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HomeMy Public PortalAboutExhibit MIEC 90B - Citizens-Indianapolis Infiltration-Inflow Analysis-v1BLACK & VEATCH MANAGEMENT CONSULTING, LLC  8415 ALLISON POINTE BOULEVARD, SUITE 410, INDIANAPOLIS, IN 46236  +1‐913‐458‐1538 | KUMARPN@BV.COM   www.bv.com  DRAFT MEMORANDUM To: Korlon Kilpatrick and Debi Bardhan, CWA Authority, Inc. From: Mathew Powis, Prabha Kumar Subject: High Level Infiltration and Inflow Analysis for Cost Allocation Purposes Date: June 21, 2018 Background  During the past two rate cases for CWA Authority, Inc. (“CWA”), Black & Veatch Management Consulting, LLC (“Black & Veatch”) prepared a cost of service study that followed guidelines outlined in the 2005 edition of the Water Environment Federation’s (“WEF”) Manual of Practice Number 27: Financing and Charges for Wastewater Systems (“WEF MOP 27”). One specific portion of the cost of service study that has been particularly disputed by the CWA Industrial Group intervenor is the allocation of wastewater system Infiltration and Inflow (“I/I”) to various classes of service. I/I occurs in all wastewater systems and it is recognized that there are costs for handling I/I that must be recovered from wastewater system customers. In general, the percentage of system I/I allocated to a certain customer class results in more wastewater system costs to be recovered by that class. WEF MOP 27 provides potential approaches for allocating I/I costs to various customer classes, including: Use of customer class contributed volumes Use of customer number of connections Use of land area Use of property valuation (if user charges are based on ad valorem taxes) WEF MOP 27 states that “the most common approaches have been to use contributed wastewater flow, the number of connections (or customers), or a combination of the two to allocate I/I related costs.” Black & Veatch allocates system I/I to the customer classes using a combination of number of customers/connections and contributed volume, i.e. 67% of I/I is allocated based on a customer class’ number of connections (number of bills is used as a proxy); and 33% of I/I is allocated based on a customer class’ contributed volume. Similar allocation bases have been used by Black & Veatch in other cost of service studies and Black & Veatch feels it is a reasonable approach. Additionally, this is the basis used by WEF MOP 27 in its cost of service examples. Using the Cause No. 44685‐S1 Satellite Subdocket Settlement Cost of Service Model, the 67%/33% approach results in the following I/I allocation to the Non‐Industrial and Self‐Reporter classes. CWA AUTHORITY, INC.; ATTACHMENT PNK-7 Exhibit MIEC ____ Page 1 of 10 90B  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 2      Table 1 Resulting I/I Allocation Using 67% Customer; 33% Volume Allocation Basis  Class Infiltration and Inflow (1,000 gal.)Percentage Non Industrial 28,825,763 93.60% Self‐Reporter 1,971,460 6.40% Total Retail 30,797,223 100.00%   As can be seen, the approach used by Black & Veatch results in approximately 6.4% of system I/I being allocated to the Self‐Reporter class. During the Settlement in Cause No. 44685, the CWA Industrial Group argued that the allocation of I/I should be established using 90% Customer; 10% Volume basis. This allocation basis results in following I/I allocated to the Non‐Industrial and Self‐Reporter classes. Table 2 Resulting I/I Allocation Using 90% Customer; 10% Contributed Volume Allocation Basis  Class Infiltration and Inflow (1,000 gal.)Percentage Non Industrial 30,168,038 97.96% Self‐Reporter 629,185 2.04% Total Retail 30,797,223 100.00%   As can be seen, the 90% Customer; 10% Volume allocation basis results in approximately 2.04% of system I/I being allocated to the Self‐Reporter class, which is more favorable to that class compared to the Table 1 results. It results in less I/I allocated to the Self‐Reporter class and accordingly results in a lower cost of service, with the balance generally being recovered by the Non‐Industrial class. Current I/I Analysis  During the Settlement in Cause No. 44685, the parties agreed to discuss certain cost of service issues, including an analysis of I/I allocations. As the historical disagreements between the parties have been related to the allocation of I/I, Black & Veatch has been requested by CWA to perform a high level analysis to determine whether the 67% Customer; 33% Volume allocation basis is reasonable, or whether it should be adjusted. To perform the I/I analysis, Black & Veatch looked at providing a calculation that incorporates several elements including length of wastewater system mains; diameter of mains; number of connections; and contributed volume. The calculation and resulting allocation of I/I by customer class can be compared to the percentages in Table 1 and Table 2 above to assess for comparability and reasonableness. Exhibit MIEC ____ Page 2 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 3      INCH‐FEET ANALYSIS  I/I is known to enter the wastewater system in several ways including:  Customer connections via the lateral sewer connection from the property to the utility’s sewer main  Manholes  Pipe joints  Cracks or other deficiencies that allow leaks to occur  Direct inflow in the combined sewer area To develop a high level allocation of I/I, Black & Veatch segmented the collection system between small mains (mains that are less than 24‐inch diameter) and large mains (mains that are 24‐inch and greater in diameter). In general, small mains reflect the portion of the collection system where the vast majority of customers are connected. The small main system is also reflective of the general expanse of the wastewater system. This provides a reasonable basis for determining I/I allocation in these mains on a per customer basis. Large mains reflect conveyance or intercepting sewers which consolidate flows from the smaller sewer mains serving multiple areas of the system for delivery to the wastewater treatment plants. They are designed to handle wastewater contributed volumes, as well as I/I, and have far fewer direct customer connections associated with them. Therefore, contributed volume provides a reasonable basis for determining I/I allocation responsibility related to these large mains. CWA provided a summary of the lengths of wastewater collection system main by diameter. Black & Veatch multiplied the feet of main by the diameter in inches to derive an inch‐feet quantity related to small mains and large mains. The following reflects a summary of the inch‐ feet quantities by small mains and large mains: Table 3 Summary of Inch‐Feet of Main by Small Main vs. Large Main Categories  Line No. Collection System Mains  Quantity  (Inch‐Feet) Percentage  1 Small Mains (Less Than 24‐Inch Diameter)139,620,386  54.17% 2 Large Mains (24‐Inch and Greater Diameter)118,111,573  45.83% 3 Total 257,731,959  100.00%   CWA provided a summary of the number of connections by diameter of main. For small mains, there are approximately 174 Self‐Reporter connections out of a total of 215,131 connections for mains less than 24‐inch diameter, or 0.08%. The remaining 214,957 connections are Non‐ Industrial class‐related and reflect a percentage of 99.92%. Exhibit MIEC ____ Page 3 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 4      For allocating I/I related to large mains, Black & Veatch utilized the pro forma contributed volumes from the cost of service model for the Cause No. 44685 S1 settlement. The Self‐ Reporter contributed volume is 5,324,473 1,000 gal. out of total retail contributed volume of 28,204,626 1,000 gal., or 18.88%. The remaining 22,880,153 1,000 gal. is the Non‐Industrial contributed volume, or 81.12% of total retail contributed volume. The following Table summarizes the resulting allocation of wastewater system I/I to the retail customer classes. Table 4 Estimated I/I by Class – Inch‐Feet of Collection Main Basis   (1) (2)(3) (4)(5) Line  No. Description  Non‐ Industrial  Self‐ Reporter Total Reference  1 Small Main Percentage 54.17% 54.17%   2 Percentage of Connections 99.92% 0.08%   3 Small Main Weighted % 54.13%0.04% Line 1 X Line 2 4 Small Main I/I  16,670,537 12,319 16,682,856 30,797,223 X Line 3 5 Large Main Percentage 45.83% 45.83%   6 Percentage of Volume 81.12% 18.88%   7 Large Main Weighted % 37.18%8.65% Line 5 X Line 6 8 Large Main I/I 11,450,408 2,663,960 14,114,368 30,797,223 X Line 7 9 Total I/I  28,120,945 2,676,279 30,797,224 Line 4 + Line 8   As the results of Table 4 show, the Self‐Reporter I/I estimate of 2,676,279 is approximately 35% higher than the current cost of service basis that uses the 67% Customer; 33% Volume basis. It is approximately 425% higher than the 90% Customer; 10% Volume basis advocated by the CWA Industrial Group. TOTAL LENGTH ANALYSIS  As an additional analysis, Black & Veatch utilized a breakout of the collection system between small and large mains based on just the total length of the system, i.e., not based on the inch‐feet quantity. The purpose of this analysis is to reflect a scenario that assumes that the small mains and associated connections impact the majority of the system I/I. The percentage of system categorized as large mains is much less in this scenario, but is still allocated on a contributed volume basis. The following Table summarizes the length of main by small mains vs. large mains. Exhibit MIEC ____ Page 4 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 5      Table 5 Summary of Length of Main by Small Main vs. Large Main Categories  Line No. Collection System Mains  Quantity  (Feet) Percentage  1 Small Mains (Less Than 24‐Inch Diameter)13,406,046  83.72% 2 Large Mains (24‐Inch and Greater Diameter)2,606,570  16.28% 3 Total 16,012,616  100.00%   Similar to the Inch‐Feet analysis above, the following Table estimates the amount of I/I applicable to the Non‐Industrial and Self‐Reporter classes on the basis of the number of connections for small mains, and the class contributed volume for large mains. Table 6 Estimated I/I by Class – Total Length of Collection Main Basis   (1) (2)(3) (4)(5) Line  No. Description  Non‐ Industrial  Self‐ Reporter Total Reference  1 Small Main Percentage 83.72% 83.72%   2 Percentage of Connections 99.92% 0.08%   3 Small Main Weighted % 83.65%0.07% Line 1 X Line 2 4 Small Main I/I  25,761,877 21,558 25,783,435 30,797,223 X Line 3 5 Large Main Percentage 16.28% 16.28%   6 Percentage of Volume 81.82% 18.88%   7 Large Main Weighted % 13.21%3.07% Line 5 X Line 6 8 Large Main I/I 4,068,313 945,475 5,013,788 30,797,223 X Line 7 9 Total I/I  29,830,190 967,033 30,797,222 Line 4 + Line 8   As the results of Table 6 show, the Self‐Reporter I/I estimate of 967,033 is approximately 51% lower than the current cost of service basis that uses the 67% Customer; 33% Volume basis. It is approximately 53% higher than the 90% Customer; 10% Volume basis advocated by the CWA Industrial Group. LAND USE ANALYSIS  As noted above, one method for allocating I/I to customer classes is based on land use. Black & Veatch utilized data from CWA’s Geographical Information System (GIS) to understand the wastewater collection system with respect to land use categories. Exhibit MIEC ____ Page 5 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 6      Data for CWA‐owned mains was reviewed to determine the length of mains by land use category. The diameter of main was also available so Black & Veatch reviewed the inch‐feet of main by land use category. The following Table provides a summary of the CWA mains by land use category. Table 7 Summary of CWA Wastewater Mains by Land Use Category  Line No.  Land Use  Category  Length of Main  (Feet)  Inch‐Feet of  Main % of Length  % of Inch‐ Feet  1 Agriculture 255,956 7,051,554 1.58% 2.72% 2 Commercial 2,068,549 40,528,774 12.76% 15.62% 3 Exempt 1,632,182 41,394,834 10.07% 15.95% 4 Industrial 717,502 17,135,965 4.43% 6.60% 5 Residential 11,382,806 149,005,300 70.21% 57.42% 6 Utilities 155,904 4,372,840 0.96% 1.69% 7 Total 16,212,899 259,489,267 100.00% 100.00%    As can be seen in the Table above, the Industrial land use category accounts for approximately 4.4% of wastewater system mains by length, and approximately 6.6% of wastewater mains (Inch‐Feet basis). Applying these percentages to the total system I/I results in approximately 1,363,000 1,000 gal. and 2,034,000 1,000 gal., respectively. Acreage by Rate Class  CWA also provided data related to land use acreage summarized by rate code. The data reflects that approximately 2.43% of wastewater system acreage is related to Rate Class 5 and Rate Class 2 customers. These two classes comprise self‐reporter and other industrial‐type customers. SYSTEM SIZE DIFFERENTIAL ANALYSIS  Another option for determining the allocation of system I/I between classes is to consider how much larger the collection system is to handle volumes from the Self‐Reporter class. The reasoning behind allocating some of the I/I cost based on the contributed volumes from the Self‐Reporter class is that their discharges require larger sewers for conveyance, which can result in more I/I entering into the system as those sewers develop defects. Assuming that collection system‐size is proportional to the I/I volume (i.e., larger collection systems have more I/I volume), a calculation that determines how much larger the collection system is due to the Self‐Reporter class can provide a basis for allocating I/I costs. Exhibit MIEC ____ Page 6 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 7      The system unit of measure used for this analysis is the inch‐diameter*mile (IDM), which is the diameter of the sewer segment in inches multiplied by the length of the sewer in miles. The data provided by CWA for the analysis included the following:  Collection system data for the entire system  Parcel data for the CWA service area spatially‐related to connected dischargers  CWA dry weather model simulation results for a typical week (not all manholes and pipes in the collection system have been modeled)  Average daily discharges for the Self‐Reporter customers The following describes the calculation procedure performed by Black & Veatch: 1. Subtracted out the Self‐Reporter parcel areas to determine the typical discharger service area (acres) 2. Divided the typical discharger average daily flow by the typical discharger service area to determine the typical discharger intensity (MGD/acre) 3. Multiplied the Self‐Reporter parcel area by the average discharger intensity to determine the Self‐Reporter discharge that would be typical for the service area 4. Subtracted the Self‐Reporter discharge typical for the service area from the Self‐ Reporter discharge. This provides the estimate of the flow increase attributable to the self‐reporters 5. Located the nearest collection system model manhole to each Self‐Reporter parcel to determine where flows in the current system would be lower if Self‐Reporter discharges were similar to a typical discharger 6. Using the CWA collection system model results for average daily flows, subtracted out the high flows attributed to the Self‐Reporters. This determines the average daily flow results in only average flows (MGD) for typical dischargers 7. Used Manning’s equation to calculate the new sewer diameter that would be needed to handle a similar percentage of dry weather capacity (percent dry weather capacity equals the average dry weather flow divided by the sewer capacity) 8. The difference between the current system IDM and the typical discharger system IDM is the difference in system size attributable to the Self‐Reporters There were approximately 249 Self‐Reporter parcels located in the parcel dataset, which represented about 58% of the Self‐Reporter customer volume. The calculation determined that the collection system is 1,031 IDM larger due to the high Self‐Reporter customers. Black & Veatch accounted for the Self‐Reporters not located by assuming a proportional increase in system IDM to 1,778 IDM. From the CWA sanitary sewer collection system data, the total collection system size is approximately 48,900 IDM. Therefore, assuming the I/I volume is proportional to the increased collection system size attributed to the Self‐Reporters, then Exhibit MIEC ____ Page 7 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 8      approximately 3.6 % of the I/I volume could be attributed to the high flows of the Self‐Reporter class (1,778 IDM divided by 48,900 IDM is 3.6%). SUMMARY OF CURRENT I/I ANALYSIS  The following Table presents a summary of the high level I/I analysis performed by Black & Veatch. As can be seen, Lines 1 through Line 6 present the estimated Self‐Reporter annual I/I using the methods outlined above. Line 7 presents the average of the method results in Lines 1 through 6. Line 8 presents the estimated Self‐Reporter I/I using the methods proposed by the CWA Industrial Group and the Black & Veatch in the previous cost of service study, respectively. As can be seen, the I/I analysis results in equivalent allocation basis ranging from 54.5% Customer; 45.5% Volume to 87.9% Customer; 12.1% Volume. Within this range of results is the allocation basis utilized in previous CWA rate filings of 66.7% Customer; 33.3% Volume. In Black & Veatch’s opinion, the allocation bases that utilize an inch‐feet basis (Line 1, Line 3, and Line 6) in lieu of length only (Line 2 and Line 4) are generally more reasonable as they better reflect that collection systems are designed to handle both the number of customers and the associated volumes expected from the customers. The results below reflect that the 66.7% Customer; 33.3% Volume system I/I allocation basis used in the last two CWA rate filings is reasonable. The System Size Differential analysis, which relies on an assessment of Self‐Reporter parcels and adjacent system mains, provides an estimate of approximately 80.4% Customer; 19.6% Volume. Table 8 Summary of High Level I/I Analysis Reflecting Self‐Reporter I/I Allocation  Line  No. Method  Self‐Reporter I/I Estimate (1,000 gal.)  Equivalent System I/I Allocation  Basis  1 Inch‐Feet Collection Main  Basis 2,676,279 54.5% Customer; 45.5% Volume  2 Length (Feet) Collection Main  Basis 967,033 84.1% Customer; 15.9% Volume  3 Land Use Inch‐Feet Basis 2,034,000 65.6% Customer; 34.4% Volume 4 Land Use Length (Feet) Basis 1,363,000 77.6% Customer; 22.4% Volume 5 Acreage by Rate Code 748,300 87.9% Customer; 12.1% Volume 6 System Size Differential 1,180,700 80.4% Customer; 19.6% Volume Summary  7 Average of Methods  (Average Line 1‐6) 1,494,885 75.0% Customer; 25.0% Volume  8 Range Cause No. 44685 S1  Model 629,1851 1,971,4602   Exhibit MIEC ____ Page 8 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 9      1  Reflects Self‐Reporter I/I allocation at 90% Customer; 10% Volume basis.  2  Reflects Self‐Reporter I/I allocation at 67% Customer; 33% Volume basis.  Potential Cost of Service Impact  Lines 1 through 6 in Table 8 above provide the potential I/I allocation percentages applicable to Self‐Reporter and Non‐Industrial customers. To assess the potential cost of service impact, Black & Veatch applied these percentages to its Case in Chief rate model for Cause No. 44685 for Phase 1 cost of service (excluding adjustments for Satellite class subsidy recovery). The following Table reflects the cost of service for both Non‐Industrial and Self‐Reporter classes. Table 9 Estimated Cost of Service Impact of Different I/I Analyses  Line No. I/I Allocation Basis Non‐Industrial Self‐Reporter 1 54.5% Customer; 45.5% Volume $209,341,100 $31,515,300 2 84.1% Customer; 15.9% Volume $219,336,600 $22,914,600 3 65.6% Customer; 34.4% Volume $213,168,300 $28,211,600 4 77.6% Customer; 22.4% Volume $217,198,900 $24,746,400 5 87.9% Customer; 12.1% Volume $220,573,100 $21,857,100 6 80.4% Customer; 19.6% Volume $218,123,600 $23,953,400 CASE IN CHIEF AT 66.7% CUSTOMER; 33.3% VOLUME 7 66.7% Customer; 33.3% Volume $213,542,300 $27,889,400 As is shown in Table 9, when the I/I allocation is based in larger part on the number of customers by class, the Self‐Reporter class has a lower cost of service when compared to the CWA case in chief result in Line 7. When the I/I allocation is based in larger part on the contributed volume by class, the Self‐Reporter class has a higher cost of service when compared to Line 7. If an average of the I/I allocation bases was used of approximately 75% Customer; 25% Volume, the equivalent cost of service for Non‐Industrial and Self‐Reporter classes would be $216,333,800 and $25,488,600, respectively. Allocation of I/I by Other Wastewater Utilities  With respect to the system I/I allocation basis used for CWA, it is useful to understand the system I/I allocation basis used by other national wastewater utilities. Black & Veatch queried its project managers to derive the following summary of system I/I allocation basis used by other national wastewater utilities. Table 10 Summary of I/I Allocation Basis Used by Other Utilities  Line No. Utility / Community Customer Volume 1 St. Joseph, MO 60% 40% 2 Kansas City, MO 40% 60% Exhibit MIEC ____ Page 9 of 10  HIGH LEVEL I/I ANALYSIS FOR COST ALLOCATION PURPOSES | PAGE 10      3 Metropolitan Sewerage District of Greater Cincinnati 75.0% 25.0% 4 Allegheny County Sanitary Authority (ALCOSAN) 66.7% 33.3% 5 Shreveport, LA 66.7% 33.3% 6 Charleston, SC 66.7% 33.3% 7 Columbus, OH 0.0% 100.0% 8 Washington Suburban Sanitary Commission 50.0% 50.0% 9 Philadelphia Water Department 15.0% 85.0% As can be seen, the I/I allocation basis used by other utilities varies, although many approximate or utilize a basis similar to the 66.7% Customer; 33.3% Volume basis utilized in the CWA cost of service studies. The majority of the above utilities are not regulated by state public utility commissions and establish their I/I allocation basis using consultant recommendations or via their own policy decisions. Conclusions and Recommendations  The approach utilized in this memorandum provides a reasonable indication of system‐wide I/I allocable between the Self‐Reporter and Non‐Industrial classes. Black & Veatch performed several different analyses to determine an appropriate basis for allocating system I/I to wastewater customer classes. The analyses show that the estimate utilized in CWA’s past two rate cases is reasonable for cost of service purposes. Black & Veatch also researched other utilities to understand the I/I allocation basis used by those utilities. In general, the allocation basis used by other utilities varies, but is generally more in line with the allocation basis of 66.7% Customer; 33.3% Volume used in the CWA rate filings as compared to the 90% Customer; 10% Volume basis proposed by the CWA Industrial Group intervener. In consideration of the abovementioned analyses, Black & Veatch recommends that for CWA’s next rate proceeding, an I/I allocation basis of 75% Customer; 25% Volume be used to allocate system‐wide I/I for cost of service purposes. Exhibit MIEC ____ Page 10 of 10