HomeMy Public PortalAboutExhibit MSD 60C Surrebuttal Testimony of Brian HoelscherBEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
AUGUST 19, 2011 SUBMITTAL OF SURREBUTTAL TESTIMONY
OF THE METROPOLITAN ST. LOUIS SEWER DISTRICT
ISSUE: WASTEWATER RATE CHANGE PROPOSAL
WITNESS: BRIAN HOELSCHER, P.E.
SPONSORING PARTY: METROPOLITAN ST. LOUIS SEWER DISTRICT
DATE PREPARED: August 19, 2011
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
Exhibit MSD 60C
Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
Q1. Mr. Hoelscher there seems to be some confusion related to the CIRP and the 1
projects within it as they relate to the rate proposal are there any documents that have 2
been provided that can assist any of the parties to clear up any confusion they have 3
regarding the Rate Proposal and the CIRP. 4
A. Yes. The district has provided at least 5 documents that should assist any party in analyzing 5
the CIRP program as outlined for this rate proposal they are: 6
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1. The Project List, or MSD Exhibit 9B1. This exhibit was submitted with my
original testimony and lists all of the capital activity currently planned for FY
2013-2016. The list separates design and construction activities by fiscal year and
also gives the general regulatory category of the project.
2. The Long Term Control Plan, or MSD Exhibit 11B. The location of this
document on MSD’s website was given in response to the Rate Commission’s
First Discovery Request. This document gives a full history of the technical basis
for the options that were considered and finally selected to mitigate the impact of
Combined Sewer Overflows on the St. Louis area waterways. It also includes the
results of the extensive public participation program that was used to develop this
document.
3. The Board Agenda Sheet, or MSD Exhibit 11A32. Since the actual consent decree
could not be made public, MSD worked with others parties to the lawsuit to
develop this sheet which describes the general areas covered by the Consent
Decree and gives some specific financial information.
4. The Consent Decree, or MSD Exhibit MSD 49A, describes all requirements
resulting from the lawsuit. Different activities have different degrees of detail
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
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depending on the requirement. Some requirements are very detailed and set
specific annual goals which must be achieved throughout the life of the decree.
Other requirements require the submittal of plans and schedules for regulatory
approval before exact details of these activities are known, though most of these
do have overall schedule deadlines that must be met by the proposed plans.
5. Finally, the District has provided the Exhibit MSD 50A which is the
Supplemental CIRP Project List. This document provides a reference for every
project on the Project List (MSD Exhibit 9B1) to the specific regulatory
requirement listed in both the Board Agenda Sheet (MSD Exhibit 11A32) and the
Consent Decree (MSD Exhibit 49A).
Q2. Do any of the projects listed in the Supplemental CIRP Project List in exhibit MSD 12
50A relate to specific sections of the Federal Consent Decree or “CD” which has been
filed as MSD exhibit 49A?
A. Yes, in fact all but 5 projects totaling $4.1 million are specifically outlined in the CD. I will 15
briefly describe the major CD references in the order that they appear in Exhibit MSD 50A:
1. V.F.29- This paragraph and the other sections referenced in this paragraph
describe the process whereby most of the capital work to be performed on MSD’s
separate sanitary sewer system. The issues to be addressed include constructed
SSO’s as well as other system surcharge issues. These issues are to be addressed
as expeditiously as possible based on a schedule to be approved by the regulators,
but in any case 85% of the constructed SSO’s must be eliminated by December
31, 2023.
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
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2. V.G.k.iii- Project ID 8694 is the only project on this project list to specifically fall
under this reference. The Caulk’s Creek Force Main has been experiencing
occasional failure issues. This project is part of a program to replace the existing
main where needed and provide redundancy to facilitate future operations. The
cost associated with increasing the capacity of this main to accommodate growth
in the Caulk’s Creek watershed will be captured through a surcharge placed on
future development in this watershed.
3. V.B.12, V.G.c.iii, and/or V.G.d.ii- These projects are to assist in addressing the
CD requirements for system rehabilitation and replacement to address Inflow and
Infiltration (I/I) as well as system renewal. Other capital projects resulting in
system replacement as well as O&M activities will also address these
requirements.
4. V.M.49- These projects are commonly referred to as “Cityshed” projects. These
projects will address the impacts of surcharged local combined sewer systems in
the City of St. Louis and surrounding areas in St. Louis County that cause
flooding of homes and properties. Solutions consist of property buy-outs, storage
basins, runoff reduction, and conveyance.
5. VI.A.51- These projects address the mitigation of combined sewer overflows
(CSO’s). These projects are in alignment with MSD’s approved LTCP (Exhibit
MSD 11B) and have a set schedule for completion as outlined in the referenced
Appendix D in the CD. Almost all of the expenditures for combined sewer
overflows are to mitigate overflows in the River Des Peres watershed as well as
on Gingras and Maline Creek. The overflows located directly on the Mississippi
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
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River, which per the LTCP represent approximately ½ of the current CSO
volume, will be addressed by a $100 million “green” program which will help
reduce discharge volumes directly to the Mississippi by reducing stormwater
runoff from individual properties and areas. If the CSO’s discharging directly to
the Mississippi River had to be addressed in the same way as the discharges to the
River Des Peres watershed and Gingras and Maline Creek, the cost of the CSO
portion of the program would increase by approximately $2 billion.
Q3. Are there some additional regulatory costs which are not necessarily outlined in the 9
CD?
A. Yes. I will refer to Exhibit MSD 50A. First, under Treatment Plant in FY 2013 is the 11
reference to project ID number 3603, or the Lower Meramec Ed/Rec Facility. The
construction of this project is required to meet a commitment made when MSD acquired
$11,584,300 in federal funding for the construction of the Lower Meramec Wastewater
Treatment Facility. Second is project ID number 11094 on the same page of the exhibit, or
the Prospect Hill Landfill. This design project is required to expand existing facilities to cost-
effectively meet regulatory requirements regarding the disposal of ash from the Bissell Point
Treatment Plant Incinerator Operations. Note that construction costs are listed later in FY
2016. Finally, under Treatment Plant in FY 2014 is the reference to project ID number 8154,
or the Lower Meramec Plant Site Restoration. The final site restoration of the recently
constructed facilities in required to meet the conditions of the Conditional Use Permit issued
by the County for the construction of this project. The construction of this restoration has
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
been delayed until now so that the new disinfection facilities at this plant can be completed 1
first. 2
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Q4. Within the Supplemental CIRP Project List there is project number 11117 which 4
has no reference to the CD or other regulatory requirements can you explain why this 5
is? 6
A. Yes. This project is under Treatment Plants in FY 2013 and is listed as the Coldwater 7
Digester Clean-Out. This project was not originally listed as having a regulatory requirement 8
because the action of cleaning the digester is not needed to meet a federal requirement. 9
However, the cleaning of the now abandoned digesters is needed to provide storage
redundancy for the sludge slurry force main that runs from the Coldwater Treatment Plant to
the Bissell Point Treatment Plant. The need for this storage is referenced in paragraph 31.k of
the consent decree.
Q5. Mr. Hoelscher can you please explain what you have done and plan to do to 15
optimize and manage the capital program?
A. MSD’s current method for managing the capital improvement program was put in place 17
approximately 10 years ago. This method has been very successful and has given us the
ability to be very flexible in addressing changes and challenges to delivery of the capital
program. The biggest challenge that MSD successfully managed was addressing new
discharge regulations during the last rate cycle which required the installation of disinfection
at all of our remaining plants no later than December 2013. Design and construction
resources were reprogrammed to meet this need, and MSD is currently on schedule to meet
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
all of these regulatory deadlines. Another adjustment that was made was the use of regulatory 1
required unfunded “contingency” projects so that additional dollars that might become 2
available in a fiscal year for various reasons (delayed projects, lower cost solutions during 3
design, low bids, variances in investment income and revenues from original projections, 4
ARRA stimulus funding, etc.) can be used for other required projects. These projects are 5
ones MSD anticipates may be ready if issues such as easement acquisition, regulatory 6
approvals, or municipal coordination are resolved quicker than programmed. In FY 2009 7
MSD started 4 contingency projects at a cost of $3.8 million, in FY 2010 MSD started 7 8
contingency projects at a cost of $20.2 million dollars, and in FY 2011 MSD started 3 9
contingency projects at a cost of $43.2 million. As of August 2011, of the projects marked as
“contingency” in MSD Exhibit 9B1, 3 projects worth approximately $10 million are
currently rated as being available if needed and an additional 2 projects worth approximately
an additional $7 million have a good chance to be ready. By using this process and by
constantly monitoring the anticipated fund balance that is available for capital projects, MSD
is scheduled to use all dollars that the last rate case made available for the capital program.
(Paragraph break?) For the future, MSD has made adjustments to the delivery model to meet
new requirements associated with the CD. These primarily consist of taking advantage of the
large quantity of qualified consulting engineer resources available within the St. Louis area.
We will do this by using larger watershed teams for extended engagements to address
regulatory issues within a geographic area instead of hiring consultant teams on a project by
project basis. This will allow us to take advantage of cost effective use of resources within a
geographical area and most importantly will provide immediate resources when needed to
address unforeseen conditions and still meet the regulatory completion dates which will now
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
be required with a CD. As testified to in my testimony Exhibit MSD 9B and MSD’s 1
response to the first Rate Commission Discovery request (Exhibit MSD 11B), MSD has 2
sufficient internal resources and processes in place to manage this new model. In addition, as 3
is apparent from our continuing coordination with the consulting engineer and construction 4
contracting representatives in St. Louis, sufficient construction contracting resources exist to 5
execute this program. 6
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Q6. Mr. Hoelscher in the testimony submitted by Billie LeConte on behalf of Barnes 8
Jewish Hospital on page 6 lines 12-15 she compares values for planned appropriations 9
against values for actual expenditures. Is it appropriate to compare those two types of
numbers?
A. No. 12
Q7. Why not? 14
A. Ms. LeConte is comparing the planned appropriations, or encumbrances, of $647.5 million 15
for FY 2007-2010 that was included in our last rate proposal to the actual expenditures of
$787.5 million that were reported in our response to the Rate Commission’s First Discovery
Request. This would be an accurate comparison if all of the expenditures actually occurred
with the same fiscal year as they were appropriated, or encumbered. In fact, the actual
expenditures reported include some expenditures from appropriations made prior to the start
of FY 2007 and does not include expenditures for projects appropriated as late as FY 2010
which are not completed by the end of FY 2010. Ms. LeConte also tries to draw the
conclusion that there is a large variance between the forecasted project activities versus the
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
actual expenditures and that this may lead to rate payers paying large amounts of money up 1
front that may not be needed within the next four years. In fact, the actual appropriations for 2
the period FY 2007-2010 were within 0.4% of the appropriations planned in the last rate 3
case. 4
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Q8. Mr. Hoelscher, is a rate proposal for the period FY 2013-2016 as submitted by 6
MSD appropriate for the execution of the Capital Improvement Plan considering the 7
regulatory requirements contained in the Consent Decree? 8
A. Yes it is. Milestones in the Consent Decree (Exhibit MSD 49A) to be addressed by 9
capital improvement projects are tied almost exclusively to specific dates, some of which
occur prior to the final entry of the Consent Decree, or to the Date of Entry of the
Consent Decree. Specific to the elimination of Constructed SSOs, MSD is required to
complete early elimination projects. This includes a specific list of Constructed SSOs that
are to be removed by December 31, 2012 as well as the early elimination of other
Constructed SSOs prior to the submission of the Sanitary Sewer Overflow Control
Master Plan on December 31, 2013. Progress on these early elimination projects must be
reported to the United States and to the State of Missouri annually beginning on October
31, 2012. This requires that MSD provide for a continuous capital program that
addresses early elimination projects as well as engineering and construction of projects
needed to assure compliance with the 2023 and 2033 overall milestones. The capital
projects for FY 2013 through FY 2016 needed to meet the requirements of the Consent
Decree were previously provided (Exhibits MSD 9B1 and 50A).
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
There are a large number of capital improvement milestones requiring between $1.5
billion and $2.0 billion that will be needed that are not currently defined in the Consent
Decree. These will allow for the future removal of Constructed SSOs and other known
SSOs as described paragraphs 23, 26, and 27 of the Consent Decree. The specific dates
for these milestones and the capital projects needed to meet these milestones will be
established in a Sanitary Sewer Overflow Control Master Plan to be submitted for
approval by the EPA by December 31, 2013. The duration of the proposed FY2013-2016
rate proposal coincides exactly with when this final piece of information will become
available. The Sanitary Sewer Overflow Control Master Plan is required to be submitted
by December 31, 2013. Assuming one year for regulatory review and MSD response to
comments before approval by the EPA, MSD estimates that the information will become
final on December 2014. MSD will begin development of its next rate proposal,
including this additional information, at this time in order to present the next rate
proposal to the Rate Commission on approximately May 2015. Assuming a Rate
Commission recommendation is completed by October 2015, the next 8 months will be
used to allow for consideration of the Rate Recommendation by MSD’s Board of
Trustees and allow time to acquire additional bond authorization if need for the beginning
of the new rate cycle starting on July 1, 2016.
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Thus a shorter rate proposal does not yield greater clarity on SSO program delivery. The
current rate proposal period of FY 2013-2016 allows MSD to meet the immediate capital
improvement requirements of the consent decree, allows the Rate Commission to
consider MSD’s rate proposal request and proposed capital improvement program with
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Surrebuttal Testimony of Brian Hoelscher, P.E. Exhibit MSD 60C___
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all the information currently available for the next four year period, and gives the Rate
Commission the opportunity to review MSD’s future rate requests for additional capital
improvement projects as soon as additional information becomes available to define all
the capital needs required to meet the Consent Decree.
Q9. Do you have an opinion regarding the recommendation in Mr. Stannard’s Rebuttal 6
testimony, exhibit L&B 30, that MSD decrease the rate proposal by $35,279,700. 7
A. MSD currently does phased annual appropriations for very large projects so that annual 8
appropriations more closely match cash flows or the availability of revenues. Deducting the 9
anticipated FY 2017 cash flow from the rate proposal would not give MSD the flexibility to
do phased annual appropriations near the end of the rate cycle to make up any possible
shortfall in anticipated capital funds.
Q10. Does this complete your surrebuttal testimony at this time? 14
A. Yes. 15