Docket UW17401
Order UW96-8

IN THE MATTER of a dispute between Mark and Janice MacDonald and the Morell Sewage Collection and Treatment Corporation.

BEFORE THE COMMISSION

on Friday, the 29th day of November, 1996.

John L. Blakney, Vice-Chair
James Nicholson, Commissioner

Order

WHEREAS:

This Order addresses a complaint made by Mark and Janice MacDonald concerning the costs of re-establishing sanitary sewage service to the MacDonalds' residence in Morell. The dispute centers on the question of whether the MacDonalds should be required to pay for a new service lateral that was necessitated by events beyond their control.

The MacDonalds' home is one of four connected to a single main which runs between two other properties. In recent years, the main had deteriorated to the point where it was in need of replacement. The line ran under one of the other property owner's driveway; however, the Utility was unable to locate a record of easement for the main. In order to replace the deteriorated sewer main, the Utility needed to obtain a new easement with the property owner. After a lengthy attempt, however, it was unable to do so. As a result, the Utility was required to examine other possibilities for replacing the main.

In July of 1996, the Utility contacted Commission staff requesting assistance and direction in resolving the problem concerning the replacement of the sewer line. In August 1996, Donald G. Sutherland, Director of the Commission's Technical Services Division, met with representatives from the Utility to discuss servicing options and the issue of who should bear the costs necessary to re-establish the service.

Following the meeting with the Utility, Commission staff sent a letter dated August 30, 1996, to the Utility Chair, Parnell Trainor, advising:

Costs associated with work in the public right-of-way are—in the case of a main upgrade or replacement—the responsibility of the utility. In the case of service laterals, the costs associated with work carried out on a customer's property are normally the customer's responsibility. However, because the laterals must be replaced for reasons other than normal wear and tear, it is, in staff's view, reasonable to compensate any owner for the remaining life of his or her current lateral. Simply stated, if a current lateral has some remaining value, recognition should be given to that value.

Staff understands that the laterals in question are of the so-called no-corrode type. In P.E.I., this type of pipe has had a typical life of not more than 30 years. As a result, we believe that any of the customers with a lateral of a newer vintage should receive a credit for the residual value of the existing lateral. For example, a customer with an existing 50-foot lateral that is 15 years old would receive a credit equal to one-half the cost of reinstalling that 50-foot line. If the replacement line is longer than the original 50 feet, the credit would be limited to the original 50-foot line.

In summary, the enclosed Rules and Regulations and staff's review of the circumstances in question result in the following:

the cost of replacing-upgrading the main line is the responsibility of the utility;

the cost of installing the new service laterals from the main to the property lines is the responsibility of the utility; and

the cost of installing the individual service laterals from the property line to the customers' premises—including any interior plumbing modifications—is the responsibility of the customers, except that recognition should be given to the residual value of any existing lateral using the method of calculation set out above.

When notified of the above by the Utility, the MacDonalds felt the cost-sharing arrangement was not satisfactory and they wrote to the Commission in October 1996 requesting that the matter be reviewed. As a result, the issue is before the Commission for formal determination.

The MacDonalds, in their letter to the Commission dated October 4th, 1996, indicate they do not think that the recommendations are fair to all parties concerned. In summary, Mark MacDonald states:

1. One year ago I purchased a property hooked up to the Main Line.

2. There is no problem with my existing lateral.

3. The Village has decided to relocate the Main Line servicing my property because they can not repair the existing line.

4. I therefore feel the village should be responsible for the cost of installing the service lateral from the property line to my premises.

The Commission subsequently received a letter from Mark MacDonald on October 10, 1996, also stating:

I feel the integrity of my existing lateral was put in question by the Village when it was hooked up to the Main Line down the Clark driveway that did not have an easement attached to it.

This is one further reason why I feel the Village should be responsible for the replacement of my service lateral.

The Morell Utility in its letter of response to the Commission dated November 4, 1996, argues:

The original sewer line servicing the MacDonald, MacAdam and Clark properties required replacing and the Sewer Corporation was unable to obtain an agreement among the three parties involved re an easement. As a result we repositioned a portion of the main sewer line so that the MacDonald, MacAdam and Clark households could all install laterals directly from their own premises to the main line.

. . .

To the best of our knowledge the original lateral running from the MacDonald property has been installed for longer than the estimated life time of the material from which the lateral was constructed. Therefore it is our position that Mr. MacDonald will have to bear the cost of installing his lateral as per the normal IRAC regulations.

For the Morell Sewer Corporation to agree to pay all or a portion of Mr. MacDonalds [sic] lateral installation would be an irresponsible act on our part (compared to our policy for all our other customers) and would create a precedent which we could not possibly apply, from a financial point of view, to the remaining residents of the community if and when they might be required to replace a lateral.

The Commission, when reviewing the matter, notes the concerns expressed by the MacDonalds and also takes into consideration the other homeowners involved in this matter.

One of the concerns raised by the MacDonalds deals with their suggestion that the main be replaced along their property line to allow a similar connection. The Commission understands that this option is not practical, mainly because of difficulty in obtaining a gravity feed connection in the area.

Another issue raised has to do with the MacDonalds not being aware when they purchased their home that there would be additional expenses for sewer services. On this issue, the Commission feels that unexpected situations can occur from time to time which will impact on homeowners. For instance, if a homeowner had a lateral on his or her property that was obstructed by tree roots, the cost of repairing or replacing the lateral, under the current Prince Edward Island Municipal Utilities General Rules and Regulations, would be the responsibility of the homeowner.

The MacDonalds' principal concern seems to be that they consider it unfair that they should have to pay for the cost of replacing the lateral from their property line to their residence when the problem was the result of the Utility's failure to obtain a proper easement. The Commission agrees that, because of an apparent error on the part of the utility a number of years ago in allowing the main to be installed without a proper easement, the onus to correct the problem and pay for reasonable costs associated with doing so lies with the current-day utility. The question then arises as to what costs are "reasonable".

The MacDonalds maintain that the complete cost should be borne by the Utility. The Utility—along with Commission staff—believe that the homeowners should be required to replace their laterals, provided recognition is given to the relative remaining value of their existing laterals. All other costs would be borne by the Utility.

While the Commission recognizes that all parties, including the Utility and its ratepayers, have been disadvantaged by the fact that an easement cannot be obtained as a result of an ongoing, unrelated dispute between two of the other property owners, it also realizes that the original provision of service was less than ideal. This opportunity to replace the main allows the Utility to re-establish the service to meet current standards while preventing similar problems in the future.

From correspondence on file, the Commission understands that the homeowners' laterals vary in age and that some—as in the case of the MacDonalds—are nearing or have exceeded their useful life. In our view, this is an important factor when considering the allocation of costs. Bearing in mind that all costs incurred by a utility are, in reality, borne by all ratepayers, it would seem unreasonable to expect a Utility to pay for the entire cost of replacing an individual lateral that would otherwise need replacing—at the customer's expense—in the near future. To do so would be asking other ratepayers to subsidize the costs to one individual.

While the Commission sympathizes with the MacDonalds, we consider the actions of the utility to be fair and the allocation of costs reasonable. In our view, such actions are consistent with the applicable Prince Edward Island Municipal Sewerage Utilities General Rules and Regulations and are therefore affirmed. The dispute lodged by the MacDonalds is dismissed.

The foregoing findings are SO ORDERED.

DATED at Charlottetown, Prince Edward Island, this 29th day of November, 1996.

BY THE COMMISSION:

John L. Blakney, Vice-Chair

James Nicholson, Commissioner

NOTICE

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 13.(1) and 13(2) of the Act provide as follows:

13.(1) An appeal lies from a decision or order of the Commission to the Appeal Division of the Supreme Court upon a question of law or jurisdiction.

(2) The appeal shall be made by filing a notice of appeal in the Supreme Court within twenty days after the decision or order appealed from and the Civil Procedure Rules respecting appeals apply with the necessary changes.