James Hunter

Wednesday, August 12, 2015

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.

"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. 

"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." 

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 Advisopublic.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:

No comments:

Post a Comment