SJWC Monthly Allocation, water/banking roll-over and the long memory of the Internet!

San Jose Water Company has said that customers were strongly opposed to basing the monthly water allocation, on a user's actual historical use. So  I decided to do a bit of research on the last drought 1988-1992 or so and try to find out what were the standards used and if they were different from their current filing. It was also said banking would cause weeks or months delays.

I found the following:

SAN JOSE WATER COMPANY CITY OF SAN JOSE 2040 GENERAL PLAN WATER SUPPLY ASSESSMENT  June 2010

Appendix B, attached to the June 2010 document, SJWCs' Water Shortage Contingency Plan (January 1992) has some interesting information.

The highlighted section shows there was an allocation by customer, rather than the average use by all customers, as currently proposed. SJWC representatives indicated it would take weeks or months to implement?

The water banking if you used was again a difficult item to implement, indicated SJWC. It seems the old methods would also rebate penalties, to the individual customer, if you managed to meet the conservation requirements.

It was also noted by SJWC that the public was strongly opposed? So opposed that no one showed up for the Public Hearing. The Internet seems to have a longer memory than SJWC appears to have.

ALJ calls for Mandatory Status Conference SJWC GRC 1501002

It turns out that the ALJ S. Pat Tsen requested, on June 2, 2015, that the Governor's Executive Order, to reduce water use in the State by 25% overall (20% in the case of San Jose Water Company), documents and arguments, in the current rate case (GRC 1501002) should be adjusted accordingly, as described in the ALJ ruling and in accordance with the Executive Order. Over two months has passed since the initial ruling and apparently San Jose Water Company apparently ignored and has not complied with the ALJ ruling. So, on August 19, 2015 a "Mandatory Status Conference" has been called. Hopefully the Conference will also address some of the other issues being contested by SJWC.

E-MAIL RULING REQUIRING UPDATES TESTIMONY FROM THE PARTIES Dated June 2, 2015, at San Francisco, California. 

"This ruling requires an immediate up-date as described herein to all served testimony that contains sales forecasts. 

In Resolution W – 5041 (Resolution) the Commission implemented the Governor’s Executive Order (B – 29 – 15) and the emergency water use regulations adopted by the State Water Resources Board (Water Board)on May 5, 2015. The Resolution ordered all class A and class B water utilities to implement a statewide 25% reduction in water usage relative to 2013 usage levels. Included in the Resolution is a requirement to "develop rate structures and other pricing mechanisms, including surcharges, fees, penalties, or other mechanisms, to maximize 25% water conservation." Pursuant to the Water Board regulations, San Jose Water Company must achieve mandatory reductions of 20 percent relative to its water consumption in 2013." 

Although there will no doubt be subsequent specific implementation steps taken by the Commission to implement the governor’s Executive Order, it seems prudent and efficient to anticipate the rate setting impacts on this proceeding. 

Given that we are about to go to hearing on San Jose Water’s general rate case on June 15, 2015, it would appear to be a perfect opportunity to recast all testimony about to be presented in order to reflect a 20% reduction from 2013 levels in water usage consistent with the requirements of both the Resolution and the Executive Order. This should be presented, if possible, in a manner consistent with the requirements in Section 2 "Mandatory Actions by Water Utilities" subsection e on page 4 of Resolution W – 5041. To the extent that any of the expense forecasts have a direct linkage to the reduction in water usage, for example purchased water, these expense forecasts should be adjusted accordingly. 

Since the duration of the executive order is set to expire February, 2016, parties are directed to use usage rebound figures from the 1987-1992 drought to forecast the remainder of the GRC period. 

This requirement is limited to only the first portion of the mandate: "to develop rate structures and other pricing mechanisms" and we will not address the more complicated aspects of "surcharges, fees, penalties, or other mechanisms." These latter requirements are being addressed by the requirement in the related Resolution W-4976 that water utilities file Tier 2 advice letters to add or activate Schedule 14.1, Water Shortage Contingency Plan, in their tariffs."

ORA has previously indicated that they would file a request for the commission address the discrimination, between ratepayers with a home or rental home with a water meter and apartments, commercial and industrial users. Basically 60% of the ratepayers are burdened with 100% of the water reduction, to 2013 average levels. Apparently the Director of Water &Audits initially replied it would take months to comply with the ORA request due to staff availability. A return to the issues involving Schedule 14.1 and the fact that the Director Raminder Kahlon of Water & Audits apparently is delaying cooperation with ORA.

Now the ALJ ruling has served notice that a mandatory status conference regarding the proposed settlement of GRC 1501002, August 19, 2015. Presently there are a dozen "contested issues", from an outside observer's view it appears that a point was reached in mid-July and limited progress towards resolution has been made. We, ratepayers should recognize that several of the issues: 

1. WRAM full de-coupling of revenue and sales, we conserve and pay more for what we use
2. WRAM contingent conservation programs, free toilets and installation (2,000/year or 1-2% of the SJWC customers annually - discriminatory to seniors, if it's going to take 50 or more years a very large percentage can't participate or is it a token payment to approve WRAM? Several of the conservation programs are sole source and not competitive bids.
3. Staffing is a significant issue SJWC requests 33 new staff. It also appears to conflict with the  Non-Tariffed Products and Services (“NTP&S”) related requests. See my post on this issue.
4. Bonuses for Officers and Managers, I as a ratepayer feel the "squeeze" ratepayers pay several million dollars a year for the SJWC Regulatory staff who have a vested interest in increasing water rates, so they receive their bonuses, the management and officers effectively serve the Board of Directors, who theoretically serve the shareholders. It appears that the officers will execute and delegate to subordinate managers tasks that improve the financial results of the Company, keeping happy shareholders and happy Board Directors. It sure looks to me that the ratepayers get to pay for SJWC staff dedicated to squeeze more money from us and build the assets of SJWC. That doesn't appear to me to be a ratepayer (SJWC customer) benefit? Shareholders should pay the bonuses in my opinion.
5. Non-Tariffed Products and Services (“NTP&S”) are in fact unregulated businesses using excess staff hours and in a post I determined that SJWC makes $4,521,058 of NTP&S revenue (annual average over 5 years). In the context of the staffing (item 3) request the question becomes, should ratepayers pay for more staff from regulated funds? What benefit/s does it provide to SJWC ratepayers (customers)? If we're going in the venture capital business I think we should get a lot better deal!

The other seven contested points are accounting issues, employee salaries, health care, temp positions all have an effect on our cost of water! over the period 2016, 2017 and 2018. 

E-MAIL RULING SETTING MANDATORY STATUS CONFERENCE ON THE PROPOSED SETTLEMENT BETWEEN SAN JOSE WATER COMPANY AND ORA Dated August 4, 2015, at San Francisco, California. 

"To the parties, This email ruling serves as notice of a mandatory status conference to be held at the Commission’s offices on August 19, 2015 at 10AM to discuss the proposed settlement agreement between ORA and San Jose Water Company. Mr. Burke, representing the mutuals, who are not sponsoring the settlement agreement may appear telephonically. Mr. Burke, please provide a number that you can be reached at and we will call you from the hearing room on the day of the hearing. San Jose Water Company and ORA should be prepared to discuss their failure to comply with the governor’s mandatory reduction order and clear direction from the assigned ALJ regarding their agreement on the sales forecast." 

THE DOCKET OFFICE SHALL FORMALLY FILE THIS RULING 

Blogger comments: In my opinion It seems implementation of a full WRAM de-coupling doesn't have obvious benefits for SJWC ratepayers, there should be a mechanism to encourage efficient operations, rather than guaranteeing SJWC revenues and profits independent of sales. 

It's apparent the shareholders need to pay for the bonuses for SJWC Officers and Managers, since they are the ones who will profit. Ratepayers have no opportunity, to comment or see the actual basis for most rewards of bonuses. 

The WRAM contingent conservation programs are either discriminatory or proposed based on sole bids, further it feels like a token payment for approving the full WRAM. 

Staffing appears to be very excessive especially if Non-Tariffed Products and Services (“NTP&S”) are considered. 

The NTP&S while appearing relatively small at about $4.5 million annually is about 18% of profit. ($300 annual revenue, at a CPUC approved profit ( at 8.08%) $24.25 million) . It is using regulated man-hours and services from the regulated SJWC company that ratepayers effectively pay for. An arms length business relationship would seem to a better approach. Keep in mind that SJWC passes through millions of gallons of water from SCVWD and surface water, so small percentages really add up! 

While the rate case (GRC 1501002) appears to be at an impasse in the negotiation between SJWC and CPUC ORA I'm the encouraged that the ALJ is taking a position on the earlier ruling and hopefully getting the parties moving towards a resolution.

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 currently contested issues 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. 

Please consider pasting the following when you fill in the eForm:

"I OPPOSE SJWC paying management and officers bonuses with money included in our water rates, bonuses benefit shareholders, shareholders should pay the bonuses. I oppose a WRAM separating revenues from sales, I oppose using regulated staff for unregulated projects with insufficient controls, reporting and evaluation of the risk/reward for ratepayers. I oppose proposals by SJWC that discriminate against seniors or other classes of SJWC ratepayers. Reference San Jose Water Company (SJWC) GRC 1501002."

You can also send an email to express your opinion on who should pay the bonuses you or the shareholders:
CPUC Public Advisor public.advisor@cpuc.ca.gov  Reference San Jose Water Company (SJWC) GRC 1501002.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
• Paul Rodgers, San Jose Mercury News, progers@mercurynews.com
• Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com

Who pays SJWC Officers & Management Bonuses?

We're confronted with trying to understand if the bonuses amount, each participant's goals and successful accomplishment and the percentage of the bonus they receive. It's unlikely that since SJWC is a wholly owned subsidiary of SJW Corporation, we (ratepayers, customers, press, etc.) will ever have access to specific information. Rather the fact's are buried under a cloak of confidentiality, again we're confronted with another instance of CPUC support for non-transparency or openness, on it's own part and on behalf of the utilities it regulates. To be fair the decision was made in early January 2015.

Blogger comment: In the final analysis the question is really who should pay for management & officers bonuses? The shareholders or the ratepayers? Who benefits the shareholders or the ratepayers? The key to the question and you're a SJWC manager or officer, it's obvious that your pay, benefits and bonus are determined by the company's senior officers and Board of Directors, not by ratepayers (your customers). The SJWC Board of Directors represents the interests of the shareholders, not the ratepayers!

The following is an excerpt from the ORA Brief dated July 14, 2015, page 8-9:

The following is an excerpt from the SJWC response to the brief ORA dated July 28, 2015 page 8-9:

It should be noted that the in the original filing of the General Rate Case (GRC 1501002) increase request several sections in the hardcopy exhibits were not included as they were deemed by CPUC on the request from SJWC of making them "Confidential".

Blogger comment: In my opinion it's apparent the shareholders need to pay for the bonuses for SJWC Officers and Managers, since they are the ones who will profit.

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 currently contested issues 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. 

Please consider pasting the following when you fill in the eForm:

"I OPPOSE SJWC paying management and officers bonuses with money included in our water rates, bonuses benefit shareholders, shareholders should pay the bonuses. Reference San Jose Water Company (SJWC) GRC 1501002."

You can also send an email to express your opinion on who should pay the bonuses you or the shareholders:
CPUC Public Advisor public.advisor@cpuc.ca.gov  Reference San Jose Water Company (SJWC) GRC 1501002.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
• Paul Rodgers, San Jose Mercury News, progers@mercurynews.com
• Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com

SJWC makes $4,521,058 of NTP&S revenue - unregulated!

SJWC makes $4,521,058 of NTP&S revenue, ratepayers get $674,117 of it!
In the spirit of openness and transparency this is a photo, I took, of the table from an Exhibit available in the SJWC office lobby in San Jose, for GRC 1501002. Interested ratepayers can also "view" the Exhibits, not published online at CPUC offices, in SF.

Blogger comment: Do you think this, access limitation, was done by SJWC on purpose?

The table above shows the SJWC sources of  NTP&S revenue that are either passive 10% (example Homeserv USA share of insurance premiums or active 30% for antenna leases. CPUC stated in their brief to the ALJ Pat Tzen, excerpt from page 11:

"More broadly, many of the employees who worked for NTP&S were in the Operations & Maintenance (“O&M”) and Construction departments.⁵⁴ Those two departments were two of the three highest overtime cost departments at SJWC. ⁵⁵ 

Of the 12,202 labor hours attributed to NTP&S in 2014, “over 8,000 hours were attributed to various Distribution System employees and a Cross-Connection Inspector. . . . Four positions, not specific employees, were used more than 50% of the time working for NTP&S.” ⁵⁶ 

SJWC’s claim that its NTP&S labor is excess capacity is undermined by the fact that it is seeing significant overtime expenses in departments used for NTP&S, the high rate of usage of certain positions and employees for NTP&S, and the company’s request to hire more people in positions and departments that are highly used for NTP&S. Taken together, SJWC appears to be using employees, ostensibly paid for by ratepayers to provide regulated services, to provide NTP&S. The result is that ratepayers are fundamentally subsidizing the NTP&S provided by SJWC by paying the salaries and benefits of those employees whose time is used to provide NTP&S." 

Since it's likely the significant revenue is derived from the Antenna Leases, typically cell service, that should require a minimum of labor hours from SJWC staff, represents ($289,138), so the remaining dollars are then
57% of the revenue or $384,879. It appears that there seems to be a discrepancy, in the calculations? SJWC indicates that they expend 12,000 man-hours or roughly 6 man years, of excess hours that are used in "unregulated activities". The obvious question since how much does SJWC make from the unregulated activities?   Total revenue $4,54,058 (based on the 5 year average through 2014 above) minus $674,117 allocated for ratepayers. SJWC then made during the period $3,846,941 or if we look at the reported 12,000 excess man-hours we get $320/hour or $641,156 annually per year for each of the 6 excess man years (approximately the yearly pay of SJWC Sr. VP Regulatory Affairs).

This appears to be a great business as long as SJWC really just expends the actual excess man hours that cost $47 and are effectively sold for $320, especially since we the ratepayers bear the majority of the risk as SJWC tries to generate unregulated revenues from existing and new sources. It makes sense to separate regulated and unregulated activities, having them at arms length would seem the best way. Other regulated water utilities have a separate business/corporation.

Contested Issues - SJWC General Rate Case GRC 1501002

CPUC ORA seems to have found some very sharp teeth! The criteria that seems to be applied is 1. do the ratepayers benefit?, 2. promote the efficiency of the utilities operations, 3. does it maintain quality and reliability of the service (in this case water), 4. is the information the utility provides clear and accurate, 5. tread the narrow line of insuring the financial health of the utility, while protecting consumer interests.

CPUC mission is:

The California Public Utilities Commission serves the public interest by protecting consumers and ensuring the provision of safe, reliable utility service and infrastructure at reasonable rates, with a commitment to environmental enhancement and a healthy California economy.  We regulate utility services, stimulate innovation, and promote competitive markets, where possible, in the communications, energy, transportation, and water industries.
Blogger comment: Welcome Back We've Missed You!

II. SUMMARY OF POSITION ON CONTESTED ISSUES The following table summarizes ORA’s positions on the issues contested between ORA and SJWC:

Revenue Decoupling – Water Revenue Adjustment Mechanism/Modified Cost Balancing Account (“WRAM/MCBA”)	Reject proposed full decoupling WRAM/MCBA. Continue Monterey-Style WRAM. WRAM-Related Conservation Programs
WRAM-Related Conservation Programs	Disallow WRAM-Related Conservation Programs. Recognize that SJWC’s proposed School Water Education Program was funded in rates for three years in the last rate case but was only instituted for one school term and reject further ratepayer funding at this time.
Payroll Expense Escalation Factors and Methodology	Use last full year of recorded data, 2014, and escalate to GRC years using Energy Cost of Service (“ECOS”) labor escalation factors.
New Positions	Allow a total of five new positions in labor forecasts— three based on employees hired since SJWC’s last GRC, one based on customer growth rates, and one based on proposed capital projects. The two new positions should be funded at $97,524 annual compensation.
Bonuses for Officers and Managers	Exclude bonuses from labor forecasts.
Payroll Expense Related to NonTariffed Products and Services (“NTP&S”)	Exclude labor attributed to NTP&S from labor forecasts.
Regulatory Commission Expense	Adopt forecast expenses of $185,000 for 2016, $190,000 for 2017, and $194,000 for 2018.
Payroll Taxes – Capitalized Portion of Federal Insurance Contributions Act (“FICA”) Tax	Capitalize 24.17% of FICA tax for a resulting tax savings of $589,000.
Tax Memorandum Accounts	Establish tax memorandum account to track Tangible Property Regulation deduction tax savings for refund to ratepayers. Establish tax memorandum account to track Enterprise Zone Sales and Use credit for refund to ratepayers.
Health Care Cost Balancing Account	Reject proposed health care cost balancing account and rely on traditional forecasting process for health care costs in order to preserve incentives to control costs.

WRAM/MCBA

The basic question, does allowing SJWC to decouple revenue from sales, provide a benefit for the ratepayers (customers of SJWC)? I can see a benefit for "shareholders" a guaranteed mechanism to guarantee profits. Historically there appears to be a reduced effort, by the utilities getting a WRAM,  to be as efficient as possible. 

The major electric utilities were able to get (ERAM) Electric Revenue Adjustment Mechanisms established by CPUC about 20-25 years ago. We have seen steadily increasing rates, apparent "close" working relationships contributing to probably favoritism by CPUC management and staff contributing to inefficiencies and likely excessive costs to ratepayers.

While in it's been observed historically CPUC has been probably too friendly and appeared to grant the Class A Water Utilities possibly and excessive latitude. Providing SJWC a full WRAM, fully decoupling revenue and actual sales, obviously this could have an affect on efforts to be efficient as possible. The arguments for this General Rate Case is 1. other Class A Water Utilities have been allowed to implement a full WRAM and 2. a WRAM would detract from conservation efforts. CPUC ORA has noted in their briefs that SJWC has met all State mandated conservation requirements, through 2020.

WRAM-Related Conservation Programs

In a previous post I noted that free ultra-high efficiency toilets and actual installation, while appearing to be an attractive offer, in reality would only apply to 1-2% of SJWC ratepayers and take over 50 years to be offered to all.ratepayers. Which effectively if you're 50 years old you better plan to live till you're 75 years old or older, to have a 50% chance to get your free toilet.

The other conservation programs are questionable at best in terms of the penetration and use by the SJWC Ratepayers.

New Positions (added staff)

SJWC has requested they be allowed to add 33 new staff positions. We're in a drought the amount of water that SJWC is selling to us has been decreasing. ORA also questioned the use of the hours, "equivalent of 6 full-time employees are being utilized to provide unregulated services under alleged “excess capacity". This effectively means we the ratepayers appear to be paying for SJWC to support and develop non-regulated business opportunities. Should we have to take the risk? have the diversion of SJWC man-hours we pay for in our rates? is it more appropriate that SJWC (SJW Corp.) shareholders take the risk and pay the cost? 

Blogger comment: SJWC please be open what does it cost for NonTariffed Products and Services (“NTP&S”) development and support verse what do we the ratepayers get? I know we get 10% of passive and 20% of active NTP&S revenues. There was a small spreadsheet buried in Exhibit E, the only way to find it was going to SJWC or CPUC offices, transparency is to make it easier for the press and ratepayers to get easier access - like online.

Payroll Expense Related to Non-Tariffed Products and Services (“NTP&S”)

Blogger comment:  In a previous post to this blog from CNBC it was noted:

"Water utilities have traditionally been regarded as a sleepy stock backwater, churning out dividends for widows and orphans and no more. But that's changing. Analysts say the utilities—though still regulated monopolies—are in growth mode, snapping up acquisitions, forging agreements with friendly regulators and, in some cases, moving into unregulated markets." excerpt from CNBC article 

This is a continuing issue how do you insure that SJWC man-hours staff and management (including officers) used in support activities NTP&S? There seems to be difficulty "verifying" what is reported versus the reality. How much an hour of the President/CEO time spent on NTP&S activities? If we assume 2,000 hours and SJWC pays him $1,400,000 yearly, at least, $700 an hour or more. So we can see the possibility of costs in the non-regulated activities easily leaking into the regulated activities.

An example is the support that SJWC provides Homeserv USA water pipe insurance and in general the lack of transparency when other local water utilities published their complete relationship with Homeserv USA.

Blogger comment: It seems, to me, that unregulated utility businesses should be at "arm's length", ideally in a separate corporate entity. Then there's no confusion and dedicated employees, management and officers could be compensated and accounted for separately, from the regulated business.

Bonuses for Officers and Managers

Should we ratepayers pay the bonuses of SJWC Officers and Managers? They do manage the regulated utility that provides water to us? If they worked for us (ratepayers) we would like to know how to participate in the award, of bonuses. Since we have no say in the grant of bonuses must be based on someone else criteria? Shareholders indirectly, actually through the Board of Directors. Does the consumers (ratepayers) interests motivate them? it's not as if we could use a different water provider unless we moved. The board and indirectly the shareholders are motivated by the profits posted quarterly and annually by SJWC. Good profits, higher share price and since the Board members and SJWC executives and management are basically rewarded based on profitability, it appears the motivation may not guarantee the best interest of consumers (ratepayers) is a primary interest. 

So, it's pretty apparent the shareholders need to pay for the bonuses for SJWC Officers and Managers, since they are the ones who will profit.

We are supposed to have someone who represents our interests, California Public Utility Commission (CPUC) and we may in fact have them back, in two years, as they recommit to their stated Mission. Luckily, the group which has been committed to protecting consumer/ratepayer interests is the Office of Ratepayer Advocates. We should find interesting that the organization CPUC whose mission is protecting consumer/ratepayer interests had to have another group actually representing the interests of consumer/ratepayer.

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 currently contested issues 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. 

Please consider pasting the following when you fill in the eForm:

"The contingent extensions of the conservation programs do not seem to provide SJWC Ratepayers specific benefits, of value, in a non-discriminatory manner. Rather the conservation measures are either, offered contingent on CPUC approval, of the WRAM or are already provided by SCVWD, are applicable to specific group of ratepayers (discrimination), are likely really paid for directly or indirectly by us (the customers/ratepayers). I OPPOSE providing SJWC with a WRAM separating revenue and water sales, effectively guaranteeing SJWC profits and not promoting SJWC business efficiency."

You can also send an email to CPUC Public Advisor public.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
• Paul Rodgers, San Jose Mercury News, progers@mercurynews.com
• Julie Putnam, NBC Channel 5, julie.putnam@nbcuni.com