HomeMy Public PortalAboutExhibit MIEC 102 - MIEC Rebuttal Testimony of Michael GormanWastewater and Stormwater Rate Change Proceeding — 2015
Rebuttal Testimony Submitted by Intervenor MIEC
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
For Consideration of a Wastewater
And Stormwater Rate Change Proposal
By the Rate Commission of the Metropolitan
St. Louis Sewer District
REBUTTAL TESTIMONY SUBMITTED BY INTERVENOR
MISSOURI INDUSTRIAL ENERGY CONSUMERS
Pursuant to Section 3(6) of the Operational Rules, Regulations and Procedures of the
Rate Commission of the Metropolitan St. Louis Sewer District, Intervenor Missouri Industrial
Energy Consumers submits the attached written testimony prepared by Mr. Michael P. Gorman.
Dated: May 11, 2015
Respectfully submitted,
BRYAN CAVE LLP
By:
ana M. Vuylsteke, #422 19
Brandon W. Neuschafer, #53232
211 N. Broadway, Suite 3600
St. Louis, Missouri 63102
Telephone: (314) 259-2543 (Diana)
Telephone: (314) 259-2317 (Brandon)
Facsimile: (314) 259-2020
dmvuylsteke@bryancave.com
bwneuschafer@bryancave.com
ATTORNEYS FOR MIEC
1
Wastewater and Stormwater Rate Change Proceeding — 2015
Rebuttal Testimony Submitted by Intervenor MIEC
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to the following on this 11th day of May, 2015.
Ms. Janice Fenton
Office Associate Senior
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
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Ms. Susan Myers
General Counsel
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103
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Mr. John Fox Arnold
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
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Ms. Lisa O. Stump
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
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Mr. Brad Goss
Smith Amundsen, LLC
120 South Central Avenue, Suite 700
St. Louis, MO 63105-1794
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2
BEFORE THE
RATE COMMISSION OF
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2015 WASTEWATER AND STORMWATER
RATE CHANGE PROCEEDING
Rebuttal Testimony and Schedules of
Michael P. Gorman
On behalf of
Missouri Industrial Energy Consumers
May 11, 2015
Project 10040
Exhibit No.:
Witness:
Type of Exhibit:
Sponsoring Party:
Date Testimony Prepared:
Michael P. Gorman
Rebuttal Testimony
Missouri Industrial Energy Consumers
May 11, 2015
Michael P. Gorman
Table of Contents
BRUBAKER & ASSOCIATES, INC.
BEFORE THE
RATE COMMISSION OF
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2015 WASTEWATER AND STORMWATER RATE CHANGE PROCEEDING
Table of Contents to the
Rebuttal Testimony of Michael P. Gorman
Page
I. SUMMARY .............................................................................................................................. 2
II. THE PUBLIC HAS BENEFITTED BY THE RATE COMMISSION’S SUCCESSFUL
OVERSIGHT OF MSD WASTEWATER RATES .................................................................... 9
III. WASTEWATER FINANCIAL PLAN COST OF SERVICE ADJUSTMENTS ....................... 10
III.A. Wastewater Volume Adjustment .............................................................................. 10
III.B. CIRP PAYGO Funding ............................................................................................... 17
III.C. O&M Expense Adjustment ........................................................................................ 19
III.D. Other Revenue Adjustments .................................................................................... 20
IV. STORMWATER RATE INCREASE PROPOSAL ................................................................ 23
Qualifications of Michael P. Gorman ...................................................................... Appendix A
Schedules MPG-1 through MPG-4
Michael P. Gorman
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BRUBAKER & ASSOCIATES, INC.
BEFORE THE
RATE COMMISSION OF
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2015 WASTEWATER AND STORMWATER RATE CHANGE PROCEEDING
Rebuttal Testimony of Michael P. Gorman
Q PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 1
A Michael P. Gorman. My business address is 16690 Swingley Ridge Road, Suite 140, 2
Chesterfield, MO 63017. 3
Q WHAT IS YOUR OCCUPATION? 4
A I am a consultant in the field of public utility regulation and a Managing Principal of 5
Brubaker & Associates, Inc., energy, economic and regulatory consultants. 6
Q PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND EXPERIENCE. 7
A This information is included in Appendix A to this testimony. 8
Q ON WHOSE BEHALF ARE YOU APPEARING IN THIS PROCEEDING? 9
A I am appearing on behalf of the Missouri Industrial Energy Consumers (“MIEC”), a 10
group of large industrial customers of the Metropolitan St. Louis Sewer District 11
(“MSD” or “District”). 12
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BRUBAKER & ASSOCIATES, INC.
I. SUMMARY 1
Q PLEASE SUMMARIZE MSD’S PROPOSED WASTEWATER RATE1 INCREASE 2
PROPOSAL. 3
A MSD is proposing four consecutive increases to its wastewater service charges at the 4
beginning of Fiscal Years (“FY”) 2017 through FY 2020. The District is proposing 5
these rate increases in order to fund a four-year wastewater Capital Improvement and 6
Replacement Program (“CIRP”) of approximately $1.5 billion. This CIRP is part of a 7
larger CIRP needed to comply with a Consent Decree (“CD”) settlement with the U.S. 8
Environmental Protection Agency (“EPA”). 9
MSD projects the wastewater user charges necessary to produce adequate 10
rate revenue funding in order to fund this CIRP with increased senior revenue bonds, 11
and state revolving funds proceeds, and approximately 72.4% debt and 27.6% other 12
funding sources,2 including current rate revenue (i.e., PAYGO) funding. MSD’s 13
projections also reflect forecasts for changes in billing units, number of customers, 14
reductions in other revenue sources, and large escalation in operation and 15
maintenance (“O&M”) expenses. 16
The wastewater user charges MSD proposes the Rate Commission approve 17
are listed in Exhibit MSD 1 at page ES-5. These proposed wastewater user charges 18
are included in the “Proposed” columns for FY17 through FY20 and are summarized 19
in my Table 1 below. 20
1The terms “wastewater rates” and “wastewater user charges” are used interchangeably
throughout this testimony.
2$1.105B debt/$1.527B CIRP, Exhibit MSD 1, page 4-16, Table 4-8.
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TABLE 1
MSD Wastewater User Charges
Approved Proposed
Line Type of Charge(a) FY15 FY16 FY17 FY18 FY19 FY20
Effective Date 7/1/2014 7/1/2015 7/1/2016 7/1/2017 7/1/2018 7/1/2019
Base Charge ($/Bill)
1 Billing & Collection Charge $3.55 $3.70 $5.47 $6.06 $6.72 $7.45
2 System Availability Charge $12.70 $14.55 $14.05 $15.57 $17.25 $19.11
3 Total: Base Charge (Residential) $16.25 $18.25 $19.52 $21.63 $23.97 $26.56
Compliance Charge ($/Bill)(b)
4 Tier 1 $9.00 $2.15 $2.86 $2.95 $3.05 $3.14
5 Tier 2 $43.55 $44.50 $57.20 $58.94 $60.89 $62.61
6 Tier 3 $92.75 $94.80 $125.84 $129.67 $133.96 $137.75
7 Tier 4 $136.00 $139.00 $185.90 $191.56 $197.90 $203.49
8 Tier 5 $179.25 $183.15 $243.10 $250.50 $258.79 $266.10
9. Total Non-Residential Charge(c) $25.25 $20.40 $22.38 $24.58 $27.02 $29.70
Volume Charge
10 Metered ($/ccf) $2.82 $3.21 $3.60 $3.99 $4.42 $4.90
Unmetered ($/Bill per fixture)
11 Per Room $1.83 $2.09 $2.13 $2.36 $2.62 $2.91
12 Per Water Closet $6.88 $7.83 $7.94 $8.80 $9.75 $10.80
13 Per Bath $5.73 $6.53 $6.62 $7.34 $8.13 $9.01
14 Per Separate Shower $5.73 $6.53 $6.62 $7.34 $8.13 $9.01
Extra Strength Surcharges ($/ton)(b)
15 Suspended Solids over 300 mg/l $244.03 $251.88 $262.00 $269.97 $278.90 $286.78
16 Biochemical Oxygen Demand over 300 mg/l $620.14 $632.38 $658.00 $678.01 $700.43 $720.20
17 Chemical Oxygen Demand over 600 mg/l $310.07 $316.19 $329.00 $339.01 $350.22 $360.11
________________________
ccf = hundred cubic feet (approx. 748 gallons)
mg/l = milligram per liter
(a) These rates were judged by courts to be user charges that are not subject to the requirements of the Hancock
Amendment. Rates for qualified low-income customers were established at 50% of the general service charge.
(b) Applicable only to non-residential customers.
(c) Total for base service charge and Tier 1 compliance (line 3 + line 4).
The rate increase escalators used by MSD to produce the requested 1
wastewater user charges are shown in Table 2 below: 2
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BRUBAKER & ASSOCIATES, INC.
TABLE 2
MSD Proposed Wastewater Rate Escalators
Description FY17 FY18 FY19 FY20
Base Charge 10.75% 10.75% 10.75% 10.75%
Compliance Charge 2.96% 3.04% 3.31% 2.82%
Volume Charge 10.75% 10.75% 10.75% 10.75%
Extra Strength Surcharges 2.96% 3.04% 3.31% 2.82%
______________
Source: Exhibit MSD 79, Revenue Proof, lines 167-171, Columns T-W.
Q ARE MSD’S PROPOSED INCREASES IN ITS WASTEWATER RATES 1
REASONABLE? 2
A No. These rates are unreasonable for several reasons including the following: 3
1. The wastewater user charges shown in Exhibit MSD 1 are not correct. MSD 4
appears to have made an error in recording the wastewater user charges listed in 5
its rate change proposal (Exhibit MSD 1) and the wastewater user charges used 6
to produce its Wastewater Financial Plan forecast. The proposed wastewater 7
user charges shown in Exhibit MSD 1, Table ES-2 are higher than the rates used 8
in the financial plan. Therefore, the wastewater user charges shown in Exhibit 9
MSD 1, Table ES-2 should be corrected. A comparison of the wastewater user 10
charges listed in Exhibit MSD 1, Table ES-2 and those used to forecast 11
wastewater revenue in MSD’s financial plan is shown on my Schedule MPG-1. 12
2. MSD’s proposed wastewater charges are also unreasonable because they are 13
based on imbalanced or unreasonable assumptions used in its wastewater 14
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BRUBAKER & ASSOCIATES, INC.
financial plan. The District financial forecast is summarized on Table 4-10, page 1
4-22 of Exhibit MSD 1. The unreasonable assumptions include the following: 2
Wastewater Sales Volume 3
a. MSD’s revenue forecast understates revenue at current rates because it is 4
reflecting a decrease in number of customer accounts, and an unreasonably 5
large projected continued decline to volume use per customer concerning 6
wastewater volume sales. This wastewater volume sales understatement also 7
results in an inflated wastewater volume charge because MSD is proposing to 8
spread its cost of service over an unreasonably low estimate of its wastewater 9
volume sales. 10
PAYGO Financing 11
b. MSD’s CIRP program enters the highest period over the CD projected 12
program starting in FY20. During this time period, because it represents four 13
of the highest projected capital spend years in the CD compliance plan period, 14
I am recommending a modification to the amount of PAYGO funding for 15
programs during the four-year period FY20-FY23. During this period, I 16
recommend increasing the amount of CIRP funded by debt to be at least 80% 17
which is higher than the target MSD is using of 75% debt. After the peak 18
CIRP (FY20-FY23) it would be reasonable to set the PAYGO percentage 19
based on what is needed to produce target debt service coverage ratios and 20
manage rate impacts. 21
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Other Revenue 1
c. I am also proposing several adjustments to MSD’s projected level of “Other 2
Revenue.” These adjustments include: 3
I decreased MSD’s projected negative Other Revenue item to account for 4
uncollectible wastewater bill collection. Historically, MSD’s bad debt 5
provision has been approximately equal to 1.0% of its wastewater usage 6
charges. However, for the forecast period, MSD assumed that this bad 7
debt provision as a percentage of wastewater charges would increase to 8
1.5%. This significantly increased the bad debt provision which is 9
recorded as a negative Other Revenue component. I recommend 10
maintaining the bad debt provision equal to 1.0% of wastewater bills, 11
consistent with historical actual costs. This will increase Other Revenue. 12
The District’s projected revenue from Late Charges should increase in 13
accordance with the increase in its projected customer bills. The Late 14
Charge rate is based on the principal amount of late payments. I revised 15
MSD’s projected escalation of its Late Charge Revenue from 1.0% per 16
year as proposed by MSD up to the projected increase in its proposed 17
wastewater user charges over the forecast period. 18
I increased the amount of Waste Hauler Permit revenues from MSD’s 19
projected level of $670,000 per year over the forecast period, to the 20
average of the actual amount of these other revenues incurred during 21
2010-2015 excluding 2014 because it appeared to be an outlier year. 22
This increased Other Revenue for Waste Hauler Permits up to 23
$1.4 million. 24
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BRUBAKER & ASSOCIATES, INC.
O&M Escalators 1
d. I also adjusted downward some of MSD’s projected operating expenses. 2
These adjustments include the following: 3
I decreased the utility expense escalation rate from 5.5% a year down to 4
3.0% every two years, starting in FY16. My recommended utility expense 5
escalation rate is based on Ameren Missouri’s projected increase in its 6
electric utility rates, and considers offsets to utility expense caused by 7
declining volume sales by MSD. This adjustment also recognizes utilities’ 8
typical adjusted prices over two years rather than every year. There are 9
also limitations on the planned number of base gas rate filings during this 10
time period, which would limit increases in natural gas utility service 11
charges. 12
Q REFLECTING ALL OF YOUR ADJUSTMENTS TO THE DISTRICT’S FINANCIAL 13
FORECAST, CAN YOU DESCRIBE THE IMPACT ON THE ESCALATION OF 14
RATES NECESSARY TO RECOVER YOUR FORECAST OF MSD’S COST OF 15
SERVICE OVER THE FORECAST FY17-FY20 PERIOD? 16
A Yes. The escalation in utility rates is outlined in the escalation table as shown below 17
in Table 3. 18
Michael P. Gorman
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BRUBAKER & ASSOCIATES, INC.
TABLE 3
MIEC Proposed Wastewater Rate Escalators
Description FY17 FY18 FY19 FY20
Base Charge 9.00% 9.00% 9.45% 9.45%
Compliance Charge 2.49% 2.83% 2.83% 2.60%
Volume Charge 9.00% 9.00% 9.45% 9.45%
Extra Strength Surcharges 2.49% 2.83% 2.83% 2.60%
______________
Source: Schedule MPG-2.
A summary of the Wastewater Financial Plan with these adjustments is shown 1
on my Schedule MPG-2, page 1, along with proposed adjusted wastewater user 2
charges on page 2. Please note that this is approximately a 10% to 15% decline in 3
the escalators used by MSD to produce its proposed wastewater user charges during 4
the forecast period. 5
Q BASED ON YOUR REVISED REDUCED RATES, WILL MSD’S CREDIT METRICS 6
AND FINANCIAL STRENGTH BE ADEQUATE TO SUPPORT ITS LARGE CIRP 7
PROGRAM? 8
A Yes. Based on my projected revised cost of service and financial outlook, MSD will 9
maintain total debt service coverage of at least 1.8x, and senior debt coverage 10
always exceeding 2.45x. Further, MSD will always maintain considerably more cash 11
on hand than needed to meet 60 days of next year’s O&M expenses and cash 12
reserve target for MSD. With these credit metrics, my proposed revised rates will 13
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support MSD’s Aa1/AAA/AA+3 bond ratings from Moody's, Standard & Poor’s (“S&P”) 1
and Fitch, respectively, and continued access to low cost revenue bond funds that 2
are needed to support MSD’s major CIRP program. 3
I have also included a list of all adjustments made to MSD’s Financial Model 4
used to derive my recommended wastewater user rates. 5
II. THE PUBLIC HAS BENEFITTED BY THE RATE COMMISSION’S 6
SUCCESSFUL OVERSIGHT OF MSD WASTEWATER RATES 7
Q HAS THE PUBLIC BENEFITTED FROM THE RATE COMMISSION’S 8
SUCCESSFUL OVERSIGHT OF MSD’S RATE INCREASE REQUEST? 9
A Yes. The Rate Commission has carefully reviewed MSD’s Staff’s requested rate 10
increases. In the last two rate cases, MSD’s proposed rates were reduced by 5% to 11
10%. This is shown on my Schedule MPG-3. For example, for the period FY13-12
FY16, MSD received approximately 95% of its requested increase in rates. For the 13
period FY09-FY12, MSD only received approximately 90% of the increase in rates it 14
proposed to put into effect. These reductions in MSD’s rate increase requests have 15
benefitted the public by reducing their cost of sewer service, and supported local 16
businesses’ and households’ ability to meet other financial obligations. 17
Q WITH THESE ADJUSTMENTS TO ITS PROPOSED RATES, HAS MSD BEEN 18
ABLE TO MEET ITS PLAN TO COMPLY WITH THE CD OBLIGATIONS? 19
A Yes. MSD witness Susan Myers, MSD’s General Counsel, stated at the rate hearing 20
that MSD is on track, and under budget, for meeting the CD obligations.4 21
3MSD Popular Annual Financial Report FY14, at 17.
4Exhibit MSD 96, p. 12, lines 14-17.
Michael P. Gorman
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BRUBAKER & ASSOCIATES, INC.
I point this out simply to encourage the Rate Commission to continue to 1
critically review MSD’s Financial Plan to eliminate unreasonable cost estimates that 2
again be used to identify and establish wastewater user rates that are no higher than 3
necessary to permit MSD to continue to fund CIRP and meet its CD obligations on 4
budget and on target. 5
III. WASTEWATER FINANCIAL PLAN COST OF SERVICE ADJUSTMENTS 6
III.A. Wastewater Volume Adjustment 7
Q PLEASE DESCRIBE MSD’S PROJECTIONS OF CONTRIBUTED WASTEWATER 8
VOLUMES AND THE NUMBER OF CUSTOMER ACCOUNTS DURING THE 9
PERIOD FROM FY17-FY20. 10
A MSD is projecting a decline in contributed wastewater volumes each year from FY16 11
and beyond. On a percentage basis, the annual decrease projected for residential 12
customers, both metered and unmetered, ranges from 0.2% - 0.3%. The forecasted 13
decrease in wastewater volumes for non-residential customers is 1.1% per year. 14
In addition to forecasting a decline in annual wastewater volumes, MSD is 15
also projecting a decrease in the number of customer accounts. MSD projects that 16
the number of residential customer accounts will decrease by 0.1% and the number 17
of non-residential customer accounts will decrease by 0.6% per year.5 18
Q ARE THESE PROJECTIONS REASONABLE? 19
A No. MSD’s projected wastewater volumes and customer accounts over the forecast 20
period are overly pessimistic and are not a reasonable outlook of expected 21
wastewater volume billing units (i.e., sales) during this forecast period. While the 22
5Exhibit MSD 79, Inputs, lines 323-328, Columns T-W.
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number of customer accounts has been decreasing recently, economic data shows 1
much stronger economic activity going forward in MSD’s service territory, which could 2
add accounts to MSD’s system via increased property additions. Further, I do not 3
dispute the downward trend in use per customer account created by conservation, 4
however MSD’s projections show an unusually large decrease in FY17 use per 5
customer account which downwardly biases the projected level of consumption 6
during the financial plan time period. Smoothing the declining use per customer 7
account volumes over the period FY16-FY20 by mitigating the steep projected 8
decline in FY17 produces a more reasonable estimate of expected wastewater 9
volumes per account. 10
Q PLEASE OUTLINE THE INFORMATION THAT SUPPORTS YOUR BELIEF THAT 11
MSD WILL NOT CONTINUE THE SAME REDUCTION IN CUSTOMER ACCOUNTS 12
OVER THE FORECAST PERIOD. 13
A According to a February 2015 Moody’s Analytics report for the Saint Louis area, the 14
number of new single-family housing permits is expected to more than double from 15
4,336 in 2014, to 9,837 by 2016, and remain in the range of 9,100 – 9,700 each year 16
through 2019. The number of new multi-family housing permits is also expected to 17
increase. The report indicates that new multi-family housing permits are projected to 18
increase from 2,388 in 2014 to 3,576 in 2016, and will decrease back to about 2,400 19
by 2019. 20
These economic indicators suggest that the Saint Louis economy is improving 21
and that more people will be attracted to the area. This means that MSD could 22
actually see an increase in the number of customer accounts it serves, along with an 23
increase in the volume of wastewater it must treat. 24
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BRUBAKER & ASSOCIATES, INC.
Based on this data, and the reasons discussed in my previous response, I 1
believe that MSD has overstated the annual decline in both the number of customers, 2
and contributed wastewater volumes, and its projections should be revised. 3
Q PLEASE EXPLAIN HOW YOU REVISED MSD’S PROJECTED NUMBER OF 4
CUSTOMER ACCOUNTS THROUGHOUT FY17-FY20. 5
A As described earlier in my testimony, MSD projected an annual decline in the number 6
of residential and non-residential customer accounts of 0.1% and 0.6% per year, 7
respectively. Rather than continuing the decline, I have updated MSD’s Rate Model 8
to maintain the FY16 customer account numbers throughout the forecast period. This 9
is a conservative approach to estimating the number of MSD customer accounts 10
going forward, given that the previously described economic indicators point to a 11
possible increase in accounts in the Saint Louis area. 12
Q PLEASE EXPLAIN WHY YOU BELIEVE MSD’S PROJECTED VOLUMES ARE 13
DOWNWARDLY BIASED DUE TO PROJECTED DECLINES FOR FY17, AND 14
EXPLAIN HOW YOU PROPOSE TO CORRECT THIS PROJECTION OF 15
WASTEWATER VOLUMES. 16
A As shown in Table 4 below, lines 1 and 2, I show MSD’s proposed projected average 17
use per customer account for actual use in FY13 and FY14, and projected for FY15 18
and FY16 used in rates already approved, and MSD’s projection for the financial 19
model forecast period of FY17-FY20. As shown on line 2, MSD’s projections show a 20
significant decline in wastewater volume per account in FY17 (2.1%) and a decline in 21
volume per account in FY18-FY20 of (0.4%). The decline in FY17 is much more 22
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significant than MSD’s projected decline for FY18-FY20. MSD has not supported the 1
drastic one-time volume decline estimate for FY17. 2
TABLE 4
Average Use Per Account (Ccf)
Actual Forecast Rate Year Forecast
Line Description FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
1 MSD Proposed1 159.9 149.0 157.2 156.3 153.1 152.5 151.9 151.2
2 Annual Change -6.8% 5.5% -0.6% -2.1% -0.4% -0.4% -0.4%
3 Gorman Adjusted2 159.9 158.6 157.3 156.4 155.7 155.1 154.5 153.9
4 Annual Change -0.8% -0.8% -0.6% -0.4% -0.4% -0.4% -0.4%
_____________
Notes:
1Exhibit MSD 1, Table 4-3, line 11 divided by Table 4-2, line 12.
2Reflects adjusted numbers of customers and adjusted wastewater volumes.
Q HOW DID YOU ADJUST MSD’S PROJECTED USE PER CUSTOMER IN 3
FORECASTED WASTEWATER VOLUMES? 4
A As shown on lines 3 and 4 of Table 4 above, my proposed adjusted level of use per 5
customer account versus MSD’s projected (0.4%) declined in FY18-FY20 over the 6
entire forecast period. My adjustment mitigates MSD’s unsupported large decline in 7
use per account in FY17, and replaces it with a linear decline that is consistent with 8
MSD’s projections for the FY18-FY20 forecast period. 9
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FIGURE 1
Q HOW DID YOU CALCULATE THE REVISED ANNUAL WASTEWATER VOLUMES 1
FOR METERED AND UNMETERED CUSTOMERS? 2
A After determining the annual use per customer account that met the target linear 3
decline, I multiplied the average use per account values by the projected number of 4
customer accounts each year to obtain the total annual wastewater volumes for 5
metered and unmetered customers. For FY17-FY20, this calculation reflects the 6
FY16 number of customer accounts. 7
The total metered wastewater volumes were then allocated between Single 8
Family, Multi-family, and Non-Residential customers in the same proportions reflected 9
61,000,000
62,000,000
63,000,000
64,000,000
65,000,000
66,000,000
67,000,000
68,000,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020CcfMetropolitan St. Louis Sewer District
Projected Annual Wastewater Volumes
MSD Projected
Gorman Adjusted
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in MSD’s projections. After deriving adjusted metered sales volumes, new annual 1
growth rates were calculated, and applied to MSD’s Rate Model. 2
The total unmetered wastewater volumes each year were also allocated 3
between Single Family and Multi-family customers using the same proportions 4
reflected in MSD’s projections. The volumes were then further divided between 5
billable units, which consist of rooms, water closets, baths and separate showers. 6
Next, the quantities of each billable unit required to produce the allocated wastewater 7
volumes were determined by converting the volumes from Ccf to gallons, and then 8
applying a “fixture usage per unit” factor, which is discussed in the next section of my 9
testimony. I then calculated the annual growth rates in the quantity of billable units. 10
Lastly, these growth rates were applied to MSD’s Rate Model. 11
Q PLEASE DISCUSS THE “FIXTURE USAGE PER UNIT” FACTOR MENTIONED IN 12
YOUR PREVIOUS RESPONSE. 13
A Unmetered sales are estimated based on the number of billable units, and the 14
corresponding fixture usage per unit. Billable units consist of rooms, baths, water 15
closets and separate showers. MSD has assigned a fixture usage per unit factor to 16
each type of billable unit, which is used to calculate wastewater volumes for 17
unmetered customers. 18
In addition to projecting a continued decline in the number of billable units for 19
unmetered customers, MSD has decreased the applicable fixture usage per unit 20
values beginning in FY17. The changes in fixture usage per unit values are shown in 21
Table 5 below. 22
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TABLE 5
MSD Fixture Usage Per Unit Value
(Gallons Per Day)
Billable Unit Up to FY16 FY17 and Beyond
Rooms 16 14.5
Water Closets 60 54.2
Baths 50 45.2
Separate Showers 50 45.2
By decreasing both the number of billable units and the fixture usage per unit 1
values shown above, MSD could be significantly overstating the decline in unmetered 2
wastewater volumes. My revised unmetered wastewater volumes reflect a 3
continuation of the FY16 fixture usage per unit values through FY20, rather than 4
accept MSD’s projected material decline. 5
MSD’s unjustified projections shift more wastewater costs allocated on volume 6
to metered customers from non-metered customers. This shift could result in MSD 7
collecting more revenue if its projections of volume to metered customers understate 8
its actual metered billable volume. By understating volume for metered customers, 9
MSD has the opportunity to collect more wastewater revenue over the forecast 10
period. In contrast, by understating the amount of volume for non-metered 11
customers, MSD does not have this same opportunity because non-metered 12
customers are charged a fixed rate. That is, non-metered customers’ bills are not 13
impacted by actual wastewater volume. 14
For this reason, I encourage the Rate Commission to carefully consider the 15
accuracy of MSD’s volume projections in development of its wastewater rates. 16
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III.B. CIRP PAYGO Funding 1
Q HAVE YOU REVIEWED MSD’S PROPOSED CIRP AND FUNDING PLAN? 2
A Yes. MSD’s proposes CIRP increases from less than $300 million in FY16 to over 3
$400 million by FY20. The CIRP projections show planned capital expenditures in 4
excess of $400 million each year for the period FY20-FY23. This nearly doubling of 5
annual capital expenditures will create a significant financial challenge for MSD and 6
will cause significant increased rate pressure on its wastewater customers. To the 7
extent these peak CIRP capital expenditures can be moderated in FY20-FY23, the 8
financial stress on MSD would be mitigated and rate pressure on its wastewater 9
customers would be reduced. 10
I cannot say for certain that MSD has the discretion to reduce planned CIRP 11
capital expenditures in FY20-FY23 to lower its funding needs, and moderate financial 12
strains and rate pressure. Nevertheless, it is important for MSD to exercise every 13
opportunity to mitigate the wastewater user charge impacts on its customers due to 14
the planned CIRP program in general but especially during this peak CIRP funding 15
period (FY20-FY23) for CD compliance. 16
Rate increases can be moderately mitigated by reducing the amount of 17
PAYGO as a percentage of total CIRP expenditures during the peak CIRP periods of 18
FY20-FY23. During this time period, I recommend MSD increase the amount of bond 19
funding for its CIRP funding, and reduce the amount of PAYGO revenue. This will 20
reverse later in the CIRP plan period as MSD approaches the end of its CIRP 21
program, and its existing bond issues start to mature and reduce the amount of 22
embedded debt service obligations for MSD toward the end of the forecast period. 23
With this as a background, I propose to modify the PAYGO amount starting in 24
FY20 to only $100 million. While this is a reduction from MSD’s proposal, it 25
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represents a 2.5x increase in the amount of PAYGO funding approved in MSD’s last 1
rate case (increasing up to $40 million per year). Hence, this is a significant increase 2
in PAYGO funding, and the CIRP program can be supported with larger amounts of 3
debt and still meet the financial and credit rating targets needed to maintain strong 4
credit standing of MSD. Again, this elevated level of capital expenditures forecasted 5
for FY20-FY23 is a relatively short-term period, which can support a reduced level of 6
PAYGO funding as a percentage of total CIRP. For these reasons, I am proposing a 7
reduction in the amount of PAYGO funding in FY20 from $110 million as proposed by 8
MSD, to $100 million. I am also recommending a corresponding increase in the 9
amount of debt issuance expense toward the end of this forecast period. 10
As shown below in Table 6, this results in a percentage of PAYGO funding to 11
CIRP decreasing from FY20 from the 25% proposed by MSD, down to 23%. This will 12
require an increase in the revenue bond issuances to make up the $10 million 13
shortfall in PAYGO funding for FY20. 14
TABLE 6
CIRP Budget vs. PAYGO
($ Millions)
Description FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26
CIRP $241 $333 $347 $373 $439 $419 $458 $463 $377 $394 $384
MSD PAYGO $40 $70 $81 $99 $110 $132 $150 $178 $225 $189 $172
% PAYGO 17% 21% 23% 27% 25% 32% 33% 39% 60% 48% 45%
Gorman PAYGO $40 $70 $81 $99 $100 $100 $100 $100 NA NA NA
% PAYGO 17% 21% 23% 27% 23% 24% 22% 22% NA NA NA
____________
Source: Exhibit MSD 79 Rate Model.
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As shown in Table 6 above, after the peak period ends in FY23, I suspect debt 1
service coverage requirements will dictate the amount of PAYGO funding. 2
Specifically, in order to maintain a minimum debt service coverage of around 1.8x will 3
likely require an increase to the amount of PAYGO funding in order to meet this bond 4
and credit strength target. Increasing the amount of PAYGO at that time will help 5
MSD pay down its embedded debt over the end period of the CIRP program, which 6
will improve its financial strength many decades down the road. This adjustment in 7
this case reduces MSD’s wastewater user charges while maintaining very strong 8
financial metrics. 9
III.C. O&M Expense Adjustment 10
Q PLEASE DESCRIBE MSD’S PROJECTION OF THE FUTURE UTILITY EXPENSES. 11
A In its Wastewater Financial Plan, MSD made projections of its utility expenses
assuming an annual escalation factor of 5.5%.
Q DO YOU BELIEVE IT IS REASONABLE TO INCLUDE A UTILITY EXPENSE 12
ANNUAL ESCALATION FACTOR OF 5.5%? 13
A No. MSD’s utility expense annual escalation factor should generally coincide with 14
outlooks by utility companies of the services that they will provide to MSD. Ameren 15
Missouri’s projected growth in its cost of service largely is tied to its rate base 16
investments and rate case cycle. Ameren Missouri in a recent investor report states 17
that it projects its rate base to grow by approximately 2.0% through year-end 2019, or 18
halfway through MSD’s FY20.6 Laclede Gas Company after a merger with Missouri 19
6Ameren investor presentation: “Powering Growth,” MUFG Spring Utility Day, April 1, 2015.
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Gas Energy has agreed to a rate stay-out ending on October 1, 2015.7 Hence, there 1
will be no change in its delivery charges up through this date. 2
Q RECOGNIZING THESE UTILITY PROJECTIONS OF RATE CHANGES, WHAT 3
ESCALATOR FOR UTILITY EXPENSES DO YOU BELIEVE IS REASONABLE? 4
A I recommend using an escalation rate of 3.0% every other year (i.e., every 5
24 months) to track what the likely growth in utility expenses for MSD will be. While 6
Laclede Gas Company (“Laclede”) may make a rate filing before the forecasted 7
period ends, it is not clear whether or not there will be a significant change in its 8
delivery service rates. Further, natural gas and commodity prices charged by Ameren 9
Missouri and Laclede currently do not expect significant increases over the forecast 10
horizon. Therefore, I believe a reasonable and conservative projection for escalation 11
in utility expenses is 3.0% every other year. 12
III.D. Other Revenue Adjustments 13
Q ARE YOU TAKING ISSUE WITH ANY OTHER REVENUE PROJECTIONS MADE 14
BY MSD IN ITS WASTEWATER FINANCIAL FORECAST? 15
A Yes. I am proposing changes to the District’s proposed: 16
1. Bad debt provision, 17
2. Late Charges, and 18
3. Waste Hauler Permit. 19
7As part of the Stipulation in Case No. GM-2013-0254, Laclede agreed to a rate moratorium,
prohibiting it from filing a rate case until October 1, 2015. In the event Laclede does file a rate case in
October, rates would not go in effect until no earlier than September 2016. Gas Utilities in Missouri
can file for an Infrastructure System Replacement Surcharge (“ISRS”) to raise customer rates between
rate cases to collect for the additions of new plant which does not increase the gas utility’s revenues.
A gas utility cannot raise its ISRS rates more than 3-4% of total gas revenues (10% of non-gas
revenues). A gas utility can stay out of filing its next rate case for almost seven years, depending on
when it files its first ISRS following a rate case. Based on Laclede’s last rate case which became
effective on July 7,2013, we do not anticipate Laclede filing a new rate case until first quarter of 2017
with rates effective first quarter 2018.
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Q HOW DID MSD FORECAST CHANGES IN ITS BAD DEBT PROVISION? 1
A In its Rate Model, MSD increased its historical bad debt provision of 1.0% of user 2
charge revenues during the 2012-2015 time period to 1.5% of user charge revenues 3
starting in 2016. The bad debt provision is treated as a reduction to Other Revenues, 4
which is the equivalent of being an expense. 5
Q PLEASE DESCRIBE YOUR ADJUSTMENT TO MSD’S BAD DEBT PROVISION 6
OTHER REVENUE. 7
A I have reduced the projected relationship of 1.5% of user charge revenues back to its 8
historical relationship of 1.0% that was used in MSD’s Rate Model during the 9
FY12-FY15 period. MSD stated in its 2014 Annual Report that it has implemented 10
new analytical tools that have significantly reduced the provision for doubtful 11
accounts, or bad debt provision. Specifically, MSD states: 12
The increase is explained by an increase in sewer service revenue as 13
a result of rate increases. In addition, the provision for doubtful sewer 14
service charges saw a reduction due to the District’s use of new 15
analytical tools leading the District to change its methodology in 16
determining doubtful accounts. (2014 Annual Report at page viii). 17
In its discussion on its 2014 results, MSD states: 18
Total revenue increased by $27.2 million or 10.1%. Sewer service 19
charges increased $11.5 million or 4.8% and the provision for doubtful 20
accounts decreased by $9.9 million or 371.6% as explained above.”(Id. 21
at page 9, emphasis added). 22
Q PLEASE DESCRIBE YOUR ADJUSTMENT TO LATE CHARGE REVENUE. 23
A In escalating changes to its Late Charge Revenue, MSD assumed it would grow by 24
1.0% per year. The Late Charge Revenue for MSD is tied to a percentage of the bill. 25
On MSD’s website in the Billing FAQ section, it states: 26
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Late charges are calculated on the outstanding principal balance at a 1
rate of .75% per month if not paid by the due date.8 2
Since the Late Charge Revenue will change relative to the growth in utility 3
bills, I propose to change the escalator for Late Charge Revenue from 1.0% used by 4
MSD up to the percent increase in bills proposed in this rate filing. This increases 5
Other Revenue by approximately $990,000 per year by 2020. 6
Q PLEASE DESCRIBE YOUR ADJUSTMENT TO WASTE HAULER PERMIT 7
REVENUES. 8
A MSD projected its Waste Hauler Permit revenues to be $675,000 per year over the 9
FY17-FY20 forecast period. However, the actual level of Waste Hauler Permit 10
revenues collected by MSD over the 2010-2015 period, excluding an abnormal 11
amount in 2014, has been $1.4 million per year. Hence, it increased Waste Hauler 12
Permit revenues to $1.4 million per year consistent with its actual revenue collected 13
over the last five years. 14
Q HAVE YOU DEVELOPED A LIST OF ALL THE CHANGES YOU MADE TO MSD’S 15
FINANCIAL PLAN IN SUPPORT OF YOUR REVISED WASTEWATER USER 16
RATES? 17
A Yes. Consistent with the Rate Commission’s request in this proceeding, I have listed 18
all the adjustments made to MSD’s financial plan in support of my revised wastewater 19
user charges on my Schedule MPG-4. 20
8From Billing FAQs: “How is my MSD bill calculated?”
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IV. STORMWATER RATE INCREASE PROPOSAL 1
Q IS MSD PROPOSING TO MODIFY ITS COLLECTION OF REVENUE TO SUPPORT 2
ITS STORMWATER SERVICES? 3
A Yes. MSD states that in FY17 it proposes to implement a more equitable and 4
consolidated stormwater charge. The District is proposing to seek voter approval to 5
assess a District-wide stormwater tax to replace the current stormwater O&M tax and 6
flat rate charge. MSD proposes a District-wide rate of 10 cents per $100 of assessed 7
property value as a new stormwater property tax. With this new tax, MSD is 8
proposing to eliminate its stormwater O&M tax, OMCI9 Subdistrict tax, and 9
stormwater fixed monthly charges (multi-family and single family). (See Exhibit 10
MSD 1, Table 5-1 at page 5-2, and Table 5-3 at page 5-9). 11
Q SHOULD THE RATE COMMISSION SUPPORT MSD’S PROPOSED FLAT RATE 12
STORMWATER PROPERTY ASSESSMENT? 13
A No. MSD has failed to provide any justification for assessing stormwater charges 14
based on uniform assessed property value tax across its service territory. If this tax is 15
implemented in an unjust manner, certain customers would pay too much for 16
stormwater services, and other customers would not pay the cost of stormwater 17
service. MSD’s proposal is simply not equitable and should be rejected. 18
9OMCI = Operation, Maintenance and Construction Improvement.
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Q HAS MSD PREVIOUSLY PROPOSED A METHOD OF COLLECTING 1
STORMWATER COSTS FROM CUSTOMERS IN A BALANCED AND EQUITABLE 2
MANNER? 3
A Yes. While MSD is restricted from implementing it, MSD previously proposed an 4
impervious surcharge rate that applied to all customers within its service territory. 5
This would impose a charge for stormwater service based on contributions of 6
impervious area water flow that customers made to MSD’s stormwater system. 7
Further, a stormwater capital charge should not be uniform across all of 8
MSD’s service territory. To the extent MSD is modernizing stormwater services in 9
some areas and developing infrastructure for others for the first time in other areas, 10
these other areas should pay for the stormwater service infrastructure. Other areas 11
of the service territory which have more modern stormwater systems have already 12
incurred the cost of those systems, and should not be required to subsidize MSD’s 13
cost of providing the same service to other areas in its service territory. This 14
cross-subsidization within the service territory is simply imbalanced and should not be 15
allowed. 16
Hence, imposing stormwater charges in a way that better reflects MSD’s 17
actual cost of providing stormwater service is a more equitable and balanced method 18
for charging for these infrastructure development and maintenance costs. 19
MSD’s proposal in this case to impose a uniform tax based on property value 20
across its District has no cost-causation basis, and therefore does not equitably 21
spread its proposed stormwater costs across its customers within its service territory. 22
For these reasons, I recommend the Rate Commission reject MSD’s proposed 23
uniform rate of property value stormwater tax and recommend that it not be taken to 24
voters for approval. MSD’s current stormwater charges/tax should remain in place. 25
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BRUBAKER & ASSOCIATES, INC.
Q DOES THIS CONCLUDE YOUR REBUTTAL TESTIMONY? 1
A Yes. 2
Michael P. Gorman
Appendix A
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Qualifications of Michael P. Gorman
Q PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 1
A Michael P. Gorman. My business address is 16690 Swingley Ridge Road, Suite 140, 2
Chesterfield, MO 63017. 3
Q PLEASE STATE YOUR OCCUPATION. 4
A I am a consultant in the field of public utility regulation and a Managing Principal with 5
Brubaker & Associates, Inc. (“BAI”), energy, economic and regulatory consultants. 6
Q PLEASE SUMMARIZE YOUR EDUCATIONAL BACKGROUND AND WORK 7
EXPERIENCE. 8
A In 1983 I received a Bachelors of Science Degree in Electrical Engineering from 9
Southern Illinois University, and in 1986, I received a Masters Degree in Business 10
Administration with a concentration in Finance from the University of Illinois at 11
Springfield. I have also completed several graduate level economics courses. 12
In August of 1983, I accepted an analyst position with the Illinois Commerce 13
Commission (“ICC”). In this position, I performed a variety of analyses for both formal 14
and informal investigations before the ICC, including: marginal cost of energy, central 15
dispatch, avoided cost of energy, annual system production costs, and working 16
capital. In October of 1986, I was promoted to the position of Senior Analyst. In this 17
position, I assumed the additional responsibilities of technical leader on projects, and 18
my areas of responsibility were expanded to include utility financial modeling and 19
financial analyses. 20
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Appendix A
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In 1987, I was promoted to Director of the Financial Analysis Department. In 1
this position, I was responsible for all financial analyses conducted by the Staff. 2
Among other things, I conducted analyses and sponsored testimony before the ICC 3
on rate of return, financial integrity, financial modeling and related issues. I also 4
supervised the development of all Staff analyses and testimony on these same 5
issues. In addition, I supervised the Staff's review and recommendations to the 6
Commission concerning utility plans to issue debt and equity securities. 7
In August of 1989, I accepted a position with Merrill-Lynch as a financial 8
consultant. After receiving all required securities licenses, I worked with individual 9
investors and small businesses in evaluating and selecting investments suitable to 10
their requirements. 11
In September of 1990, I accepted a position with Drazen-Brubaker & 12
Associates, Inc. (“DBA”). In April 1995, the firm of Brubaker & Associates, Inc. was 13
formed. It includes most of the former DBA principals and Staff. Since 1990, I have 14
performed various analyses and sponsored testimony on cost of capital, cost/benefits 15
of utility mergers and acquisitions, utility reorganizations, level of operating expenses 16
and rate base, cost of service studies, and analyses relating to industrial jobs and 17
economic development. I also participated in a study used to revise the financial 18
policy for the municipal utility in Kansas City, Kansas. 19
At BAI, I also have extensive experience working with large energy users to 20
distribute and critically evaluate responses to requests for proposals (“RFPs”) for 21
electric, steam, and gas energy supply from competitive energy suppliers. These 22
analyses include the evaluation of gas supply and delivery charges, cogeneration 23
and/or combined cycle unit feasibility studies, and the evaluation of third-party 24
asset/supply management agreements. I have participated in rate cases on rate 25
Michael P. Gorman
Appendix A
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BRUBAKER & ASSOCIATES, INC.
design and class cost of service for electric, natural gas, water and wastewater 1
utilities. I have also analyzed commodity pricing indices and forward pricing methods 2
for third party supply agreements, and have also conducted regional electric market 3
price forecasts. 4
In addition to our main office in St. Louis, the firm also has branch offices in 5
Phoenix, Arizona and Corpus Christi, Texas. 6
Q HAVE YOU EVER TESTIFIED BEFORE A REGULATORY BODY? 7
A Yes. I have sponsored testimony on cost of capital, revenue requirements, cost of 8
service and other issues before the Federal Energy Regulatory Commission and 9
numerous state regulatory commissions including: Arkansas, Arizona, California, 10
Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, 11
Louisiana, Michigan, Missouri, Montana, New Jersey, New Mexico, New York, North 12
Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah, 13
Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and before the 14
provincial regulatory boards in Alberta and Nova Scotia, Canada. I have also spon-15
sored testimony before the Board of Public Utilities in Kansas City, Kansas; 16
presented rate setting position reports to the regulatory board of the municipal utility 17
in Austin, Texas, and Salt River Project, Arizona, on behalf of industrial customers; 18
and negotiated rate disputes for industrial customers of the Municipal Electric 19
Authority of Georgia in the LaGrange, Georgia district. 20
Michael P. Gorman
Appendix A
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BRUBAKER & ASSOCIATES, INC.
Q PLEASE DESCRIBE ANY PROFESSIONAL REGISTRATIONS OR 1
ORGANIZATIONS TO WHICH YOU BELONG. 2
A I earned the designation of Chartered Financial Analyst (“CFA”) from the CFA 3
Institute. The CFA charter was awarded after successfully completing three 4
examinations which covered the subject areas of financial accounting, economics, 5
fixed income and equity valuation and professional and ethical conduct. I am a 6
member of the CFA Institute’s Financial Analyst Society. 7
\\Doc\Shares\ProlawDocs\SDW\10040\Testimony-BAI\277344.docx
# Type of Charge (a)FY 2017FY 2018FY 2019FY 2020FY 2017FY 2018FY 2019FY 2020FY 2017FY 2018FY 2019FY 2020Effective Date7/1/2016 7/1/2017 7/1/2018 7/1/2019 7/1/2016 7/1/2017 7/1/2018 7/1/2019 7/1/2016 7/1/2017 7/1/2018 7/1/2019Base Charge ($/Bill)1 Billing & Collection Charge $5.47 $6.06 $6.72 $7.45 $4.10 $4.55 $5.04 $5.5933.4% 33.2% 33.3% 33.3%2 System Availability Charge $14.05$15.57$17.25$19.11$16.12$17.86$19.78$21.91-12.8%-12.8%-12.8%-12.8%3 Total: Base Charge (Residential) $19.52 $21.63 $23.97 $26.56 $20.22 $22.41 $24.82 $27.50-3.5% -3.5% -3.4% -3.4%Compliance Charge ($/Bill) (b)4 Tier 1 $2.86 $2.95 $3.05 $3.14 $2.22 $2.29 $2.37 $2.4428.8% 28.8% 28.7% 28.7%5 Tier 2 $57.20 $58.94 $60.89 $62.61 $45.82 $47.22 $48.79 $50.1724.8% 24.8% 24.8% 24.8%6 Tier 3 $125.84 $129.67 $133.96 $137.75 $97.61 $100.58 $103.91 $106.8528.9% 28.9% 28.9% 28.9%7 Tier 4 $185.90 $191.56 $197.90 $203.49 $143.12 $147.48 $152.36 $156.6629.9% 29.9% 29.9% 29.9%8 Tier 5 $243.10 $250.50 $258.79 $266.10 $188.57 $194.31 $200.74 $206.4128.9% 28.9% 28.9% 28.9%9 Total Non-Residential Service Charge (c) $22.38 $24.58 $27.02 $29.70 $22.44 $24.70 $27.19 $29.94-0.3% -0.5% -0.6% -0.8%Volume Charge10 Metered ($/ccf) $3.60 $3.99 $4.42 $4.90 $3.56 $3.95 $4.38 $4.861.1% 1.0% 0.9% 0.8%Unmetered ($/Bill per fixture)11 Per Room $2.13 $2.36 $2.62 $2.91 $2.10 $2.33 $2.58 $2.871.5% 1.3% 1.4% 1.5%12 Per Water Closet $7.94 $8.80 $9.75 $10.80 $7.85 $8.71 $9.65 $10.711.2% 1.1% 1.0% 0.8%13 Per Bath $6.62 $7.34 $8.13 $9.01 $6.54 $7.26 $8.05 $8.931.2% 1.1% 1.0% 0.9%14 Per Separate Shower $6.62 $7.34 $8.13 $9.01 $6.54 $7.26 $8.05 $8.931.2% 1.1% 1.0% 0.9%Extra Strength Surcharges ($/ton) (b)15 Suspended Solids over 300 mg/l $262.00 $269.97 $278.90 $286.78 $259.34 $267.23 $276.07 $283.871.0% 1.0% 1.0% 1.0%16 Biochemical Oxygen Demand over 300 mg/l $658.00 $678.01 $700.43 $720.20 $651.10 $670.90 $693.08 $712.641.1% 1.1% 1.1% 1.1%17 Chemical Oxygen Demand over 600 mg/l $329.00 $339.01 $350.22 $360.11 $325.55 $335.45 $346.54 $356.321.1% 1.1% 1.1% 1.1%ccf = hundred cubic feet (approx. 748 gallons)mg/l = milligram per liter(a) These rates were judged by courts to be user charges that are not subject to the requirements of the Hancock Amendment. Rates for qualified low-income customers were established at 50% of the general service charge.(b) Applicable only to non-residential customers.(c) Total for base service charge and Tier 1 compliance (line 3 + line 4)(d) Rates from Exhibit MSD 79, Rate Summary worksheet (unprotected version).Metropolitan St. Louis Sewer DistrictComparison of Proposed Wastewater Rates and Rates Used to Develop the Financial Plan for FY 2017 - FY 2020Difference Between Proposed Rates &MSD Proposed Rates Rates Used to Develop Financial Plan (d) Rates Used to Develop Financial PlanSchedule MPG-1
ProjectedProjectedFY 2015FY 2016FY 2017FY 2018FY 2019FY 2020FY 17 - FY 20 FY 15 - FY 20Wastewater Revenue9.00% 9.00% 9.45% 9.45%Subtotal SubtotalUser Charge Revenue1. Base Charge Revenue83,077,784$ 93,300,953$ 101,878,329$ 111,277,665$ 122,081,375$ 133,954,777$ 469,192,146$ 645,570,883$ 2. Non-Residential Compliance Charge Revenue 3,757,659 1,882,074 1,930,728 1,987,488 2,045,293 2,100,949 8,064,459 13,704,192 3. Extra Strength Surcharges 6,755,989 6,910,690 7,082,540 7,283,078 7,489,238 7,683,910 29,538,766 43,205,445 4. Metered Volume Charge Revenue 155,353,879 175,400,335 193,594,338 210,336,309 229,664,974 250,451,620 884,047,241 1,214,801,455 5. Unmetered Volume Charge Revenue 32,586,782 36,993,540 37,061,437 40,401,014 44,258,322 48,421,571 170,142,345 239,722,667 6. Low Income Credits (592,570) (798,032) (1,035,476) (1,344,364) (1,753,428) (2,285,087) (6,418,355) (7,808,956) 7.Subtotal: User Charge Revenue280,939,522$ 313,689,561$ 340,511,896$ 369,941,191$ 403,785,775$ 440,327,740$ 1,554,566,602$ 2,149,195,686$ Other Miscellaneous Revenue8. Other Operating Revenue 4,869,060$ 4,657,756$ 5,023,916$ 5,010,009$ 4,992,115$ 4,960,740$ 19,986,780$ 29,513,596$ 9. Non-Operating Revenue 222,000 222,000 222,000 222,000 222,000 222,000 888,000 1,332,000 10. Connection Fee Revenue 683,000 689,830 696,728 703,696 710,733 717,840 2,828,996 4,201,826 11.Subtotal: Other Miscellaneous Revenue5,774,060$ 5,569,586$ 5,942,645$ 5,935,705$ 5,924,848$ 5,900,579$ 23,703,776$ 35,047,422$ 12.Total: Wastewater Revenue286,713,582$ 319,259,147$ 346,454,541$ 375,876,896$ 409,710,622$ 446,228,320$ 1,578,270,379$ 2,184,243,108$ % Change 4.1% 11.4% 8.5% 8.5% 9.0% 8.9%Wastewater ExpendituresOperating Expenses13. General Fund Operating Expenses (159,600,965)$ (164,868,678)$ (166,077,810)$ (170,374,687)$ (175,485,681)$ (180,094,067)$ (692,032,245)$ (1,016,501,888)$ 14. Other Operating Expenses (9,762,239) (13,245,859) (9,041,157) (8,006,502) (8,168,208) (9,737,299) (34,953,167) (57,961,264) 15.Subtotal: Operating Expenses(169,363,203)$ (178,114,537)$ (175,118,967)$ (178,381,189)$ (183,653,889)$ (189,831,366)$ (726,985,411)$ (1,074,463,152)$ 16.Net Revenue Available for Debt & Capital 117,350,379$ 141,144,610$ 171,335,574$ 197,495,707$ 226,056,733$ 256,396,954$ 851,284,967$ 1,109,779,956$ Non-Operating ExpensesDebt Service and Other IndebtednessSenior Revenue Bond Debt Service (Accrued)17. Existing (39,367,299)$ (44,851,007)$ (46,655,486)$ (46,468,892)$ (46,476,019)$ (46,535,144)$ (186,135,542)$ (270,353,847)$ 18. Proposed - (4,844,021) (15,021,096) (26,935,587) (41,682,356) (59,246,499) (142,885,538) (147,729,559) 19.Subtotal: Senior Revenue Bond Debt Service(39,367,299)$ (49,695,028)$ (61,676,582)$ (73,404,479)$ (88,158,375)$ (105,781,644)$ (329,021,080)$ (418,083,406)$ SRF & Direct Loan Debt Service (Accrued)20. Existing (25,295,222)$ (27,674,382)$ (27,592,947)$ (27,627,707)$ (27,646,335)$ (27,664,083)$ (110,531,072)$ (163,500,676)$ 21. Proposed (835,678) (3,029,860) (5,819,056) (8,153,485) (9,974,727) (11,803,924) (35,751,193) (39,616,730) 22.Subtotal: SRF & Direct Loan Debt Service(26,130,899)$ (30,704,242)$ (33,412,004)$ (35,781,192)$ (37,621,062)$ (39,468,007)$ (146,282,265)$ (203,117,406)$ 23.Subtotal: Debt Service & Other Indebtedness(65,498,198)$ (80,399,270)$ (95,088,586)$ (109,185,671)$ (125,779,438)$ (145,249,651)$ (475,303,345)$ (621,200,812)$ 24. Cash-Financed Capital (Paygo) (43,771,640)$ (43,884,789)$ (73,958,600)$ (85,033,814)$ (103,114,490)$ (104,196,780)$ (366,303,683)$ (453,960,112)$ 25. Non-recurring Projects or Studies (4,489,587) (6,322,090) (6,034,848) (5,194,950) (5,101,732) (5,281,442) (21,612,972) (32,424,648) 26. Contributions to Reserves - - - - - - - - 27.Subtotal: Non-Operating Expenses(113,759,425)$ (130,606,149)$ (175,082,034)$ (199,414,434)$ (233,995,660)$ (254,727,872)$ (863,220,000)$ (1,107,585,573)$ 28.Total: Wastewater Expenditures (283,122,628)$ (308,720,686)$ (350,201,001)$ (377,795,624)$ (417,649,549)$ (444,559,238)$ (1,590,205,411)$ (2,182,048,725)$ % Change 12.7% 9.0% 13.4% 7.9% 10.5% 6.4%29.Annual Surplus/(Deficit) (1,2)3,590,954$ 10,538,462$ (3,746,460)$ (1,918,728)$ (7,938,926)$ 1,669,082$ (11,935,032)$ 2,194,383$ Combined Operating Reserve30. Beginning Balance (3) 40,619,238$ 44,210,192$ 54,748,654$ 51,002,194$ 49,083,466$ 41,144,539$ 31. Ending Balance (3) 44,210,192 54,748,654 51,002,194 49,083,466 41,144,539 42,813,621 Actual Debt Service32. Senior Revenue Bonds 38,344,215$ 48,292,590$ 60,998,333$ 72,214,377$ 86,886,970$ 104,187,573$ 33. SRF Loans 24,086,811 28,980,783 32,065,103 34,840,505 36,670,361 38,530,015 34.Total: Debt Service62,431,026$ 77,273,373$ 93,063,436$ 107,054,882$ 123,557,332$ 142,717,589$ Debt Service Coverage35. Senior Revenue Bonds (4)3.06 2.92 2.81 2.73 2.60 2.4636. Total Debt (5)1.88 1.83 1.84 1.84 1.83 1.80Metropolitan St. Louis Sewer DistrictMIEC Revised Wastewater Financial PlanDescriptionSchedule MPG-2Page 1 of 2
#Type of Charge FY 2017 FY 2018 FY 2019 FY 2020
(1) (2) (3) (4)
Base Charge ($/Bill)
1. Billing & Collection Charge $ 4.04 $ 4.41 $ 4.83 $ 5.29
2. System Availability Charge $ 15.86 $ 17.29 $ 18.93 $ 20.72
3. Total: Base Charge (Residential) $ 19.90 $ 21.70 $ 23.76 $ 26.01
Compliance Charge ($/Bill) (b)
4. Tier 1 $ 2.21 $ 2.28 $ 2.35 $ 2.42
5. Tier 2 $ 45.61 $ 46.91 $ 48.24 $ 49.50
6. Tier 3 $ 97.16 $ 99.91 $ 102.74 $ 105.41
7. Tier 4 $ 142.46 $ 146.50 $ 150.65 $ 154.57
8. Tier 5 $ 187.71 $ 193.03 $ 198.50 $ 203.66
9. Total Nonresidential Service Charge $ 19.90 $ 21.70 $ 23.76 $ 26.01
Volume Charge
10. Metered ($/ccf) $ 3.50 $ 3.82 $ 4.19 $ 4.59
Unmetered ($/Bill)
11. Per Room $ 2.28 $ 2.49 $ 2.73 $ 2.99
12. Per Water Closet $ 8.54 $ 9.32 $ 10.22 $ 11.20
13. Per Bath $ 7.12 $ 7.77 $ 8.52 $ 9.33
14. Per Separate Shower $ 7.12 $ 7.77 $ 8.52 $ 9.33
Extra Strength Surcharges ($/ton) (b)
15. Suspended Solids over 300 mg/l $ 258.15 $ 265.46 $ 272.98 $ 280.08
16. Biochemical Oxygen Demand over 300 mg/l $ 648.10 $ 666.45 $ 685.31 $ 703.12
17. Chemical Oxygen Demand over 600 mg/l $ 324.05 $ 333.23 $ 342.66 $ 351.57
Tax-Based Charges (per $100 Assessed Taxable Value)
18. Regulatory Tax $ 0.01960 $ 0.01960 $ 0.01960 $ 0.01960
Months of Tax 12 12 12 12
19. Stormwater O&M Tax $ 0.10000 $ 0.10000 $ 0.10000 $ 0.10000
Months of Tax 12 12 12 12
Proposed Rate Increases
Base Charge 9.00% 9.00% 9.45% 9.45%
Volume Charge 9.00% 9.00% 9.45% 9.45%
Compliance Charge 2.49% 2.83% 2.83% 2.60%
Extra Strength Surcharges 2.49% 2.83% 2.83% 2.60%
Metropolitan St. Louis Sewer District
MIEC Proposed Wastewater User Charges
Schedule MPG-2
Page 2 of 2
Approved Approved Approved Approved
Proposed Approved as % of Proposed Approved as % of Proposed Approved as % of Proposed Approved as % of
Line Description Rates Rates Proposed Rates Rates Proposed Rates Rates Proposed Rates Rates Proposed
Base Charge - $/Bill
1 Billing & Collection 2.30$ 2.30$ 100.0%2.45$ 2.30$ 93.9%2.55$ 2.60$ 102.0%2.70$ 2.65$ 98.1%
2 System Availability 9.55$ 8.40$ 88.0%10.65$ 8.60$ 80.8%11.70$ 8.80$ 75.2%12.25$ 9.20$ 75.1%
3 Total Base (Residential) Charge 11.85$ 10.70$ 90.3%13.10$ 10.90$ 83.2%14.25$ 11.40$ 80.0%14.95$ 11.85$ 79.2%
4 Compliance Charge - $/Bill 28.35$ 27.40$ 96.6%29.65$ 29.65$ 100.0%30.90$ 30.85$ 99.8%32.10$ 31.95$ 99.5%
Volume Charge - $/Ccf
5 Metered - $/Ccf 2.13$ 1.88$ 88.3%2.37$ 1.92$ 81.0%2.59$ 2.02$ 78.0%2.73$ 2.11$ 77.3%
Unmetered - $/Bill
6 Each Room 1.39$ 1.23$ 88.5%1.55$ 1.25$ 80.6%1.69$ 1.32$ 78.1%1.78$ 1.38$ 77.5%
7 Each Water Closet 5.20$ 4.59$ 88.3%5.79$ 4.69$ 81.0%6.32$ 4.93$ 78.0%6.67$ 5.15$ 77.2%
8 Each Bath 4.34$ 3.83$ 88.2%4.82$ 3.91$ 81.1%5.27$ 4.11$ 78.0%5.56$ 4.30$ 77.3%
9 Each Separate Shower 4.34$ 3.83$ 88.2%4.82$ 3.91$ 81.1%5.27$ 4.11$ 78.0%5.56$ 4.30$ 77.3%
Extra Strength Surcharges - $/ton
10 Suspended Solids > 300 mg/l 220.22$ 218.90$ 99.4%239.58$ 218.90$ 91.4%260.16$ 222.62$ 85.6%270.74$ 231.35$ 85.5%
11 BOD > 300 mg/l 600.76$ 529.56$ 88.1%659.68$ 551.52$ 83.6%722.40$ 596.72$ 82.6%752.92$ 620.14$ 82.4%
12 COD > 600 mg/l 300.38$ 264.78$ 88.1%329.84$ 275.76$ 83.6%361.20$ 298.36$ 82.6%376.46$ 310.07$ 82.4%
Approved Approved Approved Approved
Proposed Approved as % of Proposed Approved as % of Proposed Approved as % of Proposed Approved as % of
Line Description Rates Rates Proposed Rates Rates Proposed Rates Rates Proposed Rates Rates Proposed
Base Charge - $/Bill
1 Billing & Collection 3.25$ 3.25$ 100.0%3.45$ 3.45$ 100.0%3.60$ 3.55$ 98.6%3.70$ 3.70$ 100.0%
2 System Availability 10.00$ 9.90$ 99.0%11.50$ 11.40$ 99.1%13.40$ 12.70$ 94.8%15.75$ 14.55$ 92.4%
3 Total Base (Residential) Charge 13.25$ 13.15$ 99.2%14.95$ 14.85$ 99.3%17.00$ 16.25$ 95.6%19.45$ 18.25$ 93.8%
Compliance Charge - $/Bill
4 Tier 1 23.00$ 23.00$ 100.0%16.00$ 16.00$ 100.0%9.00$ 9.00$ 100.0%2.35$ 2.15$ 91.5%
5 Tier 2 40.25$ 39.80$ 98.9%42.60$ 41.85$ 98.2%44.05$ 43.55$ 98.9%45.35$ 44.50$ 98.1%
6 Tier 3 85.70$ 84.75$ 98.9%90.65$ 89.15$ 98.3%93.80$ 92.75 98.9%96.55$ 94.8 98.2%
7 Tier 4 125.65$ 124.25$ 98.9%132.95$ 130.70$ 98.3%137.50$ 136 98.9%141.55$ 139 98.2%
8 Tier 5 165.60$ 163.75$ 98.9%175.20$ 172.25$ 98.3%181.20$ 179.25$ 98.9%186.55$ 183.15$ 98.2%
Volume Charge - $/Ccf
9 Metered - $/Ccf 2.39$ 2.28$ 95.4%2.72$ 2.50$ 91.9%3.07$ 2.82$ 91.9%3.45$ 3.21$ 93.0%
Unmetered - $/Bill
10 Each Room 1.55$ 1.48$ 95.5%1.77$ 1.63$ 92.1%2.00$ 1.83$ 91.5%2.24$ 2.09$ 93.3%
11 Each Water Closet 5.83$ 5.56$ 95.4%6.64$ 6.10$ 91.9%7.49$ 6.88$ 91.9%8.42$ 7.83$ 93.0%
12 Each Bath 4.86$ 4.64$ 95.5%5.53$ 5.08$ 91.9%6.24$ 5.73$ 91.8%7.01$ 6.53$ 93.2%
13 Each Separate Shower 4.86$ 4.64$ 95.5%5.53$ 5.08$ 91.9%6.24$ 5.73$ 91.8%7.01$ 6.53$ 93.2%
Extra Strength Surcharges - $/ton
14 Suspended Solids > 300 mg/l 231.35$ $231.35 100.0%231.68$ 231.35$ 99.9%257.18$ $244.03 94.9%265.68$ $251.88 94.8%
15 BOD > 300 mg/l 620.14$ $620.14 100.0%620.14$ 620.14$ 100.0%652.14$ $620.14 95.1%673.30$ $632.38 93.9%
16 COD > 600 mg/l 310.07$ $310.07 100.0%310.07$ 310.07$ 100.0%326.07$ $310.07 95.1%336.65$ $316.19 93.9%
Sources
2008 Rate proposal document
2011 Rate Proposal document
Exhibit MSD 79, Rate Summary
2011 Rate Proposal
FY 2013 FY 2014 FY 2015 FY 2016
Metropolitan St. Louis Sewer District
Comparison of Proposed and Approved Rates
2008 Rate Proposal
FY 2009 FY 2010 FY 2011 FY 2012
Schedule MPG-3
DescriptionSheet Name Cells1 Inputs S118:AA122Changed all Utilities expense escalators to 3.0% for 2016, 2018, and 2020, and 0% Increase in 2017 and 2019.2 CIRP Dashboard T86:AA86Changed from 'PFM' to 'Model'3 CIRP Dashboard T67:AA68Changed PAYGO Funding to $100 million in 2020.4 CIRP Dashboard R134:Y134Changed revenue bond proceeds to account for remaining funds needed to meet CIRP spending requirements.5 CIRP Dashboard T73:AA73Changed to account for new money proceeds6 Inputs T323:W328Changed to 0% keep the number of customer accounts at FY 2016 levels in FY 2017-20207 Inputs Q323:Q328Changed to reflect the actual differences in customer accounts between FY 2013 & FY 2014, as shown on the Demand-Input tab in Columns P & Q.8 Inputs Q331:W336Changed annual growth rates in FY 2014-2020, so that the annual changes in average use per customer account come out to be -0.8% in FY 2014 and 2015, -0.6% in FY 2016, and -0.4% in FY 2017 - 20209 Demand-Input F147:F150Changed so that the fixture usage unit values would remain at current levels instead of decreasing in FY 2017 and beyond.10 Demand Projection Q8Changed to "Projected", so that the Excel formulas used to determine customer accounts and wastewater volumes would reference the growth rates from Columns Q:W, rows 323:328, 331:336 of the Inputs tab.11 Demand Projection Q164, 216, 249Changed to "Actual"12 Inputs S224:W224; S230:W230Changed input rates for late fees.13 Inputs S240:AA240Changed input rates for doubtful accounts.14 Inputs S250Changed input rates for waste hauler fees.15 Rate Summary (MPG-2 Page 2) T46:W48Adjusted rates to meet DSCR and cash reserve requirements.Location of ChangeMIEC Changes to the MSD ModelMetropolitan St. Louis Sewer DistrictSchedule MPG-4