HomeMy Public PortalAboutExhibit MSD 56A MSD Response to BJH 2nd Discovery RequestExhibit MSD 56A
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
AUGUST 22, 2011 RESPONSE TO THE SECOND DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL TO MSD
METROPOLITAN ST. LOUIS SEWER DISTRICT RESPONSE
ISSUE: WASTEWATER RATE CHANGE PROPOSAL
WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT
SPONSORING PARTY: BARNES JEWISH HOSPITAL
DATE PREPARED: AUGUST 22, 2011
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
EXHIBIT 56A
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
AUGUST 22, 2011 RESPONSE TO THE SECOND DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer
District (the "Charter Plan"), Operational Rule 3(5) and Procedural Schedule §§ 17 (b)(i)
and (ii) of the Rate Commission of the Metropolitan St. Louis Sewer District ("Rate
Commission"), the Metropolitan St. Louis Sewer District ("District") thereby submits this
response to the Second Discovery Request of Barnes Jewish Hospital, Dated August 11,
2011, regarding the Rate Change Notice dated May 10, 2011 (the "Rate Change Notice").
Metropolitan St. Louis Sewer District Response
1. In MSD Exhibit 1, Table 3-8, page 3-14, and MSD Exhibit 1, Table 3-9, the total CIRP
for FY2013-FY2016 is $1.006 billion. In MSD Exhibit 9B, page 2, line 10, Mr. Brian
Hoelscher states that "the size of the CIRP reflected in the Rate Proposal is over $1.0
billion over the four fiscal years 2013-2016". In MSD Exhibit 9B1 and MSD Exhibit
50A, the amount of the CIRP for FY2013 â FY2016 is $884.7 million.
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AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
EXHIBIT 56A
A) Please explain why Mr. Hoelscher defined the CIRP as "over $1.0 billion" in his
testimony and how that compares to the $884.7 million in MSD Exhibits 9B1 and
50A.
RESPONSE: The costs shown in Exhibits MSD 9B1 and 50A are expressed
at a 2010 cost level. Applying the same 3 percent annual inflation rate to these
amounts produces a total inflated amount of $1,008,622,000 which is 0.17
percent greater than the $1,006,878,000 value reported in Table 3-8 and
presented in the table below.
Comparison of Consent Decree CIRP Costs with Projected Rate Model CIRP Costs
Fiscal Exhibit 50A Inflation Exhibit 50A Rate Model Percent
Year Uninflated Factor Inflated Inflated Difference Difference
$ $ $ $
2011 1.03000
2012 1.06090
2013 255,819,000 1.09273 279,540,000 273,807,000 5,733,000 2.05%
2014 203,777,000 1.12551 229,353,000 237,428,000 (8,075,000) -3.52%
2015 227,534,500 1.15927 263,775,000 261,630,000 2,145,000 0.81%
2016 197,607,750 1.19405 235,954,000 234,013,000 1,941,000 0.82%
Total 884,738,250
1,008,622,000 1,006,878,000 1,744,000 0.17%
B) Please explain in detail the process that MSD used to derive the CIRP amounts in
Table 3-8 and MSD Exhibits 9B1 and 50A.
RESPONSE: Table 3-8 is based on inflated costs of capital cost categories available
from the Engineering Department at the time the report was published. Minor
increases in these values have occurred since this time as noted in the table above.
2. MSD Exhibit 50 Response, 2-2.3 states "Exhibit MSD 50A may be used to link the CD to
rate proposal tables (sic) 3-8, page 3-14, line 12 and table 3-9 page 3-15 of the Rate
Proposal." Please explain how these may be "linked" when the amounts are not the
same, in total or for each fiscal year.
RESPONSE: They are approximately the same in total when expressed at
the same inflated cost levels (see table above for Question 1A).
3. In MSD Exhibit 18A4, the Total Inflated Cash Expenses for CIRP for FY2013-FY2016 is
$971.6 million. The Total 2010 Cash Expense is $884.7 million in 2010$.
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AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
A) Please explain why MSD used a 3% inflation factor.
EXHIBIT 56A
RESPONSE: The District used a composite of several inflation indices specific to
MSD expense types as the basis for its inflation assumption. These inflation indices
include the Consumer Price Index for All Urban Customers (CPI -U), the Producer
Price Index, Fuel and Energy components of the CPI and operational and
construction cost indices from the Engineering News -Record.
The CPI -U consists of a "market basket" of goods and services not relevant to the
goods and services provided by the District. The U.S. Bureau of Labor Statistics
defines CPI -U as an index based on the prices of food, clothing, shelter,
transportation fares, charges for doctors' and dentists' services, drugs and the other
goods and services that people buy for day-to-day living. Per the U.S. Bureau of
Labor Statistics, prices of these types of items are collected, on a monthly basis, in
87 urban areas across the country from approximately 4,000 housing units and
25,000 retail establishments such as department stores, supermarkets, hospitals, gas
stations, and other types of stores and service establishments. The CPI -U data is
collected from urban populations consisting of individual wage earners and groups
such as professional, managerial and technical workers, the self-employed, short-
term workers, the unemployed, retirees and others not in the work force.
While the CPI -U may be used as an inflation indicator for some of the District's
O&M costs, the majority of its O&M expenses consist of a combination of expenses
impacted by more specific inflation indexes such as the energy and fuel components
of the CPI, the Producer Price Index (PPI) and construction and operational supply
cost indices published by the Engineering News -Record (ENR). Other O&M
expenses are primarily impacted by factors other than inflation like investment
market conditions, actuarial traits of the MSD work force and short term historical
MSD expense trends. A composite rate based on these inflation indices is 4.50%.
The District used a 3% rate to reflect cost efficiencies and an estimate of potential
future trends. The use of an inflation assumption lower than the 4.46% composite
rate provides a conservative projection to assure sufficient revenue is generated by
the proposed rates to recover the District's cost and funding the required CIRP
program.
B) Please explain why the appropriated amount for CIRP varies from the total inflated
cash amount by $35.3 million ($1,006 million less $971.6 million).
RESPONSE: Appropriations, as presented in Table 3-8 of the rate proposal, are set
to fund projects over a multi -year period whereas actual expenditures reflect
Page 4 of 8
AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
EXHIBIT 56A
appropriations actually spent during the year. Typically, most projects can be
completed over a two-year period where approximately 60 percent of the
appropriations are expended during the first year and 40 percent during the second
year. Although fiscal year budgets provide sufficient funds for all projected
appropriations during the year, projects are typically staggered during the year as
projects become ready to bid. Also, a lag of typically 2-3 months from introduction
of the appropriate ordinance to the first payment to the contractor is needed to
introduce and adopt the necessary ordinances, provide time for contractors to
mobilize and to pay contractors for work completed during the prior month. In
addition, large projects that will take more than two years to complete are typically
appropriated in phases to reduce annual appropriation amounts. Therefore,
current appropriations will never match current expenditures but total unspent
appropriations should always exceed actual costs to be expended. The amount of
appropriations in excess of amounts remaining to be spent will vary based on the
relative magnitude of the CIRP in a year compared to the CIRP for the prior year.
4. In MSD Exhibit 9B, page 5, lines 11 â 14, Mr. Hoelscher states that "because of this
economic condition, the District was receiving bids for capital work that in some cases
was 40% below traditional costs. This created additional funds which could be used to
complete projects beyond the original program budget." Please provide the amount of the
additional funds that became available due to economic conditions.
RESPONSE: MSD has not performed a study to determine the amount of the
additional funds that became available due solely to economic conditions. More
importantly, what MSD does do, is to constantly monitor the current and projected
status of fund balances as they are adjusted from the original rate proposal for
whatever reason and makes adjustments to the program to make sure that all
needed projects can be funded and that any additional funds are used to construct
projects needed in the future.
5. In MSD Exhibit 9B, page 5, Mr. Hoelscher explains that during the FY2008-FY2012
period, MSD had to fund the construction of disinfection facilities. The cost of this
construction was not anticipated at the time MSD filed its Rate Proposal for the FY2008-
FY2012 period. What was the additional cost to complete the construction of the
disinfection facilities?
RESPONSE: See answer to Question 1-12 on MSD Exhibit 16.
Page 5 of 8
AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
EXHIBIT 56A
6. In MSD Exhibit 50A, several projects over the period FY2013âFY2016 are designated
as either "supplemental appropriation" or "supplemental." Please explain what each term
means.
RESPONSE: Both mean the same thing. These are yearly appropriations for
projects where the vendor and initial appropriation were in a previous fiscal year
and the total cost of the project was not appropriated in the initial year.
iik
Susan Myers, General Counsel
METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6200
Fax: (314) 768-6372
Page 6 of 8
AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
CERTIFICATE OF SERVICE
The undersigned hereby certifies that on the 22nd day of August, 2011:
EXHIBIT 56A
An electronic copy of the foregoing instrument was emailed to the Secretary of the Rate Commission c/o
jfenton@stlmsd.com
SECRETARY OF RATE COMMISSION: Ms. Nancy Bowser
Secretary of Rate Commission
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
robowser@swbell.net
At the request of Rate Commission Counsel, one paper original and associated Exhibits
are held at the Rate Commission office for Commissioner review.
An electronic copy of the foregoing instrument and Exhibits were emailed to:
RATE COMMISSION LEGAL COUNSEL: Lisa O. Stump, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
lostump(a),lashlybaer.com
RATE COMMISSION CONSULTANT: Mr. William Stannard
President
Raftelis Financial Consultants, Inc.
3013 Main Street
Kansas City, MO 64108
wstannard@raftelis.com
COVIDIEN: Mr. Randy Meyer
Utility Manager
Covidien
3600 North 2nd Street
St. Louis, MO 63147
Randy.Meyer@covidien@com
Page 7 of 8
AUGUST 22, 2011 RESPONSE TO THE SECOND
DISCOVERY REQUEST OF
BARNES JEWISH HOSPITAL
ROBERT A. MUELLER: Mr. Robert A. Mueller
16 Ladue Crest Lane
St. Louis, MO 63124
ramreco@sbcglobal.net
EXHIBIT 56A
BARNES JEWISH HOSPITAL: Ms. Lisa Langeneckert
Sandberg, Phoenix and VonGontard P.C.
One City Centre, Suite 1500
St. Louis, MO 63101
llangeneckert(2i sandbergphoenix.com
MISSOURI INDUSTRIAL ENERGY John Kindschuh, Esq.
CONSUMERS: Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
John.kindschuh@bryancave.com
AARP & CONSUMERS COUNCIL OF
MISSOURI:
Diana M. Vuylesteke, Esq.
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
dmvuylesteke@bryancave.com
John B. Coffman, LLC
Attorney at Law
871 Tuxedo Blvd.
St. Louis, MO 63119
j ohn@j ohncoffman.net
1714/66
Susan Myers, General Counse
METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6200
Fax: (314) 768-6372
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