Docket UW32303
Order UW92-13IN THE MATTER of an application of the East Royalty Pollution Control Corporation for approval of the implementation of uniform sanitary sewerage rates.
BEFORE THE COMMISSION
on Wednesday, the 16th day of December, 1992.
Linda Webber, Chairman
John L. Blakney, Vice-Chairman
Order
Contents
Appearances & Witnesses
Reasons for Order
1 Introduction
2 Background
3 The Application
4 Discussion
Order
Appearances & Witnesses
1. For the East Royalty Pollution Control Corporation
Witnesses:
Kevin McCarville, Administrator
David Gallie, Chairman, Community Council
Kevin McGuire, Chairman, ERPCC2. For Himself
Witness:
Patrick Chan, Community Resident3. For Herself
Witness:
Patricia Joslin, Community Resident4. For Himself
Witness:
Darren Ings, Community Resident5. For Hambly Enterprises Ltd.
Witness:
Wayne Hambly6. For the Island Regulatory and Appeals Commission
Staff:
Donald G. Sutherland
Director, Utilities DivisionShayne A. Hogan
Research AnalystHeather Walker
Recording Secretary
Reasons for Order
1 Introduction
This is an application by the East Royalty Pollution Control Corporation (the "Applicant," "Utility" or "ERPCC") for an order or orders of the Commission authorizing the phase-in of uniform sanitary sewerage rates in the Community of East Royalty. The application, which was filed with the Commission on November 4, 1991, was heard in public on November 19, 1991, after due public notice.
In addition to representatives of the ERPCC and the East Royalty Community Council, a number of area residents and property owners were in attendance and participated in the public hearing. The Commission also received several letters from interested parties.
The Commission's findings and conclusions in this matter follow. We acknowledge and thank those who participated in the public review process.
2 Background
The ERPCC is a public utility within the meaning of the Water and Sewerage Act, R.S.P.E.I. 1988, Cap. W-2, engaged in the provision of sewerage services to the public in a portion of the Community of East Royalty. The Applicant commenced operations in 1987-88 following construction of a partial sanitary sewage system in the central and eastern areas of the Community. A portion of the western area of the Community—the area known as Royalty Heights—has been serviced with sewerage as well as water services by the Charlottetown Commissioners of Sewers and Water Supply ("Charlottetown Water Commission" or "CWC") since the early 1970's. In addition, a trailer park operated by Hambly Enterprises Limited located in the western area of the Community has been provided with sewerage services by the Sherwood Sewage Collection and Water Distribution Corporation ("Sherwood") for a number of years.
In 1988, the East Royalty Community Council applied on behalf of the newly formed utility to the former Public Utilities Commission ("PUC") for an amendment to Section 5.10 of the Prince Edward Island Municipal Sewerage Utilities General Rules and Regulations (the "Regulations"). Section 5.10 of the Regulations then read as follows:
Customers located in one (1) municipality and receiving sewerage service from another municipality shall pay charges in accordance with the rates prescribed for the municipality in which they are located. The utility in the municipality in which such customer is located shall be billed and be responsible for the payment of charges to the adjoining utility for such services as may be provided by that utility.
The 1988 application of the ERPCC was prompted by the following letter from PUC staff:
19 January 1988
Mr. Earle Arsenault, Chairman
East Royalty Community Council
1 Avonlea Drive
East Royalty, P.E.I.
C1A 1C8- Rules and Regulations -
Dear Mr. Arsenault:
During our meeting last Wednesday, we discussed the application of s. 5.10 of the Prince Edward Island Municipal Sewerage Utilities General Rules and Regulations as it affects customers of the Charlottetown Water Commission located in the Hillsborough Development area of East Royalty. As you are aware, this regulation stipulates that customers located in one municipality receiving service from another shall pay charges in accordance with the rates prescribed for the municipality in which they are located.
The views of the Council on this matter would be appreciated.
Yours very truly,
(Sgd) Donald G. Sutherland
Donald G. Sutherland
Director, Utilities DivisionThe following letter of response was submitted by the then Council Chair, J. Earle Arsenault:
January 27, 1988
Mr. Donald G. Sutherland
Director, Utilities Division
P.E.I. Public Utilities Commission
134 Kent Street, P.O. Box 577,
Charlottetown, P.E.I.
C1A 7L1Dear Mr. Sutherland
Thankyou [sic] for your letter of January 19th concerning rules and regulations governing Municipal Sewerage Utilities.
As I mentioned to you at our recent meeting, there is some concern and diversity within the Community of East Royalty in so far as sewerage services are concerned.
The Parkwood Estates Trailor [sic] Park is presently serviced, and has been for some years, by the Community of Sherwood. The Royalty Heights, and in effect, total Hillsborough Development, is serviced by the Charlottetown Commission of Sewer and Water. The property west of Wright's Creek known as the Love property is able to be serviced by the Sherwood Utility and, we expect, in the not too distant future, to have a development proposal for that particular property.
East Royalty, east of Wright's Creek, will be able to be serviced by a Central Service feeding into a Lagoon. In calculating the cost of putting in the Lagoon and Central Service we considered only the users within the area to be serviced by the Lagoon.
We would like to see a change in the regulation whereby that portion of the Community of East Royalty now being serviced by other Utilities outside the Community, ie The Commissioners of Sewer and Water Supply and the Sherwood Utility, would be able to maintain the present system and present customers.
We realize the charges to the customers of both the Commissioners of Sewer and Water and the Sherwood Utility may vary considerable [sic] for those charges necessary to operate the lagoon. However, we feel this fair in as much as the residents of Royalty Heights have not only already paid for their system when they acquired their lots, but continue to pay a reasonable rate for the service which has been in place in excess of ten (10) years. By the same token, we would be going across boundaries once again to try and incorporate the Parkwood Estates service into the East Royalty Utility. This, we feel, would be unfair and unreasonable to the owners.
To develop the Love property, it would be necessary to have this property serviced by the Sherwood Utility. If that can be done, then we feel the Community of Sherwood should have whatever benefit there might be from the additional customers being added to the system.
We realize from information we have received from you and from discussions with a number of people, that to have more than one utility operating within the Community is not in keeping with present rules and regulations. As was mentioned, however, rules and regulations are made to be changed, and we would request that the rules and regulations governing this particular situation be changed to accomodate [sic] us.
We feel the most important aspect of introducing a Central Sewer System is to alleviate future problems which septic systems may create. Therefore, we should be more concerned with potential pollution problems than with who provides the service. The key issue is that the service be provided.
No doubt situations similar to ours may crop up in other areas of the Province as more and more communities seek to install Central Sewer Systems. If this is the case then it would be nice to see the regulations geared up to allow for a number of Municipalities where necessary, for a number of Utilities where necessary to be able to accomodate these situations.
Again, on behalf of the East Royalty Council, I wish to make the request that the rules and regulations be changed to accomodate [sic] the situation which we have in East Royalty. This situation may now be somewhat unique, but down the road, may be come more and more a reality within different areas of the Province.
There is no way, as we see it, without having a world war on our hands, to be able to even attempt to have Royalty Heights and the Parkwood Estates Trailor [sic] Park become part of our Utility with residents being charged a much higher rate than they are now enjoying. We were unable to provide the service when it was needed in these particular areas, and I think it is only right and fitting that the utilities that originally agreed to provide the service, either at request of government or by us, continue on with the customers and systems they have in place.
Yours Very Truly,
(Sgd) J. Earle Arsenault
ChairmanAs a result of this letter and additional submissions the PUC received from the ERPCC and the Charlottetown Water Commission on this matter, the PUC amended Regulation 5.10 by adding the words [u]nless otherwise ordered by the Commission at the beginning thereof and issued an Order1 exempting the Utility from the requirement that all sewerage customers in East Royalty be charged the rate prescribed for the ERPCC. This resulted in a continuation of the status quo: sewerage customers were charged in accordance with the rates prescribed for the utility providing the service.
3 The Application
The Applicant effectively seeks the reversal of the above exemption order of the PUC. The application is opposed by a number of residents of the Community as well as a representative of Parkwood Estates trailer park.
The proposal of the ERPCC would, if approved, see the phase-in of uniform sewerage rates throughout the Community over a three-year period. Table 1 shows the approximate affect of the proposal assuming implementation in January of 1992.
Table 1
Impact of ERPCC Proposal
(Rate Per Equivalent Household Unit)
Customers Served by
1991
1992
1993
1994
Sherwood
$120.88
$139.13
$157.38
$175.63
CWC*
$73.20
$107.34
$141.48
$175.63
CWC**
$73.20
$95.25
$130.44
$175.63
ERPCC
$342.00
$260.38
$217.79
$175.63
*CWC rates before April 15, 1992 amendments.
**CWC rates after April 15, 1992 (exclusive of Jan 1/93 8.8% increase proposal of CWC)($95.25 reflects old rate for four months and new rate ($102.60) for eight months. Year 1 adjustment Commission staff-calculated. An 8.8% increase would bring the Jan1/93 CWC rate to $111.63.
Table 2 shows the potential East Royalty customer base involved in the proposal. The figures for 1992 - 1994 are ERPCC forecasts.
Table 2
Potential ERPCC Customer Base
(Equivalent Household Units)
Customers Served by
1991
1992
1993
1994
ERPCC
242.65
250.3
255.3
260.3
CWC
265.6
265.6
265.6
Sherwood
60.1
60.1
60.1
Total Units
242.65
576.0
581.0
586.0
In its application to the Commission, the ERPCC gives the following reasons for the proposal:
1. We wish to conform to the regulations;
2. We wish to distribute the cost of sewer services equally among East Royalty properties receiving sewer service;
3. In order to complete the system and to allow for subdivision development in the Community, the ERPCC needs to dramatically increase our customer base; and
4. We wish to complete the installation project before the Province decides to alter or eliminate the ESAP program.2
The need for a broader customer base and the resulting increase in revenue is outlined by the ERPCC this way:
There is one phase remaining to complete the [sewer] system. This phase will consist of the installation of a sewage lift station and is designed to service the extreme eastern portion of the system. Under the present ESAP3 funding arrangement (50% province - 50% municipal) it is estimated the ERPCC would have to borrow an additional $225,000 and the resultant annual sewer rate would approach $400 per unit.4
As noted above, the proposal is opposed by a number of property owners and residents of the Royalty Heights area of the Community and by the operator of Parkwood Estates Trailer park. In addition to the presentations made at the public hearing, the Commission also received several letters against the proposal. With the exception of one letter of support filed by the East Royalty Community Council, no one appeared or filed a submission in favor of the proposal.
The opponents of the application argue, among other things, that the ERPCC proposal is unfair and that the long-standing relationship residents of the Royalty Heights area have had with the Charlottetown Water Commission should not change. Several opponents submit that the increased costs associated with the proposal would result in financial hardship and that they can ill afford to financially assist those presently served by the ERPCC. It is argued, as well, that rates should be based on the costs of the utility providing the service and that one group of customers should not be asked to subsidize another.
One intervener, Patrick Chan, argues that the present problems confronting the ERPCC are the result of poor planning on the part of the Community Council and the ERPCC. He submits that the Council and the ERPCC lack a commitment to develop a comprehensive pollution control plan in the Community. He further submits that the ERPCC has not fully disclosed in its financial forecasts the true impact of future expansion plans. Mr. Chan asks that the ERPCC proposal be denied pending the development of a comprehensive pollution control plan for the Community.
Another intervener, Wayne Hambly, argues that the Parkwood Estates trailer park should not be required to pay any increases in rates associated with the application. According to Mr. Hambly:
Parkwood Estates has 78 lots rented to mobile home owners. Over twenty years ago, we installed a water and sewer system at out own expense. This system services the mobile home park. The outflow connects to the main sewer line running from Sherwood to the Charlottetown Area Pollution Control Plant.
Presently, we pay a pro-rata rate per household to the Community of Sherwood. It is our understanding that the East Royalty PCC's proposal will substantially raise our sewer rate charges.
It is our belief that since we incurred the original capital cost and annual maintenance cost, the new rate structure should not apply to this development. Our system is fully maintained by Hambly Enterprises Ltd. and makes absolutely no claim for any maintenance costs that have been incurred to keep the system operational.
If the community wishes to take over the system and absorb the maintenance cost, then some justification can be given for a rate increase. Otherwise, Parkwood Estates will continue to absorb the maintenance costs and pay the increased rates...5
4 Discussion
One can characterize the urban structure of the greater Charlottetown area—of which East Royalty is a component—as a fragmented set of municipalities served by a fragmented set of utilities providing water and sewer services and, in some cases, only sewer services to the majority of residents of the area. This fragmentation has led to a degree of service duplication—the result of government decision-making that allowed the formation of local municipal governments without considering amalgamation or extension of established or traditional municipal boundaries.
From a local government perspective, the result is the provision of municipal services by independent utilities making independent decisions and competing for limited resources in an area characterized by most urban standards as a small population base and low density development.
The case before the Commission involves both a history of government subsidization and an actual housing project characteristic of the urban residential design standards of the 1960's and 1970's. These standards included a higher residential density than was considered the norm in the province.
The Hillsborough development area was typical of the federal model of the planned suburban community providing full services. Those who acquired lots and invested in homes bought into a complete package that included streets with curbing and storm sewers, public recreation areas and a municipal water and sanitary sewer system. The Charlottetown Water Commission was vested with the water and sewer assets in this area and has maintained the Hillsborough development system to ensure that property owners or customers receive safe and adequate service. At the time, the decision to vest the assets in the CWC appeared to be reasonable and customers have received service at a rate they understand to be fair and reasonable.
As a result of a dramatic decrease in the level of government financial assistance for water and sewer utility development, the present customers of the ERPCC find themselves faced with a rate that is not, as first anticipated, less than $200 per annum but rather at $342 per annum. Without expanding its customer base to include East Royalty residents now served by the Charlottetown Water Commission, the ERPCC believes that it must charge its customers a higher rate; one considered by some to be reaching an unreasonable level.
The Commission notes that the decision to proceed with the installation of the ERPCC core system has its roots in a public decision-making process. A review of this process indicates that the decision on the part of the Community of East Royalty to proceed with the installation of a central sewer system was premised on the understanding that customers would receive service at a rate less than $200 per annum and that those already serviced with both sewer and water by other utilities would not be affected.
The Commission believes that, at the regional level, comprehensive planning with the efficient and effective allocation of available financial and human resources could have averted this fragmented municipal and utility structure. Effective planning could have limited the attendant variations in service and rates. Instead, the Commission in its expanded role witnesses neighboring communities within the Provincial-capital region locked in competition for dwindling resources with neighborhood and household conflict over significant variations in what each pays for services.
People affected by these variations often approach the Commission for help. They feel arbitrarily harmed by the system and believe they have no other place to go for assistance. Yet the Commission is not in any position to provide assistance. The East Royalty situation exemplifies the suburban municipality that has evolved as a result of the absence of a comprehensive regional urban development policy that ensures a rational approach to the delivery of municipal services in an effective, efficient and equitable manner throughout the region.
A consequence of this urbanization process is the situation before us here: a large number of residents of East Royalty pay approximately $100 for combined water and sewer service while others pay almost $400 for sewer service alone. The situation is made worse by the fact that, at present, residents in East Royalty are served, in the case of sewer services, by the ERPCC in the central and eastern area of the Community and, in the western area, by the CWC and Sherwood. In the case of water services, residents are served in portions of the central area of the Community by two private water utilities and, in the western area, by the CWC. In the Commission's view, many of the problems associated with the proposal before us and, indeed, with the overall servicing of the Community of East Royalty with both sewer and water service could be mitigated through the provision of these services by one utility. Regrettably, the Commission, within its own mandate, has no authority to bring this about.
While we spent a considerable amount of time studying this matter—reviewing the evidence, discussing possible ways of resolving the issue, and then reviewing the evidence again—we were unable to discover within our mandate any fair solution to the problem facing this municipality.
The Commission would, however, suggest that the ERPCC enter into discussions with the CWC and other utility operators in East Royalty for the transfer of all water and sewer distribution assets located in East Royalty to the ERPCC. Given negotiations that are currently underway over a proposal that would see the Charlottetown Water Commission become the supplier of bulk or wholesale water to municipal utilities in the Provincial-capital region—with each municipal utility providing its own distribution system—it is, we believe, timely to attempt to correct many of the planning decisions that have resulted in the situation before us. The ERPCC with expanded authority over all of the water and sewer distribution assets in the Community would be in a better position to properly plan and initiate services to the residents of East Royalty.
Until this is done, the Commission is not prepared to impose upon the residents served by the CWC and Sherwood the financial burden resulting from this haphazard planning and development. While fairness in this case is hard to find, the Commission believes that those who chose to develop the system independent of the CWC and Sherwood customers must at this point in time be required to seek another resolution to their dilemma.
The ERPCC should immediately proceed with these negotiations. If negotiations to acquire all of the water and sewer assets in East Royalty are successful, we are prepared to revisit the issue of moving towards a combined uniform water and sewer rate structure for residents in the Community of East Royalty. In the meantime, however, we are not prepared to alter the status quo.
In the result,
1. The application is dismissed
An order will accordingly issue.
Order
WHEREAS the East Royalty Pollution Control Corporation applied to the Commission on November 4, 1991 for an order or orders of the Commission authorizing the phase-in of uniform sanitary sewerage rates in the Community of East Royalty;
AND WHEREAS the Commission heard the application at public hearings conducted in Charlottetown on November 19, 1991 after due public notice;
AND WHEREAS the Commission has issued its findings in this matter in accordance with the Reasons for Order issued with this Order;
NOW THEREFORE, pursuant to the Island Regulatory and Appeals Commission Act and the Water and Sewerage Act;
IT IS ORDERED THAT
1. The application is dismissed.
DATED at Charlottetown, Prince Edward Island, this 16th day of December, 1992.
BY THE COMMISSION:
Linda Webber, Chairman
John L. Blakney, Vice-Chairman
1 PUC Order WS880818(1), dated August 18, 1988.
2 Exhibit 1, p. 5.
3 Environmental Servicing Assistance Program.
4 Exhibit 1, p. 2.
5 Exhibit 8.
