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HomeMy Public PortalAboutExhibit MSD 92 - Pre-Hearing Conference Summary of MSDTHE DISTRICT’S PREHEARING CONFERENCE SUMMARY July 12, 2019 Good Morning, my name is Susan Myers and I am the General Counsel for the Metropolitan St. Louis Sewer District. As you all know the District submitted a Wastewater Rate Change Proposal to you on March 4, 2019, proposing wastewater rates for FY21-FY24. Although the District provided information that contained projected rate increases after FY24 for long-term future planning purposes, this information is preliminary and was not subjected to the same level of scrutiny and analysis that was conducted to calculate rates for FY21-FY24 and is outside the scope of the current proposal being considered by the Rate Commission. As proposed, the District’s proposal meets the five criteria outlined in the MSD Charter Section 7.270. Now the task at hand for you is to consider all the evidence presented and issue a Rate Recommendation to the Board of Trustees that also meets those five criteria. Based upon the evidence as presented there seems to be four topics that warrant further discussion. Topic #1 involves the schedule required to design and build the fluidized bed incinerators at both the Lemay and Bissell treatment plants. MSD’s position is that the existing incinerators will be in violation of the law without maintenance. Under the SSI Rule maintenance repairs are not an option, and the units have to be replaced. MSD committed to EPA to follow the law and replace the incinerators beginning construction in 2023 as a condition of a CD amendment. The Intervener, MIEC, proposes that we can request a CD extension from EPA anytime or that MSD has discretion to move projects. Your Rate Consultant agrees that MSD has very little discretion to move projects in this rate proposal, including the incinerators. You all may recall an inaccurate Channel 5 News Report on the impact of incinerators on the St. Louis area. If you would like accurate information please review the entire interview on MSD’s website. It is MSD’s position that moving the incineration project construction start out past FY23 will cause - 1 - Exhibit MSD 92 the District to not meet Criteria 4, as it would impair the ability of the District to comply with existing law. Topic #2 involves how infiltration and inflow should be allocated. The District testified that the allocation of 40% to customer and 60% to volume has been in place since 2007 and was found to be fair and reasonable in the 2007, 2011 and 2015 wastewater Rate Commission processes. The primary source for this information was based upon an I/I Allocation Study done in 2005. However, an explanation of how that study was used to arrive at the allocation factors was provided in the District’s 2007 Rate Proposal. MSD’s experts testified that they have not identified any changes in the character of the wastewater system since this study that would modify this allocation up or down. MSD is committed to performing a new I/I Allocation Study prior to the next Rate Proposal. The new report will take into account the impact of the removal of 189 SSO’s (85%) since the start of the consent decree. The intervener, MIEC, proposes an arbitrary allocation of 50% to customer and 50% to volume. This proposal is not based upon any supporting evidence or data. Your Rate Consultant seems to agree with the District, that there has not been any evidence presented to prove that the allocation from the study has changed. At this time, an arbitrary change to the allocation would be in violation of Criteria #5 by not being fair and reasonable to all classes of ratepayers. Topic #3 involves the Intervener’s proposal that MSD should move $70M from FY23 and FY24 to lessen wastewater rate increases projected for FY21 to FY24. MSD has provided evidence, and again your Rate Consultant agrees, that we have very little discretion to move projects. Specifically, MSD cannot delay the incinerator project. District staff has concluded that there is not $70M in projects that can be responsibly delayed in FY23 and FY24, without significant, negative consequences. Topic #4 involves the proposed Extra Strength Surcharge. The Extra Strength Surcharge proposed by MSD has been adjusted beginning in FY21 so that the cost to service customers subject to the surcharge are recovered and increases to the surcharge in FY 22 thru FY 24 are - 2 - based on expected increases in O&M expenses. MSD experts acknowledge that there are other methodologies that would also be considered fair and reasonable. The Intervener suggests that an across the board increase should be implemented. The difference between an across the board increase and an increase based on O&M changes is very minimal; however, an across the board increase would result in rates higher than what is requested by MSD. Please remember that during the current rate cycle (FY17-FY20) the MSD customers not subject to this surcharge have been subsidizing those customers that are subject to a surcharge. This subsidy would continue if the increase was phased in over 2 years as recommended by the Rate Consultant. As I stated at the beginning of my statement, the task at hand is for the Rate Commission to issue its Rate recommendation to the Board of Trustees that meets the five criteria outlined in the MSD Charter Section 7.270. Upon review of the complete record of these proceedings you will be able to determine that the District’s proposal does just that, however, the proposal provided by the Intervener cannot be objectively evaluated due to numerous errors in the models that were submitted by their consultant. This concludes the District's official summary statement. A copy of our statement will be filed as Exhibit MSD 092. Thank You - 3 -