HomeMy Public PortalAboutExhibit MSD 74 - MSD's First Discovery Request to Intervener MIEC April 26, 2019Exhibit MSD 74
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
MSD'S FIRST DISCOVERY REQUEST
TO INTERVENER MIEC
ISSUE: WASTEWATER RATE CHANGE PROCEEDING
WITNESS: MISSOURI INDUSTRIAL ENERGY CONSUMERS
SPONSORING PARTY: RATE COMMISSION
DATE PREPARED: APRIL 26, 2019
Exhibit MSD 74
BEFORE THE RATE COMMISSION
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Wastewater
Rate Change Proposal by the Rate Commission
of the Metropolitan St. Louis Sewer District
MSD'S FIRST DISCOVERY REOUEST
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer
District (the "Charter Plan"), Restated Operational Rule § 3(7) and Procedural Schedule §§ 16
and 17 of the Rate Commission of the Metropolitan St. Louis Sewer District (the "Rate
Commission"), the MSD requests additional information and answers from Missouri Industrial
Energy Consumers ("MIEC") regarding the Rate Change Proposal dated March 4, 2019 (the
"Rate Change Proposal").
The MIEC is requested to amend or supplement the responses to this Discovery Request,
if MIEC obtains information upon the basis of which (a) MIEC knows that a response was
incorrect when made, or (b) MIEC knows that the response, though correct when made, is no
longer correct.
The following Discovery Requests are deemed continuing so as to require MIEC to serve
timely supplemental answers if MIEC obtains further information pertinent thereto between the
time the answers are served and the time of the Preheating Conference.
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Exhibit MS@ 74
FIRST DISCOVERY REQUEST
1. Your rebuttal testimony states that, "It is possible that MSD may be able to issue
new debt at around a 2.5% interest rate. However, it could be as high as 3%. Therefore, I
recommend a more conservative estimate of the interest cost on new bond issues to be 3%,
rather than the 5% proposed by MSD" (page 14, lines 6-9). The municipal market benchmark
yield curve produced by Municipal Market Data ("MMD") is generally reported based on yield.
However, the underlying assumed coupon rate for MMD is 5%. Consequently, MSD's Rate
Proposal assumed 5.0% to 5.5% coupon rates. When yields are lower than the assumed coupon,
bond premium can be generated and serve as a component of bond proceeds in addition to the
principal amount. Please clarify if your 2.5% and 3% rate assumptions relate to interest rate (i.e.
coupon) or yield on the bonds? Furthermore, please provide on a by maturity basis your assumed
interest rates, yields and total bond proceeds (principal plus premium) assumed to be generated
in your debt financing scenarios.
RESPONSE:
2. Are you aware of any recent water/wastewater revenue bond market transactions
similar to MSD's proposed issuances in terms of credit rating, size, and maturity that utilized
coupons and yields similar to your assumptions? If so, please provide a list of the transactions,
including the names of the issuers and the dates of the transactions.
RESPONSE:
3. Your testimony states that, "historically AA municipal rated debt interest rates have
tracked that of 30 year Treasury securities" (page 14, lines 1-2). Please provide the specific data
or benchmarks and specific historical period reviewed to come to this conclusion.
RESPONSE:
4. You state in your testimony that, "projections of Treasury bond yields out over
the next three years indicate a relatively flat interest rate curve" (page 14, lines 3-4). Did you
make any allowances for interest rate increases in your projections over that three year period? If
so, how much and how much cushion for uncertainty, if any, was included? Since the three year
Treasury projection extends to 2022, what informs your assumptions for interest rates beyond
that? Please explain your assumptions for those rates and specify if a cushion for uncertainty of
projections was included in those assumptions.
RESPONSE:
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Exhibit NASD 74
5. The schedules included in your testimony appear to show an overall decrease in
capital funding in the first two years of the Rate Proposal Period (higher debt funding that is
more than offset by lower PAYGO funding) that looks like it would push the balance of the
construction fund to a negative balance. Did you model Construction Fund cashflows in a
manner similar to Table 4-8 in the Rate Change Proposal? If so, please share your schedule or
table.
RESPONSE:
6. Please provide any rate model you used, including changes made to MSD's Rate
Model, to develop the schedules and positions presented in your rebuttal testimony.
RESPONSE:
Res s ectfully submitted,
4116--\
Susan M. Myers, General Counsel
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
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Exhibit MSD 74
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to Lisa O. Stump and Brian J. Malone, Lushly & Baer, P.C., Brandon W. Neuschafer and
Kamilah Jones, Bryan Cave Leighton Paisner on this 26th day of April 2019.
Lisa O. Stump, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
lostump@lashlybaer.com
Brian J. Malone, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
bmalone@lashlybaer.com
Brandon W. Neuschafer
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
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Kamilah Jones
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
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Susan M. Myers, General Counsel
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
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