company, Virginia-American Water, asked for a WWISC regulation in 2014 that would permit any water company to use a WWISC.

The SCC denied it. Almost as soon as the SCC acted, Virginia-American reapplied on its own, and got a test WWISC tariff just for its own facilities and customers in the City of Alexandria.

“This case is currently on appeal to the Supreme Court of Virginia, where the Cities of Alexandria and Hopewell are arguing that the SCC doesn’t have authority to allow Virginia-American to impose a WWISC, and that it is arbitrary and capricious to do so,” Lockaby said.

The case was argued last month and Lockaby said Aqua filed a brief in support of Virginia-American’s position in the case.

“The Supreme Court will likely rule sometime this summer or fall in that case, which obviously would have big implications for our case here,” Lockaby said.