HomeMy Public PortalAboutExhibit MSD 60E Surrebuttal Testimony of Jonathon SpragueBEFORE 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: JONATHON SPRAGUE, 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 60E
Surrebuttal Testimony of Jonathon Sprague, P.E. Exhibit MSD 60E__
Q1. Mr. Sprague will you please describe the different types of O&M that is 1
included in the District’s rate proposal? 2
A. Yes, Operations and Maintenance (O&M), expenses in this proposal fall into two 3
categories, on-going O&M costs which are reflected in the Rate Proposal, Exhibit 4
MSD 1 Table 3-11 line 16 and additional O&M costs reflected in the Rate Proposal, 5
Exhibit MSD 1 Table 3-11 line 17. On-going O&M costs are the costs for operating 6
and maintaining existing equipment and facilities and continued existing services. 7
Additional O&M expenses cover the operating and maintenance costs required for 8
new facilities being built through capital projects as well as new services that are not 9
part of operations at this time. 10
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Q2. How does the on-going O&M escalate in the proposal? 12
A. If you look at exhibit MSD 1, Table 3-11 Line 16 which was submitted on May 10, 13
2011 you will see that the existing O&M expenses increase from year to year over
the rate proposal period. The vast majority of these increases are due to inflationary
rates. These composite of inflation indices as discussed the surrebuttal testimony of
Jan Zimmerman tend to be higher than the CPI inflation rate due to the energy
intensive nature of the wastewater industry along with the mix on construction
supplies and equipment used. In general however, the rate is near 3.5% . In FY
2013 and FY2014, there is a higher percentage increase. These larger O&M
expenses are due to additional $1 Million in FY 2013 and $1.5 Million in FY 2014
allocated in the Information Systems Department budget.
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Surrebuttal Testimony of Jonathon Sprague, P.E. Exhibit MSD 60E__
Q3. Will you please explain what the expenses are in line 17 of the Rate 1
Proposal, Table 3-11, which refers to additional O&M? 2
A. Yes those additional O&M expenses cover the operating and maintenance costs 3
required for new facilities being built through capital projects as they are put in 4
service. The additional O&M expenses included in the proposed rate case are listed 5
in further detail in the table below. 6
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Projected Future Additional O&M Costs
2013 2014 2015 2016
WWTP Disinfection 112000 2159800 7484100 7801900
CMOM 140600
Totals 112000 2159800 7484100 7942500
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The listed additional O&M expenses are needed to operate the new regulatory and
Consent Decree projects. The addition of disinfection facilities are currently
underway of planned for at the Lower Merrimac WWTP, the Missouri River WWTP,
the Coldwater WWTP, the Lemay WWTP and the Bissell WWTP. These O&M
expenses for the Disinfection projects are primarily comprised of electricity and/or
chemical expenses, additionally, they include parts, and labor for maintenance. The
CMOM activities reflect increased labor costs needed to increase inspection
activities needed to comply with the CD.
Q4. Does any of the O&M shown in the Rate Proposal, Table 3-11 relate directly 18
to requirements in the federal consent decree which is exhibit MSD 49?
A. Yes, the Consent Decree has significant requirements for CMOM related activities 20
such as, sewer cleaning, CCTV work, manhole inspection, rehab, pump station
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Surrebuttal Testimony of Jonathon Sprague, P.E. Exhibit MSD 60E__
inspection. However, the related O&M expenses for these activities are not reflected 1
in additional future O&M expenses, but included in the existing O&M expenses. 2
While there is a significant cost to perform these functions, the costs are absorbed in 3
the existing O&M expenses. This is due to the fact that Operations has been 4
performing many of these functions to varying degrees. 5
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Q5. Are there any items in the Rate Proposal which are listed as O&M expenses 7
which are truly CIRP components? 8
A. No, the footnote in Table 3-11 of the Rate Proposal clearly states that the O&M 9
costs are the additional costs required to operate and maintain the new systems as
well as assets that are installed through the CIRP.
Q6. Mr. Sprague can you please explain what you have done and plan to do to 13
optimize Operations and Maintenance Costs.
A. The Operations department is always striving to improve the performance and
efficiency of its crews. The workforce practices a culture that focuses on proactive
maintenance, the utilization of technology, and personnel flexibility to increase
efficiency. Additionally, we continue to look at the cost effectiveness of performing work
with internal crews as compared to contractors and adjust our mix as necessary.
One of the fundamental ways to improve performance is to define and communicate
realistic goals for crews and then measure and monitor performance. In Operations, we
look to the private sector to understand output goals of individual crew types. Sewer
cleaning, CCTV, manhole inspection, and rehab work are all examples of preventative
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Surrebuttal Testimony of Jonathon Sprague, P.E. Exhibit MSD 60E__
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maintenance work that is performed with internal crews. Daily output goals have been
established and communicated based on private sector contractors. All work is
scheduled and tracked using a computerized maintenance management system, and
results available in real time using computer based dashboards and regular reports.
This preventative maintenance focus has caused significant improvements to the
collection system and customers. In the past 3 years the District has seen a 40% drop
in dry weather overflow and a 60% reduction in blockage related basement backups.
These significant improvements not only improve customer service levels and reduce
Districts costs, but they also represent an opportunity for Operations to increase output.
Crews that in the past were dedicated to responding to customer emergency calls now
are being utilized to increase preventative maintenance. This allows the District to
perform more CMOM related activities without increased cost.
Flexibility is also an important factor. The District has implemented a cross-training
program between its construction crews and maintenance crews. This flexibility allows
us to move crews between functions based on need. During storms we can utilize
constructions crews that may have been idle to provide peak response in maintenance.
Conversely, we can move maintenance staff to provide response to emergency repairs
as well.
Continued utilization of technology has also improved output. This past year the District
purchased 3 new CCTV trucks that can more than double the output of a CCTV crew.
This change will allow us to increase the output enough to meet the CCTV requirements
as outlined in section G of the consent decree without additional staff.
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Surrebuttal Testimony of Jonathon Sprague, P.E. Exhibit MSD 60E__
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Lastly the District continually analyzes the costs of its crews to that of contractors. This
business focused approach has resulted in changes in the mix of work in the District. In
2007 the District analyzed the cost of contracting its continued flow metering work and
decided to in source this work. This move was done successfully and has resulted in
2.5 million savings annually vs. contracted work. We were able to do this because we
could absorb the overhead cost by utilizing existing facilities and supervision staff.
Additionally we utilized technology to automate certain functions that were previously
done with personnel. Conversely, we have analyzed the Districts ability to in-source
sewer rehab techniques such as Cured-in-place sewer lining and feel it is more cost
effective to contract.
The above examples represent some of the techniques and improvements we continue
to make, but certainly not all. In the future, the District will sustain this focus to continue
to strive for improvement and efficiency within it Operations.
Q7. Does that complete your surrebuttal testimony today? 15
A. Yes 16