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