a SPILMAN THOM,AS & BATTLE,pLLC

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1 a SPILMAN THOM,AS & BATTLE,pLLC A T T O R N E Y S A T L A W November 14,2007 Direct Dial: [email protected] VIA HAND DELIW?R Y Sandra Squire Executive Secretary Public Service Commission of West Virginia 201 Brooks Street Charleston, West Virginia Re: Case No W-42T West Virginia-American Water Company Rule 42T Application to Increase Water Rates and Charges Dear Ms. Squire: Enclosed for filing on behalf of the City of Charleston and SWVA, Inc. in the abovereferenced matter are an original and twelve copies of the following: 1. Direct Testimony of Mayor Danny Jones; 2. Direct Testimony of Timothy R. Duke Please do not hesitate to contact me if you have any questions regarding this matter. LFF/tmg:mi 17 Enclosures cc: See Certificate of Service Lee F. Feinberg (WV State Bar #1173) u Spilman Center i 300 Kanawha Boulevard, East t Post Office Box 273 t Charleston, West Virginia i i fax West Virginia North Carolina Pennsylvania Virginia

2 CERTIFICATE OF SERVICE I, Lee F. Feinberg, Counsel for the City of Charleston and SWVA, Inc. do hereby certifl that on this 14* day of November, 2007, the Direct Testimony of Mayor Danny Jones and Direct Testimony of Timothy R. Duke; was served upon: VIA U.S. Mail Christopher L. Callas, Esquire John Philip Melick, Esquire Stephen N. Chambers, Esquire Jackson Kelly PLLC P.O. Box 553 Charleston, West Virginia Robert R. Rodecker, Esquire P.O. Box 3713 Charleston, West Virginia David A. Sade, Esquire Consumer Advocate Division 700 Union Building 723 Kanawha Blvd., East Charleston, West Virginia Thomas N. Hanna, Esquire Attorney at Law P. 0. Box 3967 Charleston, West Virginia Ray Keener, Esquire Assistant County Attorney Kanawha County Commission P. 0. Box 3627 Charleston, West Virginia VIA HAND DELIVERY Meyishi Pearl Blair, Esquire Public Service Commission of West Virginia 201 Brooks Street Charleston, West Virginia Lee F. Feinberg (WV 8 ate Bar # 1173)

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4 1 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON West Virginia-American Water Company : Case No W-42T Rule 42T application to increase rates and charges. 8 Q 9 A Q 12 A 13 Q 14 A Q A Please state your name and business address. Danny Jones. I am the Mayor of Charleston. My business address is Court and Virginia Streets, Charleston, WV Are you a resident of the City of Charleston? Yes. I have been a resident of the City of Charleston ( Charleston ) for all of my life. What is the purpose of your testimony? The purpose of my testimony is to demonstrate the adverse impact that West Virginia- American Water Company s (the Company ) proposed increase in water rates will have on the citizens of Charleston, and will have on the City itself. Are you familiar with the level of increase in water rates the Company has requested in this case? Yes. The Company originally requested an increase in annual revenues of approximately $24 million or nearly 25%. Subsequently the Company has reduced the requested increase to about $22.5 million annually.

5 Mayor Danny Jones Direct Testimony Page 2 1 A 2 3 Yes. The Company originally requested an increase in annual revenues of approximately $24 million or nearly 25%. Subsequently the Company has reduced the requested increase to about $22.5 million annually. 4 Q Are there any other rate issues about which the City has concerns? 5 A Because the Company proposes to create, without statutory or regulatory authority, a low 6 income water discount of 25% most other customers, including the City of Charleston 7 will face an even larger increase than would otherwise occur. 8 Q Have you reviewed the City s payments for water service? 9 A Yes. In 2006, the City spent approximately $258,000 for water service to its facilities 10 exclusive of fees for fire hydrants. The increase requested would amount to Q A Q 19 A approximately $58,000 annually for water service to its facilities, exclusive of fire hydrants. Please describe the impact such a large increase in water rates would have on the City. Such a large increase presents a significant challenge to Charleston s annual budget. As the City faces tighter and tighter budgets this substantial increase can cause an adverse impact on the provision of services to Charleston s citizens. Does this conclude your testimony at this time? Yes, it does.

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8 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON West Virginia-American Water Company : Rule 42T application to increase rates and charges... Case No W-42T DIRECT TESTIMONY OF TIMOTHY R. DUKE 1 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 2 A. My name is Timothy R. Duke. My business address is 17fh Street & 2nd Avenue, 3 Huntington, WV Q. BY WHOM ARE YOU EMPLOYED? 6 A. I am employed by SWVA, Inc., ( SWVA ). 7 8 Q. WHAT IS YOUR POSITION WITH SWVA, Inc.? 9 A. I am President and CEO of SWVA, Inc.

9 1 Q. 2 3 A. Timothy R. Duke Page 2 PLEASE DESCRIBE YOUR EDUCATIONAL AND EMPLOYMENT BACKGROUND. I earned an MBA from Duquesne University and a B.S. in Business from Pennsylvania 4 State University. I am a Certified Public Accountant, a Certified Management Accountant, and a Certified Computer Professional. I have 35 years of progressive management experience in heavy industry. I have worked at SWVA since Prior to that, I worked for several Fortune 500 manufacturing companies. 8 9 Q. 10 A IN WHAT TYPE OF BUSINESS IS SWVA, INC. INVOLVED? SWVA, Inc., operates a steel mini-mill and a steel fabrication facility for the manufacture and distribution of special sections and steel billets. SWVA, Inc., custom designs and manufactures special steel products principally for use in the construction of truck trailers, industrial lift trucks, off-highway construction equipment (such as bulldozers and graders), manufactured housing, guardrail post, and in the mining industry Q. 17 A PLEASE PROVIDE A BRIEF HISTORY OF THE SWVA, INC., FACILITY, The facility originated in the early twentieth century and was operated fiom 1909 to 1956 by the Schonthan family. It began with fewer than 30 employees in a 7,200 square-foot building on a three-acre site on the Ohio River at Seventeenth Street. The plant was then owned by H.K. Porter from 1956 until In 1982 the plant was closed because it was unprofitable. The primary reasons for its closure were a lack of capital investment and a restrictive union labor contract..

10 Timothy R. Duke Page 3 In August 1982, local private investors purchased the assets and negotiated a non- restrictive labor contract. Since that time, SWVA, Inc., has expanded to forty-four acres between Fourteenth and Twentieth Streets in Huntington and spent millions of dollars in capital upgrades. We currently employ approximately 502 individuals. From December 1998 until April 2006, Roanoke Electric Steel Corporation owned SWVA which it had purchased on December 16, On April 12,2006, Steel Dynamics, Inc. purchased all of Roanoke Electric Steel. SWVA, Inc. now operates as a wholly owned subsidiary of Steel Dynamics, Inc. S WVA's industrial and office buildings incorporate over 500,000 square feet and contain state of the art steel-making and finishing equipment to meet customers' specifications. S WVA, Inch, manufacturing process includes a melt shop, rolling mills, fabricating facilities, warehousing, and a distribution center. We utilize all kinds of scrap metal such as shredded automobiles, old appliances, wheel rims, and metal shavings, and we re-melt them using electricity in our two 70 ton electric arc hrnaces. Our recycling of scrap metal into useable products is significantly beneficial to the environment. If it were not for companies like ours, these large amounts of scrap metal would have to be disposed of in landfills and would take years to rust away Q. 20 A PLEASE DISCUSS SWVA, INC.'S IMPACT ON THE LOCAL ECONOMY. In fiscal year ended 2006, SWVA, Inc., paid a total of $45.1 million in direct wages and benefits to our employees, and we support large numbers of suppliers in our local economy by purchasing millions of dollars of supplies, repair items, and spare parts. We also hire the services of numerous local maintenance and construction contractors. In

11 1 2 Timothy R. Duke Page 4 addition, we pay approximately $3.0 million in local and state income and property taxes annually. 3 4 Q. PLEASE DESCRIBE WHY THIS CASE IS IMPORTANT TO INDUSTRIAL 5 CUSTOMERS LIKE YOURSELF. 6 A SWVA, Inc., was closed in 1982 as it was not competitive and was unprofitable. A group of local investors saved the plant from demolition by investing in the idled facility. A total of $148.2 million has been reinvested in the plant since 1982 to keep it competitive in the world market. Knowing the background of our company and the world market in which we have to compete, this case is extremely important to an industrial customer like SWVA, Inc. We compete against both other domestic steel producers along with world-wide producers. In order to remain competitive we have had to expend over $148 million to modernize the plant. Other costs continue to rise, particularly health care and electricity. We operate in a low margin cyclical business and find it quite difficult to pass along a cost increase. It is not likely that we will be able to pass this increase along to our customers Q A IF THE COMMISSION WERE TO APPROVE WEST VIRGINIA-AMERICAN WATER S PROPOSED RATE INCREASE, WHAT WOULD BE THE IMPACT ON YOUR FACILITY? In 2006 we spent approximately $463, for water service to our facilities. The increase requested would add approximately $104, annually for water service to SWVA, Inc.

12 1 Timothy R. Duke Page 5 2 Q. DOES THIS CONCLUDE YOUR TESTIMONY? 3 A. Yes.

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