HomeMy Public PortalAboutExhibit MSD 86A - MSD Response to Third Discovery Request of the Rate CommissionExhibit MSD 86A
BEFORE THE RATE COMMISSION OF THE
METROPOLITAN ST. LOUIS SEWER DISTRICT
APRIL 3, 2015 THIRD DISCOVERY REQUEST
OF THE RATE COMMISSION
Metropolitan St. Louis Sewer District. Response
ISSUE: WASTEWATER AND STORMWATER RATE
CHANGE PROCEEDING
WITNESS: METROPOLITAN ST. LOUIS SEWER DISTRICT
SPONSORING PARTY: RATE COMMISSION
DATE PREPARED: APRIL 13, 2015
Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
1
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
APRIL 3, 2015 THIRD DISCOVERY REQUEST
OF THE RATE COMMISSION
Metropolitan St. Louis Sewer District Response
Pursuant to §§ 7.280 and 7.290 of the Charter Plan of the Metropolitan St. Louis Sewer
District (the "Charter Plan"), Operational Rule 3(5) and Procedural Schedule §§ 17 (b)(i) and (ii)
of the Rate Commission of the Metropolitan St. Louis Sewer District ("Rate Commission"), the
Metropolitan St. Louis Sewer District ("District") thereby responds to the Rate Commission
April 3, 2015 Third Discovery Request for additional information and answers regarding the
Rate Change Notice dated February 26, 2015 (the "Rate Change Notice").
1
APRIL 3, 2015 THIRD DISCOVERY REQUEST
OF THE RATE COMMISSION
Metropolitan St. Louis Sewer District Response
The Rate Model describes a growth rate for low income customers of 19% a year
for the period FY2015—FY2020 and 0% thereafter. See District Rate Model, tab "Inputs" Excel
lines 339-340. Please (a) describe the analysis that was performed to reach this conclusion; (b)
provide copies of any memorandum, report, work paper, summary, analysis, or schedule that
supports this conclusion; (c) describe the rationale for such conclusion.
RESPONSE:
(a) Using the Customer Assistance Program (CAP) analysis that was performed as a basis (see
Exhibit MSD1, Appendix 7.4.1) the District determined the CAP growth rate used in the Rate
Model by calculating the percentage of actual CAP customers to eligible customers using the
2012 Criteria.
Actual CAP cust / Eligible cust from 2012 Criteria=Percentage of actual cust
2, 200/13, 423 = 16%
This percentage was then used to determine the number of projected CAP customers by applying
it to the eligible customers using the 2014 Criteria.
Percentage of actual cust * Eligible cust from 2014 Criteria = Projected CAP cust
16% * 38,982 = 6,237
The District made the assumption it would reach this projected CAP enrollment by 2020 so the
growth rate was increased proportionately.
(b) The 2012 and 2014 Criteria can be found in Exhibit MSD1, Appendix 7.4.1 under the section
titled CAP Qualification Stats.
(c) Over the years the District has made a number of changes to the CAP eligibility
requirements. Typically, there is an initial growth phase before the number of CAP customers
stabilizes. The growth rate presented in the model is forecasting a similar reaction by showing a
steady increase over time and then leveling off. The District has set an internal goal of reaching
this level of CAP customers during this proposed rate cycle. It will continue to be re-evaluated
in the future.
2
2. The Rate Model lists factors utilized in allocating Operation & Maintenance
expenses. See District Rate Model, input values in tabs "OM-Funct" and "OM-Alloc". Please
(a) describe the analysis that was performed to determine this allocation; (b) provide copies of
any memorandum, report, work paper, summary, analysis, or schedule that supports this
conclusion; (c) describe the rationale for such conclusion.
RESPONSE:
The allocation factors used to allocate the test year operating costs were developed based upon
input provided by MSD Staff based on their understanding of the design and operational
requirements of the wastewater and stormwater systems. The allocations for Engineering,
Support, and Finance were developed based upon cost center -specific allocations and the
composite allocation factors were used in the model. The detailed allocations are shown in MSD
Exhibit 86B `STL MSD COS Allocation Working 3'd Discovery Request.
3. The Rate Model lists factors utilized in allocating Plant Inventory. See District
Rate Model, input values in tabs "Plant-Funct", and "Plant-Alloc". Please (a) describe the
analysis that was performed to determine this allocation; (b) provide copies of any memorandum,
report, work paper, summary, analysis, or schedule that supports this conclusion; (c) describe the
rationale for such conclusion.
RESPONSE:
The allocation factors used to allocate the test year plant in service net book value were
developed based upon input provided by MSD Staff based on their understanding of the design
and operational requirements of the wastewater and stormwater systems. The allocations reflect
the approximate share for each asset class and type related to the functions of the wastewater
and stormwater systems.
4. The Rate Model allocates Operations -Collection systems between wastewater -
collection, wastewater -conveyance, and stormwater. See District Rate Model, tab "OM-Funct".
Please (a) describe the analysis that was performed to determine this allocation; (b) provide
copies of any memorandum, report, work paper, summary, analysis, or schedule that supports
this conclusion; (c) describe the rationale for such conclusion.
3
RESPONSE:
The allocation factors used to allocate the test year operating costs were developed based upon
input provided by MSD Staff based on their understanding of the design and operational
requirements of the wastewater and stormwater systems. The allocations for Stormwater were
influenced by the SW level of service estimate developed by MSD Staff to support the increased
service levels. The detailed allocations are shown in MSD Exhibit 86B, `STL MSD COS
Allocation Working 3rd Discovery Request.
5. The Rate Model allocates Collection Operation & Maintenance costs as (a) 10%
volume, 80% capacity, and 10% customer for collection, and (b) 20% volume and 80% capacity
for conveyance. See District Rate Model, tab "OM-Alloc" lines 8-9. Please (a) describe the
analysis that was performed to determine this allocation; (b) provide copies of any memorandum,
report, work paper, summary, analysis, or schedule that supports this conclusion; (c) describe the
rationale for such conclusion.
RESPONSE:
The allocation factors used to allocate the test year operating costs were developed based upon
input provided by MSD Staff based on their understanding of the design and operational
requirements of the wastewater and stormwater systems. The detailed allocations are shown in
MSD Exhibit 86B, `STL MSD COS Allocation Working 3rd Discovery Request. ' The rationale is
that both systems must be sized to meet the peak demands driven by capacity, but that a portion
of the collection system costs are driven by the smaller laterals and other lines specific to
customer accounts. The conveyance system represents pipes that are 18" and larger, which
function to meet the total capacity requirements of the system and not customer -specific
demands.
6. The Rate Model allocates the treatment portion of pumping operation &
maintenance costs to all treatment plant components (e.g. sludge, primary treatment, secondary
treatment and pumping, etc.) rather than directly to treatment pumping. See District Rate Model
tab "OM-Alloc". Please (a) describe the analysis that was performed to determine this
allocation; (b) provide copies of any memorandum, report, work paper, summary, analysis, or
schedule that supports this conclusion; (c) describe the rationale for such conclusion.
4
RESPONSE:
The cost of service approach utilizes an industry -standard methodology whereby system costs
are allocated first to their functional costs (in this case 25% of the Rump Stations' budget
allocated to the `Treatment' Functional Category) and from the functional category to the cost
drivers. The allocation factors used to allocate the test year operating costs were developed
based upon input provided by MSD Staff based on their understanding of the design and
operational requirements of the wastewater and stormwater systems. MSD Staff also provided
the breakdown of total Treatment costs into the separate processes in which 20% of the overall
Treatment costs were allocated to Pumping.
7. The Rate Model allocates plant investment for sanitary sewers as 20% volume,
80% capacity. See District Rate Model tab "Plant-Alloc". Please (a) describe the analysis that
was performed to determine this allocation; (b) provide copies of any memorandum, report, work
paper, summary, analysis, or schedule that supports this conclusion; (c) describe the rationale for
such conclusion.
RESPONSE:
The allocation factors used to allocate the test year operating costs were developed based upon
input provided by MSD Staff based on their understanding of the design and operational
requirements of the wastewater and stormwater systems. The general rationale is that both
systems must be sized to meet the peak demands driven by capacity, but that a portion of the
collection system costs are driven by the smaller laterals and other lines specific to customer
accounts.
8. The Rate Model allocates all sanitary sewer collection system plant, including
combined sewer assets, to sanitary sewer (Collection and Conveyance). See District Rate Model
tab "Plant-Funct." Please (a) describe the analysis that was performed to determine this
allocation; (b) provide copies of any memorandum, report, work paper, summary, analysis, or
schedule that supports this conclusion; (c) describe the rationale for such conclusion.
RESPONSE:
The detailed asset data maintained by MSD Staff has a code attached to each asset that indicates
whether it belongs to one of three attributes: sanitary, storm, or unallocated There is no field
that would indicate if an asset serves a combined function. For the collection system assets
under the `sanitary' heading, no analysis was performed to determine what percentage of these
assets are of a combined nature.
5
9. The Rate Model allocates the treatment portion of pumping station plant
investment to all treatment plant components rather than treatment pumping only. See District
Rate Model tab "Plant-Alloc." Please (a) describe the analysis that was performed to make this
determination; (b) provide copies of any memorandum, report, work paper, summary, analysis,
or schedule that supports this conclusion; (c) describe the rationale for such conclusion.
RESPONSE:
See Response to Question Number 6.
10. Please describe how stormwater projects were prioritized in each of the former
Red, Green and Yellow zones described in Rate Change Proposal, Section 5 at page 5-4 (a)
between each of the areas; (b) within each of the areas.
RESPONSE:
(b) Prioritization within each area. Each stormwater project has been evaluated at a conceptual
level to determine a benefit cost ratio corresponding with the project. The benefits to the public
are quantified and scored using a uniform system, and a conceptual cost is determined. A
project's benefit points are divided by its conceptual cost, resulting in a benefit cost ratio. The
higher the ratio, the greater the benefit is to the public, per cost. Generally, higher benefit cost
ratio projects are funded first.
(a) Prioritization between each of the Zones. Projects identified within the Rate Change
proposal and within each zone (Red, Yellow, Green) were prioritized by planning the projects
with the highest benefit cost ratio project within each Zone independently based on funding
availability. Generally the projects identified in Green and Yellow zones have equal benefit cost
ratios. Generally the projects within the Red Zone have a higher cost benefit ratio than those
being done in the Green and Yellow zones. There are no projects to be completed in the Red
zone with a lower benefit cost ratio than the Green and Yellow zones.
11. The Rate Model includes a high level summary of the CIRP only. See District
Rate Model "CIRP Input" The Rate Model includes a comment that references the Spreadsheet
"CIRP Inflation V2". Please (a) provide the "CIRP Inflation V2" spreadsheet; and (b) explain
why there are no design costs before FY17.
6
RESPONSE:
(a) The comment referenced is actually an outdated note that should have been deleted from the
Rate Model. Please see Exhibit MSDI, Appendix 7.1.5 Schedule of Adjustments to WW CIRP
Project, for the most up to date version of "CIRP Inflation V2 ".
(b) The District does expect to have design -related costs for the URP in FY15 and FY16. The
report used to populate the CIRP Input for these years rolled the design and construction costs
into a single line to represent total costs, which was entered into the construction line in the rate
model.
12. Should the Example for Liquidation figure be $7,731,541? See Appendix 7.1.5 of
the Rate Proposal Summary Schedule of Adjustments to SW CIRP Project.
RESPONSE:
YES; the math on the example should equal $7,731,541. The example includes an additional
$3, 000, 000 of Infrastructure Repair (IR) added after the adjustments for inflation, appropriation
delays and liquidations were made. See Exhibit MSD1 Appendix 7.5 for projected IR amounts
each year. For clarification we have provided a revised Summary Schedule of Adjustments to
SW CIRP Projections displaying the additional step to add the IR. See Exhibit MSD 86C.
13. The first table of Appendix 7.5.1 summarizes the Regulatory Fund and OMCI
Funds. (a) Please explain why OMCI funds are depleted until 2021 when, because of negative
capital costs, the fund balances rises again. (b) Please explain the reference to a 5 cent tax and a
1.2 cent tax. The next table shows "proposed" which ties with FY17 in the rate report. Note the
Proposed table references an 8.8 cent tax and a 1.2 cent tax. This is also indicated in the Rate
Model on the SW dashboard/graphs; however, the input data on the dashboard indicates 1.96
cent and 10 cent taxes. (c) Please provide Appendix 7.5.1 in Excel format.
RESPONSE:
(a) In FY 2021, the fund balance begins to recover due to project liquidations. Any unspent
appropriated dollars on a CIRP project are returned to the original fund upon completion. As
Exhibit MSDJ, Appendix 7.1.5 indicates, the District has estimated the liquidation amount to be
8% of the annual CIRP, refunded three years after the appropriation.
7
(b) Exhibit MSD1, Appendix 7.5.1 is intended to provide a more detailed look at the District's
proposed SW service levels. The colors on the table coincide with the colors in the Exhibit
MSD1 on page 5-4. The Regulatory Fund tax revenue represents the 1.96 cents. The OMCI
Fund tax revenue ranges from 5 cents up to 10 cents depending on the OMCI. The Stormwater
O&M Fund (5130) is the existing fund that represents the District's original boundary. This
fund is currently collecting a 6.82 cents tax and is being calculated that way in the Rate Model
and Appendix. It is referred to as a 5 cents tax in the Rate Model and Appendix due to an
oversight. In the past, this tax was set at $0.05 cents and occasionally still gets referenced this
way internally. The Proposed District -Wide SW Fund (5120) is collecting the proposed 10 cents
tax and would replace the Stormwater O&M Fund In the Rate Model and the Appendix, this 10
cents tax is divided into 8.8 cents and 1.2 cents.
(c) Please see Exhibit MSD 86D for the Excel version of Exhibit MSD1, Appendix 7.5.1.
14. Brian L. Hoelscher states in Direct Testimony that the balance in the current tax
funds will be used for improvements to the public stormwater system in the areas where these
taxes are collected. See MSD Exhibit 3A, p. 4, 11. 19-20. Please provide (a) copies of the
ordinances and ballot language if submitted to the voters which approved the imposition of each
of the (i) Regulatory Tax, (ii) the Stormwater O&M Tax, (iii) the OMCI Specific Subdistrict
Taxes; and (iv) the; and (b) describe "improvements to the public stormwater system.
RESPONSE:
(a) Ordinance No. 13856, adopted June 12, 2014, approved the current tax rates for general
administration that is used for regulatory compliance (Section Two), operation and maintenance
of existing public stormwater facilities (Section Three), and for the OMCI subdistricts (Sections
Four through Twenty -One). This ordinance is provided as Exhibit MSD 86E.
These taxes were in place prior to Missouri's Hancock Amendment (1980) so a vote was not
required and no ballot language exists.
(b) Stormwater improvements to the public system would consist of asset renewal and/or small
additions that would improve the life and/or functionality of a stormwater system. Examples
would include such things as storm sewer rehabilitation or adding an additional inlet and/or
piping to improve drainage within a system. In addition, improvements can be made to the
stormwater system as whole to protect structures and property from flooding or
erosion. Examples would include such things as the construction of new storm sewer systems,
providing increased capacity to storm sewer systems, channel rehabilitation, and channel
stabilization to provide erosion protection.
8
Respectfully submitted,
14 /Pi Ira
Susan M. Myers
METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
Tel: (314) 768-6366
Fax: (314) 768-6279
9
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing was sent by electronic transmission
to Janice Fenton, Office Associate Senior, Metropolitan St. Louis Sewer District; Lisa Stump,
Counsel for the Rate Commission; Brad Goss, Counsel for Intervener Home Builders
Association of St. Louis & Eastern Missouri, and Brandon Neuschafer, Counsel for Intervener
Missouri Industrial Energy Consumers on this 13th day of April, 2015.
Lisa O. Stump, Esq.
Lashly & Baer, P.C.
714 Locust Street
St. Louis, MO 63101
lostump@lashlybaer.com
Mr. Brad Goss
Smith Amundsen, LLC
120 South Central Avenue, Suite 700
St. Louis, MO 63105-1794
bgoss@salawus.com
Brandon W. Neuschafer
Bryan Cave, LLP
211 N. Broadway, Suite 3600
St. Louis, MO 63102
John.kindschuh@bryancave.com
Susan M. Myers, General Counsel
METROPOLITAN ST. LOUIS SEWER DISTRICT
2350 Market Street
St. Louis, Missouri 63103
smyers@stlmsd.com
Tel: (314) 768-6366
Fax: (314) 768-6279
1