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Exhibit RC 87A - Rate Commission's Response to First Discovery Request of MIEC Exhibit RC 87A BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT RATE COMMISSION’S RESPONSE TO FIRST DISCOVERY REQUEST OF THE MISSOURI INDUSTRIAL ENERGY CONSUMERS TO THE RATE COMMISSION ISSUE: WASTEWATER RATE CHANGE PROCEEDING WITNESS: RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT SPONSORING PARTY: THE MISSOURI INDUSTRIAL ENERGY CONSUMERS DATE PREPARED: JULY 5, 2019 Lashly & Baer, P.C. 714 Locust Street St. Louis, Missouri 63101 2 BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT For Consideration of a Wastewater ) Rate Change Proposal by the Rate Commission ) of the Metropolitan St. Louis Sewer District ) RESPONSE OF THE RATE COMMISSION TO THE FIRST DISCOVERY REQUEST OF THE MISSOURI INDUSTRIAL ENERGY CONSUMERS TO THE RATE COMMISSION REQUEST NO. 1: Referring to Pamela Lemoine’s testimony at the June 20, 2019, Technical Conference on Surrebuttal Testimony, Ms. Lemoine stated she reviewed the impact of Mr. Gorman’s deferral of $70 million in CIRP spending in both FY23 and FY24. Please provide any analysis or Rate Models Ms. Lemoine relied on to support her Surrebuttal Testimony. RESPONSE: In reaching her conclusions Ms. Lemoine stated in her testimony that she utilized the MSD Rate Model provided by MSD in Exhibit MSD 66C. To evaluate the potential impact on total utility revenue needs of deferral of $70 million per year in FY 2023-2024 to FY 2025-2026, Ms. Lemoine made the following changes: • CIRP Input Tab: o Subtracted $70 million per year in FY 2023 and FY 2024 (cells Z11 and AA11) o Added $70 million per year in FY 2025 and FY 2026 (cells AB11 and AC11) • CIRP Dashboard Tab: o Subtracted $70 million per year in FY 2023 and FY 2024 (cells Z57 and AA57) o Added $70 million per year in FY 2025 and FY 2026 (cells AB57 and AC57) o Changed model scenario from “PFM” to “Model” in line 91 from column Z onward o Changed % Premium assumption in line 93 from column Z on to 4.5% from 13% in model. (Note, 4.5% reflects the approximate average % premium per PFM data for FY21-FY24 in the Rate Proposal). • Rate Summary: o Assumed revenue increases were adjusted in lines 47 and 48 (base and volume charge revenue). This analysis did not reflect cost of service, and ultimate calculation of rates in COS Rate Summary Tab of the Rate Model, but rather is a comparison of the adjustments necessary to the base and volume charge revenue (Note, the Rate Model calculates projected revenues for compliance charges and extra strength surcharges based on O&M cost escalation factors) to 3 approximate year-end metrics such as days cash and DSC in a manner similar to the MSD Rate Proposal results (to better understand impact of deferral of capital spending only). Based on the above changes, as indicated in Ms. Lemoine’s testimony, the projected revenue adjustments for base and volume charges are lower than that in MSD’s Rate Proposal, but not in a material way. This scenario also requires an additional $25 million in bond authorization (from $500 million to $525 million). In addition, to understand the impact of the change in CIRP spending, without changing the assumption for % Premium included in the model in Exhibit MSD 66C, Ms. Lemoine evaluated required revenue increases utilizing the 13% assumption for premiums in the Rate Model, to compare with Mr. Gorman’s analysis (Exhibit MIEC 75C). As expected, with higher assumed premiums, revenue adjustments are lowered further than under the previous scenario. In addition, additional bond authorization is not required. However, even at assumed higher premiums that are very unlikely, MSD would still require revenue increases that would not normally be considered “significantly lower” as Mr. Gorman indicated in his testimony. Ms. Lemoine also compared the above analysis with Mr. Gorman’s analysis. Because Mr. Gorman has separately calculated projected rates and pasted over formulas in the Rate Summary tab, Ms. Lemoine compared total system revenue (including base charges, volume charges, compliance charges, extra strength surcharges, etc.), as summarized in both Financial Plan tab, line 19 and Revenue Proof tab, line 107, for the MSD Rate Proposal, Mr. Gorman’s analysis, and the two analyses Ms. Lemoine completed, as discussed above. The following table provides a comparison of the percent change in revenue year over year for each scenario. [continued on next page] Fiscal Year MSD Rate Proposal Black & Veatch: 4.5% Premium Black & Veatch: 13% Premium 2021 2.50%2.50%2.50% 2022 3.75%3.40%3.00% 2023 3.75%3.40%3.00% 2024 3.75%3.40%3.00% 2025 7.20%7.00%7.00% 2026 3.55%3.55%3.55% 2027 3.50%3.50%3.50% 2028 3.15%3.20%3.20% 4 The analysis Ms. Lemoine conducted, based on 4.5% premium, is provided as Exhibit RC 87B. Respectfully submitted, /s/ Brian J. Malone Lisa O. Stump Brian J. Malone LASHLY & BAER, P.C. 714 Locust Street St. Louis, Missouri 63101 Tel: (314) 621-2939 Fax: (314) 621-6844 lostump@lashlybaer.com bmalone@lashlybaer.com Attorneys for the Rate Commission of the Metropolitan St. Louis Sewer District Fiscal Year MSD Rate Proposal MIEC Proposed Rates Black & Veatch: 4.5% Premium Black & Veatch: 13% Premium 2021 2.74%-1.89%2.74%2.74% 2022 3.90%3.89%3.53%3.13% 2023 3.97%3.97%3.62%3.25% 2024 4.01%3.99%3.66%3.18% 2025 7.77%7.73%7.52%7.58% 2026 4.19%4.18%4.21%4.13% 2027 4.09%4.10%4.12%4.16% 2028 3.80%3.79%3.85%3.88% 5 CERTIFICATE OF SERVICE The undersigned certifies that a copy of the foregoing was sent by electronic transmission to Janice Fenton, Office Associate Senior, Metropolitan St. Louis Sewer District; Susan Myers, Counsel for the Metropolitan St. Louis Sewer District, on this 5th day of July, 2019. Ms. Janice Fenton Office Associate Senior Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, Missouri 63103 jfenton@stlmsd.com Ms. Susan Myers General Counsel Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, Missouri 63103 smyers@stlmsd.com Brandon W. Neuschafer Kamilah Jones Bryan Cave, LLP 211 North Broadway, Suite 3600 St. Louis, Missouri 63102 bwneuschafer@bclplaw.com kami.jones@bclplaw.com Attorneys for Missouri Industrial Energy Consumers /s/ Brian J. Malone Brian J. Malone