James Hunter

Wednesday, August 13, 2014

What is our water rate going to be? (SJWC GRC A1201003, Rate Increase)

The following is from the published agenda for tomorrow's CPUC Consent Hearing, page 19.

 CPUC Consent Hearing, 14 August 2014, page 19

We can easily see that San Jose Water Company has proposed $95,154.000 million, the ALJ Proposed Decision is $48,998,000 million and the very misleading "Estimated Cost" of $22,063,000?

CPUC must buy their calculators at the same place I got mine....................................

ORA (Office of Ratepayer Advocates aka DRA) in their "Comments" to the Proposed Decision pointed out  as follows: (refer to page 2)
A. The Commission Commits Technical Error if it Does not
Ensure That the PD Is Consistent With Amounts
Presented in Attachment A 
On pages 2, 126, and 130, the PD’s summary of the increase in an average residential customer’s bill should match the amounts indicated in the PD’s Attachment A. Additionally, the PD should clarify that the summarized increase in a customer’s monthly bill pertains only to base rates and does not include any authorized surcharges that may also appear on a monthly bill. Using the rates indicated in Table I of the PD’s Attachment A, a residential customer with a 5/8” by 3/4” meter using 15 ccf per month would incur base rate charges of $67.41 (not including surcharges), which is significantly higher than the $46.20 indicated on page 2 of PD. 
I reviewed the published documents and wasn't able to confirm this was taken into consideration by either CPUC or the ALJ.

The $22,063,000 in 2013 was also questioned by ORA (Office of Ratepayer Advocates aka DRA) in their "Comments" to the Proposed Decision: (refer to page 4)
SJWC’s most recent annual report4 with the Commission, on pages 8 and 9, indicates that SJWC earned an actual return on equity in 2013 of 8.14%. Since the PD increases rates by amounts designed to increase revenue by $22,063,000 in 2013 (a year now concluded—in which no new expenses or capital costs will be incurred) an additional $22,063,000 of revenue translates into additional income of approximately $13,000,000, after taxes, and an effective return on equity of 12.16%. 
The Commission’s PD implicitly endorses a return on equity of 12.16% for SJWC, and the PD should provide an explanation on how such implicit endorsement reconciles with SJWC’s most recent cost of capital decision. In that decision, the Commission expressed concern that the settled 9.99% return on equity “may be somewhat excessive.  
 If the Commission is not prepared to implicitly endorse a return on equity greater than 12% for a regulated monopoly, the PD should consider further adoption of ORA’s recommendations contained within the evidentiary record. 


LAST CHANCE TO MAKE YOUR OPINION HEARD
IF YOU WANT TO KNOW IF CPUC KNOWS 
WHAT THE SJWC RATE INCREASE IS?


Please send email, make your opinion heard!

 If you are concerned about these issues, send email to CPUC at: District 5 United eForm eMail  Simply click on the "eForm eMail" and you will get a page to fill out the information and specify the reason for your opposition to the SJWC Rate Increase and the simple fact that we don't know how much were going to pay monthly, to SJWC, for our water and we're not sure CPUC knows! and they plan to vote in four days.

You can also send an email to CPUC Public Advisopublic.advisor@cpuc.ca.gov  The Public Adviser will insure your email will be sent to all the appropriate CPUC staff members.

Other people to drop an email (note) and express your opinion are:
  • Scott Herhold, San Jose Mercury News, sherhold@mercurynews.com
  • Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com

Sunday, August 10, 2014

San Jose Rate Increase, How much will we pay?

San Jose Rate Increase, How much will we pay? CPUC will vote Thursday 14th August 2014

CPUC will consider the ALJ Proposed Decision, Comments and Replies from SJWC & ORA, at the Consent Hearing in 4 days!

The estimated cost to ratepayers is estimated at $22,063,000 (yes that's millions), so if we divide the 22 million by the approximate number of SJWC water connections 225,000, it appears to be about $100 over three years. If we look at the Proposed Outcome below, $7.96 is estimated the monthly increase, in 2013 test year, plus higher rates in 2014 and 2015. it's possible to estimate $8.00 per month times 36 months gives us $288 total increase?

Fellow ratepayers I'm confused! After 30 months of negotiation between SJWC and ORA/DRA, with CPUC representing "our interests" the increase seems greater than the estimated 22% or the original mythical 44% . As a matter of fact an increase of 20.8% is referenced in the Consent Hearing "Proposed Outcome" for the test year of 2013.

See page 2 of the Office of Ratepayer Advocates, Comments. ORA disagrees:
Using the rates indicated in Table I of the PD’s Attachment A, a residential customer with a 5/8”by 3/4” meter using 15 ccf per month would incur base rate charges of $67.41 (not including surcharges), which is significantly higher than the $46.20 indicated on page 2 of PD. 
This indicates the minimum increase would be $67.41 - $38.24 = $29.17 which is 

a staggering increase of 77%
(for the test year of 2013)

 As at ratepayer I'd like to see the number that CPUC will consent to and what are we really going to have to pay, before they vote! So to be fair it's very complicated ............... the other implication is the effective increase is really not $22 million, it's really, if we take $29.00 monthly increase x 36 months = $1044 x 225,000 =  $251,100,000

$235,000,000 that's a really big number
(my calculator must be broken)

Is it unreasonable to expect to know what CPUC is going to vote on? Is it unreasonable to question whether CPUC Commissioners know what they're voting on? Is it unreasonable to know much we'll pay to SJWC per month? CPUC needs to tell us the (ratepayers) what their going to vote on - on Thursday in 4 days!

=======================================================================
Public Agenda 3340                                                                                 Thursday, August 14, 2014
Consent Agenda - Orders and Resolutions (continued)

18                                 San Jose Water Company's General Rate Increase for 2013,
[13130]                        2014, and 2015

In the Matter of the Application of San Jose Water Company for an Order authorizing it to increase
rates charged for water service by $47,394,000 or 21.51% in 2013, by $12,963,000 or 4.87% in 2014, and by $34,797,000 or 12.59% in 2015.

PROPOSED OUTCOME:
  • Authorizes San Jose Water Company (SJWC) to increase rates by amounts designed to increase revenue by $22,063,000 or 9.79% in its test year 2013, $11,579,000 or 4.72% in 2014, and $15,356,000 or 6.02% in 2015.
  • As a result of the revenue increase granted by this decision, the monthly bill for the average SJWC residential customers using 1500 cubic feet of water with a 5/8" by 3/4" meter would increase by $7.96 or 20.8% to $46.20 from $38.24 for the test year 2013.
  • Closes the proceeding. 
SAFETY CONSIDERATIONS:
  • Pursuant to Public Utilities Code Section 451, SJWC must take all actions necessary to promote the safety, health, comfort, and convenience of utility patrons, employees, and the public.
ESTIMATED COST:
  • $22,063,000.
(Comr Sandoval - Judge Wilson)
htp://docs.puc.agov/SearchRes.apx?docfrmat=AL&docid=9840303 ** Proposed Decision

Pub. Util. Code § 311 – This item was mailed for Public Comment.
Pub. Util. Code §1701.1 -- This proceeding is categorized as Ratesetting.
=======================================================================

If you think the participants should be able to tell us (ratepayers) how much we'll pay for water, to San Jose Water Company , after 30 months of negotiating, please do the numbers and send an email.

Please send email, make your opinion heard!

 If you are concerned about these issues, send email to CPUC at: District 5 United eForm eMail  Simply click on the "eForm eMail" and you will get a page to fill out the information and specify the reason for your opposition to the SJWC Rate Increase and the simple fact that we don't know how much were going to pay monthly, to SJWC, for our water and we're not sure CPUC knows! and they plan to vote in four days.

You can also send an email to CPUC Public Advisopublic.advisor@cpuc.ca.gov  The Public Adviser will insure your email will be sent to all the appropriate CPUC staff members.

Other people to drop an email (note) and express your opinion are:
  • Scott Herhold, San Jose Mercury News, sherhold@mercurynews.com
  • Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com

Friday, August 8, 2014

San Jose Water Company's Rate Increase is on CPUC's 14 August Agenda

CPUC will consider the SJWC GRC (General Rate Increase) A1201003, at the August 14, 2014 Consent Hearing. The agenda is available at the CPUC website, the SJWC is on page 19.

The Comments were submitted on July 31st by ORA/DRA and SJWC. ORA/DRA comments addressed the following items:

SJWC is trying to re-open the entire case again, refer to page 1 & 2 of the ORA Comments.

"SJWC’s Comments Amount to an Additional Round of Briefing Intended to Re-litigate This Proceeding SJWC’s comments do not comply with Rule 14.3(c). Instead of focusing on factual, legal, or technical errors, SJWC served 25 pages 1 of comments that represent a fourth round of briefing in this case.. Because they do not comply with Rule 14.3, the Commision should disregard SJWC’s comments."

"............SJWC, on the other hand, chose to re-argue issues. For example, SJWC asserts
that “[t]he Proposed Decision not only ignores SJWC’s rebuttal evidence supporting the
Company’s 3-tier proposal; it fails to address SJWC’s proposal to retain the existing 2-
tier ate design if a WRAM/MCBA is not authorized..Not only is this assertion
irrelevant, it is incorrect. In fact, the PD specifically recognizes that, “SJWC’s  three-tier
residential rate design proposal is conditioned upon concurrent Commission's approval of
its proposal for a full [WRAM/MCBA]. Absent approval of the WRAM/MCBA, SJWC
proposes to retain its present two-tier residential rate design.The Commission's simply
decides, after weighing the record, to adopt ORA’s proposed rate design.9
This type of argument pervades SJWC’s comments."


"Section O of SJWC’s comments is the only section that comments on a factual
error in the PD. That section addresses Test Year 2013 Rent Expense.10 In rebuttal
testimony, SJWC changed its Test Year 2013 Rent Expense estimate to $382,00.1 At
hearing, ORA’s witness agreed that $382,00 is an appropriate amount for Test Year
2013 Rent Expense.12 This is the only section of SJWC’s Opening Comments that he
Commision should adopt."


SJWC’s disregard for the Commission’s Rules in its opening comments is not
limited just o re-briefing this rate case. Additionally, SJWC attempts to use extra-record
evidence to sway the Commission's. For example, SJWC argues for the funding of more
employe positions by claiming over the two years since briefs were filed in this
GRC, SJWC has found it necessary, despite uncertainty as to the disposition of its
application, to fill some of the 27 additional positions proposed in Ms. Leal’s testimony.
As of this date, eleven of those positions have been filed . .This argument is
contrary to Commission's rules. Not only did the Commission's weigh the record evidence
and make its decision on labor and payroll expense, but SJWC now attempts to
introduce evidence that is not part of the record, that is not sponsored by a witness, and
that no party has a chance to subject o cross-examination."

Bloggers comment: In simple english, not legalize, ORA specifies SJWC Comments are not in compliance with specific CPUC rules, further that SJWC is attempting to re-argue items resolved in the ALJ's Proposed Decision and argued by SJWC over the past 30 months, but to sway the Commissioners, by attempting justify actions not in compliance, by justifying the action, by the action itself. I think the French term is "fiat accompli" (A thing that has already happened or been decided before those affected hear about it, leaving them with no option but to accept) This is not a valid legal argument. It's also interesting that SJWC is also trying to tie the change from two to three tier residential pricing, to the WRAM de-coupling sales and revenue. That appears to be a rather blatant effort to sway the CPUC Commission.
Several of the tactics I see were mentioned, in a previous blog, "SJWC Rate Increase, "Follow the money", I said, "a strategy commonly used by the losing negotiator is to "make it more complicated", challenge everything and run the other negotiator out of time/resources, ask for "so many things" you'll get something." I'm not a lawyer but it sure looks like what SJWC is trying to do.

Please send email, make your opinion heard!

 If you are concerned about these issues, send email to CPUC at: District 5 United eForm eMail  Simply click on the "eForm eMail" and you will get a page to fill out the information and specify the reason for your opposition to the SJWC Rate Increase and continuing requests to de-couple their revenue from the requirement to do business efficiently and your concern about their lack of openness and transparency.  If you agree with this blog please also mention the violations of CPUC rules and the tactics being used by SJWC and that the ALJ and commissioner should take a position that all the points made by SJWC should be rejected, except item O in the SJWC Comments.

You can also send an email to CPUC Public Advisopublic.advisor@cpuc.ca.gov  The Public Adviser will insure your email will be sent to all the appropriate CPUC staff members.

Other people to drop an email (note) and express your opinion are:
  • Scott Herhold, San Jose Mercury News, sherhold@mercurynews.com
  • Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com

Tuesday, August 5, 2014

SJWC Rate Increase, "Follow the money"

In the current GRC (A1201003) how can we as non-attorneys (ratepayers) begin to understand the motivations behind the requests and positions of of parties. Keep in mind, in reality, they're arguing over, "Our Money!". There is no question SJWC will get an increase, but the real question is how much, of our money will SJWC (SJW Corp.) get. 

Where is the GRC process at? SJWC, CPUC and ORA/DRA are in the final stages, of the GRC (A1201003) process, leading up to a decision, by the CPUC Commissioners. The earliest CPUC can consider and vote is their meeting on 14 August, 2014. Both SJWC and ORA/DRA submitted
OPENING COMMENTS ON THE PROPOSED DECISION RESOLVING THE GENERAL RATE CASE OF SAN JOSE WATER COMPANY 
ORA/DRA agrees in general with the Proposed Decision and addresses items that can improve the accuracy of the Proposed Decision, especially that can impact the base rate and rate of return. In particular addressing the implied rate of return, of 12%, as well as SJWC increasing capital spending.

Bloggers Comments: SJWC may see the possibility of a loss in the GRC (A1201003). I've done a lot of negotiations and found that a strategy commonly used by the losing negotiator is to "make it more complicated", challenge everything and run the other negotiator out of time/resources, ask for "so many things" you'll get something. I've read both "Opening Comments" and the response from SJWC seems to me to be anticipating and trying to provide the CPUC commissioners, with opportunities to offer compromises. I think SJWC is creating excuses for CPUC to approve higher rates than the ALJ's Proposed Decision

In contrast SJWC challenged 19 points, of disagreement, that the Proposed Decision will reduce the SJWC revenue or provide revenue protections, to SJWC and was 37 pages long with Appendices. How can I make that statement? Simple a class A water utility revenue is determined by a standard formula and a financial statement.based on the following definition:
Rate base: The value of property upon which a utility is permitted to earn a specified rate of return as established by a regulatory authority. The rate base generally represents the value of property used by the utility in providing service and may be calculated by any one or a combination of the following accounting methods: fair value, prudent investment, reproduction cost, or original cost. Depending on which method is used, the rate base includes cash, working capital, materials and supplies, deductions for accumulated provisions for depreciation, contributions in aid of construction, customer advances for construction, accumulated deferred income taxes, and accumulated deferred investment tax credits.
The actual SJWC revenue is based effectively on a percentage of the Rate base and is called:
Rate of return: The ratio of net operating income earned by a utility is calculated as a percentage of its rate base.
Rate of return on rate base: The ratio of net operating income earned by a utility, calculated as a percentage of its rate base.
The current SJWC ROR (Rate of return) is 9.43%.  We're getting closer to the simple explanation that's driving the GRC process.

Now we look at what we as ratepayers pay to SJWC for our water. It's the sum of the costs, purchasing water, well tax, and processing the water. Plus the cost of funds for loans by SJWC, the calculated Base Rate, which includes building, vehicles, pipelines, pumps, wells, water processing facilities - minus depreciation. Then we have the salaries and benefits for staff and management, etc. Plus the 9.43% ROR which is the CPUC established "Rate of return on rate base" and which includes the shareholders dividends.

The simplified formula, shown below, shows how SJWC can increase their revenue:
R = O + (V - D)r
The elements of the traditional rate formula are defined as:
  • R is the utility's total revenue requirement or rate level. This is the total amount of money a regulator allows a utility to earn.
  • O is the utility's operating expenses.
  • V is the gross value of the utility's tangible and intangible property.
  • D is the utility's accrued depreciation. Combined (V - D) constitute the utility's rate base, also known as its capital investment
  • is the rate of return a utility is allowed to earn on its capital investment or on its rate base.
The elements in the formula should be considered as parameters that are changed in the General Rate Case, every three years. This is what SJWC and ORA (DRA) argue before the ALJ, then the ALJ submits a Proposed Decision (PD) to the CPUC Commissioners.  CPUC can approve the PD or change the PD and then approve.
With this understanding it becomes apparent that Class A California water utilities want, including SJWC argue for every three years:
  • R - SJWC wants to increase rates
  • O - SJWC claims it's mostly fixed costs and in any case ratepayers will always pay for this, includes cost of water. ORA (DRA) effectively argues for the lowest rate and limits to the growth of fixed costs, within the bounds of reliable clean water service.
  • V - SJWC tangible and intangible property (pipelines, water plants, wells) wants to increase, by     replacing and building new infrastructure.As well it includes shareholders investment, retained operating funds, etc.
  • D - SJWC wants to increase the amount of depreciation, to match the tangible and intangible property, so maximize the return on the tangible and intangible property, by building or replacing pipelines, wells, etc., so the depreciation clock is reset, at a higher interest rate, but potentially over a longer period of time.

    Note: the SJWC goal is that (V-D) increases over time to effectively increase R
  • r - SJWC wants to increase the ROR (CPUC Rate of Return).
Look at the above formula and what each element represents then look at the OPENING COMMENTS submitted by SJWC and ORA/DRA, to the ALJ and what they want to change.

We can see that SJWC is continuing to make every effort to de-couple sales from revenues. In fact it's apparently so important to SJWC, that it's almost all the first two pages of SJWC Comments, Introduction, page 2 and part of page 3.
"Specifically, the Proposed Decision would reject SJWC’s proposal to implement a full Water Revenue Adjustment Mechanism/Modified Cost Balancing Account (“WRAM/MCBA”) intended to decouple the Company’s revenues from its water sales while requiring implementation of a three-tier rate design that was premised on approval of the WRAM/MCBA, would disallow most of the Water Conservation programs budget proposed by SJWC, and would severely limit the authorized investment in Recycled Water delivery systems and in SJWC’s ongoing Pipeline Replacement Program." 
Blogger Comment: From my perspective a public company should not have taxpayers "guarantee it's profits" (Note 1) or to phrase it in Utility Talk, "SJWC wants it's ratepayers to guarantee its revenues, dividends to shareholders and the rather large salaries and benefits of it's management. Independent of its operations and how much water they sell. Where is their motivation to operate as efficiently as possible and control rate increases? It should also be noted that SJWC and ORA are in an "adversarial" relationship, as shown in the Comments of the parties to the Proposed Decision. (Bloggers simplification of an argument), I especially appreciate what appears to be a claim by SJWC in the Comments that, "John and Dave have a full WRAM, so SJWC should have it as well. If they don't we'll "sulk" and my conservation efforts will suffer and I won't be able to build more pipelines, water tanks, etc., which just happens to increase "tangible and intangible property", in the formula and surprise ratepayers bills increase."

Please read the Comments from both SJWC and ORA (DRA), see if you see a difference, in the "tone" and content of the Comments submitted. Based on the formula shown above you may be able to see the motivations for the positions SJWC has taken.

We the ratepayers pay for the entire negotiation process, every three years, it's part of the fixed costs under "O" operating expenses, in the formula. Indirectly we also pay for CPUC and ORA (DRA).In fact I've identified over a million dollars, of SJWC expenses, not including legal fees per year to argue and manage the Regulatory issues and the GRC.

Please send email, make your opinion heard!

 If you are concerned about these issues, send email to CPUC at: District 5 United eForm eMail  Simply click on the "eForm eMail" and you will get a page to fill out the information and specify the reason for your opposition to the SJWC Rate Increase and continuing requests to de-couple their revenue from the requirement to do business efficiently and your concern about their lack of openness and transparency. 

You can also send an email to CPUC Public Advisopublic.advisor@cpuc.ca.gov  The Public Adviser will insure your email will be sent to all the appropriate CPUC staff members.

Other people to drop an email (note) and express your opinion are:
  • Scott Herhold, San Jose Mercury News, sherhold@mercurynews.com
  • Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com