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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.