The Public Service Commission of West Virginia (“PSC”) recently entered an order stating that while a public service district (“PSD”) has an obligation to make a good faith effort to seek government financing for a capital improvement project, the requirement to obtain public funding is not absolute.  The order demonstrates why it is crucial for a publicly-owned utility to carefully consider with its project team whether to pursue public or private financing for a capital improvement project.  A failure to do so might result in significant delays for the utility’s project. 

The PSD subject to the PSC’s order filed an application for a certificate of convenience and necessity to make improvements to its existing sewer system.  After having discussions with several public funding agencies and being told that public funding was not available, the PSD proposed to fund the sewer project with a $2.3 million loan from a private bank for a term of 20 years at 3.5% interest. 

PSC Staff recommended denial of the application.  It argued that denial was appropriate because the PSD did not show public funding was unavailable. 

Ultimately, the presiding Administrative Law Judge (“ALJ”) sided with PSC Staff and denied the PSD’s certificate application because the PSD failed to apply for government financing. 

The PSD took exception to the ALJ’s decision, and the PSC overruled the ALJ.  Specifically, the PSC granted the PSD a certificate and concluded that “[w]hile governmental funding currently is the preeminent source for certain public utility projects, there is no absolute requirement that utilities obtain public funding.”  The PSC observed that while utilities are required to make a good faith effort to obtain public funding, the PSD made a good faith effort to obtain governmental financing by having discussions with public funding agencies.  Also, the PSC noted it “will determine on a case-by-case basis whether a utility” has made a good faith effort to obtain public funding.