Representative seeks to soak water customers

April 14, 2017

Inside Insight

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This legislative interference never ends

By HANNAH HILL

An interesting bill was filed in the House last week. H.4091 would abolish the five-member board of the Pioneer Rural Water District (currently elected by its customers) and replace it with a seven-member board selected by the Oconee and Anderson County legislative delegations.

At the end of the bill, there’s also this: “The district shall not construct a water treatment facility unless it can prove by clear and convincing evidence that no other feasible option capable of meeting the demands of its service area is available.”

That seemed odd, so I called Terry Pruitt, the manager of the Pioneer Rural Water District, and he told me a startling story.

Pioneer buys all its water from the cities of Seneca and Westminster in Oconee County and resells it to its customers. Between 2008 and 2012, the city of Westminster raised its rates 174 percent, Pruitt said. After a feasibility study, the board of directors (the same board that was selected by the Pioneer Water customers) determined that building its own water treatment plant and taking water from Lake Hartwell was the most cost-effective option.

In 2012, Rep. Bill Sandifer of Oconee filed a bill that would have replaced the customer-selected board with one selected by lawmakers, and prevented construction of a water treatment plant until 2016. The final version of this bill — which passed and is now law — shortened board members’ terms and added additional hoops the district had to jump through before it could build a water treatment plant. One of the new conditions was that an independent audit must be conducted and presented to the customers before any action could be taken.

According to Pruitt, all of the new conditions have been met. Construction on the plant began in January.

Then Westminster asked the district to stop building and offered it a rate reduction.

Pioneer considered the offer, but determined that the rate reduction wouldn’t offset the cost of building the new plant (to date, $6 million has been spent). According to the district’s latest financial calculations, customers would see a $4-per-month increase in rates if the new plant is built. If building stopped and the district continued buying water at the reduced rate, the cost to the customers would go up an estimated $8-$12 per month.

Plant construction continued.

At that point, according to Pruitt, Rep. Sandifer filed H.4091. (Sandifer did not return our calls regarding this story.) The bill currently resides in the House Labor, Commerce and Industry committee, which Sandifer chairs.

When you think about it, this type of power-grab — which is not unusual for state lawmakers — is simply confounding.

Using the force of government to halt citizens’ actions when citizens are providing for their needs as they see fit is dubious in so many ways. Stripping control of the district from the customers who pay the rates and handing it to an already too-powerful legislature is just adding insult to injury.

Nerve stories are always free to reprint and repost. We only ask that you credit The Nerve.
  • Philip Branton

    I can only imagine what Erin Brockovich would say to Rep. Bill Sandifer of Oconee. https://uploads.disquscdn.com/images/1b9237431f924faced2e73ddc5b0cad37d310ae8ad3a359b618270bb37f2067e.jpg

    • WBHobbs

      She would say thanks Bill Sandifer for working to reign in an organization that has few controls and little accountability. The same type of thing that Brockovich did…

  • DA Bennett

    Please keep us posted on the outcome of all this power abuse, also why do you think Sandifer would do this? Who is benefiting ?

    • WBHobbs

      Sandifer is standing up for the law of the land. We may have differing opinions on whether building this plant is a good economic decision, but the law as written long ago never gave Pioneer authority to build a plant. Sandifer is one of those guys who believes that even government organizations like Pioneer are not above the law. Sandifer is trying to bring some clear accountability to the organization.

      Below is a link to a letter from the Office of the Attorney General written in 2012 that basically states that Pioneer has no legal authority in this area.

      http://www.scag.gov/wp-content/uploads/2012/05/fiffick-a-os-9430-4-30-12-pioneer-rural-water-district.pdf

      • Steve

        If Pioneer has no legal authority under existing law to build a plant why is Sandifer trying to pass new legislation to prevent them from building a plant?

        • WBHobbs

          Pioneer does not seem to understand the law. Sandifer attempted to clarify the legislation back in 2011 or 12. His language was clear at that time, but the wording was changed while in come committee, etc. He’s attempting to do the same again.

          I personally have found it amazing that Pioneer has as much authority as they do. Prior to Sandifer requiring an “audit”, there was almost no oversight for their operations. Elections were a mess (my wife for example was not allowed to vote in the last election of our board member because the bill had my name on it, not hers – even though she could prove where she lived).

          Sandifer is attempting to clean up some of this, get some people on the board with backgrounds suitable for the responsibility of being a board member, etc.

          Additionally, the plant was uneconomical when compared to purchasing of water at rates that could have been negotiated back 6 months ago. I’m not going to get into a blame game trying to say which side is at fault.

          As more money is spent on the plant, it will eventually hit a point of no return, where it is uneconomical to quit. At that point Pioneer customers will be locked into permanently higher rates, as will Westminster and Seneca customers. Sandifer would prefer that not happen.

          Worst case for Pioneer customers would be that say 15 million gets spent, then the courts declare that the plant is illegal. Pioneer customers bills will go way up, but Westminster and Seneca bills would remain as they should be. Even worse, Pioneer would have to spend even more to improve connections to the cities (pipes, pumps, etc.) and Pioneer customers bills will again got up.

          • Steve

            “but the law as written long ago never gave Pioneer authority to build a plant.”

            According to the SCAG letter you posted the law did not expressly prohibit it either.

          • WBHobbs

            That’s true. The law lists only the activities and powers that Pioneer can engage in. Things like building pipelines and setting rates for customers. I’m no legal expert, but it seems logical that laws granting authority have to be limited by what they specifically grant. That same law does not specifically prohibit Pioneer from building an airport, or forming its own police force, or any of the millions of other things that they might think of.

            If you look at the law that created some other rural water districts, you will see that the law written for them specifically includes language about building and operating water treatment plants. So it’s obvious that legislators intended to give that right to some but not all of the districts.

          • Steve

            from the letter you posted

            “South Carolina Code section 6-13-240 empowers the District to exercise “all such powers as may be necessary or incidental to carry out its purposes, functions and responsibilities.” Thus, if a court found that the construction of a new freshwater treatment facility was necessary to the District’s water distribution function, it might find the District had authority to take such action.”

            Seems the AG agrees that the law may indeed grant, or at least not prohibit, Pioneer from having a plant.

          • WBHobbs

            You forgot to include the next sentence from the AG.

            “In light of the fact that the District currently obtains water from other available sources, a determination whether a new treatment facility is necessary likely would involve questions of fact..,”

            What the AG is saying is that, Pioneer has a clear charge to distribute water. If there was no way to acquire water other than building a plant, Pioneer might be able to go to a court and obtain a ruling allowing the construction of a plant. (Now add their last comment) In light of the fact that Pioneer now obtains water from other sources, the courts ruling would involve the question of whether Pioneer can continue to obtain water from those other sources.

            The AG was asked only to interpret what the law says, not whether or not Pioneer was in violation of it.

            But you are right, the law may not prohibit Pioneer from building a plant if they go to court and prove that they have no other source of water.

          • WBHobbs

            Steve, let’s turn this around and look at it from Seneca and Westminster’s position.

            The two cities built plant capacity to treat water for Pioneer customers and have been selling water to Pioneer. Pioneer decided to build a plant. Water customers of Seneca and Westminster will be harmed as they will have to pay for “Pioneer’s capacity”.

            A remedy would be to go to court and have a judge apply the law. (And indeed Seneca, Westminster, and the County are suing Pioneer on behalf of those customers who will have to pay more.)

            I can imagine the Judge saying, “You can build the plant if you can you submit proof to this court that you have no other available source of water.”

            Pioneer could respond. “We do have sources, but they increased their prices.”

            What follows could be interesting…

            A) The Judge might just say, “The law says nothing about price. You have a source of water. I rule that you are in violation of the law.”

            OR

            B) Even if the Judge is sympathetic to the price argument. The two cities might respond. “Years ago we offered Pioneer long term contracts for water at rates lower than the cost that they can produce water for, but Pioneer refused to sign them.” In which case the Judge would rule against Pioneer.

            OR

            C) If the price argument were to be examined… The Judge might say “I’m sympathetic to your price complaint against Westminster. Can the attorney for Westminster explain the cost increase?” to which that attorney might say “All cost increases were due to costs the city incurred as a result of dealing with Pioneer. It would have been improper to charge our customers for their costs, therefore we simply charged them what they had cost us.” In which case the Judge might say “Pioneer has a source of water. Their complaint that the water is expensive is a result of their own actions and is therefore meaningless as a defense in this case. Since you cannot prove you have not other source of water, I order you to cease construction of the plant and to purchase water from Seneca and Westminster in the future.”

            OR

            D) Pioneer might throw itself on the mercy of the court. “Your Honor, We have a source of water, we admit that the prices charged were justified, we further admit that we were offered excellent prices and long term contracts that would have been cheaper for our customers than building a plant, further we admit that the illegality of this plant was pointed out to us in 2011, further we admit that this plant will result in risks and costs to our customers above what would have resulted had we accepted contracts from Seneca and Westminster… However, we have spent millions of dollars on this plant and if we stop construction now, our board has obligated us to pay millions more. This money will have been wasted and our customers will be forced to pay for our actions. Although our board should have investigated the facts and determined that the contracts with Seneca and Westminster would have been more economical, and although customers will now pay more, if we stop construction customers bills will rise EVEN HIGHER we ask for permission to finish construction.” To which the Judge might respond, “You have no right to build this plant. You knew that years ago. You have sources of water. Further, you would cause damage to the customers of Seneca and Westminster if you complete construction of the plant. I will limit the cost increases to your own customers by ordering you to cease construction of the plant and to purchase water from Seneca and Westminster in the future.”

          • Steve

            Pioneer has the ability under the law to “acquire, construct and operate a waterworks system, utilizing therefor water from available sources”, why is Lake Hartwell not considered a “source” in your opinion?

          • WBHobbs

            Lake Hartwell is not a water source for Pioneer because the lake is not filled with drinking water. Pioneer was established to distribute drinking water and is required to meet U.S. Environmental Protection Agency standards for that water. If the raw lake water met those standards, Pioneer would not be spending millions on a treatment plant, right? …and we wouldn’t be having this dispute…

            Available sources for large quantities of drinking water around here are Westminster, Seneca, and Anderson Regional Joint Water System.

          • Steve

            Point me to the part in 6-13-210 where it says they can only distribute or transport drinking water meeting EPA standards.

            Considering Pioneer was established in 1965 and the EPA was not formed until 1972 I’m interested in your logic here.

          • WBHobbs

            The law you reference is related only to the “Creation and purpose of Pioneer Rural Water District” and it’s a SC law. Pioneer, like the rest of us, is subject to hundreds of thousands of pages of laws dealing with almost ever aspect of almost every thing we do. As much as we would like to think that there is just one small section of SC law that we need to pay attention to, there are other laws some of which are Federal, some can be county, some may even be at the city level… all must be obeyed.

            My logic “Considering Pioneer was established in 1965 and the EPA was not formed until 1972” is that being formed (or born) before a law was enacted does not exempt you from that law. (wouldn’t life be complicated if that were the case… Dear IRS, I notice that you assumed I should pay 39.6% on short term capital gains. When I was born the maximum rate was 25%. I have adjusted my taxes to reflect that lower payment.)

            BTW I think the EPA was formed in 1970…

            The Safe Drinking Water Act is the main body of law that regulates the quality of water that Pioneer can legally distribute. Pioneer can only distribute “Drinking Water”, and lake Hartwell is not full of that (Hence the problem with acquiring water to distribute)

            Congress enacted the Safe Drinking Water Act in 1974 and amended and reauthorized it in several times since then. Prior to 1974, I don’t know what the standards were. I suspect that there were some requirements, but I have no knowledge of them.

  • WBHobbs

    What we have here is biased and one sided report by Hannah Hill. The truth is a bit more complicated, but it’s still as interesting. It would take more effort to provide a more complete picture of what has happened, so let’s challenge Hannah to find the other side of the story.

    Start by answering the question; “Did Pioneer ever have the legal authority to build a treatment plant?”

  • claire nettles

    someone needs to follow the money . How can this legislation possibly benefit his constituents

    • WBHobbs

      Here is how. The legislation that established Pioneer was written so that a few large and efficient treatment plants would be built. Water from those plants would be distributed and sold by government agencies like Pioneer who were not given authority to build plants.

      Westminster and Seneca have built plants that are designed to serve Pioneer. Pioneer’s water purchases pay for the extra capacity of those plants. If Pioneer builds it’s own plant that is smaller and less efficient, then 1) Pioneer customers will pay more than they should and 2) when Pioneer stops buying water, the Seneca and Westminster customers will have to pay for Pioneer’s unused capacity.

      His legislation, if followed, would benefit all groups involved in this dispute.

  • Lyn Wilson

    Is Pioneer a private water company or a public utility?

    • WBHobbs

      It’s neither private or publicly owned. It’s a government entity established by law. They have an amazing amount of power and very little oversight by anyone.

  • ED Lown

    the crooked bastards smell blood …..er water……er money

  • Philip Branton

    Hmm……..this sounds rather familiar.

    “….Pioneer buys all its water from the cities of Seneca and Westminster in Oconee County and resells it to its customers. Between 2008 and 2012, the city of Westminster raised its rates 174 percent, Pruitt said. After a feasibility study, the board of directors (the same board that was selected by the Pioneer Water customers) determined that building its own water treatment plant and taking water from Lake Hartwell was the most cost-effective option…..”

    Well…….now think of Ukraine and how they are dependent on Putin in Russia for their gas. “…..Ukraine buys all its GAS (water) from Russia and resells it to its customers. Between 2008 and 2012, the dictator of Russia, Vladimir Putin raised its gas https://uploads.disquscdn.com/images/00c50a265c259760b52457865db18b5a28054cb6542d44c37e6b67da4d378885.jpg rates 174 percent, Igor said. After a feasibility study, the board of directors (the same board that was selected by the Ukrainian customers) determined that buying its gas from someone else was the most cost-effective option…..”

    • WBHobbs

      Phillip, Maybe you know the answer to this question. I heard that Westminster raised rates to cover the legal costs incurred when Pioneer tried to take some customers. Is that true?

      If so, it would seem that Pioneer was responsible.

      Maybe you are familiar with this too. I also heard that Westminster and Seneca both offered very low rates with guarantees of low escalation back years ago, but Pioneer did not take them up non their offers. That would mean that Pioneer customers have been paying more for water than they needed to for some time. Do you know if that’s true?

      • Philip Branton

        Mr. Hobbs, your tenacity here in this comment section is very refreshing. The information you are asking me about should be linked and imbedded in this article by the writer and editor. You wise rascal. You need to be an honorary member of the Brockovich posse.

        Saddle up….. Mr. Hobbs https://uploads.disquscdn.com/images/d87d52dc8e21e0862c192aa3ac279ccdd4f31bc18fcbbad0551fa897d60c3d96.jpg

        • WBHobbs

          Thanks Philip,

          I spent 35 years in Finance working for a Fortune 100 company where I evaluated the economics of utility projects much larger than, but similar to this one. I find this particular project very interesting since I am a customer, and since the facts have been difficult to uncover. I think it would make a great Harvard Business School case study.

          The author and editor have a unique opportunity to be “fair and balanced” here. I can see another story with the title “Representative seeks to SAVE water customers… The other side of the story”.

        • WBHobbs

          I was just passing through Atlanta where, with thousands of other motorists, I sacrificed an hour or more of my life to drive just a few miles in heave traffic caused by this man. Let me at him!

  • WBHobbs

    Just found that the AG issued a new opinion that affirms their prior 2012 opinion. Pioneer would have to show necessity and convince a court that they had to build a plant.

    http://2hsvz0l74ah31vgcm16peuy12tz.wpengine.netdna-cdn.com/wp-content/uploads/2017/04/Sandifer-B.-OS-10135-FINAL-Opinion-4-13-2017-01318697xD2C78.pdf

  • WBHobbs

    According to WGOG radio… State Senator Thomas Alexander introduced a bill yesterday in Columbia, aimed at stopping the construction of the plant…

    It seems obvious to me that a number of people don’t see the “need” for the increased cost of one additional government project when there are already sources of water for Pioneer.