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Exhibit MSD 91 - Transcript of Surrebuttal Testimony June 20, 2019 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 1 1 MEETING OF THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT 2 3 4 5 6 7 8 9 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY June 20th, 2019 10 11 12 13 14 15 16 Reported by: 17 Ms. Jamie Jo Kinder, CCR, CSR ALARIS LITIGATION SERVICES 18 711 North Eleventh Street St. Louis, MO 63101 19 (800) 280-3376 www.alaris.us 20 21 22 23 24 25 Exhibit MSD 91 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 2 1 I N D E X 2 Page 3 WITNESS: Mr. Richard L. Unverferth 4 Questions by Mr. Neuschafer 13 Questions by Ms. Stump 33 5 Questions by Ms. Myers 35 Questions by Commissioner Stein 38 6 Questions by Commissioner Palans 42 Questions by Commissioner Beckmann 49 7 Questions by Commissioner Croyle 51 Questions by Chairman Toenjes 52 8 9 WITNESS: Mr. Thomas A. Beckley 10 Questions by Mr. Neuschafer 53 Questions by Ms. Myers 60 11 Questions by Chairman Toenjes 64 Questions by Commissioner Goss 66 12 13 WITNESS: Mr. William Stannard 14 Questions by Mr. Neuschafer 68 Questions by Ms. Myers 81 15 Questions by Commissioner Stein 82 Questions by Commissioner Goss 86 16 Questions by Chairman Toenjes 94 17 18 WITNESS: Mr. Marion Gee 19 Questions by Ms. Myers 97 Questions by Commissioner Palans 105 20 Questions by Commissioner Schoedel 117 Questions by Commissioner Brockmann 118 21 Questions by Commissioner Goss 119 Questions by Chairman Toenjes 122 22 Questions by Ms. Stump 123 23 24 25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 3 1 WITNESS: Ms. Bethany Pugh 2 Questions by Ms. Myers 125 Questions by Commissioner Stein 119 3 Questions by Commissioner Palans 131 4 WITNESS: Mr. Tim R. Snoke 5 Questions by Chairman Toenjes 136 Questions by Mr. Neuschafer 137 6 Questions by Ms. Stump 139 Questions by Ms. Myers 142 7 Questions by Commissioner Palans 152 Questions by Commissioner Goss 158 8 9 WITNESS: Mr. Michael Gorman 10 Questions by Ms. Stump 161 Questions by Commission Palans 167 11 Questions by Commissioner Goss 171 Questions by Chairman Toenjes 174 12 Questions by Mr. Neuschafer 178 Questions by Commissioner Goss 185 13 Questions by Commissioner Palans 190 14 WITNESS: Ms. Pam Lemoine 15 Questions by Mr. Neuschafer 193 Questions by Ms. Stump 197 16 Questions by Commissioner Goss 201 Questions by Chairman Toenjes 210 17 18 WITNESS: Ms. Nicole Young 19 Questions by Mr. Neuschafer 212 Questions by Ms. Stump 215 20 21 22 23 24 25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 4 1 A P P E A R A N C E S 2 For the Rate Commission: 3 Ms. Lisa Stump Mr. Brian J. Malone 4 LASHLY & BAER, PC 714 Locust Street 5 St. Louis, MO 63101 (314) 621-2939 6 lstump@lashlybaer.com bmalone@lashlybaer.com 7 8 For the Missouri Industrial Energy Commission: 9 Mr. Brandon Neuschafer BRYAN CAVE, LLP 10 One Metropolitan Square, Suite 3600 St. Louis, MO 63101 11 (314) 259-2000 brandon.neuschafer@bryancave.com 12 13 Ms. Susan F. Myers, General Counsel METROPOLITAN ST. LOUIS SEWER DISTRICT 14 2350 Market Street St. Louis, MO 63103 15 (314) 768-6209 smyers@stlmsd.com 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 5 1 COMMISSIONERS PRESENT: 2 Mr. Leonard Toenjes, Chair Mr. Jerry Beckmann 3 Mr. Paul Brockmann Ms. Mickey Croyle 4 Mr. Brad Goss Mr. Russell Hawes 5 Mr. Chan Mahanta Mr. Lloyd Palans 6 Mr. Tom Ratzki (via phone) Mr. Mark Schoedel 7 Mr. Jack Stein 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 6 1 (Technical Conference commenced at 9:00 a.m.) 2 CHAIRMAN TOENJES: Good morning. Being 9:00 3 o'clock, we will call to order this meeting of the Rate 4 Commission of the Metropolitan St. Louis Sewer District for 5 the 2019 wastewater rate change proceeding. My name is Len 6 Toenjes, and I am Chair of the Rate Commission of the 7 Metropolitan Sewer District and will serve as Chair of this 8 proceeding. Let's take the roll call. Mr. Schoedel. 9 COMMISSIONER SCHOEDEL: Thank you. Jerry 10 Beckmann. 11 COMMISSIONER BECKMANN: Present. 12 COMMISSIONER SCHOEDEL: Brandy Bowdry. Paul 13 Brockmann. 14 COMMISSIONER BROCKMANN: Present. 15 COMMISSIONER SCHOEDEL: Don Bresnan. Mickey 16 Croyle. 17 COMMISSIONER CROYLE: Present. 18 COMMISSIONER SCHOEDEL: Brad Goss. 19 COMMISSIONER GOSS: Present. 20 COMMISSIONER SCHOEDEL: Russell Hawes. 21 COMMISSION HAWES: Present. 22 COMMISSIONER SCHOEDEL: Chan Mahanta. 23 MR. MAHFOOD: Present. 24 COMMISSIONER SCHOEDEL: Steve Mahfood. Lloyd 25 Palans. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 7 1 COMMISSIONER PALANS: Present. 2 COMMISSIONER SCHOEDEL: Tom Ratzki? 3 COMMISSIONER RATZKI: On the phone. 4 COMMISSIONER SCHOEDEL: Mark Schoedel. Jack 5 Stein. 6 COMMISSIONER STEIN: Present. 7 COMMISSIONER SCHOEDEL: Leonard Toenjes? And 8 Paul Ziegler. Chairman, we have a quorum. 9 CHAIRMAN TOENJES: Thank you, Mr. Schoedel. 10 The Charter Plan of the District was approved by the voters 11 of St. Louis and St. Louis County at a special election on 12 February 9th, 1954, and amended at a general election on 13 November 7th, 2000. The amendment to the Charter Plan 14 established the Rate Commission to review and make 15 recommendations to the District regarding changes in 16 wastewater rates, storm water rates and tax rates proposed 17 by the District. 18 The Charter Plan requires the Board of 19 Trustees of the District to select organizations to name 20 delegates to the Rate Commission, to ensure a fair 21 representation of all users of the District's services. 22 The Rate Commission representative organizations are to 23 represent commercial industrial users, residential users 24 and other organizations interested in the operation of the 25 District, including organizations focusing on environmental TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 8 1 issues, labor issues, socioeconomic issues, community 2 neighborhood organizations and other nonprofit 3 organizations. 4 The Rate Commission currently consists of 5 representatives of Associated General Contractors of 6 Missouri, St. Louis County Municipal League, Lutheran 7 Senior Services, St. Louis Council of Construction 8 Consumers, Greater St. Louis Labor Council, Missouri 9 Botanical Garden, Mound City Bar Association, League of 10 Women Voters of Metro St. Louis, Home Builder's 11 Association, North County, Inc., Missouri Coalition for the 12 Environment, City of Ladue, Engineers Club of St. Louis, 13 Missouri Industrial Energy Consumers and Education Plus. 14 Upon receipt of a Rate Change Notice from the 15 District, the Rate Commission is to recommend to the Board 16 of Trustees changes in a wastewater, storm water or tax 17 rate necessary to pay interest and principal falling due on 18 bonds issued to finance assets of the District, the cost of 19 operation and maintenance, and such amounts as may be 20 required to cover emergencies and anticipated 21 delinquencies. 22 Further, any change in a rate recommended to 23 the Board of Trustees by the Rate Commission is to be 24 accompanied by a statement that the proposed rate change is 25 consistent with constitutional, statutory or common law as TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 9 1 amended from time to time, enhances the District's ability 2 to provide adequate sewer and drainage systems and 3 facilities or related services, is consistent with and not 4 in violation of any covenant or provision relating to any 5 outstanding bonds or indebtedness of the District, does not 6 impair the ability of the District to comply with 7 applicable federal or state laws or regulations as amended 8 from time to time and imposes a fair and reasonable burden 9 on all classes of rate pays. 10 The Rate Commission received a Rate Change 11 Notice from the District on March 4th, 2019. Under the 12 District's Charter Plan, the Rate Commission must, on or 13 before July 2nd, 2019, issue its report on the proposed 14 Rate Change Notice to the Board of Trustees of the District 15 unless the Board of Trustees, upon application of the Rate 16 Commission, extends the period of time for the issuance of 17 the Rate Commission report for an additional 45-day period. 18 At its meeting on March 4th, 2019, the Board 19 of Trustees approved the Rate Commission's request for an 20 extension. The Rate Commission's report on the proposed 21 rate change must now be issued on or before August 16th, 22 2019. On March 4th, 2019, the District submitted to the 23 Rate Commission prepared direct testimony of Brian 24 Hoelscher, Susan Myers, Richard L. Unverferth, Brett A. 25 Berthold, Marion M. Gee, Tim R. Snoke, Bethany Pugh, TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 10 1 William Stannard and Thomas A. Beckley. 2 On April 8th, 2019, the Technical Conference 3 was held on the record regarding the rate setting documents 4 and the direct testimony filed with the Rate Commission by 5 the District. The purpose of the Technical Conference was 6 to provide the District an opportunity to answer questions 7 propounded by members of the Rate Commission, then by any 8 Intervenor and finally by Lashly & Baer, legal counsel to 9 the Rate Commission. 10 On April 23rd, 2019, the Rate Commission, 11 consultants and Intervenor Missouri Industrial Energy 12 Consumers submitted rebuttal testimony. On May 9th, 2019, 13 the Technical Conference was held on the record regarding 14 the rebuttal testimony by the Intervenor and rate 15 consultants. Written discovery requests have been made 16 between the parties throughout these proceedings. All 17 responses are included in the record on the Rate Commission 18 website. Rate payers who do not wish to intervene are and 19 have been permitted to participate in a series of 20 on-the-record public hearing sessions, which began on May 21 14th, 2019. 22 This Technical Conference will be held on the 23 record regarding the surrebuttal testimony filed. Each 24 person submitting surrebuttal testimony shall answer 25 questions propounded by members of the Rate Commission, our TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 11 1 legal counsel and other parties. 2 Before we proceed with the testimony, I would 3 like for the Rate Commissioners to review the minutes of 4 the May 9th, 2019, meeting for review and/or approval. The 5 motion made, seconded, to approve the May 9th minutes as 6 presented. All in favor, signify by saying aye. 7 COMMISSIONERS: 8 ALL: Aye. 9 CHAIRMAN TOENJES: Opposed? Minutes are 10 approved. Thank you. Who is here on behalf of the 11 Metropolitan St. Louis Sewer District? 12 MS. MYERS: Susan Myers. 13 CHAIRMAN TOENJES: Who is here on behalf of 14 the Missouri Industrial Energy Consumers? 15 MR. NEUSCHAFER: Brandon Neuschafer. 16 CHAIRMAN TOENJES: Also present are Pam 17 Lemoine of Black & Veatch Consultants to the Rate 18 Commission, and Lisa Stump and Brian Malone of Lashly & 19 Baer, legal counsel to the Rate Commission. I understand 20 that Nicole Young of Lion, CSG is present via phone; 21 correct? 22 MS. LEMOINE: Correct. 23 CHAIRMAN TOENJES: Under the Rate Commission's 24 operational rules, no person shall be required to answer 25 questions for a period of more than three hours, and the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 12 1 time shall be evenly divided among all of the participants 2 desiring to ask questions. Following questions by members 3 of the Rate Commission, I will attempt to allocate the time 4 equally among the participants and our legal counsel. To 5 the extent that the District, the Intervenor or legal 6 counsel has not completed questions at the expiration of 7 that person's allotted time and to the extent that time 8 remains, such persons will at least be permitted to 9 propound additional questions until the three hours has 10 expired. 11 Are there any procedural matters? I am going 12 to ask the Rate Commissioners and those testifying to be 13 sure to use the microphone so our court reporter can 14 understand and hear clearly. 15 Since there are no further procedural matters, 16 Ms. Myers, are you agreeing to present those persons for 17 whom you filed surrebuttal testimony on behalf of the 18 District? 19 MS. MYERS: We are, yes. 20 CHAIRMAN TOENJES: Please proceed. 21 MS. MYERS: Okay. Our first witness will be 22 Rich Unverferth. 23 (Witness sworn in.) 24 CHAIRMAN TOENJES: Does any member of the Rate 25 Commission have questions for Mr. Unverferth? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 13 1 Mr. Neuschafer, do you have any questions for 2 Mr. Unverferth? 3 MR. NEUSCHAFER: I do. 4 CHAIRMAN TOENJES: Please come forward. 5 * * * * * 6 RICHARD UNVERFERTH, 7 being produced, sworn and examined, deposes and says: 8 EXAMINATION 9 QUESTIONS BY MR. NEUSCHAFER: 10 Q Good morning. 11 A Good morning. 12 Q I assume you have in front of you a copy of 13 your surrebuttal testimony? 14 A I do. 15 Q Okay. I wanted to spend some time talking 16 about projects and scheduling of the projects. And if I 17 understand MSD's testimony correctly, there is no 18 discretion in the schedule that has been created and put 19 forward for projects for this rate cycle; is that correct? 20 A That is correct. 21 Q When was -- When did MSD establish the 22 schedule of projects for this upcoming rate schedule? 23 A Primarily over the last -- Well, obviously, a 24 portion of it was part of the consent decree, so that 25 schedule has been established since we entered the consent TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 14 1 decree. The schedule that includes the non consent decree 2 on the regulatory projects was probably established over 3 the last several years. Part of that was a negotiation 4 with the EPA, the major project, incinerator project. The 5 remainder of the projects are the asset management 6 projects, and the upkeep and maintenance and operation of 7 our treatment plants. Those we do evaluations over a 8 period and generally we're scheduling over a period of 9 about four years, but we probably fine-tuned it probably in 10 the last year, two years. 11 Q Okay. So at least for those consent decree 12 projects and regulatory projects, is it fair to say that 13 schedule was established prior to MSD diving into the 14 analysis of the rates that were going to be proposed as 15 part of this cycle? 16 A That would be a fair statement. 17 Q Okay. And when -- when those -- When those 18 timelines were established, did MSD give consideration to 19 the amount spent or potential impact on rates of schedules 20 that were being corrected? 21 A Oh, yes, we -- Our entire consent decree, the 22 23 years, was negotiated with the thought of impacts of 23 rate payers in mind. The major components of CSO long-term 24 control plan, which is approximately a two billion dollar 25 program over the life of the consent decree, had TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 15 1 significant public input on actual alternatives to address 2 combined sewer overflows and was used to help develop the 3 actual plan. 4 The SSO master plan, basically we had to have 5 overflows removed based on a negotiation within a certain 6 time frame, 85 percent by 2023, and we built the schedule 7 based on that. In other words, we took the projects and 8 put them in a schedule where we could meet that 85 percent 9 removal by 2023. 10 Q Okay. Based on your descriptions, though, 11 that seems to be sort of outcome-based and not necessarily 12 based on the impact of charges to customers? 13 A To some extent. I mean, obviously, we have to 14 do it, and we have timed it out over a period of time. And 15 some projects we don't -- We're not doing all the projects 16 in one year. We have timed them out. A lot of the 17 projects are phased, multi-phased projects. Almost every 18 one of our sanitary sewer overflow projects has a component 19 where we remove public and private inflow and infiltration, 20 and then we come back, we monitor that, and then we proceed 21 with some sort of a relief project, whether it be sanitary 22 relief, sewer relief or storage or whatever components 23 necessary to remove that overflow by a specific date. 24 So we look at when that -- and it kind of 25 backs into it, and when we set the original master TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 16 1 schedule, we did that to spread that work over time over at 2 least the first ten years because that's when 85 percent 3 had to be out. So it was taken into consideration. In 4 fact, the whole process that we do by doing the private I&I 5 and the public I&I upfront, doing the monitor is, in fact, 6 so we can -- after we do one portion of the project, we can 7 look to see if the remaining portion is necessary. And by 8 doing that, we have seen some savings. We've already seen 9 about $30 million in the projects that we're not going to 10 have to do as we move forward. We continue to do that. So 11 we're always keeping in mind to try not to do projects that 12 we don't have to do. 13 Q Okay. There have been a couple of projects or 14 maybe groups of projects that have been mentioned in MIEC's 15 testimony and MSD's testimony. I am going to give you -- I 16 don't know if you've got it available. This is Exhibit MSD 17 78B. This is the schedule of projects that was provided by 18 MSD. I give that to you just because I want to go through 19 some of those projects, and I think it will help to have 20 that available in front of us. The first grouping of 21 projects that I wanted to talk about is on 12565, which 22 begins on page four. So this is the Bissell and Lemay 23 fluidized bed incinerator project. 24 A Okay. 25 Q It begins kind of there in the middle of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 17 1 page four with some design services and fiscal year '21, 2 and then there are eight or ten line entries that include 3 construction, design, engineering during construction, et 4 cetera. 5 A Yeah, I've got that. 6 Q Okay. This project, this is -- MSD's position 7 is this is required by regulation, not by consent decree; 8 is that right? 9 A Correct. It is a regulatory requirement to 10 stay in compliance with our current air permits for our 11 incinerators on the Lemay and Bissell wastewater treatment 12 plants. 13 Q And I believe MSD's assertion has been that 14 this must be completed by 2026? 15 A That is correct. That is the time frame 16 that -- It's a very lengthy project, so it's a time frame 17 we have to -- in order to get it done, it would be a time 18 frame we negotiated with the EPA. We went to the EPA. In 19 order to do this project in the time frame to stay in 20 compliance, it was going to sit right on top of one of our 21 major combined sewer overflow projects along River Des 22 Peres. It would have had a significant impact to the CIRP. 23 Obviously, those projects, those eight or nine we talked 24 about, total about $290 million. That would have had to go 25 right on top of one of our largest CSO tunnels, which is TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 18 1 about a $750 million project. Rather than put it right on 2 top, we asked the negotiators to slide back a portion of 3 the overall program and move this project up in its place 4 and without -- And all of that was with taking the rate 5 payers in mind. 6 Q So you said that was a negotiated date with 7 the EPA. Where is that date memorialized? 8 A It's -- I would have to look. It's part of 9 our agreement with the -- I think it's in the front end of 10 the CD amendment. I don't know exactly. 11 Q And I believe your testimony references the 12 Consent Decree Amendment No. 2. 13 MS. MYERS: Is that an exhibit? 14 Q (By Mr. Neuschafer) Yeah. It's Exhibit 37A. 15 What I'm hoping you can help me understand is where in here 16 does this obligate MSD to complete this project by 2026? 17 A If you look at page three, in the whereas, 18 where the -- in agreement for us completing the sewer 19 sludge incinerators, the District received an extra five 20 years. I'm not reading the exact language there, but -- 21 Q Maybe three sentences in, which begins on 22 about the seventh line of the page. 23 MS. MYERS: Hang on just a second. 24 Q (By Mr. Neuschafer) Yeah. Sure. 25 A Okay. You referred to it, sir. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 19 1 Q Yeah, page three. It's the third sentence. 2 This is referenced in your testimony as well as discovery 3 responses submitted by MSD. The third sentence says, "The 4 replacement of these incinerators will occur in fiscal 5 years 2021 to 2026 time frame by its estimated cost." 6 A That is correct. 7 Q Okay. And this is in what we will call one of 8 the whereas clauses cited -- 9 A Correct. 10 Q -- as opposed to the actual order. This is 11 what MSD has cited for the 2026 completion date, but as I 12 read this, it just says that's when MSD has scheduled it. 13 I don't read this as saying MSD is obligated to complete 14 the project by 2026, and this is what MSD has cited for the 15 compliance deadline. I'm trying to understand where MSD 16 has gotten this 2026 deadline. 17 A The 2026, we have to -- In other words, our 18 current incinerators do not meet the current standards. 19 Q Okay. 20 A In other words -- And it's a large project. 21 In other words, we can't do any additional work to meet 22 compliance, so we made a regulatory decision to replace 23 these incinerators within a five-year time frame in order 24 to be in compliance with our permits; otherwise, we will be 25 out of compliance. In order to do that, we -- In order to TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 20 1 not impact the rates to our customers, we went to the EPA. 2 In other words, this is a requirement regulatorily, but we 3 agreed with the EPA that we were going to do that, and they 4 agreed to give us five additional years and move back our 5 CSO program. 6 In other words, it was part of the whole 7 negotiation with the EPA. If we didn't -- If it didn't 8 matter when we did the incinerator, we probably would have 9 never gone to the EPA to begin with. 10 Q And to be clear, I do want to make clear, I'm 11 not disputing that it needs to be done or even the decision 12 to do it or the decision to do this work. That's not a 13 dispute, nor is the estimated cost. I think it's more 14 about timing and whether MSD has got some flexibility 15 because I just haven't seen, nor have I really seen MSD 16 point us to anything other than this was the schedule MSD 17 decided to use. And if that's all it is, then it seems to 18 me like there's maybe some discretion as far as timing on 19 this project. 20 A If we want to remain in compliance with our 21 air permits, we need to construct this incinerator. 22 Q And that point I'm not disputing. It's the 23 timing that I have a question about. On what time frame 24 and where is the time frame where MSD has said this needs 25 to be done by 2026? Where is that? Is that -- Is that TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 21 1 encapsulated in the permit? Is that encapsulated in the 2 regulation? Is that somewhere else? 3 A It's a permit. I mean, we have a permit just 4 like we do at our treatment plants. We have permits for 5 our incinerators, and the new rulings are sanitary sewer 6 sludge incinerators, we would not be in compliance if we do 7 not move to replace. We have already made some additional 8 upgrades to them to the extent we could. We can't make any 9 more so that we plan the replacement. 10 Q Again, not disputing that a replacement needs 11 to be made or performed. It's all about the time frame. 12 Where is this time frame established in the permit and the 13 regulations? Right now, all MSD has pointed us to is this 14 sentence. 15 A It's basically we would be in violation of our 16 permit if we do not -- if we do not build these 17 incinerators. We don't have administrative order, we don't 18 have a consent decree to build the incinerators, but in 19 order to be in compliance, we must build these 20 incinerators; otherwise, we will be in violation subject to 21 the permit. 22 Q Does the permit say that these new 23 incinerators have to be constructed and operational by 24 2026? 25 A It says that our air emissions have to be in TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 22 1 compliance. I don't think it says we have to construct 2 incinerators. 3 Q It says they have to be in compliance by 2026? 4 A I don't know the terms. I don't know the 5 exact when -- I think they are renewed. It's probably in 6 that time frame. They are five-year permits. I would have 7 to get back with you. I think the permits were provided as 8 an exhibit. I would have to go look at that. 9 Q Okay. Let's look back at the table here that 10 listed the projects. Now, this goes through the top of 11 page five, fiscal year 2024. But I understand from your 12 testimony that there are actually allocations -- more money 13 is allocated for fiscal year 2025, but it's not captured in 14 this document; is that correct? 15 A That is correct. Under large projects, we 16 fund it over multiple years and make sure we have the money 17 in place. 18 Q Do you know how much is allocated for fiscal 19 year '25? 20 A I do have that somewhere. I don't think I 21 have that here. I could get that for you pretty quickly, 22 though. 23 Q I'm not going to hold you to it. Do you have 24 a ballpark number? I mean, I'm assuming it's near the end 25 of the project. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 23 1 A I think it was pretty equally, what did we 2 have, maybe '24. 3 Q '24 looks like 150 million for construction, 4 design, build and 15 for engineering? 5 A I think it was approximately -- I want to say 6 it was another 100 million. 7 Q When you plan a project like this, do you -- I 8 assume you build in a contingency for timing? 9 A Correct. I mean, the 2026 date, obviously we 10 are building in time for startup. These are very 11 complicated pieces of equipment, so we wanted to be fully 12 operational and gives us time for some operational. Plus, 13 when we appropriated that last bid in 2025, generally our 14 appropriations will spread over a year, year and a half 15 over that time frame. 16 Q Okay. What would be -- And I understand this 17 project is not your standard project. This is a really 18 large project. But what would be typical for the amount of 19 sort of timing contingency built in? 20 A For this one, just because it is critical, I 21 mean, a lot of our major projects, say, a tunnel, our large 22 pumping station, generally in six months to a year by the 23 time it's actually, you know -- it might be operational, 24 but by the time you complete all the restoration and stuff 25 like that. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 24 1 Q And that would be for a tunnel or pumping 2 station, not necessarily a project? 3 A Or plant work, typical plant work. Understand 4 this has got to work in conjunction with an existing 5 treatment plant at two locations, so you've got to keep 6 your operations -- we still have to handle our sludge over 7 that period of time. So there is a transition period from 8 the old incinerators to the new incinerators. 9 Q Yeah. Sure. While we're talking about 10 incinerators here, I'm sure you're aware of recent media 11 about MSD's incinerators and alleged health effects from 12 incinerator emissions? 13 A Yeah. We were in the news. I know that. 14 Q Yeah. Have you considered any alternatives to 15 incineration? Not necessarily as a result of those 16 stories, I'm just saying over the past years as you were 17 planning this project. 18 A Yeah. I mean, there was a large -- we looked 19 at, I guess it was probably five or six years ago, the 20 District performed a solids handling master plan for all of 21 our facilities about how to handle it the appropriate way, 22 regulations changing all the time. I mean, issues with 23 land applications now with biosolids. There are concerns 24 about trucking biosolids. There's concerns about 25 landfilling biosolids, but we currently incinerate, at TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 25 1 least two largest plants, the amount of sludge that is 2 generated was the determining factor at these two 3 locations. So we did take things into account, other 4 things, other potentials. 5 Q Okay. I want to move on. In your surrebuttal 6 testimony, another group of projects that were discussed 7 beyond the incinerators, the second group was wastewater 8 plant repair, and this was identified as a number of 9 wastewater treatment plant repair projects at various 10 wastewater treatment plants. Again, I'm not sure which 11 projects you're referring to. 12 A Well, it's actually -- It's referred to as 13 regulatory, not CD. We have provided a listing of 14 projects. It represents about $28 million, about 15 eight percent of the CIRP. Primarily, they will be looking 16 at upgrading and replacing assets of various treatment 17 plants, the District. That's really what it represents. 18 Q Okay. 19 A To me, it's an area of profit. 20 Q I'm going to hand you here MSD 78D. That's 21 sort of the counterpart to the one that I just provided, 22 and I think this one, you can have it. At the top it says, 23 "Regulatory-related projects that are non-CD related." 24 A Correct. 25 Q That's the group projects you're talking TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 26 1 about? 2 A Yeah. It includes the incinerators and then 3 other miscellaneous projects at the various treatment 4 plants. 5 Q Okay. And I see there on the far right-hand 6 column, there is at least one that mentions 2026. I 7 believe that's the incinerators. Are there -- Are there 8 deadlines identified for when those projects have to be 9 on-line? 10 A There are no specific dates that these have to 11 be on-line. Some are basically in order to keep the plant 12 up and running and meeting our permit requirements. Should 13 these assets fail or we fail to replace them or maintain 14 them or rehabilitate them, we will have failure of plan, 15 which would put us out of compliance with our MVPS permits. 16 The District currently has about -- We identified about 28 17 million, roughly, and during this reporting period, we 18 probably have another $75 million worth of projects we have 19 identified as beyond their useful life at our treatment 20 plants that we are conferring in order to just try to plan 21 these out over a period of time, a lot of asset condition 22 assessment, things like that, trying to actually take into 23 consideration how much of this type of work we're doing. 24 Q Okay. I would like -- I would like to go 25 through a few of the other projects on that first longer TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 27 1 list. 2 A The longer list. Okay. 3 Q If you could review that. If you turn to 4 page five. In the middle there is -- there are two line 5 entries for Project No. 11847. 6 A Okay. 7 Q It's about -- It looks like a little over 8 $9 million for construction of some sewer line at Black 9 Creek/Hattington Court. I see that these -- Well, let's 10 start here. Commencing construction in 2023, September of 11 2023 is the current schedule? 12 A Yes. 13 Q How long does it take to construct 8,300 feet 14 of sewer? 15 A Generally, that's over a two-year period, so 16 more than likely -- Generally, most of our sanitary relief 17 projects of any length, when you're in the mile range, are 18 built over a two-year period of time. 19 Q So this is scheduled to begin in 2023 and will 20 hit fiscal budget in fiscal years 2022 and 2023? 21 A Correct. It's currently under design. It's 22 upstream of the current Deer Creek tunnel, which is under 23 construction. If you figure with the gallery -- upstream 24 from the Galleria in the Deer Creek tunnel. 25 Q If I'm reading this correctly, the placement TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 28 1 and service column says June 2027. It's almost four years 2 after construction is commenced. And I'm reading that 2027 3 is the consent decree obligation; is that correct? 4 A That is correct. 5 Q If my math is correct, based on what you just 6 said, this will be done in the 2025 range, but there is no 7 obligation to have it done until 2027. 8 A Again, I don't know. There could be -- I 9 would have to go look. I don't know all the watersheds. 10 Generally, if you're seeing something like that, there is a 11 subsequent project that isn't called an upstream project 12 that would require this whole system to be in place by that 13 time period. But again, I don't know every one, but 14 typically, if you see something like that, there -- it's 15 not just -- this is -- Like I said, we have to have Deer 16 Creek tunnel done, and then this project gets done, and 17 then there could be another follow-up project. I don't 18 have the connection right now, but that's typically what 19 you would see. 20 Q Okay. If you go to page 10, Project 21 No. 11146. These relate to, they're called CSO volume 22 reduction green infrastructure with five million a year 23 allocated over the four-year period, each year over the 24 four-year period. Construction is a part of the ongoing 25 green infrastructure compliance work. I understand that to TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 29 1 be a consent decree obligation? 2 A Yes, that's part of our CSO long-term control 3 plan. 4 Q And then for placement and service, which 5 would be the -- I guess the consent decree deadline, it 6 again just says part of ongoing green infrastructure 7 compliance work. What's the deadline? 8 A The District had a commitment in the 9 Mississippi River watershed, the Bissell watershed, to 10 address combining sewer overflows along the Mississippi 11 River. The consent decree permit was $100 million of green 12 infrastructure construction over the life of the consent 13 decree. We simply spread that out over a period of time of 14 $5 million a year based on the -- and primarily, that work 15 being done as part of the grants, green infrastructure 16 grants coordinated with private development. And in 17 addition, District is also building rain guards and green 18 infrastructure in that area as well. So basically, we 19 spread that period out to ensure that we're done by the 20 time of the consent agreement. 21 Q Okay. Let's go to page 13. Again, just a 22 couple more examples of issues that I think repeat in some 23 of the projects. The second entry, 11888, Fabick pump 24 station. It's a construction task. And the financial 25 year, it says fiscal year 2022. The construction does not TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 30 1 commence until 2024. Can you help me understand why it's a 2 financial year that's a couple of years before the 3 construction commences? And it's not necessarily this 4 project. I mean, there are other projects like this. I'm 5 using this as an example. 6 A Yeah. Understand the fiscal year of 2024. 7 Again, I don't know every single project, but, you know, 8 there is a design. I don't know whether or not the project 9 includes the force main. But generally, we procure the 10 design, takes a year or so to design, and if there is 11 easement acquisition, there's a year in between, and then 12 we have construction the following year. I don't know all 13 the nuances to that, but I tend to look at our capital of 14 our projects generally at a three-year cycle. We procure 15 the engineer, takes a year to design in most cases 16 depending on the size, we have a year of easement 17 acquisition and, generally, there's a gap of a year for 18 construction. I can't explain exactly what the difference 19 is here. 20 Q Okay. Go a few down, 11745. Fee Fee trunk 21 sewer relief. This one, it says construction was commenced 22 in 2018, placed in service in 2019, but the financial year 23 to which the almost $2 million is allocated is fiscal year 24 '21. 25 A Again, I would -- If I knew exact details, I TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 31 1 would say that's a multi-phase project and this is the 2 final phase of it or close to it. In other words, we've 3 done some downstream work on this Fee Fee trunk sewer. I 4 think there's like 10 or 11 phases of this particular 5 project, and so that's probably -- We started with an 6 earlier phase back in 2016. 7 Q Okay. If you go to page 32. A few lines down 8 are two-$5 million projects for, I guess, different phases 9 of the Mississippi flood wall, pump station rehabilitation. 10 A Correct. 11 Q And actually there are several projects before 12 that that look like prior phases of the design, but I don't 13 see anything in here on when these are obligated to be 14 completed. 15 A Again, these are not consent decree-related, 16 they are not regulatorily required, but the District has an 17 obligation. When the flood wall was built about 50 years 18 ago, the District's responsibility as far as pump stations 19 and gate structures along the Mississippi River flood wall 20 and the City of St. Louis is responsible for the wall 21 itself. We do have a commitment. We meet with the Board 22 annually to do inspections. These pump stations, I think 23 there's 28 of them, including gate structures, that are all 24 over 50 years old. We did a major assessment of all of 25 those within the last five years and identified about TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 32 1 $35 million worth of work. We've been working since that 2 time working with the Board to try to get federal funding 3 to do that work. In the meantime, we've had some gate 4 failures. So what we're doing, we've done some condition 5 assessment and we have -- we've started systematically, 6 over a period of seven or eight years, programs, one or two 7 of those in the $5 million range to make those repairs to 8 avoid any issues or any failures with that system. Again, 9 not regulatorily required, but the potential risk of those 10 flood wall pumping stations and those gate structures is 11 pretty significant. 12 I mean, I've got some numbers that were put 13 together by the Corps. You know, obviously, Downtown St. 14 Louis could be impacted, so the financial impact of a 15 failure of that system as evidence of the current flood 16 that we're in is prudent. Again, we still continue to work 17 with our federal legislators in trying to get funding that 18 would allow us to work with the Corps and get that funded, 19 but currently we cannot sit around and wait to spend that 20 35 million. 21 MR. NEUSCHAFER: Okay. I think that's all 22 I've got. Thank you. If you don't mind, I'll take that 23 back here. Thank you. 24 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 25 Ms. Stump, do you have any questions for Mr. Unverferth? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 33 1 MS. STUMP: I do have a couple. 2 CHAIRMAN TOENJES: Please come forward. 3 EXAMINATION 4 QUESTIONS BY MS. STUMP: 5 Q Good morning. 6 A Good morning. 7 Q So as you know, my job is a little bit more at 8 the upper level of just trying to clarify some of the 9 things for the record. So I'm just going to ask you a few 10 questions based on your surrebuttal testimony and the other 11 surrebuttal testimony. Did you have the opportunity to 12 review Mr. Gorman's surrebuttal testimony? 13 A Yes, I did. 14 Q Do you have that one or I can just -- 15 MR. NEUSCHAFER: Yeah, we have them. 16 Q (By Ms. Stump) On page five of Mr. Gorman's 17 surrebuttal testimony, he discusses that -- you'll see at 18 the top of the page, in effect certain projects currently 19 planned for fiscal years '23 and '24 can be deferred until 20 '25 and '26, and MSD will not be in conflict with its 21 regulatory obligations. The actual selection of which 22 projects could be deferred can be left up to MSD staff, 23 which can be managed in a way which means the consent 24 decree obligations, other regulatory obligations can manage 25 impacts on water rates. Can you tell me what you think of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 34 1 that statement in the testimony? 2 A I do not agree with that statement. The 3 District really doesn't -- we have planned the projects we 4 feel that would allow us to meet our regulatory and consent 5 decree requirements. I think in my prior questioning here, 6 we've identified that, and I think Mr. Gorman basically is 7 asking that we try to move $70 million from '23 and '24 8 into '25 and '26. There's only one project that could even 9 come up with that 140 million, and that's the incinerators. 10 And if we do not build those incinerators, obviously we 11 wouldn't be in compliance with our air permits. 12 Q So if the Rate Commission were to adopt 13 Mr. Gorman's proposal, do you think that -- Would it be 14 your opinion that the resulting rate change proposal would 15 impair the ability of the District to comply with 16 applicable federal or state laws? 17 A It certainly would. 18 Q Can you explain that just a little bit? Sorry 19 if you're being repetitive. 20 A Again, our -- If we do not upgrade our 21 wastewater incinerators, we will be out of compliance with 22 our current air permits based on the regulations for sewage 23 sludge. 24 Q And then one other question: Is there any -- 25 As you noted, this proposal is to remove $70 million a year TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 35 1 for those two years from -- to the two later years. Do you 2 have any feasibility concerns beyond the regulatory 3 requirements of doing that? Would that have any effect on 4 the sequencing of projects or anything else outside of 5 regulatory? 6 A It had already come up with an additional 70 7 million each of those two years. Even if I took out the 8 non-CD projects or the regulatory projects, we would have 9 to end cap the incinerators in. We would then have to 10 defer consent decree projects, which obviously would defeat 11 the purpose while we wouldn't be meeting our consent 12 decree. In fact, our consent decree -- I think I answered 13 that. 14 MS. STUMP: You did, at least what I thought 15 you answered. So I am good. I have no further questions. 16 CHAIRMAN TOENJES: Thank you, Ms. Stump. Ms. 17 Myers, do you have any further questions for the witness? 18 MS. MYERS: I do. I have one. 19 EXAMINATION 20 QUESTIONS BY MS. MYERS: 21 Q Rich, you've already talked a little bit about 22 Mr. Gorman's surrebuttal testimony. In that testimony, he 23 states that MSD does not take customer wastewater rates 24 into consideration when developing the CIRP; is that 25 accurate? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 36 1 A No, that would not be accurate. Anything we 2 do regarding the development of our CIRP, we always take 3 our rate payers into consideration. I think we've shown 4 that with our original negotiation of the consent decree, 5 getting 23 years what at the time was probably one of the 6 lengthier consent decrees out there at the time with the 7 amount of financial commitment we had, with our -- the 8 occurrence of having to upgrade our sewage sludge 9 incinerators in the middle of the consent decree. We went 10 back to those regulators and said, hey, this isn't going to 11 work. It's going to really be a problem for our rate 12 payers putting this incinerator project right on top of our 13 major CSO program. 14 We were able to have them agree to an extra 15 five years of moving back CSO controls in order to do that. 16 I think I talked a little bit about it earlier. We really 17 scrutinized the work outside of consent decree, the asset 18 major work or the treatment plants and pump stations. We 19 work hard at identifying what really has to be done in 20 order to stay in compliance. I think I mentioned, you 21 know, probably between pump stations and treatment plants, 22 we have identified another 75 million that are plants and 23 pump station that -- work that needs to be done. It's 24 reached the end of its useful life, but we feel like we can 25 maintain and operate over some period of time and generally TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 37 1 schedule it as we have. 2 We are really taking a good hard look at that. 3 And another thing with the consent decree, with the way we 4 approached our SSO master plan, with the infiltration and 5 inflow program where we went out and tried to get storm 6 water out of our system, we originally estimated the 7 sanitary sewer overflow program of up around -- two 8 hundred -- I'm sorry, $2 billion dollars. As we've gone 9 through and maintained and operated our system, done some 10 of the I&I work, we are seeing some of the capacity issues 11 that were identified as the master plan go away. We are 12 seeing some savings initially. We are seeing about 13 $30 million of projects that we're not having to do going 14 forward. 15 As we continue to do that work, which is 16 ongoing right now, we monitor that, we go back, we remodel, 17 we look at any of our future projects, we see future 18 projects potentially. So I just want to make sure that it 19 was known that we do take that into consideration in 20 everything we do. 21 MS. MYERS: I don't have any further 22 questions. 23 CHAIRMAN TOENJES: Thank you, Ms. Myers. Do 24 any members of the Rate Commission have any questions for 25 this witness? Commissioner Stein. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 38 1 EXAMINATION 2 QUESTIONS BY COMMISSIONER STEIN: 3 Q Mr. Unverferth, just a few questions. With 4 respect to the alleged health effects of the incinerator 5 emissions at Bissell Point, has the DNR or EPA spoken to 6 the District about that? Are they investigating that or 7 where does that stand? 8 A I don't know specific details, so I'm probably 9 not the one to describe that, but we have had conversations 10 with DNR. They're aware of where we are at with our air. 11 Actually, I take that back. Is -- I think our air permit 12 is actually with EPA. Again, I'm not totally familiar, but 13 we have had conversations with them. Obviously, when the 14 rule changed in 2012, we made some modifications. I would 15 be tough to speak to it in detail. Right now, there are no 16 violations that we have been cited for. 17 Q You did your master plan on solids handling 18 back in, you said, six years ago? 19 A I don't know the exact date, but it's probably 20 been in the five-year range, yeah. 21 Q So at that time there were no neighborhood 22 issues with respect to alleged health effects related to 23 the air emissions; would that be correct? 24 A Again, I'm not sure I'm good enough to answer 25 that. I would have to go back and read the report again. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 39 1 Q If you were to conduct that master plan 2 evaluation of solids handling today, would you be looking 3 at additional air emissions factors that you might not have 4 considered six or seven years ago? 5 A I mean, when we developed the plan for the 6 current incinerators, the fluidized bed incinerators, we 7 did go back and review that. There was another study done. 8 So again, everything we're doing is driven by our air 9 permit that we have for our incinerators, and in order to 10 comply with that permit, the incinerators will require an 11 upgrade before the next permit renew. 12 Q My point is that permit, as it's written 13 today, may not address health issues that are yet to be 14 discovered, and is it not possible that health issues 15 related to whatever could be coming out of the incinerators 16 could cause EPA to say incineration is no longer 17 appropriate? 18 A Regulations change all the time, so you would 19 be asking me to predict what that might look like. Right 20 now, we're not seeing it. I mean, we're seeing very 21 similar technology being utilized across the nation today. 22 Q Would it be appropriate to get EPA's opinion 23 if it's prudent to move ahead on this project without a 24 full understanding of whether there might be additional 25 permit conditions that might be coming up in the future to TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 40 1 address the health concerns that might point you in a 2 different direction than incineration? 3 A I mean, we're just now getting started with 4 our formal plan for this, but things like that are taken 5 into consideration during the design study process, which 6 is the process we're in right now. 7 Q I would like to shift gears for just a minute 8 and talk about the trickling filter meter replacement at 9 Bissell Point. How many trickling filters are there at 10 Bissell Point? 11 A That's not something -- I'm not as familiar 12 with that. I couldn't answer that. I don't know for a 13 fact. 14 Q Are they -- Is the work going to be done all 15 at once or is it going to be sequenced, and if so, in what 16 way would it be sequenced? Would you do one at a time, two 17 at a time? 18 A That plan hasn't been formalized yet. But 19 obviously, it's an operational plant, so it wouldn't happen 20 all at once. We would have to make sure that we could keep 21 the plant operational. 22 Q So if that plan has not been formulated, how 23 is it possible to come up with a detailed schedule plan? 24 Because, obviously, the time it takes to do those 25 filters -- the filter meter replacement is going to affect TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 41 1 the length of the project. 2 A Yeah. Again, we've identified what we feel 3 like the cost is going to be and programmed that over the 4 time frame we feel like we can do it. Again, I don't have 5 the preliminary studies sitting right in front of me. 6 Q The question is, there is -- is there some 7 flexibility in the timing of this, whether you do it at -- 8 all at once or you do a third of them at a time and then 9 the next third and then the next third and do it in a more 10 phased approach? 11 A Again, we will again -- Again, we've got the 12 total dollar amount over the four-year period. In other 13 words, it could adjust and we would phase the funding, but 14 that's the dollar amount we feel like it's going to take. 15 Q My point is, instead of a four-year period, it 16 might be a five-year period or a six-year period or 17 seven-year period, depending on how you sequence the work. 18 A And again, we're dealing with a filter media 19 that's beyond five years over what its life is supposed to 20 be, so we will start making that replacement as quick as we 21 can in order to do that. Again, there's not a defined -- 22 In other words, we're in, again, another project where 23 we're just now starting the design process that would 24 dictate what that phase looks like. 25 Q Have you done any engineering analysis of the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 42 1 media to determine whether it has a two-year life, a 2 four-year life, a six-year life? 3 A It has no life based on what I am being told. 4 In other words, we're seeing signs of failure now. That's 5 why we're moving on it. That's why we programmed it. 6 Q What will you do if there's failure? 7 A It would have to be addressed via an 8 emergency. And again, in other words, we hope that all the 9 trickling filters wouldn't fail at one time, that you could 10 manage flows until you could get them replaced, but that's 11 why we're trying to get the project off and moving. 12 Q Thank you. 13 A That's why we scheduled it the way we did. 14 CHAIRMAN TOENJES: Thank you, Mr. Stein. 15 Mr. Palans. 16 EXAMINATION 17 QUESTIONS BY COMMISSIONER PALANS: 18 Q Thank you. Mr. Unverferth, I do want to 19 switch gears just a little bit. Can you tell us in view of 20 the widespread flooding that we're experiencing currently 21 in our region, including our District, the Mississippi, 22 Missouri, Meramec Rivers, what impact, if any, has this 23 flooding had upon MSD's service requirements in the 24 District? 25 A Obviously, we're in flood control mode now. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 43 1 We continue to be. It would be difficult for me to say 2 exactly what the financial impact, I guess, until the flood 3 is over because we're still in flood mode. But I know on 4 the operational side, it's fairly significant. We are on 5 24-hour duty along the Mississippi River and along the 6 River Des Peres. I'd probably have to defer -- Again, I 7 don't know that we would even be able to put those numbers 8 together since we're right now continuing to be in that 9 flood mode. 10 Obviously, post flood, we do analysis of any 11 of our facilities that maybe were flooded or damaged. It 12 particularly impacts -- All of our pump treatment plants 13 are seeing additional flows, so there's impacts to those. 14 They're seeing more flows. We have pump stations that get 15 flooded during higher river like this. There will have to 16 be assessments made. It might be something Marion would 17 know. We've had flooding on the Meramec. We've had some 18 floods in '15 and '17 on the Meramec. We kind of have an 19 idea of what those costs were to us. And obviously, we 20 lost a treatment plant in 2015, the Fenton treatment plant. 21 We haven't had anything major like that this time, but 22 again, we're still in flood mode, so it's difficult to say. 23 Q Have you had discussions with your financial 24 group as to what the potential impact of the current 25 flooding conditions may be? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 44 1 A I would probably defer to Marion. He sees the 2 operating budget, and he probably sees what impact. 3 Obviously has impact again on the operations or operational 4 costs, primarily manpower, additional costs to run pumping 5 stations, additional costs for some of our temporary things 6 we put into place to address the flood. 7 Q Okay. I will ask Mr. Gee about this, but my 8 question to you is, have you had discussions with the 9 financial group about the potential impact of the current 10 flooding conditions upon the District's finances? 11 A At a fairly high level. I don't know that 12 we've got in to see if we're going to have budget 13 shortfalls or anything like that. Not to that detail. 14 Q You made reference to the flooding conditions 15 that existed in 1993, I believe. Looking back, do you have 16 an estimate as to what the cost of remediation of that 17 flooding condition was to the District? 18 A I wouldn't have that number. I was here in 19 '93, but I mean -- 20 Q Mr. Unverferth, there has -- I think you've 21 been pretty clear in your testimony that the District does 22 not have discretion to defer the CIRP projects that are 23 presently scheduled during this rate cycle; correct? 24 A That's correct. 25 Q And it's your testimony that these have to be TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 45 1 done pursuant to the consent decree; correct? 2 A Correct. 3 Q Mr. Neuschafer asked you to recite a 4 particular provision in the consent decree that required 5 this, and you referenced one of the whereas clauses on 6 page three. In that whereas clause, it states that the 7 federal plan requirements for sewage sludge incineration 8 units constructed on or before October 2010 issued by EPA 9 in 2016 required MSD to replace its multiple hearth 10 incinerators. The replacement of these incinerators will 11 occur in fiscal years 2021 through 2026 time frame; 12 correct? 13 A That is correct. 14 Q And this was a preamble that was a basis for 15 EPA to agree to amend the consent decree; correct? 16 A That is correct. 17 Q And a consideration was the impact to rate 18 payers during this cycle; correct? 19 A Yes. 20 Q So that the basis, as I understand it, was 21 that you agree to do this in exchange for obtaining an 22 extension of the time for compliance with consent decree, 23 that is one of the elements? 24 A That is correct. 25 Q Mr. Gorman made some statements. I just want TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 46 1 to see what you think about them. Mr. Gorman said on 2 page two that MSD does not have regulatory obligations that 3 require it to have a spike in CIRP spending in these two 4 years, these two years being -- fiscal year '23 and '24. 5 Further discovery indicates that MSD did not consider 6 impact on wastewater cost of service or retail rates in 7 prioritizing CIRP projects; is that correct? 8 A I think I answered that just a little bit ago. 9 We do not have that discretion. 10 Q Mr. Gorman also states in the next page that 11 MSD has failed to use wastewater cost of service as a 12 planning factor in establishing priority for projects. Is 13 that a true statement? 14 A No, that is not a true statement. 15 Q Mr. Gorman also says that the deficiency in 16 your planning process is not to the best benefit of 17 customers and should be implemented in order to ensure that 18 rates are managed in a reasonable and prudent manner, along 19 with modernizing your wastewater infrastructure in line 20 with regulatory objectives and good wastewater planning. 21 Is it your position that you have, in fact, modernized your 22 wastewater infrastructure in line with regulatory 23 objectives and good wastewater planning? 24 A Yes, it is. 25 Q Mr. Unverferth, I understand that this rate TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 47 1 cycle proposes to borrow $500 million; correct? 2 A I believe that's the number. I would have to 3 defer to my financial, either Tim or Marion, to give the 4 various specifics, but, yeah, I do believe that's what the 5 plan is. 6 Q And the record has been established that MSD 7 must spend $6 billion dollars in 2019, in present dollars, 8 to comply with the consent decree over the next 20 years; 9 correct? 10 A Yeah, that's the correct number. 11 Q So in the words of an old commercial, Fram oil 12 filter, you can either pay me now or you can pay me later. 13 Is that a fair characterization of compliance with the 14 consent decree? 15 A Correct. 16 Q And in your surrebuttal testimony on 17 page four, you identified the dollars that are allocated to 18 be spent for each fiscal year '21 through '24 under the 19 consent decree and under regulatory requirements. Do you 20 see that? 21 A Correct. Yeah, on page three? Yeah. 22 Q Page four of mine. 23 A Yeah. Mine printed out a little different. 24 Oh, I don't have the final one. Yeah, it's the same table. 25 Q I took the liberty of adding up the numbers, TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 48 1 and the total -- approximate total of dollars spent under 2 the consent decree and regulatory compliance over the next 3 four fiscal years are approximately $1.4 billion; is that 4 about correct? 5 A Yes. That would be correct. 6 Q So of the $1.5 billion total to be spent over 7 the next four fiscal years, 1.4 billion is for consent 8 decree and regulatory compliance; correct? 9 A That is correct. 10 Q If you believe my comment that you can either 11 pay me now or pay me later to comply with a consent decree, 12 if you were to -- Strike that. If the District were to 13 borrow an additional $100 million during this rate cycle, 14 would the District be able to complete more CIRP projects? 15 A If there was additional funding, I think the 16 District would look at some of the backlog infrastructure 17 work that we have that I spoke of earlier and assess the 18 criticality of expending additional dollars on that. I 19 don't know that you would see a whole lot of change with 20 the consent decree projects because they're fairly 21 scheduled out. You know, I guess you could potentially 22 slide some of the work that we slid out, slide that back 23 in. We would have -- There's other things to take into 24 consideration. 25 Q But you could make more progress on the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 49 1 scheduled projects that are currently scheduled during 2 the -- this current rate cycle if you had a $100 million? 3 A Yes, that would -- Yes, that would be nice. 4 COMMISSIONER PALANS: Thank you. I have no 5 further questions. 6 CHAIRMAN TOENJES: Thank you, Mr. Palans. Any 7 other Rate Commissioners? Yes, Mr. Beckmann. 8 EXAMINATION 9 QUESTIONS BY COMMISSIONER BECKMANN: 10 Q Yes. I would like to ask, say MSD has 11 approved sanitary rates, and two years from now a 12 $20 million immediate need for a project pops up. What do 13 you do? Do you look at deferring something that's in the 14 cycle now or is there some supplemental appropriation? 15 That's what it would be in my world. I'm just interested 16 in how that is handled. 17 A We would take a look. I mean, based on what 18 we've seen, obviously we're trying to create savings within 19 the CIRP. We have projects that we're analyzing all the 20 time, hope that you gain some of that back through good 21 bids and things like that. So hopefully that 20 million, 22 maybe it's only 10 million, and then you can spread it out. 23 But we would probably have to defer something. You're not 24 going to spend $20 million, you know, overnight. You may 25 not even spend it within one fiscal year, so you're talking TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 50 1 about spreading $10 million out over two years. But based 2 on what we've seen over the rate cycles, 20 million might 3 be something we would be able to absorb within that rate 4 cycle. But again, if it's unplanned, similar to the 5 incinerators, depending on what it is, if it was a true 6 emergency, in other words, to keep our plants up and 7 running, obviously we would have to deal with it. We had 8 to rebuild the Fenton wastewater treatment plant due to 9 flooding. We were able to absorb that. We would look 10 anywhere we could for savings and we would look again, 11 probably to prioritize some of our infrastructure work. 12 Q Has the District experienced emergency 13 projects of that magnitude? 14 A Probably the largest would have been the 15 Fenton wastewater treatment plant that was flooded. And 16 again, with insurance and FEMA, we were able to recoup some 17 of those costs. 18 Q What was the spend on that? 19 A I think I'll defer to Marion on that. He's -- 20 I'm sure he has those numbers. He probably has them right 21 in his head. 22 COMMISSIONER BECKMANN: Nothing further. 23 Thank you. 24 CHAIRMAN TOENJES: Thank you, Mr. Beckmann. 25 Ms. Croyle. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 51 1 EXAMINATION 2 QUESTIONS BY COMMISSIONER CROYLE: 3 Q Mine is just a little bit on the 77I, on 4 page five-1 and five-2. It was a discussion of a 5 disinfectant. 6 MS. MYERS: MSD 77I? 7 COMMISSIONER CROYLE: Yes. 8 MS. MYERS: Is that rebuttal? 9 COMMISSIONER CROYLE: These are part of -- 10 A We've got it. 11 Q (By Commissioner Croyle) Okay. One comment is 12 that you are proposing chlorine in the disinfecting 13 process, and it's a caveat from my point of view. In 1979 14 when I was working in the infectious disease laboratory at 15 the University of Iowa on TV, our Biosafety Code 3 was 16 certified with UV lights. They were two years old. They 17 said they were fine, that I could reposit it because the 18 lights were failed. So you can't really necessarily -- You 19 need to check the lights. The other concern is, you 20 haven't really discussed the safety or security concerns 21 with the chlorine gas and its storage. I assume those are 22 in the budget, but I just wanted to confirm that. 23 A Yes, both of those will be evaluated during 24 the final design process, which is actually ongoing right 25 now for that expansion. Yeah, we have both. We have TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 52 1 chlorine at some plants and we have -- In fact, Lemay has 2 UV and chlorination, so we have some accommodations. We 3 try to -- A lot of it depends on the wastewater that comes 4 to the plant. Missouri River has a UV, but then we were 5 starting to see some darker effluent due to the influent 6 coming in, which makes it not as effective. So we try to 7 address that as part of the design process. 8 Oh, Brian just said something. We use 9 chlorine in liquid form. 10 COMMISSIONER CROYLE: Thank you. 11 CHAIRMAN TOENJES: Any further questions from 12 any Rate Commissioners? I have one question. 13 EXAMINATION 14 QUESTIONS BY CHAIRMAN TOENJES: 15 Q During the prior testimony, the solids study 16 was referred to, the incinerator permit was referred to, 17 the preliminary incinerator study was referred to. Are any 18 of those three documents part of the record right now? 19 A I'm sure the permits. I think we provided 20 those initially. I do not believe the solids handling and 21 then our update study probably have not, that I'm aware of, 22 but we can put those in there. 23 Q I think to inject some fact into feelings, it 24 would be great to have those as part of the record. 25 A We can do that for you. We can do that. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 53 1 CHAIRMAN TOENJES: Any further questions for 2 this witness? Thank you, Mr. Unverferth. I appreciate 3 that. We will take a break until 10:30. 4 (Whereupon, a short break was taken.) 5 CHAIRMAN TOENJES: Ms. Myers, do you have any 6 further witnesses to call? 7 MS. MYERS: Yes, our next witness is Tom 8 Beckley. 9 CHAIRMAN TOENJES: Mr. Beckley, will you come 10 forward, please? 11 (Witness sworn in.) 12 CHAIRMAN TOENJES: Thank you. Does any member 13 of the Rate Commission have any questions for Mr. Beckley? 14 Hearing none, Mr. Neuschafer, do you have questions for 15 Mr. Beckley? 16 MR. NEUSCHAFER: Yes. 17 CHAIRMAN TOENJES: Please come forward. 18 * * * * * 19 THOMAS A. BECKLEY, 20 being produced, sworn and examined, deposes and says: 21 EXAMINATION 22 QUESTIONS BY MR. NEUSCHAFER: 23 Q Good morning. 24 A Good morning. 25 Q Hopefully, we will be less than an hour long. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 54 1 It was a joke. It was a joke. 2 CHAIRMAN TOENJES: We will not hold you to 3 that. You have up to three hours. 4 Q (By Mr. Neuschafer) Thank you. You submitted 5 some surrebuttal testimony on extra strength surcharges; is 6 that correct? 7 A Yes. 8 Q You have a copy of that in front of you. You 9 testified that the -- in the fiscal years 2018, '19 and 10 '20, rates were increased less than necessary because of 11 some inaccurate assumptions; is that correct? 12 A So when we did the 2017 rate proposal, most of 13 the rates were increased by the across-the-board rate 14 increase, the 10.75 percent rather than the requirement. 15 But there was some discussion while we were preparing the 16 rate proposal that we felt that that might be inaccurate, 17 in particular, for extra strength surcharges because we 18 thought that would be driven more by operation maintenance 19 expense increase than by capital expenditures. And as it 20 turns out, that wasn't quite accurate, but neither was 21 across-the-board. Either one would have been inaccurate. 22 If we had done across-the-board increases, it 23 would be lowering the extra strength surcharges in this 24 rate proposal as opposed to now where we -- we undershot 25 the mark and now we're having to given increases, in TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 55 1 particular with BOD having gone almost 25 percent, TSS 2 going up nine and a half percent. 3 Q So help me understand. You said -- I guess 4 I'm -- I want to understand the difference between the O&M 5 cost and capital cost. Dive down into that. Dig down a 6 little deeper. Why would that be incorrect? 7 A Well, the rate increases, in particular in the 8 last rate proposal, were driven primarily by capital 9 expenditures. That's why the 10.75 percent average annual 10 increase in the last rate proposal was driven by capital 11 expenditures more so than O&M, which increased by about 12 2.8 percent, I believe it was, per year, and then the rest 13 of the increase was primarily attributable to capital 14 expenditures. And again, there was some discussion among 15 ourselves, you know, us as the District's rate consultant 16 and District staff that there was concern that giving extra 17 strength surcharges at 10.75 percent increases across the 18 board for the non-test years, '18, '19 and '20, would have 19 overshot the mark, and it actually would have been correct. 20 Now, we would have overshot the mark less than 21 we undershot the mark at least for BOD. On TSS, we would 22 have actually overshot the mark more by using across the 23 board than we did by using the O&M. 24 Q It sounded to me a lot like the first answer 25 that you gave. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 56 1 A I don't know. 2 Q I'm trying to understand. So the increase 3 last time around was driven more by capital expenditure 4 than O&M? 5 A The total revenue increase that was in the 6 rate proposal of 10.75 percent was driven by capital 7 expenditures. 8 Q In the end, looking back, we've got a little 9 hindsight now, what was it that led to the extra strength 10 surcharges not being what they should have been? 11 A It was increasing them for the three non-test 12 years, '18, '19 and '20, by the O&M increase instead of 13 some other number. But really even -- For instance, Ms. 14 Lemoine has made recommendations we should use 15 across-the-board instead of O&M increases. But if we had 16 used across-the-board, we would have overshot the mark. 17 This is a challenge we face when we do multi-year rate 18 plans because there's a few different approaches you can 19 take. 20 The approach we use is probably the most 21 common, which is you do a test year that does cost of 22 service and then for however many more years you want to do 23 it, you do across-the-board increases, and that's what we 24 have traditionally done here in St. Louis. The other 25 option is, you do multiple test years. You do a test year TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 57 1 for each of the four years, which may provide -- I would 2 say it would provide perceptually more accuracy, but the 3 reality is, you're still making assumptions for those 4 following test years that aren't going to turn out to be 5 exactly correct. So to some extent, it provides more 6 perception of precision that really doesn't exist because 7 there are so many assumptions that go in there. When you 8 look at we're doing a four-year rate plan now for rates 9 that are going to be in effect until almost five years from 10 as we sit here today, you know, there's assumptions in that 11 four to five-year range that, honestly, they won't turn out 12 to be accurate. 13 Q Let me come at this a different way. So what 14 I'm hearing is that for these years, '18, '19, and '20, the 15 cost of service associated with TSS and BOD is actually 16 higher than what MSD is recovering through the extra 17 strength surcharge? 18 A Correct. The cost of service would have been 19 higher. 20 Q Why is cost of service higher? 21 A Because we ended up spending more on capital 22 than the assumption we made in the 2017 rate proposal. 23 Q And did we not understand how much capital we 24 were going to be spending during those years? 25 A We had a projection of capital expenditures TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 58 1 and, as has always been the case, we don't spend the money 2 exactly as we had planned, projects don't come in exactly 3 as they were budgeted and things like that. But in 4 hindsight, we ended up spending -- the discussion we had 5 was capital expenditures are being driven by improvements 6 in the collection system and conveyance system more so than 7 the treatment plants. So it was felt that BOD and TSS 8 would be less impacted, so using O&M would be more accurate 9 than using across-the-board. As it turns out, when you 10 look at the proportion of how much was spent at the 11 treatment plants relative to conveyance and collection, it 12 ended up being almost about the same. 13 Q So we had more capital expenditures than 14 anticipated over those periods? 15 A I wouldn't say that. I didn't say that. I 16 just said they were different. I said they were different. 17 I didn't say they were more. I honestly don't -- I don't 18 know that off the top of my head. I said they were 19 different. 20 Q Okay. You said they were different. But 21 capital expenses -- you said -- Cost of service increased 22 higher than what the rate increase was for TSS and BOD over 23 those years? 24 A TSS and BOD, correct. 25 Q Cost of service increased because of higher TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 59 1 capital expenditures than anticipated? 2 A Than we forecasted when we did the rates, yes. 3 Q Than you anticipated? 4 A Yes. 5 Q Okay. Those higher capital expenditures, were 6 those general MSD capital expenditures or were those 7 associated with treatment of TSS and BOD? 8 A My understanding is that they were associated 9 with treatment -- when you look at the asset -- the booked 10 assets for MSD, when you book -- we ended up booking more 11 in the treatment plants -- I wouldn't even say more. We 12 thought that -- Basically, the discussions we had with 13 ourselves and staff were that the capital improvements 14 would go more proportionately into the conveyance and 15 collection system than the treatment plants, but when we 16 looked at what actually occurred from 2017 to 2021 is the 17 proportion of treatment plant assets ended up being 18 approximately the same as conveyance and collection. 19 Q Is conveyance -- 20 A Part of that was actually due to depreciation 21 and not just necessarily new assets. Because when you look 22 at how we do cost of service, it's based on the net book 23 value of the MSD's assets, and so -- But when you look at 24 the change in value of the system, treatment ended up going 25 up approximately as much as conveyance and collection on a TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 60 1 proportionate basis, not on an absolute dollar basis. 2 Q Are conveyance and collection systems, that 3 benefits the system as a whole, that's not just a function? 4 A Yeah. 5 Q Leading to treat extra -- excess strength? 6 A Correct. Those are allocated primarily 7 involving. 8 Q Is there an industry standard or a commonly 9 accepted understanding of what level of rate increase 10 results in rate shock? 11 A I wouldn't say there's an industry standard or 12 commonly accepted. Kind of, if you want just to put it in 13 simple numbers, often it's expressed as double digit 14 increases, which we subjected our retail customers to over 15 the past four years. 16 MR. NEUSCHAFER: Thank you. 17 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 18 Ms. Stump, do you have any questions for Mr. Beckley? 19 MS. STUMP: One. 20 EXAMINATION 21 QUESTIONS BY MS. MYERS: 22 Q I think Mr. Neuschafer did an excellent job of 23 asking the questions that I was going to ask and getting 24 the answers out of you. But one final question relating to 25 that discussion about the surcharges. As you know, the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 61 1 Rate Commission has defined that the proposed rate change 2 results in rates that are fair and reasonable across all 3 classes of rate payers. Can you explain to me, looking at 4 this issue, the surcharge issue, what your opinion is on 5 that and why, on the fair and reasonableness across all 6 classes? 7 A The challenge when we do this, when you're 8 using a multi-year rate plan -- And again, this isn't 9 unique to MSD, it's anytime you're doing multi rate plans, 10 you have to make assumptions for those out years. Like I 11 said, when we had this discussion preparing the 2017 rate 12 proposal, there was specific discussion about that issue 13 that there was concern that we were going to raise the 14 surcharges too much if we applied across-the-board 15 increases to them, and that would have turned out to be 16 accurate. We would have -- We would be talking about 17 lowering the surcharges now by 13 percent for TSS, almost 18 four percent for BOD if we had done across-the-board 19 instead of going with the increases based on O&M. 20 And so in fair and reasonable, we make our 21 best estimate on a lot of assumptions and there is a -- 22 there is a lot of assumptions in the rate proposal. We do 23 our best to determine what will provide fair and reasonable 24 rates for all classes, for residential, commercial, 25 industrial, all rate classes. And on this one, obviously TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 62 1 we had a lot of discussions. We were preparing the 2021 2 rate proposal about this specific issue because there was 3 concern by MSD staff, as well as ourselves, that we wanted 4 to make sure that we understood why this was occurring, and 5 that's why even our direct testimony that we filed with the 6 rate proposal this specific issue was addressed. We 7 understand that this -- Like I said in my surrebuttal 8 testimony, we missed the mark more than we would like, but 9 sometimes that happens. And so we end up undercharging the 10 industrial customers for surcharges, and at the end of the 11 day, that means the other customers paid a little bit too 12 much. 13 Now, you have to recognize that we're talking 14 about less than two percent of the total revenue 15 requirement for the District. So, yes, they paid a little 16 bit too much, but in the grand scheme of things, it's not 17 that they were way overpaying to subsidize these industrial 18 customers, but -- We would have preferred it had been 19 closer, but it just turned out this way that we were wrong. 20 Like I said, actually on TSS, when you look at TSS, we were 21 closer on TSS by using O&M than we would have been using 22 across-the-board. If we used across-the-board, we would be 23 lowering the rates by 13 percent instead of increasing the 24 rates by 10 percent. 25 Q So for this rate change proposal, really what TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 63 1 you're doing is a result of what happened in the last rate 2 change proposal? 3 A Right. It happens in every rate change 4 proposal. Some of the assumptions we made just weren't 5 accurate, and so that's why when you look at the percentage 6 increase, that 2.75 increase in the first year, not 7 everybody's rates are changing by 2.75 percent. These 8 surcharge rates are going up more. Residential rates are 9 going up a little less, in part because of that, because 10 they've been overpaying by a little bit to support those 11 rates over the past three years since we did -- as we made 12 those adjustments. 13 Q But if you look at this rate change proposal 14 in the years we have in this proposal, you still feel that 15 it's fair and reasonable? 16 A I believe it's fair and reasonable. And 17 again, even though we've gone -- again, for years -- for 18 the three years following the cost of service, the test 19 year and 2021, we have gone with the O&M increase. 20 However, it's important to point out this time around, the 21 difference between across-the-board and the O&M increase is 22 less than three percent, whereas last time it was almost 23 30 percent. So there is a significant difference in the 24 magnitude of difference between the two options that we're 25 talking about. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 64 1 Q So that's another reason why. Because my 2 other question was going to be: Are we going to be talking 3 about this in the next rate change proposal? 4 A If it is, it's due to a completely different 5 reason because the difference between the two options now, 6 like I said, it's less than three percent, whereas last 7 time the difference between across-the-board and O&M was 8 almost 30 percent. So it was a much wider range last time 9 just because the across-the-board increases were much 10 larger last time than they are this time. 11 MS. MYERS: Okay. Thank you. No more 12 questions. 13 CHAIRMAN TOENJES: Thank you, Ms. Stump. Ms. 14 Myers, do you have any further questions for Mr. Beckley? 15 MS. MYERS: I do not. 16 CHAIRMAN TOENJES: Do any of the Rate 17 Commissioners have any questions for Mr. Beckley? I have 18 one. 19 EXAMINATION 20 QUESTIONS BY CHAIRMAN TOENJES: 21 Q Could you drill down on the specifics that 22 roll that inaccuracy of your estimate? 23 A It primarily comes down to the discussion we 24 had over primarily the 2017 rate proposal, was that it was 25 felt that when we booked the assets and booked depreciation TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 65 1 and everything else over those three years after the test 2 year, that the relative value of the conveyance and 3 collection system would be increasing at a faster rate than 4 treatment on MSD's books. But what actually ended up 5 occurring is when all of those factors were taken into 6 account, that the proportion of MSD's assets in the 2021 7 proposal that's dedicated to treatment, it increased it 8 approximately the same rate as the conveyance and 9 collection. And so even though when you look at the 10 absolute dollars, it's -- And I'm going off the top of my 11 head. It's like a $50 million increase in treatment versus 12 $150 million increase in conveyance and collection. But in 13 terms of proportion, they both increase. And again, I 14 don't have a number. That should be in the ballpark. But 15 they increased by, say, 10 percent. They both increase by, 16 say, 10 percent, but we thought that conveyance and 17 collection was going to increase more than treatment, and 18 that just didn't turn out to be the case once everything 19 was accounted for. 20 Q So it was a depreciation? 21 A Depreciation was part of the answer because 22 our conveyance and collections, honestly, there's just so 23 much conveyance and collection depreciation, these are -- 24 The conveyance and collection system have a book value of 25 approximately a billion dollars, and so when you actually TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 66 1 account for depreciation, we're depreciating. Over tens of 2 millions of dollars each year gets depreciated. 3 Q And that was the bulk of the error? 4 A It wouldn't say it was an error, it was just 5 an inaccurate assumption. Like I said, whenever we do 6 this, we have to make an assumption on how it's going to 7 change. And for instance, like I said, Ms. Lemoine 8 suggested that we should be using across-the-board 9 increase, which I don't disagree with is a bad approach. 10 That's a reasonable approach, too. If we had done that, we 11 still would have missed the mark. 12 CHAIRMAN TOENJES: Any further questions for 13 Mr. Beckley? Yes, Mr. Goss. 14 EXAMINATION 15 QUESTIONS BY COMMISSIONER GOSS: 16 Q So if I understand this testimony, I'm not 17 sure I do, you would have missed the mark by a lot less if 18 you had used the across-the-board? 19 A We would have actually missed it by more for 20 suspended solids. We would have missed it by less for BOD. 21 Q But overall, it would have been less, if you 22 combined the two? 23 A I'm actually not sure off the top of my head 24 the proportion of TSS to BOD, but I believe that's correct. 25 Q But your testimony now is that either way, TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 67 1 either method you choose is more or less the same? 2 A I didn't say it's more or less the same. Both 3 are reasonable approaches. 4 Q Well, I thought I heard a three percent 5 difference. What is that? 6 A That's the difference between the two 7 approaches for this rate -- for the 2021 rate proposal. 8 Q Well, in my cookbook that's more or less the 9 same. It's pretty doggone close; right? 10 A It is. 11 Q Okay. So Ms. Lemoine believes using 12 across-the-board would be preferable than these two, more 13 or less, the same approaches, because you're guessing less, 14 I think is what she said. Would you agree with that? 15 A I wouldn't call it guessing. 16 Q Well, you're making assumptions. 17 A You're making assumptions. 18 COMMISSIONER GOSS: I call those guesses. 19 They may be good guesses, they may be bad guesses. We hope 20 they're good ones. That's all I got. 21 CHAIRMAN TOENJES: Any further questions from 22 any of the Rate Commissioners? Thank you, Mr. Beckley. 23 Ms. Myers, do you have an additional witness or two? 24 MS. MYERS: We do. It is Bill Stannard. 25 (Witness sworn in.) TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 68 1 CHAIRMAN TOENJES: Thank you. Do any members 2 of the Rate Commission have any questions for Mr. Stannard? 3 Mr. Neuschafer, do you have any questions for Mr. Stannard? 4 MR. NEUSCHAFER: I do. 5 CHAIRMAN TOENJES: Please come forward. 6 * * * * * 7 WILLIAM STANNARD, 8 being produced, sworn and examined, deposes and says: 9 EXAMINATION 10 QUESTIONS BY MR. NEUSCHAFER: 11 Q Good morning. 12 A Good morning. 13 Q First, I just want to check and make sure you 14 have a copy of your surrebuttal testimony. 15 A I do. 16 Q Okay. We're going to talk about I&I for a bit 17 here, and you referenced a table that has been provided by 18 Mr. Gorman about I&I allocations used in other utilities. 19 You recall that table? 20 A Yes, I do. 21 Q Okay. And you focused in on two of the other 22 utilities that are referenced in that table, Kansas City, 23 Missouri, and St. Joseph, Missouri; is that correct? 24 A Yes. 25 Q And you indicate that you think that Kansas TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 69 1 City is a good model for St. Louis because of its size, 2 topography and climate? 3 A And also its similarity in the nature of the 4 system being both a proportionate system that's combined 5 sewer system and a portion that's separated sewer. So 6 we're dealing with similar consent decree requirements, but 7 CSO and also SSO. 8 Q Okay. Do you know, how does the Kansas City 9 system compare to the St. Louis system in terms of age? 10 A Don't know. 11 Q How about miles of sewer collection, 12 conveyance and infrastructure? 13 A Off the top of my head, I don't know. 14 Q But I think you indicated that they are under 15 a consent decree roughly similar to St. Louis? 16 A Yes, they are. 17 Q Do you have any direct experience with the 18 Kansas City system? 19 A Historical experience. 20 Q What do you mean by historical experience? 21 A Back in my prior life at Black & Veatch, I did 22 water and wastewater rate work for Kansas City, Missouri, 23 and then with my current employer, Raftelis, we did a 24 wastewater cost survey study probably about 12 years ago. 25 Q Okay. You also indicate that you didn't think TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 70 1 St. Joseph, Missouri, was very comparable. I would like to 2 understand the basis for that. 3 A Principally size. 4 Q And by size, you mean size of 5 collection/conveyance system, geography of the city? I 6 don't think St. Joseph's has a metropolitan area. 7 A Correct. The geographic area, number of 8 customers, and principally the nature of their systems. 9 Q Okay. What about any of the other eight 10 systems that were identified by Mr. Gorman, did you conduct 11 any analysis as to comparability of those to MSD? 12 A I didn't really look at those, but I do know 13 that there is a wide range of how those systems allocated 14 recovery costs or assigned costs associated with I&I 15 between customers and volume, ranging from Columbus, Ohio, 16 which I believe zero percent is allocated to customers; 17 Philadelphia, it's about 15 percent allocated to customers 18 on up to something as high as 75 percent allocated to 19 customers. 20 Q Let's talk about how MSD reached its current 21 I&I allocation. And there is reference and included in the 22 record as a CDM study from approximately 2005; that's 23 correct? 24 A That's correct. 25 Q And then you also reference Exhibit MSD 65C, TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 71 1 which is a page from the 2007 rate proposal. It has a box 2 that explains how we reach the current allocations; is that 3 correct? 4 A Yes. 5 Q We'll let them get that because I have some 6 questions about that. Okay. You've got Exhibit MSD 65C in 7 front of you? 8 A Yes. 9 Q Take whatever time you need to look at this 10 page and, in particular, the box in the middle of the page. 11 This is what you have referenced as how MSD arrived at the 12 allocation factors based on the CDM study. I'll give you a 13 minute. 14 A Yes, I recall this, and at the time, I was the 15 rate consultant for the Rate Commission for that 2007 rate 16 case. 17 Q I'm going to admit that I've read this, I 18 don't know how many times, and I'm having trouble 19 understanding it. Can you help explain to me what this is 20 saying, how MSD, I guess, arrived at a 21 40 percent/60 percent split for I&I? 22 A It's a very complicated approach that they 23 use, but this was done in part with the engineering 24 consultant, CDM, that had been engaged by the city for that 25 prior study, and then the lack of issue as the rate TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 72 1 consultant for the commission -- or to the MSD and working 2 through to determine what the appropriate distribution of 3 costs associated with -- or assignment of costs associated 4 with infiltration/inflow. So this was their explanation of 5 how they got to the 40/60 split. 6 Q Okay. So let's walk through this just a bit. 7 It looks like they started with or the split at the time 8 was 60 percent customer-related -- I'm not sure. I'm 9 reading that incorrectly. What I want to know is, how do 10 we get from all of the data in the CDM report, which 11 doesn't actually recommend a certain split, it just 12 provides a bunch of data, to the current 40 percent 13 distributed based on the number of customers within the 14 class and 60 percent based on volume? For example, say 15 that the bill versus treated volume is currently 50/50. 16 I'm understanding that prior to this, this rate cycle 17 referenced in here was a 50/50 split, not a 40/60 split; is 18 that correct? 19 A No, I think this was -- The bill volume as a 20 percentage of the total treated volume at the time was 21 50 percent from sanitary sewage, 50 percent from extraneous 22 sources including, principally, the infiltration and 23 inflow. 24 Q So then it says, in order to adjust the 25 33 percent wet weather volume and the 60 percent customer TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 73 1 capacity allocation. Where does 33 percent wet weather 2 volume I&I come from? 3 A That was, I believe as I recall from the 4 testimony at the time, that goes back to the work that CDM 5 was doing relative to the portion of flow that was 6 occurring during wet weather periods. Again, when you look 7 at a system, there are multiple sources of infiltration and 8 inflow, including what's commonly called a dry weather 9 infiltration which occurs at a constant rate just by the 10 nature of the system. We have river-induced infiltration 11 for those segments of the collection system that are near 12 rivers that the river flow and the level of groundwater 13 will be -- as that increases, then that will increase the 14 river-induced infiltration, and then there's during wet 15 weather periods where there's storm flow and other causes 16 of flow that gets into the system through surface water 17 runoff. 18 So those were all the components that CDM 19 looked at, and that was -- I didn't go back, and I don't 20 recall the details in their study. I would have to go back 21 and examine that to see if there's any substantive backup 22 information with regard to the determination that 23 33 percent of the flow of wet weather flow was -- how they 24 made that determination of the total volume that they did. 25 Q I'm going to approach this a different way. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 74 1 So if we look at the first paragraph, it appears that prior 2 to 2017, the I&I split was 60 percent customer-related and 3 40 percent volume. 4 A Yes. 5 Q Is that correct? 6 A Yeah, that's the allocation that had been used 7 in prior rate proposals by MSD. 8 Q And in this rate proposal in 2007, they 9 switched goals. They switched from 60 percent customer to 10 40 percent customer, 40 percent volume to 60 percent 11 volume, so we ended up with a 40 percent 12 customer-related/60 percent volume-related? 13 A Correct. 14 Q The rest of this box purports to explain 15 how -- the justification for switching those. Can you help 16 explain that? 17 A I'll do my best. But again, this was a 18 detailed analysis that was done by Black & Veatch and CDM, 19 and it was adopted in that rate change proposal. We did 20 not question that. I don't believe there was any testimony 21 that disputed it or -- I'd have to go back and look at the 22 actual transcripts of that, but it was also stated the same 23 in every rate change proposal since then without in-depth 24 discussion. 25 Q Okay. So was the -- As part of the current TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 75 1 rate proceeding, did MSD itself or did MSD cause you all to 2 do any reanalysis of whether this is the appropriate I&I 3 allocation? 4 A No. 5 Q And why is that? Do you believe that there 6 could be factors that could have changed the I&I allocation 7 in the past 12 years? 8 A That's going to be -- Most significantly with 9 regard to the distribution of investment that's done on 10 the -- I would say the trunk sewers and interceptor sewers 11 that -- and the sources of I/I that occurred in those 12 systems versus the customer-induced I/I, which -- where 13 there is a -- Mr. Unverferth said earlier, a substantial 14 amount of effort in the separated areas to remove that 15 infiltration/inflow from customer properties. So there's 16 that investment going on that would reduce the amount of 17 the infiltration/inflow that would be customer-related, but 18 then the impact of what the amount of infiltration and 19 inflow in the more common areas, which are those trunk 20 sewers and interceptors, the river-induced types of 21 infiltration/inflow, and other elements of the systems that 22 require -- that result in increased levels of wet weather 23 entering the system during rain events. 24 So we did not talk about the hydraulic 25 modeling that the District has done and asked to model and TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 76 1 understand their collection system, but that is something 2 that I think I need to identify in my direct testimony was 3 that it was recommended that they take a look at 4 reexamining this issue for the next rate case, the next 5 rate proposal in four years, so that we can have a better 6 understanding of what the impact has been on the nature of 7 the flows entering the system as a result of the capital 8 investment that we're making to comply with and reduce the 9 amount of lines for overflow as well as reducing the 10 separated sewer overflows as well. All of those things 11 will come into play. But it's -- As Ms. Kumar said in her 12 testimony, that's an expensive study to do. Great Lakes 13 Water Authority is spending millions of dollars in their 14 modeling and metering of their system to get a better 15 understanding of the sources of flows entering their 16 system. 17 Q As we all know, MSD is in the middle of a 18 pretty significant capital expenditure program relating to 19 the system as a whole; right? 20 A Right. 21 Q So the system probably looks a lot different 22 now than it did 15 years, doesn't it? 15 years ago? 23 A They've made investments, yeah, both in -- 24 both in terms of the separated sewer, trying to eliminate 25 separated sewer overflows which are much more significant TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 77 1 from a scheduling standpoint than the CSO compliance. But 2 all of those things pull in together, and we will have -- 3 In some ways, if we reduce the amount of overflows, the 4 amount of extraneous flow in reaching the treatment plant 5 will increase. 6 Q You mentioned Ms. Kumar's testimony a few 7 times. If you look at your testimony at the bottom of 8 page two and the top of page three, you take issue with her 9 referring to something called WEF MOP 27 as a guideline; is 10 that correct? 11 A That is correct. 12 Q So putting aside how we refer to that 13 document, do you have any disagreement with the substance 14 of her testimony with respect to the, I guess, example that 15 WEF MOP 27 provides? 16 A That's just an example. I will say that the 17 issue of infiltration/inflow and how it should be recovered 18 from customers has been even part of the Environmental 19 Protection Agency regulations, user charge regulations, 20 which are part 35 of the Code of Federal Regulations 21 dealing with user charges. But over the years as it 22 changed, what the final version was that utilities -- This 23 question was being asked of the EPA, how should we do this? 24 And the EPA determined that they can be recovered a hundred 25 percent on customers or a hundred percent on volume or TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 78 1 anything in between, so they gave a lot of leeway to 2 wastewater utilities to determine how they should recover 3 those costs. Most systems have not done even the studies 4 that MSD has done back approaching 15 years ago. Most 5 systems -- And I suspect that I would not be surprised if 6 any of the other systems that were included or most of 7 those systems that were included in Mr. Gorman's Table 5, 8 his testimony, had done even the study that MSD had done. 9 Q You don't know that because you told me 10 earlier that you didn't do an analysis of those other 11 systems; right? 12 A I did work for them over the years. My prior 13 role was at Black & Veatch in terms of Columbus, Ohio, 14 Cincinnati MSD, Philadelphia. So I know what others have 15 done, and I know having done this for 47 years now and 16 working with wastewater utilities around the United States, 17 I know how this issue is being addressed and how they're 18 dealing with it. So only now as we get better metering and 19 modeling capabilities, the utilities started to do even 20 more in examining the sources of wet weather flow and dry 21 weather infiltration and inflow metering systems. 22 MR. NEUSCHAFER: Thank you. That's all I've 23 got. 24 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 25 Ms. Stump, do you have questions for Mr. Stannard? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 79 1 MS. STUMP: One again. 2 EXAMINATION 3 QUESTIONS BY MS. STUMP: 4 Q Good morning, still. Just picking up on your 5 conversation with Mr. Neuschafer. So I think we all know 6 that the last study was done in 2005. The District has 7 changed a lot since then. I think you admitted to that. 8 And you also said that you are recommending that the 9 District do another study before the next rate change 10 proposal that it would do; correct? 11 A Yes. 12 Q Why -- And I'm back now, still looking at this 13 rate proposal and whether this rate proposal is fair and 14 reasonable with respect now specifically to the I&I. If 15 you're going to recommend that for the next rate proposal, 16 why would you say that this one is fair and reasonable? 17 A I would say that in given the -- Looking at 18 the changes in the system and how those have focused both 19 in terms of removal of property-related infiltration and 20 inflow and from individual customers into the separated 21 systems and then the investment that's been done in the 22 trunk sewers and interceptors, that that balance of impacts 23 may not be -- it's difficult to say how much it changed 24 since 2005. In total, it's changed. It's really 25 proportional to the sources of infiltration and inflow. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 80 1 So as far as where we are today, I think this 2 is a reasonable representation of the responsibility based 3 on some -- not any arbitrary determination of should it be 4 zero percent customer and 100 percent volume, or 75 percent 5 volume and 25 percent customer or vice versa, that this is 6 at least based on some technical analysis that has been 7 done, but that next time we can take a new look at that, 8 MSD can take a new look at that analysis in that study and 9 update it based on how the system is being operated at that 10 point. 11 Q And when you say technical analysis, you're 12 saying from 2005; correct? 13 A Yes. And what we didn't talk to MSD about 14 this time is whether in terms of modeling of the system, 15 the hydraulic modeling of the system, how those -- modeling 16 reviews to help support some of these analyses. 17 Q And if you were a rate payer in this system, 18 would you feel like the way that the I&I is treated in this 19 rate change proposal is fair and reasonable based on the 20 2005 study? 21 A Yes. 22 MS. MYERS: I have no further questions. 23 CHAIRMAN TOENJES: Thank you, Ms. Stump. Ms. 24 Myers, do you have questions for Mr. Stannard? 25 MS. MYERS: I do have a couple. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 81 1 EXAMINATION 2 QUESTIONS BY MS. MYERS: 3 Q Bill, are you familiar with Mr. Gorman's 4 recommendation in his surrebuttal testimony that the I&I 5 allocation should be 50 percent to customers and 50 percent 6 to volume? 7 A Yes. I read his surrebuttal testimony and 8 noted that he had made that recommendation that the -- in 9 his opinion that we should shift to a 50/50 split with no 10 basis for that. 11 Q So your testimony is that he did not have any 12 technical support to support that recommendation? 13 A I did not see any technical basis referred to 14 in his testimony. It appeared to me that he was looking at 15 the ranges in his table five in his earlier testimony and 16 saw that the 50/50 would be kind of in the ballpark, in the 17 middle of what others are doing. 18 Q Okay. And would this proposed 50/50 split per 19 I&I have an impact on customers' bills? 20 A If we took our proposal and changed it solely 21 for a 50/50 split, it would shift the impact of the 22 increase on bills of all customers. And -- Yeah. So 23 actually for, say, a small customer, say, a small 24 residential customer using one CCF per month, an individual 25 on their own would be using 30 gallons of water per day. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 82 1 If we shifted from the current 40/60 to a 50/50 split, they 2 would see a rate increase of about -- almost 17 percent for 3 their bill as opposed to a one percent increase under the 4 proposed change in the rate proposal. A typical customer 5 for MSD uses six CCFs, which a CCF is 100 cubic feet, which 6 is always an interesting term. Most people understand 7 gallons, but one cubic foot of water has about 7.48 gallons 8 of water in that cubic foot. So under the 50/50 split, if 9 we did that, their rates -- their bill would go up 10 6.7 percent as opposed to a 1.8 percent under the rate 11 change proposal, and that's just for the first year in the 12 rate change for 2020. On the flip side, the larger 13 customers, so not -- It's a large amount of residential 14 customers that uses 100 CCFs per month. 15 Under the 50/50 split, they would get nearly a 16 five percent decrease in their bill as opposed to the 17 three percent increase that is being proposed by the 18 District, so it would have some significant impacts 19 shifting us from large-volume users to small-volume users. 20 MS. MYERS: I have no further questions. 21 CHAIRMAN TOENJES: Thank you, Ms. Myers. Do 22 any members of the Rate Commission have questions for 23 Mr. Stannard? Mr. Stein. 24 EXAMINATION 25 QUESTIONS BY COMMISSIONER STEIN: TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 83 1 Q Mr. Stannard, it's been stated this morning 2 the EPA says that you can have an allocation anywhere from 3 a hundred percent customer to a hundred percent volume; is 4 that correct? 5 A That's what the user charge regulations state. 6 Q Okay. And if we had not looked at this in 14 7 years, why wouldn't it be reasonable to split the 8 difference and make it 50/50? 9 A I'm not sure that 50/50 has -- would be any 10 more valid than a 40/60. A 40/60, at least, is based on 11 analysis, technical analysis that was done, even though it 12 was 15 years ago. Again, looking at the investment that's 13 been made in the system and how that proportionate 14 investment relative to reducing and eliminating 15 infiltration/inflow from properties versus that what's part 16 of the collection system, that split of investment is 17 probably -- We can get back and take a look at that, but I 18 think it's probably -- that proportion would have not 19 changed significantly since that study was done before. 20 Q It's also been stated in prior testimony, 21 maybe not in this rate case, but in past rate cases, that 22 MSD has the fourth largest collection system in terms of 23 miles. And if I do my math right, if we look at the ratio 24 of customers to miles of sewer, that's going to be a fairly 25 low ratio compared to most other municipal systems; would TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 84 1 that be correct? 2 A I would not -- I wouldn't argue that. 3 Q You wouldn't argue that? 4 A I think that's probably a reasonable 5 presumption to make. 6 Q And I believe it has been agreed in past 7 testimony that infiltration/inflow correlates to miles of 8 sewer, and particularly miles of small diameter sewer, just 9 because of the sheer number of pipe joints and other 10 structures that have a tendency to leak; is that correct? 11 A There's two components to that. One is the 12 miles of private sewer laterals that are on private 13 property, which are the source of the customer-induced 14 infiltration/inflow coming from their properties, as 15 opposed to the collection system in total, which is -- has 16 the smallest collection sewers, maybe eight inches in 17 diameter on up to multiple feet in diameter. But there's 18 the connections, there's the joints, but then there's 19 manholes, manhole covers, those things that can -- over 20 time can deteriorate or age and be sources of infiltration 21 as well as the -- where the pipes are adjacent to streams 22 or rivers or where the groundwater table rises and there's 23 a break in a pipe where the water will just enter the 24 system until that's investigated or -- It's very difficult 25 to find it. So until they are televised and examined as TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 85 1 part of the ongoing CMOM, what's called the capacity 2 management and operation maintenance protocols for the 3 collection system, until that's done, they can't be found. 4 So the size of the sewer lines and the length 5 of sewers has a direct impact, but those, generally, would 6 be things that would be done on a volume of use as the 7 objective of the system is to recover the costs from 8 customers in proportion to how they are using the system. 9 Q It just seems to me, thinking out loud here, 10 that if I have a large system with a lot of sewers in terms 11 of mileage with lots of joints and lots of manholes and all 12 the other things that, as you said, create opportunities 13 for inflow as well as all of those private connections with 14 tree roots and everything that create opportunities, that 15 that would tip the scale toward more infiltration/inflow 16 being associated with customers as opposed to volume; am I 17 wrong there, and if so, why? 18 A Well, that could be -- That's an assumption 19 you could make, but there's other assumptions that could be 20 made because the nature of the system could be that the 21 larger sewers that are close to the streams could be 22 sources of even higher levels of infiltration/inflow. So 23 without an analytical and detailed analysis, the changes 24 would just be based on very broad assumptions what feels 25 right. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 86 1 COMMISSIONER STEIN: That's all that I have. 2 CHAIRMAN TOENJES: Mr. Goss. 3 EXAMINATION 4 QUESTIONS BY COMMISSIONER GOSS: 5 Q Mr. Stannard, did you go back and read the 6 2005 study in preparing for this rate testimony? 7 A I reviewed it back at the time the original -- 8 we prepared the original testimony, yes. 9 Q So roughly six months ago or something? 10 A Yes. 11 Q So I pulled up the 2005 study and was looking 12 at it while you were giving testimony, and the background 13 investigation data collection section says that the basis 14 of this study, the information used, included the daily 15 flow data for each MSD wastewater treatment plant. Did you 16 go back and compare the current daily flow data for MSD 17 wastewater treatment plants today to what was used in the 18 rate study -- or this study in 2005? 19 A I did not look at the daily flow, but did look 20 at the annual flows and monthly flows. 21 Q Well, that wasn't my question. 22 A That's what we did look at. We didn't look at 23 the daily number. 24 Q This study looks at the daily flow. That's 25 what they used. So did you look -- Next, they looked at TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 87 1 the rainfall data from the MSD rain gauges. Do you know 2 if -- Did you go and look at the current data for rainfall 3 MSD rain gauges and compare to the data they used in the 4 2005 study? 5 A We didn't compare it with the 2005 study, but 6 we did examine the rainfall over the last three years. 7 Q Right. That's not my question. 8 A But we looked at the -- 9 Q I'm trying to get to the meat of it. Did you 10 look at this study and the data from this study, what was 11 the basis for this study, and the current data and compare 12 the two? That's what I'm trying to get at. I'm going to 13 go through each one of these and ask the same question. So 14 I'm not really interested in the fact you just looked at 15 two years, three years of the current stuff. I want to see 16 the comparison to the old. 17 A Well, what they were doing was to determine 18 the 50/50 split between the total flow at the plant and 19 bill flow. So we did the same thing using monthly data for 20 the last three years to see how the impact of rainfall has 21 impacted the total flows at the plant. The last rate 22 change proposal was based on -- That split was based on the 23 most recent year. 24 With this rate change proposal, we examined 25 the model. We used a three-year average of the amount of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 88 1 flow being received at the plant. So again, looking at 2 similar data for determining the total percentage of flow 3 that can be determined to be from non-sanitary sources. 4 Q Okay. And you believe that's an accurate way 5 to evaluate this; right? 6 A Yes. 7 Q So why are you recommending that they go back 8 and redo the 2005 study? 9 A We've already -- 10 Q You made that recommendation twice. 11 A Right. But that's for the determination of 12 the portion of the flow, for infiltration/inflow coming 13 from customers versus coming from the collection system as 14 a total. 15 Q Okay. 16 A Not the total percentage of the total flow at 17 the plant that's infiltration/inflow. So we shifted from 18 the 50/50 that was 50 percent sanitary flows and industrial 19 flows and 50 percent extraneous flow, looking at the 20 average over the last three years, which was a higher 21 percentage. 22 Q I understand what you did and what you didn't 23 do. And what you didn't do, I think what you said is -- 24 the MSD needs to go back and redo -- If I've heard your 25 testimony correctly, they need to go back and evaluate it; TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 89 1 is that accurate? 2 A That's what I said. 3 Q Okay. Now, you didn't go and look at the data 4 that was used in the 2005 report for flow monitoring data 5 within the collection systems; is that right? 6 A I'm sorry. Could you repeat that, please? 7 Q Did you go back and look at the data for the 8 flow monitoring that was used in the 2005 report? Did you 9 evaluate that? 10 A No, I did not. 11 Q Did you evaluate the impervious area data for 12 all service areas that was used in the 2005 report? 13 A No, I did not. 14 Q Did you evaluate the collection system data, 15 such as pipe length and diameter for the entire collection 16 system, that was used in the 2005 report? 17 A No, we were not asked to redo that study. 18 Q I understand. I just want -- 19 A I am not -- 20 Q I'm just asking if you went -- 21 A So with -- 22 Q I don't want to talk over you. All I want to 23 do is know if you evaluated this data. If you did, fine. 24 If you didn't, that's what I'm asking you. I'm not asking 25 what they asked you to do, I'm asking what you did. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 90 1 A We used that study. 2 Q You used the 2005 study? 3 A We used the results of that study, which was 4 put into the 2007 rate case, rate proposal, that shifted 5 the recovery and responsibility from -- to 40/60. So we 6 used that and did not change that determination of the 7 relative responsibility for infiltration/inflow. 8 Q But you did not go back and compare the data 9 that formed the basis for the 2005 study conclusions and 10 compare it to the current data? That you did not do? 11 A Did not do that. 12 Q And that means you didn't go back and look at 13 the bill volume or number of billable units for all 14 accounts in 2005 and compare that to the current counts; 15 correct? 16 A There was no reason to go back and look at 17 what it was then. 18 Q So the answer is no? 19 A No. 20 Q Am I am correct? 21 A It would be -- You are correct. 22 Q Thank you. And you didn't go back and look at 23 significant industrial user data from 2005 and compare it 24 to the current data; is that correct? 25 A I did not make that comparison. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 91 1 Q And you didn't look at the influent wastewater 2 strength data at all MSD wastewater treatment plants in 3 2005 and compare that to the current influent wastewater; 4 is that correct? 5 A We're looking at that data, but not as a 6 comparison to that 2005 data. 7 Q The 2005 report has some data in terms of what 8 the impervious area and square feet is in the system. And 9 for example, it says it's 855,000 -- excuse me. 10 855,071,716 square feet of impervious area that's 11 commercial. Do you have any idea how that may have changed 12 to today? 13 A Not off the top of my head, but we did look at 14 data with the storm water rate proposal last year. 15 Q Okay. But you didn't take that data from the 16 storm water proposal and compare it to this data to see if 17 that would change the assumptions of this 2005 18 recommendation, did you? 19 A No. 20 Q Do you know what the plant inflow volume is at 21 the Bissell plant? 22 A Not off the top of my head. 23 Q Do you have any idea if it's the same as the 24 average annual volume between 2001 and 2003 that was used 25 for the 2005 report? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 92 1 A Don't know. 2 Q So the 2005 report actually is using data from 3 2001, 2003, but it's not even 14 years old. It's almost 20 4 years old. It's a generation that's gone by since the data 5 from this study was created. And you would agree with me 6 that there have been significant changes in the system 7 since that time; isn't that true? 8 A There have been changes in the system since 9 that time. 10 Q I guess the same question Ms. Stump had. I 11 don't know if we're relying on the 2005 report and this 12 data is actually from 2001 to 2003, and we admit that 13 there's been significant changes in the system, why 14 wouldn't we now for this rate go and reanalyze this so that 15 we're certain we have a reasonable allocation in 16 recommending a fair rate? Why wouldn't we do that now, 17 particularly when you're recommending that it ought to be 18 done three years from now? 19 A Well, I think that based on discussions with 20 MSD staff, we felt it was still a reasonable way to recover 21 those costs without changing the -- without doing that 22 analysis because, again, that would take effort and time, 23 and will we have better information even for next time, but 24 I feel -- I believe that the result of this study is still 25 a fair and reasonable determination of the cost of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 93 1 providing service to the various customers and customer 2 classes of MSD. 3 Q But you have no way of really knowing that 4 because you didn't go back and look and compare the 2005 5 stating the assumptions and data it used? I mean, you're 6 using something that you think may be right, but it's -- 7 The comment you made to Mr. Stein, it was, you're making 8 assumptions. And you said to him you would be making an 9 assumption. I don't want to do that. And you're making 10 assumptions now that's not based on current data that this 11 report used to come up with its allocation, so I don't 12 understand how you can come to that conclusion. 13 A Well, I think that at least it's based on an 14 analysis that was performed and the investment in the 15 system and the work that MSD has done. Again, it's a 16 proportionality of that investment, not how the system has 17 changed in totality, that has the impact on the 18 determination of proportion of the infiltration/inflow that 19 can be reasonably allocable to individual customers as 20 opposed to total use of the system based on volume. 21 Q Do you know how much money we've spent to date 22 to eliminate CSOs in this effort to comply? 23 A We've spent a lot of money on CSOs and SSOs. 24 Q Right. So we've made some significant changes 25 in the system? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 94 1 A Right. 2 Q And this 2005 report doesn't account for any 3 of those changes, does it? It can't -- 4 A Right. Right. 5 Q So the answer is, no, it didn't; right? 6 A Right. 7 COMMISSIONER GOSS: I don't have anything 8 further. 9 CHAIRMAN TOENJES: Thank you, Mr. Goss. Any 10 questions from any other Rate Commissioners? I have one. 11 EXAMINATION 12 QUESTIONS BY CHAIRMAN TOENJES: 13 Q Mr. Stannard, could you describe the process 14 and a general cost for performing this I&I study? 15 A Based on what I've seen more recently is 16 examining the -- in looking at the hydraulic modeling 17 nature of the system where the data is, I don't know if we 18 have flow meters within the collection system, but I know 19 Great Lakes Water Authority, which is the Detroit 20 metropolitan area, which has combined systems serving the 21 City of Detroit and separated systems serving the suburban 22 communities, there has been several million dollars doing a 23 similar analysis. 24 Q Sir, could you define several? 25 A I would estimate it's around $2 million that TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 95 1 the -- but they're doing part of their master plan, their 2 sewer master plan that is underway, but they're trying to 3 determine the amount of infiltration/inflow and storm flow 4 that is being created within the Detroit system, the City 5 of Detroit, which is combined, relative to what is 6 happening within the suburban communities that are all 7 separated systems. So I can't really give an estimate of 8 what the level of effort that -- You would have to go back 9 and define a scope of services in looking at the 10 information that would be available for MSD today with 11 regard to the system and how we can use that data for an 12 updated analysis. But that's not something -- That's an 13 engineering analysis that would not be something that my 14 firm would do. I would have -- It's like it would have to 15 be done by an engineering firm. 16 Q So it's something that needs to be done, in 17 your opinion, it's just a case of when? 18 A And again, I'm not sure -- Time-wise, yes, 19 it's just -- I don't know how long it would take to do this 20 analysis and in getting the data and then doing whatever 21 metering, flow metering would be necessary to augment that 22 and the sources of those -- that infiltration/inflow and 23 other elements of extraneous flows that enter the system. 24 Q Would you guess this is a six-month, 12-month, 25 18-month process? Any opinion? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 96 1 A It would be just a guess. I would say it 2 could be approaching 12 months, six to 12-month time frame 3 to do that effort. 4 CHAIRMAN TOENJES: Any other questions from 5 any of the Rate Commissioners? Thank you, Mr. Stannard. I 6 think we will begin the next testimony. We will break a 7 little bit later for lunch. We will continue on for a 8 little bit here. 9 MS. MYERS: The District's next witness is 10 Marion Gee. 11 (Witness was sworn.) 12 CHAIRMAN TOENJES: Do any members of the Rate 13 Commission have any questions for Mr. Gee at this point? 14 Hearing none, Mr. Neuschafer, do you have questions for Mr. 15 Gee? 16 MR. NEUSCHAFER: Nothing at this time. 17 CHAIRMAN TOENJES: Ms. Stump, do you have any 18 questions of Mr. Gee? 19 MS. MYERS: I do not have any questions. 20 CHAIRMAN TOENJES: Mr. Myers, do you have 21 questions for Mr. Gee? 22 MS. MYERS: Yes, I do have a few. 23 * * * * * 24 MARION GEE, 25 being produced, sworn and examined, deposes and says: TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 97 1 EXAMINATION 2 QUESTIONS BY MS. MYERS: 3 Q Mr. Gee, has MSD changed the allocation of 4 infiltration and inflow to customers in volume that was 5 used during the 2015 Rate Commission process? 6 A No, we have not made a change to that 7 allocation. For the prior rate proposals, I think it was 8 two rate proposals prior to this one, we used 40 percent 9 allocation to customers and a 60 percent allocation to 10 volume. We have continued with that for this rate proposal 11 as well. 12 Q And what would the impact on the proposed 13 rates of a typical residential customer be if the I&I 14 allocation to customer and volume was changed to 50 percent 15 to 50 percent as recommended by Mr. Gorman? And to assist 16 Marion in his answer, he has put together an exhibit that I 17 would like to pass out to the Rate Commission at this time, 18 if that's appropriate. 19 CHAIRMAN TOENJES: Certainly. Let's 20 distribute it. 21 MS. MYERS: It's Exhibit MSD 85. 22 MS. STUMP: Ms. Myers, can I ask you a 23 question? 24 MS. MYERS: Sure. 25 MS. STUMP: So this is the same -- You're TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 98 1 asking him now something that's already in his testimony. 2 This is the same thing that's in his testimony? 3 MS. MYERS: Yes, this has been part of his 4 rebuttal testimony. 5 MS. STUMP: His surrebuttal, just to clarify. 6 Q (By Ms. Myers) Mr. Gee, on page one of your 7 surrebuttal testimony? 8 A That's correct. 9 MS. STUMP: Okay. Thank you. I just want 10 to -- 11 CHAIRMAN TOENJES: So this is a duplicate 12 document with what was submitted as part of your 13 surrebuttal? 14 A The numbers are the same. I think I changed 15 the description a little bit so that it was more accurate. 16 MS. MYERS: So let me go ahead and re-ask the 17 question. 18 Q (By Ms. Myers) Looking at Exhibit MSD 85, can 19 you explain to us the impact on the proposed rates of a 20 typical residential customer if the infiltration and inflow 21 allocation was changed to 50 percent to 50 percent as 22 recommended by Mr. Gorman? 23 A Yes. As Mr. Stannard pointed out earlier, the 24 typical MSD customer uses six CCFs, and so this chart 25 depicts what the rate increase is that we're proposing for TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 99 1 FY21 through FY24. So for example, in FY21, we are 2 proposing a 1.9 percent rate adjustment for our typical 3 residential customer. If that allocation was changed to 4 50/50, that rate increase would be 6.7 percent. The impact 5 on the bill would be -- Under our current proposal of 6 1.9 percent, the customer's bill in FY21 for a typical 7 customer would be about $56.60. It would increase under 8 the 50/50 proposal by Mr. Gorman to about $59.30. If you 9 take a look at FY22 to FY24, our rate proposal is 10 requesting 3.8 percent increase for each of those years. 11 If that allocation was changed to 50/50, the impact on our 12 typical residential customer, our increase would need to be 13 approximately 8.7 percent. So we have a significant 14 increase that more than doubles if we were to make that 15 change to the allocation. 16 Q As you testified to in your surrebuttal 17 testimony regarding extra strength surcharge, can you kind 18 of re-explain what the purpose of the extra strength 19 surcharge is? 20 A Yes, wastewater customers that are discharged 21 from businesses, they typically have a higher strength of 22 wastewater than what you would find for a typical 23 residential customer. There are more chemicals and other 24 substances in their wastewater streams that you would not 25 find in a typical residential customer. So it costs more TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 100 1 to remove that additional strength of the wastewater from 2 those customers than it would, again, for a typical 3 wastewater customer. So utilities, wastewater utilities 4 typically charge an extra strength surcharge in order to 5 recover the cost of removing that additional strength of 6 wastewater. 7 Q Okay. And are customers not subject to the 8 extra strength surcharge rate currently subsidizing the 9 amount paid by those customers that are? 10 A Yes, they are. Per our current wastewater 11 proposal, the one that is from FY17 to FY20, from FY17 12 through FY19, our customers that are not commercial 13 customers that are subject to this surcharge, they are 14 subsidizing that by having to pay $1.1 million more than 15 they would if that rate would have been distributed to 16 those customers that are subject to the surcharge. So 17 they're -- Again, they're paying an additional $1.1 million 18 through FY19 that really should be charged to those 19 customers with the higher wastewater strengths. 20 Q Okay. And what would be the anticipated 21 revenue during FY21 through FY24 if the proposed change to 22 the extra strength surcharge rates were approved, and how 23 does this compare to MSD's most recently audited fiscal 24 year, FY18? 25 A Okay. So to give you an example, our extra TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 101 1 strength surcharges would increase in our projected amount 2 of about $5.9 million in FY20, which is the last year of 3 our existing rate cycle, to about 7.1 million in FY21. So 4 that differential of $1.2 million is basically the 5 additional amount that would be needed to cover that amount 6 that's been currently subsidized. And I want to point out, 7 when we did our calculations for this upcoming rate cycle, 8 we didn't go back and look to see -- we didn't go back and 9 try to necessarily recover the amount that was not being 10 charged currently. We based that on numbers for the next 11 rate cycle. So the $7.1 million is actually what would be 12 needed to treat that extra strength surcharge that's coming 13 from those customers. We're not going back trying to 14 recover what we've lost in the current recycle. Again, 15 it's based solely on what it's going to cost to service 16 those customers for the next four-year rate cycle. 17 In FY18, which is our last audited year, there 18 were 118 commercial customers that were billed an extra 19 strength surcharge. And again, for FY18, that amount was 20 $5.7 million. The largest customer that was subject to 21 that surcharge paid $1.6 million or 28 percent of that 22 amount. So 28 percent of that surcharge is paid by our 23 largest commercial customer. I looked at our top ten 24 customers that paid a surcharge, and they were billed 25 $4 million of the 5.7 million, which is 70 percent. So our TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 102 1 top ten commercial customers subject to that surcharge paid 2 70 percent of the amount of 40 percent. The remaining 110 3 customers paid the 1.7 million. Our smallest customer 4 that's subject to a surcharge only paid $137. 5 Q In his surrebuttal testimony, Mr. Gorman 6 indicated that the impact on the wastewater rates was not a 7 factor in establishing the timing of MSD's CIRP spend. Do 8 you agree with this statement? 9 A No, I do not. As Rich mentioned earlier, when 10 we negotiated the amended consent decree with the EPA, the 11 impact on our customers with respect to the rate increase 12 was definitely a consideration. At the time, prior to our 13 negotiations with EPA, we were projecting that the rate 14 increases for this current rate proposal, FY21 to FY24, 15 would have been 11.4 percent. With the amended consent 16 decree, we were able at the time to project rates on 17 average over that four-year period that were about five and 18 a half percent. So that amended consent decree allowed us 19 to reduce that rate increase by about a hundred percent. 20 If not for that, the rate increase would have been doubled 21 what we were asking for at the time. So we definitely did 22 consider the impact on our customers when we negotiated 23 that amended consent decree. 24 Q Okay. And you've heard a little bit this 25 morning about the current flooding conditions that we have. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 103 1 Will these conditions or the current flood event impact the 2 current rate proposal? 3 A No, it will not. The existing flood event 4 that is currently going on, we were really fortunate in 5 that there's not been a significant amount of damage to any 6 MSD facilities, unlike our 2015 flood event. To give you 7 an example, the event we had in late December, early 8 January of 2016, that was approximately a $24 million event 9 for the District. And of that amount, we were able to 10 recover about 13 million of it from insurance, $6 million 11 of it from FEMA and the remaining $5 million actually 12 related to water -- wastewater backup claims that the 13 District had to pay. 14 We had another flood event two years later, 15 unfortunately, in April of 2017, but that event was much 16 smaller in terms of scale and dollar-wise. We incurred 17 about $2.6 million worth of expenses for that particular 18 flooding. A lot of that, I think, had to do with what we 19 learned from the 2015 flood event. There are some 20 protective measures that were put in place. We got dollars 21 from FEMA that were mitigation dollars to help us to better 22 flood-protect our facilities. All of that kind of 23 contributed to that. I'm certainly not seeing that it made 24 up for that difference. We were fortunate in that I don't 25 think that rain event was as significant. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 104 1 With respect to the event that's going on now, 2 the bulk of what we're seeing is an increase in overtime 3 expenses in our operations area. We are now projecting 4 that they are going to be about $700,000 over budget in 5 overtime. Our electricity costs are also going to be 6 higher. But even with the projected amounts for additional 7 electricity to operate our flood pumping stations, we're 8 still projecting to be within our budget for electrical 9 costs, so that in itself is a good thing. 10 The most significant expenditure that we were 11 anticipating to carry as a result of this flood event has 12 to do with our wastewater backup claims. Just the claims 13 associated with the floods are projected to cost about 14 $3 million right now. 15 MS. MYERS: That's all I have. 16 CHAIRMAN TOENJES: Prior to taking questions 17 from the Rate Commissioners for Mr. Gee, we will take a 18 break until 12:30 and have lunch, and then we will have 19 questions from the Rate Commissioners. 20 (Whereupon, a short break was taken.) 21 CHAIRMAN TOENJES: Well, I guess if there's no 22 objection, we will start two minutes early. We will resume 23 our testimony from Mr. Gee, and we are at the point of 24 having questions from the Rate Commissioners for Mr. Gee. 25 Mr. Palans first. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 105 1 EXAMINATION 2 QUESTIONS BY COMMISSIONER PALANS: 3 Q Thank you. Mr. Gee, just picking up where we 4 left off on the flooding conditions, I think you testified 5 that the current flood conditions have a -- I won't call it 6 minimal impact upon the District, but not a material impact 7 upon the District; correct? 8 A That's correct. That's a fair assessment. 9 Q And the primary costs that you have seen 10 associated with the current flooding conditions relate to 11 overtime costs; correct? 12 A Correct. 13 Q Additional electricity costs? 14 A Correct. 15 Q And wastewater backups? 16 A That's correct. 17 Q I believe you also did a comparison to 18 flooding that occurred in 2015 and '16? 19 A Yes, sir. 20 Q As I recall, the current flooding conditions 21 are reported to be most similar to the great flood that our 22 region experienced in 1993; is that correct? 23 A That's my understanding. But to be honest 24 with you, I would have to defer to our operations people. 25 Q Did you do any look back to the costs that the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 106 1 District incurred in '93 in response to that flooding 2 situation? 3 A No, sir, I did not. No. 4 Q And if you were to look back at those costs, 5 would they be considered material at that time or you just 6 don't know? 7 A I am not certain. We would have to pull 8 financial records from 1993, and truthfully, if we pulled 9 our audit, it's probably not going to be detailed enough to 10 tell me exactly how much of that related to the '93 flood, 11 but I did not try to do that, though. 12 Q Okay. Mr. Gee, the testimony has been 13 established that the District has no discretion to defer 14 CIRP projects during the rate cycle under the requirements 15 under the consent decree; correct? 16 A Yes. As I understand it, there is very little 17 in terms of what we can defer that's non-regulatory or 18 non-CD related. 19 Q And in fact, as Mr. Unverferth's testimony 20 indicates, about 1.4 billion of the 1.5 billion in costs 21 that are associated in this rate cycle relate to mandatory 22 requirements under the consent decree; right? 23 A That is his testimony, as I recall. 24 Q And our current rate cycle proposes that the 25 District borrow $500 million; is that correct? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 107 1 A Actually, the $500 million is borrowed funds 2 from a new authorization. In total, I think the borrowed 3 funds is approximately 970 million. Of it, 500 million 4 would be in a new bond authorization. 5 Q So that if this proposal is approved and the 6 voters approve it, the total borrowings with this proposal 7 under this rate cycle would increase to roughly $1.4 8 billion? 9 A Not -- Are you referring to the total 10 outstanding borrowing? I just want to make sure. 11 Q The bonds. I'm talking about bonds. 12 A Our bonds right now, we're at about 13 $1.8 billion. 14 Q 1.8 -- 15 A Billion dollars of outstanding bond debt. We, 16 of course, would make principal payments on that between 17 now and the end of the four years, but just -- If we were 18 just to do a rough calculation, add another $970 million to 19 that 1.8. 20 Q So you would be at about 2.7? 21 A Somewhere around that level. I don't have my 22 rate change proposal in front of me, but we actually have 23 that identified in the document. 24 Q So the $500 million that you're requesting 25 approval on under this rate cycle is an incremental amount TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 108 1 that will bring the total borrowings up to 1.8 billion? 2 A The total borrowings for the rate cycle would 3 be about $970 million. Of that, we have authorization for 4 470 million of that now. We would have to obtain voter 5 approval to issue an additional 500 million. 6 Q What is the incremental costs from a P&L 7 standpoint, an annual cost to increase those bonds to 8 $500 million? Why $500 million borrowed? 9 A Okay. Are you asking if we issued a 10 $500 million bond issue, what would that be? 11 Q Yes, sir. 12 A I'm going to defer that question to Tim 13 because I believe he's actually done some research on it -- 14 to Mr. Snoke when he comes up to testify to better address 15 that question. 16 Q Okay. Well, don't you have your financial 17 forecast available? 18 A We do, yeah. And I'll point you to where you 19 can find that information in the rate proposal. Give me 20 just a second here. So on page -- I don't know if you have 21 your rate proposal, but on page 4-17 of the rate proposal, 22 it outlines our capital improvement financing plan, and it 23 gives you a breakdown of the sources of funds. So it shows 24 you how much we would issue in terms of both senior and 25 subordinate debt and kind of what those amounts would look TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 109 1 like. 2 Q And point out the line that specifically would 3 relate to this 500 million in increased borrowing? 4 A Well, there's a couple of lines that would 5 relate to that. So if you're looking at that table 4-8, 6 you will see line numbers two, three, and number six and 7 seven identify the borrowings. 8 Q So you're saying that Mr. Snoke could identify 9 the annual cost impact of increasing the authority by 10 $500 million? 11 A That is correct. I believe there is another 12 table. Give me just a moment here. If you turn to 13 page 4-19, it identifies the projected wastewater debt 14 service requirements by year so you can see what both the 15 existing amounts are and what those incremental amounts 16 would be on line one. And two, it shows you the existing 17 amounts for our senior bonds. Line two actually shows the 18 proposed increased associated with debt service for those 19 senior bonds. But we also have SRF funding that we get and 20 also WIFIA funding as well. 21 So in lines four and five, it would show you 22 the projected increase in debt service related to those 23 subordinate items in a WIFIA loan in existing -- as well as 24 the existing amounts that were paid. So in total, it looks 25 like from FY21 to FY24, the additional increase in debt TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 110 1 service would be about $138.5 million. 2 Q Would be $38.5 million? 3 A 138.5. What I'm looking at is the total of 4 line two, that far right-hand column for the proposed bonus 5 or senior bonus, and then the proposed bonds on line five, 6 so that 100 million dollar figure plus the $38.5 million 7 figure. 8 Q And if you were to increase the amount of the 9 requested authority from 500 million to 600 million, would 10 that be approximately a 20 percent increase over what is 11 indicated here? 12 A Not necessarily because -- and the reason I 13 say that is, that $100 million, we would have to calculate 14 the impact of the debt service on our debt service 15 coverage. So it's not as simple as saying, okay, you're 16 increasing it by 20 percent. So would your debt service 17 increased by 20? Probably could, using a rough estimate, 18 but it wouldn't be exact. 19 Q We've heard testimony that if we were to have 20 additional funds available during this rate cycle, I used 21 the number $100 million, we could accelerate our CIRP 22 projects. Were you present and heard that testimony? 23 A I don't recall who exactly said that, but I 24 would say yes, if we had an additional $100 million, we 25 could do one or two things. We could either -- if you're TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 111 1 referring to $100 million of additional debt, we could do 2 additional projects. 3 Q And if we were to increase the rate from what 4 is currently proposed, 1.9 percent in 2021 and then 5 3.8 percent thereafter during the cycle, if we were to 6 increase that rate to five percent, do you have any idea as 7 to what that dollar amount would be in terms of increased 8 revenue annually? 9 A Well, I can tell you right now our budgeted 10 revenues are about a little bit over $400 million, so 11 five percent of that, of the existing amount to date, would 12 be another $20 million. 13 Q And the difference between that $20 million 14 and the proposed rate increase would be what amount? 15 A I would have to do some calculations. Off the 16 top of my head, I don't know. 17 Q To comply with the consent decree, what is the 18 amount of the debt that the District must increase its 19 borrowing level to over the next 20 years? 20 A Well, the consent decree itself, it's 21 approximately a $6.1 billion consent decree, and I think 22 we've spent roughly about two billion of that. So we would 23 need to fund about $4.1 billion. Now, of course, all of 24 that would not be in debt. If we keep our current 60/40 25 debt to cash funding, you're looking at 60 percent of an TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 112 1 additional $4 billion, which would be $2.4 billion, if my 2 math is correct. 3 Q Borrowing more now, increasing the borrowing 4 level now will allow us to accelerate CIRP projects under 5 the consent decree. At this time, the record indicates 6 that we have historically favorable interest rates; 7 correct? 8 A That's correct, and that interest rates are 9 low. 10 Q And we have historically favorable CIRP 11 pricing; correct? 12 A I think we've received favorable bids for some 13 projects. I don't know if I would characterize it as 14 historically favorable bids, but we have -- We've gotten 15 bids that have been above estimates, and we've gotten some 16 that have been below what we estimated. 17 Q And the District currently enjoys a favorable 18 credit rating from the rating agencies; correct? 19 A That is correct. And again, that's based on 20 our -- of course, our current debt levels plus what we 21 projected and what we projected for coverage and cash on 22 hand, so there's a number of factors that go into that 23 favorable rating. 24 Q And the District currently has what I would 25 characterize as a good liquidity position; correct? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 113 1 A I would agree. 2 Q And if the District would increase its 3 borrowings by $100 million and increase its rates, let's 4 just say to five percent over what is currently forecasted, 5 it would nevertheless improve its liquidity, would it not? 6 A I think if we increase rates, we would improve 7 liquidity to the extent that if you're just going to turn 8 around and spend that on capital projects, then, you know, 9 if I increase the rates and I get $100 million, well, if I 10 spend 100 million on capital, that really doesn't improve 11 my liquidity. 12 Q Well, under the consent decree, the District 13 is required to comply with this consent decree over the 14 course of the next 20 years; correct? 15 A Yes. I think the consent decree ends in 2038, 16 I believe. 17 Q And so if the consent decree is performed, if 18 there are CIRP projects that are required and the 19 regulatory requirements are complied with in advance of 20 2039, it would be a favorable outcome for the District, 21 would it not? 22 A It could be. What we basically would be 23 doing, though, is increasing rates on customers really 24 earlier than we perhaps would need to. So you're saying 25 that maybe we should consider accelerating projects, but we TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 114 1 also have to look at what the impact would be on our 2 customers. Our last four-year rate cycle, our average rate 3 increase was double digits, as I think has been pointed out 4 later. It's 10 percent up to 11 percent. At some point in 5 time, I think customers do experience rate fatigue. So I 6 think what we have traditionally tried to do is to propose 7 rates for projects that we need to get done at as low of a 8 rate as we possibly can while still maintaining a good 9 financial condition as well as favorable bond ratings. 10 But I know it's been -- It sounds like if we 11 proposed our rate increases and we were able to get 12 projects done quicker, EPA may view that as favorable, but 13 I'm not so sure that our rating indices would do that 14 favorably because we would be borrowing more. Certainly, 15 the money we certainly borrowed, we would try to make sure 16 that we had adequate debt service coverages and other 17 ratios that were needed. 18 One thing, too, we have to consider is, what's 19 going to be the impact on that customer to actually paying 20 those increasing bills. 21 Q Well, the Board of Trustees during the last 22 cycle anticipated a 10 percent rate increase to customers, 23 did it not? 24 A During the last rate cycle, the rates actually 25 again were increased by 10 percent to 11 percent during the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 115 1 four-year rate cycle. 2 Q So merely increasing them now to five percent 3 in lieu of what is currently proposed, 1.9 and 3.8 for the 4 remaining three years, is not an appreciable increase over 5 what was previously anticipated and approved by the Board; 6 correct? 7 A Well, yeah. You have to look at that 8 independently. And what I mean by that is, at the time 9 that the Board approved the rates for the existing rate 10 cycle, they had to consider what were the required projects 11 that needed to be done because our CIRP primarily drives 12 our rate increase to a certain extent. So they had to look 13 at financially what did we need in order to comply with our 14 regulatory requirements with the CD, while at the same time 15 ensuring that we had funds for operational expenses. Well, 16 that has changed for this four-year rate cycle. 17 So again, what our primary focus is, is what 18 are the expenditures that we need and how can we get there 19 with the lowest rate possible so that we have the least 20 impact on customers. 21 Q So your focus has been the lowest rate 22 possible as opposed to completing the CIRP projects in a -- 23 or accelerated fashion? 24 A Well, actually, I think as I understand it, I 25 was not here for the last wastewater Rate Commission cycle, TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 116 1 but the Rate Commission itself requested that Stefnotics 2 (sic) accelerate projects. 3 Q Given the historical low interest rate 4 environment, given favorable CIRP pricing, given the 5 liquidity position of the District, given the credit rating 6 of the District, do you consider it good prudent business 7 management to accelerate the CIRP projects given these 8 opportunities? 9 A Again, I think you have to look at what we're 10 trying to accomplish in totality. It's not just about 11 accelerating consent decree projects. We have to look at 12 how our expenditures will impact our customers as well. So 13 it's a little bit more to it than just accelerating those 14 projects. 15 Q Now, I used that analogy before, Fram oil 16 filter, you can either pay me now or pay me later. Would 17 you not agree that paying me later may cost more money than 18 the favorable conditions we have today? 19 A It could, yes. I would agree if we had to 20 borrow money, that could potentially cost more. But again, 21 you also have to look at affordability. I'm sure that when 22 folks go out and they look at buying a home, for instance, 23 and they buy a $200,000 home, most people can't afford to 24 pay cash for a $200,000 home, so they have to borrow in 25 order to make it affordable. We kind of have to do the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 117 1 same thing here. When we look at the expenditures, and 2 especially our capital program, we try to look at what's 3 going to be the impact on our rates, what is it that 4 customers can afford to pay. And I get what you're saying, 5 that if we could get the consent decree done quicker, 6 long-term would it save us money. Potentially it could, 7 but you also have to look at what can people afford to pay. 8 COMMISSIONER PALANS: Thank you. I have no 9 further questions. 10 CHAIRMAN TOENJES: Thank you, Mr. Palans. 11 Mr. Schoedel. 12 EXAMINATION 13 QUESTIONS BY COMMISSIONER SCHOEDEL: 14 Q Back to the I&I question. Something that we 15 discussed at great length in some of the previous testimony 16 brought up some interesting details that you probably 17 haven't become aware of, that if we went to the 50/50 as 18 currently proposed, the residential rates would increase 19 and the commercial rates would go down. Would the total 20 revenue still maintain? 21 A Yes, the total revenues would not change. 22 It's just who pays that proportion of the revenues. 23 Q I'm curious as to the District's decision as 24 to not to do a different study if one of the things we have 25 to look at is being fair, reasonable to all rate payers, TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 118 1 and to why we didn't look at maybe defining that study that 2 has been stated from back in 2005, is there time to do 3 that. It didn't seem like there's an exorbitant amount of 4 money or time to do something about that to get better, 5 accurate data. Not that I want residential rates to go up, 6 but is it time to get that data, and why did the District 7 decide not to do it during this rate? 8 A Well, again, I think Mr. Stannard kind of 9 discussed that point. At the time, we rely on our 10 technical experts, at least I do, to advise us on do we 11 really -- is -- or have there been substantial changes that 12 would move the needle in terms of this ratio that we're 13 talking about, and they felt confident that the results of 14 that study, while I agree that the information is -- is a 15 little bit dated, would not result in a rate proposal that 16 would be unfair to customers. So we made the decision not 17 to do a study for this particular rate cycle. It's been 18 pointed out we do anticipate -- or it's been recommended 19 that we do a study for the next rate cycle. 20 COMMISSIONER SCHOEDEL: Okay. Thank you. 21 CHAIRMAN TOENJES: Questions? Mr. Brockmann 22 and Mr. Goss? 23 EXAMINATION 24 QUESTIONS BY MR. BROCKMANN: 25 Q Mr. Gee, if we were to increase, say, a TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 119 1 million dollars a year, if we were to increase a million 2 dollars a year for construction projects, does MSD have the 3 staff to react to that increase in volume? 4 A For a million dollars? 5 Q I mean 100 million. I'm sorry. A 100 6 million. 7 A That's probably more of a question for Rich. 8 I would say it depends on how many projects that we're 9 talking about. If we're talking about two $50 million 10 projects, then we probably do have the staff for that, but 11 if we're talking about a hundred projects at a million 12 dollars each, maybe not. It really depends. 13 CHAIRMAN TOENJES: Mr. Goss. 14 EXAMINATION 15 QUESTIONS BY COMMISSIONER GOSS: 16 Q Mr. Gee, if I could refer you to your 17 surrebuttal testimony, if you could look at that. 18 A Yes, I have that. 19 Q Look at question eight, please. Would you 20 elaborate on your answer? Could you explain that a little 21 bit more fully for me, please? 22 A Sure. And just for the folks that don't have 23 my surrebuttal testimony, what the question is, is the 24 question asked: Why should the District not increase the 25 rates in the proposed FY21 through 24 rate cycle to prevent TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 120 1 potential spikes in rates in FY25. First of all, our rate 2 proposal is for this existing four-year period of time, so 3 that is really what we are focused on. My answer was, is 4 that for the FY25 data that is in the models, we did not go 5 through and analyze that data from FY25. I think we 6 actually showed years going out, I think another 12 years 7 or so in the model. We didn't apply the same level of 8 scrutiny on those numbers for that particular rate cycle or 9 for those particular years that we did for the existing 10 rate cycle. 11 Q Sir, when you say the same level of scrutiny, 12 what does that mean, that analysis? Because that was what 13 I wanted you to explain going forward. 14 A For instance, we didn't go through and try 15 to -- we didn't have data, for instance, for inflation 16 rates that would go out that far over a 16-year period. We 17 didn't apply those rates in the rate model. We didn't go 18 through, for instance, and try and look at our capital 19 program and go into the same level of scrutiny that we made 20 in terms of trying to prioritize projects that were placed 21 in FY25 or in FY30 that we may have the ability to 22 either -- we may have to accelerate some stuff or change 23 things out. We didn't go through that level of exercise 24 because, again, our focus was just on what we were asking 25 the Rate Commission to approve. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 121 1 Q Okay. So in the second sentence of your 2 answer, you say that given the District's history of 3 projective rate increases beyond previously proposed 4 four-year rate cycles being less than expected, it would be 5 prudent to not increase the rates in the current four-year 6 cycle to mitigate a potential spike in rates in fiscal year 7 '25. 8 A Correct. 9 Q So when I read that, what I take away from 10 that is, while we've done better over four years 11 historically than what we thought, and so since we're not 12 certain what's going to happen in the 2025 year, we really 13 shouldn't try to adjust for something in 2025 because we 14 simply don't know. 15 A That's correct. Yeah, we don't want customers 16 paying a higher rate unnecessarily. 17 Q So the 2025 projected increase is pretty 18 speculative, is what I got out of this; is that a fair 19 statement? 20 A It is at this point, and again, we have not 21 gone through and done the same calculations that we did for 22 the rate cycle. 23 Q When you get to that rate increase or that 24 rate -- that request for rate increase, you will go through 25 that analysis -- TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 122 1 A We will. 2 Q -- and you'll -- You're going to know that 3 better, but my takeaway from this is, we just don't know 4 enough to trust that 2025 increase number as solid, so we 5 don't think we should be adjusting the rates in this rate 6 cycle to prevent the current spike? 7 A Correct. 8 COMMISSIONER GOSS: Thank you. 9 CHAIRMAN TOENJES: Any other questions by any 10 of the Rate Commissioners? Mr. Gee, I have one question. 11 EXAMINATION 12 QUESTIONS BY CHAIRMAN TOENJES: 13 Q You gave us this exhibit in this D 85? 14 A Yes, sir. 15 Q Do you have similar projections for other 16 classes of rate payers based on this 50/50 change? 17 A I think Mr. Stannard had pointed out some 18 impacts on some of the larger industrial customers at 19 various levels of usage. But the answer to your question, 20 yes, we do have that in the models. 21 Q Okay. Is that part of the current exhibits? 22 A It is not in the exhibit that I provided. I 23 think it's -- Mr. Stannard, in his testimony, I thought 24 referenced an increase, but we did -- I think when we were 25 asked to go back and calculate what the rates would look TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 123 1 like at a 50/50 split, there is a table that's in that rate 2 model that shows what that looks like at various usage 3 levels. 4 Q And it does include all classes of rate 5 payers? 6 A Yes, because we have -- What we do is we 7 project at various usage levels, and the reason we do that 8 is, if you're looking at our commercial customers, there 9 are some commercial customers that use less water than the 10 typical residential customers, so there's a wide range in 11 terms of what that would look like. We have folks from 12 your mom and pop store on the corner to an Anheuser-Busch 13 that's way off the scale. So we have to look at, here's 14 the various levels of usage. But it's not identified 15 necessarily as, here's the residential and here's 16 commercial. Now, we have identified in the rate model what 17 a typical residential customer would look like, but then we 18 have usage levels beyond that as well. 19 CHAIRMAN TOENJES: Ms. Stump. 20 EXAMINATION 21 QUESTIONS BY MS. STUMP: 22 Q Mr. Gee, I think the material that you're 23 referring to, from what I understand, is in the rate model 24 itself, which is going to be difficult for the commission 25 to access. Could we get a separate exhibit with that TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 124 1 information so it could be easily -- 2 CHAIRMAN TOENJES: That's really what I'm 3 seeking is if you've gone through the exercise for a 4 typical residential customer. And I know what you're 5 saying, there's no such thing as a typical commercial 6 industrial user, but if some sort of groupings could be 7 developed that would reflect those impacts on those other 8 classes of customers similarly, then I think that would be 9 helpful for us to frame our discussions. 10 A Yes. In general, if you're moving from a 11 40 percent customer to 60 -- I'm sorry. Going from what we 12 have right now, which is 40 percent customers/60 percent 13 volume, and you're looking to go to a 50/50, obviously the 14 more volume you use under our 50/50 proposal, the less your 15 wastewater rates would be, but we can produce that. 16 CHAIRMAN TOENJES: Any further questions or 17 comments? Mr. Gee, that completes your testimony. Thank 18 you, Mr. Gee. 19 MS. STUMP: Mr. Chair, we need a minute. 20 Mr. Ratzki dropped off. Can we give him a quick call? 21 CHAIRMAN TOENJES: Certainly. 22 (Whereupon, a short break was taken.) 23 CHAIRMAN TOENJES: Ms. Myers, I see you have 24 another witness. 25 MS. MYERS: Our next witness is Bethany Pugh. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 125 1 (Witness sworn in.) 2 CHAIRMAN TOENJES: Thank you. Do any members 3 of the Rate Commission have questions for Ms. Pugh at this 4 point? Hearing none, Mr. Neuschafer, do you have questions 5 for Ms. Pugh? 6 MR. NEUSCHAFER: We do not. 7 CHAIRMAN TOENJES: Ms. Stump, do you have 8 questions for Ms. Pugh? 9 MS. STUMP: I do not. 10 CHAIRMAN TOENJES: And, Ms. Myers, do you have 11 questions for Ms. Pugh? 12 MS. MYERS: I do have a couple. 13 * * * * * 14 BETHANY PUGH, 15 being produced, sworn and examined, deposes and says: 16 EXAMINATION 17 QUESTIONS BY MS. MYERS: 18 Q Bethany, can you briefly restate your role 19 with the District? 20 A I'm with PFM Financial Advisors, LLC, serving 21 as financial advisors to the District in that capacity. We 22 assist on both debt transaction management, i.e., assist 23 with the negotiation and bond pricings, but also the 24 development of a financial plan. I personally have worked 25 with the District since -- or became the lead advisor to TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 126 1 the District since 2012 and have been working in the 2 industry, working with municipal entities, particularly 3 public utilities with respect to long-term financial plans 4 for 20 years. 5 Q And to your knowledge, does MSD have a 6 financial policy targeting capital funding at 70 percent 7 debt and 30 percent cash funding? 8 A No. The District does have a debt management 9 policy, which is provided and available on our website, and 10 it's dated March 22nd, 2004. And while it does state that 11 there should be a mix of debt and capital funding, it does 12 not specify a percentage. What it says is that the 13 percentage should be determined in conjunction or in 14 consideration on affordability of rates and charges and the 15 impact on the debt burden, so there should be a balanced 16 approached to analyzing what the right mix of debt and cash 17 funding of capital should be. It does also speak to 18 liquidity levels in terms of the minimum balance of 45 days 19 of operating expenses. 20 Q And do you believe it is prudent to target a 21 specific percentage of debt and capital funding? 22 A I think what I have observed is it is 23 customary for entities to have a targeted mix, and that's 24 usually in the context of multiple financial metrics, 25 including, for example, debt service coverage and liquidity TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 127 1 targets, and so you will often find that in addition to 2 those other targets, there will be some sort of debt to 3 PAYGO mix that entities are targeting. And I would say 4 that for the way that we've gone about developing the 5 District's rate proposal, the driving financial metrics 6 have been debt service coverage with respect to the 7 District's senior revenue bonds, debt service coverage in 8 aggregate, which is both the senior bonds and the state 9 revolving bond debt of the District, so an aggregate 10 coverage as well as liquidity. And what we've seen is that 11 that is driven the PAYGO mix, i.e., the mix of debt versus 12 cash funding to a result of outcome of these other 13 financial metrics that we have developed in consideration 14 of ratings as well as the debt policy of the District. 15 Q Okay. In the rate proposal process conducted 16 in 2015, your recommendation resulted in a debt to PAYGO 17 mix of 70 percent/30 percent. Did your recommendation to 18 the District change from 2015 to 2019? 19 A No. There was no fundamental change in the 20 recommendations to the District. Similar to the approach 21 we took in 2019, back in 2015, we had a number of financial 22 metrics that we were targeting, 2.5 times coverage with 23 respect to senior debt, which is the same, 2015, 2019. 24 Targets with respect to the amount of cash on hand, which 25 is liquidity metrics. Excuse me. In 2015, given the level TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 128 1 of rate increases that were projected in the double digit 2 range, and in consideration of the debt policy, language 3 around trying to balance rate impact on customers, we did 4 have a target of 1.6 times for aggregate debt service. So 5 that's debt service for both the junior and -- excuse me, 6 for the state resolving fund debt as well as the revenue 7 bond debt. 8 What happened in 2015, which is similar to 9 what happened in 2019, is that the other financial metrics, 10 like the need to have a 2.5 times senior debt service 11 coverage is really what grows revenues. So even though we 12 had a 1.6 times target back in 2015, the need to generate 13 revenues for the senior bond target 2.5 for liquidity, so 14 on and so forth, actually resulted in a coverage number 15 that was significantly higher than 1.6 times. So when you 16 have multiple targets that you're trying to meet at any 17 given time, one target is really what's going to drive the 18 revenue requirements for any given year, which would have 19 caused you to exceed perhaps the minimum of another target. 20 And that's what happened in 2015, and that's what's driven 21 some of the numbers in 2019. 22 And I would say even if we look at the model 23 that Mr. Gorman presented where he's emphasized a target of 24 1.6, but in his calculations, at least the initial models 25 that we saw, the numbers, the targets were a lot higher -- TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 129 1 I'm sorry, the results were higher than 1.6 because there 2 were other revenue requirements that are driving those 3 targets higher. 4 MS. MYERS: That's all I have. 5 CHAIRMAN TOENJES: Questions from other Rate 6 Commissioners? Mr. Stein. 7 EXAMINATION 8 QUESTIONS BY COMMISSIONER STEIN: 9 Q Ms. Pugh, a few questions about bond ratings. 10 I think from what we've heard, not just in this proceeding, 11 but in earlier proceedings that the District very jealously 12 guard its high bond ratings. It would appear that to do 13 that, one of the things that they are focused on is staying 14 on the conservative side of the debt service coverage 15 ratios that the bond rating agencies put out there. Would 16 you agree with that? 17 A No, I don't think it's conservative. I think 18 the language that all rating agencies have used specific to 19 the District are pretty explicit in that our expectations 20 for you, St. Louis, Metropolitan St. Louis Sewer District 21 are this, and so that's really what has driven our targets. 22 And I would have to go back and look, but I believe some of 23 our targets are actually even lower than the median for the 24 particular rating category that we are in. So in the 25 context of the AA rating category, I don't -- I would have TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 130 1 to go back and check to affirm what you're saying. I'm not 2 sure that that's necessarily the case with respect to each 3 of our targets in terms of the metrics. 4 Q If the District elected to go with a lower 5 debt service coverage for X-period of time and the rating 6 agencies then reduced the rating of the bonds, how 7 difficult would that be to say, come back two or three 8 years later at the next bond issue, adjust the ratio back 9 up and reclaim the earlier rating? 10 A As you might expect, it's a lot easier to 11 maintain a level of rating than it is to try and reacquire 12 to build yourself back up because we've set a standard in a 13 history of behavior, which you're getting credit for from 14 the rating agency, but I should say the District is getting 15 credit for in terms of multi-rate cycles and planning for 16 certain coverage levels. 17 And so the management and governance component 18 of the rating, which is a strong portion of how they 19 evaluate ratings, one of the qualitative metrics, you're -- 20 as long as you repeat the same behaviors, you're getting 21 credit for that. If you take a step back or the District 22 takes a step back from that behavior and altered that, it 23 would change their expectations for the future. So I don't 24 think you can go back and say, okay, we're going to reduce 25 coverage for 2020, just making up a date, but then we will TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 131 1 come back in 2022 with a new philosophy. I think it would 2 take a lot longer time to re-establish, if you will, a 3 reputation of rate setting within a certain metric. Does 4 that answer your question? 5 COMMISSIONER STEIN: Yes. Thank you. 6 CHAIRMAN TOENJES: Mr. Palans. 7 EXAMINATION 8 QUESTIONS BY COMMISSIONER PALANS: 9 Q Good afternoon. 10 A Good afternoon. 11 Q We have before us a proposal that the District 12 proposes to authorize $500 million of additional wastewater 13 revenue bonds; correct? 14 A Yes. 15 Q That's what the -- 16 A Well -- 17 Q Go ahead. 18 A The request is for an additional authorization 19 of 500 million. 20 Q An additional authorization of 500 million. 21 So an additional authorization of 500 million does not 22 equate with an actual borrowing of the full $500 million; 23 correct? 24 A Correct. 25 Q This is just an authorization; correct? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 132 1 A Correct. 2 Q And this authorization, as I understand it, in 3 this proposal is going to cost approximately $138.5 million 4 a year? 5 A So the numbers that were referenced in 6 Mr. Gee's testimony are the aggregate incremental increases 7 to debt service over the proposed rate cycle, so that would 8 be fiscal '21 to '24. So it's not an annual number, is my 9 only point. 10 Q You are correct. It is issued during the 11 study period, which is the rate cycle, which would be 12 $138 million over the rate cycle? 13 A Correct. 14 Q And does that assume that the entire 15 $500 million of additional wastewater revenue bonds which 16 are authorized are, in fact, issued and outstanding? 17 A I believe that's right. So the only thing I 18 would say is if there's a 2024 issue, I'm not sure how much 19 of that would be a partial amount of debt service as 20 opposed to a full 12 months. But give or take, that's 21 probably accurate. 22 Q So in lieu of requesting authorization for 23 $500 million, if the District were to request authorization 24 at this vote for $600 million, that does not necessarily 25 mean that the District will borrow all $600 million; TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 133 1 correct? 2 A That's right. 3 Q It just has authority to borrow up to $600 4 million? 5 A Correct. 6 Q What would be the approximate carry cost if 7 the full $100 million of additional bonds were issued? 8 A That's a great question. About six million, 9 give or take. I mean, a lot of -- Obviously, there's a lot 10 of assumptions in terms of interest rates and so on and so 11 forth. So that's annual incremental debt service. 12 Q $6 million -- 13 A In incremental debt service. 14 Q -- to borrow an additional $100 million; 15 correct? To issue an additional $100 million of wastewater 16 revenue bonds? 17 A I missed the first part of your question. I'm 18 sorry. Say it one more time. 19 Q Could the court reporter repeat the question? 20 (The requested portion of the 21 record read by the reporter.) 22 A Okay. So assuming the $30 million bond 23 issuance to fund $100 million of proceeds, current market 24 rates with a little bit of an interest rate cushion, your 25 annual incremental debt service cost is approximately TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 134 1 $6 million. So six million times 30, $180 million. 2 Q And would this additional cost materially 3 adversely impact the liquidity of the District? 4 A Are you asking without a rate -- without an 5 incremental rate increase, what would an additional 6 $6 million impact? 7 Q I'm asking what the impact of an additional 8 $6 million cost would be upon the liquidity of the 9 District? 10 A Without any changes to the rates? 11 Q Correct. 12 A Let me put it this way, without any changes to 13 the proposed rates, the rates as proposed but with an 14 additional $100 million worth of debt? 15 Q Yes. 16 A Well, it would have a direct impact on 17 liquidity because the way we've structured this now, right, 18 is we're meeting all of our kind of coverage targets with 19 $500 million in additional authorization. You add an 20 additional $100 million, and we assume we issued that all 21 upfront, that's an additional $6 million dollars each year. 22 That's $24 million over the rate cycle that's going to come 23 right out of liquidity, if I'm thinking about this 24 correctly, and is also going to have a disproportionate 25 impact on coverage. And I don't think it's going to be TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 135 1 enough to move the needle from -- Again, this is all off 2 the top of my head without doing an analysis. I don't 3 think that in and of itself over a four-year period is 4 going to necessarily move the needle on some of the ratings 5 components, but it will have a direct impact on liquidity. 6 Q So the additional -- borrowing of additional 7 $100 million of wastewater revenue bonds would not 8 adversely impact the credit rating of the District? 9 A I would say -- We'd want to do more analysis 10 on that. I wouldn't advise it, right, without an analysis 11 on whether the rates should increase. 12 Q Understood. 13 A Because over the long term, it would have an 14 impact on coverage. I would just think if we're looking at 15 it in the context of this particular rate proposal over a 16 four-year time -- and to be fair, I was answering the 17 question in the context of liquidity initially, not 18 necessarily in the context of rating impact. So that's a 19 bit of a different analysis because then you're talking 20 about adding an additional $100 million to the amount of 21 debt you have outstanding and how would the rating agencies 22 look like that. I don't think it's going to have a huge 23 impact on these four years on coverage. It will have a 24 direct impact on liquidity. I would want to do more 25 analysis before I could answer your question about a TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 136 1 ratings impact. 2 COMMISSIONER PALANS: Thank you. I have no 3 further questions. 4 CHAIRMAN TOENJES: Thank you, Mr. Palans. Any 5 other questions for Ms. Pugh? Thank you very much. 6 THE WITNESS: Thank you. 7 MS. MYERS: The District's last witness is Tim 8 Snoke. 9 (Witness is sworn in.) 10 CHAIRMAN TOENJES: Do any members of the Rate 11 Commission have questions for Mr. Snoke at this point? I'm 12 going to ask you one. 13 THE WITNESS: Okay. 14 CHAIRMAN TOENJES: I'm going to really break 15 the model here. 16 THE WITNESS: Okay. 17 * * * * * 18 TIM SNOKE, 19 being produced, sworn and examined, deposes and says: 20 21 EXAMINATION 22 QUESTIONS BY CHAIRMAN TOENJES: 23 Q We heard earlier from Mr. Beckley about this 24 depreciation calculation and the variances therein. Could 25 you discuss that issue a little bit? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 137 1 A Yeah. That's actually probably a question for 2 Marion, maybe. 3 MR. GEE: I'm not sure what his question is. 4 A So if you have a debt question, I'm the person 5 to ask. If you're talking about something from the 6 financial statements in the District, it's probably more 7 Marion. 8 CHAIRMAN TOENJES: So maybe I will ask the 9 District through you to provide some additional detail on 10 those depreciation calculations from the prior rate case 11 interrogations therein. 12 MS. MYERS: Okay. 13 CHAIRMAN TOENJES: Thank you. Any questions 14 from any of the other Rate Commissioners at this point? 15 Mr. Neuschafer. 16 MR. NEUSCHAFER: Yes. 17 CHAIRMAN TOENJES: Do you have questions for 18 Mr. Snoke? 19 EXAMINATION 20 QUESTIONS BY MR. NEUSCHAFER: 21 Q Okay. We've talked a lot about bond ratings 22 this afternoon. 23 A Yes. 24 Q And what I -- What I want to start out asking 25 about is, have you done an analysis of what the impact is TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 138 1 if MSD were to slip a notch in a bond rating? 2 A I don't remember if PFM put something together 3 in the past that showed what it would be, but we should 4 expect higher costs. I think at this point it is ample 5 basis points, 15 basis points, 20 basis points is what 6 we've seen historically, maybe higher. I'm looking at you. 7 We stayed within the AA category. So right now we're, you 8 know, AA plus. If we go to AA, that's a lot smaller 9 increase than if we drop to something of a single A 10 category. But of course, we don't get to choose what our 11 ratings are. So once you go down, we're at the mercy of 12 the ratings. 13 Q And if you were -- If MSD were to drop down, 14 it is possible to -- you're aware Ms. Pugh talked about 15 this a little bit, that it might be difficult to come back 16 up or more difficult to come back up and to maintain. But 17 it's not impossible to improve your credit rating? 18 A It's not impossible to come back at some 19 point. I think, as you mentioned, it would just take time. 20 Those ratings usually are set -- using outlook over a 21 couple of few years, if you look at some of the ratings, it 22 will say this is what we expect over the next few years. 23 So you know, one change or improvement in one year is not 24 going to have them swing ratings up. It will take a 25 sustained period of time before I believe a ratings TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 139 1 increase would be considered. 2 Q Generally, does revenue stability have a 3 positive impact on your bond rating? 4 A I think -- I think it does, but its revenue 5 stability also plays a factor in the key metrics that they 6 look at, which would be things like debt coverage and 7 liquidity. So if you don't have revenue stability, you're 8 going to see it in those factors as well. But I think 9 rating agencies and some of the reports have mentioned that 10 if we saw a big dropoff in the usage, for example, that 11 would be a factor they would consider at that point. 12 MR. NEUSCHAFER: That's all I've got. Thank 13 you. 14 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 15 Ms. Stump, do you have question? 16 MS. STUMP: Yes, I do. 17 EXAMINATION 18 QUESTIONS BY MS. STUMP: 19 Q Good afternoon. 20 A Good afternoon. 21 Q Just a couple of questions. Do you have your 22 testimony on surrebuttal in front of you? 23 A I do. 24 Q On page -- Well, really starting with your 25 question four. You talk about the potential impact if you TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 140 1 would have to come back to the Rate Commission if the 2 approved rates are not to cover the CIRP? 3 A Right. 4 Q And on page four, you say the need for more 5 frequent rate proposals should be expected to be seen as a 6 deterioration in the financial strength and stability of 7 the District. Could you explain that a little bit, please? 8 A Sure. So in our discussions with the rating 9 agencies -- and I'm the primary contact for the rating 10 agencies for PFM and the ones that have the most direct 11 contact -- Our four-year cycle is a huge strength for our 12 District. It is viewed positively by the ratings agency, 13 it's viewed positively by the debt investors because they 14 have certainty now or some certainty in what our rates of 15 revenue would be over a multi-year period. To do that more 16 frequently adds a lot of uncertainty into the process, and 17 they can't be sure of what rates will be in a couple of 18 years. 19 So I think when you look at entities that do 20 maybe annual rates -- have annual rate cycles, that's is a 21 lot more uncertainty and you probably see more lower 22 ratings. 23 Q Okay. Thank you. And then on page five, 24 there is just a sentence. I'm struggling with it, and I 25 just want you to -- I don't know if it's me or if you could TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 141 1 explain it. 2 A Sure. 3 Q At the end of question five, you say, 4 "Overall, wastewater user charges for this cycle are 5 actually projected to be lower with the 60/40 debt PAYGO 6 mix than they would be with the historical average of 75/25 7 due to the higher projected debt service and resulting DSC 8 ratios associated with the 75 percent debt/25 percent PAYGO 9 mix." 10 A Right. So the Intervenor claims that we have 11 historical 75/25 mix, that that's a policy. It's not a 12 policy. That's more of an average. We modeled at both 13 levels. The rates that we were proposing are actually 14 lower at 60/40 because if we went to more debt service, if 15 we -- I'm sorry. If we did more debt funding, it would 16 increase debt service. In order to maintain our targeted 17 coverage ratios -- In order to maintain to those ratios, we 18 would have to increase revenue even more. So what you see 19 over time is the amount that we are proposing, the debt 20 from the CIRP has gone down. It was 85 percent in fiscal 21 years '13 to '16 rate proposal. It was 70 percent in the 22 last rate proposal. It's 60 percent in this one, and each 23 of those are resulting in lower rate increases to the rate 24 payer than it would if we did more debt. That's what that 25 means. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 142 1 MS. STUMP: Okay. Thank you. That's all the 2 questions that I have. 3 CHAIRMAN TOENJES: Thank you, Ms. Stump. Ms. 4 Myers, do you have any further questions? 5 MS. MYERS: Yes, I do. 6 EXAMINATION 7 QUESTIONS BY MS. MYERS: 8 Q Mr. Snoke, did you review the Intervenor's 9 surrebuttal testimony? 10 A Yes, I did. 11 Q And did you review the Intervenor's revised 12 model that they submitted? 13 A Yes, I did. 14 Q Okay. And at the previous testimony, the 15 Intervenor admitted that there were errors in that model. 16 Did he correct the errors that he noted in his original 17 model? 18 A Well, he did adjust the coupon rates on the 19 new debt to a standard -- to a level that's more in line 20 with current market standards, so I was glad to see that. 21 But he did not use the model that he asked for in discovery 22 to calculate premiums, nor did he use the calculations that 23 he asked us to prepare for different yield levels to 24 calculate premium and debt service. And so the result is 25 the model, the premiums that he's showing are using a piece TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 143 1 of the model that was never intended to be used to 2 calculate premiums. It was a piece that we had turned off 3 and overridden with premiums from PFM's model. 4 Q Is that what the impact of not using the model 5 correctly was? 6 A Right. So the impact is that he's calculating 7 the premium in a flat 12 and a half percent, whatever the 8 par amount of the debt is. So that's resulting in an extra 9 $66 million of premium in his model. That is $66 million 10 of premium that if rates go up above the low yield that 11 he's projecting, if yields go up from there, that 66 12 million starts to disappear as a funding source. And if 13 rates move to the level that we have in our model, that 66 14 million disappears entirely. 15 And so that would be money that would have to 16 come from either additional debt funding or from cash 17 financing, and since he doesn't have a contingency in his 18 model for rising rates either, it's a flat 12 and a half 19 percent every year, there is no way to get that additional 20 funding without a deterioration in our credit metrics. 21 Q And his model still assumes a lower overall 22 level of CIRP spending? 23 A That's right. So the 140 million that we've 24 talked about, that Rich has testified that we do not have 25 flexibility to move, that is out of his model. So if you TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 144 1 add 140 million of capital funding back in, that increases 2 the risk actually. 3 Q Have you reconciled this with the Intervenor's 4 claim that MSD's interest rate assumptions imposed 5 significant cost on customers? 6 A No, I would say it's the other way around. 7 Actually, in our model we're showing less total debt 8 service cost than he's showing in his model because of 9 timing of debt. But overall, I think his model adds 10 significant risk to our financial stability and financial 11 health. Again, if rates rise, and we're talking just to 12 levels that we saw -- the implied yield in his model is at 13 levels we saw just last October and November of last year. 14 So if rates rise beyond that, the premium 15 that's in his model, like I said, starts to shrink and 16 eventually disappears. So there is a lot more risk in 17 getting that premium calculation wrong than there is if 18 you -- if rates don't rise as high as what's in our model, 19 that would be, you know, could be up to a couple million 20 dollars in debt service costs. His model could be tens of 21 million dollars of CIRP funding that's at risk. 22 Q Are there any other options for handling the 23 shortfall in funding that would arise if interest rates 24 increase? 25 A Not any that are feasible. We've already TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 145 1 testified that we don't have the flexibility to delay 2 projects. Ms. Stump just asked about another or internal 3 Rate Commission hearing. That takes a lot of time. It's 4 roughly a year from the time we start preparing these to 5 the time that the Board, you know, accepts or rejects a 6 Rate Commission recommendation. It's expensive, it's 7 time-consuming and, as I said in my surrebuttal testimony, 8 I do believe that that would be seen as deterioration in 9 our financial strength and stability. 10 Q Are there any other material differences 11 between MSD's CIRP funding model and the Intervenor's? 12 A Yes. The biggest one that comes to mind is 13 the debt service coverage target. So our debt service -- 14 I'm sorry. Debt service coverage target is two and a half 15 times on senior debt. So debt service coverage is the 16 amount of revenue we have after operating expenses to cash 17 fund the CIRP and to pay for debt, interest and principal. 18 So we target a number of two and a half times on senior 19 debt cost and 1.8 times on total debt cost. That's based 20 on, you know, feedback we've received from the rating 21 agencies. The Intervenor shows levels of 2.4 in his model 22 and wants to change our 1.8 target to 1.6 times, which is 23 not only below our historical averages, it's below industry 24 medians and below the rating agencies' expectations that 25 they've outlined for us in their reports. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 146 1 Q Has debt service coverage exceeded targets in 2 the past? 3 A Yes. The targets have changed slightly as our 4 debt burden has grown and as the rating agencies' 5 expectations have changed. So they've communicated that to 6 us not only verbally, but also in the reports that they put 7 out for the investing community. So not only have our 8 targets changed, I would say modestly, but the industry 9 medians have also changed much more quickly. So we're 10 actually behind the industry medians now, as Bethany 11 alluded to. 12 Q Are there any other material differences 13 between MSD's CIRP funding model and the Intervenor's? 14 A I think the debt service coverage is probably 15 the biggest one. There was the funding portion of the 16 CIRP, which again I think I answered that question when Ms. 17 Stump asked about it. But the 60/40 model actually 18 produces lower revenues. There are, I think, flaws in his 19 model and in his assumptions that don't let him see that 20 right now or he recognizes and states in his rebuttal 21 answer, rebuttal testimony that he does expect the cash 22 funding of the CIRP to increase over time. It's just -- 23 It's happening now. 24 Q And have MSD's debt service coverage targets 25 changed over the last few rate proposals? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 147 1 A So they have changed. Like I said, they have 2 changed modestly. So two proposals ago, we targeted 2.3 3 total debt service coverage and 1.6 -- I'm sorry. 2.3 4 senior debt coverage and 1.3 total debt coverage. In this 5 one, we are at 2.5 and 1.8, so modest increase. In the 6 middle there, right in the middle, we were 2.5 and 1.6. 7 And as I also mentioned, the medians have moved a lot 8 faster. So when we were at 2.3 and 1.6, the -- I'm going 9 to use Fitch's medians because they publish the most robust 10 set of medians. Their AA medians were at 2.3 and 1.9, so 11 we were a little below at 2.3 and 1.6. They were 2.3, 1.9. 12 For fiscal year '17/20 when we were at 2.5 and 1.6 targets, 13 the medians for AA ratings were actually 2.5 and 2.0. So 14 we're falling just a little bit more behind there. But in 15 this cycle, while we are projecting 2.5 and 1.8, which I 16 think is reasonable based on what the rating agencies have 17 said about our credit, I think we do need to recognize that 18 the Fitch ratings are 3.2 and 2.5, which are significantly 19 higher than where we are today. 20 Q And what do these rating agencies say their 21 expectations are for us? 22 A The rating agencies are pretty clear about 23 what they expect from us. We have the -- I think it's 24 Exhibits 38 through 40 are the ratings reports from our 25 2017 aid debt. So in those, Moody states that narrowed TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 148 1 liquidity or debt service coverage would be a factor that 2 could lead to a downgrade as well as inability to 3 successfully manage the consent decree. Just for a 4 context, when they say narrow liquidity or debt service 5 coverage, this is on the heels of several years where our 6 actual reported coverage metrics were around 2.9 and 1.9. 7 So when they're saying narrow, they're talking about from 8 where we've been reporting our coverage interest. 9 Fitch is a little bit more straightforward. 10 So in Exhibit MSD 40, Fitch, first of all, notes that 11 they -- their debt coverage calculations for us was 1.8. I 12 think we said we reported 1.9. So they tweaked that 13 coverage, and they very specifically said they expect 14 coverage levels to come in at around 1.9 times over the 15 next few years. Fitch also notes that even that is 16 somewhat of a deterioration in our coverage over the last 17 few years. And I'm going to quote from their report, they 18 say that, "Ongoing retail support will be critical to 19 maintenance of the Metropolitan St. Louis Sewer District's 20 rating given the rapid escalation in system debt. Coverage 21 margins," which is what we're talking about, "are leveraged 22 weaker than the forecast levels," that's their 1.9, "or 23 decline in liquidity below historical norms would be 24 expected to result in negative rating actions." So I 25 believe this directly contradicts the Intervenor's TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 149 1 testimony that 1.6 is adequate. 2 Q And does MSD have a policy that sets its debt 3 service coverage target? 4 A No, there is no -- There is no set policy. We 5 have to be flexible and change as the investor rating 6 agencies' expectations for us change. 7 Q Is there a policy that sets the amount of the 8 CIRP that is debt-funded? 9 A No. Also, you know, in order to minimize 10 revenue increase, we need to be flexible with the amount of 11 CIRP that is debted-funded as well. So the 60/40 debt 12 versus cash funding that we're proposing in this model is 13 not due to a policy, it's more of an output from the model 14 than an input. So as Bethany mentioned, there's a lot of 15 different financial factors that we're trying to balance. 16 And so it came up that in this cycle, a 60/40 split 17 actually allowed for lower revenue increases than 70/30 18 would. 19 Q How has the amount of the capital plan that is 20 funded by debt changed over time? 21 A So as I mentioned earlier, a couple of rate 22 proposals ago, it was 85 percent funded. The last rate 23 proposal was 70 percent debt funding. This one is 24 60 percent debt funding. So again, it's just a result of 25 managing rate increases and trying to stay within the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 150 1 target financial increase. 2 Q Does Mr. Gorman see this the same way? 3 A Well, he might say he doesn't, but as I 4 mentioned, in his rebuttal and surrebuttal testimony, he 5 acknowledges that over time this is going to happen. 6 Again, I think there's flaws in his model and his 7 assumptions to keep him from recognizing that it's 8 happening now. 9 Q And what are those? 10 A We talked about some of them. For example, 11 the 140 million of CIRP that's not in his model is a 12 factor. I believe ignoring the rating agencies' statements 13 and expectations for us is a factor. One we haven't 14 touched on is the level of operating reserves. So his 15 operating references are much higher than ours. I think if 16 you correct for those things, you would see that his plan 17 would also have close to 60 percent debt-funded rates. 18 Q And you mentioned more than once how financing 19 decisions impact wastewater rates. Is it fair to say that 20 MSD does consider the impact of higher wastewater rates in 21 its decision-making? 22 A Absolutely. So every day we're making 23 decisions that we don't have to make, but we do them 24 because it lowers future rate increases. For example, just 25 on the debt financing, just since the last proposal, some TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 151 1 of the things that we've done is refinance debt for 2 savings. We didn't need to do that to stay in compliance 3 with debt coverage or to maintain our ratings, but doing so 4 lowers future debt costs and maybe we can lower future 5 revenue increases. Unfortunately, the tax law changed and 6 so we can no longer advance your fund debt. That's a 7 refinancing for savings before the call date, tax exempt 8 rates. So we're going to be a little bit more limited 9 there going forward. 10 The fact that we pursued with the funding, 11 that we tried to get more SRF funding than we proposed. 12 Those are other factors that lowered that service cost and 13 lowered rates as well. There have been times we haven't 14 issued debt even though we would have -- the proposal would 15 have shown it. That's because we didn't need the funds 16 that would have locked in debt service costs. These are 17 all factors that are part of why we're showing you lower 18 rate increases today than what we projected to show a few 19 years ago. It's not all an accident. 20 I think the biggest one is the consent decree 21 extension. There were regulatory changes that meant that 22 the incinerator project had to be moved up. We didn't have 23 to go to the EPA to ask for an extension, but we did. And 24 rate affordability was a key and central theme to that 25 request and one of the reasons I think that the EPA granted TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 152 1 the extension. 2 MS. MYERS: I have no further questions. 3 CHAIRMAN TOENJES: Thank you, Ms. Myers. 4 Questions from Rate Commissioners? 5 EXAMINATION 6 QUESTIONS BY COMMISSIONER PALANS: 7 Q Mr. Snoke, what is your title or position with 8 the District? 9 A My title is secretary/treasurer. 10 Q And could you describe what the scope of your 11 duties as secretary and treasurer of the District is? 12 A Sure. So I'm going to split it up. So the 13 treasurer part is a little more straightforward. So I am 14 responsible for overseeing the safety and liquidity of the 15 District's funds. So I manage our borrowing programs, our 16 investing programs, our bank accounts and liquidity. Those 17 are all within my group on the treasury side. And then on 18 the secretary piece, I report directly to the Board of 19 Trustees, and so I help run the board meetings, I am the 20 keeper of records for the District. All the Sunshine 21 requests come through my group. So I think those are kind 22 of the high level things. 23 Q Do your duties include being familiar, more 24 than familiar, but intimately familiar with the financials 25 of the District? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 153 1 A Yes. So my -- I would say overall, yes. I 2 don't study them probably as closely as Marion does since 3 his group puts together all the financial reports, but -- 4 So I bring Marion along when I go and talk to the rating 5 agencies, but definitely on the debt and investment side 6 and overall position, I think, yes, I'm very familiar with 7 the District's financials. 8 Q And in your surrebuttal testimony with respect 9 to interest rates, you say that not making a sufficient 10 allowance for the possibility of rising interest rates over 11 the next five years is dangerous to the integrity of MSD's 12 financial plan and to its strong AA ratings? 13 A That's correct. 14 Q And you go on to say that interest rates are 15 extremely difficult to forecast and they are volatile. 16 A That's correct. 17 Q And you also say that rates are near historic 18 lows today. 19 A That's also correct. 20 Q The current proposal is to authorize -- You 21 want District voters to authorize $500 million of 22 additional wastewater revenue bonds; correct? 23 A Correct. 24 Q And merely authorizing those bonds is not 25 tantamount to borrowing all of them at once and paying for TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 154 1 all of them at once, is it? 2 A It is not, that's correct. 3 Q And is there -- Is there any additional costs 4 associated with seeking voter approval to authorize 5 $600 million of additional wastewater revenue bonds? 6 A Just asking for $600 million will cost no more 7 than asking. 8 Q No more ink on the ballot; right? 9 A Correct. 10 Q And you indicate that the debt service for the 11 senior revenue bonds and SRF financing proposed to be 12 issued during the study period, this is the rate cycle, 13 will be approximately $138.5 million; correct? 14 A That's correct. 15 Q If we were to seek approval for an additional 16 $100 million, and if that additional $100 million of 17 additional bonds were issued, what would be the approximate 18 cost of that additional $100 million? 19 A As Bethany said, it would be about $6 million 20 a year for the life of those bonds. 21 Q Do you consider $6 million cost per year to be 22 a material cost to the District? 23 A I don't think from the liquidity standpoint it 24 would have a -- It would obviously reduce the amount we 25 have to spend by $6 million per year. I'd be a little more TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 155 1 concerned on the debt coverage side because every dollar of 2 debt service cost we want to cover by two and a half times 3 of its senior debt. So $6 million of additional debt 4 service at the senior debt level would have to come with 5 $15 million of additional revenues in order to keep the 6 debt service coverage level the same, exactly the same. 7 Q Would issuing an additional $100 million of 8 wastewater revenue bonds result, in your opinion, in a 9 downgrade of rating from the credit rating agency? 10 A I think it would depend on other factors, but 11 not necessarily by itself. 12 Q Would the increase of $100 million of 13 additional wastewater revenue bonds result in additional 14 loss of liquidity to the District? 15 A There would be some loss of liquidity. I 16 would say on the liquidity side it wouldn't be more, it 17 wouldn't be material. I would be more concerned on the 18 debt coverage side. 19 Q So it wouldn't be a material on the debt 20 service side? 21 A On the liquidity side, it would not be 22 material. 23 Q Given the historic low interest rates, the 24 favorable pricing that the District has enjoyed with regard 25 to bidding on CIRP projects, do you not believe it would be TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 156 1 good and prudent business management to request an 2 additional authorization of $100 million of wastewater 3 revenue bonds? 4 A Well, I think there's a couple of ways to look 5 at it. So if I were in the -- in maybe the corporate 6 world, I could definitely see, you know, borrowing money 7 while it was low. But I agree with what Marion said, we do 8 have to balance that with rate payer impacts. So when we 9 talked about going to the EPA for consenting to an 10 extension, we look at affordability. And so we look at our 11 rates as a percentage of median household income within our 12 service area. And for the last, not just the last rate 13 cycle, but the one before that, too, we saw double digit 14 rate increases, and so our rates were really much higher 15 than wages were, the median household income was. And so 16 while we're not near affordability limit, you know, we were 17 gaining ground on where those limits were. 18 And so I don't -- I can see why you would 19 think it makes sense to borrow more when rates are low, and 20 as the person who is in charge of borrowing, I can support 21 that. But I also understand why some might argue that it's 22 time to have lower rate increases and just let wages and 23 median household income catch up a little bit so that we 24 can make sure that we maintain affordable rates into the 25 future. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 157 1 Q Given that interest rates and your 2 acknowledgment in your surrebuttal are volatile, would it 3 not be good, prudent business management to seek 4 authorization for an additional $100 million? I'm talking 5 authorization for $100 million. 6 A The authorization, as I mentioned, would not 7 cost any bit more. We chose 500 million because, based on 8 the proposal we've put in front of you, we actually only 9 plan to use about, I think, 366 million of that. That was 10 in my original direct testimony a couple of months ago, I 11 guess, at this point. And so 500 million seems sufficient 12 so that we had even a little bit left over as we started 13 the next cycle. But as I mentioned, it wouldn't cost any 14 more to do 600 million. 15 Q So we're talking about a $6 million hit to 16 liquidity on an annual basis if we were to authorize and, 17 in fact, borrow the additional $100 million; correct? 18 A That's correct. 19 Q Mr. Snoke, one more question. Do you have an 20 estimate as to what the annual discretionary expenses that 21 the District incurs a year are? 22 A That I do not. I'm sorry. That is a detail 23 beyond what I use in my debt investment management 24 functions. I'm sorry. 25 Q No opinion on it? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 158 1 A Not an informed one, no. 2 Q How about an uninformed one? 3 A I would rather not. Thank you. 4 COMMISSIONER PALANS: I have no further 5 questions. 6 CHAIRMAN TOENJES: Thank you, Mr. Palans. Mr. 7 Goss. 8 EXAMINATION 9 QUESTIONS BY COMMISSIONER GOSS: 10 Q Mr. Snoke, in 2016, the District was assigned 11 bond ratings in connection with bond issue in 2016. You 12 recall that; right? 13 A Yes. 14 Q And the bond rates are standard as far as AAA 15 and AA, plus for Fitch and AA1 for Moody's -- 16 A Yeah. 17 Q -- investors. So prior to that, what was the 18 bond rating for the District, do you know? 19 A So for the 2015 issuance, they were the same. 20 I did not -- I started in 2014. We did not issue bonds 21 that year. We had sufficient liquidity in bond proceeds 22 from a previous debt authorization, so we didn't issue 23 bonds in '14. And there was at some point -- We were AAA 24 with Fitch at one point after 2010, and so we were 25 downgraded from AAA to AAA plus at some point. I want to TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 159 1 say -- 2 CHAIRMAN TOENJES: I will date myself. When I 3 came on the Rate Commission, we were AAA rating. 4 A Okay. So that was probably within the last 5 ten years. So we've had these ratings for multiple years, 6 the current ratings. 7 Q (By Commissioner Goss) And the bond rating has 8 changed at least once, we just talked about. Has the bond 9 rating for the District ever changed other than that? 10 A PFM. Bethany, you've been here longer than I 11 have. 12 MS. PUGH: So I think in 2013, they switched. 13 One of the rating agencies actually gave us an upgrade -- 14 THE REPORTER: I'm sorry. I'm sorry. I can't 15 hear. 16 CHAIRMAN TOENJES: Based on the information, 17 I'm not sure what year it was. But could you identify 18 yourself? 19 MR. SCHNACKENBERG: Matt Schnackenberg with 20 PFM. 21 CHAIRMAN TOENJES: Thank you. 22 MR. SCHNACKENBERG: One year, and I'm still 23 looking up what year it is, but the ratings actually 24 switched where Fitch, we received a downgrade, and SMP, we 25 received an upgrade to AAA. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 160 1 Q (By Commissioner Goss) So I guess we had the 2 same ratings, just distributed a little differently? 3 A And I'm not sure at some point it sounds like 4 we may have been AAA. I think we started borrowing in 5 2004. 6 Q So prior to 2004, the District didn't have any 7 bond ratings because it wasn't following -- 8 A Yeah, for the years immediately prior to 2004, 9 there is no debt outstanding. If you go back in history, 10 there was some District debt, but not the same. 11 Q Do we have a table or information that would 12 show us the bond ratings over the three agencies from the 13 District from 2004 to the present? 14 A We could gather it pretty easily if we don't 15 have it. 16 Q And if there's any changes in those rates, 17 would you be able to tell us why you believe the agency 18 changed those rates? 19 A They probably, when they issued the reports, 20 told us why. 21 Q Would that be information that you could 22 supply us as well? 23 A Absolutely. 24 COMMISSIONER GOSS: Thank you. I'd appreciate 25 it very much. That's all. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 161 1 CHAIRMAN TOENJES: Thank you, Mr. Goss. Any 2 other questions from any Rate Commissioners? Hearing none, 3 thank you, Mr. Snoke. We will take a break until 2:00 4 o'clock. 5 (Whereupon, a short break was taken.) 6 CHAIRMAN TOENJES: Let's reconvene here, and 7 our next witness does not appear to be in the room right 8 now, Mr. Neuschafer. Yes. Good afternoon, Mr. Neuschafer, 9 and good afternoon, Mr. Gorman. 10 (Witness sworn in.) 11 CHAIRMAN TOENJES: Thank you. Do any members 12 of the Rate Commissioners have questions for Mr. Gorman at 13 this point? Hearing none, Ms. Myers, do you have questions 14 for Mr. Gorman? 15 MS. MYERS: We do not. 16 CHAIRMAN TOENJES: Ms. Stump, do you have any 17 questions for Mr. Gorman? 18 MS. STUMP: I do. Just a minute. 19 * * * * * 20 MICHAEL GORMAN, 21 being produced, sworn and examined, deposes and says: 22 EXAMINATION 23 QUESTIONS BY MS. STUMP: 24 Q Good afternoon. 25 A Good afternoon. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 162 1 Q You will recall this morning that I spoke to 2 Mr. Unverferth about your testimony, specifically on 3 page five of your surrebuttal testimony -- 4 A Thank you. 5 Q -- about deferring. And I just wanted you to 6 give the -- he gave his feelings on that paragraph, and I 7 wanted you to have the opportunity to explain it or 8 respond. 9 A Thank you. We asked specifically for the 10 priority MSD employed in determining the amount and the 11 annual spend related to their annual CIRP program. In that 12 response, they did provide two documents that outlined 13 priorities and outlined scheduling protocols. In neither 14 of those documents did either the priorities or the 15 scheduling protocols include an assessment of managing cost 16 of service and identifying the annual level of CIRP 17 spending. From that standpoint, I concluded that their 18 formal protocols do not include a wastewater cost of 19 service protocol in identifying the annual level of 20 expenditures programs. 21 This morning, Mr. Unverferth and several other 22 witnesses did tell us that wastewater rates is a factor 23 that should be considered in designing the annual level of 24 CIRP spending. Very glad to hear that for the first time 25 this morning. I was also pleased to hear that MSD has once TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 163 1 before sought authority with the EPA to delay capital 2 expenditures that had to be implemented in accordance with 3 their consent decree in order to manage the impact on their 4 wastewater customers. My recommendation in this proceeding 5 is essentially they do the same thing one more time. 6 If you look at my testimony, on page four, it 7 outlined their budgeted level of CIRP spending now through 8 2028, and it is significant that there is a significant 9 jump in annual CIRP spending for fiscal years '23 and '24. 10 To the extent they are capable of deferring some of those 11 capital expenditures to periods between 2025 and 2028 to 12 levelize the annual spending, that will have a very 13 significant reduction in the increase in wastewater rates 14 that would be necessary to support a higher level of CIRP 15 capital expenditures in those two years. 16 Q And, Mr. Gorman, in the testimony you heard 17 this morning, and you heard them say that they do not 18 believe that they have the discretion to move the projects 19 from '23 and '24 to '25 and '26. Do you disagree with that 20 statement? 21 A I do, I think, for two reasons. First, the 22 commitments on a lot of the incinerators goes out through 23 the calendar year 2026, so I believe they do have some 24 discretion to delay some of their capital expenditures. I 25 also learned this morning, again for the first time, that TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 164 1 it might be possible to negotiate an extension in the 2 permitting with the EPA to allow them a little more 3 flexibility to try to spread out this annual level of CIRP 4 spending. I think there may be opportunities available to 5 MSD staff, particularly if the Rate Commission directs them 6 to pursue them to allow them to better vantage the cost of 7 service impact on their wastewater customers in this case 8 than what they currently propose to do. 9 Q And then as we talk about just the issue of 10 changing and spreading out CIRP for two more years, 11 spreading out those projects, I will use the words of 12 Mr. Goss who frequently says, well, as far as the rates are 13 concerned, what does that mean to me and do I care. So 14 what would be the effect -- Have you computed what the 15 effect on the rates would be if changing those -- removing 16 that 70 million each year out? 17 A Yeah. The 70 million delay two years in a row 18 will reduce revenue requirements by the end of the 19 four-year period by roughly about $20 million per year in 20 wastewater revenue, and you can easily confirm that. What 21 we've heard today is MSD staff is proposing a 60/40 rate 22 revenue funding and debt funding in capital expenditure 23 programs. If you reduce your amount of CIRP spending by 24 $70 million, that's $24 million of reduced rate revenue 25 funding alone. There's also a reduction in the amount of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 165 1 additional debt service they would have to take on. 2 Now, there's some offsets to that because 3 there's a lot of moving parts in the model, apparently a 4 model that isn't working correctly, according to Mr. Snoke. 5 But just from that one standpoint alone, by taking the 6 spike in CIRP funding, '23 and '24, and reducing it by 7 $70 million and maintaining a 30/70 equity and funding mix 8 for CIRP funding as I proposed, would reduce the amount of 9 revenue funding needed to fund that capital expenditure 10 program by about $20 million, which is right in line with 11 the way I modeled it using the model that the MSD staff 12 gave the Rate Commission under the understanding that there 13 was a rate model that was wired up and would allow parties 14 to use it in the way that vantaged the revised estimates 15 what the wastewater cost service would be. 16 Q Can you turn to page 18 of your testimony, 18 17 and 19? And this is where we talked about the impact of 18 I/I, and you have run what you believe the impact would be 19 based on a 50/50 allocation. Have you had the chance to 20 look at this in comparison with what Mr. Gee provided? 21 A He did it a little differently, so I could 22 have read the rate impact, but it's not directly 23 comparable. This is a class cost of service impact. 24 Essentially, it measures the impact on all residential and 25 non-residential customers. In comparison, Mr. Gee TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 166 1 estimated the rates from the allocation of cost and then 2 used those rates to measure the impact on the typical 3 customer. So this just kind of measures the residential 4 customers as a group for any measure of the impact on a 5 typical residential customer based on typical load 6 characteristics. 7 Q Do you disagree in any way with Mr. Gee? 8 Because I know he just gave us that today, but his chart 9 was in his surrebuttal testimony. 10 A No, I think it's -- It seems pretty much in 11 line with what I have estimated it would be, yes. 12 Q Okay. 13 A Although, I want to be clear that this is not 14 the rates I proposed because I did not propose to move 15 rates across the service. I get them closer, I believe, 16 because I'm proposing to put more of the increase on the 17 fixed cost and less on volume charges, which is more 18 consistent with what I believe to be a more accurate class 19 cost of service study, and I also believe it produces a 20 more stable revenue collection for MSD because the fixed 21 charges don't vary from month to month as much as the 22 volume charges do, which is significant, I think, for a 23 utility that's taken on more debt than more stable revenue 24 collection. 25 But the impact on the residential customers TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 167 1 under my rate proposal would not be as significant as Mr. 2 Gee has estimated because I have not proposed to remove 3 everybody all the way across the service. 4 MS. STUMP: Okay. I have no further 5 questions. 6 CHAIRMAN TOENJES: Any other Rate 7 Commissioners have questions for Mr. Gorman? Mr. Palans. 8 EXAMINATION 9 QUESTIONS BY COMMISSIONER PALANS: 10 Q Mr. Gorman, on page two of your surrebuttal, 11 paragraph one, talking about interest rates, your second 12 sentence you say, "I found that MSD's projected interest 13 rates or new bond issues during the period exceeded current 14 and likely prospective market rate costs of these new bond 15 issuances." Interest rates is speculative, is it not? 16 A It is. 17 Q It's subject to many external factors, is it 18 not? 19 A It is. 20 Q It could be impacted by some Korean dictator 21 launching a missile, could it not? 22 A It could, and we don't know if that would 23 cause them to go up or down. 24 Q So would it not be prudent to recommend at 25 least some adjustment for the possibility of future upward TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 168 1 pressure on interest rates and not based solely on current 2 economic conditions? 3 A Well, in my assessment of interest rates, I 4 did rely on independent consensus economists projected 5 changes in interest rates in my direct testimony. I did 6 remove that proposed change and the cost of service and 7 revised my model to reflect what their interest rate 8 assumptions were when they provided that model to me, so 9 that would include the change in the bond premiums as well 10 as the interest rates on the bonds. So it is a difficult 11 forecast. There is a lot of uncertainty. I will 12 acknowledge that. But the uncertainty doesn't just mean 13 that interest rates could go up. It does mean that they 14 could stay at relatively low levels like they've been. And 15 if you listen to what the federal reserve told us 16 yesterday, interest rates may go down again, for part of 17 the forecast period anyway. 18 So there is a lot of uncertainty, but the 19 uncertainty doesn't simply mean that interest rates are 20 more likely to go up than they are to stay flat or to even 21 decrease. 22 Q Do you agree with Ms. Lemoine's statement that 23 the rate change proposal should include at least some 24 adjustment for the possibility of future upward pressure on 25 interest rates and not be based solely on current economic TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 169 1 conditions? 2 A Like I said, I agree with her because I did 3 look at projected changes in interest rates in arriving at 4 what I thought to be more reasonable outlooks for interest 5 rates in the forecast period. But unlike MSD, I did not 6 rely on my individual projections, I instead relied on 7 consensus economists' outlooks for changes in interest. 8 Q Do you agree with Ms. Pugh's supplemental 9 surrebuttal that it is prudent to assume a rise in interest 10 rates? 11 A Well, I did do that in this case, but I don't 12 necessarily agree that it's always reasonable to assume an 13 increase in interest rates, particularly over relatively 14 medium-term forecast. Three to five years typically is 15 what I would refer to as a medium forecast. So a 16 significant increase in interest rates over the next three 17 to five years I don't think is reasonable because I don't 18 think there's any market evidence that would support that 19 much of a conservative estimate in measuring MSD's cost of 20 service in this case. Possibly some increase relative to 21 current levels would be appropriate, only because there is 22 always a little bit of an outlook for an increase in 23 interest rates by independent economists. But right now, 24 independent economists' projections of interest rate 25 changes over the next two years in particular is not for TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 170 1 significant change. Over the next three to five years is 2 maybe a little increase, but not a significant increase. 3 Q Do you agree with Mr. Snoke's statement that 4 not making a sufficient allowance for the possibility of 5 rising interest rates over the next five years is dangerous 6 to the integrity of MSD's financial plan and to its strong 7 AA ratings? 8 A I believe it's reasonable to make reasonable 9 projections of what the cost of service will be. I'm not 10 sure that they fully recover their cost of service and 11 bring out adequate debt service coverage ratio and maintain 12 adequate liquidity to support their bond rating. But 13 there's a whole host of factors that go into that, 14 including ensuring that customers pay only just and 15 reasonable rates for the services provided to them. So I 16 think there is a balance that needs to be exercised by the 17 Rate Commission in ensuring that financial integrity of the 18 MSD is preserved, but at the same time, rates charged 19 through their retail customers are reasonable and don't 20 reflect too many contingencies of highly uncertain unknown 21 facts that may or may not impact cost of service over the 22 next four years. 23 COMMISSIONER PALANS: Thank you. I have no 24 further questions. 25 CHAIRMAN TOENJES: Thank you, Mr. Palans. Any TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 171 1 other questions? Mr. Goss. 2 EXAMINATION 3 QUESTIONS BY COMMISSIONER GOSS: 4 Q Two questions. In your surrebuttal testimony, 5 you cited that MSD 59 percent of the storm -- of the flow 6 into the treatment plants comes from I&I. Do you recall 7 that in your surrebuttal? 8 A I assumed 50/50 because I thought that's about 9 as balanced as -- Yeah, I'm sorry. Yes, page 17. That's 10 correct. 11 Q On page 17 you said, "For MSD, I&I represents 12 about 59 percent of the total wastewater flow reaching the 13 treatment plants each year." Do you see that? 14 A Yes. 15 Q Where did you get that data? 16 A That came out of one of the company's work 17 papers. 18 Q Do you recall which exhibit that came from? 19 A I can provide that to you. I don't have it 20 with me. 21 Q I would like to see that. I would like to 22 know the citation if you could give it to us. And in your 23 experience, is that typical to the District to have that 24 percentage of I&I in their wastewater level? Do you have a 25 basis for giving that opinion? TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 172 1 A It depends on the age of the wastewater 2 system. I don't know if there is a standard. It depends 3 on when the measurement is made, what the weather 4 conditions are when it's made. So it can vary over time. 5 It can vary based on, you know, how modern the 6 infrastructure is. It can certainly vary based on how much 7 distribution pipe length they have, how many lift stations 8 they have, how many manhole covers they have. The actual 9 infrastructure itself is a big factor. But I really can't 10 say that that's what you typically see across all 11 wastewater utilities. I think it's more an individual 12 utility perspective and the weather conditions that existed 13 when that amount of inflow was measured. 14 Q Do you know if the 2005 study used that 15 percentage? 16 A I would have to double-check that. I do not 17 know off the top of my head. 18 Q And do you know if -- Ms. Stump, you were 19 raising your hand? 20 MS. STUMP: I was just going to tell you that 21 I did find, Mr. Goss, the statement on the 59 percent is 22 actually in the rate change proposal on page 431, 23 "District-wide I/I is approximately 59 percent of the total 24 wastewater flow reaching the treatment plants on an annual 25 basis." Sorry to interrupt. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 173 1 COMMISSIONER GOSS: That's all right. When 2 they gave -- When they made that statement in the rate 3 proposal, did they cite to any data or supporting data for 4 that, or that's just a statement in the proposal? 5 MS. STUMP: It's just a statement in that 6 section of the proposal. 7 Q (By Commissioner Goss) And do you have any 8 knowledge about the Kansas City system? We were talking 9 about the Kansas City system, I believe with Mr. Stannard, 10 would be a comparable system to MSD as opposed to St. Joe. 11 So do you know what the I&I is in the Kansas City system? 12 A I do not know what the Kansas City system is, 13 but I do have quite a bit of experience in the Indianapolis 14 system, and that is a city that's along the river. Not the 15 Missouri River, but a significant river. It also is an I&I 16 study that is only a few years ago, and that I&I study 17 indicated it would be appropriate to assign I&I cost on the 18 basis of 75 percent customers/25 percent volume. And also, 19 it's -- it's also a wastewater system that is in the midst 20 of undertaking a very consistent capital improvement 21 program based on EPA consent decree, including 22 installations of storm water tunnel systems. So from that 23 standpoint, it's very similar to MSD, and the I&I study is 24 relatively new. 25 Q I know that the City of Atlanta has also gone TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 174 1 through a significant capital improvement program because 2 of the EPA -- an EPA consent decree. Do you have any sense 3 of what the Atlanta sewer system I&I -- 4 A I never worked on that system. 5 Q And to obtain the data from Indianapolis, is 6 that something that you could supply us with? 7 A If it's not confidential, I can, yes. 8 Q I don't want you to violate any 9 confidentiality clauses. 10 A It is a Black & Veatch study, so I mean, with 11 a Black & Veatch witness in the room, I would be able to 12 comment. 13 COMMISSIONER GOSS: Thank you. 14 CHAIRMAN TOENJES: Any further questions? Mr. 15 Gorman, I have a couple. 16 EXAMINATION 17 QUESTIONS BY CHAIRMAN TOENJES: 18 Q During Mr. Snoke's testimony, he talked about 19 this 1.9, two and a half times, you know, for the debt 20 service and the debt coverage and your model being 1.6. 21 How would you speak to that particular concern? 22 A Well, first, I would appreciate it if we could 23 at least describe each other's testimonies' correctly. 24 When I spoke to 1.6, I was referring to rate-making policy 25 and MSD stats have undertaken at least the last three rate TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 175 1 increases. When I proposed my revenue requirement in this 2 case, I did not adjust the revenue requirement down to 1.6 3 times. That's a disingenuous representation. It's not 4 true. When I -- When I developed the revenue requirement 5 for this utility, I specifically designed it for about 6 30 percent rate revenue funding and 70 percent debt 7 funding. That produced a debt service coverage that ranged 8 from 1.7 up to about 1.9 times. Nowhere in my testimony do 9 I recommend a revenue requirement of 1.6 times. That's a 10 disingenuous representation. 11 In modeling the revenue requirement, I used 12 MSD's model, the model they provided to this Rate 13 Commission when you asked them for a model that had all the 14 formula intact that allowed for a participant in this rate 15 proceeding to model the changes in the revenue requirement 16 based on whatever issues we would want to take with what 17 the MSD did. 18 So the suggestion by Mr. Snoke that I provided 19 a model with incorrect numbers was also a little 20 disingenuous because I used his model. I simply adjusted 21 the model from data inputs provided by the rate consultant 22 to instead allow the model to calculate the financial 23 parameters themselves. And again, the model that was 24 requested by this Rate Commission was intended to be a 25 fully functional model to allow for just that kind of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 176 1 manipulation, and in order to make recommendations to this 2 commission on different revenue requirements based on 3 different assumptions on what the cost of service would be. 4 So I'm a little taken aback by that representation. 5 But my testimony based on the model MSD 6 provided this Rate Commission, adjusted the revenue 7 requirement based on roughly 30 percent rate revenue 8 funding and 70 percent bond funding mix of the CIRP 9 program. Just like MSD said, they were able to negotiate 10 with the EPA, they modified their annual CIRP program, 11 mitigated the impact on customers' rates before. My 12 recommendation is for them to do that one more time, in '23 13 and '24, to find a way to move about $140 million, 70 14 million each year of capital programs, only two years, and 15 when you do that, you do significantly reduce the revenue 16 rates of the last two years of the rate cycle, 17 approximately $20 million per year. If you can do that 18 without comparing the utility's ability to meet its EPA 19 obligations or its other regulatory obligations, then 20 you'll significantly decrease the revenue increase and rate 21 increase on MSD's customers in this case. 22 All of that was modeled in the rate model, the 23 functioning rate model that MSD staff provided this Rate 24 Commission to accommodate those changes. I withdrew my 25 interest rate change because there seemed to be a lot of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 177 1 concern about not giving enough contingencies in the -- in 2 the MSD's uncertain outlook of what certain factors may be 3 their cost of service going forward, so I removed that. So 4 when I adjusted, reversed that adjustment, I simply put 5 back in the rate -- interest rate assumption MSD originally 6 had in the model. 7 The only other model change I made was the 8 funding mix of rather than 60/40, it was 70/30, and 9 apparently the model didn't correctly adjust for the amount 10 of bond proceeds when you made that change in the model, 11 even though it was presented to the commission as a fully 12 functioning rate model. 13 Q Does that impact that premium that Mr. Snoke 14 referred to -- 15 A Yes. He suggested that -- 16 Q Is that the $600 million premium? 17 A I'm sorry. He suggested that when I adjusted 18 the rate revenue funding for issue of additional bonds that 19 the premium on those bonds should have also adjusted. 20 Well, when I increased the amount of bonds, that may 21 suggest that the premium might go up. But in any event, 22 the rate model wasn't fully functioning correctly, so it 23 didn't make those adjustments in sync with one another, 24 again, even though it was a model provided by MSD staff 25 under the understanding that it was a fully functioning TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 178 1 rate model. 2 CHAIRMAN TOENJES: Any other questions for Mr. 3 Gorman? Mr. Neuschafer, do you have any questions for Mr. 4 Gorman? 5 MR. NEUSCHAFER: Yes, I do have a few 6 questions. 7 EXAMINATION 8 QUESTIONS BY MR. NEUSCHAFER: 9 Q Mike, you have heard questions about whether 10 the I&I study and allocation are reliable and can be used 11 for cost of service. Do you have an opinion on whether 12 there is a way to ensure that rates are fair and reasonable 13 for all customers given concerns about the age and quality 14 of that study? 15 A I do, and I think it's generally consistent 16 within the industry when a regulatory commission is faced 17 with a situation where it doesn't have a cost of service 18 model that it has confidence in, the accuracy of the model 19 in question, that the regulatory commission typically will 20 simply adjust rates on an equal percent basis to ensure 21 that no customer is harmed by the utility offering it at a 22 rate the cost of service model was based on in some way, 23 some data that is not reliable. I believe that's 24 consistent with the rate consultant witness, the loans 25 recommendations in this proceeding. And I think if there TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 179 1 is concern about the accuracy of that cost of service 2 model, then I would agree with her that that typically is 3 the methodology that most often is employed by regulatory 4 commissions to ensure that no customer is harmed by the 5 utilities' failure to provide a reliable cost of service to 6 them. 7 Q Mr. Gee provided us what MSD labeled as 8 Exhibit MSD 85 earlier today. If the I&I study is not 9 reliable, does this schedule show what might be a more 10 reliable application for classes of customers? 11 A Yeah, I think it -- Essentially you can use 12 this and try to gauge just what the impact on a residential 13 customer would be with an equal percent change. Under the 14 companies' current proposal, it would be around 1.9 percent 15 in the first year. I believe that the increase was a 16 little less than three, so -- and under the 50/50 I&I 17 study, the increase would be about 6.7, with an equal 18 percent change would be three percent, which would be 19 roughly right in the middle of these two proposals. And 20 then if MSD was directed to perform an I&I study before its 21 next rate case, then at least there would be more 22 confidence that there was some concern about ensuring that 23 no customer group specifically was harmed by use of this 24 study that no longer was reasonably representative of the 25 utility system in this case. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 180 1 Q We've talked some about extra strength 2 surcharges today and wanted to know if you had any response 3 to the testimony on extra strength surcharges being 4 underestimated or understated in the last cost of service 5 study and now being used to justify? 6 A Yeah, I do, and Mr. Beckley's testimony 7 essentially is that he performed some analysis they 8 considered depreciation expense on capital investments of 9 certain plant investment to determine that surcharge 10 revenues were not adequate to recover the cost of extra 11 strength particles delivered to the wastewater treatment 12 plant. And he's also the witness sponsored the class cost 13 of service study. 14 His explanation didn't make sense to me. The 15 rate design for utilities should recover the wastewater 16 revenue requirement of the utility. The wastewater revenue 17 requirement developed in this case does not recognize 18 depreciation expense as a cost of service for any elements 19 of the wastewater system. Depreciation expense is removed 20 from class cost of service, and it is replaced with 21 principal payments on bonds. It is replaced with rate 22 revenue funding, which is the whole financial policy 23 arguments that we've been talking about. Those are what 24 goes into developing the wastewater revenue requirement, 25 and the rates then should be designed in which all classes TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 181 1 pay a fair share of that revenue requirement for wastewater 2 service. Again, depreciation expense is not in that mix. 3 So his entire explanation kind of distorts how 4 he determined that waste surcharge revenue was not 5 adequately recovering the utility's cost of extra strength 6 surcharges relative to how the utility's recovering 7 developing a revenue requirement allows it to recover all 8 of its element of providing service, including the extra 9 strength surcharges. None of that includes a depreciation 10 expense component. So he's -- Truly he's mixing apples and 11 oranges and arriving at what his proposed rate design is, 12 as his explanation simply does not comport with the way 13 wastewater revenue requirements are being developed in this 14 case. 15 Q I know you were present for Ms. Pugh's 16 testimony on credit rating and debt service coverage ratio. 17 Do you have any response or thoughts on her testimony? 18 A Yeah, only one. I mean, she stated that the 19 rating agencies are very clear, and they are in some 20 respects, but what they're not clear on what appropriate 21 rate setting financial policy is. I've included quotes 22 from all the regulatory credit rating agencies in my 23 testimony. All of these reports are in the record. And if 24 you look at them, the credit rating agencies have been 25 looking at the rate making treatment of MSD over the last TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 182 1 12 years and find the decisional metrics you've been using 2 to establish wastewater revenue requirements have 3 contributed to the strong credit rating of MSD. That 4 includes the old mix of 75 percent debt/25 percent rate 5 revenue funding that produced that service coverage ratios 6 that S&P explicitly noted are no less than 1.6 times debt 7 service coverage, but actually have exceeded that level 8 more recently. 9 Fitch, in particular, and I believe she noted 10 this in her comment or maybe it was Mr. Snoke, that 11 forecasted going forward debt service coverage ratios on 12 the total debt service basis would be about 1.9 times, but 13 then they explicitly stated that the rating is based on a 14 lower debt service coverage ratio, knowing that, if they're 15 familiar with the rate making process, that the revenue 16 requirement has not been set to produce at that service 17 coverage as high as MSD has actually been earning because 18 then their forecast across the service has consistently 19 exceeded what their actual cost of service is and allowed 20 them to earn a DSC that's higher than what DSC was implied 21 in the rate making forecast. 22 So all of that presumably is available to 23 credit rating agencies, but the credit rating agencies are 24 clear that the rate making protocols this condition has 25 been using are predictable and are credit supportive. And TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 183 1 importantly, the rate setting protocols this commission has 2 complete -- consistently used for at least for the last 12 3 years has been roughly 75/25 debt pay-as-you-go funding mix 4 that ensured the debt service coverage ratio would not be 5 less than 1.6 times, which was the financial policy I still 6 embraced, although under my proposal, I proposed to bump it 7 up a little bit, recognizing that we're moving towards the 8 end of the CIRP program and that the debt service coverage 9 ratio is likely going to be the metric that is going to be 10 driving the overall level of revenue requirement very soon. 11 Q I believe there was some testimony earlier 12 from Mr. Snoke about filing rate cases, the impact that 13 might have on credit rating. Have you ever suggested that 14 MSD should change the four-year rate cycle? 15 A I have not. I believe Mr. Snoke took out of 16 context testimony at the last hearing where I was asked 17 whether or not there would be any way the MSD could respond 18 if the revenue requirement was set at a level that did not 19 fully recover the cost of service, and at that time I noted 20 that the credit rating agencies just want assurance that 21 the MSD's rates will be adjusted for cost of service, 22 assuming they manage the cost of service in a reasonable 23 and prudent way. 24 And one way to give the MSD less cushion in 25 their forecast right now would be to give them certain TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 184 1 rights to come in if a forecast with less contingencies 2 turned out to be a little shy of what their actual cost of 3 service is. And I noted that maybe at that point they 4 could come in for an additional rate increase outside of 5 the four-year cycle. It was not my testimony that they 6 replace annual rate cases, the four-year cycle with annual 7 rate cases. It was my testimony that if the MSD needed it, 8 they could come in for an additional rate change inside the 9 four-year rate cycle in order to provide more assurance to 10 the credit analysts that rates will recover their cost of 11 service, and do so again while managing just prices to 12 wastewater customers under a just and reasonable level, 13 which is a factor I think MSD staff should give more weight 14 to. 15 Q Based on the remaining testimony you heard 16 today, is there anything else that you would like to add to 17 your testimony in response to anything that you have heard 18 today? 19 A I have not. I will say that MIEC has been an 20 Intervenor in these rate cases for every rate cycle since 21 the consent to create was implemented. We were 22 instrumental in convincing this Rate Commission that 75/25 23 was an appropriate funding mix for the CIRP program, 24 knowing that the MSD debt was going to increase 25 significantly over time. We had a lot of opposition to TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 185 1 that testimony initially, and as we can see now with the 2 credit reports, that funding mix has delivered what we 3 thought it would deliver, that is a strong credit standing 4 for the MSD and much cheaper wastewater rates than what MSD 5 proposed when it first started the consent decree capital 6 program. At that time, the MSD wanted to fund everything 7 with 100 percent rate revenue funding. We found that to be 8 unreasonable. 9 Every step of the way through this process, we 10 have focused our attention on the adequacy of revenues to 11 provide strong credit metrics and maintain strong credit 12 standing to respect the MSD's obligation to make necessary 13 capital investments to remain in compliance with the 14 regulatory obligations, but to do all of that while still 15 managing to the greatest extent possible the level of 16 wastewater rates so they can be as competitive as possible 17 to MSD's retail customers. Our objective in these rate 18 cases has been consistent in every rate case they've had 19 over the last 12 years, and that is our objective in this 20 case. 21 MR. NEUSCHAFER: Thank you. 22 CHAIRMAN TOENJES: Mr. Goss. 23 EXAMINATION 24 QUESTIONS BY COMMISSIONER GOSS: 25 Q Mr. Gorman, I went back and I looked at the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 186 1 2005 study again, trying to understand it. And that study, 2 this is the wet weather cost study, was focused on trying 3 to figure out what kind of adjustments should be made in 4 the cost allocation from the 33/67 percent allocation, 5 which is where we were -- where MSD was at the time that 6 they began the study to whether a different allocation 7 should be appropriate. 8 So if I read this report right, the first CDM 9 who did this, first took MSD's proposal model and then ran 10 a lot of different alternatives from zero percent, 50/50, 11 60/40, so they were testing -- It was a sensitivity 12 analysis to try to see what impact that would have on the 13 rates for individual customers. And in the MSD model that 14 they were testing, the I&I allocation was 45 percent, and 15 that was across all the different alternative models. And 16 then CDM ran its own analysis, and the I&I allocation they 17 used was 33 percent. So those seemed to be the assumptions 18 of the two different sets of sensitivity analyses. What 19 does that mean? I mean, instead of 59 percent, they used 20 45 percent and 33 percent. How would that affect the 21 allocation? 22 A Well, they're measuring the amount of 23 infiltration and inflow into the collector system and 24 ultimately into the wastewater treatment plants, and 25 they're trying to get a sense of just -- the capacity of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 187 1 those -- of that infrastructure that is necessary to 2 accommodate the actual wastewater flow of the system, but 3 to have adequate capacity when the infrastructure is maxed 4 out because of wet weather conditions. 5 So it's a means of identifying just how big of 6 a collector system you have to build, how big of a 7 wastewater treatment plant that might be necessary to 8 accommodate all the volume of fluids that come into the 9 plant. Part of that study is going to be impacted in this 10 case, if it is updated, by MSD's ability to revert certain 11 wet weather condition water flows and prevent it from 12 blowing into the wastewater treatment plant under a 13 non-controlled condition. So that will have a big impact, 14 most likely, on the results of the I&I study. You have to 15 do the study, of course, to confirm that. 16 But the system we have today is very different 17 than the system back then. So the amount of waste -- the 18 amount of infiltration and inflow volume going into the 19 system is managed very differently now and will continue to 20 be managed differently over time as the MSD's ability to 21 separate wastewater from storm water becomes more advanced 22 in their ability to manage volume movement into wastewater 23 treatment, which is more of a controlled level. 24 Q So is it true that determining the proper fair 25 allocation between residential rate payers and commercial TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 188 1 rate payers we've been talking about, it's affected by this 2 percentage we're assuming of I&I that's coming in the 3 system; is that true? 4 A That affects the utility's costs, so yeah. 5 The question is, is how much cost is attributable to it and 6 how do you identify some way of barely allocating that 7 additional cost across the customer's own system. 8 Q So is it appropriate to be relying upon the 9 2005 study if it was using 33 percent and 45 percent as 10 their two alternative I&I factors as opposed to 59 percent, 11 which is what MSD is telling us is currently the case? 12 A I don't think it is, because I think the 13 system is very different now. We won't know whether or not 14 the new study, if there is a new study, will change those 15 assumptions significantly. And if the assumptions are 16 updated and they do turn out to be the same as they were 17 back then, which I think is unlikely, then at least there 18 will be some data supporting the finding on that 19 appropriate number. But the only way you're going to know 20 what the new study will tell you is to update the study. 21 Q So is that something that you're recommending 22 be done now or was that something that can be deferred to 23 the next rate proposal? 24 A Well, I think an updated study would be ideal. 25 It depends on the cost of the updated study. We need to be TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 189 1 careful with that because if the Board directs MSD that it 2 has to do a study, then it's almost certain the cost of 3 that study is going to be twice as much as what the cost 4 would be if MSD just decided to update their study. So I 5 think there needs to be some flexibility that they update 6 the study if they can add a reasonable cost for an updated 7 study. 8 But in terms of setting rates right now, I 9 think there needs to be recognition that a study conducted 10 14 years ago does not reasonably reflect the system that is 11 in existence today, and it's very different than the 12 results of studies that have been updated for other 13 utilities that I'm aware of that are undergoing similar 14 transformations of their systems, which may or may not be 15 appropriate for MSD. 16 So it's a double-edged sword. You want -- It 17 would be nice to have the study. You don't want to overpay 18 for it, but at the same time, you don't want to use a study 19 that you just don't have confidence in that accurately 20 reflects what the system is today. 21 Q And in fact, some of the data from this study 22 was actually based on 2001 to 2003 data, so it's really 23 more than 14 years old? 24 A The data is, yes. 25 Q Is part of the study they used a report that TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 190 1 EPA made to Congress? I think they used that in 2 conjunction with the SSO portion of the study. Are you 3 familiar with that? 4 A At a very high level. I mean, it was not used 5 for rate setting for interclass cost allocations and that. 6 It's my understanding that it was -- it was information 7 that was useful for recessing just how much infiltration 8 groundwater and surface water into the collector system in 9 the wastewater treatment plants. 10 Q So it backs up the assumptions of 33 or 11 45 percent; is that what you're saying? 12 A Presumably, yes. That would be my -- I don't 13 know for certain what that would be. 14 COMMISSIONER GOSS: Thank you. That's all I 15 have. 16 CHAIRMAN TOENJES: Mr. Palans. 17 EXAMINATION 18 QUESTIONS BY COMMISSIONER PALANS: 19 Q I'm really confused. We've got a 20 responsibility to make findings that the rate that is 21 proposed is fair and reasonable on all rate payers. It 22 seems like we're going through a transition, and the 23 consent decree is one big transition until the systems are 24 finally upgraded. What are other municipalities -- strike 25 that -- sewer districts doing today that are operating TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 191 1 under consent decrees that will improve their system and 2 yet make such allocation today that is fair and reasonable? 3 A Well, Indianapolis did have a more recent I&I 4 study performed, so to the extent the price of the study is 5 reasonable, then it's worth undertaking. 6 Q Would it -- Certainly when the improvements 7 are made to the River Des Peres project, to the Deer Creek 8 project, when those projects are completed, would that be 9 an appropriate time to do this study? 10 A The study would be more of a factor of the 11 collector system around the wastewater treatment plants, 12 how much of that water actually gets to wastewater 13 treatment plants. So you know, it would be worth talking 14 to the engineer performing the study, but I would not think 15 there be would a need to delay the study until all the 16 wastewater treatment plants have been upgraded. 17 Q But the system is also upgrading wastewater 18 and storm water to keep storm water out of the wastewater 19 system; right? 20 A Yes. 21 Q So until these improvements are completed, are 22 we really spending our money wisely for such a study? 23 A Again, I would talk to the engineer that is 24 performing the study, but you are fairly close to the end 25 of most of the major renovations on the system. Whether or TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 192 1 not it makes sense to do it in the next four years or the 2 next eight years, I can't answer. 3 Q My understanding is that these projects have a 4 life that will be four and five more years for resolution. 5 What would you suggest our commission do today to make a 6 finding of fair and reasonable allocation? 7 A Well, I think a 60/40 classification of the 8 costs associated with I&I is too heavily weighted toward 9 volume, and I base that on what other utilities I've worked 10 on used for I&I cost allocations. I think there has been 11 strong suggestions that it makes more sense to have an 12 actual study of MSD system to do a more accurate 13 determination of when appropriate classification of 14 customer and volume metric components of the I&I cost 15 should be. I think that makes a lot of sense as long as 16 the study cost is reasonable. And again, I'm only 17 cautioning the Rate Commission that if the staff is ordered 18 to do the study, the study is going to be a lot more 19 expensive. And from a customer advocate, I don't want to 20 put MSD in a position where they have to spend money 21 unwisely. So I think a study upgrade is good, but when 22 it's done, it should be done at a reasonable price. 23 COMMISSIONER GOSS: Thank you. 24 CHAIRMAN TOENJES: Any further questions for 25 Mr. Gorman? Mr. Gorman, I appreciate your statement about TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 193 1 the historical involvement of MIEC in these rate cases and 2 I, for one, truly appreciate all the hard work that you and 3 MIEC have done on behalf of the customers. Thank you. 4 THE WITNESS: Thank you. 5 CHAIRMAN TOENJES: Ms. Stump, are you ready to 6 proceed with those persons for whom you filed testimony on 7 behalf of the Rate Commission? 8 MS. STUMP: I am. Ms. Pam Lemoine. 9 CHAIRMAN TOENJES: Please proceed. 10 (Witness sworn in.) 11 CHAIRMAN TOENJES: Do any members of the Rate 12 Commission have questions for Ms. Lemoine at this time? 13 Ms. Myers, do you have any questions for Ms. Lemoine? 14 MS. MYERS: We do not. 15 CHAIRMAN TOENJES: Mr. Neuschafer, do you have 16 questions for Ms. Lemoine? 17 MR. NEUSCHAFER: I do. 18 CHAIRMAN TOENJES: Please come forward. 19 * * * * * 20 PAM LEMOINE, 21 being produced, sworn and examined, deposes and says: 22 EXAMINATION 23 QUESTIONS BY MR. NEUSCHAFER: 24 Q Good afternoon. 25 A Good afternoon. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 194 1 Q I assume you have your testimony, surrebuttal 2 testimony available in front of you? 3 A Yes. 4 Q Question four is about the proposed deferral 5 of $70 million a year spend for a couple of years, and you 6 state that, in your opinion, this shift is not a major 7 driver in the development of the revised financial plan. 8 Can you provide an explanation as to what that means? 9 A I can. In developing the financial plan for 10 the study period, the rates that have been proposed are not 11 discretely calculated for each year. It's really been 12 developed looking at the utility over the study period and 13 even into the following year that comes after this current 14 rate proposal period. In addition, the capital program is 15 not all cash funded, it's debt funded. So in debt 16 financing, capital improvement program, that's spreading 17 the cost of that capital program over a 30 year period of 18 time for all of that portion that is debt funded. So when 19 you shift out costs from '23 and '24 into '25 and '26, as I 20 was evaluating it, it does allow some downward movement of 21 the rates, but not in a material way. 22 Q What would you consider a material way? 23 A Well, the rates that have been proposed are, 24 let's see, 2.5 percent. And again, I'm talking revenue 25 increase at this point, not individual rate components. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 195 1 2.5 percent in '21 followed by 3, 3.75 percent increases. 2 Just in my analysis, looking at moving $70 million a year 3 from '23 and '24 into '25 and '26, and it's never in a 4 perfect alignment, but trying my best to emulate roughly 5 the same level of liquidity based cash, debt service 6 coverage so I could isolate just the impact of that one 7 change and not introduce a lot of changes. I was looking 8 at more around maybe 3.4 to 3.5 percent per year increases 9 in those years instead of 3.75 percent. 10 Q On question five, when you talk about minimum 11 debt service coverage ratios and the PAYGO capital 12 financing of 30 percent, and you state that the shift to a 13 1.6 X minimum in DSC places MSD of risk of a rating 14 downgrade. What's the basis for this conclusion? 15 A The basis for that is my review of what the 16 rating agencies reported in their rating documents. Fitch, 17 in particular, I think Mr. Snoke may have quoted it 18 earlier, and I think it's in Mr. Gorman's surrebuttal 19 testimony as well. Let me find the exact quote so I don't 20 misrepresent it. 21 In the Fitch report on MSD's rating, which is 22 Exhibit MSD 40, they state, "Any deterioration in financial 23 performance beyond projected levels would be expected to 24 result in a negative rating action." So that seemed pretty 25 straightforward to me, and they were referencing what was TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 196 1 currently being projected at the time, which was well in 2 excess of 1.6 times. 3 Q You did go on in your answer to say that the 4 actuals produced by Mr. Gorman's proposal put us at 1.76 at 5 the end of 2024 as compared to MSD's owns proposal of 1.81; 6 is that right? 7 A That's correct. That was the model that he 8 had presented or discussed in the rebuttal testimony. 9 Q And you characterize those as not materially 10 different? 11 A Correct. 12 Q So MSD's actuals are going to be sufficient to 13 maintain the credit rating, and Mr. Gorman's actuals are 14 not materially different. How do Mr. Gorman's -- How does 15 Mr. Gorman's proposal put us at risk of a credit downgrade? 16 A At 1.76, that is true, that would not. I was 17 referencing the 1.6 target that he was ideally looking for 18 that he thought was reasonable. 19 Q But not the actuals -- 20 A Correct. 21 Q -- that were used? 22 A Yes. 23 MR. NEUSCHAFER: Okay. That's all I've got 24 right now. Thank you. 25 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 197 1 Do any members of the Rate Commission have further 2 questions for Ms. Lemoine? Hearing none, Ms. Stump, do you 3 have additional witnesses? 4 MS. STUMP: May I ask Ms. Lemoine a couple of 5 questions? 6 CHAIRMAN TOENJES: Yes, you may. The Chair 7 begs your pardon for skipping over you. 8 EXAMINATION 9 QUESTIONS BY MS. STUMP: 10 Q Pam, I just want to clarify a couple of 11 things. One thing that I am confused with after listening 12 to both the District and Mr. Gorman is the whole subject of 13 depreciation and that discussion. Could you clarify your 14 views on that? 15 A Sure. Yes. I don't want to speak for 16 Mr. Beckley, but in listening to his testimony and 17 reviewing the cost of service study and the model, the 18 discussion with the topic of depreciation came up. I 19 believe he was referencing it with regard to the change in 20 the book to fixed assets for MSD now versus four years ago. 21 So if we go back to how rates are set, how a cost of 22 service analysis is done, you know, the first step of it is 23 the financial planning piece of it so you identify what 24 your costs are that you need to recover through rates, but 25 then you allocate capital-related costs and operating costs TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 198 1 at a little bit of a different manner. Capital-related 2 costs are allocated based on an allocation of the fixed 3 assets in the system. And when we look at that, we look at 4 the net booked value. 5 So I believe when he was talking about the 6 change he was talking about assets that had been booked, 7 and then he commented that, you know, depreciation has 8 occurred on existing assets has also brought down those 9 fixed assets, so that's the limit of where that was. 10 This -- MSD's model is a cash based revenue requirement, so 11 there are no depreciation costs in there. I just wanted to 12 make sure that that was -- that there wasn't any confusion 13 on that. 14 Q Thank you. A couple other things. The other 15 thing that was a lot in surrebuttal testimony and you heard 16 a lot about today is the surcharges, and you heard 17 Mr. Beckley discuss his opinion as to your previous 18 testimony on an across-the-board approach would be 19 preferable. I just wanted to give you the opportunity if 20 you had anything else you wanted to clarify or say about 21 the reasonableness of your approach versus his approach. 22 A Sure. The -- My testimony was recommending 23 more using across-the-board type basis, and the reason for 24 that is, as he had testified, that the rates are -- 25 revenues are increasing and costs are being incurred, not TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 199 1 only for operating-related costs, but capital-related costs 2 as well. And it is true that any assumption you make when 3 you are setting a single test year and then using some 4 other assumption for escalating rates in subsequent years, 5 you're never going to be perfect, but because looking at 6 the revenue requirements over this time period, there are 7 substantial capital investments being made, there are 8 investments being made on the wastewater side as well. 9 That was the reason why I recommended that we go with an 10 across-the-board type basis to avoid getting too out of 11 kilter. 12 Now, in this rate cycle, the difference 13 between the factors that have been put in the rate proposal 14 for O&M escalation for the surcharge rates is not 15 substantially different than what the across-the-board 16 increases are. I believe Mr. Beckley said that those 17 rates -- the across-the-board increase was higher than what 18 the operating expenses are. Let me make sure -- Let me 19 pause for a second. I want to make sure that we state what 20 the -- which direction it would go here. Since it's not my 21 model, it will take me a little bit longer to get to the 22 right table. It appears to me that in all of the years, 23 the O&M escalation is lower than the across-the-board 24 increase. 25 Q You already had a conversation with TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 200 1 Mr. Neuschafer about the possibility of and the effect of 2 moving the projects out on a rate change proposal, which I 3 think you said was not significant. And also in your 4 testimony, I just want to clarify, on question six, you 5 talk about the MSD policy PAYGO financing, does that have a 6 significant impact on the rate change proposal, and you 7 indicated no. 8 A It does, and the reason is -- and there's been 9 testimony here today to that effect -- that is not driving 10 the financial plan at this point in time, that service 11 coverage is. So the PAYGO split is more of an outcome than 12 it is an input. 13 Q And finally, I just -- after hearing the 14 surrebuttal from all the witnesses today, I just -- is 15 there anything else that you would like to comment on or 16 explain for the Rate Commissioner? 17 A Yeah. I guess the only other piece that I 18 wanted to touch on, Mr. Goss, was related to some of your 19 questions. Just to clarify, you know, we've been -- a lot 20 of percentages that get kind of interchanged, I think, as 21 we talk about things. It gets really complicated. But the 22 59 percent -- percentage for I&I, that's not an allocation 23 factor as far as between customer and volume, that's the -- 24 that's the percentage of total flow at the plant that is -- 25 that is I&I or -- it's not the bill revenue, so it's the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 201 1 difference between the total plant flow and the bill flow. 2 That's what the 59 percent is, and then it's that 3 59 percent that has to get allocated to the customer volume 4 component. And that's the piece that's been discussed 5 quite a lot. 6 So that 59 percent changes each year depending 7 on, you know, what's happening within the system. So as 8 the consent decree program moves forward, overflows are 9 captured, you would expect that percentage to go up. But 10 at the same time, there's a lot of work being done to 11 tighten up the system and so forth, which would remove some 12 of the flow, so that percentage will -- does change over 13 the course of the consent decree program. 14 MS. STUMP: I have no more questions. 15 CHAIRMAN TOENJES: Thank you, Ms. Stump. 16 Mr. Goss, any questions? 17 EXAMINATION 18 QUESTIONS BY COMMISSIONER GOSS: 19 Q I did understand it that way. So if you use a 20 45 percent number, which one of these alternatives looked 21 at, or use a 33 percent number, it's just changing the 22 dollar amount that you're allocating between volume and the 23 system; correct? I mean, just -- it's like the difference 24 between -- I've got $100 across that I've got to allocate 25 versus a thousand or something like that and I'm unclear as TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 202 1 to the actual numbers as opposed to the percentages. 2 A So the total flow would be the same, it's just 3 which component, whether it's customer or volume that it 4 goes to. The CDM report, I did review it. Probably Laura 5 reviewed it a lot more in-depth than I did, but it appears 6 as though that report also is being used for an evaluation 7 of a potential impervious area base charge, so there are a 8 lot of -- a lot of the scenarios incorporated that as well. 9 And then as Mr. Stannard said earlier, it appears as though 10 the output of that model or of that report was then used in 11 the 2007 rate proposal to determine that 12 40 percent/60 percent split; however, some of the pages are 13 missing in the exhibit, so we don't really have those 14 conclusions that kind of came out of this, we just have the 15 scenarios. 16 Q Right. There was a sensitivity analysis. 17 They put in zero percent, they put in a hundred percent, 18 they put in the 37 and 66, which was where -- which is 19 where MSD for 37/63, that's where they were before they 20 adjusted for that rate. And they just ran all of these 21 different models based on 33 percent I&I and 45 percent 22 I&I. Those are two different models they ran as opposed to 23 59 percent I&I. So what I'm trying to figure out is, that 24 much, does that make a difference in terms of our 25 evaluation of a fair and reasonable rate, which is our TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 203 1 task. That's what we are supposed to be doing. 2 A I think I see what you're saying, and, no, it 3 really doesn't because the 59 percent is the total that 4 you're trying to allocate. So the discussion of what's 5 fair and reasonable is how that then gets split between 6 customer and volume, which then flows into how rates are 7 designed. So whether that number is 59 percent or 8 65 percent or 40 percent, that doesn't have an impact 9 necessarily on how you allocate that between customer and 10 volume. The distinction would be, as has been discussed 11 today, changes in the -- fundamental changes in the system 12 that have impacted that number would drive it, but not the 13 number itself. 14 Q Okay. And so if we have those changes in the 15 system, then presumably this 33 percent number changes to 16 something else, so it would reflect the actual, which might 17 be 59, might be 45; right? 18 A Changes in the system would have an impact on 19 the amount of I&I in the system; correct. 20 Q Which is created as a number, it's an absolute 21 number that we are allocating between volume and customers? 22 A Right, and that allocation between volume and 23 customers would be -- would be determined -- it would be 24 determined by looking at, what are the sources of the I&I, 25 where is it coming from, is it coming from the private side TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 204 1 and is the program -- consent decree program project 2 addressing that affecting that piece of it, more or less, 3 than the other piece, and that's what would lead to that 4 split. 5 Q So that's the reason you would be doing the 6 study was to try to figure out what is driving this problem 7 from volume versus -- 8 A Correct. 9 CHAIRMAN TOENJES: We, in essence, have two 10 sets of numbers, the first set being a percentage of I&I, 11 the second set being the sources of that percent? 12 A Right. Correct. 13 Q (By Commissioner Goss) Right. And so if it's 14 going to be studied, the reason they went through the 2005 15 study was to try and figure out what's a reasonable way to 16 allocate that I&I based upon the condition of the system at 17 that point, and that would be why we would presumably do 18 that or MSD would do that now or at some point in the 19 future to figure out whether this 50/50 or 60/40 is really 20 fair? 21 A Correct. 22 Q And my sense -- Well, I don't know we know 23 today enough to be able to make that determination. I'm 24 kind of struggling with this because it seems to me like 25 it's really old, and it seems to me that MSD has done a TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 205 1 great job of improving the system, a lot of work. And so 2 are we -- Do we have good data that we can make a 3 determination that's a fair and reasonable rate? That's 4 what I'm trying to get to. 5 A And I couldn't speak to what data is available 6 versus what would have to be collected in order to do that 7 kind of study that MSD is doing a lot of modeling in the 8 system, so the extent to which they have the data in place 9 to where then they could procure someone to do the analysis 10 or if that would have to be collected in order to do that, 11 I don't know. But you have to balance that out. The other 12 side that you need to balance also is, as we've talked a 13 lot about today, the customer impact. And you've got 14 different kinds of customers; right? And hence you want to 15 balance the impact so that you've got fair and reasonable 16 rates for everybody, and part of that is anytime you make a 17 change, to make a change in a meaningful way to mitigate 18 impacts over time. 19 So in my view, fair and reasonable rates 20 aren't necessarily always 100 percent cost of service 21 immediately and always, but also reflecting other concerns 22 that you have as far as, you know, rate shock on customers 23 or any other kind of impacts. And we see that a lot. A 24 lot of utilities may allocate I&I one way, but they might 25 not necessarily recover their costs in that way, so some TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 206 1 utilities don't get to full cost of services with their 2 rates because they are addressing other concerns in 3 addition to cost of service. 4 Q If I heard the testimony right, if you don't 5 allocate that right, then the commercial side is 6 subsidizing the residential customers or vice versa; did I 7 get that right? 8 A That's correct. 9 Q I mean, either way they're recovering the 10 cost? 11 A That's correct. 12 Q The question is, who's paying for it? 13 A That's correct. 14 Q And so if I heard the testimony correctly 15 today, the difference in the rates between 50/50 and 60/40, 16 I think if I remember right, is like $3 a year -- per month 17 for the average residential customer; is that right? 18 A I believe that was in the range of what was in 19 the exhibit, yes. 20 Q Okay. So if you're worried about rate shock, 21 the question is, is that three or four bucks a month going 22 to cause rate shock as opposed to -- I guess that's part of 23 the question that we need to evaluate as well. 24 A So that was an example for residential 25 customer was six CCFs usage, but you would have to look TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 207 1 also at the impact for, say, smaller volume customers, say 2 a retired elderly woman living alone because the cost is -- 3 the way the rate structure is designed, that 4 customer-related I&I is in the service charge. And so that 5 fixed charge component becomes a very large portion of a 6 very low volume customer's bill, and so their impact would 7 be a much larger percentage impact on it then, as opposed 8 to a larger volume customer. Because if you increase the 9 service charge, you're decreasing the volume charge 10 because, again, you're recovering your costs, so that's 11 where the -- that's where the shift occurs between 12 residential and larger commercial because larger commercial 13 customers have larger volumes, so they will pay a larger 14 percentage of their bill through that volume charge 15 proportionately as compared to a residential customer. 16 Q We haven't seen any data to give us any 17 guidance in that regard. These residential classes, the 18 subclasses of residential people and the impact it would 19 have on them. We saw Mr. Gee's exhibit that was just kind 20 of blended across-the-board, but in terms of an evaluation, 21 what's the relevant costs. For your example -- 22 A One CCF. 23 Q -- an elderly person living at home. I don't 24 really -- and how many people that's impacting. I don't 25 remember seeing that. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 208 1 A There are a few examples in the rate proposal 2 on page 5-1, table 5-1, so there are a few examples there. 3 Wait. Make sure I'm on the right page there. I believe 4 that's the right section. I want to make sure that I'm 5 not -- Yes, pages 5-1 and 5-2. 5-1 has the metered rate 6 comparison. So they've got a few examples for single 7 family residential, multi-family and non-residential. 8 Q Do those examples go through each subclass of 9 rate there? I don't think they do. 10 A Well, I guess I'm not sure what you mean by 11 subclass. It shows single family residential and then it 12 has a bill. For instance, line one is a 100 cubic foot per 13 month customer, line two has a 500 cubic foot per month 14 customer and so on. And this is obviously in dollars, 15 not -- it's not percentages, but as you look at -- And this 16 is just for the proposal. So what you don't have is a 17 similar table for Mr. Gorman's proposal, for instance, in 18 order to be able to compare the impact if you change that. 19 But that table is in the rate model, so it would get 20 produced. Under any scenario, one could go to that table 21 and pull that through. 22 MS. STUMP: Mr. Goss and the rest of the Rate 23 Commission, I would say, too, we're -- I'm sure Susan will 24 love to hear this -- but we're planning on submitting one 25 more discovery request, hopefully on Monday or Tuesday, and TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 209 1 we could also -- so if that's what you want and that's what 2 you think would be helpful for, say, to have them run it 3 all for the 50/50 I&I or if you would like for us to 4 request Mr. Gorman to run something, I mean -- 5 COMMISSIONER GOSS: Well, I do think it would 6 be helpful. I'm kind of struggling with this. I'm trying 7 to -- I want to be able to answer whether this is a fair 8 and reasonable rate, and I don't want any trouble by the 9 fact that, in my opinion what I've heard today, they don't 10 have good data or we are using 20-year-old data to reach 11 these conclusions, and that's bothersome to me, but -- and 12 so, yeah, I would like to know more so that we're able 13 to -- 14 MS. STUMP: And it's easier to compare apples 15 to apples. I mean, it's difficult if we don't have the 16 actual numbers and the actual rate percentages. It's hard 17 to even compare what the different positions, what the 18 effect of them are. 19 Q (By Commissioner Goss) I've heard a couple of 20 times today that perhaps MSD has data that they could run 21 further analysis to help us in that regard. Obviously, if 22 we want to do that, that would be helpful. I just want to 23 be able to answer the question correctly. 24 A I want to manage expectations on that. When I 25 was indicating that they might have the data that would TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 210 1 allow them to do that analysis, it would still take a lot 2 of time to actually do the analysis, but you wouldn't have 3 to -- if they have, for instance, flow meters in the right 4 places as part of their modeling to be calculating all of 5 this, then they're talking about a desktop analysis. If 6 they don't have the data necessary, then they would have to 7 perhaps put meters in certain areas, collect that data, and 8 that takes time before you can do the analysis. That's 9 what I meant. 10 Q Right. And I had that sense, and that's part 11 of why everybody has been hedging, saying it depends on the 12 cost of the study and is it reasonable or not. That's why 13 we have that kind of instruction in place. The more that 14 we can shed light on those issues I think, at least for me, 15 it would help me feel that I'm making a better decision 16 about what's fair and reasonable. 17 A We will add that to the discovery request. 18 We've got a few different items that we've identified. 19 COMMISSIONER GOSS: Thank you. 20 CHAIRMAN TOENJES: I have one question, Ms. 21 Lemoine. 22 EXAMINATION 23 QUESTIONS BY CHAIRMAN TOENJES: 24 Q Mr. Gorman raised the question about the model 25 that was provided by MSD, the rate model. Do you have that TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 211 1 same experience with using that model? 2 A So the model is functional, and it works fine. 3 I think the issue is when the District's proposal is 4 utilizing an analysis of principal and interest payments on 5 new debt for the study period as well as deposits to the 6 construction fund and funds from premiums. So that was an 7 external PFM model, so those are inputs. In order to make 8 any changes to cash debt funding mixes, changes to the 9 overall annual spending in the CIRP, anything like that, 10 you can no longer use the PFM's numbers because you're 11 making changes to what those bonding requirements would be. 12 So you have to switch over to the model -- There's a toggle 13 where you can switch over to the model and then a model 14 automatically calculates it, but it has inputs for the 15 premium percentage, which was like 12.5 or 13 percent. So 16 if you just allow that to flow through versus making 17 adjustments, I don't know, you know, how that was 18 calculated or when it was calculated, but that really does 19 need to be updated; otherwise, as has been indicated, it 20 automatically calculates a significantly higher amount of 21 premiums than what PFM is projecting. 22 So that was the first thing I did was I looked 23 at making no changes to the model other than just switching 24 it to the model analysis versus PFM's numbers, and a 25 calculated premium was substantially higher than what PFM TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 212 1 had calculated in their model. So you have to make an 2 adjustment to that premium percentage. 3 CHAIRMAN TOENJES: Any further questions? 4 Thank you, Ms. Lemoine. I'm going to suggest a five-minute 5 break until 3:30 before we have our final witness. 6 (Whereupon, a short break was taken.) 7 CHAIRMAN TOENJES: Ms. Stump, you have your 8 next witness here. 9 (Witness sworn in.) 10 CHAIRMAN TOENJES: Thank you. Do any members 11 of the Rate Commission have any questions for Ms. Young? 12 Ms. Myers, do you have any questions for Ms. Young? 13 MS. MYERS: I do not. 14 CHAIRMAN TOENJES: Mr. Neuschafer, do you have 15 questions for Ms. Young? 16 MR. NEUSCHAFER: I do. 17 CHAIRMAN TOENJES: Please come forward. 18 * * * * * 19 NICOLE YOUNG, 20 being produced, sworn and examined, deposes and says: 21 EXAMINATION 22 QUESTIONS BY MR. NEUSCHAFER: 23 Q Good afternoon. Do you have your surrebuttal 24 testimony available there? Okay. Let's look at 25 question four of your answer. This is about timing of TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 213 1 projects during this cycle, and your conclusion was, 2 essentially there are four projects that you feel like may 3 be able to be moved; is that correct? It's on pages six 4 and seven. 5 A This was strictly looking at the additional 6 information that the District had provided upon consent -- 7 THE REPORTER: I'm sorry. I'm having a hard 8 time hearing. 9 A So this was strictly based on the additional 10 exhibits that the District provided, but, yes, there were a 11 few projects we identified. 12 Q (By Mr. Neuschafer) You said additional 13 exhibits. Just to be clear, that's Exhibit MSD 78B? 14 A Yes. 15 Q Okay. So can you lead me through the analysis 16 that you did to determine these four projects could 17 potentially be adjusted as far as timing is concerned? And 18 for now, I'm just asking the high level. We don't need 19 each individual project. 20 A I was strictly looking at the commence 21 construction dates and the placement and service dates as 22 compared to the CIRP dates. 23 Q Okay. When you say as compared to the CIRP 24 dates, what do you mean by the CIRP dates? 25 A For fiscal years -- So for fiscal years '21 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 214 1 through '24 as compared to the dates that were listed in 2 Exhibit 78B. 3 Q Okay. So then how did on -- how did you 4 determine that these four projects -- 5 A Well, if we can, for instance -- Okay. So 6 12088, that particular project has commence construction in 7 2026 and a placement of service of 2028, so it appeared 8 that that could potentially be moved out; however, as I 9 explained, there may be other reasons why that particular 10 project is moved forward into the CIRP. 11 Q What other reasons? 12 A It could be attached to another project. For 13 phasing reasons, oftentimes there are reasons that you 14 would want to collect projects together. 15 Q And so the four that you identified, those 16 were based purely on commence construction and placement of 17 service outside fiscal years '21 to '24? 18 A That's correct. 19 Q Did you do any analysis of the deadlines 20 identified by MSD in the placement of service column? 21 A I did. 22 Q And more specifically to the accuracy of 23 those? 24 A I did not. 25 Q Okay. So you took MSD's word for it on the TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 215 1 dates? 2 A I did, yes. 3 MR. NEUSCHAFER: Okay. That's all I've got. 4 Thank you. 5 CHAIRMAN TOENJES: Thank you, Mr. Neuschafer. 6 Do any members of the commission have further questions for 7 Ms. Young? Ms. Stump, do you have further questions for 8 Ms. Young? 9 MS. STUMP: Yes. You know, Ms. Young drove 10 all the way from Florida last night through the night to be 11 here, so I'm going to ask her just one question. 12 CHAIRMAN TOENJES: We could make it worth her 13 while. She would appreciate more questions. 14 EXAMINATION 15 QUESTIONS BY MS. STUMP: 16 Q Nicole, you were able when you were in the 17 car, did you listen to Mr. Unverferth's -- one day -- One 18 day I'll get his name right. 19 CHAIRMAN TOENJES: Mr. U. 20 Q (By Ms. Stump) Rich's testimony earlier today? 21 A Yes, I did. 22 Q And you know that there was -- There is a 23 disagreement in the testimony over whether there is -- the 24 MSD has any discretion to move projects into the latter -- 25 in two more years more, '25 and '26. What is your opinion TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 216 1 on that? 2 A It's difficult for me to comment on the 3 incinerator project. I have to take the District's 4 testimony on that particular project. For the consent 5 decree, I think those projects are scheduled in the consent 6 decree, and the remaining projects are somewhere on the 7 order of two to five percent, depending on which fiscal 8 year you look at. So I think ultimately at the end of 9 Mr. Gorman's testimony, he did say that if the District 10 could go and negotiate with the EPA on these projects, that 11 that would be something that they could look into. And I 12 think that, at the end of this, having heard the District's 13 testimony, where I end up on this. There's very little 14 room other than the incinerator project or the consent 15 decree projects to move the CIRP projects around, so it has 16 to be either the incinerator project or the consent decree 17 projects that would be moved. 18 MS. STUMP: Thank you. I have no further 19 questions. 20 CHAIRMAN TOENJES: Anyone else have questions 21 for Ms. Young? We appreciate your dedication to the cause. 22 There's one other matter to come before the Commission 23 before we adjourn, and that is a report from Mr. Brockmann 24 on the public hearings. 25 MR. BROCKMANN: So we've had three public TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 217 1 hearings thus far. All three, I think, were successful -- 2 We've had three public hearings thus far, all three of 3 which I think were successful in their own right. We have 4 three more scheduled, one on June 27th, July 10th and then 5 the final one here on July 24th. Related to your table of 6 schedule, please let me know by Tuesday of next week if you 7 will be able -- if your name is on the list and you will 8 attend the June 27th or if your name is not on the list and 9 you're going to attend so we have enough spaces and 10 nametags available. That's it. 11 CHAIRMAN TOENJES: Is there any other business 12 to come before the Rate Commission before we adjourn? Mr. 13 Palans? 14 COMMISSIONER PALANS: Mr. Chairman, if we 15 could just get a quick summation as to our future dates and 16 our next steps. 17 CHAIRMAN TOENJES: Ms. Stump. 18 MS. STUMP: I would be happy, except for my 19 microphone doesn't work. But we are -- Our next scheduled 20 event is on July 12th, which is the prehearing conference, 21 which is the time where each of the three parties will try 22 to narrow exactly what the issues are. And you'll get a 23 discussion of what each party's position is on those 24 issues, and you'll have the opportunity to ask questions to 25 the three attorneys. Also then, we will follow it with TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 218 1 written prehearing conference reports, which are due on 2 July 19th, and then on July 29th we have the final -- I'm 3 sorry, July 24th we have the final public hearing where we 4 will submit everything into evidence, and then we proceed 5 with Rate Commission meetings starting on July 29th. But I 6 do believe, and back into discovery, we will be doing -- 7 discovery responses take ten days, but we will be doing at 8 least one more discovery prior to next time. So if you 9 have anything or if you want to see what we're submitting 10 ahead of time to make sure your questions are included, I'm 11 happy to provide that; otherwise, we will plan on doing it 12 on Monday or Tuesday. 13 CHAIRMAN TOENJES: I would certainly recommend 14 that you provide that to the Rate Commission for time to 15 provide any final comments. 16 MS. STUMP: Okay. Perfect. Will do. 17 COMMISSIONER PALANS: Would we entertain a 18 motion to adjourn? 19 CHAIRMAN TOENJES: According to Robert's Rule, 20 a motion to adjourn is in order at any point during the 21 proceedings. 22 COMMISSIONER PALANS: I so move. 23 CHAIRMAN TOENJES: All in favor, signify by 24 saying aye. 25 ALL: Aye. TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 219 1 COMMISSIONER PALANS: Opposed? Thank you. We 2 are adjourned until 9:00 a.m. on July 12th. 3 4 (Technical Conference was adjourned at 3:40 p.m.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES Page 220 1 CERTIFICATE OF REPORTER 2 3 I, Jamie Jo Kinder, CCR No. 842, CSR No. 4 084.003306, do hereby certify that the foregoing proceeding 5 was taken by me to the best of my ability and thereafter 6 reduced to typewriting under my direction; that I am 7 neither counsel for, related to, nor employed by any of the 8 parties to the action, and further that I am not a relative 9 or employee of any attorney or counsel employed by the 10 parties thereto, nor financially or otherwise interested in 11 the outcome of the action. 12 13 __________________________ 14 Certified Shorthand Reporter 15 16 17 18 19 20 21 22 23 24 25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES A a.m 6:1 219:2 AA 129:25 138:7,8,8 147:10,13 153:12 158:15 170:7 AA1 158:15 AAA 158:14,23 158:25,25 159:3,25 160:4 aback 176:4 ability 9:1,6 34:15 120:21 176:18 187:10 187:20,22 220:5 able 36:14 43:7 48:14 50:3,9 50:16 102:16 103:9 114:11 160:17 174:11 176:9 204:23 208:18 209:7 209:12,23 213:3 215:16 217:7 absolute 60:1 65:10 203:20 Absolutely 150:22 160:23 absorb 50:3,9 accelerate 110:21 112:4 116:2,7 120:22 accelerated 115:23 accelerating 113:25 116:11 116:13 accepted 60:9 60:12 accepts 145:5 access 123:25 accident 151:19 accommodate 176:24 187:2,8 accommodati... 52:2 accompanied 8:24 accomplish 116:10 account 25:3 65:6 66:1 94:2 accounted 65:19 accounts 90:14 152:16 accuracy 57:2 178:18 179:1 214:22 accurate 35:25 36:1 54:20 57:12 58:8 61:16 63:5 88:4 89:1 98:15 118:5 132:21 166:18 192:12 accurately 189:19 acknowledge 168:12 acknowledges 150:5 acknowledgm... 157:2 acquisition 30:11,17 across-the-bo... 54:13,21,22 56:15,16,23 58:9 61:14,18 62:22,22 63:21 64:7,9 66:8,18 67:12 198:18,23 199:10,15,17 199:23 207:20 action 195:24 220:8,11 actions 148:24 actual 15:1,3 19:10 33:21 74:22 131:22 148:6 172:8 182:19 184:2 187:2 192:12 202:1 203:16 209:16,16 actuals 196:4,12 196:13,19 add 107:18 134:19 144:1 184:16 189:6 210:17 adding 47:25 135:20 addition 29:17 127:1 194:14 206:3 additional 9:17 12:9 19:21 20:4 21:7 35:6 39:3,24 43:13 44:4,5 48:13 48:15,18 67:23 100:1,5 100:17 101:5 104:6 105:13 108:5 109:25 110:20,24 111:1 111:2 112:1 131:12,18,20,21 132:15 133:7 133:14,15 134:2,5,7,14,19 134:20,21 135:6,6,20 137:9 143:16 143:19 153:22 154:3,5,15,16 154:17,18 155:3,5,7,13,13 156:2 157:4,17 165:1 177:18 184:4,8 188:7 197:3 213:5,9 213:12 address 15:1 29:10 39:13 40:1 44:6 52:7 108:14 addressed 42:7 62:6 78:17 addressing 204:2 206:2 adds 140:16 144:9 adequacy 185:10 adequate 9:2 114:16 149:1 170:11,12 180:10 187:3 adequately 181:5 adjacent 84:21 adjourn 216:23 217:12 218:18 218:20 adjourned 219:2,4 adjust 41:13 72:24 121:13 130:8 142:18 175:2 177:9 178:20 adjusted 175:20 176:6 177:4,17 177:19 183:21 202:20 213:17 adjusting 122:5 adjustment 99:2 167:25 168:24 177:4 212:2 adjustments 63:12 177:23 186:3 211:17 administrative 21:17 admit 71:17 92:12 admitted 79:7 142:15 adopt 34:12 adopted 74:19 advance 113:19 151:6 advanced 187:21 adversely 134:3 135:8 advise 118:10 135:10 advisor 125:25 advisors 125:20 125:21 advocate 192:19 affect 40:25 186:20 affirm 130:1 afford 116:23 117:4,7 affordability 116:21 126:14 151:24 156:10 156:16 affordable 116:25 156:24 afternoon 131:9 131:10 137:22 139:19,20 161:8,9,24,25 193:24,25 212:23 age 69:9 84:20 172:1 178:13 agencies 112:18 129:15,18 130:6 135:21 139:9 140:9,10 145:21 147:16 147:20,22 153:5 159:13 160:12 181:19 181:22,24 182:23,23 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 183:20 195:16 agencies' 145:24 146:4 149:6 150:12 agency 77:19 130:14 140:12 155:9 160:17 aggregate 127:8,9 128:4 132:6 ago 24:19 31:18 38:18 39:4 46:8 69:24 76:22 78:4 83:12 86:9 147:2 149:22 151:19 157:10 173:16 189:10 197:20 agree 34:2 36:14 45:15,21 67:14 92:5 102:8 113:1 116:17,19 118:14 129:16 156:7 168:22 169:2,8,12 170:3 179:2 agreed 20:3,4 84:6 agreeing 12:16 agreement 18:9 18:18 29:20 ahead 39:23 98:16 131:17 218:10 aid 147:25 air 17:10 20:21 21:25 34:11,22 38:10,11,23 39:3,8 ALARIS 1:17 alignment 195:4 alleged 24:11 38:4,22 allocable 93:19 allocate 12:3 197:25 201:24 203:4,9 204:16 205:24 206:5 allocated 22:13 22:18 28:23 30:23 47:17 60:6 70:13,16 70:17,18 198:2 201:3 allocating 188:6 201:22 203:21 allocation 70:21 71:12 73:1 74:6 75:3,6 81:5 83:2 92:15 93:11 97:3,7,9 97:9,14 98:21 99:3,11,15 165:19 166:1 178:10 186:4,4 186:6,14,16,21 187:25 191:2 192:6 198:2 200:22 203:22 allocations 22:12 68:18 71:2 190:5 192:10 allotted 12:7 allow 32:18 34:4 112:4 164:2,6 165:13 175:22,25 194:20 210:1 211:16 allowance 153:10 170:4 allowed 102:18 149:17 175:14 182:19 allows 181:7 alluded 146:11 altered 130:22 alternative 186:15 188:10 alternatives 15:1 24:14 186:10 201:20 amend 45:15 amended 7:12 9:1,7 102:10,15 102:18,23 amendment 7:13 18:10,12 amount 14:19 23:18 25:1 36:7 41:12,14 75:14,16,18 76:9 77:3,4 82:13 87:25 95:3 100:9 101:1,5,5,9,19 101:22 102:2 103:5,9 107:25 110:8 111:7,11,14,18 118:3 127:24 132:19 135:20 141:19 143:8 145:16 149:7 149:10,19 154:24 162:10 164:23,25 165:8 172:13 177:9,20 186:22 187:17 187:18 201:22 203:19 211:20 amounts 8:19 104:6 108:25 109:15,15,17 109:24 ample 138:4 analogy 116:15 analyses 80:16 186:18 analysis 14:14 41:25 43:10 70:11 74:18 78:10 80:6,8 80:11 83:11,11 85:23 92:22 93:14 94:23 95:12,13,20 120:12 121:25 135:2,9,10,19 135:25 137:25 180:7 186:12 186:16 195:2 197:22 202:16 205:9 209:21 210:1,2,5,8 211:4,24 213:15 214:19 analysts 184:10 analytical 85:23 analyze 120:5 analyzing 49:19 126:16 and/or 11:4 Anheuser-Bu... 123:12 annual 55:9 86:20 91:24 108:7 109:9 132:8 133:11 133:25 140:20 140:20 157:16 157:20 162:11 162:11,16,19,23 163:9,12 164:3 172:24 176:10 184:6,6 211:9 annually 31:22 111:8 answer 10:6,24 11:24 38:24 40:12 55:24 65:21 90:18 94:5 97:16 119:20 120:3 121:2 122:19 131:4 135:25 146:21 192:2 196:3 209:7 209:23 212:25 answered 35:12 35:15 46:8 146:16 answering 135:16 answers 60:24 anticipate 118:18 anticipated 8:20 58:14 59:1,3 100:20 114:22 115:5 anticipating 104:11 anytime 61:9 205:16 anyway 168:17 apparently 165:3 177:9 appear 129:12 161:7 appeared 81:14 214:7 appears 74:1 199:22 202:5 202:9 apples 181:10 209:14,15 applicable 9:7 34:16 application 9:15 179:10 applications 24:23 applied 61:14 apply 120:7,17 appreciable 115:4 appreciate 53:2 160:24 174:22 192:25 193:2 215:13 216:21 approach 41:10 56:20 66:9,10 71:22 73:25 127:20 198:18 198:21,21 approached 37:4 126:16 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES approaches 56:18 67:3,7 67:13 approaching 78:4 96:2 appropriate 24:21 39:17 39:22 72:2 75:2 97:18 169:21 173:17 181:20 184:23 186:7 188:8,19 189:15 191:9 192:13 appropriated 23:13 appropriation 49:14 appropriations 23:14 approval 11:4 107:25 108:5 154:4,15 approve 11:5 107:6 120:25 approved 7:10 9:19 11:10 49:11 100:22 107:5 115:5,9 140:2 approximate 48:1 133:6 154:17 approximately 14:24 23:5 48:3 59:18,25 65:8,25 70:22 99:13 103:8 107:3 110:10 111:21 132:3 133:25 154:13 172:23 176:17 April 10:2,10 103:15 arbitrary 80:3 area 25:19 29:18 70:6,7 89:11 91:8,10 94:20 104:3 156:12 202:7 areas 75:14,19 89:12 210:7 argue 84:2,3 156:21 arguments 180:23 arrived 71:11,20 arriving 169:3 181:11 aside 77:12 asked 18:2 45:3 75:25 77:23 89:17,25 119:24 122:25 142:21,23 145:2 146:17 162:9 175:13 183:16 asking 34:7 39:19 60:23 89:20,24,24 89:25 98:1 102:21 108:9 120:24 134:4 134:7 137:24 154:6,7 213:18 assertion 17:13 assess 48:17 assessment 26:22 31:24 32:5 105:8 162:15 168:3 assessments 43:16 asset 14:5 26:21 36:17 59:9 assets 8:18 25:16 26:13 59:10,17,21,23 64:25 65:6 197:20 198:3 198:6,8,9 assign 173:17 assigned 70:14 158:10 assignment 72:3 assist 97:15 125:22,22 associated 8:5 57:15 59:7,8 70:14 72:3,3 85:16 104:13 105:10 106:21 109:18 141:8 154:4 192:8 Association 8:9 8:11 assume 13:12 23:8 51:21 132:14 134:20 169:9,12 194:1 assumed 171:8 assumes 143:21 assuming 22:24 133:22 183:22 188:2 assumption 57:22 66:5,6 85:18 93:9 177:5 199:2,4 assumptions 54:11 57:3,7,10 61:10,21,22 63:4 67:16,17 85:19,24 91:17 93:5,8,10 133:10 144:4 146:19 150:7 168:8 176:3 186:17 188:15 188:15 190:10 assurance 183:20 184:9 Atlanta 173:25 174:3 attached 214:12 attempt 12:3 attend 217:8,9 attention 185:10 attorney 220:9 attorneys 217:25 attributable 55:13 188:5 audit 106:9 audited 100:23 101:17 augment 95:21 August 9:21 authority 76:13 94:19 109:9 110:9 133:3 163:1 authorization 107:2,4 108:3 131:18,20,21 131:25 132:2 132:22,23 134:19 156:2 157:4,5,6 158:22 authorize 131:12 153:20,21 154:4 157:16 authorized 132:16 authorizing 153:24 automatically 211:14,20 available 16:16 16:20 95:10 108:17 110:20 126:9 164:4 182:22 194:2 205:5 212:24 217:10 average 55:9 87:25 88:20 91:24 102:17 114:2 141:6,12 206:17 averages 145:23 avoid 32:8 199:10 aware 24:10 38:10 52:21 117:17 138:14 189:13 aye 11:6,8 218:24,25 B back 15:20 18:2 20:4 22:7,9 31:6 32:23 36:10,15 37:16 38:11,18,25 39:7 44:15 48:22 49:20 56:8 69:21 73:4,19,20 74:21 78:4 79:12 83:17 86:5,7,16 88:7 88:24,25 89:7 90:8,12,16,22 93:4 95:8 101:8,8,13 105:25 106:4 117:14 118:2 122:25 127:21 128:12 129:22 130:1,7,8,12,21 130:22,24 131:1 138:15,16 138:18 140:1 144:1 160:9 177:5 185:25 187:17 188:17 197:21 218:6 background 86:12 backlog 48:16 backs 15:25 190:10 backup 73:21 103:12 104:12 backups 105:15 bad 66:9 67:19 Baer 4:4 10:8 11:19 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES balance 79:22 126:18 128:3 149:15 156:8 170:16 205:11 205:12,15 balanced 126:15 171:9 ballot 154:8 ballpark 22:24 65:14 81:16 bank 152:16 Bar 8:9 barely 188:6 base 192:9 202:7 based 15:5,7,10 15:12 28:5 29:14 33:10 34:22 42:3 49:17 50:1 59:22 61:19 71:12 72:13,14 80:2,6,9,19 83:10 85:24 87:22,22 92:19 93:10,13 93:20 94:15 101:10,15 112:19 122:16 145:19 147:16 157:7 159:16 165:19 166:5 168:1,25 172:5 172:6 173:21 175:16 176:2,5 176:7 178:22 182:13 184:15 189:22 195:5 198:2,10 202:21 204:16 213:9 214:16 basically 15:4 21:15 26:11 29:18 34:6 59:12 101:4 113:22 basis 45:14,20 60:1,1 70:2 81:10,13 86:13 87:11 90:9 138:5,5,5 157:16 171:25 172:25 173:18 178:20 182:12 195:14,15 198:23 199:10 Beckley 2:9 10:1 53:8,9,13,15 53:19 60:18 64:14,17 66:13 67:22 136:23 197:16 198:17 199:16 Beckley's 180:6 Beckmann 2:6 5:2 6:10,11 49:7,9 50:22 50:24 bed 16:23 39:6 began 10:20 186:6 begins 16:22 16:25 18:21 begs 197:7 behalf 11:10,13 12:17 193:3,7 behavior 130:13 130:22 behaviors 130:20 believe 17:13 18:11 26:7 44:15 47:2,4 48:10 52:20 55:12 63:16 66:24 70:16 73:3 74:20 75:5 84:6 88:4 92:24 105:17 108:13 109:11 113:16 126:20 129:22 132:17 138:25 145:8 148:25 150:12 155:25 160:17 163:18 163:23 165:18 166:15,18,19 170:8 173:9 178:23 179:15 182:9 183:11,15 197:19 198:5 199:16 206:18 208:3 218:6 believes 67:11 benefit 46:16 benefits 60:3 Berthold 9:25 best 46:16 61:21 61:23 74:17 195:4 220:5 Bethany 3:1 9:25 124:25 125:14,18 146:10 149:14 154:19 159:10 better 76:5,14 78:18 92:23 103:21 108:14 118:4 121:10 122:3 164:6 210:15 beyond 25:7 26:19 35:2 41:19 121:3 123:18 144:14 157:23 195:23 bid 23:13 bidding 155:25 bids 49:21 112:12,14,15 big 139:10 172:9 187:5,6,13 190:23 biggest 145:12 146:15 151:20 bill 67:24 72:15 72:19 81:3 82:3,9,16 87:19 90:13 99:5,6 200:25 201:1 207:6,14 208:12 billable 90:13 billed 101:18,24 billion 14:24 37:8 47:7 48:3 48:6,7 65:25 106:20,20 107:8,13,15 108:1 111:21,22 111:23 112:1,1 bills 81:19,22 114:20 Biosafety 51:15 biosolids 24:23 24:24,25 Bissell 16:22 17:11 29:9 38:5 40:9,10 91:21 bit 33:7 34:18 35:21 36:16 42:19 46:8 51:3 62:11,16 63:10 68:16 72:6 96:7,8 98:15 102:24 111:10 116:13 118:15 119:21 133:24 135:19 136:25 138:15 140:7 147:14 148:9 151:8 156:23 157:7 157:12 169:22 173:13 183:7 198:1 199:21 Black 11:17 27:8 69:21 74:18 78:13 174:10,11 blended 207:20 blowing 187:12 bmalone@las... 4:6 board 7:18 8:15 8:23 9:14,15 9:18 31:21 32:2 55:18,23 114:21 115:5,9 145:5 152:18 152:19 189:1 BOD 55:1,21 57:15 58:7,22 58:24 59:7 61:18 66:20 66:24 bond 107:4,15 108:10 114:9 125:23 127:9 128:7,13 129:9 129:12,15 130:8 133:22 137:21 138:1 139:3 158:11,11 158:14,18,21 159:7,8 160:7 160:12 167:13 167:14 168:9 170:12 176:8 177:10 bonding 211:11 bonds 8:18 9:5 107:11,11,12 108:7 109:17 109:19 110:5 127:7,8 130:6 131:13 132:15 133:7,16 135:7 153:22,24 154:5,11,17,20 155:8,13 156:3 158:20,23 168:10 177:18 177:19,20 180:21 bonus 110:4,5 book 59:10,22 65:24 197:20 booked 59:9 64:25,25 198:4,6 booking 59:10 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES books 65:4 borrow 47:1 48:13 106:25 116:20,24 132:25 133:3 133:14 156:19 157:17 borrowed 107:1 107:2 108:8 114:15 borrowing 107:10 109:3 111:19 112:3,3 114:14 131:22 135:6 152:15 153:25 156:6 156:20 160:4 borrowings 107:6 108:1,2 109:7 113:3 Botanical 8:9 bothersome 209:11 bottom 77:7 Bowdry 6:12 box 71:1,10 74:14 Brad 5:4 6:18 Brandon 4:9 11:15 brandon.neus... 4:11 Brandy 6:12 break 53:3,4 84:23 96:6 104:18,20 124:22 136:14 161:3,5 212:5 212:6 breakdown 108:23 Bresnan 6:15 Brett 9:24 Brian 4:3 9:23 11:18 52:8 briefly 125:18 bring 108:1 153:4 170:11 broad 85:24 Brockmann 2:20 5:3 6:13 6:14 118:21,24 216:23,25 brought 117:16 198:8 BRYAN 4:9 bucks 206:21 budget 27:20 44:2,12 51:22 104:4,8 budgeted 58:3 111:9 163:7 build 21:16,18,19 23:4,8 34:10 130:12 187:6 Builder's 8:10 building 23:10 29:17 built 15:6 23:19 27:18 31:17 bulk 66:3 104:2 bump 183:6 bunch 72:12 burden 9:8 126:15 146:4 business 116:6 156:1 157:3 217:11 businesses 99:21 buy 116:23 buying 116:22 C C 4:1 calculate 110:13 122:25 142:22 142:24 143:2 175:22 calculated 194:11 211:18 211:18,25 212:1 calculates 211:14,20 calculating 143:6 210:4 calculation 107:18 136:24 144:17 calculations 101:7 111:15 121:21 128:24 137:10 142:22 148:11 calendar 163:23 call 6:3,8 19:7 53:6 67:15,18 105:5 124:20 151:7 called 28:11,21 73:8 77:9 85:1 cap 35:9 capabilities 78:19 capable 163:10 capacity 37:10 73:1 85:1 125:21 186:25 187:3 capital 30:13 54:19 55:5,8 55:10,13 56:3 56:6 57:21,23 57:25 58:5,13 58:21 59:1,5,6 59:13 76:7,18 108:22 113:8 113:10 117:2 120:18 126:6 126:11,17,21 144:1 149:19 163:1,11,15,24 164:22 165:9 173:20 174:1 176:14 180:8 185:5,13 194:14,16,17 195:11 199:7 capital-related 197:25 198:1 199:1 captured 22:13 201:9 car 215:17 care 164:13 careful 189:1 carry 104:11 133:6 case 58:1 65:18 71:16 76:4 83:21 90:4 95:17 130:2 137:10 164:7 169:11,20 175:2 176:21 179:21,25 180:17 181:14 185:18,20 187:10 188:11 cases 30:15 83:21 183:12 184:6,7,20 185:18 193:1 cash 111:25 112:21 116:24 126:7,16 127:12,24 143:16 145:16 146:21 149:12 194:15 195:5 198:10 211:8 catch 156:23 category 129:24,25 138:7,10 cause 39:16 75:1 167:23 206:22 216:21 caused 128:19 causes 73:15 cautioning 192:17 CAVE 4:9 caveat 51:13 CCF 81:24 82:5 207:22 CCFs 82:5,14 98:24 206:25 CCR 1:17 220:3 CD 18:10 25:13 115:14 CDM 70:22 71:12,24 72:10 73:4,18 74:18 186:8,16 202:4 central 151:24 certain 15:5 33:18 72:11 92:15 106:7 115:12 121:12 130:16 131:3 177:2 180:9 183:25 187:10 189:2 190:13 210:7 certainly 34:17 97:19 103:23 114:14,15 124:21 172:6 191:6 218:13 certainty 140:14 140:14 CERTIFICATE 220:1 certified 51:16 220:14 certify 220:4 cetera 17:4 Chair 5:2 6:6,7 124:19 197:6 Chairman 2:7,11 2:16,21 3:5,11 3:16 6:2 7:8,9 11:9,13,16,23 12:20,24 13:4 32:24 33:2 35:16 37:23 42:14 49:6 50:24 52:11,14 53:1,5,9,12,17 54:2 60:17 64:13,16,20 66:12 67:21 68:1,5 78:24 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 80:23 82:21 86:2 94:9,12 96:4,12,17,20 97:19 98:11 104:16,21 117:10 118:21 119:13 122:9 122:12 123:19 124:2,16,21,23 125:2,7,10 129:5 131:6 136:4,10,14,22 137:8,13,17 139:14 142:3 152:3 158:6 159:2,16,21 161:1,6,11,16 167:6 170:25 174:14,17 178:2 185:22 190:16 192:24 193:5 193:9,11,15,18 196:25 197:6 201:15 204:9 210:20,23 212:3,7,10,14 212:17 215:5 215:12,19 216:20 217:11 217:14,17 218:13,19,23 challenge 56:17 61:7 Chan 5:5 6:22 chance 165:19 change 6:5 8:14 8:22,24 9:10 9:14,21 34:14 39:18 48:19 59:24 61:1 62:25 63:2,3 63:13 64:3 66:7 74:19,23 79:9 80:19 82:4,11,12 87:22,24 90:6 91:17 97:6 99:15 100:21 107:22 117:21 120:22 122:16 127:18 127:19 130:23 138:23 145:22 149:5,6 168:6 168:9,23 170:1 172:22 176:25 177:7,10 179:13 179:18 183:14 184:8 188:14 195:7 197:19 198:6 200:2,6 201:12 205:17 205:17 208:18 changed 38:14 75:6 77:22 79:7,23,24 81:20 83:19 91:11 93:17 97:3,14 98:14 98:21 99:3,11 115:16 146:3,5 146:8,9,25 147:1,2 149:20 151:5 159:8,9 160:18 changes 7:15 8:16 79:18 85:23 92:6,8 92:13 93:24 94:3 118:11 134:10,12 151:21 160:16 168:5 169:3,7 169:25 175:15 176:24 195:7 201:6 203:11 203:11,14,15,18 211:8,8,11,23 changing 24:22 63:7 92:21 164:10,15 201:21 characteristics 166:6 characterizati... 47:13 characterize 112:13,25 196:9 charge 77:19 83:5 100:4 156:20 202:7 207:4,5,9,9,14 charged 100:18 101:10 170:18 charges 15:12 77:21 126:14 141:4 166:17,21 166:22 chart 98:24 166:8 Charter 7:10,13 7:18 9:12 cheaper 185:4 check 51:19 68:13 130:1 chemicals 99:23 chlorination 52:2 chlorine 51:12 51:21 52:1,9 choose 67:1 138:10 chose 157:7 Cincinnati 78:14 CIRP 17:22 25:15 35:24 36:2 44:22 46:3,7 48:14 49:19 102:7 106:14 110:21 112:4,10 113:18 115:11,22 116:4 116:7 140:2 141:20 143:22 144:21 145:11 145:17 146:13 146:16,22 149:8,11 150:11 155:25 162:11 162:16,24 163:7,9,14 164:3,10,23 165:6,8 176:8 176:10 183:8 184:23 211:9 213:22,23,24 214:10 216:15 citation 171:22 cite 173:3 cited 19:8,11,14 38:16 171:5 city 8:9,12 31:20 68:22 69:1,8 69:18,22 70:5 71:24 94:21 95:4 173:8,9 173:11,12,14,25 claim 144:4 claims 103:12 104:12,12 141:10 clarify 33:8 98:5 197:10,13 198:20 200:4 200:19 class 72:14 165:23 166:18 180:12,20 classes 9:9 61:3 61:6,24,25 93:2 122:16 123:4 124:8 179:10 180:25 207:17 classification 192:7,13 clause 45:6 clauses 19:8 45:5 174:9 clear 20:10,10 44:21 147:22 166:13 181:19 181:20 182:24 213:13 clearly 12:14 climate 69:2 close 31:2 67:9 85:21 150:17 191:24 closely 153:2 closer 62:19,21 166:15 Club 8:12 CMOM 85:1 Coalition 8:11 Code 51:15 77:20 collect 210:7 214:14 collected 205:6 205:10 collection 58:6 58:11 59:15,18 59:25 60:2 65:3,9,12,17 65:23,24 69:11 73:11 76:1 83:16,22 84:15,16 85:3 86:13 88:13 89:5,14,15 94:18 166:20 166:24 collection/con... 70:5 collections 65:22 collector 186:23 187:6 190:8 191:11 Columbus 70:15 78:13 column 26:6 28:1 110:4 214:20 combined 15:2 17:21 66:22 69:4 94:20 95:5 combining 29:10 come 13:4 15:20 33:2 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 34:9 35:6 40:23 53:9,17 57:13 58:2 68:5 73:2 76:11 93:11,12 130:7 131:1 134:22 138:15 138:16,18 140:1 143:16 148:14 152:21 155:4 184:1,4,8 187:8 193:18 212:17 216:22 217:12 comes 52:3 64:23 108:14 145:12 171:6 194:13 coming 39:15 39:25 52:6 84:14 88:12,13 101:12 188:2 203:25,25 commence 30:1 213:20 214:6 214:16 commenced 6:1 28:2 30:21 commences 30:3 Commencing 27:10 comment 48:10 51:11 93:7 174:12 182:10 200:15 216:2 commented 198:7 comments 124:17 218:15 commercial 7:23 47:11 61:24 91:11 100:12 101:18 101:23 102:1 117:19 123:8,9 123:16 124:5 187:25 206:5 207:12,12 commission 1:1 3:10 4:2,8 6:4 6:6,21 7:14,20 7:22 8:4,15,23 9:10,12,16,17 9:23 10:4,7,9 10:10,17,25 11:18,19 12:3 12:25 34:12 37:24 53:13 61:1 68:2 71:15 72:1 82:22 96:13 97:5,17 115:25 116:1 120:25 123:24 125:3 136:11 140:1 145:3,6 159:3 164:5 165:12 170:17 175:13,24 176:2,6,24 177:11 178:16 178:19 183:1 184:22 192:5 192:17 193:7 193:12 197:1 208:23 212:11 215:6 216:22 217:12 218:5 218:14 Commission's 9:19,20 11:23 Commissioner 2:5,6,6,7,11,15 2:15,19,20,20 2:21 3:2,3,7,7 3:11,12,13,16 6:9,11,12,14,15 6:17,18,19,20 6:22,24 7:1,2 7:3,4,6,7 37:25 38:2 42:17 49:4,9 50:22 51:2,7 51:9,11 52:10 66:15 67:18 82:25 86:1,4 94:7 105:2 117:8,13 118:20 119:15 122:8 129:8 131:5,8 136:2 152:6 158:4,9 159:7 160:1,24 167:9 170:23 171:3 173:1,7 174:13 185:24 190:14 190:18 192:23 200:16 201:18 204:13 209:5 209:19 210:19 217:14 218:17 218:22 219:1 Commissioners 5:1 11:3,7 12:12 49:7 52:12 64:17 67:22 94:10 96:5 104:17,19,24 122:10 129:6 137:14 152:4 161:2,12 167:7 commissions 179:4 commitment 29:8 31:21 36:7 commitments 163:22 common 8:25 56:21 75:19 commonly 60:8 60:12 73:8 communicated 146:5 communities 94:22 95:6 community 8:1 146:7 companies' 179:14 company's 171:16 comparability 70:11 comparable 70:1 165:23 173:10 compare 69:9 86:16 87:3,5 87:11 90:8,10 90:14,23 91:3 91:16 93:4 100:23 208:18 209:14,17 compared 83:25 196:5 207:15 213:22 213:23 214:1 comparing 176:18 comparison 87:16 90:25 91:6 105:17 165:20,25 208:6 competitive 185:16 complete 18:16 19:13 23:24 48:14 183:2 completed 12:6 17:14 31:14 191:8,21 completely 64:4 completes 124:17 completing 18:18 115:22 completion 19:11 compliance 17:10,20 19:15 19:22,24,25 20:20 21:6,19 22:1,3 26:15 28:25 29:7 34:11,21 36:20 45:22 47:13 48:2,8 77:1 151:2 185:13 complicated 23:11 71:22 200:21 complied 113:19 comply 9:6 34:15 39:10 47:8 48:11 76:8 93:22 111:17 113:13 115:13 component 15:18 130:17 181:10 201:4 202:3 207:5 components 14:23 15:22 73:18 84:11 135:5 192:14 194:25 comport 181:12 computed 164:14 concern 51:19 55:16 61:13 62:3 174:21 177:1 179:1,22 concerned 155:1,17 164:13 213:17 concerns 24:23 24:24 35:2 40:1 51:20 178:13 205:21 206:2 concluded 162:17 conclusion 93:12 195:14 213:1 conclusions 90:9 202:14 209:11 condition 26:21 32:4 44:17 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 114:9 182:24 187:11,13 204:16 conditions 39:25 43:25 44:10,14 102:25 103:1 105:4,5,10,20 116:18 168:2 169:1 172:4,12 187:4 conduct 39:1 70:10 conducted 127:15 189:9 conference 1:9 6:1 10:2,5,13 10:22 217:20 218:1 219:4 conferring 26:20 confidence 178:18 179:22 189:19 confident 118:13 confidential 174:7 confidentiality 174:9 confirm 51:22 164:20 187:15 conflict 33:20 confused 190:19 197:11 confusion 198:12 Congress 190:1 conjunction 24:4 126:13 190:2 connection 28:18 158:11 connections 84:18 85:13 consensus 168:4 169:7 consent 13:24 13:25 14:1,11,21 14:25 17:7 18:12 21:18 28:3 29:1,5,11 29:12,20 31:15 33:23 34:4 35:10,11,12 36:4,6,9,17 37:3 45:1,4,15 45:22 47:8,14 47:19 48:2,7,11 48:20 69:6,15 102:10,15,18 102:23 106:15 106:22 111:17 111:20,21 112:5 113:12,13,15,17 116:11 117:5 148:3 151:20 163:3 173:21 174:2 184:21 185:5 190:23 191:1 201:8,13 204:1 213:6 216:4,5,14,16 consenting 156:9 conservative 129:14,17 169:19 consider 46:5 102:22 113:25 114:18 115:10 116:6 139:11 150:20 154:21 194:22 consideration 14:18 16:3 26:23 35:24 36:3 37:19 40:5 45:17 48:24 102:12 126:14 127:13 128:2 considered 24:14 39:4 106:5 139:1 162:23 180:8 consistent 8:25 9:3 166:18 173:20 178:15 178:24 185:18 consistently 182:18 183:2 consists 8:4 constant 73:9 constitutional 8:25 construct 20:21 22:1 27:13 constructed 21:23 45:8 construction 8:7 17:3,3 23:3 27:8,10 27:23 28:2,24 29:12,24,25 30:3,12,18,21 119:2 211:6 213:21 214:6 214:16 consultant 55:15 71:15,24 72:1 175:21 178:24 consultants 10:11,15 11:17 Consumers 8:8 8:13 10:12 11:14 contact 140:9,11 context 126:24 129:25 135:15 135:17,18 148:4 183:16 contingencies 170:20 177:1 184:1 contingency 23:8,19 143:17 continue 16:10 32:16 37:15 43:1 96:7 187:19 continued 97:10 continuing 43:8 Contractors 8:5 contradicts 148:25 contributed 103:23 182:3 control 14:24 29:2 42:25 controlled 187:23 controls 36:15 conversation 79:5 199:25 conversations 38:9,13 conveyance 58:6,11 59:14 59:18,19,25 60:2 65:2,8 65:12,16,22 65:23,24 69:12 convincing 184:22 cookbook 67:8 coordinated 29:16 copy 13:12 54:8 68:14 corner 123:12 corporate 156:5 Corps 32:13,18 correct 11:21,22 13:19,20 17:9 17:15 19:6,9 22:14,15 23:9 25:24 27:21 28:3,4,5 31:10 38:23 44:23 44:24 45:1,2 45:12,13,15,16 45:18,24 46:7 47:1,9,10,15,21 48:4,5,8,9 54:6,11 55:19 57:5,18 58:24 60:6 66:24 68:23 70:7,23 70:24 71:3 72:18 74:5,13 77:10,11 79:10 80:12 83:4 84:1,10 90:15 90:20,21,24 91:4 98:8 105:7,8,11,12 105:14,16,22 106:15,25 109:11 112:2,7 112:8,11,18,19 112:25 113:14 115:6 121:8,15 122:7 131:13 131:23,24,25 132:1,10,13 133:1,5,15 134:11 142:16 150:16 153:13 153:16,19,22 153:23 154:2 154:9,13,14 157:17,18 171:10 196:7,11 196:20 201:23 203:19 204:8 204:12,21 206:8,11,13 213:3 214:18 corrected 14:20 correctly 13:17 27:25 88:25 134:24 143:5 165:4 174:23 177:9,22 206:14 209:23 correlates 84:7 cost 8:18 19:5 20:13 41:3 44:16 46:6,11 55:5,5 56:21 57:15,18,20 58:21,25 59:22 63:18 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 69:24 92:25 94:14 100:5 101:15 104:13 108:7 109:9 116:17,20 132:3 133:6 133:25 134:2 134:8 144:5,8 145:19,19 151:12 154:6,18 154:21,22 155:2 157:7,13 162:15,18 164:6 165:15 165:23 166:1 166:17,19 168:6 169:19 170:9,10,21 173:17 176:3 177:3 178:11,17 178:22 179:1,5 180:4,10,12,18 180:20 181:5 182:19 183:19 183:21,22 184:2,10 186:2 186:4 188:5,7 188:25 189:2 189:3,6 190:5 192:10,14,16 194:17 197:17 197:21 205:20 206:1,3,10 207:2 210:12 costs 43:19 44:4,4,5 50:17 70:14,14 72:3 72:3 78:3 85:7 92:21 99:25 104:5,9 105:9,11,13,25 106:4,20 108:6 138:4 144:20 151:4 151:16 154:3 167:14 188:4 192:8 194:19 197:24,25,25 198:2,11,25 199:1,1 205:25 207:10,21 Council 8:7,8 counsel 4:13 10:8 11:1,19 12:4,6 220:7 220:9 counterpart 25:21 counts 90:14 County 7:11 8:6 8:11 couple 16:13 29:22 30:2 33:1 80:25 109:4 125:12 138:21 139:21 140:17 144:19 149:21 156:4 157:10 174:15 194:5 197:4,10 198:14 209:19 coupon 142:18 course 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86:16 87:2,11,15 90:10,14,24 91:3 93:10 99:5 100:10 101:14 102:14 102:25 103:1,2 105:5,10,20 106:24 111:24 112:20 121:5 122:6,21 133:23 142:20 153:20 159:6 167:13 168:1 168:25 169:21 179:14 194:13 currently 8:4 24:25 26:16 27:21 32:19 33:18 42:20 49:1 72:15 100:8 101:6,10 103:4 111:4 112:17,24 113:4 115:3 117:18 164:8 188:11 196:1 cushion 133:24 183:24 customary 126:23 customer 35:23 72:25 74:9,10 75:15 80:4,5 81:23,24 82:4 83:3 93:1 97:13,14 98:20,24 99:3,7,12,23 99:25 100:3 101:20,23 102:3 114:19 123:17 124:4,11 166:3,5 178:21 179:4,13,23 192:14,19 200:23 201:3 202:3 203:6 203:9 205:13 206:17,25 207:8,15 208:13,14 customer's 99:6 188:7 207:6 customer-ind... 75:12 84:13 customer-rela... 72:8 74:2 75:17 207:4 customer-rela... 74:12 customers 15:12 20:1 46:17 60:14 62:10,11 62:18 70:8,15 70:16,17,19 72:13 77:18,25 79:20 81:5,22 82:13,14 83:24 85:8,16 88:13 93:1,19 97:4,9 99:20 100:2,7,9,12 100:13,16,19 101:13,16,18,24 102:1,3,11,22 113:23 114:2,5 114:22 115:20 116:12 117:4 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 118:16 121:15 122:18 123:8,9 123:10 124:8 128:3 144:5 163:4 164:7 165:25 166:4 166:25 170:14 170:19 176:21 178:13 179:10 184:12 185:17 186:13 193:3 203:21,23 205:14,22 206:6 207:1 207:13 customers' 81:19 176:11 customers/25 173:18 customers/60 124:12 cycle 13:19 14:15 30:14 44:23 45:18 47:1 48:13 49:2,14 50:4 72:16 101:3,7,11,16 106:14,21,24 107:7,25 108:2 110:20 111:5 114:2,22 114:24 115:1,10 115:16,25 118:17,19 119:25 120:8 120:10 121:6 121:22 122:6 132:7,11,12 134:22 140:11 141:4 147:15 149:16 154:12 156:13 157:13 176:16 183:14 184:5,6,9,20 199:12 213:1 cycles 50:2 121:4 130:15 140:20 D D 2:1 122:13 daily 86:14,16,19 86:23,24 damage 103:5 damaged 43:11 dangerous 153:11 170:5 darker 52:5 data 72:10,12 86:13,15,16 87:1,2,3,10,11 87:19 88:2 89:3,4,7,11,14 89:23 90:8,10 90:23,24 91:2 91:5,6,7,14,15 91:16 92:2,4 92:12 93:5,10 94:17 95:11,20 118:5,6 120:4 120:5,15 171:15 173:3,3 174:5 175:21 178:23 188:18 189:21 189:22,24 205:2,5,8 207:16 209:10 209:10,20,25 210:6,7 date 15:23 18:6 18:7 19:11 23:9 38:19 93:21 111:11 130:25 151:7 159:2 dated 118:15 126:10 dates 26:10 213:21,21,22 213:24,24 214:1 215:1 217:15 day 62:11 81:25 150:22 215:17 215:18 days 126:18 218:7 deadline 19:15 19:16 29:5,7 deadlines 26:8 214:19 deal 50:7 dealing 41:18 69:6 77:21 78:18 debt 107:15 108:25 109:13 109:18,22,25 110:14,14,16 111:1,18,24,25 112:20 114:16 125:22 126:7 126:8,11,15,16 126:21,25 127:2,6,7,9,11 127:14,16,23 128:2,4,5,6,7 128:10 129:14 130:5 132:7,19 133:11,13,25 134:14 135:21 137:4 139:6 140:13 141:5,7 141:14,15,16,19 141:24 142:19 142:24 143:8 143:16 144:7,9 144:20 145:13 145:13,14,15,15 145:17,19,19 146:1,4,14,24 147:3,4,4,25 148:1,4,11,20 149:2,11,20,23 149:24 150:25 151:1,3,4,6,14 151:16 153:5 154:10 155:1,2 155:3,3,4,6,18 155:19 157:23 158:22 160:9 160:10 164:22 165:1 166:23 170:11 174:19 174:20 175:6,7 181:16 182:6,11 182:12,14 183:3,4,8 184:24 194:15 194:15,18 195:5,11 211:5 211:8 debt-funded 149:8 150:17 debt/25 141:8 182:4 debted-funded 149:11 December 103:7 decide 118:7 decided 20:17 189:4 decision 19:22 20:11,12 117:23 118:16 210:15 decision-maki... 150:21 decisional 182:1 decisions 150:19,23 decline 148:23 decrease 82:16 168:21 176:20 decreasing 207:9 decree 13:24 14:1,1,11,21,25 17:7 18:12 21:18 28:3 29:1,5,11,13 33:24 34:5 35:10,12,12 36:4,9,17 37:3 45:1,4,15,22 47:8,14,19 48:2,8,11,20 69:6,15 102:10 102:16,18,23 106:15,22 111:17,20,21 112:5 113:12,13 113:15,17 116:11 117:5 148:3 151:20 163:3 173:21 174:2 185:5 190:23 201:8,13 204:1 216:5,6,15,16 decree-related 31:15 decrees 36:6 191:1 dedicated 65:7 dedication 216:21 deeper 55:6 Deer 27:22,24 28:15 191:7 defeat 35:10 defer 35:10 43:6 44:1,22 47:3 49:23 50:19 105:24 106:13,17 108:12 deferral 194:4 deferred 33:19 33:22 188:22 deferring 49:13 162:5 163:10 deficiency 46:15 define 94:24 95:9 defined 41:21 61:1 defining 118:1 definitely 102:12,21 153:5 156:6 delay 145:1 163:1,24 164:17 191:15 delegates 7:20 delinquencies TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 8:21 deliver 185:3 delivered 180:11 185:2 depend 155:10 depending 30:16 41:17 50:5 201:6 216:7 depends 52:3 119:8,12 172:1 172:2 188:25 210:11 depicts 98:25 deposes 13:7 53:20 68:8 96:25 125:15 136:19 161:21 193:21 212:20 deposits 211:5 depreciated 66:2 depreciating 66:1 depreciation 59:20 64:25 65:20,21,23 66:1 136:24 137:10 180:8 180:18,19 181:2,9 197:13 197:18 198:7,11 Des 17:21 43:6 191:7 describe 38:9 94:13 152:10 174:23 description 98:15 descriptions 15:10 design 17:1,3 23:4 27:21 30:8,10,10,15 31:12 40:5 41:23 51:24 52:7 180:15 181:11 designed 175:5 180:25 203:7 207:3 designing 162:23 desiring 12:2 desktop 210:5 detail 38:15 44:13 137:9 157:22 detailed 40:23 74:18 85:23 106:9 details 30:25 38:8 73:20 117:16 deteriorate 84:20 deterioration 140:6 143:20 145:8 148:16 195:22 determination 73:22,24 80:3 88:11 90:6 92:25 93:18 192:13 204:23 205:3 determine 42:1 61:23 72:2 78:2 87:17 95:3 180:9 202:11 213:16 214:4 determined 77:24 88:3 126:13 181:4 203:23,24 determining 25:2 88:2 162:10 187:24 Detroit 94:19,21 95:4,5 develop 15:2 developed 39:5 124:7 127:13 175:4 180:17 181:13 194:12 developing 35:24 127:4 180:24 181:7 194:9 development 29:16 36:2 125:24 194:7 diameter 84:8 84:17,17 89:15 dictate 41:24 dictator 167:20 difference 30:18 55:4 63:21,23,24 64:5,7 67:5,6 83:8 103:24 111:13 199:12 201:1,23 202:24 206:15 differences 145:10 146:12 different 31:8 40:2 47:23 56:18 57:13 58:16,16,19,20 64:4 73:25 76:21 117:24 135:19 142:23 149:15 176:2,3 186:6,10,15,18 187:16 188:13 189:11 196:10 196:14 198:1 199:15 202:21 202:22 205:14 209:17 210:18 differential 101:4 differently 160:2 165:21 187:19,20 difficult 43:1,22 79:23 84:24 123:24 130:7 138:15,16 153:15 168:10 209:15 216:2 Dig 55:5 digit 60:13 128:1 156:13 digits 114:3 direct 9:23 10:4 62:5 69:17 76:2 85:5 134:16 135:5 135:24 140:10 157:10 168:5 directed 179:20 direction 40:2 199:20 220:6 directly 148:25 152:18 165:22 directs 164:5 189:1 disagree 66:9 163:19 166:7 disagreement 77:13 215:23 disappear 143:12 disappears 143:14 144:16 discharged 99:20 discovered 39:14 discovery 10:15 19:2 46:5 142:21 208:25 210:17 218:6,7 218:8 discretely 194:11 discretion 13:18 20:18 44:22 46:9 106:13 163:18,24 215:24 discretionary 157:20 discuss 136:25 198:17 discussed 25:6 51:20 117:15 118:9 196:8 201:4 203:10 discusses 33:17 discussion 51:4 54:15 55:14 58:4 60:25 61:11,12 64:23 74:24 197:13 197:18 203:4 217:23 discussions 43:23 44:8 59:12 62:1 92:19 124:9 140:8 disease 51:14 disinfectant 51:5 disinfecting 51:12 disingenuous 175:3,10,20 disproportion... 134:24 dispute 20:13 disputed 74:21 disputing 20:11 20:22 21:10 distinction 203:10 distorts 181:3 distribute 97:20 distributed 72:13 100:15 160:2 distribution 72:2 75:9 172:7 District 1:1 4:13 6:4,7 7:10,15 7:17,19,25 8:15,18 9:5,6 9:11,14,22 10:5 10:6 11:11 12:5 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 12:18 18:19 24:20 25:17 26:16 29:8,17 31:16 34:3,15 38:6 42:21,24 44:17,21 48:12 48:14,16 50:12 55:16 62:15 75:25 79:6,9 82:18 103:9,13 105:6,7 106:1 106:13,25 111:18 112:17 112:24 113:2,12 113:20 116:5,6 118:6 119:24 125:19,21,25 126:1,8 127:9 127:14,18,20 129:11,19,20 130:4,14,21 131:11 132:23 132:25 134:3 134:9 135:8 137:6,9 140:7 140:12 152:8 152:11,20,25 153:21 154:22 155:14,24 157:21 158:10 158:18 159:9 160:6,10,13 171:23 197:12 213:6,10 216:9 District's 7:21 9:1,12 31:18 44:10 55:15 96:9 117:23 121:2 127:5,7 136:7 148:19 152:15 153:7 211:3 216:3,12 District-wide 172:23 districts 190:25 Dive 55:5 divided 12:1 diving 14:13 DNR 38:5,10 document 22:14 77:13 98:12 107:23 documents 10:3 52:18 162:12 162:14 195:16 doggone 67:9 doing 15:15 16:4 16:5,8 26:23 32:4 35:3 39:8 57:8 61:9 63:1 73:5 81:17 87:17 92:21 94:22 95:1,20 113:23 135:2 151:3 190:25 203:1 204:5 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202:9 215:20 early 103:7 104:22 earn 182:20 earning 182:17 easement 30:11 30:16 easier 130:10 209:14 easily 124:1 160:14 164:20 economic 168:2 168:25 economists 168:4 169:23 economists' 169:7,24 Education 8:13 effect 33:18 35:3 57:9 164:14,15 200:1,9 209:18 effective 52:6 effects 24:11 38:4,22 effluent 52:5 effort 75:14 92:22 93:22 95:8 96:3 eight 17:2,23 25:15 32:6 70:9 84:16 119:19 192:2 either 47:3,12 48:10 54:21 66:25 67:1 110:25 116:16 120:22 143:16 143:18 162:14 206:9 216:16 elaborate 119:20 elderly 207:2 207:23 elected 130:4 election 7:11,12 electrical 104:8 electricity 104:5 104:7 105:13 element 181:8 elements 45:23 75:21 95:23 180:18 Eleventh 1:18 eliminate 76:24 93:22 eliminating 83:14 embraced 183:6 emergencies 8:20 emergency 42:8 50:6,12 emissions 21:25 24:12 38:5,23 39:3 emphasized 128:23 employed 162:10 179:3 220:7,9 employee 220:9 employer 69:23 emulate 195:4 encapsulated 21:1,1 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES ended 57:21 58:4,12 59:10 59:17,24 65:4 74:11 ends 113:15 Energy 4:8 8:13 10:11 11:14 engaged 71:24 engineer 30:15 191:14,23 engineering 17:3 23:4 41:25 71:23 95:13,15 Engineers 8:12 enhances 9:1 enjoyed 155:24 enjoys 112:17 ensure 7:20 29:19 46:17 178:12,20 179:4 ensured 183:4 ensuring 115:15 170:14,17 179:22 enter 84:23 95:23 entered 13:25 entering 75:23 76:7,15 entertain 218:17 entire 14:21 89:15 132:14 181:3 entirely 143:14 entities 126:2 126:23 127:3 140:19 entries 17:2 27:5 entry 29:23 environment 8:12 116:4 environmental 7:25 77:18 EPA 14:4 17:18 17:18 18:7 20:1 20:3,7,9 38:5 38:12 39:16 45:8,15 77:23 77:24 83:2 102:10,13 114:12 151:23 151:25 156:9 163:1 164:2 173:21 174:2,2 176:10,18 190:1 216:10 EPA's 39:22 equal 178:20 179:13,17 equally 12:4 23:1 equate 131:22 equipment 23:11 equity 165:7 error 66:3,4 errors 142:15,16 escalating 199:4 escalation 148:20 199:14 199:23 especially 117:2 essence 204:9 essentially 163:5 165:24 179:11 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148:24 195:23 expending 48:18 expenditure 56:3 76:18 104:10 164:22 165:9 expenditures 54:19 55:9,11 55:14 56:7 57:25 58:5,13 59:1,5,6 115:18 116:12 117:1 162:20 163:2 163:11,15,24 expense 54:19 180:8,18,19 181:2,10 expenses 58:21 103:17 104:3 115:15 126:19 145:16 157:20 199:18 expensive 76:12 145:6 192:19 experience 69:17,19,20 114:5 171:23 173:13 211:1 experienced 50:12 105:22 experiencing 42:20 experts 118:10 expiration 12:6 expired 12:10 explain 30:18 34:18 61:3 71:19 74:14,16 98:19 119:20 120:13 140:7 141:1 162:7 200:16 explained 214:9 explains 71:2 explanation 72:4 180:14 181:3,12 194:8 explicit 129:19 explicitly 182:6 182:13 expressed 60:13 extends 9:16 extension 9:20 45:22 151:21 151:23 152:1 156:10 164:1 extent 12:5,7 15:13 21:8 57:5 113:7 115:12 163:10 185:15 191:4 205:8 external 167:17 211:7 extra 18:19 36:14 54:5,17 54:23 55:16 56:9 57:16 60:5 99:17,18 100:4,8,22,25 101:12,18 143:8 180:1,3,10 181:5,8 extraneous 72:21 77:4 88:19 95:23 extremely 153:15 F F 4:13 Fabick 29:23 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feasibility 35:2 feasible 144:25 February 7:12 federal 9:7 32:2 32:17 34:16 45:7 77:20 168:15 Fee 30:20,20 31:3,3 feedback 145:20 feel 34:4 36:24 41:2,4,14 63:14 80:18 92:24 210:15 213:2 feelings 52:23 162:6 feels 85:24 feet 27:13 82:5 84:17 91:8,10 felt 54:16 58:7 64:25 92:20 118:13 FEMA 50:16 103:11,21 Fenton 43:20 50:8,15 figure 27:23 110:6,7 186:3 202:23 204:6 204:15,19 filed 10:4,23 12:17 62:5 193:6 filing 183:12 filter 40:8,25 41:18 47:12 116:16 filters 40:9,25 42:9 final 31:2 47:24 51:24 60:24 77:22 212:5 217:5 218:2,3 218:15 finally 10:8 190:24 200:13 finance 8:18 finances 44:10 financial 29:24 30:2,22 32:14 36:7 43:2,23 44:9 47:3 106:8 108:16 114:9 125:20 125:21,24 126:3,6,24 127:5,13,21 128:9 137:6 140:6 144:10 144:10 145:9 149:15 150:1 153:3,12 170:6 170:17 175:22 180:22 181:21 183:5 194:7,9 195:22 197:23 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 200:10 financially 115:13 220:10 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170:13 hour 53:25 hours 11:25 12:9 54:3 household 156:11,15,23 huge 135:22 140:11 hundred 37:8 77:24,25 83:3 83:3 102:19 119:11 202:17 hydraulic 75:24 80:15 94:16 I I&I 16:4,5 37:10 68:16,18 70:14 70:21 71:21 73:2 74:2 75:2,6 79:14 80:18 81:4,19 94:14 97:13 117:14 171:6,11 171:24 173:11 173:15,16,17 173:23 174:3 178:10 179:8 179:16,20 186:14,16 187:14 188:2 188:10 191:3 192:8,10,14 200:22,25 202:21,22,23 203:19,24 204:10,16 205:24 207:4 209:3 i.e 125:22 127:11 I/I 75:11,12 165:18 172:23 idea 43:19 91:11 91:23 111:6 ideal 188:24 ideally 196:17 identified 25:8 26:8,16,19 31:25 34:6 36:22 37:11 41:2 47:17 70:10 107:23 123:14,16 210:18 213:11 214:15,20 identifies 109:13 identify 76:2 109:7,8 159:17 188:6 197:23 identifying 36:19 162:16 162:19 187:5 ignoring 150:12 immediate 49:12 immediately 160:8 205:21 impact 14:19 15:12 17:22 20:1 32:14 42:22 43:2,24 44:2,3,9 45:17 46:6 75:18 76:6 81:19,21 85:5 87:20 93:17 97:12 98:19 99:4,11 102:6,11,22 103:1 105:6,6 109:9 110:14 114:1,19 115:20 116:12 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SERVICES 184:24 194:25 199:17,24 207:8 increased 54:10 54:13 55:11 58:21,25 65:7 65:15 75:22 109:3,18 110:17 111:7 114:25 177:20 increases 54:22,25 55:7,17 56:15 56:23 60:14 61:15,19 64:9 73:13 102:14 114:11 121:3 128:1 132:6 141:23 144:1 149:17,25 150:24 151:5 151:18 156:14 156:22 175:1 195:1,8 199:16 increasing 56:11 62:23 65:3 109:9 110:16 112:3 113:23 114:20 115:2 198:25 incremental 107:25 108:6 109:15 132:6 133:11,13,25 134:5 incurred 103:16 106:1 198:25 incurs 157:21 indebtedness 9:5 independent 168:4 169:23 169:24 independently 115:8 Indianapolis 173:13 174:5 191:3 indicate 68:25 69:25 154:10 indicated 69:14 102:6 110:11 173:17 200:7 211:19 indicates 46:5 106:20 112:5 indicating 209:25 indices 114:13 individual 79:20 81:24 93:19 169:6 172:11 186:13 194:25 213:19 industrial 4:8 7:23 8:13 10:11 11:14 61:25 62:10,17 88:18 90:23 122:18 124:6 industry 60:8,11 126:2 145:23 146:8,10 178:16 infectious 51:14 infiltration 15:19 37:4 72:22 73:7,9,10,14 75:18 78:21 79:19,25 84:20 97:4 98:20 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LITIGATION SERVICES issues 8:1,1,1 24:22 29:22 32:8 37:10 38:22 39:13 39:14 167:13 175:16 210:14 217:22,24 issuing 155:7 items 109:23 210:18 J J 4:3 Jack 5:7 7:4 Jamie 1:17 220:3 January 103:8 jealously 129:11 Jerry 5:2 6:9 Jo 1:17 220:3 job 33:7 60:22 205:1 Joe 173:10 joints 84:9,18 85:11 joke 54:1,1 Joseph 68:23 70:1 Joseph's 70:6 July 9:13 217:4 217:5,20 218:2,2,3,5 219:2 jump 163:9 June 1:9 28:1 217:4,8 junior 128:5 justification 74:15 justify 180:5 K Kansas 68:22 68:25 69:8,18 69:22 173:8,9 173:11,12 keep 24:5 26:11 40:20 50:6 111:24 150:7 155:5 191:18 keeper 152:20 keeping 16:11 key 139:5 151:24 kilter 199:11 kind 15:24 16:25 43:18 60:12 81:16 99:17 103:22 108:25 116:25 118:8 134:18 152:21 166:3 175:25 181:3 186:3 200:20 202:14 204:24 205:7 205:23 207:19 209:6 210:13 Kinder 1:17 220:3 kinds 205:14 knew 30:25 know 16:16 18:10 22:4,4 22:18 23:23 24:13 28:8,9 28:13 30:7,7,8 30:12 32:13 33:7 36:21 38:8,19 40:12 43:3,7,17 44:11 48:19,21 49:24 55:15 56:1 57:10 58:18 60:25 69:8,10,13 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177:8 181:2 182:4 183:3 184:23 185:2 mixes 211:8 mixing 181:10 MO 1:18 4:5,10 4:14 mode 42:25 43:3,9,22 model 69:1 75:25 87:25 120:7,17 123:2 123:16,23 128:22 136:15 142:12,15,17,21 142:25 143:1,3 143:4,9,13,18 143:21,25 144:7,8,9,12 144:15,18,20 145:11,21 146:13,17,19 149:12,13 150:6,11 165:3 165:4,11,13 168:7,8 174:20 175:12 175:12,13,15,19 175:20,21,22 175:23,25 176:5,22,23 177:6,7,9,10,12 177:22,24 178:1,18,18,22 179:2 186:9,13 196:7 197:17 198:10 199:21 202:10 208:19 210:24 210:25 211:1,2 211:7,12,13,13 211:23,24 212:1 modeled 141:12 165:11 176:22 modeling 75:25 76:14 78:19 80:14,15,15 94:16 175:11 205:7 210:4 models 120:4 122:20 128:24 186:15 202:21 202:22 modern 172:5 modernized 46:21 modernizing 46:19 modest 147:5 modestly 146:8 147:2 modifications 38:14 modified 176:10 mom 123:12 moment 109:12 Monday 208:25 218:12 money 22:12,16 58:1 93:21,23 114:15 116:17 116:20 117:6 118:4 143:15 156:6 191:22 192:20 monitor 15:20 16:5 37:16 monitoring 89:4 89:8 month 81:24 82:14 166:21 166:21 206:16 206:21 208:13 208:13 monthly 86:20 87:19 months 23:22 86:9 96:2 132:20 157:10 Moody 147:25 Moody's 158:15 MOP 77:9,15 morning 6:2 13:10,11 33:5,6 53:23,24 68:11,12 79:4 83:1 102:25 162:1,21,25 163:17,25 motion 11:5 218:18,20 Mound 8:9 move 16:10 18:3 20:4 21:7 25:5 34:7 39:23 118:12 135:1,4 143:13 143:25 163:18 166:14 176:13 215:24 216:15 218:22 moved 147:7 151:22 213:3 214:8,10 216:17 movement 187:22 194:20 moves 201:8 moving 36:15 42:5,11 124:10 165:3 183:7 195:2 200:2 MSD 13:21 14:13 14:18 16:16,18 18:16 19:3,11,12 19:13,14,15 20:14,15,16,24 21:13 25:20 33:20,22 35:23 45:9 46:2,5,11 47:6 49:10 51:6 57:16 59:6,10 61:9 62:3 70:11,20,25 71:6,11,20 72:1 74:7 75:1,1 76:17 78:4,8 78:14 80:8,13 82:5 83:22 86:15,16 87:1 87:3 88:24 91:2 92:20 93:2,15 95:10 97:3,21 98:18 98:24 103:6 119:2 126:5 138:1,13 148:10 149:2 150:20 162:10,25 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 164:5,21 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18:14,24 32:21,24 33:15 45:3 53:14,16,22 54:4 60:16,17 60:22 68:3,4 68:10 78:22 78:24 79:5 96:14,16 125:4 125:6 137:15 137:16,20 139:12,14 161:8 161:8 178:3,5 178:8 185:21 193:15,17,23 196:23,25 200:1 212:14 212:16,22 213:12 215:3,5 never 20:9 143:1 174:4 195:3 199:5 nevertheless 113:5 new 21:5,22 24:8 59:21 80:7,8 107:2,4 131:1 142:19 167:13,14 173:24 188:14 188:14,20 211:5 news 24:13 nice 49:3 189:17 Nicole 3:18 11:20 212:19 215:16 night 215:10,10 nine 17:23 55:2 non 14:1 non-CD 25:23 35:8 106:18 non-controlled 187:13 non-regulatory 106:17 non-residential 165:25 208:7 non-sanitary 88:3 non-test 55:18 56:11 nonprofit 8:2 norms 148:23 North 1:18 8:11 notch 138:1 noted 34:25 81:8 142:16 182:6,9 183:19 184:3 notes 148:10,15 Notice 8:14 9:11 9:14 November 7:13 144:13 nuances 30:13 number 22:24 25:8 44:18 47:2,10 56:13 65:14 70:7 72:13 84:9 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 86:23 90:13 109:6 110:21 112:22 122:4 127:21 128:14 132:8 145:18 188:19 201:20 201:21 203:7 203:12,13,15 203:20,21 numbers 32:12 43:7 47:25 50:20 60:13 98:14 101:10 109:6 120:8 128:21,25 132:5 175:19 202:1 204:10 209:16 211:10 211:24 O o'clock 6:3 161:4 O&M 55:4,11,23 56:4,12,15 58:8 61:19 62:21 63:19,21 64:7 199:14 199:23 objection 104:22 objective 85:7 185:17,19 objectives 46:20,23 obligate 18:16 obligated 19:13 31:13 obligation 28:3 28:7 29:1 31:17 185:12 obligations 33:21,24,24 46:2 176:19,19 185:14 observed 126:22 obtain 108:4 174:5 obtaining 45:21 obviously 13:23 15:13 17:23 23:9 32:13 34:10 35:10 38:13 40:19 40:24 42:25 43:10,19 44:3 49:18 50:7 61:25 124:13 133:9 154:24 208:14 209:21 occur 19:4 45:11 occurred 59:16 75:11 105:18 198:8 occurrence 36:8 occurring 62:4 65:5 73:6 occurs 73:9 207:11 October 45:8 144:13 offering 178:21 offsets 165:2 oftentimes 214:13 Oh 14:21 47:24 52:8 Ohio 70:15 78:13 oil 47:11 116:15 okay 12:21 13:15 14:11,17 15:10 16:13,24 17:6 18:25 19:7,19 22:9 23:16 25:5,18 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162:7 198:19 217:24 opposed 11:9 19:10 54:24 82:3,10,16 84:15 85:16 93:20 115:22 132:20 173:10 188:10 202:1 202:22 206:22 207:7 219:1 opposition 184:25 option 56:25 options 63:24 64:5 144:22 oranges 181:11 order 6:3 17:17 17:19 19:10,23 19:25,25 21:17 21:19 26:11,20 36:15,20 39:9 41:21 46:17 72:24 100:4 115:13 116:25 141:16,17 149:9 155:5 163:3 176:1 184:9 205:6,10 208:18 211:7 216:7 218:20 ordered 192:17 organizations 7:19,22,24,25 8:2,3 original 15:25 36:4 86:7,8 142:16 157:10 originally 37:6 177:5 other's 174:23 ought 92:17 outcome 113:20 127:12 200:11 220:11 outcome-bas... 15:11 outlined 145:25 162:12,13 163:7 outlines 108:22 outlook 138:20 169:22 177:2 outlooks 169:4 169:7 output 149:13 202:10 outside 35:4 36:17 184:4 214:17 outstanding 9:5 107:10,15 132:16 135:21 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 160:9 overall 18:3 66:21 141:4 143:21 144:9 153:1,6 183:10 211:9 overflow 15:18 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168:16 187:9 189:25 205:16 206:22 210:4 210:10 partial 132:19 participant 175:14 participants 12:1 12:4 participate 10:19 particles 180:11 particular 31:4 45:4 54:17 55:1,7 71:10 103:17 118:17 120:8,9 129:24 135:15 169:25 174:21 182:9 195:17 214:6,9 216:4 particularly 43:12 84:8 92:17 126:2 164:5 169:13 parties 10:16 11:1 165:13 217:21 220:8,10 parts 165:3 party's 217:23 pass 97:17 Paul 5:3 6:12 7:8 pause 199:19 pay 8:17 47:12 47:12 48:11,11 100:14 103:13 116:16,16,24 117:4,7 145:17 170:14 181:1 207:13 pay-as-you-go 183:3 payer 80:17 141:24 156:8 payers 10:18 14:23 18:5 36:3,12 45:18 61:3 117:25 122:16 123:5 187:25 188:1 190:21 PAYGO 127:3,11 127:16 141:5,8 195:11 200:5 200:11 paying 100:17 114:19 116:17 121:16 153:25 206:12 payments 107:16 180:21 211:4 pays 9:9 117:22 PC 4:4 people 82:6 105:24 116:23 117:7 207:18 207:24 percent 15:6,8 16:2 25:15 54:14 55:1,2,9 55:12,17 56:6 61:17,18 62:14 62:23,24 63:7 63:22,23 64:6,8 65:15 65:16 67:4 70:16,17,18 71:21 72:8,12 72:14,21,21,25 72:25 73:1,23 74:2,3,9,10,10 74:10,11,12 77:25,25 80:4 80:4,4,5 81:5 81:5 82:2,3,10 82:10,16,17 83:3,3 88:18 88:19 97:8,9 97:14,15 98:21 98:21 99:2,4 99:6,10,13 101:21,22,25 102:2,2,15,18 102:19 110:10 110:16 111:4,5 111:6,11,25 113:4 114:4,4 114:22,25,25 115:2 124:11,12 124:12 126:6,7 127:17 141:8,8 141:20,21,22 143:7,19 149:22,23,24 150:17 171:5,12 172:21,23 173:18,18 175:6,6 176:7 176:8 178:20 179:13,14,18,18 182:4,4 185:7 186:4,10,14,17 186:19,20,20 188:9,9,10 190:11 194:24 195:1,1,8,9,12 200:22 201:2 201:3,6,20,21 202:12,17,17 202:21,21,23 203:3,7,8,8,15 204:11 205:20 211:15 216:7 percent/30 127:17 percent/60 71:21 202:12 percentage 63:5 72:20 88:2,16,21 126:12,13,21 156:11 171:24 172:15 188:2 200:22,24 201:9,12 204:10 207:7 207:14 211:15 212:2 percentages 200:20 202:1 208:15 209:16 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES perception 57:6 perceptually 57:2 Peres 17:22 43:6 191:7 perfect 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place 18:3 22:17 28:12 44:6 103:20 205:8 210:13 placed 30:22 120:20 placement 27:25 29:4 213:21 214:7 214:16,20 places 195:13 210:4 plan 7:10,13,18 9:12 14:24 15:3,4 21:9 23:7 24:20 26:14,20 29:3 37:4,11 38:17 39:1,5 40:4,18 40:22,23 45:7 47:5 57:8 61:8 95:1,2 108:22 125:24 149:19 150:16 153:12 157:9 170:6 194:7,9 200:10 218:11 planned 33:19 34:3 58:2 planning 24:17 46:12,16,20 46:23 130:15 197:23 208:24 plans 56:18 61:9 126:3 plant 24:3,3,5 25:8,9 26:11 40:19,21 43:20,20 50:8,15 52:4 59:17 77:4 86:15 87:18,21 88:1,17 91:20 91:21 180:9,12 187:7,9,12 200:24 201:1 plants 14:7 17:12 21:4 25:1,10,17 26:4,20 36:18 36:21,22 43:12 50:6 52:1 58:7,11 59:11,15 86:17 91:2 171:6,13 172:24 186:24 190:9 191:11,13 191:16 play 76:11 plays 139:5 please 12:20 13:4 33:2 53:10,17 68:5 89:6 119:19,21 140:7 193:9,18 212:17 217:6 pleased 162:25 plus 8:13 23:12 110:6 112:20 138:8 158:15 158:25 point 20:16,22 38:5 39:12 40:1,9,10 41:15 51:13 63:20 80:10 96:13 101:6 104:23 108:18 109:2 114:4 118:9 121:20 125:4 132:9 136:11 137:14 138:4 138:19 139:11 157:11 158:23 158:24,25 160:3 161:13 184:3 194:25 200:10 204:17 204:18 218:20 pointed 21:13 98:23 114:3 118:18 122:17 points 138:5,5,5 policy 126:6,9 127:14 128:2 141:11,12 149:2 149:4,7,13 174:24 180:22 181:21 183:5 200:5 pop 123:12 pops 49:12 portion 13:24 16:6,7 18:2 69:5 73:5 88:12 130:18 133:20 146:15 190:2 194:18 207:5 position 17:6 46:21 112:25 116:5 152:7 153:6 192:20 217:23 positions 209:17 positive 139:3 positively 140:12,13 possibility 153:10 167:25 168:24 170:4 200:1 possible 39:14 40:23 115:19 115:22 138:14 164:1 185:15,16 possibly 114:8 169:20 post 43:10 potential 14:19 32:9 43:24 44:9 120:1 121:6 139:25 202:7 potentially 37:18 48:21 116:20 117:6 213:17 214:8 potentials 25:4 preamble 45:14 precision 57:6 predict 39:19 predictable TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 182:25 preferable 67:12 198:19 preferred 62:18 prehearing 217:20 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priorities 162:13 162:14 prioritize 50:11 120:20 prioritizing 46:7 priority 46:12 162:10 private 15:19 16:4 29:16 84:12,12 85:13 203:25 probably 14:2,9 14:9 20:8 22:5 24:19 26:18 31:5 36:5,21 38:8 38:19 43:6 44:1,2 49:23 50:11,14,20 52:21 56:20 69:24 76:21 83:17,18 84:4 106:9 110:17 117:16 119:7,10 132:21 137:1,6 140:21 146:14 153:2 159:4 160:19 202:4 problem 36:11 204:6 procedural 12:11 12:15 proceed 11:2 12:20 15:20 193:6,9 218:4 proceeding 6:5 6:8 75:1 129:10 163:4 175:15 178:25 220:4 proceedings 10:16 129:11 218:21 proceeds 133:23 158:21 177:10 process 16:4 40:5,6 41:23 46:16 51:13,24 52:7 94:13 95:25 97:5 127:15 140:16 182:15 185:9 procure 30:9,14 205:9 produce 124:15 182:16 produced 13:7 53:20 68:8 96:25 125:15 136:19 161:21 175:7 182:5 193:21 196:4 208:20 212:20 produces 146:18 166:19 profit 25:19 program 14:25 18:3 20:5 36:13 37:5,7 76:18 117:2 120:19 162:11 165:10 173:21 174:1 176:9,10 183:8 184:23 185:6 194:14 194:16,17 201:8,13 204:1 204:1 programmed 41:3 42:5 programs 32:6 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119:2 119:8,10,11 120:20 145:2 155:25 163:18 164:11 191:8 192:3 200:2 213:1,2,11,16 214:4,14 215:24 216:5 216:6,10,15,15 216:17 proper 187:24 properties 75:15 83:15 84:14 property 84:13 property-relat... 79:19 proportion 58:10 59:17 65:6,13 66:24 83:18 85:8 93:18 117:22 proportional 79:25 proportionality 93:16 proportionate 60:1 69:4 83:13 proportionately 59:14 207:15 proposal 34:13 34:14,25 54:12,16,24 55:8,10 56:6 57:22 61:12 61:22 62:2,6 62:25 63:2,4 63:13,14 64:3 64:24 65:7 67:7 71:1 74:8 74:19,23 76:5 79:10,13,13,15 80:19 81:20 82:4,11 87:22 87:24 90:4 91:14,16 97:10 99:5,8,9 100:11 102:14 103:2 107:5,6 107:22 108:19 108:21,21 118:15 120:2 124:14 127:5 127:15 131:11 132:3 135:15 141:21,22 149:23 150:25 151:14 153:20 157:8 167:1 168:23 172:22 173:3,4,6 179:14 183:6 186:9 188:23 194:14 196:4,5 196:15 199:13 200:2,6 202:11 208:1 208:16,17 211:3 proposals 74:7 97:7,8 140:5 146:25 147:2 149:22 179:19 propose 114:6 164:8 166:14 proposed 7:16 8:24 9:13,20 14:14 61:1 81:18 82:4,17 97:12 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36:18,21,23 43:12,14 pumping 23:22 24:1 32:10 44:4 104:7 purely 214:16 purports 74:14 purpose 10:5 35:11 99:18 pursuant 45:1 pursue 164:6 pursued 151:10 put 13:18 15:8 18:1 26:15 32:12 43:7 44:6 52:22 60:12 90:4 97:16 103:20 129:15 134:12 138:2 146:6 157:8 166:16 177:4 192:20 196:4,15 199:13 202:17 202:17,18 210:7 puts 153:3 putting 36:12 77:12 Q qualitative 130:19 quality 178:13 question 20:23 34:24 41:6 44:8 52:12 60:24 64:2 74:20 77:23 86:21 87:7,13 92:10 97:23 98:17 108:12 108:15 117:14 119:7,19,23,24 122:10,19 131:4 133:8,17,19 135:17,25 137:1,3,4 139:15,25 141:3 146:16 157:19 178:19 188:5 194:4 195:10 200:4 206:12,21,23 209:23 210:20,24 212:25 215:11 questioning 34:5 questions 2:4,4 2:5,5,6,6,7,7 2:10,10,11,11,14 2:14,15,15,16 2:19,19,20,20 2:21,21,22 3:2 3:2,3,5,5,6,6 3:7,7,10,10,11 3:11,12,12,13,15 3:15,16,16,19 3:19 10:6,25 11:25 12:2,2,6 12:9,25 13:1,9 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS 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134:13,13 135:11 140:2,14 140:17,20 141:13 142:18 143:10,13,18 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 144:11,14,18,23 150:17,19,20 151:8,13 153:9 153:10,14,17 155:23 156:11 156:14,19,24 157:1 158:14 160:16,18 162:22 163:13 164:12,15 166:1,2,14,15 167:11,13,15 168:1,3,5,10,13 168:16,19,25 169:3,5,10,13 169:16,23 170:5,15,18 176:11,16 178:12,20 180:25 183:21 184:10 185:4 185:16 186:13 189:8 194:10 194:21,23 197:21,24 198:24 199:4 199:14,17 203:6 205:16 205:19 206:2 206:15 rating 112:18,18 112:23 114:13 116:5 129:15 129:18,24,25 130:5,6,9,11,14 130:18 135:8 135:18,21 138:1 138:17 139:3,9 140:8,9 145:20,24 146:4 147:16 147:20,22 148:20,24 149:5 150:12 153:4 155:9,9 158:18 159:3,7 159:9,13 170:12 181:16 181:19,22,24 182:3,13,23 182:23 183:13 183:20 195:13 195:16,16,21 195:24 196:13 ratings 114:9 127:14 129:9 129:12 130:19 135:4 136:1 137:21 138:11 138:12,20,21 138:24,25 140:12,22 147:13,18,24 151:3 153:12 158:11 159:5,6 159:23 160:2 160:7,12 170:7 ratio 83:23,25 118:12 130:8 170:11 181:16 182:14 183:4,9 ratios 114:17 129:15 141:8,17 141:17 182:5,11 195:11 Ratzki 5:6 7:2,3 124:20 re-ask 98:16 re-establish 131:2 re-explain 99:18 reach 71:2 209:10 reached 36:24 70:20 reaching 77:4 171:12 172:24 reacquire 130:11 react 119:3 read 19:12,13 38:25 71:17 81:7 86:5 121:9 133:21 165:22 186:8 reading 18:20 27:25 28:2 72:9 ready 193:5 reality 57:3 really 20:15 23:17 25:17 34:3 36:11,16 36:19 37:2 51:18,20 56:13 57:6 62:25 70:12 79:24 87:14 93:3 95:7 100:18 103:4 113:10 113:23 118:11 119:12 120:3 121:12 124:2 128:11,17 129:21 136:14 139:24 156:14 172:9 189:22 190:19 191:22 194:11 200:21 202:13 203:3 204:19,25 207:24 211:18 reanalysis 75:2 reanalyze 92:14 reason 64:1,5 90:16 110:12 123:7 198:23 199:9 200:8 204:5,14 reasonable 9:8 46:18 61:2,20 61:23 63:15,16 66:10 67:3 79:14,16 80:2 80:19 83:7 84:4 92:15,20 92:25 117:25 147:16 169:4 169:12,17 170:8,8,15,19 178:12 183:22 184:12 189:6 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recovered 77:17 77:24 recovering 57:16 181:5,6 206:9 207:10 recovery 70:14 90:5 recycle 101:14 redo 88:8,24 89:17 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES reduce 75:16 76:8 77:3 102:19 130:24 154:24 164:18 164:23 165:8 176:15 reduced 130:6 164:24 220:6 reducing 76:9 83:14 165:6 reduction 28:22 163:13 164:25 reexamining 76:4 refer 77:12 119:16 169:15 reference 44:14 70:21,25 referenced 19:2 45:5 68:17,22 71:11 72:17 122:24 132:5 references 18:11 150:15 referencing 195:25 196:17 197:19 referred 18:25 25:12 52:16,16 52:17 81:13 177:14 referring 25:11 77:9 107:9 111:1 123:23 174:24 refinance 151:1 refinancing 151:7 reflect 124:7 168:7 170:20 189:10 203:16 reflecting 205:21 reflects 189:20 regard 73:22 75:9 95:11 155:24 197:19 207:17 209:21 regarding 7:15 10:3,13,23 36:2 99:17 region 42:21 105:22 regulation 17:7 21:2 regulations 9:7 21:13 24:22 34:22 39:18 77:19,19,20 83:5 regulatorily 20:2 31:16 32:9 regulators 36:10 regulatory 14:2 14:12 17:9 19:22 25:13 33:21,24 34:4 35:2,5,8 46:2 46:20,22 47:19 48:2,8 113:19 115:14 151:21 176:19 178:16,19 179:3 181:22 185:14 Regulatory-re... 25:23 rehabilitate 26:14 rehabilitation 31:9 rejects 145:5 relate 28:21 105:10 106:21 109:3,5 related 9:3 25:23 38:22 39:15 103:12 106:10,18 109:22 162:11 200:18 217:5 220:7 relating 9:4 60:24 76:18 relative 58:11 65:2 73:5 83:14 90:7 95:5 169:20 181:6 220:8 relatively 168:14 169:13 173:24 relevant 207:21 reliable 178:10 178:23 179:5 179:9,10 relied 169:6 relief 15:21,22 15:22 27:16 30:21 rely 118:9 168:4 169:6 relying 92:11 188:8 remain 20:20 185:13 remainder 14:5 remaining 16:7 102:2 103:11 115:4 184:15 216:6 remains 12:8 remediation 44:16 remember 138:2 206:16 207:25 remodel 37:16 removal 15:9 79:19 remove 15:19 15:23 34:25 75:14 100:1 167:2 168:6 201:11 removed 15:5 177:3 180:19 removing 100:5 164:15 renew 39:11 renewed 22:5 renovations 191:25 repair 25:8,9 repairs 32:7 repeat 29:22 89:6 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34:5 35:3 42:23 45:7 47:19 69:6 106:14 106:22 109:14 113:19 115:14 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES 128:18 129:2 164:18 176:2 181:13 182:2 199:6 211:11 requires 7:18 research 108:13 reserve 168:15 reserves 150:14 residential 7:23 61:24 63:8 81:24 82:13 97:13 98:20 99:3,12,23,25 117:18 118:5 123:10,15,17 124:4 165:24 166:3,5,25 179:12 187:25 206:6,17,24 207:12,15,17 207:18 208:7 208:11 resolution 192:4 resolving 128:6 respect 38:4,22 77:14 79:14 102:11 104:1 126:3 127:6 127:23,24 130:2 153:8 185:12 respects 181:20 respond 162:8 183:17 response 106:1 162:12 180:2 181:17 184:17 responses 10:17 19:3 218:7 responsibility 31:18 80:2 90:5,7 190:20 responsible 31:20 152:14 rest 55:12 74:14 208:22 restate 125:18 restoration 23:24 result 24:15 63:1 75:22 76:7 92:24 104:11 118:15 127:12 142:24 148:24 149:24 155:8,13 195:24 resulted 127:16 128:14 resulting 34:14 141:7,23 143:8 results 60:10 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secretary/trea... 152:9 section 86:13 173:6 208:4 security 51:20 see 16:7 26:5 27:9 28:14,19 31:13 33:17 37:17 44:12 46:1 47:20 48:19 52:5 73:21 81:13 82:2 87:15,20 91:16 101:8 109:6,14 124:23 139:8 140:21 141:18 142:20 146:19 150:2,16 156:6 156:18 171:13 171:21 172:10 185:1 186:12 194:24 203:2 205:23 218:9 seeing 28:10 37:10,12,12 39:20,20 42:4 43:13,14 103:23 104:2 207:25 seek 154:15 157:3 seeking 124:3 154:4 seen 16:8,8 20:15,15 49:18 50:2 94:15 105:9 127:10 138:6 140:5 145:8 207:16 sees 44:1,2 segments 73:11 select 7:19 selection 33:21 senior 8:7 108:24 109:17 109:19 110:5 127:7,8,23 128:10,13 145:15,18 147:4 154:11 155:3,4 sense 156:19 174:2 180:14 186:25 192:1 192:11,15 204:22 210:10 sensitivity 186:11,18 202:16 sentence 19:1,3 21:14 121:1 140:24 167:12 sentences 18:21 separate 123:25 187:21 separated 69:5 75:14 76:10 76:24,25 79:20 94:21 95:7 September 27:10 sequence 41:17 sequenced 40:15,16 sequencing 35:4 series 10:19 serve 6:7 service 28:1 29:4 30:22 42:23 46:6,11 56:22 57:15 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76:10 76:24,25 83:24 84:8,8 84:12 85:4 95:2 129:20 148:19 174:3 190:25 sewers 75:10,10 75:20 79:22 84:16 85:5,10 85:21 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES share 181:1 shed 210:14 sheer 84:9 shift 40:7 81:9 81:21 194:6,19 195:12 207:11 shifted 82:1 88:17 90:4 shifting 82:19 shock 60:10 205:22 206:20,22 short 53:4 104:20 124:22 161:5 212:6 shortfall 144:23 shortfalls 44:13 Shorthand 220:14 show 109:21 151:18 160:12 179:9 showed 120:6 138:3 showing 142:25 144:7,8 151:17 shown 36:3 151:15 shows 108:23 109:16,17 123:2 145:21 208:11 shrink 144:15 shy 184:2 sic 116:2 side 43:4 82:12 129:14 152:17 153:5 155:1,16 155:18,20,21 199:8 203:25 205:12 206:5 significant 15:1 17:22 32:11 43:4 63:23 76:18,25 82:18 90:23 92:6,13 93:24 99:13 103:5 103:25 104:10 144:5,10 163:8 163:8,13 166:22 167:1 169:16 170:1,2 173:15 174:1 200:3,6 significantly 75:8 83:19 128:15 147:18 176:15,20 184:25 188:15 211:20 signify 11:6 218:23 signs 42:4 similar 39:21 50:4 69:6,15 88:2 94:23 105:21 122:15 127:20 128:8 173:23 189:13 208:17 similarity 69:3 similarly 124:8 simple 60:13 110:15 simply 29:13 121:14 168:19 175:20 177:4 178:20 181:12 single 30:7 138:9 199:3 208:6,11 sir 18:25 94:24 105:19 106:3 108:11 120:11 122:14 sit 17:20 32:19 57:10 sitting 41:5 situation 106:2 178:17 six 23:22 24:19 38:18 39:4 82:5 86:9 96:2 98:24 109:6 133:8 134:1 200:4 206:25 213:3 six-month 95:24 six-year 41:16 42:2 size 30:16 69:1 70:3,4,4 85:4 skipping 197:7 slid 48:22 slide 18:2 48:22 48:22 slightly 146:3 slip 138:1 sludge 18:19 21:6 24:6 25:1 34:23 36:8 45:7 small 81:23,23 84:8 small-volume 82:19 smaller 103:16 138:8 207:1 smallest 84:16 102:3 SMP 159:24 smyers@stlm... 4:15 Snoke 3:4 9:25 108:14 109:8 136:8,11,18 137:18 142:8 152:7 157:19 158:10 161:3 165:4 175:18 177:13 182:10 183:12,15 195:17 Snoke's 170:3 174:18 socioeconomic 8:1 solely 81:20 101:15 168:1 168:25 solid 122:4 solids 24:20 38:17 39:2 52:15,20 66:20 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172:20 173:5 193:5,8 197:2 197:4,9 201:14 201:15 208:22 209:14 212:7 215:7,9,15,20 216:18 217:17 217:18 218:16 subclass 208:8 208:11 subclasses 207:18 TECHNICAL CONFERENCE FOR SURREBUTTAL TESTIMONY 6/20/2019 www.alaris.us Phone: 1.800.280.3376 Fax: 314.644.1334 ALARIS LITIGATION SERVICES subject 21:20 100:7,13,16 101:20 102:1,4 167:17 197:12 subjected 60:14 submit 218:4 submitted 9:22 10:12 19:3 54:4 98:12 142:12 submitting 10:24 208:24 218:9 subordinate 108:25 109:23 subsequent 28:11 199:4 subsidize 62:17 subsidized 101:6 subsidizing 100:8,14 206:6 substance 77:13 substances 99:24 substantial 75:13 118:11 199:7 substantially 199:15 211:25 substantive 73:21 suburban 94:21 95:6 successful 217:1 217:3 successfully 148:3 sufficient 153:9 157:11 158:21 170:4 196:12 suggest 177:21 192:5 212:4 suggested 66:8 177:15,17 183:13 suggestion 175:18 suggestions 192:11 Suite 4:10 summation 217:15 Sunshine 152:20 supplemental 49:14 169:8 supply 160:22 174:6 support 63:10 80:16 81:12,12 148:18 156:20 163:14 169:18 170:12 supporting 173:3 188:18 supportive 182:25 supposed 41:19 203:1 surcharge 57:17 61:4 63:8 99:17,19 100:4 100:8,13,16,22 101:12,19,21 101:22,24 102:1,4 180:9 181:4 199:14 surcharges 54:5,17,23 55:17 56:10 60:25 61:14,17 62:10 101:1 180:2,3 181:6 181:9 198:16 sure 12:13 18:24 22:16 24:9,10 25:10 37:18 38:24 40:20 50:20 52:19 62:4 66:17,23 68:13 72:8 83:9 95:18 97:24 107:10 114:13,15 116:21 119:22 130:2 132:18 137:3 140:8,17 141:2 152:12 156:24 159:17 160:3 170:10 197:15 198:12 198:22 199:18 199:19 208:3 208:4,10,23 218:10 surface 73:16 190:8 surprised 78:5 surrebuttal 1:9 10:23,24 12:17 13:13 25:5 33:10,11,12,17 35:22 47:16 54:5 62:7 68:14 81:4,7 98:5,7,13 99:16 102:5 119:17,23 139:22 142:9 145:7 150:4 153:8 157:2 162:3 166:9 167:10 169:9 171:4,7 194:1 195:18 198:15 200:14 212:23 survey 69:24 Susan 4:13 9:24 11:12 208:23 suspect 78:5 suspended 66:20 sustained 138:25 swing 138:24 switch 42:19 211:12,13 switched 74:9,9 159:12,24 switching 74:15 211:23 sword 189:16 sworn 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