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Home My Public Portal AboutExhibit MSD 19B MSD Response to 2nd Discovery Request MIECEXHIBIT MSD 19B ]BEFORE THE RATE COMMISSION OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT JULY 1, 2011 SECON * DISCOVERY REQUEST OF THE MISSOURI INDUSTRIAL ENERGY CONSUMERS Metropolitan St. Louis Sewer District Response ISSUE: WASTEWATER RATE CHANGE PROPOSAL WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT SPONSORING PARTY: MISSOURI INDUSTRIAL ENERGY CONSUMERS DATE PREPARED: July 11, 2011 Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, Missouri 63103 3661274.3 1 EXHIBIT MSD 19B 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 JULY 1, 2011 SECOND DISCOVERY REQUEST OF THE MISSOURI INDUSTRIAL ENERGY CONSUMERS Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer District (the "Charter Plan"), Operational Rule 3(2) and Procedural Schedule §§ 1, 14, 15 and 17 of the Rate Commission of the Metropolitan St. Louis Sewer District ("Rate Commission"), Metropolitan St. Louis Sewer District ("District") thereby responds to the Missouri Industrial Energy Consumers July 1, 2011 Second Discovery Request for additional information and answers regarding the Rate Change Proposal dated May 10, 2011 (the "Rate Change Proposal"). The District is requested to amend or supplement the responses to this Discovery Request, if the District obtains information upon the basis of which (a) the District knows that a response was incorrect when made, or (b) the District knows that the response, though correct when made, is no longer correct. The following Discovery Requests are deemed continuing so as to require the District to serve timely supplemental answers if the District obtains further information pertinent thereto between the time the answers are served and the time of the Prehearing Conference. 3661274.3 2 EXHIBIT MSD 19B JULY 1, 2011 SECOND DISCOVERY REQUEST OF THE MISSOURI INDUSTRIAL ENERGY CONSUMERS Metropolitan St. Louis Sewer District Response 2-1. The MIEC's Discovery Request 1-1 dated June 7, 2011 requested MSD to provide an electronic copy, with formulas intact, of the May 10, 2011 MSD Wastewater Rate Proposal drafted by Black & Veatch. On June 17, 2011, MSD responded to MIEC 1-1, but MSD did not provide an electronic copy of the proposal as requested. The MIEC's request for the electronic copy of the May 10, 2011 MSD Wastewater Rate Proposal is renewed. Please provide the electronic copy of this document to the MIEC as soon as possible. RESPONDER: Susan Myers, MSD General Counsel RESPONSE: The District objects to Question 2-1 of this Discovery Request and Question 1-1 of the MIEC June 7, 2011 Discovery Request. Pursuant to paragraph # 7 the July 28, 2010 and July 11, 2011 Rate Consulting Services Agreement between MSD and Black & Veatch, the Water/Sewer Rate Design Model ("Rate Model") used by MSD's rate consultant, Keith Barber (Black & Veatch Project Manager) is considered proprietary property of Black & Veatch and therefore MSD is prohibited from providing the Rate Model to any entity. 2-2. During the Technical Conference for the District Testimony and Rate Setting Documents, Brian Hoelscher testified that there are projects, such as the expansion of the ash lagoon, that are listed in Exhibit 9B1 that are not specifically listed in the Consent Decree. Please identify and describe any projects, including but not limited to the expansion of the ask lagoon, that are listed in Exhibit 9B1 that are not required by the Consent Decree. (See Exhibit MSD 17, Testimony of Brian Hoelscher, page 89, lines 19 — 25 and page 90, lines 1 — 18). RESPONDER: Brian Hoelscher, MSD Director of Engineering RESPONSE: The following projects, reflected in Exhibit 9B1, are not specifically listed or covered in the Consent Decree: 1) Coldwater Digester Clean -Out (page 2, Exhibit 9B1) at a cost of $1,500,000 to clean no longer used digesters in preparation for eventual demolition. 2) Lower Meramec Educational/Recreational Facility (page 2, Exhibit 9B1) and Lower Meramec Site Improvements Phase II (page 6, Exhibit 9B1). Total of $750,000 to complete construction of regulatory mandated Lower Meramec Treatment Facility. 3) Prospect Landfill (pages 3 and 8, Exhibit 9B1). Total of $1,850,000 to maintain cost effective disposal site for incinerator ash from solids handling process. 2-3. During the Technical Conference for District Testimony and Rate Setting Documents, Brian Hoelscher testified that MSD has additional projects available "in the queue 3661274.3 3 EXHIBIT MSD 19B waiting to go" if MSD can complete more projects for a specified amount of money. (See Exhibit MSD 17, Testimony of Brian Hoelscher, page 95, lines 4 — 5). (a) Please identify and describe all of the extra project(s) that are "in the queue waiting to go" and have been awarded because an extra amount of revenue was available to fund the additional project(s). RESPONDER: Brian Hoelscher, MSD Director of Engineering RESPONSE: The following contingency projects, which were unfunded at the start of FY 2011, were appropriated in FY 2011 with available funds: 1) Missouri River WWTP Secondary Expansion and Disinfection Facilities- $37,000,000 2) Greve Coeur Creek Sanitary Trunk Sewer relief Ph IIA- $3,800,000 3) CSO- McKnight- $2,400,000 As with all projects discussed during this rate proceeding, these three projects are required to address the Consent Decree. (b) Please state whether any of these extra project(s) are included in the capital projects listed in the Black & Veatch rate study. If affirmative, please identify the year and amount of the extra project capital item. RESPONDER: Brian Hoelscher, MSD Director of Engineering RESPONSE: The contingency projects for FY 2012 are found on pages 1-3 of Exhibit 9B1 and identified as "contingency". These are projects currently not funded in FY 2012 but are scheduled to be potentially ready for FY 2012 should funding become available. It is the District's standard practice to proactively identify contingency projects for each upcoming year of the capital program (2013-2016). Contingency projects will also be identified from the FY17 capital program for initiation in FY16 should funding become available. This contingency planning also allows the District to address Consent Decree infrastructure requirements in the most accelerated and thus cost-effective manner possible. 2-4. During the Technical Conference for District Testimony and Rate Setting Documents, Karl Tyminski testified that MSD has submitted numerous applications for State Revolving Fund loans. Please identify and describe the status of all of the applications that MSD has submitted to the State Revolving Fund Loans. (See Exhibit MSD 17, Testimony of Karl Tyminski, page 118, lines 13 — 22). RESPONDER: Karl Tyminski, MSD Secretary / Treasurer RESPONSE: The current FY2012 SFR Intended Use Plan (Exhibit MSD 11W), has approved two District projects: A $37,000,000 loan for the expansion of the Missouri River Treatment Plant including disinfection and $111,000 loan for the Bond Place subdivision to convert from septic tanks to sewers. The District anticipates closing on the Missouri River loan in October 2011.The 3661274.3 4 EXHIBIT MSD 19B District also has two current loans that are in draw down status: a $10,980,000 loan and grant for two sanitary sewer projects known as Upper Maline Creek and Argonne, a $40,000,000 loan also for the Missouri River Treatment Plant including disinfection. The total value of loans -in —progress is approximately $88 million. 2-5. Please provide a copy of any documents prepared by Butcher & Mark and/or PFM, MSD's financial advisors, evaluating the feasibility study prepared by Black and Veatch. (See Exhibit MSD 17, Testimony of Karl Tyminski, page 132, lines 18 — 25 and page 133, lines 1 — 3). RESPONDER: Keith Barber, MSD Rate Consultant RESPONSE: The Black & Veatch financial feasibility study is in draft form and has not yet been reviewed by MSD's bond financing advisors or other members of the bond working group other than for general acceptance of interest rates and bond issuance costs. The feasibility study is an independent document expressing Black & Veatch's assumptions and projections of revenues and costs used to form an opinion of the District's financial feasibility to issue proposed bonds in the near future. Bond financing advisors do not typically evaluate such independent reports but do contribute to assessing the reasonableness of bond interest rates and issuance costs. Although not yet available, these advisors also typically provide a debt service schedule for the proposed bonds for incorporation into the financial feasibility study. MSD's upcoming bond sale is currently planned for September 2011. Comments from its bond working group concerning the draft bond feasibility study have yet to be submitted to Black & Veatch for consideration. Therefore, no additional documents related to this discovery request question are currently available. The next MSD bond working group update is expected in late July. 2-6. During the Technical Conference for District Testimony and Rate Setting Documents, Jan Zimmerman testified that she would provide information regarding MSD's anticipated environmental compliance costs for non-residential customers for 2011. Please provide MSD's anticipated environmental compliance costs for non-residential customers for 2011, 2012, 2013, 2014, 2015, and 2016, and provide any supporting documents, analyses, or reports discussing the same. (See Exhibit MSD 17, Testimony of Jan Zimmerman, page 156, lines 6 — 15). RESPONDER: Keith Barber, MSD Rate Consultant. RESPONSE: The compliance charge is proposed to transition from a uniform charge in 2012 to a five -tier cost of service based compliance charge over the four year horizon of the Rate Change Proposal (Exhibit MSD 1). As a result the percentage distribution of the. projected compliance charge revenue varies by year. Exhibit MSD 19C provides a breakdown of the five compliance charge tiers by number of accounts, existing and projected monthly compliance charge, projected compliance charge revenue by tier and percentage distribution of projected compliance charge revenue by tier. As Exhibit MSD 19C indicates, the percentage of compliance charge revenue generated by Tier 1 customers, decreases from 94.0 percent under existing 2012 charges to 27.6 percent by FY16 as revenues derived from the four other tiers increase. This shift in the distribution of revenue continues until the charges are fully transitioned to equal the projected compliance cost of service level in 2016. At this point the 2016 revenue distribution is approximately equal to the 2010 3661274.3 5 EXHIBIT MSD 19B distribution of costs shown in Column 1 of Table 3-22 of the Rate Change Proposal (Exhibit MSD 1). Exhibit MSD 19C further indicates, this redistribution of compliance charge revenue results in an increase in revenue generated by Tier 2 customers from 1.8 percent in 2012 to 9.9 percent in 2016; compliance charge revenue generated from Tier 3 customers increases from 2.7 percent to 32.7 percent; revenue from Tier 4 customers increases from 0.9 percent to 15.7 percent, and compliance charge revenue generated by Tier 5 customers increases from 0.6 percent to 14.1 percent.. This redistribution of revenue results in a more equitable spread of the compliance cost of service across all customer classes as the monthly compliance charge is more closely tied to the level of compliance monitoring required for each customer. Additional compliance charge material is provided by Exhibit MSD 18W and 18X. 2-7. During the Technical Conference for District Testimony and Rate Setting Documents, Jan Zimmerman testified that MSD attempts to recover its compliance costs from each customer tier level. What portion of MSD's costs are recovered from each customer tier level (i.e., Tiers 1 — 5)? (See Exhibit MSD 17, Testimony of Jan Zimmerman, page 156, lines 16 — 25). RESPONDER: Keith Barber, MSD Rate Consultant RESPONSE: A portion of costs previously recovered by the environmental compliance charge are now recovered through the basic wastewater rate structure. Under this reallocation of costs, the 2010 costs directly related to the District's monitoring efforts is estimated to be $1,881,100 as indicated in Table 3-22 of Exhibit MSD 1. Transitioning the existing uniform compliance charge to the 2016 cost of service charge will bring the projected 2016 revenue in -line with estimated 2016 costs. Therefore, the compliance monitoring costs can be estimated by interpolating between the 2010 costs and the 2016 projected costs resulting in the following fiscal year estimates: 2010 $1,881,100 per Table 3-22 of Exhibit MSD 1 2011 $1,963,000 2012 $2,044,900 2013 $2,126,800 2014 $2,208,700 2015 $2,290,600 2016 $2,372,500 per Table 3-17 for FY 2016 (Exhibit MSD 19D). 2-8. What portion of the SEP is associated with MSD's two taxing subdistricts, the Lower Meramec River Basin and the Missouri River Bottom? (See Exhibit MSD 17, Testimony of Jan Zimmerman, page 159, lines 19 — 25). RESPONDER: Brian Hoelscher, MSD Director of Engineering RESPONSE: There are no SEPs associated with the Lower Meramec River Basin or Missouri River Bottom taxing subdistricts. 3661274.3 6 EXHIBIT MSD 19B 2-9. What is the amount of the ad valorem tax revenue collected in the Lower Meramac River Basin and the Missouri River Bottom subdivisions prior to 2008? (See Exhibit MSD 17, Testimony of Jan Zimmerman, page 160, lines 4 — 13). RESPONDER: Jan Zimmerman, MSD Director of Finance RESPONSE: The following provides the requested information. Ad Valorem Taxes Mo River Meramec FY WWTP River WWTP Total 2008 $ 751,802 $ 2,669,678 $ 3,421,480 2007 677,850 2,254,753 2,932,603 2006 632,425 2,194,244 2,826,669 2005 628,135 2,001,515 2,629,650 2004 618,880 2,025,874 2,644,754 2-10. During the Technical Conference for District Testimony and Rate Setting Documents, Keith Barber references a NACWA survey. Please provide a complete copy of this NACWA survey and any supporting documents, analyses, or reports discussing .the same. (See Exhibit MSD 17, Testimony of Keith Barber, page 214, lines 16-17; and page 217, lines 7 — 9). RESPONDER: Jan Zimmerman, MSD Director of Finance RESPONSE: The referenced NACWA survey is provided as Exhibit 11A13. 2-11. During the Technical Conference for District Testimony and Rate Setting Documents, Keith Barber references a bond feasibility report. Please provide a complete copy of this bond feasibility report and any supporting documents, analyses, or reports discussing the same. If the bond feasibility report is still in draft form, please provide copies of all drafts. (See Exhibit MSD 17, Testimony of Keith Barber, page 251, lines 14-16). RESPONDER: Jan Zilnmeinian, MSD Director of Finance RESPONSE: The bond feasibility report is provided as Exhibit MSD 18Y. usan 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 3661274.3 7 EXHIBIT MSD 19B CERTIFICATE OF SERVICE The undersigned hereby certifies that on the llth day of July, 2011: 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 was emailed and one paper copy and associated Exhibits were couriered to: RATE COMMISSION LEGAL COUNSEL: Lisa O. Stump, Esq. Lashly & Baer, P.C. 714 Locust Street St. Louis, MO 63101 lostump@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 3661274.3 8 EXHIBIT MSD 19B ROBERT A. MUELLER: Mr. Robert A. Mueller 16 Ladue Crest Lane St. Louis, MO 63124 ramreco@sbcglobal.net BARNES JEWISH HOSPITAL: Ms. Lisa Langeneckert Sandberg, Phoenix and VonGontard P.C. One City Centre, Suite 1500 St. Louis, MO 63101 llangeneckertc 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 Diana M. Vuylesteke, Esq. Bryan Cave, LLP 211 N. Broadway, Suite 3600 St. Louis, MO 63102 dmvuylesteke@bryancave.com GOA usan Myers, General Couns METROPOLITAN ST. LOUIS SEWER DISTRICT 2350 Market Street St. Louis, Missouri 63103 Email: smyers@stlmsd.com Tel: (314) 768-6200 Fax: (314) 768-6372 3661274.3 9