HomeMy Public PortalAboutExhibit 12 Proposal to Revise Procedual ScheduleMIEC/BJH EXHIBIT 12
Wastewater and Rate Change Notice
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
PROPOSAL TO REVISE THE PROCEDURAL SCHEDULE
FOR THE 2011 RATE CASE
Intervenors Missouri Industrial Energy Consumers ("MIEC") and Barnes -Jewish Hospital
("BJH"), are proposing some revisions to the 2011 Rate Case procedural schedule that, if
adopted, will enable all of the parties to better identify the issues involved in this rate case,
exchange and respond to additional discovery, and provide the Rate Commission with more time
to evaluate the key issues in this proceeding and draft the Rate Commission Report.
Thank you in advance for reviewing and considering this proposal. We welcome the opportunity
to speak with you further about this proposal on June 13, 2011 at the beginning of the technical
conference, if desired.
A. Legal and Procedural Background
Section 7.280(f) of the Charter of Metropolitan St. Louis Sewer District ("Charter") states that
the Rate Commission shall issue the Rate Commission Report to the Board of Trustees and to the
public no later than one hundred twenty (120) days after the receipt of a Rate Change Notice.
Significantly, the Rate Commission has the authority to recommend to the Board of Trustees that
the 120 days be extended by an additional forty-five (45) day period. Historically, in other rate
cases, the Rate Commission has recommended, and the Board of Trustees has approved, the
forty-five day extension.
Metropolitan St. Louis Sewer District ("MSD") submitted the Rate Change Notice on May 10,
2011. Without the 45 day extension, the Rate Commission will need to submit the Rate
Commission Report to the Board of Trustees on September 6, 2011. If the additional 45 days is
included in the schedule, the Rate Commission will need to submit the Rate Commission Report
to the Board of Trustees on October 21, 2011.
In preparing this document, the MIEC and BJH have carefully reviewed the Charter, the
Procedural Schedule of the Rate Commission of the Metropolitan St. Louis Sewer District for
Consideration of a Wastewater Rate Change Notice ("Procedural Schedule"), and the
Operational Rules, Regulations, and Procedures of the Rate Commission of the Metropolitan St.
Louis Sewer District ("Operational Rules"). To the best of the MIEC's and BJH's knowledge,
the following proposal adheres to the regulations and provisions outlined in the Charter, the
Procedural Schedule, and the Operational Rules. Ultimately, the goal of this revised procedural
schedule is to provide all parties with additional time to better understand the issues in this rate
case and hopefully reach agreement on some of the outstanding issues.
3648919.2 1
Wastewater and Rate Change Notice
B. Summary of the Proposed Revisions to the Schedule
The proposal is designed to build -in additional time for all parties (the Rate Commission, MSD,
and the Intervenors) to evaluate testimony and engage in discovery. The proposal also enables
the Rate Commission to take more time to deliberate and/or draft the Rate Commission Report.
Attached please find the proposed schedule. See Exhibit A. The key events appear in bold font,
and the additional forty-five days are depicted on the. calendar as well. Significantly, this
proposal mirrors the original schedule as much as possible with respect to deadlines and the
timing between events. Stated differently, this proposed schedule keeps the same relative time
frames between the events as the original schedule.
Below please find some comments regarding some of the key changes to the original schedule.
1. Submission of Rebuttal Testimony. As discussed in more detail in Section C
below, due to the magnitude of the rate proposal, the extensive capital program, the negotiations
with EPA with respect to the Consent Decree, and many other issues, it is imperative that the
Rate Commission and the Intervenors be allowed a few additional weeks to review and evaluate
MSD's testimony. By allowing more time between the Technical Conference for the Direct
Testimony and the submission of the Rebuttal Testimony, the parties will be able to engage in
more discovery, which, in turn, will focus and potentially resolve some of the issues in this rate
case. Therefore, the proposal extends the time period by twenty-six (26) days from June 22,
2011 (or the date the rebuttal testimony was originally due) to July 18, 2011.
2. Technical Conference for Rebuttal Testimony. By extending the deadline for the
submission of rebuttal testimony, the technical conference for the rebuttal testimony must also be
shifted. The Rate Commission was already planning on meeting from August 8th — August 10th
for the surrebuttal technical conference. This proposal recommends that the Rate
Commissioners conduct the rebuttal technical conference (and not the surrebuttal technical
conference) on those same dates. Hopefully these dates are still convenient for members of the
Rate Commission.
3. Public Hearings. Public hearings are already scheduled for August 16, August 18,
August 20, August 22, and August 24. If the proposed schedule is adopted, these five public
hearings are scheduled to occur after the rebuttal testimony technical conference but before the
surrebuttal testimony technical conference. Having public hearings earlier in the rate case can
only be beneficial; all of the parties will be able to better understand what issues are concerning
the public before the last technical conference. Moreover, since the hearings have already been
scheduled, we recommend conducting these hearings on these dates. Operational Rule 3(10)
requires that at least one public hearing be held after the prehearing conference. Accordingly, if
the revised schedule is adopted, at least one more hearing would have to be added to the schedule
after August 15, 2011.1
Per Section 7.280(d) of the Charter, the Rate Commission will need to publish notice of the public hearing on three
separate days in one or more newspapers of general circulation in the District at least five business days prior to the
date set for the public hearing. If the revised procedural schedule is adopted, the MIEC and BJH anticipate there
3648919.2 2
Wastewater and Rate Change Notice
4. Submission of Surrebuttal Testimony. For the same reasons discussed in Section
C below, the proposal includes two (2) additional days after the technical conference for rebuttal
testimony concludes and surrebuttal testimony has to be submitted. This provides all parties
with critically needed time to finalize testimony and continue responding to discovery, as
needed.
5. Technical Conference for Surrebuttal Testimony. In order to accommodate for
the Labor Day holiday, the technical conference for the surrebuttal testimony will begin on
September 6 if the schedule is adopted. Accordingly, the proposal builds in one (1) extra day for
the holiday weekend.
6. Prehearing Conference and Filing of Prehearing Conference Reports. These dates
are simply shifted back in the calendar by a few weeks from the original schedule.
7. Additional Time for the Rate Commission to Deliberate. The remaining sixteen
(16) days are inserted at the end of the process to allow the Rate Commission to evaluate the
issues, confer, and/or draft the Rate Commission Report. We anticipate that all parties will see
the benefit of giving the Rate Commission additional time to meet.
8. Issue Rate Commission Report. If the additional 45 days is included in the
procedural schedule, the Rate Commission will need to submit the Rate Commission Report to
the Board of Trustees on October 21, 2011, or one hundred and sixty-five (165) days from the
date that MSD submitted the Rate Change Notice.
C. Rationale for Using the Additional Time to Evaluate the Testimony
Below please find a brief summary of some of the technical reasons as to why the schedule
should be extended to include additional time for the parties to both file technical testimony and
submit and respond to discovery:
1. Magnitude of the Proposal. MSD Staff is proposing an increase in water revenues
of approximately $130 million to take place over a four-year period. This is roughly a 60%
increase in wastewater revenue collections. The details of this significant increase must be
reviewed in detail by all parties, including the Rate Commission, to protect the public in setting
MSD wastewater rates.
2. Differences from Previous Rate Proposals. While the MSD Staff has proposed a
(roughly) 60% increase in wastewater rates in prior rate filings, this rate plan is very different
because it includes a significant increase in MSD debt financing and capital programs. The
overall impact on MSD's financial standing, capital needs, and ongoing rate structure justifies a
careful review of this filing to ensure the integrity of the revenue stream, MSD financial
integrity, and MSD competitive rates.
should be no procedural problem with MSD fulfilling these publication requirements that need to be met in August
of 2011.
3648919.2 3
Wastewater and Rate Change Notice
3. Extensive Capital Program. A major factor contributing to the substantial
increase in water rates is a capital program of $1.3 billion planned to be made over the next four
years. In order to accomplish this capital program, MSD is proposing to increase the District's
debt service cost by approximately $950 million. This, in turn, will increase the District's debt
service cost by over $70 million per year, and the rate revenue capital funding by approximately
$25 million per year.
4. Consent Decree/Settlement Agreement with EPA. On June 2, 2011, MSD agreed
to the terms of a Consent Decree with EPA. It is our understanding that although the final
Consent Decree has not yet been signed by the parties, there are certain provisions that have been
agreed upon and will be formally presented to the Board of Trustees, EPA, and the other parties
to the lawsuit for approval. It is important that the details of this settlement agreement be
understood by all of the parties and the necessary capital improvement projects and time frame
are consistent with those embedded in MSD's proposed rate plan.
5. Necessary Review of Improvements and Expenses. All parties need the time to
conduct a detailed review of the capital program, the timing, and the funding mechanisms needed
to take place in the rate proposal. This detailed review includes consideration of the Consent
Decree's mandated capital improvements, normal recurring improvements, and non -Consent
Decree major improvements. Annual recurring operations and maintenance expenses and non -
Consent Decree capital programs must be reviewed to determine whether or not MSD Staff is
doing everything possible to mitigate the impact on its wastewater rates.
6. Operations and Maintenance Expenses. MSD Staffs filing also reflects a rate
increase to support a $34 million increase in its operations and maintenance expenses. This
reflects approximately a 16% annual increase in expense levels. This substantial increase in
operating expense needs to be investigated through discovery, tested in comparison to other
wastewater systems around the country, and reviewed to determine whether or not the MSD
Staff is proposing all reasonable efforts to keep operation expenses under control.
7. Sales Losses. MSD Staff's filing also reflects approximately a $3.5 million
annual loss of revenue at current wastewater rates due to sales losses. The permanent loss of this
revenue should be reviewed in discovery, and evaluations made on prospective sales level during
the period rates will be in effect. To the extent that the MSD Staff is overstating reasonable
estimates of future sales, it is understating revenue at certain rates, and inflating the claimed need
for a rate increase in this proceeding. Careful review of the sales levels will require a detailed
review of economic conditions in MSD sales territory, a review of the statistical analysis
conducted by MSD to support its sales level projections, a review of actual sales levels for
existing customers based on planning operating outlooks, and housing developments.
D. Sensitivity of the Proposed Schedule to MSD's Anticipated Bond Election
The MIEC and BJH are very sensitive to the fact that MSD Staff are preparing for a bond
election in April of 2012. If adopted, the proposed revisions to the procedural schedule will not
interfere with the bond election.
3648919.2 4
Wastewater and Rate Change Notice
On or around January 21, 2011, Jan Zimmerman of MSD prepared a "Tentative Wastewater Rate
Change Timeline" which she distributed to stakeholders in the MSD 2011 rate case ("Timeline
Document"). Attached please find a copy of the Timeline Document. See Exhibit B. Ms.
Zimmerman and her staff had the foresight to build in an additional forty-five days into the Rate
Commission Review process without affecting the schedule leading up to the bond authorization
on the ballot.
Therefore, if adopted, this proposed schedule does not impact or affect MSD's ability to place
bond authorization on the April 2012 ballot.
In short, the MIEC and BJH believe that this proposed schedule will allow the parties to engage
in meaningful discussions, discovery exchanges, and negotiations. It is in everyone's interest to
make sure that the process enables the Rate Commission to make a reasonable, appropriate, and
fair determination regarding the 2011 MSD rate case. We appreciate your consideration of this
proposal, and we are happy to answer any questions that you may have.
Respectfully submitted,
John Kindschuh, Esq.
Diana Vuylsteke, Esq.
Attorneys for the MIEC
Michael Gorman
Brubaker and Associates
Consultant to the MIEC
Dated: June 7, 2011
3648919.2 5
Lisa L-ttfigeneckert, Esq.
Sandberg, Phoenix & von Gontard, P.C.
Attorney for Barnes -Jewish Hospital
Billie Sue LaC
Drazen Consulting Group
Consultant to Barnes -Jewish Hospital
Exhibit A
June 2011
Sunday
Monday
T uesday
Wednesday
Thursday
Friday
Saturday
1
2
3
4
5
6
7
8
9
10
11
12
13
Technical
Co nference for
District testimony
and Rate Setting
Documents
14
Tech nical
Conference for
District testim ony
and Rate Setting
D ocuments
15
Technical
Confere nce for
District testimony
and Rate Setting
Documents (if
needed)
16
17
18
19
20
21
22
Additio nal Day 1
23
Additional Day 2
Additional Day 3
24
25
Additio nal Day 4
26
Additional D ay 5
27
Additional Day 6
28
Additional Day 7
29
A dditional Day 8
30
Additional Day 9
3647938. 2
1
Exhibit A
July 2011
S unday
Monday
Tuesday
Wed nesday
Th ursday
Friday
Sat urday
1
Additional Day 10
2
Additional Day 11
3
Addition al Day 12
4
4th of J uly Holiday
Additional Day 13
5
Additional Day 14
6
Additional Day 15
7
Additional Day 16
8
Additio nal Day 17
9
Additional Day 18
10
Additional Day 19
11
A dditional Day 20
12
Additional Day 21
13
Additional Day 22
14
Additional D ay 23
15
Additio nal Day 24
16
Additi on al D ay 25
17
Addition al Day 26
18
Submission of
Rebu ttal
Testimony
19
20
21
22
23
24
25
26
27
28
29
30
31
3647938. 2
2
Exhibit A
Aug ust 2011
S unday
Monday
Tuesday
Wed nesday
Thursday
Friday
Sat urday
1
2
3
4
5
6
7
Technical
Confere nce f or
Rebuttal
testimony
8
Technical
Conference for
Rebuttal
testimony
9
10
Tech nical
Co nference for
Reb uttal
testimo ny (if
needed)
11
12
13
14
15
Public Hearing'
16
17
Additional Day 27
18
Public Hearing2
Additional Day 28
Submission of
S urrebutt al
Testimony
19
20
Public Hearing3
21
Pu blic Hearing4
22
23
24
Public Heari ngs
25
26
27
28
29
30
31
' 7:00 — 9:00 p.m.; Engin eers Clu b of St. Louis, 4359 Lin dell Blvd. , St. Lou is, Missouri 63108
2 6:00 — 9:00 p.m.; City of Chesterfield, 690 Chesterfield Parkway West, Chesterfield, Missouri 63017
3 9:00 a.m. — 12:00 p. m.; Cliff Cave Bran ch Library, 5430 Telegraph Road, St. Louis, Missouri 63129
4 6:00 — 9:00 p. m.; Florissan t V alley Branch Library, 195 S. New Florissant Road, St. Lo uis, Missou ri 63031
5 6:00 — 9:00 p.m. ; Herbert Hoover Boys' & G irls' Club, 2901 No rth G rand, St. Lou is, Missou ri 63107
3647938.2 3
Exhibit A
September 2011
S unday
Monday
Tuesday
Wednesday
Thursday
Friday
Sat urday
1
2
3
4
5
Labor Day
Holiday
Additional Day 29
Technic al
Conference for
S urrebuttal
testimony
6
Technical
Conference for
Surreb uttal
testimony
7
Tech nical
Conference for
Surreb uttal
testimony (if
needed)
8
9
10
11
12
13
14
Prehearing
Confere nce
15
16
17
18
19
*Need to Schedule
At Least 1 Public
Hearin g After the
Prehearing
Co nference.'
20
21
Filing of
Prehearing
Conference
Reports
22
Possible Rate
C ommissi on
Meeting
23
24
25
26
Possible Ra te
Commission
27
Meetin g —3
28
Possible Rate
29
Commission
Meeti ng
30
6 See O peratio nal Rule 3(10). The pu blic hearin g must occu r after the prehearing conferen ce has con clu ded on September 15, 2011.
3647938.2 4
Exhibit A
October 2011
Sunday
Monday
T uesday
Wedn esday
Thursday
Friday
Saturday
1
2
3
Possible Rate
Commissio n
Meeting
4
5
Additional Day 30
6
Additional Day 31
7
Additi onal Day 32
8
Additio nal Day 33
9
A dditional Day 34
10
Additional D ay 35
11
Additio nal Day 36
12
Additi onal Day 37
13
Additional Day 38
14
Additio nal Day 39
15
Additio nal Day 40
16
Addition al Day 41
17
Additional Day 42
18
A ddition al D ay 43
19
Additio nal Day 44
20
Additional Day 45
21
Iss ue Report to
Board Tr ustees'
22
23
24
25
26
27
28
29
30
31
7 MSD submitted the Rate Chan ge Notice to the Rate Co mmission on May 10, 2011, and this submittal began the 120 day peri od . With out the 45 (forty-five) day
exten sion , the Rate Commission will n eed to su bmit the Rate Co mmission Report to the Board of Trustees on September 6, 2011. With the additi onal 45 (forty-five)
days, the Rate Co mmission will n eed to submit the Rate Commission Report to the Bo ard of Trustees on October 21, 2011.
3647938.2 5
Tentative Wastewater Rate Change Timeline (4 Year Plan FY13 — FY16)
Rate Comm
Meeting
(Procedltral
Prep, Con sultan t
RRPs)
Intro & A dopt
4-14-11
Assumes RFPs
Issued 2-1-11
1-21-11
Additio nal Meetings as
Required
4 (3 Months)
45 Day
Mandatory
Waiting
Period
Completed
11-27-11
(1.5 Mo. )
Exhibit B Ja nuary 21, 2011
Rate
Proposal
To Rate
Commissi on
Rate Comm.
Meeti ng
5-2-11
MSD
Publish Rate
Notice
3 Days
( 5-2-11 Thru
5-4-11) (at least 1 Public Hearing required
after preheari ng c onference)
Rate C omm
Public Hear.
Notice 5 days.
Prior
Rate Commission
Review
Consideration
Completed
8-29-11
120 Days
(4 Mo.)
Additional
Rate Comm.
Time if
needed
Completed
10-13-11
45 Days
(1 .5 . Mo .)
Rate Commissio n Review
(5 .5 Months)
BoT Meeting
10-13-11
Completed
1-4-12
(1 Mo.)
Completed
Complet ed
4-12-12
(0.5 Mo .)
Bo T introduces
WW Rate Increase &
Bond Election
Ordinance
BoT Meeting
12-8-11
(.5 Mo. )
Required
Public
Hearing
1-5-12
Completed
4-3-12
(3 Mo .)
--►
Public Hearin gs & Introducti on / Adoption
(5.0 Months)
Total Length of Time: A pproximately 15.5 months
Wastewater R ate Increase Implementation : 4-28-12 (earliest after Ado ptio n)
❑ Public N otices/Hearings. ❑ Rate Commission work
BoT In vo lvement
New
Wastewater
New Rates
lmples nenled
4-28-12
Earliest
Implementation
(0.5 Mo .)
* Adoption of o rdinance n eeded by 1/5/12 to place b ond auth orization on April 2012 ballot.