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VOLUME 38
NUMBER 3
The Magazine of the National Association of Water Companies
OFFICERS
CHAIRMAN OF THE BOARD j . james Barr American Water Works Company
PRESIDENT Floyd E. Wicks Southern California Water Company
GENERAL VICE PRESIDENTS Eugene H. Owen Baton Rouge Water Company
Robert A. Dolson Continental Water Company
Marshall T. Chiaraluce The Connecticut Water Company
W. Richard Roth San Jose Water Co.
SECRETARY Peter L. Cook
TREASURER Sharon L. Gascon
Copyright 1997, National Association of Water Companies. The articles printed in this magazine do not necessarily represent the position of the National Association of Water Companies. NA WC disclaims responsibility for all information provided by individual authors or organizations and published in WATER magazine, including technical information which should be independently verified by separate sources.
STAFF
Peter L. Cook Executive Director
Sharon L. Gascon Deputy Executive Director for
Administration and State Regulations
Robert j. Lewis Deputy Executive Director for
Federal Relations
Michael j. Horner Director of Administration and
Membership
Louis jenny Director of Federal Relations
jean Lewis Administrative Manager
Bonita j . Hayden Finance Manager
Audra Zellner Executive Assistant
Lucie-Anne Radimsky Federal Relations Assistant
jane Bolin Program Assistant/Data Processor
CONTENTS
The President's Message . ..... . . .. 3 1997 Honorary Member
Presentation. . . . . . . . . . . . . . . . .. 4
1997 Management Innovation Awards. . . . . . . . . . .. 6
1997 Annual Conference in Photos .. 7
Twenty-One Myths About Privatization, by Janice A. Beecher ... .. .... .. 10
NA WC Member Benefits . . . . . . . . . 12
United Water Focuses on Public-Private Partnerships to Meet Industry Needs ........... 13
EPRI Conference on Competition in
the Water and Wastewater Industries, by Commissioner Henry M. Duque . . . . . . . . . . . . . . 17
Infrastructure Replacement-Credit Quality Concerns, by Thomas J. Purvenas ........ 21
Executive Director's Report. . . . . .. 24
Regulatory Relations Report . . . . .. 26
Recent Regulatory Decisions. . . . .. 30
Quorum Call. . . . . . . . . . . . . . . . .. 33
New Members. . . . . . . . . . . . . . . .. 34
Corporate Changes. . . . . . . . . . . .. 35
Etcetera. . . . . . . . . . . . . . . . . . . . .. 36
Dates to Remember . . . . . . . . . . . .. 42
WATER-Published four times each year by the National Association of Water Companies, Suite 1212, 1725 K Street, N.W., Washington, DC 20006. NA WC is a nonprofit trade association dedicated to serving the needs of the investor-owned state-regulated, public water supply industry. WATER is circulated to all Active and Associate Members of the Association, members and staff of public utility commissions, federal and state officials concerned with our industry and will be sent to qualified persons upon written request. Requests and changes of address should be sent to NA WC, Suite 1212, 1725 K Street, N.W., Washington, DC 20006 (202) 833-8383.
p
The President's Message by Floyd E. Wicks
I t's amazing how time accelerates. 1998
is already here, and I've served as
NAWC President for almost a year.
The swift passage of time makes it impera~
tive that we enjoy ourselves while
we can, savoring each moment. I
hope that all of you, and your fami~
lies, were able to have the best of
holidays, and I hope that God's
richest blessings are yours in this
new year.
For this issue of Water, we are focusing on
a topic close to all of us in the industry
Public/Private Partnerships. We have
included several articles on this subject,
from the vantage point of different "players"
in the industry. Also, some of the regular
columns feature discussions of issues related
to Public/Private Partnerships.
Additionally, this issue includes
photographs from NAWC's Annual
Conference.
It is my hope that all of you have
mild winters, but if you don't, I'd
like to offer a special thanks to
those dedicated waterworks people
who will find themselves battling
Mother Nature's winter
challenges-snow, ice and, this year, El
Nino-in the interest of insuring that our
customers receive the best water service in
the world. Their dedication is a crucial part
of our industry's success.
Again, my best for 1998. ~
1998 •
NAWC 1997 Honorary Member Presentation to
Jay Weinhardt San Jose Water Company
presented by NAWC Chairman of the Board
J.James Barr, at the 1997 Annual Conference
September 29, 1997
The bylaws of the National Association of Water Companies permit the designation of Honorary Membership for those individuals who have made significant contributions to the regulated water utility industry. It should be noted the selection of an Honorary Member is not required but allowed. It is done only when it is clear someone deserves this recognition. NA WC intended, by establishing Honorary Membership, to recognize those-who have over many years of devotion to the causetruly distinguished themselves as unique and special people. As you consider the list of those who have been accorded this status in our Association, you can begin to grasp the stature membership in this group represents.
Now, before going any farther, let me introduce to you some honorary members who are in attendance here this morning:
Leo Louis Continental Water Company
1980
Jim LaFrankie American Water Works Company
1991
Charlie Buescher Continental Water Company
1996
• NAWC WATER
I am pleased to announce there is someone here today that has been chosen to join this illustrious group of people. It is truly a privilege and a pleasure to have the opportunity of introducing this individual to you.
He was born and raised a Cornhusker ... He is the youngest of 3 children ... He, even at an early age, was a dapper kid and a good scout!
Following high school graduation, he moved west to attend the University of Colorado where he earned a BA degree in Accounting in 1953.
After graduation, the Army Air Corp occupied his time during the Korean War. He was a navigator-stationed in Alaska. I've wondered if that means I've forgotten all of the theaters in the Korean War or if it tells us something about his navigational skills.
Following military service, our newest Honorary Member returned to the University of Colorado for a year of graduate work, and then it was westward ho again-this time to San Francisco and a brief stint with the California Packing Corp.
In 1961, he relocated to San Jose and joined Peat Marwick.
After auditing the San Jose Water Company for three years, he joined the company as chief accountant and, as they say, the rest is history. Today, he is Chairman of the Board of Directors of San Jose Water Company and its parent, SJW Corporation, and also serves on the Board of Directors of the California Water Service Company and the San Jose National Bank.
You know now, of course, that I am talking about none other than Jay Weinhardt-the now infamous host of the largest Halloween Party in the industry's history!
Jay was elected President of San Jose Water in 1974. Then barely 40 years old, he was the youngest person ever elected to this position in the water company.
As Jay assumed his new responsibilities, San Jose Water was a company with revenues of $21 million-income of $3 million-net plant of $108 million which served 171,000 customers and the market value of the common stock was $18 million.
With a proud history dating back to 1866, San Jose Water looked forward optimistically to the challenges ahead. I doubt, though, that Jay and his associates at the company in 1974 realized what lie ahead .
•
There was, of course, the normal, everyday demands on ingenuity and leadership associated with the development, treatment and delivery of daily water service.
That meant new supply development, upgraded treatment technology to contend with evolving environmental regulations and distribution system reconstruction. It also meant the introduction and implementation of computerization.
In short, a daunting task of its own for a major metropolitan area in the heart of the rapidly developing Santa Clara and Silicon Valley.
But, that wasn't all there was to occupy the time and attention of the CEO of San Jose Water. He led the effort in 1985 to
create SJW Corporation, a holding company that positioned his organization for the future. And, on several occasions, he had the opportunity to develop a closer relationship with Mother Nature then anyone might care to-given the choice.
Several monumental drought periods in the mid 1970s and late 1980s required unprecedented leadership and change in the way San Jose Water did business. And just to keep things really interesting, why not interrupt a World Series game with a massive earthquake?
In characteristic understatement, the company's profile published in NA WC's Water Magazine in 1991 to commemorate its 125th anniversary concludes its description of these events with the comment"Operating an investor-owned water utility is a challenging activity at any time."
Through it all, the steady hand of Jay Weinhardt was on the throttle and at the controls. And just for good measure, he would take what I always considered a perverse delight in the company's ability to produce a first-rate annual report to shareholders at least six weeks faster than anyone else could in the industry.
At the end of 1996-after 22 years with Jay at the helm-the company clearly portrays the results of his leadership. Revenues now exceed $100 million. Net income of $19 million is six times greater than when he became CEO and shareholders smile because the company's market value now exceeds $150 million-8 times greater than it was when Jay became President.
There is an old adage-if something needs to be done, find a busy man to do it. Jay epitomizes this thought.
While CEO of San Jose Water, he also served as President ofNA WC; Chairman of the California-Nevada Section of A WW A;
Board member and treasurer of the A WW A Research Foundation, an organization that credits him with having devised and implemented a financial control system that places the foundation amongst the elite in this country; President of the San Jose Rotary Club; President of the YMCA, and President of the Chamber of Commerce.
In contacting various sources-none to be identified-for information to exploit this morning, I inquired ifJay had retired.
The answer I got was-No, I don't think so. He is still Chairman of the Board of Directors but, come to think of it, we never see him around here very much anymore! Another comment wasYou know, I saw Jay the other day and all he was talking about was titanium-perhaps as in driver.
The good news is that, while still caring for his company and our industry, he is taking time-so justly deserved-to enjoy his other passions in life for golf and an occasional fly fishing expedition!
Now, before I ask Jay to come forward and accept the highest honor in NA WC, I would like to introduce a special guest who is here to share this morning with her father-Joye Weinhardt! ~
jay Weinhardt (I) receives a plaque recognizing him as an Honorary Member of NAWC from Chairman of the Board j. james Barr, as his daughter, joye Weinhardt, looks on.
1998 •
1997 MANAGEMENT INNOVATION AWARD ENTRIES
In 1997, the winner of the Management Innovation Awards Small Companies Award was Middlesex Water Co., for its entry RENEW Public Information Campaign. Southern California Water Co. was the winner of the Large Company Award for Water Issues Class. And T ennesseeAmerican Water Co. won an At-Large Award for A New Model for Community Relations. -
Below are listed all of the entries, along with the person to contact for more information. NA WC can provide you with the written material that accompanied entries that you are interested. Please circle the entries on a copy of this page, and return to Mike Homer at NA WC, 1725 K St., N.W., Ste. 1212, Washington, DC 20006.
Keep an eye out for entry forms for the 1998 competition, which will be issued in June.
1 RENEW Public Information 8 Water Issues Class 15 Water Awareness Fair Campaign Sou~hern California Water Co. Southern California Water Co. Middlesex Water Co. Contact: Roland Tanner Contact Person: Roland Tanner Contact: Bernadette Sohler
9 Work Management/Continuous 16 The Benefits of Using a Baldridge-2 Customer Satisfaction Survey Improvement Program Based State Quality Award as an
Hazardville Water Co. Philadelphia Suburban Water Co. Assessment Tool Contact: Sue Ruggieri Contact: Roy H. Stahl BHCCompany
3 BHC Maintenance Process Redesign 10 Kentucky-American Water Co. Contact Person: Jennifer Paul
BHCCompany Vision for the Future- 17 Experiences in Partnering for Design Contact: Twig Loiselle Communicating Core Values and Construction of Water
Kentucky-American Water Co. Treatment Facilities 4 Welcome Kit Contact: Barbara Brown BHCCompany
Hazardville Water Co. Contact: Peter Galant Contact: Sue Ruggieri 11 Mobile Mapping Pilot Project Video
Kentucky-American Water Co. 18 Partnership for Satisfaction Program 5 A New Model for Community Contact: Barbara Brown BHCCompany
Relations Contact: John L. Gabor Tennessee-American Water Co. 12 Secretarial Support Services Contact: J. Frances Alexander BHCCompany 19 Line Stopping! Minimizing Costs
Contact Person : Glenn Thornhill and Customer Inconvenience 6 Helping to Rebuild the Chattanooga BHCCompany
Community 13 Kentucky-American Water Co. Contact: Jeffrey P. Farrell Tennessee-American Water Co. Annual Fayette County Science Contact: J. Frances Alexander Fair- Theme: Launch Into Science
7 Establishment of a Distribution Kentucky-American Water Co. Contact: Barbara K. Brown
System Improvement Charge This is a joint entry from 14 Kentucky-American Water Co. Pennsylvania-American Water Co. Treatment Plant Improvement (PA WC) and Philadelphia Suburban Dedication Water Co. (PSWC) Kentucky-American Water Co. Contact: James Harrison (PAWC) Contact Person: Barbara Brown and David Smeltzer (PSWC)
eNAWCWATER
•
AruutaC coriference in Pictures
Children of NA WC attendees participated in the opening of the Conference.
A. William Wiggenhorn of Motorola, the Keynote Speaker.
The Southern California Water Company Choir helped get the Conference off to a rousing start.
California Commissioner Henry M. Duque addresses the Conference.
Panelists (I to r) William T. Bagley (Nossaman, Guthner, Knox and Elliott), the Honorable Ruth Kretschmer (Illinois Commerce Commission) and the Honorable John Quain (Pennsylvania Public Utilities Commission).
Dr. Tom McDonald, speaking about innovative leaders.
1998 •
Annua( Coriference in Fictures
Bill Diamond, of the US EPA, speaks to attendees.
Conference Chairman and NA WC President Floyd Wicks, of Southern California Water Co.
The Sunday night Fiesta was a big hit. Speaker Doug Wead shared his experiences with Conference attendees.
• NAWCWATER
Chairman of the Board j. james Barr (American Water Works Service Co.) addresses the group.
Executive Director Peter Cook provides an update of NA WC activities .
p
AnnuaL Conference in Pictures
NARUC Chair and Florida Commissioner Diane Kiesling provides a message from NARUC.
"Quality Customer Service" panel Nancy Norling (moderator), Commissioner Henry Duque (California), Commissioner Bruce Ellsworth (New Hampshire), Commissioner jolynn Butler (Ohio), Commissioner Mary jo Huffman (Indiana), Commissioner Diane Kiesling (Florida), and Commissioner Carmen Armenti (New jersey) .
Indianapolis Mayor Stephen Goldsmith. President Floyd Wicks (I) congratulates outgoing Government Relations Committee Chairman Don Correll (United Water).
NAWC Vice President Eugene Owen (Baton Rouge Water Works) presents a Management Innovation Award to Gloria Collins-Stankevitz (Southern California Water Co.) as presenter Melody Pacheco looks on.
Or. janice A. Beecher (Center for Urban Policy and the Environment at Indiana University) discusses NAWCs Sourcebook of Innovative Regulatory Techniques for Water Utilities.
1998 •
I
I
TWENTY-ONE MYTHS ABOUT PRIVATIZATION (AND COUNTING)
janice A. Beecher, Ph.D. Center for Urban Policy and the Environment Indiana University
Few issues are as polarizing as privatization. The disagreement is made worse by the many myths and stereotypes about privatization. Some myths exaggerate the promises of privatization (for example, "privatization is a panacea for the water industry"). More often, however, the myths about privatization have negative connotations (for example, "privatization is antigovernment"). Like all myths, those about privatization usually are founded on some grains of truth. But some myths about privatization are myths simply because they need not be accepted as truth. That is, specific strategies can be used to ensure that the myth does not become reality.
Myths present a problem if they interfere with meaningful dialog, preclude empirical an a lysis, or guide decisionmaking. Privatization should not be dismissed on the basis of myth; nor should privatization be implemented for the wrong reasons. Some of the common myths or stereotypes about privatization are summarized here.
1. Privatization is a new idea. Privatization is an idea at least as old as the times of Adam Smith, who espoused the virtues of capitalism and the idea of privatizing the King's assets in The Wealth of Nations. Governments long have used the private sector to provide goods and services. Privatization has gained popularity in recent years because of a variety of pragmatic and political reasons, the high visibility of a few privatization entrepreneurs, and the growing number of privatization cases. Investor-owned utilities were prominent in the early history of the U.S. water industry and continue to play an important role today.
2. Privatization involves absolute changes in ownership. Transferring ownership and operations from the public to the private sectors is the only "absolute" form of privatization. Full privatization offers certain advantages, especially in terms of access to
• NAWCWATER
private capital and long-term infrastruc-, ture planning. A broader definition of privatization recognizes a full range of options that involve the public and the private sectors as partners in assuring the provision of services. In other words, privatization may not be an "all or nothing" proposition. Marketization and competitivization are terms that are used in the privatization movement to shift the focus from ownership to the more salient issue of operational efficiency.
3. Privatization is the divestiture of public responsibilities. Privatization redefines roles and responsibilities in the public and private sectors. However, transferring certain functional responsibilities to the private sector does not divest public agencies of accountability for public safety and health, environmental protection, and oversight of monopolistic enterprises. Inherently public functions must be maintained at the governmental level in order to preserve the public trust. Although competition is affecting all of the utility industries, including the water industry, competition cannot supplant government oversight as long as monopoly power persists.
4. Privatization is antigovernment. When it works well, privatization can help fulfill governmental mandates more effectively and efficiently. These mandates include the federal Safe Drinking Water Act (SDW A) and the Clean Water Act (CWA), as well as a host of state and local governmental mandates, regulations, and standards that apply to all service providers (public or private). Government policies and regulations can foster markets, while ensuring accountability. Government also can provide a social safety net to mitigate against undesirable market outcomes.
5. Privatization reduces government. Privatization is not self-implementing. With the possible exception of the total
transfer of a system from the public to the private sector, privatization arrangements generally cause local governments to incur additional administrative responsibilities in the areas of contract development, competitive bidding, and performance monitoring. A very valid concern on the part of privatization critics is whether many cities have adequate resources and expertise to effectively design, execute, and oversee privatization agreements. Privatization actually may expand some governmental roles, such as economic regulation.
6. Privatization is antiregulation. As long as monopoly power persists, some form of economic oversight is needed to prevent imprudent expenditures, discriminatory service, or excessive earnings. As an institutional model, contracting appears to circumvent state economic regulation in favor of municipal oversight. However, for privatization through investor-owned utilities, economic regulation helps balance interests and ensure accountability. The prevailing regulatory regime could be modified to provide checks on the monopoly power of contractors, conduct independent cost reviews, and resolve disputes between cities and privatizers. Some alternative models of economic regulation (or "structured competition") could help level the playing field among competitors.
7. Privatization is antilabor. Some privatization arrangements have been justified on the grounds that they will help resolve labor disputes or lower labor costs . Increasing worker productivity is a central goal of privatization, but labor interests fear the outright loss of jobs. Privatization can be arranged to address the interests of the existing labor force. In many cases, worker wages, benefits, training, and advancement opportunities can be improved with privatization. When privatization involves growth and/or diversification, job opportunities may expand. Some labor organi-
..
...
zations have redefined their roles to include helping government workers prepare competitive bids.
8. Privatization is antienvironment. Placing water resources in the hands of the private sector seems contrary to the interest in protecting "the commons." All water utilities must be good environmental stewards in order to preserve the quality of the product they deliver. Private utilities can be provided with specific incentives for sound environmental practices, including watershed protection. Regional private utilities may be in a unique position to advance a watershed perspective because they are less constrained by local political boundaries and pressures. In general, making environmental protection (or other social goals) "profitable" may be more effective than "command-and-control" regulation.
9. Privatization jeopardizes service. Competition is price-driven but it also centers on service. Privatization agreements can and should address service roles and responsibilities, including the obligation to serve. Attention to unserved, underserved, or hard-to-serve areas may be needed. Service accountability is important because under some arrangements, the contractor can be positioned between the governmental agency and utility customers. In the short term, privatization agreements can be designed to address specific service needs. Over the long term, privatizers that neglect service issues are not likely to be successful competitors.
10. Privatization sacrifices quality for profits. The quality of water service can be measured in various metrics: health, safety, pressure, taste, odor, reliability, pollution control, and so on. Quality service means meeting or exceeding service standards, as well as meeting or exceeding service expectations. A leading concern about the private sector is that the profit motive will prevail over meeting quality standards. A well-designed arrangement, however, will help ensure that incentives (including profits) are closely tied to meeting specified performance standards and goals. The competitive spirit behind privatization should promote long-term quality improvement.
11. Privatization results in social inequities. Privatization can raise valid concerns about equity in terms of the fair
treatment of racial or socioeconomic groups in the community. Community leaders may be concerned about changes in the composition of the labor force or levels of service for different customer groups or neighborhoods. A major concern is that groups with less political clout will get shortchanged. Equity issues and goals can be explicitly addressed in the course of designing, implementing, and evaluating privatization. Depending on community preferences, a mix of public and private resources can be used to address equity issues.
12. Privatization requires little public involvement. In matters where public assets, funding, and trust are involved, the public will want and need to be informed about all options under consideration. Treating privatization as "just another business deal" undermines the public's faith in community leaders. While opportunities for public involvement in some aspects of privatization may be limited, public understanding and support for the idea of privatization seems to be essential for success. Regardless of market forces and privatization, the water industry always will be "affected with the public interest."
13. Privatization is just a matter of political will. Political will on the part of local officials is a necessary but not a sufficient factor in privatization. Political will is needed to put privatization on the agenda, but an overemphasis on political will implies that opposition represents only a barrier to overcome, rather than valid political and economic interests. Privatization must be accepted by the public and stakeholders as a legitimate policy option, which takes more than political will. Successful privatization requires vision, skill, and accountability.
14. Privatization will lower utility costs. Water supply is a rising cost industry and costs actually may increase in the course of privatization because of the need to make substantial improvements in water systems. Private utilities must pay a higher cost of capital, as well as earn a return and pay taxes. Ideally, productivity and efficiency gains will offset the costs associated with privatization. One of the chief attractions of privatization may be the ability to shift costs-often rising costs-from the public to the private sector.
15. Privatization will lower utility rates. When realized, the savings from privatization often are needed to pay for improvements or expansion, so that rate decreases are not implemented. When privatization involves a move toward full-cost (and nonsubsidized) pricing, economic efficiency will be improved but utility prices actually might increase. In some cases, savings to municipalities are used to fund other municipal services or facilities.
16. Privatization is the only key to economic efficiency. Both privately and publicly owned water utility monopolies probably have opportunities to improve efficiency. Publicly owned utilities can think and behave competitively, and many do. Savings from new technologies can be realized by public or private utilities. Publicly owned systems also can institute benchmarking, competitive bidding, efficiencyoriented pricing, or other strategies. A shift in ownership or operation from the public to the private sector can result in efficiency gains, but theoretical and empirical studies indicate that competition is more important than ownership when it comes to efficiency. The competition among ownership forms has had a positive effect on the water industry as a whole.
17. Privatization is a possibility for every water system. Privatization requires willing buyers and sellers. For sellers, some facilities may be off limits for political or institutional reasons. For buyers, some facilities may be unattractive for privatization in terms of locational, demographic, or financial considerations. When the marketplace does not provide opportunities for privatization, other means of efficiency improvement can and should be sought.
18. Privatization models implemented elsewhere can be applied in the U.S. Over the past decade, many state-owned enterprises around the globe have been privatized. In Great Britain, water systems were regionalized and nationalized from the "top down" prior to privatization. Privatization of formerly state-owned enterprises often requires the creation of an economic regulatory system. Privatization in the U.S. will be shaped by the federal system of governance, the absence of a national economic regulatory force, and the existence of thousands of water utilities with diverse size and
(continued on next page)
1998 •
, I
Twenty-one Myths, continued
ownership characteristics. In other words, privatizing U.S. water utilities is a "bottom-up" proposition.
19. Privatization ensures competition. Involvement of the private sector in the water industry by itself is not a sufficient indicator of competition. Whether publicly or privately owned, water utilities tend to be monopolistic. Although service territories might be "contestable," real opportunities to compete for customers are limited. The initial competition for contracts can be vigorous or weak. Contracting over very long time periods can create a monopolistic position for the service provider. When cities surrender a function to a private provider, they lose the capacity to perform the function and thus the ability to pose a competitive threat. Performance incentives and monitoring are crucial to successful privatization arrangements, particularly in the absence of competition or economic regulation.
20. Privatization is an end unto itself. Only the purist ideologues will advocate privatization for its own sake. Privatization should be guided by a vision of more fundamental goals. For the water sector, these goals include safe, adequate, reliable, affordable, and responsive water service. Each community must define its goals before exploring alternative arrangements for their achievement.
21. Privatization is a panacea for the water industry. The water industry faces significant challenges in terms of rising costs, an evolving structure, and a demanding public. Investing in the utility infrastructure, finding cost-effective ways to meet future demand, and protecting water resources require a long-term view, extending well beyond the time frame of the typical contract for operations. Privatization can playa significant role in the future of the water industry, but it cannot provide answers to all of the industry's planning and policy needs.
Privatization is easily glorified or vilified, partly because of the many myths and stereotypes surrounding this issue. The truth about privatization is that it can be whatever the parties to an arrangement want it to be. ~
• NAWCWATER
PHO~E PROG~\l ADVICE When it comes to discounted long distance sales pitches, we at NA WC have heard them all. After listening, calculating and comparing, we enlisted the help of a company called UWI to administer the NA WC Discounted Long Distance Telephone Program.
Because UWI has experience with a variety of programs, we've found the advice of their representatives to be sound, honest and unbiased.
But whether you choose to enroll in the NA WC member benefit program or another one, UWI has this cautionary advice about making your selection.
Beware of pitches that go like this: Sign up with XYZ Long Distance Carrier today, commit to stay with them for three years and they'll give your company 20% off.
In reality, the "discounted" price that the company pays will likely increase throughout the term of the agreement. That's because many carriers periodically raise their base rate throughout the length of the contract term.
For instance, if the carrier raises their base rates 3% for the next three years, at the end of a three-year term, you are still getting your 30% discount - but the carrier has increased their rates 36%.
Bottom line: A guaranteed flat rate in writing is your only assurance of getting the savings you expect.
To learn more about the NA WC Discounted Long Distance Telephone Program, contact UWI at 800/342-9287.
Support Wf..W(!.,
(!hoo$e Pennywi$e NAWC members get huge selection, free, fast delivery and the guaranteed lowest prices on office products from Penny Wise. Members get up to 36% off already discounted prices, a total savings of up to 80% off suggested list price.
Penny Wise also offers an additional 3% savings when orders are placed on-line. And, members' prices are guaranteed - Penny Wise will match competitor's prices or if a NA we member buys a product from Penny Wise, sees it advertised for less and sends the ad to Penny Wise within 30 days, Penny Wise will refund the difference or
credit the member's account.
Penny Wise not only offers the lowest prices, but also provides a huge selection of over 20,000 items - four times the selection of the superstores. Plus, delivery is free within the contiguous U.S. and next day is virtually guaranteed
from Penny Wise's 38 distribution centers nationwide. Just call and ask for a Members Only catalog to start saving today. Don't forget to tell the operator that you are a NAWC member to receive your special discounts. Call 1-800-
942-3311.
-UNITED WATER FOCUSES ON
PUBLIC-PRIVATE PARTNERSHIPS TO MEET INDUSTRY NEEDS
Today, more than ever before, municipalities are facing increasing fiscal and regulatory pressures. Cities, towns and counties are burdened with aging water and wastewater infrastructure and rising public demands to provide a higher level of service at a lower cost. It has become increasingly difficult for municipalities to meet these demands while controlling costs and limiting their risk.
The United States Environmental Protection Agency estimates that approximately $138 billion of drinking water infrastructure investments and more than $13 7 billion of wastewater infrastructure investments are needed to meet increasing system rehabilitation and expansion needs. In a recent draft report to Congress, the EPA encouraged the consideration of utilizing public-private partnerships to finance these infrastructure needs.
In a public-private partnership, cities/municipalities can retain their assets, keep rates in line, receive a commission in exchange for the right to manage day-today operations and benefit from the "critical mass" of financial, administrative and technical resources a qualified private partner brings to the table.
"When a municipality is providing drinking water or wastewater services at the same time it is providing fire protection, police services and school funding, water service often is the last item that gets the attention of local government," said Donald L. Correll, chairman and CEO of United Water (Harrington Park, NJ), which provides water and wastewater services to more than 5 million people in the United States. "And in normal budgetary times, the water system often is considered after these other services have received their funding."
"The lack of investment in infrastructure and the additional burdens of meeting stricter mandates from the Safe Drinking Water Act and the Clean Water Act has placed enormous strains on the funding and technical capabilities of many public water and wastewater systems," said Correll. "That's why many local communities have begun to reach out to the private sector for solutions."
According to Correll, United Water's track record of accomplishments in the water services industry helps the company offer flexible solutions to municipalities. He notes that movement from public to private ownership in one step is not always possible, either financially or politically. There are, however, interim steps that can serve as alternative solutions for municipalities. Here's a look at several of the solutions United Water is providing for communities across the United States:
Hoboken, New Jersey Partnering with the Community to Provide Solutions
Hoboken is a historic New Jersey city located just across the Hudson River from New York's financial district. For most of this century Hoboken operated its own water system. But as the infrastructure of the municipal utility aged and regulation became more demanding, Hoboken found it was losing money to the tune of $800,000 a year. Municipal officials realized rates would have to be increased by 35% just to break even.
In looking for a solution, Hoboken did not want to totally privatize its water services. That would mean selling its water system and turning it into a regulated utility. But it was clear that something had
to be done. In 1994, the city negotiated an innovative public-private partnership with United Water by taking advantage of special legislation that had been passed earlier by the New Jersey Legislature.
Under the agreement, United Water operates and manages the city's water system, which serves 33,000 people. Hoboken received a much needed capital infusion through an up-front concession payment of $5.5 million (used for property tax reduction) and the city retains the ownership of its water assets.
In addition, Hoboken retains control over rates charged to residents, while enjoying the benefits of United Water's professional management-both technical and operational-at the lowest possible cost. The partnership is a classic example of "win ... win."
Hoboken's 10Qg-term contract represents a major innovation. Previously, agreements involving water systems had been on a year-to-year basis. The contract between Hoboken and United Water is for 10 years, renewable for up to 40 years. It provides for fixed terms for the first 10 years, renegotiable every 10 years through 2034.
Basic Terms • United Water advanced $5.5 million for
the right to operate Hoboken's water department.
• The water company assumed all responsibility for operations, maintenance, administration, billing and collections.
• Water meters are being replaced with an automatic meter reading system at no cost to Hoboken. The city will own the meter reading system after 10 years.
• Rate schedules are fixed for the first 10
(continued next page)
1998 •
United Water, continued
years, with no rate increase in the first year.
• Hoboken maintains the authority to set higher rates and collect the additional revenue for its own use.
• Hoboken retains ownership of the assets with the option to sell or mortgage the water system.
• United Water funds routine construction and emergency repairs for the first 10 years up to an overall cap of $3 million.
• United Water hired five city employees and works with Hoboken on employee issues.
Indianapolis, Indiana Public-Private Partnership Leads to Reduced Costs
United Water, Suez Lyonnaise des Eaux partnered with the Indianapolis Water Company in 1994 and initially signed a five year contract to provide comprehensive management, operations and maintenance for the city's wastewater treatment facilities.
The partnership (called the White River Environmental Partnership, WREP) provides a variety of water and wastewater services to the City of Indianapolis that have resulted in upgraded infrastructure and improved efficiencies leading to substantial cost savings for the city.
The City of Indianapolis saved $24 million in the first two years. Based on the excellent performance of the partnership, Indianapolis extended the public-private contract another 10 years and WREP expects to save the city $189 million over 15 years. Savings will be achieved primarily through the optimization of treatment processes and labor utilization. Other UW achievements include: • Implementation of a centralized plan
ning system for maintenance which dramatically reduced corrective maintenance and replacement costs for the plant and equipment and reduced equipment vibration problems by 70 percent.
• Recognition by the Indiana Water Pollution Control Association with an award of excellence which resulted from refined standard operating procedures and improved quality control methods.
• Implementation of a safety program, including more than 2,824 hours of train-
• NAWCWATER
ing, that resulted in an 80 percent decrease in employee accidents and a 40 percent decrease in the number of OSHA reportable incidents.
• Signing a labor contract with the American Federation of State, County, and Municipal Employees.
• Advanced operation of two wastewater treatment facilities with the capacity of 250 million gallons a day. In April 1996 the partnership was cho
sen to manage the city's storm and wastewater collection system. Under this five year contract, WREP will manage more than 200 lift stations; 12.5 million feet of sanitary sewers; 4.3 million feet of storm sewers; and more than 45,000 manholes and other structures.
Houston, Texas Reduced Costs and Improved Efficiencies
The City of Houston wanted the best of both worlds: reduced costs associated with the operations and maintenance of its Southeast Water Purification Plant (SEWPP) and improved water quality to levels often surpassing many state and federal requirements. To accomplish these goals Houston turned to United Water.
United Water assumed responsibility for operating SEWPP in August 1996 under a five-year contract with the city. United Water's innovative approach to water treatment, sludge production minimization and
power reduction will save Houston $12.7 million over the life of the contract versus the previous operator's prices.
One of United Water's first accomplishments was to install a computerized maintenance management system within the first 60 days of project startup. This has helped reduce breakdowns and improve efficiencies.
A large portion of the savings are being achieved as a result of converting to a more effective water treatment process. Further savings have been achieved by entering into wholesale power purchasing arrangements. These agreements have reduced SEWPP's annual electrical bill.
At the same time that costs have been reduced, water quality has improved. Houston has set stricter water quality standards than the state or federal government and United Water has met or surpassed every test.
Atlanta, Georgia Operations Assistance Provides Expertise
In addition to assuming operational responsibility for water and wastewater treatment facilities, United Water has extensive consulting expertise to help municipalities better manage their water systems.
Atlanta, Georgia is a city where United Water is presently involved in such activities. Atlanta has four water reclamation centers and seven combined sewer over-
Quick response to service breaks was part of the solution for improved service in the city of Hoboken, . N}. United Water crews have increased efficiency two-fold in repairing service breaks .
flow facilities. As growth continues, public officials were concerned about the City's ability to manage the existing water infrastructure and prudently plan for the future.
The city retained United Water to provide operations assistance services to help Atlanta meet its goals of continued environmental compliance and cost-effective operation. The core of United Water's approach to the project centers around a system of continual improvements that complement the city's existing Total Quality Management program, including benchmarking, strategy development, team building and measurement of results. All levels of the city's wastewater personnel participate in this program.
A Strategic Planning Team composed of United Water and City personnel has been formed to identify short and longterm goals and to help implement action plans designed to achieve these goals. The team has outlined a five-year management plan for operations, maintenance and management of the City's four water reclamation centers and seven combined sewer overflow facilities. Numerous areas for improvement have been identified, including: • Human resources and organizational
functionali ty • Laboratory management • Operational performance and process
management control • Integration of management informa
tion systems • Safety, training and fiscal management • Coordination of facility operations du~
ing construction of capital improve-
ment projects currently under design
United Water and Atlanta are also preparing operations and maintenance documentation to assist plant operators. United Water will train the current city employees to prepare them to manage and operate new and existing facilities. Once each training program has been completed, United Water will establish a review process to measure its effectiveness and highlight components to be modified.
United Water is also helping to select, design and implement the maintenance
'management system (MMS). This system will define the combination of activities Atlanta will employ to identify, plan, schedule, monitor and analyze the work necessary to maintain equipment and facilities in good working order.
Jersey City, New Jersey $10 Million Savings Achieved in First Year
United Water entered into a five-year contract in May, 1996 with Jersey City, NJ for the management, operation and maintenance of the city's entire water system. This represented the largest public-private partnership of a water system in the United States. United Water paid Jersey City $2.5 million for the ability to operate and maintain the city's water system. The city maintains sole control over water usage charges billed to system customers.
The agreement will provide the city with more than $38.5 million in savings and benefits over the life of the contract.
uoitedWJI I
New vehicles, equipment and maintenance facility have added up to a new attitude in Jersey City, NJ, since United Water signed a five-year agreement to manage the city's water department.
Jersey City stands to benefit directly from the $17.5 million in operational savings achieved by United Water and the $18.5 million from United Water improvements to the billing, collection and customer service functions.
The Jersey City water system serves 239,000 residents and consists of two reservoirs containing a total of 11.3 billion gallons of water. The water is treated at an 80 million gallon per day conventional water treatment plant and is carried by a 23-mile aqueduct to Jersey City. The distribution system consists of approximately 275 miles of mains ranging in size from six to 60 inches. There are approximately 3,500 fire hydrants and 32,000' meters. United Water is responsible for all billing and collections.
In addition to daily operations, United Water has improved the City's system in numerous ways, including: • Implementing a beneficial reuse sludge
disposal program within the first 90 days of the contract.
• Installing a computerized maintenance management system.
• Securing standby power for related facilities. The previously existing standby power system had been out of service for more than 3 years.
• Implementing a corrosion control program.
Unlted Water is paid an annual service fee which includes an incentive encouraging it to improve billing and collections recovery to reduce unaccounted-for water sales. United Water also markets Jersey City's surplus water to nearby communities.
EI Segundo, California Reclaimed Water and Secondary Effluent to Drinking Water Quality
United Water entered into an 18 month agreement in 1993 with the City of EI Segundo, California to provide management expertise for construction and facilities planning services for the West Basin Water Recycling Plant-a 20 million gallon per day treatment plant with two 5 million gallon per day nitrification facilities.
The purpose of this unique water recycling plant was to reclaim water from throughout Los Angeles South Bay area and secondary quality effluent from the
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1998 •
United Water, continued
Hyperion Treatment plant and treat it to Title 22 Drinking Water Standards for seawater intrusion barrier injection, industrial uses and landscaping irrigation.
For Phase I of the project, United Water managed a 30 person construction crew and operation team to assess and identify potential problems. The team brought the project in on-time and within budget.
United Water also provided detailed plans on start-up procedures, recruiting, staffing, process control, laboratory, maintenance and computerized information management for the West Basin Water Recycling Plant. United Water's planning resulted in quick and efficient plant staffing, start-up and operations.
United Water also put the plant on-line and had industrial accounts up and running by the time the plant was ready for operation.
Upon completion of the initial 18 month contract, United Water entered into its current long-term operation and maintenance agreement with West Basin Municipal Water District for the West Basin Water Recycling Plant.
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Fulton County, Georgia Reducing Taxpayer Burden
United Water has worked with Fulton County, Georgia on projects of increasing size and significance since 1992. United Water's work in the area has led to savings of more than $6.5 million for Fulton County. The county recently renewed and expanded the contract with United Water to operate and manage three wastewater facilities, associated pumping stations and all sludge hauling operations.
United Water began its relationship with Fulton County in 1992 when it supervised the expansion and start up of the Big Creek Water Reclamation Plant. The company assisted with construction to increase the capacity of the facility from 10 million gallons per day to 24 million gallons per day. United Water also installed a state-of-the-art supervisory control and data acquisition system (SCADA) which eliminated the need for 24-hour surveillance and notifies plant management in the event of equipment or power failure.
United Water's responsibilities expanded in 1997 to include the management, operation and maintenance of three wastewater facilities, the associated pump-
. ' ~ . .-
.. :.li.
'. , .' III .
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ing stations, all sludge removal for the County and consultant services for capital planning. The treatment facilities include:
• Big Creek Water Reclamation Plant (24 MGD)
• Little River Water Pollution Control Plant (.85 MGD)
• Johns Creek Water Pollution Control Plant (7 MGD)
United Water's work in Fulton County has been recognized on three occasions by the U.S. Environmental Protection:
• 1994 EPA Region IV Award
• 1995 EPA Region IV Operations & Maintenance Award
• 1995 EPA National Operations & Maintenance Award (Second Place)
During the past five years, United Water has developed a strong sense of community in the Fulton County area. Our employees have contributed more than 250 hours of volunteer service per year in the surrounding community. Additionally, we've contracted with the Minority Business Enterprise for 39 percent of the work performed by United Water in the Fulton County area. ~
Preventive maintenance such as hydrant testing is now part of the routine daily operation of the city of Jersey City, Nj's water system since United Water began managing the water department in 7996 .
• NAWCWATER
EPRICONFERENCE ON COMPETITION IN THE
WATER AND WASTEWATER INDUSTRIES
Commissioner Henry M. Duque California Publie Utilities Commission
San Franeiseo~ California Oetober 20~ 1997
Thank you for permitting me to substitute for Commissioner Conlon at today's conference. Let me begin by welcoming you to California. I hope that your stay in San Francisco is pleasant and enjoyable.
Over the last two years, as a Commissioner at the California Public Utilities Commission, my case assignments have permitted me to take a leadership role in the regulation of water companies in California. Like most of you, my work requires me to attend numerous conferences. I trust that you will agree with me that the agenda of this conference promises a uniquely fresh perspective on the water and wastewater industries. No other conference in my experience has offered such a comprehensive and structural view of the water industry and its relationship to government regulation. The conference organizers deserve our compliments.
The Regulatory Perspective
The conference organizers have asked
that I bring the "regulatory perspective" to
this conference. As a member of the
California Public Utilities Commission, one
quickly learns that on a deliberative body
with five independent individuals, there is
no single "regulatory perspective." The
"regulatory perspective" emerges from the
give-and-take of five different perspectives
that eventually produces a decision docu
ment that garners three votes on a particu
lar day. Thus, the label "regulatory
perspective" implies a static rationality that
varnishes the closer that one gets to the dy
namics of regulatory decision making.
(continued next page)
1998 •
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EPRI Conference, continued
Regulatory Fundamentals in California Although there is no single "regulatory
perspective," democratic government, bureaucracy, and the water industry have structures that do shape the perspective of anyone who sits in a regulatory role. Clearly, the scope and scale of the water industry shapes the regulatory perspective. The first speaker of this conference provided an overview of the national water picture-public and private. My own remarks will also start with the basic structural facts of the water industry in California, and how that structure affects regulation.
A little background is in order: In California, private water companies serve 20 percent of the population, or approximately 6 million individuals. Annual private company revenues in California total approximately $650 million. The top ten water companies serve approximately 90 percent of the private company customers, and yield a similar proportion of the revenues. Nevertheless, there are over 200 water companies providing service throughout California. Some serve as few as 30 connections, and many serve between 100 and 200 connections.
The chief sources of water are under direct governmental control. The Federal Water Project, the State Water Project, and the San Francisco and Los Angeles municipal systems and the Metropolitan Water District of Southern California control the water supplies originating in the Sierra Mountains and the Colorado River. Agriculture uses approximately 80% of the water in California. Municipal and industrial uses account for approximately 20%.
Government operating distribution systems not only serve 80% of California's population, they provide service in most of the major metropolitan centers. Finally, water quality regulation resides in the State's Department of Health, which administers and enforces the Safe Drinking Water program of the U.S. Environmental Protection Agency. This water quality regulation, in tum, drives a major portion of new system investments by many companies. For a very small company, filtration and treatment equipment may very well account for 50% of a company's plant in service.
How do these facts shape the perspec-
• NAWCWATER
tive of a regulator on a public utilities Commission? Let me answer this question candidly-the water industry is the smallest regulated industry under the jurisdiction of the California Public Utilities Commission. The top four companies in California's regulated energy market for electricity and gas, for example, have annual sales of over $20 billion, or approximately 30 times that of the entire water industry. Moreover, these private energy companies serve the key urban areas of the state and an overwhelming proportion of the State's population. Not surprisingly, energy regulation receives the major portion of political and media attention. Since economics, politics, and the concerns of the public drive a Commission's agenda, the major portion of the time and attention of regulators also accrue to the energy industry. Consequently, on a crowded Commission agenda, water issues often make weaker claims for time and attention.
Second, the Commission makes few decisions of major consequence in regulating the water industry. In addition to the previously mentioned control of water supply by government agencies outside the jurisdiction of a Public Utilities Commission, the control of water quality generally falls to the Department of Health. Currently, health regulations drive many of the major capital investments by private water companies. The net result is that most of the significant water decisions are made outside the domain of a Public Utilities Commission.
Put yourself in my shoes for a second: If the Department of Health requires the installation of a new filtration system, how could I rule the investment as imprudent? The job of a Public Utilities Commissioner is often one of simply approving rate increases to finance the investments required by the Department of Health or to meet the rising cost of water supplies charged by a government agency.
Third, most regulatory decisions involving the water industry require the unpleasant and unpopular act of authorizing rate increases. In California and throughout the country the water infrastructure is wearing out. Following the second World War and the rapid expansion of California, water utilities invested in steel mains, replacing the older technology of iron pipes. Today, these steel mains are failing. Their lifetime of 50 years appears much shorter
than that of iron pipe, which can frequently last over a century. Moreover, pipe that went into the ground at $2 a linear foot now costs over $100 a linear foot to replace. It is difficult to explain to citizens and their elected officials why the costs for delivering water is rising-the water looks and tastes the same, why should its costs rise without end while the costs of energy and phone service fall?
Fourth, the water industry and its regulation do not provide the political and intellectual excitement of other regulated industries. Changes to water regulation such as performance-based regulation, for example, may prove practical, but these will only affect the margins of the regulatory program for water. In an industry whose capital intensity exceeds other utilities and technological change is modest, the traditional regulatory model based on the regulation of capital costs continues to make sense. Water regulation seems relatively ensconced in cost-of-service rate-return regulation.
In contrast, consider the telecommunications industry. There new digital technologies are blurring distinctions between voice, data, and video that served as the basis for a structure of regulation. Prices are falling and internet growth is transforming networks. New legislation h as changed national policy and states must respond. Thus, traditional regulation no longer makes sense in that industry. Regulators must rethink the public interest and how regulation can and should advance it. These issues present exciting and important intellectual challenges.
Fifth, competitive markets, whether in the supply or distribution of water, promise few benefits to water customers. In particular, since so much of the cost of the water service comes from the service infrastructure of pipes in the ground-not from providing the good---competition for providing wholesale water offers few prospects of major cost savings. This is very different from the electric industry in California, where supplying electrons can account for over 60 percent of the delivered price.
Similarly, at the distribution level, competition is impractical. The high cost of placing pipe-in-the-ground makes the entry of a new local water company virtually unthinkable. Furthermore, the future holds no prospect of a breakthrough distribution technology. Unlike the telecommunica-
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tions industry, where radio waves can bypass the copper wires that bring phone calls to each home, there is no distribution technology that will magically beam water to the customer. Also unlike the telecommunications industry, where new technology enables coaxial cable-TV wire to provide phone services, there are no foreseeable technological advances that will enable the gas pipe going to each home to carry both gas and water. Trucks may deliver bottled water to a home, but few will use this water to flush toilets or water lawns.
To sum up, from a regulatory perspective there is no "crisis" in water regulation that necessitates a full-scale overhaul of water regulation. Moreover, increasing costs throughout the water industry require Commissioners to vote for always unpopular rate increases at a time when other utilities face flat or declining prices.
Opportunities for Change and Emerging Competition
By this time, many of you will wonder if I'm all wet. Why have I come to a conference on competition with a message that would dampen the spirits of participants? Don't I understand that the unstated agenda of any conference is to develop interest on a topic?
Let me assure you, I have no intention to rain on your parade. There is another side to the regulation of the water industry that makes change possible and participation rewarding.
First, the political and regulatory climate surrounding the water industry in California makes change much simpler to accomplish than in other regulated industries.
"Climate" is a nebulous term, and I find it difficult to describe this important element. Let me describe the regulatory and institutional climate that I see in the energy and telecommunications industries.
In both those industries, firms are fighting competitive battles not only in markets but on the field of regulation. Consequently, regulators find that rather than opening markets to new forms of competition, they fi nd -themselves refereeing disputes. Moreover, because of history of command and control regulation, I find that regulators are placing handcuffs and new regulations on telecommunications and energy firms under the rationale of controlling "market power." Parenthetically, I call this the "hammer and nail problem"-if all you have is a
hammer, every problem looks like a nail. Further, because of the high stakes for the parties involved in the telecommunications and energy industries, litigation costs are only a small component of any regulatory outcome. For this reason, progress towards opening markets is extremely slow and hampered by "deep-pockets" litigation. Thus the "climate" is harshly adversarial.
The institutional "climate" in both energy and telecommunications is complex and no organization emerges as a single powerful actor. The decisions of a state Commission on telecommunications, for example, are second-guessed by the FCC, by federal courts, and by state courts. Every decision that a state Commission makes is subject to intensive scrutiny. Paralysis often results from the furious battles waged in regulatory proceedings that move from state to federal regulatory jurisdictions and then through the courts. For energy regulation, a more cooperative FERC replaces the FCC, but the underlying institutional "climate" remains the same.
This is not the case in the water industry. "Deep-pockets" litigation is financially ruinous and does not occur. There are no federal agencies seeking to impose a different regulatory structure on states. The access to federal courts is extremely limited, and state courts have given wide deference to water regulators. Thus, the "climate" in the water industry makes it possible for a Commissioner actively involved in water policy to "make a difference." For someone who desires to make a difference in government and in people's lives, involvement in water regulation offers great rewards.
Emerging Competition in the Water Industry is Bringing Regulatory Change
Now, turning to topics closer to the heart of this conference~competition is beginning to arise in the water industry. In California, three forms of competition are arising in the water industry. First, firms are competing with each other to provide support services to government organizations now providing retail water services. Second, direct competition is arising between firms wishing to acquire or merge with existing firms or to serve new developments on the fringes of their current service territory. Third, a broad competition is underway be-
tween public and private water companies over whether government or the private sector can best serve the infrastructure and water service needs of a city or region.
Competition in Service Contracting The simplest form of competition now
emerging is competition to provide services-such as billing and payment collection-to another utility, whether municipal or private. In this competition, water companies seek to market some of the infrastructure management and customer service skills that they have acquired in their core business. On field trips to water companies, firms showed me state-of-the-art billing and collection operations. These operations are highly automated and with a per unit cost far below that of banks offering similar services on the competitive market.
In the last year, the City of San Jose contracted with a private water company to provide the billing for one of its municipal services-sanitation. The regulated utility providing the service came before the Commission for approval of the operation, and a resulting mess ensued. None of the cost-accounting or structural safeguards like those developed in the telecommunications and electric industry were in place. A regulatory battle arose at the Commission between the utility and our consumer staff concerning both measurement and allocation of costs and profits.
This type of controversy serves consumers, companies, and California poorly. Following this mess, the Commission held a roundtable with water industry executives and informal workshops on how to resolve these issues. Our goal is to develop a winwin strategy that facilitates entry by regulated water companies into new lines of business. This Wednesday, the Commission will open a proceeding that will develop clear rules for these situations. These rules should provide water companies the information and regulatory certainty that they need to compete and should prevent, captive utility customers from subsidizing utility ventures into competitive markets. In my view, the rules that result will serve the public interest and will benefit both companies and consumers. Moreover, I am extremely confident that this goal is practical, for the Commission has already developed similar rules for the electric and telecommunications industry.
1998 •
Territorial Competition Let me turn now to a second form of
competition-territorial competition. Today, water utilities compete in the acquisition and consolidation of firms and service territories. In California, modem water operatio~s, including health testing and water service planning, require a degree of sophistication beyond the reach of the smallest water companies. For some time, public policy has encouraged consolidation, but for the past few years there has been little progress in reducing the number of very small water companies. This, however, is an area where as a Commissioner, it appeared I could make a difference.
My staff and Water Division staff worked with the water industry on this problem, but no simple solution appeared that could simply replace the "book value of rate base" as the acquisition standard. Indeed, Commission staff was deeply divided, and passionately presented both sides of this policy argument. Moreover, since many California water companies have extensive land holdings acquired long ago, the difference between market value and the price that an acquiring firm may reasonably bid can be extreme.
The water industry, however, was able to move this issue onto the agenda of the state legislature. Here, it was possible to resolve this matter. Legislation was introduced that states "the Commission, for ratesetting and all other purposes, use the standard of fair market value when establishing the rate base value for the distribution system acquired by a water utility." As I understand it, this sets "reproduction-costnew minus depreciation"-defined in the evidence code-as the new standard for reviewing the reasonableness of the distribution plant in any acquisition. Moreover, at the Commission's insistence, language was added to ensure that acquisitions would meet broad public interest criteria and would not result in the "churning" of ownership to inflate plant costs.
The bill passed easily through the Senate and Assembly. Governor Wilson has signed this bill into law, and the Commission will soon initiate a proceeding to develop rules consistent with the new legislation. Thus, in less than a year it proved possible to get
eNAWCWATER
the legislative guidance needed to move forward on this matter.
Government vs. The Private Sector Finally, a broad political and economic
competition is underway in California to determine whether water service is best delivered by government or the private sector. Moreover, private firms are competing successfully with government water agencies in a very new environment. Two recent legal developments have helped spur many cities and towns to reconsider privatization or long term leasing of water facilities. First, the IRS has changed its treatment of long term leases. This offers cities the ability to "privatize" water service without making an irreversible decision to sell the system. Second, the passage of Proposition 218, a citizen ballot initiative that will control special property tax assessments and other charges by towns and government organizations, sets in place legal requirements that may make rate changes by government water companies more complicated than rate changes by private companies. Indeed, the complicated Public Utility Commission rate proceedings may soon look simple when compared to those that spring from Proposition 218.
These developments are leading local governments to ask themselves whether they wish to be in the water business. Mayors and city council members now ask: Wouldn't our time and energy be better spent on public safety and education policy than in running a water company?
Although government agencies have access to low-cost debt financing, it is unclear that the agencies can translate this competitive advantage into lower prices for water. Some preliminary studies conducted by private companies in California indicate that the number of employees per connection in municipal systems is frequently two to three times that of a private water company operating next door. Moreover, despite the long standing economic hypothesis that rate of return regulation leads to overinvestment in plant, it appears that municipal systems frequently carry higher investments per customer than private firms. The consequence of these developments is that it can prove difficult to make the case
that government provision of water service serves the public interest.
Just recently in California, several water companies have bid for a twenty-year leasing contract to provide water service to the town of Cupertino, and several other similar contracts are under discussion. Rumors abound that this will happen in many areas throughout the state.
Here again, the California Commission is seeking to develop clear rules that facilitate competition by private water companies in this emerging market.
Conclusion: Water Regulation Can Make an Important Difference for California
Finally, this overview of the "regulatory perspective" would be remiss if it did not acknowledge that the history of the West shows that the water infrastructure holds the key to sustained prosperity. The perspective of this regulator is that unprecedented opportunities still exist to fashion policies that serve the public interest. Competition between companies to provide services to towns and customers, albeit through monopoly distribution systems, is requiring that water regulation change along the path already traveled in the regulation of telecommunications. Although the underlying issue of an aging infrastructure will lead inexorably to increases in the price of water service, private companies and regulatory policy can provide cost-effective solutions to the problems that communities and individuals face. Moreover, the absence of head-to-head competition and adversarial adjudication make government action more possible than in either the energy or telecommunications sectors.
In conclusion, my regulatory perspective is that water regulation can change to affect significantly and positively the lives of Californians. Traditional regulation is working relatively better in the water industry than in either telecommunications or energy, and this provides a sound core making new ventures possible and beneficial.
Thank you. ~
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, N F R..AST R..U CT U R..E REPLACEMENT-
C~ED IT Q.UALITY CON CE~N S by Thomas j. Purvenas P. Maul & Associates, Inc.
It is recognized that water utilities are the most capital intensive public utilities, whether compared to electric, gas or telephone companies. As the telephone, electric and gas companies slowly wander their way through the trackless wilderness known as deregulation, water utilities seem to be left behind. While the saga of the energy utilities may capture headlines, certainly the critical role the water utilities play, safeguarding public health and safety, has not been ignored by management and regulators. Regulatory requirements to assure public health have dominated the water industry in recent years. As changes are made to the regulatory requirements mandated for water utilities, other challenges face the management of the water utility industry including critical infrastructure replacement programs. Recent public announcements by Standard & Poor's C orporation (S&P) and actions by the Pennsylvania Public Utility Commission (PUC) highlight the need for the management to focus on the critical task of infrastructure replacement and rehabilitation.
Times (X)
4.0 3.77
3.0
2.0
1.0
0.0 Water Cos.
Capital Intensity for Various Utility Groups
Divers. Tele. Cos. Local Exch. Tel Gas Pipelines Gas Distributors Electric
I - Net Plant/Revenue
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1998 •
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COMPLETION OF SDWA CONSTR..UCTION
In the late 1980's and early 90's, the water utility industry was faced with the difficulties of finding the financial resources necessary to deal with evolving regulatory requirements mandated by the Safe Drinking Water Act (SDWA) amendments. More recently, the need to invest in replacing the aging water distribution infrastructure has become a hot topic. These infrastructure projects, more often than not, are non-revenue producing and non-expense reducing projects necessary to rehabilitate or replace existing facilities. These facilities, whether through aging or breakage, need to be replaced as a matter of the distribution constraints of the utility. They provide the ability to supply the existing level of service on an ongoing basis while not providing additional revenues to the utility. This will exacerbate the already capital intensive nature of the water utility industry as newer more expensive pipe replaces older facilities. When a utility is in a period of high customer growth it would have the ability to finance some of these construction expenditures internally by generating cash through customer growth. The current 1 % customer growth environment in which many water utilities find themselves makes it difficult, if not impossible, to supply the internal funding necessary to pay for these critical projects. This forces the water utilities to be in a capital attraction mode at all times. This is further compounded by the long-term trend in decreasing customer usage habits through conservation, aging customer demographics or the use of more efficient fixtures. A combination of slowing customer growth and stagnant revenue from decreasing customer usage defines the financial predicament of the water utilities. This increased financial stress has forced many water utilities to seek rate relief more aggressively.
Current infrastructure rehabilitation which may have been delayed in order to fulfill SDW A and surface water treatment mandates has made current infrastructure replacement more critical. Further, the delaying of infrastructure replacement or rehabilitation can lead to reduced quality as indicated by taste and odor complaints, or interruptions 'in service which may generate negative customer satisfaction .
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Regulators and companies face the wrath of disgruntled customers who find it hard to swallow increased rates for reduced quality.
S&'P SPEAKS TO THE WATER.. INDUSTR..Y
The capital intensity of the water utilities has been recognized by S&P and since the early 90's S&P has provided a running commentary on the financial risks faced by the water utility industry. On May 25, 1992, S&P revised its credit quality benchmarks for investor-owned water
utilities. S&P saw increased business risk for the water utility industry through concerns over acquiring future water resources, the quality of existing sources and low rates of capital recovery. These revisions to the benchmarks in 1992 made it necessary to obtain stronger financial measures to keep and/or obtain the same financial bond rating. The biggest challenge to water utilities cited in 1992 was the implementation of SDW A amendments. S&P noted the financial stress of improving treatment and related facilities while increasing spending on distribution infrastructure.
Revised water utility financial benchmarks AA A BBB BB
Funds from operations to average total debt
Above Average 19 15 10 7
Average 25 21 15 9
Below Average 27 20 12
Funds from operations interest coverage
Above Average 3.00 2.50 1.50 1.00
Average 3.50 3.25 2.25 1.25
Below Average 4.00 3.00 1.75
Net cash flow to capital spending
Above Average 75 60 35 20
Average 95 7,5 50 30
Below Average 90 65 40
Total debt to total capital
Above Average 52 56 64 70
Average 48 52 59 65
Below Average 48 54 60
Pretax interest coverage Above Average 2.75 2.25 1.25 0.75 Average 3.25 3.00 2.00 1.00 Below Average 3.75 2.75 1.50
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On June 20,1994, S&P applied its new matrix approach bond rating benchmarks to the water utilities, which had previously been applied to the electric and gas industries. These changes in 1994 did not lead to any change in ratings or criteria, simply a clarification of the methodology and an incorporation of a specific assessment of business risk into the credit rating process. Again, the difficulties surrounding SDW A were listed as a primary challenge to the water utilities although, again, expenditures for infrastructure are cited as concerns.
INFKASTKucrUKE REPLACEMENT
More recently on March 31 and April 7, 1997, S&P has highlighted the credit quality implications of pipeline infrastructure replacement and repairs. S&P notes that water utilities industry through the late '80s and '90s spend most of their money and time complying with the SDW A amendments with the water treatment systems which are now in place. S&P notes an Environmental, Protection Agency (EPA) report which indicates that approximately 56% of the capital expenditures needed for water systems nationwide over the next 20 years will be utilized to replace and/or rehabilitate aging infrastructures. Also, the typical investment in infrastructure modernization has only amounted to approximately 0.5% of the total system, which implies a 200 year construction cycle to fully replace existing facilities. The aging infrastructure has resulted in increased frequency of main breaks, led to larger levels of unaccounted for water, and reduced quality of service. Earnings may be negatively affected during the construction cycle for infrastructure replacement due to regulatory lag, where expenditures are not recognized in rate base until a base rate case is filed. S&P encourages utilities and regulators to seek innovative solutions to regulatory lag and the difficulties of water utilities meeting capital requirements. The Distribution System Improvements Charge (DSIC) used in Pennsylvania was listed by S&P as an innovative mechanism which is positive for the credit quality of Pennsylvania water utilities and indicates that regulatory support such as the enactment of the DSIC as it is positive for the credit quality of water utilities.
PENNSYLVANIA'S RESPON SE
The Pennsylvania DSIC is an adjustment clause tariff pursuant to Section 1307 (a) of the Public Utility Code, 66 Pa.C.S. 1307(a). The purpose of the DSIC is to provide recovery of depreciation and pretax return on certain non-revenue producing, non-expense reducing, distribution improvements completed and placed in service between base rate cases. Two of the largest water utilities in Pennsylvania, Philadelphia Suburban Water Company and Pennsylvania-American Water Company filed petitions with the PUC for the implementation of a DSIC. These were eventually approved by the PUC to be filed with the Company's new tariffs. After the approval of the PUC, the Pennsylvania state legislature modified the Public Utility Code to reflect the DSIC. Other water utilities in the state have since filed for and received DSICs of their own.
WHAT IS THE DSIC? Pennsylvania DSIC was written into
the Public Utility Code in the same section where other utilities in the state have adjustment clauses to recover fuel expenses and tax increases. The DSIC provides the water companies the ability to provide recovery of fixed costs when a specific set of eligible property such as: services, meters and hydrants installed as in-kind replacements; the replacement of mains and valves which had worn out or deteriorated; main extensions to eliminate dead-ends; main cleaning and lining projects; and unreimbursed funds for highway relocations. The DSIC has a quarterly effective date to recover fixed costs on eligible plant additions placed into service during a 3-month period ending one month prior to the effective date. The pre-tax return is calculated using the company's actual capital structure and cost rates for the 3-month period. This cost of equity will either be from the company's last fully-litigated base rate case, if within two years, or older if the cost of equity will be taken from a calculation by the Commission Staff from a quarterly report released by the Commission. The DSIC surcharge is calculated as an additional percentage applied to the amount billed to customers, capped at 5% of base rates. The DSIC is subject to an annual reconciliation and
can be audited by the Commission at any time. The annual reconciliation compares the revenue received by the company to the eligible costs, the difference between revenues collected and costs will be recouped, or refunded with interest. The DSIC surcharge will be reset at zero on the effective date of each new base rate case and the charge will be reset to zero if at any quarter the company's most recent earnings report filing with the commission shows that the company earned a rate of return in excess of its allowed rate of return.
DOES EVEKYONE NEED A DSIC?
While the DSIC may be appropriate in Pennsylvania there are certainly other alternatives available to companies and regulators other than automatic adjustment clauses. Clearly a future test year which would contemplate plant additions beyond historic test year levels would help alleviate the regulatory lag between installation of infrastructure improvements and the recognition in rates. Allowing companies to earn a return on construction work in progress would also help alleviate the cash constraints of this construction cycle. Alternatively, higher depreciation rates are another source which would provide water utilities with the cash necessary to fund construction projects. Depreciation on contributed property would also provide relief since, as we move into the late 1990's, we are 50 years after the countries'
largest housing expansion after WWII and those pipes placed in the ground will soon need to be replaced. Of course, higher earnable returns provide the company with an additional cushion to support the appropriate financial profile necessary to attract capital and to maintain its credit rating. Management needs to be mindful that proactive steps need to be taken in order to not repeat the devastating construction cycle that the electric utilities struggled through in the 1970's and early 80's. A collaborative approach with regulators which will seek solutions is necessary for water utilities to maintain appropriate financial profiles and their current bond ratings through this construction cycle. ~
1998 •
Executive Director's Report by Peter Cook
:1l:R;II:N~K;I'·N·.G w.T·.~·:R· STA·.N:[)·A:R:[)· S·.~·TTI"N:G ·.P:R·O·C·.~·SS
Focus Problem EPA continues to live up to its promise
of extensive stakeholder involvement in the implementation of the new requirements of the Safe Drinking Water Act Amendments (SDWAA). EPA's stakeholder meetings give us both insight on where EPA is going and an opportunity to influence their proposed direction. In the recent stakeholder meeting on the standard setting process we have, unfortunately, learned that EPA is going everywhere and, consequently, nowhere. EPA has decided to let a thousand flowers bloom by having its staff research and develop every conceivable type of analysis that one could perform on the way to developing a standard. There has been no attempt so far to bound the process or identify the absolutely critical data and analyses needed to make a decision. Given the profound effect standards have on our industry and the number of standards currently under development that could go awry if the most important analyses aren't identified, this lack of direction and focus is distressing.
Causes The lack of focus is in part a function of
how the work effort has been organized and
• NAWCWATER
implemented at EPA. Simply put, the effort has been organized along division of labor principles with each staff specialist taking responsibility for a piece of the overall standard setting process (e.g. risk assessment, cost analysis, benefits analysis, data quality objectives, etc.). Each person has been asked to look at all the possible analyses that could be performed, select all
those that are required by law or are relevant, and incorporate them into the design of their assigned piece of the decision process. The pieces will then be assembled into the final standard setting paradigm.
The problem is there is no integrated design plan guiding the various staffers and, to make things worse, there appears to be limited communication among them. To top it off, no one has spoken to the princi-
pal EPA decision makers to determine what analyses and data they believe they need to make a credible decision. Imagine what would happen if an auto maker never talked to its customers and had its design teams operating independent of each other. You would get a state-of-the-art vehicle that none of the customers liked with a Toyota bumper, on a Chevy frame, with a Ford engine, and a Honda interior. Weare afraid this is what could come out of the EPA's process. Consequently, NA WC has taken the lead and developed language that has been included in an A WW A comment letter urging EPA to substantially change the way they are proceeding to design their standard setting process.
Our Comments to EPA We have informed EPA in our com
ments that in designing any decis ion process, one must first identify the most critical questions that must be answered to
make the decision. Once this is done, one can determine what data must be gathered to answer the questions, what analyses must be performed on that data, and what data quality objectives must be imposed upon the data to yield credible answers. These
(continued next page)
principles clearly apply to the design of a process for setting standards. EPA has started the design but has so far failed to identify the critical decision questions!
In the materials that EPA provided at the stakeholder meeting, EPA identified an overwhelming number of potential data elements to be gathered and analyses to be performed. The number goes well beyond any human's ability to comprehend, much less use in making a decision. Clearly this mass of data and related analyses must be reduced to a manageable amount to allow the key decision makers to focus on the most important issues. This cannot be accomplished until the EPA identifies the critical questions that need to be answered before decisions can be made.
Identifying the Critical Decision Questions
Identifying the critical questions that will drive the decision will require that priorities be set among the myriad of issues that should be considered under the SDW A and the other statutes that apply. While many of the issues contained in these statutes must be included in support documents associated with the rule, they will not be, in most cases, the predominant issues on which the decisions will be made. Many of these issues can be eliminated as decision drivers by determining if the impact is beiowa certain level (screening thresholds).
The bottom line is, we must identify, perhaps a dozen or fewer, critical issues and their related questions that will in most cases drive the EPA's decision. We must think through how the questions relate to each other and how the decision maker could use the answers to the questions to make a decision. We need a process that gives the decision maker answers to the critical questions and then helps him use those answers to make the decision. Whether we are successful will, in large part, be determined by how well the decision maker assimilates the mass of material in the decision document, which in turn is a function of how skillful we are in presenting the data and analyses in an understandable form.
Uncertainty and Data Quality Objectives
Only after the critical decision questions have been identified can the accept-
able levels of uncertainty in the data and analyses be firmed up, along with the related data quality objectives. In addition, data quality objectives cannot be established for one part of the analysis in isolation from the other parts. For example, benefit-cost ratios are derived from two separate sets of data and analyses, the "benefits analysis" and the "cost analysis." It is very likely that the cost portion in the ratio may have an uncertainty of as little as ±2S% while the benefits portion may have an uncertainty of ±200%, and in some cases as much as an order of magnitude. What does such a discrepancy mean for the decision process? How will it affect our ability to answer the critical questions relating to whether the costs are justified by the benefits and whether the alternative selected is cost-effective? We may decide that we must reduce the uncertainty in the benefits analysis if we are to make credible decisions. Can the uncertainty be reduced by devoting more resources to the benefits side? Right now EPA appears to be devoting far more resources to perfecting the cost analysis than the benefits analysis.
A New Design Approach for EPA To address these problems we recom
mended that EPA immediately assemble a team to study past drinking water (DW) regulatory decisions and assemble a list of the most critical questions that must be answered. All relevant statutes should be reviewed to see if they contain "items to be considered'; that might be "critical" questions. The team should also identify the data and analyses needed to answer these questions as well as the most effective ways to present the data and analyses. Many of
EPA's past DW decision memoranda provide excellent examples for how to present and relate data and analyses. We recommended that a stakeholder meeting be held to specifically review the team's work and offer comments.
We also asked that this material be presented to the key EPA decision makers to determine if they feel the proposed decision approach is adequate and to address any differences of opinion that may have surfaced in the stakeholder meeting. Additional analyses or alternative presentations of the information may be needed to satisfy the decision makers or address significant issues raised by the stakeholders. We also asked EPA to hold a second stakeholder meeting to review the final critical questions, data, and analyses. Once a general consensus is reached on these issues then data quality objectives can be set for the data and all the elements of the analysis. We ended by saying when these steps are completed, EPA should have a relatively clear picture of the most important elements to focus on in their decision memoranda and regulatory impact documents.
A Proposed Model for Standard Setting from Industry
We will follow up these comments with a model standard setting process that we are developing jointly with A WW A. Our objective is to provide EPA with specific examples of the critical questions they must answer and the data and analyses they will need to answer them. We expect to have this to EPA before the end of the year. We hope it will facilitate the development of a consensus on what EPA needs to focus on when it sets standards. \III
Future NAWC Conference Dates and Locations
October 11-15, 1998 The Greenbrier White Sulphur Springs, West Virginia
October 17-21, 1999 Charleston Place Charleston, South Carolina
September 24-28, 2000 The Westin Hotel Boston, Massachusetts
October 7-11,2001 La Quinta Resort and Club Palm Springs, California
1998 •
Regulatory Relations Report by Sharon L. Gascon
Shaping Privatization Policy-Commissions Have a Key Role
Privatization is a key component of restructuring the water supply industry in the United States today. Economic regulation has an essential role in shaping policy that ensures the best possible water service for customers today and in the future and in that context will have a viable role in privatization issues.
A heightened interest in privatization for water supply has been stimulated by rising cost pressures including compliance with SDW A mandates and aging infrastructure replacement. The political interest in privatization has been intensified by concerns about the size and scope of government. State PUCs will become part of the solution as performance advantages of private utilities, including ownership and the incentives associated with economic regulation, are assessed.
Key Regulator's Opinion California PUC Commissioner Henry
M. Duque, who will succeed Florida Commissioner Diane Kiesling as Chair of the NARUC Committee on Water, put things in perspective in a speech given at a conference addressing current issues challenging the regulatory process, in March of 1997. He said:
"If I were betting on the emergence of a new regulatory issue in the next five years, I would bet that the issue
• NAWCWATER
of privatization of municipal and other governmental water distribution systems will appear forcefully on the agendas of utility commissions in the West.
In California, we are beginning to see that this trend towards privatization brings a set of political and regulatory issues. Some cities will face the difficult political task of accept-
ing that their water systems are only worth what the revenue stream will support, not the costs incurred to build the gold-plated systems now in place. Other cities find that they have few or no records of costs. Others have an impenetrable set of prices consisting of usage charges, hook-up taxes, and cross-subsidies of services from many other departments. Still others will need to adjust to the loss of a mission, a loss not attributable to their actions, but one
induced by the winds of political change. Regulatory agencies will likely set policies that determine the selling price for privatizing these systems. This will prove both technically and politically difficult.
Regulatory agencies will see a trend towards privatization of water systems, an expansion in oversight responsibilities and a reduction in resources devoted to regulation. These trends will provide analytic, political and managerial challenges for my own Commission, and for oth
. ers as well."
States Take Action In January of 1997 Californians
amended their state's Constitution to require voter approval for local taxes and user's fees under specific circumstances. The amendment has the potential to encourage privatization arrangements that segregate water utility rate making from the local political process.
In 1985, with the enactment of the Water Supply Privatization Act, New Jersey became the first state to move towards "Privatization" of municipal water systems. The legislation was never fully utilized. It was perceived as being burdensome because of the extensive regulatory requirements. However, recognizing the benefits of public-private partnerships and taking into account the difficulties experienced with the old law, the New Jersey legislature endorsed
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the concept of privatization and streamlined regulatory review of contract agreements in the Water Supply Public-Private Contracting Act. The Act was effective in May of 1995 and allows for contracts up to 40 years.
Indiana enacted privatization legislation in 1995 (amending Title 36 of the Indiana Code) to provide new options for designing, constructing, and operating municipal facilities under privatization agreements. However, the statute does not address a role for the state regulatory commission with respect to private operations of water or wastewater systems.
What's Next? As the process of regulation of utilities
in the United States continues to evolve, regulators must not lose sight of the importance of the vital public service of water supply and how it differs from other utility services. Unlike other utility products, water service is essential to public health and safety. Quality and dependability are key elements.
Economic regulation imposes a discipline which is a valuable contribution to effective public policy for water supply. A long-term commitment of financial and technical resources is critical to meet the needs of future reliable water service. A process that allows for solutions that look beyond next month or next year in favor of what will best serve the customers needs in the long run is crucial. Effective economic regulation incorporates these attributes.
The role of commissions could change dramatically in the context of privatization. Regulation can help create a more level playing field for competition, as well as helping to ensure long-term investments in infrastructure. Working together, regulators and the utilities they regulate can assure that the public receives quality and affordable drinking water service.
REGULATORY HIGHLIGHTS
Arizona Surcharge Legislation
A rizona Chairman Carl Kunasek has reported that during its 1997 legislative session, the Arizona House and the Senate passed Senate Bill 1252, which the
Governor signed into law on July 21,1997. A portion of the Bill deals with the re
covery of certain water utility operating expenses through a surcharge, without the utility having to file a full-blown rate case. The specific wording in the law states, "The operating costs that may be considered in this procedure are limited to specific, readily identifiable costs that are subject to the control of another person, including the cost of purchasing water from another utility, municipality or district and the payment of ad valorem taxes or any other similar tax or assessment levied on the water utility." The total amount of all surcharges for these certain costs may not exceed ten percent (10%) of the utility's presently authorized rates.
In addition, this bill provides the water utility with the ability to not only add a surcharge to increase rates to recover those certain costs when they increase, but to also establish a negative surcharge to reduce rates when those certain costs decrease.
Before implementing any surcharge based on this bill, the utility must file written notice with the Commission detailing the surcharge amount and cost increase to be recovered. The utility must also notify its customers and inform the customers of their rights to contact the Commission.
After the Commission has been notified by the utility of its intent to implement a surcharge, the Commission has thirty (30) days to review it. The Commission may do nothing (which would allow the utility to implement the surcharge), it may deny the surcharge, or it may notify the utility that further investigation is necessary. The Commission may require a hearing to be held. The Commission must issue a decision within 120 days after the utility first notified the Commission of its intent to implement a surcharge.
The Commission Staff is presently working on the policy by which Semte Bill 1252 will be implemented by the Commission.
Indiana-American Requests Uniform Rates
Indiana-American Water Co., which operates 17 water systems that provide water to 59 Indiana communities, has requested permission from the Indiana Utility Regulatory Commission to move toward
uniform rates. The average increase is estimated to be 13.38 percent, although hikes would vary depending on current rates. A move to a single-rate block would be phased in over six to seven years, beginning with four levels of rates.
The company is proposing the move "to avoid the rate spikes that occur when major construction projects are completed and added to the rate base." Indiana-American is in the process of replacing aging facilities throughout the state.
Some communities are unhappy with the proposal that would require them to subsidize other communities' improvements. The Indiana URC is to rule on the rate proposal by December.
Florida PUC Lowers ROE for Water Utilities
The Florida Public Service Commission has recalculated rate of return on equity (ROE) for water and wastewater utilities, finding that 9.21 % to 10.46% is an appropriate range for return on equity capital.
The midpoint in the approved range of earnings has decreased by 120 basis points when compared to existing ROE figures. The commission also capped rate of return on equity for water and wastewater utilities with equity ratios of less than 40% at 10.46% to "discourage imprudent financial risk." The actual return allowance for each utility will also reflect the level of equity contained in its capital structure.
The commission is required to review its formula for water utility ROE at least once a year, but had maintained the previous earnings level since 1995. In setting the new range the commission used a formula that reflects changes in underlying market conditions such as changes in bond yields and investor expectations. It also ruled that ROE for water utilities should reflect a negative adjustment of 24 basis points when compared to a study group of publicly traded natural gas utilities to reflect a "perceived difference in risk" between two industry group indices.
Nevertheless, the formula adopted by the commission also includes a 25 basis point private placement premium in recognition of several factors unique to water and wastewater companies, including their: (1) small size; (2) lack of institutional interest in their securities; and (3) lack of
(Continued on next page)
1998 •
Regulatory Relations Report, continued
liquidity of their stock issues. Re Range of Returns on Common Equity, Dkt. No. 970006-WS, Order No. PSC-97-0660-FOF-WS, June 10, 1997 (Fla. P.S.c.).
s.c. Test Year/Availability Fees Decision Reversed
Heater of Seabrook Inc. provides water and sewer services to the town of Seabrook Island. The South Carolina Public Service Commission (PSC) compared Heater's testyear expenses with prior calendar years' expenses and determined that Heater had not justified its need for a rate increase. Also, in its order denying a rate increase, the PSC deviated from its past practice of considering availability fees as contributions in aid of construction. Instead, it included availability fees as operating revenue. Heater appealed the PSC's denial of the rate increase, and the trial court affirmed the PSc.
The appellate court said that with regard to the test-year comparison, the PSC should use only test-year data and known and measurable changes ,occurring after the test year. According to the court, the PSC failed to compare the test-year expenses from Heater's previous rate case with those from this rate case. The court said that the PSC's comparison of prior non test years with the test year for the current case was seriously misleading. Turning to the issue of availability fees, the court said that no substantial evidence supported the PSC's decision regarding their treatment. The trial court decision was reversed, and the case was sent back to the PSC for further proceedings.
Heater of Seabrook v. Public Serv . Com'n., Supreme Court of South Carolina, Aug. 12, 1996, rehearing denied Sept. 6,1997.
Main Extension Expense The Pennsylvania Public Utility
Commission has upheld a proposal by Pennsylvania-American Water Co. to update its main extension rules increasing the limit on company investment in individual main extensions from $1,400 to $10,800 for each applicant for new service. It rejected allegations by the state Office of Consumer Advocate (OCA) that even with the increase, the company's policy violated existing legal standards governing main extensions.
The OCA had claimed that the proposed
eNAWCWATER
tariff would permit the utility to request contributions from prospective residential customers in many more instances than would occur where the utility held to an appropriate standard of "material financial hardship" or "undue burden on existing customers" in deciding when to require customers to contribute to cost of the extensions. (Under existing common law as reflected in a recently enacted commission policy statement, a utility must bear the cost of capitalizing the investment necessary to extend service except where a given extension would "materially handicap the utility in securing a fair rate of return on its investment, or unless the line extension would place an undue burden on utility customers as a result of rate increases.") .
The commission found that the OCA interpretation of the existing standard would, due to the size of the utility, mandate that the company could never require an applicant's contribution, and that no limit would be set to company investment required for line extensions to each applicant. It said that such an interpretation appears to advocate that the company should provide "totally free main extensions, with no recognition given to the standards set in the law and state commission policy." Popowsky v. PennsylvaniaAmerican Water Co ., R-00943155C0001, June 9,1997 (Pa . P.U.C.).
NARUC Executive Director, Peggy Welsh, Receives the 'Association Leadership Award'
NARUC Executive Director Peggy Welsh was selected to receive an Association Leadership Award at the September 10 "Power in Partnership" symposium at the National Press Club. The
Peggy Welsh
event was hosted by the Business Women's Network and Association Trends magazine.
Welsh was honored during an awards luncheon ceremony with eight other leaders in the nonprofit organization community. She received her award for her work on behalf of NARUC. The annual, daylong "Power in Partnership" program celebrated the success of women across the nation, and the leadership award honored and recognized the accomplishments of certain women in business and professional organizations.
The Business Women's Network is a Washington, D.C.-based coalition of over 1,000 women's business and professional organizations and resources in the United States representing 8 million professional entrepreneurial women. Association Trends is the independent weekly news publication for association professionals throughout the U.S.
Governor Carnahan Appoints Sheila Lumpe
Chairman Sheila Lumpe was appointed as Commissioner to the Missouri Public Service Commission on June 5, 1997, by Governor Mel Carnahan and appointed Chairman of the Missouri Public Service Commission on August 19,1997.
Prior to her appointment to the
Sheila Lumpe
Commission, Chairman Lumpe chaired the House Budget Committee of the Missouri House of Representatives. A nine-term state representative, she represented St. Louis County in the Missouri ,House since first elected in 1980. Chairman Lumpe also served on the following legislative committees: Elections; Governmental Organization and Review; Joint Committee on Legislative Research; Utili ties
b
Regulation; and Ways and Means. Her significant legislative accomplish
ments include sponsoring bills on developmental disabilities, school districts and personnel, enterprise zones, excellence in education, Head Injury Advisory Council, banks-financial privacy, Women's Economic Development Council, risk pool, personal property assessment lists, mobile homes, termination of guardianship, cost price index tax, clean drinking water, taxation of certain railroad cars and emissions.
Named Legislator of the Year by the Missouri Association of Rehabilitation Facilities in 1994, Chairman Lumpe has also been honored with a citation from the Missouri Parks and Recreation Association (1995), an Outstanding Public Service Award from the University of Missouri, St. Louis (1993) and a Special Leadership Award in government from the YWCA (1993).
Chairman Lumpe received a baccalaureate degree in government from Indiana University in 1957 and a masters degree in political science from the University of Missouri, St. Louis in 1989. She married Gus Lumpe in June 1958. They have four children and three grandchildren.
Chairman Lumpe's term expires on April 15, 2003.
NARUC President Appoints John Betkoski to the Committee on Water
The Honorable John W. Betkoski, III, Commissioner, Connecticut Department of Public Utility Control has been appointed as a member of the Committee on W ater by NARUC President Bruce Ellsworth.
From 1989 to 1997, Commissioner Betkoski served as Director of Human Services for the Salvation Army. He has been
John W. Betkoski, /11
a state Representative for the 105th District in Connecticut from 1987 to 1997. In addition, he chaired the Commerce Committee from 1993 to 1997. He was a member of the Beacon Falls Board of Selectmen from 1981 to 1987, and the Beacon Falls Board of Finance from 1979 to 1981.
He assumed Commissionership July 1, 1997. His term expires June 30,2001.
NRRI Director Doug Jones to Retire
Dr. Douglas N. Jones, Director of the National Regulatory Research Institute (NRRI) , announced that he would leave the directorship on July 1, 1998, and return to full-time teaching position in the School of Public Policy and Management at The Ohio State University.
Dr. Jones became director of the NRRI in 1978. He has been a senior specialist in public utility and natural resources economics at the Congressional Research Service, and before that served in two senior POSltlOns in the Johnson Administration. Dr. Jones stated that they have largely achieved all of the goals that NARUC and The Ohio State University envisioned for the NRRI such as: a stable and expert staff in place, all 51 commissions contributing funds, national and international recognition, a highly credible research product known for its objectivity. During his directorship the NRRI has com-
Doug/as N. Jones
piled a history of some 450 policy studies and reports on virtually every issue faced by regulators over the past two decades.
NAWC would like to take this opportunity to thank Dr. Jones for the contribution that he and the NRRI have made to the private, investor-owned water industry. We wish him well in all future en-
deavors.
Governor Locke Appoints Anne Levinson to Chair Washington UTC
Anne Levinson has spent almost her entire professional career in public service. Governor Gary Locke appointed her Chair of the Washington Utilities and Transportation Commission (WUTC) in August 1997. Her appointment is for a sixyear term and is subject to confirmation by the Washington State Senate.
Previously, Chairman Levinson served as Deputy Mayor and Legal Counsel for Seattle Mayor Norman B. Rice. As the senior appointed official for Washington's largest city, she was responsible for developing policy,
Anne Levinson
balancing competing interests and overseeing management of a wide range of issues. Among them, transportation and public utilities (including electric, water, drainage and solid waste), education, human services, health care, police and fire services, economic development, human rights, personnel, environment, finance and budget, capital infrastructure, parks, libraries and arts.
She was selected by the Puget Sound Business] oumal as among "Forty Under 40," by the Seattle Times as "People To Watch," by the Seattle Weekly as "Leaders To Look For Under 40," by the Seattle Management Association for Excellence in Management Innovation, by Women in Communications as a "Woman of Achievement" and three times by the Seattle King County Municipal League as nominee for outstanding public employee.
She graduated Phi Beta Kappa from the University of Kansas in 1980 and received her law degree from Northeastern University in 1983. ~
1998 •
Recent Regulatory Decisions Stephen B. Genzer, Esq. Mark L. Mucci, Esq.
ILLINOIS ApPELLATE COURT
AFFIRMS ORDER OF THE ILLINOIS
COMMERCE COMMISSION AGAINST
EXCLUSIVE RIGHT TO SERVE
The Illinois Appellate Court has recently affirmed a determination by the Illinois Commerce Commission (Commission) that State law does not grant either a public water district or a public utility an exclusive right to serve, or bar one from operating within the boundaries of the other. Fountain Water District v. Illinois Commerce Commission, Case No. 5-96-0531 (August 1, 1997). Plaintiff Fountain Water District (Fountain) is a public water district organized and created under the provisions of the Illinois Water District Act. The statute provides that any contiguous area of not more than 500,000 people may be created into a public water district by a process of referendum and court order that fixes and determines the boundaries of the district. The statute also permits a district to supply water to areas located outside its geographical limits.
Illinois-American Water Co. (IllinoisAmerican), a public utility regulated by the Commission, provides water service to an area contiguous to that serviced by Fountain. In April 1995, Illinois-American sought authority to expand its water service to residents of Country Aire Estates, a subdivision located within the boundaries of the Fountain district. Fountain intervened and argued that it had the exclusive right to provide service to the subdivision. The Commission granted Illinois-American a
• NAWCWATER
certificate of public convenience and necessity to provide water to the subdivision, and Fountain appealed. Fountain argued that the Commission did not have jurisdiction to grant Illinois-American permission to service an area located within the corporate boundaries of a public water district.
The appeals court held that there is no provision in either the Public Water District Act or the Public Utilities Act that grants to either a public water district or public utility an exclusive right to service a particular area or that bars one from operating within the geographical boundaries of another. The court said the Commission has jurisdiction over Illinois-American, a public utility, and that Illinois-American sought to operate a water distribution system in areas located within a public water district. The court concluded that there is no language in either statute that would limit the jurisdiction of the ICC to matters affecting areas lying outside the geographical boundaries of a public water district.
NEW MEXICO COMMISSION
REMOVES RESTRICTION
ON PUBLIC UTILITY
PROVIDING SERVICE TO
AN AREA SERVED BY
ANOTHER WATER
PROVIDER
In removing a restriction contained in a water utility's Certificate of Public Convenience and Necessity (CCN), the New Mexico Public Utility Commission (Commission) has held that a water utility does not require a CCN to extend service into contiguous territory, even if such territory is served by a non-utility mutual domestic water association. Re Moongate Water Company, Case No. 2686 (June 5, 1997). The case arose as a result of a request by a homeowners association to receive water for their wholly-owned water distribution company from Moongate Water Company (Moongate), instead of from the Organ Water and Sewer Association (OWSA). The case facing the Commission involved a territorial dispute between a fully regulated public water utility, and two entities which were not fully regulated by the Commission. The systems were described as being "in close proximity and in some circumstances intermingled."
The Commission had originally imposed a restriction in Moongate's CCN, based upon a conclusion that duplicate facilit ies might have to be constructed in the event Moongate attempted to serve areas already served by water and sewer associations. Under state law, a public utility shall not construct an extension of its system without first obtaining a CCN, unless that extension is into territory not already
L
receiving similar service from another utility. The Commission concluded that this statute did not apply to locations receiving service, not from another utility, but from a non-regulated "mutual domestic water consumer association," the legal designation of the associations objecting to the extension of service by Moongate.
The Commission reviewed the facts which had been presented by Moongate, including evidence concerning the quality of the service provided by the associations, and concluded that the record demonstrated that the public convenience and necessity required that the original restriction in Moongate's CCN be lifted. The Commission referred to a recent New Mexico Supreme Court analysis, that the protection against encroachment was more limited for water providers that were not regulated by the Commission, in concluding "that it is rational and constitutional to give preference to a regulated utiliry over an unregulated one." The Commission stated: "There may be circumstances in which competition may be allowed because of the absence of unnecessary duplication and economic waste. For example where the public faces poor, insufficient, or uneconomic service, it may be necessary to allow duplication for the purpose of providing reasonable, adequate and efficient service." The Commission noted that removal of the restriction in Moongate's CCN merely gave it the same status as other public utilities in New Mexico, and did not give it an absolute right to expand its system, which expansion would still be required to be done pursuant to law.
The associations also argued to the Commission that the removal of the restriction in Moongate's CCN would violate their rights under Federal law which, they argued, provided certain territorial protection to associations or entities that qualify for federal loans under 7 U.S.c. §1926(a), which provides in part: "The service provided or made available through any such association shall not be curtailed or limited by inclusion of the area served by such association within the boundaries of any municipal corporation or other public body, or by the granting of any private franchise or similar service within such area during the term of such loan." In other words , the argument is that the OWSA has an outstanding federal loan that affords it the protections of that statute. Noting
that it had limited jurisdiction over such mutual domestic water consumer associations, the Commission recognized that the associations could still file a complaint seeking a determination of the scope of their service areas. The Commission noted certain issues which would have to be addressed, not the least of which would be the determination of whether any association had a clearly-defined service area prior to the request by Moongate to modify its CCN. Based on the facts before it in the case, the Commission determined that the associations failed to support their request for relief under Federal law.
INDIANA COMMISSION
RESOLVES TERRITORIAL
DISPUTE BETWEEN
UTILITIES, IN A CASE OF
FIRST IMPRESSION
Under Indiana Code §8-1-2-86.5, the Indiana Utility Regulatory Commission (Commission) has authority to determine territorial disputes between water utilities. The Commission recently issued its first order in a fully litigated case under that statute. In the Matter of the Petition of Flowing Wells, Inc. for Determination of a Territorial Dispute Between it and IndianaAmerican Water Company and Findings of Public Convenience and Necessity, Cause No. 40446 (July 16, 1997). The Commission noted that, while it had jurisdiction, the statute provided little or no guidance as to the considerations to be used for such determinations, the limits, if any, on the Commission's authority in making such determinations, or even as to what would constitute a "dispute" over which the Commission would have jurisdiction.
The Commission noted that both of the operating water utilities involved in the case demonstrated the ability to serve the area in dispute. One utiliry, Flowing Wells, Inc. (Flowing Wells) asked for an exclusive service territory to serve a residential subdivision known as Hampton Point, on the grounds that it is physically in a better position to serve that area, because its existing customers would benefit from adding the territory, and because its rates are lower than the other involved company, Indiana-American Water Company, Inc. (Indiana-American) .
Based on the different treatment of water utilities, as compared to other utilities
under Indiana law, the Commission concluded that the legislature did not intend for water utilities to have presumptive exclusive service territories in rural areas. Since the legislature did not provide any guidance as to the specific approach to use in order to resolve territorial disputes, especially where there is no statutory basis to grant exclusive service territories or to draw boundary lines, the Commission concluded it had broad discretion to resolve such disputes. The Commission concluded that it should retain the flexibility to determine such disputes on a case-by-case basis.
Flowing Wells argued that it had a water main currently located 240 feet from the Hampton Point subdivision, and had adequate supplies in order to provide service to that subdivision. Flowing Wells also noted that its rates were not only lower, but it would require a smaller investment in order to provide service to Hampton Point. Flowing Wells also pointed out that IndianaAmerican would have to install a main parallel to an existing main owned by Flowing Wells, thereby resulting in duplication of existing facilities. For its part, IndianaAmerican argued that it had been contacted by the developer of Hampton Point specifically, in order to provide service, and reached agreement to provide such service almost immediately. Indiana-American pointed out that the main extension necessary to serve Hampton Point had already been completed, and service to Hampton Point would permit Indiana-American the potential to add a substantial number of new customers and decrease its average investment per customer in the area. The project manager for the Hampton Point subdivision also testified, stating that the developer had a preference for Indiana-American, based upon the discussions which the developer had had with both companies.
Flowing Wells did contest some of the criticisms which Indiana-American had made of the Flowing Wells system, and the argument by Indiana-American that Flowing Wells provided less customer service than Indiana-American did. Flowing Wells also contested the testimony which had been presented that Indiana-American had been more diligent in responding to
the developer's needs. The Commission pointed out that, be
cause of the executed main extension agree-
(Continued on next page)
1998 •
I.
Recent Regulatory Decisions, continued
ment, Indiana-American was obligated by contract to provide water serVice to Hampton Point. The Commission stated: "While it is true that if we were to order Indiana-American to cease providing service, Indiana-American would be obligated to comply with our order, no evidence has been presented by [Flowing Wells] convincing us that such an order would be in the public interest." Flowing Wells argued that Indiana-American should have sought approval from the Commission prior to executing its main extension agreement or extending its mains. The Commission held that Indiana-American was unaware of the existence of any "dispute" until the filing of the petition by Flowing Wells. Since utility territories are not exclusive, and furthermore since the territory in which Indiana-American extended its system was not previously served by any utility, there was no necessity for prior approval by the Commission before such service was extended. The Commission concluded that Flowing Wells had failed to carry its burden of proof that it should have exclusive service rights within any portion of Hampton Point, or that Indiana-American's main extension agreement should be superseded.
NEW JERSEY BOARD OF
PUBLIC UTILITIES ApPROVES
RIGHT TO SERVE BASED
UPON IMPLIED CONSENT
The New Jersey Board of Public Utilities (Board) issued an order addressing a dispute between Middlesex Water Company (Middlesex), a public utility regulated by the Board, and the City of Perth Amboy (City), which provides water service within its boundaries. The Board determined that, although the City never formally granted Middlesex a franchise to serve customers within the boundaries of the City, the fact that the City had in the past acquiesced to the provision of service by Middlesex to Chevron USA, Inc. (Chevron), could be used to stop the City from ordering Middlesex to cease providing such service at a later date. Middlesex Water Company v. City of Perth Amboy, Docket No. WE93100423 (July 30, 1997). The Middlesex service territory is located next to the City, and Chevron's property is located on land adjacent to the Middlesex ter-
.• NAWC WATER \
ritory. In the mid-1970s, Chevron expanded its refinery in the City; prior to that expansion, all of Chevron's requirements for water service were supplied by the City. On December 11, 1973, the City's Board of Adjustment recommended approval of variances needed for the proposed expansion, stating that it would require, as a condition of granting the variances, that Chevron obtain all of its water needs from Middlesex, and not look to the City for a water supply for the expanded parts of the refinery. The City Cotmcil adopted the recommendation of the Board of Adjustment on December 18, 1973. Middlesex commenced providing service to Chevron on May 18, 1975, and continued to do so for nearly 18 years without objection from the City. Middlesex had never sought Board approval of the municipal consent to serve Chevron, as required tmder New Jersey law.
On February 2, 1993, the City Council issued a resolution rescinding the previous requirement that Chevron not use water from the City, and directed Chevron to purchase its water from the City. Middlesex filed a petition seeking to have the Board either approve the mtmicipal consent which Middlesex claims is reflected in the 1973 City Cotmcil resolution, or find that no such consent is required since the service connection to deliver water to Chevron is located outside of the City, in Middlesex's territory.
The Board first held that the location of the Middlesex connection within its approved franchise area did not eliminate the need for a municipal consent to render service to any point within the City. Thus, where the customer's property may be located in both the utility service area as well as in a non-franchised area, a mtmicipal consent would still be necessary to provide service within the City, even though public rights of way within the City were not necessary in order to provide such service. Thus, Middlesex was required to obtain the consent of the City in order to render service to Chevron within the City.
The Board then turned to the issue of whether the City did give its consent to such service, albeit not through a specific enactment which was then filed with the Board. In reviewing the record, the Board concluded that the City's 1973 resolutions showed "an expression of intent on the part of the City that Middlesex or some entity other than the City would service the Chevron facil-
ity." The Board nevertheless concluded that there was still ambiguity in this regard, with respect to whether the City also intended that Middlesex would be the provider used by Chevron, and that no further municipal action or approval was necessary. The Board concluded that, in addition to reviewing the facts existing in 1973, it also needed to examine the equities of the situation.
The Board determined that "in addition to whatever degree of intent can be inferred from the wording of the 1973 resolutions and all surrotmding circumstances, there also exists sufficient equitable factors militating in favor of estopping the City from denying the existing of municipal consent." The factors found by the Board to support an estoppel against the City include the fact that the City voltmtarily intended to induce reliance, by both Middlesex and Chevron, on the City's willingness to permit Middlesex to service Chevron. Chevron was clearly directed to seek water service from Middlesex or a source other than the City, and made that a specific requirement for Chevron's zoning approval. In addition, for nearly 20 years the City did not object to the construction and subsequent operation of Middlesex's service to Chevron. The Board found that both Middlesex and Chevron had expe~ded substantial sums in reliance upon the City's actions. The Board concluded that, under appropriate circumstances, "a municipality may be estopped from denying the existence of municipal consent, despite procedural irregularities in the action relied upon to establish that consent."
Despite finding that Middlesex did have authority to serve Chevron, the Board indicated that a question still existed as to the exclusivity of such authority. The Board directed the Administrative Law Judge in the proceeding to determine whether the existing factual record was sufficient in order to address the issues of exclusivity, as well as the duration of the authority of Middlesex to serve Chevron, and conduct further evidential hearings in the event additional facts were necessary for such determination.
Thanks to Kathy L. Pape, Esq., of American Water Works Services Company , S. B .. Givens, Esq., of Indiana-American Water Company, B. Kenneth Gatlin, Esq . , and Louise Knight, Esq. for submitting items of interest . ~
F
6
, Quorum Call By Louis Jenny
Since this issue of Water is dedicated to "Privatization" in its various forms, it seems that it is appropriate to take a moment and examine where Washington is on this issue. And when I say Washington, I mean both Congress and the Administration.
First, Congress. I have written previously in this space about how the Republican Majority in the House of Representatives came into power in 1995 with a lot of energy, a big agenda, big ideas, and just generally a lot of noise. They promised to rethink and reorganize how every facet of the government works. The famed "Contract with America" was going to sail into law (as the plan goes) and then they would move onto every other ill facing our nation, if not the world. Well, only bits and pieces of the Contract made it into law, and those that did were watered down and late (some only having been passed into law this year, two years after the Contract).
"Privatization" in its broadest form was part of the Republican's plan (though not part of the Contract, per se). It seems, however, to have suffered the fate of much of what the Republicans planned to do, which
, is to say that not much has happened. One of Speaker Gingrich's allies, Scott Klug (RW I), was chosen early in '95 to chair a "Privatization Task Force." This task force consisted of just Klug and didn't have a stated agenda other than to look at all manne rs of privatization and report to the Leadership as needed. Jim Barr with American Water, Don Correll with United, and myself went to visit Klug early in '95 to state our position and discuss the NA WC's agenda.
In the end, the task force didn't do much and neither did Congress, other than selling off some government property and privatizing some of Congress' internal
operations, like the barber shop. Virtually all of the initiatives which would have been a help to this industry have either not moved at all (codification of Executive Order 12803) or were passed without the help of the task force (repeal of the CIAC tax). Now Klug is planning on retiring from
Congress at the end of this term, and the House Republicans spend most of their time on internal power struggles.
On the up side, the Republicans say they support the concept of privatization and public/private partnerships, whereas Democrats are generally more suspicious and don't see it as their issue. Under the Republicans, there have been hearings on various issues and bills which are pro-privatization, the CIAC bill did get passed into law, legislation codifying E.O. 12803 started the legislative process (only to be derailed by various forces), pro-privatization provisions were included in a CW A bill (which died a slow death), and the new drinking water SRF allows for IOU eligibility.
Also, there is a new legislation being shopped around for sponsors which is a broad catch-all privatization bill. It was put together by a coalition calling itself "Project America" which is co-chaired by Jack
Kemp and made up of pro-privatization firms and organizations. The bill would remove many different barriers to privatization and public/private partnerships in all sorts of infrastructure projects, including airports, highways, bridges, water and wastewater systems. The barriers in their sites range from regulatory to tax; and include codifying and expanding the 1997 Treasury regulations allowing for 20-year management contracts, codifying and improving E.O. Order 12803 (making federal grant repayment unnecessary when privatizing), and redefining a waste-water POTW to include investor-owned utilities.
A bill of this nature is an interesting idea, and, certainly, because of the fire power and organizations behind it (not to mention the issues involved), it is worth keeping a close eye on. However, a bill this big and complex would require amending many different Acts and involve several Congressional Committees with competing jurisdictions and interests. Simply put, it is difficult to see how something this broad would actually make its way through the legislative process. The catch all bill is probably more useful as a lobbying/P.R. vehicle, and I suspect should its provisions ever see enactment it will be as part of other bills.
The Administration, broadly speaking, has been all over the place on the issue. The Treasury Department gave a big vote of confidence to public/private partnerships when in January it issued its rules allowing for management contracts of up to 20 years. Previously, such contracts were limited to 5, with an escape hatch for municipalities of only 3 years. After years of lobbying on the part of the NA WC and
(continued next page)
1998 •
/
many groups, Treasury acknowledged through these regulations that there is a valid role that private firms can play in long term management contracts and that these should be encouraged by tax rules.
The U.S. Environmental Protection Agency, on the other hand, has been doing some things which are very troubling. Mike Cook, Director of the Office of Wastewater Management, has been sending out a letter to Mayors which appears to interpret Executive Order 12803 (an order intended to promote privatization) in such a way that will be very anti-privatization. Under his reading, virtually any arrangement between a private entity and municipal wastewater system is considered a "privatization" as defined by the order, thus requiring EPA "okay." This, even though the order is generally accepted as only applying when there are outstanding federal grants to the municipal facility. Further, Cook lays out detailed and open-ended requirements for information to be submitted to EPA be-
fore they can approve such deals. This industry was just set free by the above mentioned Treasury rules, now to face potentially lengthy case-by-case reviews could "re-stifle" an industry which has proven it can bring operating efficiencies to wastewater systems, yet maintain and even improve upon environmental standards. EPA is trying to vastly broadep. the number of transactions it believes it should approve and uses a pro-privatization Executive Order to stifle privatization, turning the intentions of the Order on their head. If this precedent is followed by other agencies the effect on other fields could be large.
Many organizations, including the NA WC have expressed their displeasure with this reading of the Order, and efforts are underway to change EPA's mind.
In summary it is fair to say the concepts of privatization and public/private partnerships are alive and well in Washington. There are many elected officials both in the Clinton Administration and on Capitol
Hill who firmly believe that the many barriers should be removed, it is just not at the top of anybody's agenda. Add to this that there are many officials who have pressure on them to keep things as they are. These pressures may be protecting committee/agency jurisdictions and projects, politics back home, union pressures, etc. So to change procedures and regulations which h ave been in place for decades is difficult, and you can't expect it to happen overnight. The NA WC is committed to championing these issues, and we have had many solid wins, and a few disappointments. Today we have a solid strategy in place, accepted by our Board of Directors, to promote privatization and public/private partnerships which will keep us busy for some time to come. (I wrote about the strategy in detail in a previous column.)
If you would like a copy of any of the documents I have referred to including the Project American bill, or the Cook letter, please contact me at the NA WC. 1111
WELCOME TO ...
J obn R. Davis Panama City, FL
A.Judson Hill HSBC Securities, Inc. Washington, DC
Jim Keffer EBAA Iron Sales Inc. Eastland, TX
Jack Kennedy Standard & Poor's New York, NY
James D. Larson Dahlen, Berg & Co. Minneapolis, MN
• NAWC WATER
OUR NEWEST MEMBER COMPANIES
Hobe Sound Water Co. Hobe Sound, FL
OUR NEWEST ASSOCIATE MEMBERS
Mark Niehaus Price Waterhouse LLP Philadelphia, P A
James W. Nowoswiat Price Waterhouse LLP Philadelphia, P A
Jill Sakol Standard & Poor's Corp. New York, NY
Stephen R. Schuller Dorsey and Company, Inc. New Orleans, LA
Joanne Solomon Price Waterhouse LLP Philadelphia, P A
Elisa M. Speranza Metcalf & Eddy Wakefield, MA
Boyd J. Springer Jones, Day, Reavis & Pogue Chicago,IL
William R. Thomas W right-Pierce Topsham, ME
Thelma Triche Stone & Webster Management Consultants, Inc. Washington, DC
corporate changes RING NAMED
LONG ISLAND WATER PRESIDENT The board of directors of Long Island
Water Corporation announced the appointment of William Ring as president, effective August 1, replacing Louis Mirando who retired. Ring joined the company in 1990 as manager-engineering and was promoted to vice-president in 1994. Last year, he was named executive vice president.
Prior to coming to Long Island Water Corporation, he held positions with the Fairfax County (Virginia) Water Authority, the American Water Works Association and Malcolm Pirnie Inc., an environmental engineering firm.
He holds an MBA from the University of Rochester, and both an MS and a BS degree in civil engineering from the State University of New York at Buffalo, and
Lafayette College, respectively. Ring is a li
censed professional engineer in New York
and Virginia, a member of the American
Water Works Association, the National
Association of Water Companies, the
National Society of Professional Engineers
and the Long Island Water Conference.
O'NEILL NAMED CWC'S CUSTOMER SERVICE MANAGER
Arthur J. O'Neill has been named the Manager of Customer Service for The Connecticut Water Company. O'Neill will oversee customer service in each of the company's three non-contiguous operating regions. The company has nearly 62,000 customers in 32 Connecticut towns. In his new position, O'Neill will coordinate a variety of customer service functions including: responding to all customer inquiries; scheduling service appointments; directing water meter reading and testing, and billing and collection efforts.
In making the appointment, Maureen P. Westbrook, Vice President of Customer Service and Government Affairs at CWC, n oted that O'Neill has a proven track record in customer service. "For the past five years as the Region Manager of Customer Service, Art has continually initiated policies and procedures that have helped improve customer satisfaction with CWe. I am con-
fident that with his focus on the customers' needs he will continue to make improvements to customer service programs companywide."
O'Neill began working for CWC in 1975 as an employee of its former subsidiary the Rockville Water and Aqueduct Company, where he worked in construction and customer service. Since then he has served as a Construction Foreman, Assistant Region Manager in the Northern Region and most recently as the Region Manager of Customer Service in CWC's Northern Region.
SALMON PRESIDENT OF
AUS PATHWAYS AUS Consultants announced the ap
pointment of Dr. Edward H. Salmon as president of a newly formed division, AUS Pathways, which will specialize in governmental relations, regulatory strategy and competitive alternatives. Dr. Salmon will be joined by senior vice president Anthony J. Zarillo. Salmon has served as president of the New Jersey Board of Public Utilities and Zarillo was CEO until his early retirement in 1991. Salmon is also a former mayor, freeholder director, New Jersey assemblyman and cabinet officer, and has spent 25 years in government. As a member of the National Association of Regulatory Utility Commissioners (NARUC) Salmon is the immediate past president of the Great Lakes conference. He also served two years as vice president of the national NARUC organization and is a former member of the Board of Directors for the National Society of Rate of Return Analysts.
Zarillo was a senior policy advisor in the area of public utility regulation for 32 years at the NJ Board of Public Utilities. In that capacity, he was responsible for developing and directing staff policy and initiatives on a myriad of complex issues involving water, sewer, telephone, electric, gas, cable TV and solid waste companies. As an AUS Consultant, Zarillo has participated in consulting assignments for investor-owned utility companies on traditional regulatory subjects as well as regulatory policy, strategy and options. He has testified before numerous utility commissions and boards.
Joseph F. Bennan, CEO of AUS Consultants, notes that the AUS Pathways team will have the backing of over 100 AUS professionals in the fields of utility consulting, market analysis, market research and asset valuation. According to Brennan, "Nobody knows utilities better than AUS, and nobody knows New Jersey better than the new AUS Pathways team. It's a unique resource for utilities, businesses, and government."
1998 •
etcetera etcetera etcetera
PENNICHUCK TO
ACQUIRE PITTSFIELD AQUEDUCT Pennichuck Corporation of Nashua,
New Hampshire, recently announced that a merger agreement has been signed between Pennichuck and the Board of Directors of the Pittsfield Aqueduct Company ("PAC") of Pittsfield, New Hampshire. Penni chuck President, Maurice Arel said, "We believe that this acquisition of the Pittsfield utility by our organization is good for the water customers of the Pittsfield community. We will be able to bring our technical, managerial, and financial strengths to Pittsfield to assure proper operation of the new treatment plant and to improve service to the community."
The current shareholders of Pittsfield have been faced with the need for construction of a new water treatment plant, which has recently been completed. The plant was started up on October 29th and is presently going through trials and finetuning. PAC President Bob Dustin stated,
• NAWCWATER
"This project has been a long time coming. I am pleased to report that PAC is now in full compliance with EPA and State public health requirements." The new treatment facility was a mandate of the EPA Surface Water Treatment Rule. Water from the source, Berry Pond, is now clarified and filtered to ensure removal of particles, color and water born pathogens. Dustin acknowledged that Pennichuck's experience and expertise will be important to the proper and efficient operation of the new facility.
The treatment plant cost PAC nearly $1 million. This major investment plus the additional operating costs will lead to a doubling of the revenue requirement for PAC's operation. New rates are expected to go into effect in the next billing cycle. Customers of PAC will pay for their October usage at the old rate of $1 .15 per 100 cubic feet (748 gallons) but November and December's usage will be charged at
the new rate of $2.66. The charge to the
Town for municipal fire protection is not expected to increase.
Pennichuck Water Works, Inc., the
largest subsidiary of Pennichuck Corporation, was established in 1852 as an investor owned water utility to provide water supply for the growing City of Nashua. For over 145 years, Pennichuck has owned and/or operated water systems in Nashua and other parts of southern New Hampshire. The company is the largest, investor-owned water company in New Hampshire. Pennichuck supplies water for domestic, commercial and indus
trial use and fire protection to the City of Nashua and to the towns of Amherst, Hollis and Merrimack. In addition, Pennichuck has wholesale water agreements for serving the towns of Milford, Merrimack, Hudson, Litchfield and Londonderry, New Hampshire. ~
Jeffrey Neeman (center) was the 7998 winner of the Utilities, Inc. scholarship. A student at University of Missouri-Rolla, Neeman is seen with Robert Mitchell (I), the school's Dean of Engineering, and James H. Buckler, Chairman of NAWCs JIIinois-Missouri Chapter .
-
-
:aiLC ~f)f)'~~IJJ)~J) ~1i" 'fl:IJ~'~"1i"" C~.'~~EG,~1i"·"~Elti
Xerox Company Chairman and CEO Paul A. Allaire, describing quality as "a marathon without a finish line," applauded BHC Company's pursuit of continuous improvement and encouraged its employees to stay in the race.
Allaire served as keynote speaker for the Connecticut Quality Improvement Award's 10th Anniversary Banquet Celebration on October 6 at the Tara Stamford Hotel in Stamford, Connecticut. More than 160 business executives representing companies from all corners of the state attended the celebration.
In July the Connecticut Quality Improvement Award (CQIA) Partnership announced BHC as winner of the 1997 Connecticut Small Organization Quality Award, which is its mid-level award.
Now in the tenth year of its quality program, BHC is the first water utility in the Northeast to win a state-level quality award based on the rigorous Malcolm Baldrige National Quality Award Criteria.
State Attorney General Richard Blumenthal presented the award to BHC
President and CEO James S. Mcinerney Jr. and to Aquarion President and CEO Richard K. Schmidt prior to Allaire's keynote address.
As head of a document company that has benchmarked with its Japanese competitors to increase customer satisfaction, market share and return on assets, Allaire said the quality journey requires discipline. "To be world-class, we have to challenge everything we'd done in the past," he said.
Addressing company executives who are also involved in quality improvement efforts, Allaire said, "I realize that I'm preaching to the choir here, but quality is not a passing fad or a program. This is a marathon that has no finish line-it just keeps moving."
A division of Xerox received the Baldrige award several years ago. To make a point, Allaire added that a commitment to continuous improvement can yield some unexpected results.
"It energizes our competition," he said. "And no matter how good you are, (customers) just expect you to be better to-
morrow. I was pleased to hear Jim (Mcinerney) say, he realizes that BHC has got to keep going" for improved quality and service, Allaire said.
The CQIA is based in Stamford. Its award examiners noted that they were impressed by the fact that BHC's management and employees are equal partners in the company's excellence program, said Sheila Carmine, founder and president of CQIA.
BHC employee teams since 1990 have saved $1.86 million by finding new solutions to business problems, and from 1995 to 1997 have clinched 23 gold and silver CQIA entry-level Connecticut Innovation Prizes for improved customer service and productivity. Mcinerney applauded BHC employees for winning the award, and said BHC will remain loyal to its commitment to quality.
"I commend our employees for their diligence, and promise our customers that we will continue our efforts to provide superior quality and service," the CEO added.
CONSUMERS WATER TO SELL NH OPERATIONS
Peter L. Haynes, President of Consumers Water Company announced that the town of Hudson, New Hampshire, and C onsumers New Hampshire Water Company (CNHWC) have reached a tentative agreement under which the town will acquire, under the threat of eminent domain, the assets of CNHWC, a subsidiary of Consumers Water Company, for $34.5 million. The agreement is subject to the completion of a definitive purchase and
sale agreement, the approval of the New Hampshire Public Utilities Commission, as well as an enabling vote of the citizens of Hudson. It is anticipated that such vote will occur in late 1997 or early 1998. If the vote is affirmative the transaction would probably close in mid-1998.
CNHWC serves approximately 8,000 customers in Hudson and several surrounding communities. The company's 1996 revenues were $6.4 million and its
net income for the year was $660,000. Haynes stated the company has incurred substantial legal costs recently as a result of the town's desire to acquire the system. CNHWC agreed to submit the sale to the voters of Hudson in order to determine an outcome and curtail the legal expenditures on both sides. The company believes it is an efficient provider of water to its customers, but acknowledges the right of the town to acquire the system.
1998 •
UNITED CONTRACT EXTENDED FOR INDY PARTNERSHIP
United Water Resources announced that its affiliate, United Water Services, has received an extension and expansion of its contract through the White River Environmental Partnership (WREP), to manage the wastewater treatment facilities and sewage collection system for the City ofIndianapolis. The new contract with Indianapolis will make the nation's biggest and most successful public-private partnership even larger, saving local taxpayers an additional $189 million.
"From both a financial and environmental standpoint, this partnership is a model for other communities throughout the nation," stated Donald Correll, chairman & CEO of United Water Resources. "Through improved management of wastewater systems, a city such as Indianapolis can direct additional dollars to other worthwhile projects without increasing the budget or forcing higher sewer rates."
"This is exactly the type of results-oriented service our affiliate, United Water Services, is providing to cities and municipalities throughout the U.S., Canada and Mexico. Through United Water's jointventure with Suez Lyonnaise des Eaux, United Water Services brings international expertise to bear on solving water and wastewater issues for communities," added Correll. "Weare proud of the success this
has brought to our Indianapolis partnership."
The city has saved more than $46 million since contracting in 1994 with the WREP to manage the Southport and Belmont Advanced Wastewater Treatment facilities and the collection system. The WREP is a joint venture between United Water and Indianapolis Water Company. According to Indianapolis Mayor Stephen Goldsmith, those savings have yielded big benefits for taxpayers in the form of a massive investment in sewer repair projects and the lowest sewer user rates in central Indiana. Despite inflation, Indianapolis residents pay no more for sewer usage today than they did in 1985 and city homeowners pay less per month than residents of any surrounding city.
"Six years ago, Indianapolis' sewer system was on the verge of collapse," stated Mayor Goldsmith. "The savings from our contract have allowed us to invest more than $90 million in rebuilding that system-without raising sewer user fees."
Goldsmith noted that over the next several years, the city will need to continue to invest heavily in its wastewater collection and treatment systems and will need to address several combined sewer overflow issues. But while other cities have funded similar investments through tax hikes and user fee in-
creases, Indianapolis will be able to fund these projects using savings generated through its new, ten-year contract extension with the United Water partnership.
Under the new contract, the WREP will provide savings to the city of $189 million over the next ten years while preserving the city's solid environmental record. Mayor Goldsmith noted that he intends to use these savings to continue to hold the line on rate increases, to make capital improvements to the wastewater collection system and treatment plants, and to fund a $55 million project of reduce combined sewer overflows.
Over the past five years, the city has put more than 70 governmental services up for competitive bid. Though its new wastewater contract, Indianapolis will realize $400 million in savings, which Goldsmith said the city has invested in Building Better Neighborhoods-the largest infrastructure improvement project in city history-and more police officers.
"The water leaving the plant is as clean as ever, employee wages are up and grievances are down, and taxpayers enjoy strong sewers and low rates," added Goldsmith. "Because of competition, we are getting more out of every tax dollar, cutting costs and improving quality to produce more value for our customers-the taxpayers of Indianapolis."
Contract Awarded to Southwest Water Company
Southwest Water Company has secured
a three-year, $2.3 million contract to oper
ate and maintain water and wastewater util
ity systems for Pecan Grove Municipal Utility
District, just west of Houston, Texas.
Southwest Water Company's subsidiary,
ECO Resources, Inc., the leading utility op
erating company in the Houston area, will
provide water production, water distribution,
• NAWCWATER
sewage collection, sewage treatment, meter
reading, customer service, and billing and
collection services for Pecan Grove. Under
the terms of the new contract, the company
will also operate the District's storm water
levee system.
Southwest Water President Anton C. Gamier said, "Weare extremely pleased to
be of service to the citizens of Pecan Grove
Municipal Utility District. This contract,
coupled with the agreement we announced
earlier this month with Santa Teresa Services
Company in New Mexico, adds over $10
million to our revenue backlog, which now
totals over $60 million, double what it was in
1995. We look forward to securing additional new contracts in the months ahead, in line
with our aggressive marketing strategy."
-
C~I ~V~t~ .. .A... ........ ee§ N~~PI~ ..
The Board of Directors of California Water Service Company has authorized a new Dividend Reinvestment and Stock Purchase Plan ("Plan"). The new Plan is expected to be introduced during the first quarter of 1998, after the Company completes the formation of a holding company structure which is expected to be completed later this year.
Features of the Plan are considered standard by the investment community and will make the Cal Water Plan competitive with those plans considered "state-of-the-art."
"This exciting new Plan provides existing and new shareholders with an economical and more convenient way to invest in Cal Water," said Robert W. Foy, Chairman of the Board of Directors. "It also provides the company with a more flexible and less expensive way to obtain
new equity, if needed." "Eleven percent of our shareholders cur
rently participate in our Dividend Reinvestment Plan. They will automatically be enrolled in the new Plan, although only shares registered in a shareholder's name-and not held in a broker's nameare eligible," Foy said.
Plan features are expected to be:
• existing shareholders can make cash payments to acquire additional shares;
• new investors may acquire shares directly from the company for cash;
• first time purchases must be a minimum of $500;
• subsequent purchases must be at least $100;
• maximum weekly purchases by a
shareholder are $5,000;
• allows shares to be purchased without a commission;
• and, existing shareholders may authorize automatic transfers from their bank accounts to purchase additional shares.
The new Plan also provides the company with financial flexibility. Under the Plan, the company may issue new shares or purchase them on the open market depending on its need for new equity capital. The company may switch between these options on a quarterly basis, allowing the company to change the method as its financing needs dictate. This method is also less expensive than a public offering because it avoids the associated fees and commissions.
National Association of Water Companies Presents:
"The Sourcebook of Regulatory Techniques for Water Utilities"
Compiled by Janice A. Beecher, Ph.D.
Comprehensive Information Resource
Invaluable Regulatory and Ratemaking Information
EXAMPLES - ASSESSMENT DOCUMENTATION
COMMISSION POLICY - STATISTICS RULES - ORDERS
ADVANTAGES V. DISADVANTAGES
For purchase information, contact Jane Bolin at (202) 833-8383
American Express, MasterCard, Visa Accepted
1998 •
PSC Grants Kentucky-American Authority to Resolve Deficit
Kentucky-American Water Company received the Public Service Commission's Order in Case No. 93-434-Investigation of Sources of Supply and Future Demand of Kentucky-American Water Company. In the long awaited Order, the Public Service Commission has validated KentuckyAmerican Water Company's position that a water supply deficit exists in the Central Kentucky region and entire Kentucky River Basin. Quoting from the Order: "The evidence before this Commission indicates that additional steps must be taken and financial resources will have to be committed to develop an adequate and reliable source of water supply, not only for the customers of Kentucky-American, but for all the citizens served by the Kentucky River. The evidence further indicates that the net effect of the Kentucky River Authority's proposed activities, if implemented, will be insufficient. Anything KentuckyAmerican does which affects its withdrawals from the Kentucky River during such an occurrence also affects the drought's impact on others that depend on the Kentucky River as a source of water. The responsibility to develop an adequate and reliable source of supply for KentuckyAmerican's customers is a direct obligation of Kentucky-American itself." The Order further states that: "It is therefore ordered that Kentucky-American shall take the necessary and appropriate measures to obtain sources of supply so that the quantity and quality of water delivered to its distribution system shall be sufficient to adequately, dependably, and safely supply the total reasonable requirements of its customers under maximum consumption through the year 2020."
The Order culminates years of intense exploration into alternate sources of supply and demand for Kentucky-American Water Company customers. Kentucky-American Water Company is gratified by the validation of the company's long-range plans. Quoting Kentucky-American Water Company Vice President and Manager Roy
eNAWC WATER
Mundy, "Kentucky-American appreciates the trust that the Public Service Commission places in us to continue to supply a sufficient, safe, and dependable water supply for our customers now and in the future. We look forward to moving ahead with plans to resolve the deficit and working with the PSC on the solution to the water supply deficit. KentuckyAmerican feels the best least-cost most feasible environmental solution is a pipeline to purchase water originating from the Ohio River, treated through Louisville Water Company, and distributed via a 55-
mile pipeline to Kentucky-American Water Company customers."
The next step for Kentucky-American Water Company will be to pursue a Certificate of Convenience and Necessity which will include obtainment of easements, design, and contractual arrangements with Louisville Water Company, as well as numerous community outreach meetings to address issues regarding the pipeline with the community. The construction of the pipeline will increase the average residential customer's bill approximately $4.62 per month.
Ne~ Ol1M Contract for Consumers Illinois
Consumers Water Company announced that Consumers Illinois Water Company (CIWC), has been awarded a five year operating and maintenance contract to provide water services for the Village of Tower Lakes. The Village, located in CIWC's Candlewick Division, currently serves a population of approximately 1,360 people.
Consumers Illinois, Candlewick Division, assumed general management and operations responsibility for the village on September 8,1997. Services to be provided under the contract include water production, water distribution, maintenance, meter reading, customer service, billing and collection, engineering, and capital expense planning.
Commenting on the new contract, Consumers Water Company president
Peter L. Haynes said, "Weare delighted to
be adding the Village of Tower Lakes to our municipal client list. We look forward
to providing the Village with the same
high-quality, responsive service that has
made Consumers Water an industry leader."
CIWC's scope of work under the new
contract will include oversight support for
the construction of a new 250,000 gallon
ground water storage tank, booster pump
station/water treatment plant, and the re
placement of distribution mains. The award of this contract supports
Consumers Illinois' strategy of growth
through new business services. The addition
of the Village ofT ower Lakes service area in
creases CIWC's presence in northern Illinois.
AQUARION TO PARTI(~IPATE IN ANKARA, TURKEY
SUPPLY PROJE(~T The United States Trade and
Development Agency (TDA) has chosen Aquarion Company to be a member of a U.S. team of engineering professionals to evaluate water distribution and wastewater collection system operation and maintenance procedures for ASKI, the water/wastewater utility for Ankara, Turkey. The team is led by Millennium Science & Engineering, Inc. of McLean, Virginia, and further supported by Gannett Fleming, Inc. of Harrisburg, Pennsylvania.
Ankara is Turkey's second largest city, and ASKI provides water service to approximately 90% of the city's three million inhabitants. The outlying city's newer water pipeline additions have been designed to relatively high standards; in contrast Ankara's core area is home to old and crumbling water/sewerage systems. With the recent addition of an automated Supervisory Control and Data Acquisition
System, it is appropriate now for knowledgeable consultants to evaluate existing capabilities and propose new maintenance procedures and equipment purchases.
The Wodd Bank is providing funds for the project through the Evergreen Fund of the United States. The administration of the project is through USTDA, an independent U.S. Government agency whose mission is to enhance the market opportunities for U.S. companies with respect to infrastructure and industrial proj ects in developing and middle-income countries. TDA works closely with foreign governments and other foreign entities to get U.S. businesses involved in the early stages of planning these projects.
Aquarion will participate in the project through its Aquarion Management Services (AMS) subsidiary. AMS provides municipally owned water and wastewater systems with contracted operation, maintenance
and administrative services and has previously participated in a USTDA-funded initiative to evaluate a water system in Chile, S.A. The AMS team will be led by Glenn Thornhill, vice president, technical services for Aquarion's water utility subsidiary-BHC Company. Thornhill has over twenty-five years of senior water management responsibilities and has "handson" water system experience with maintenance procedures and equipment purchases. His work will include a threeweek in country visit with ASKI personnel and evaluation team members.
Aquarion Company President and CEO Richard K. Schmidt, said "This is a good opportunity for Aquarion to further offer its water system operating capabilities to the international water supply community. We look forward to working with Millennium and Gannett Fleming in partnership with USTDA."
James Perry (I) Chairman of NA WC's New York Chapter, presents Louis Mirando with an engraved crystal water pitcher in celebration of his retirement. Mirando retired as president of Long Island Water Corporation after a 42-year career. He is past chairman and director of NAWC's New York Chapter.
1998 •
r i
NAWC calendars were sent to members in early December. Please note that NAWC's Customer Service Conference (May 3-5) and the Mid-Atlantic Conference of Regulatory Utilities Commissioners (June 28-July 3) were inadvertently omitted from the calendar. The correct date for the Annual Meeting of NAWC's Pennsylvania Chapter is September 8. NAWC's Indiana Chapter will have it's Annual Meeting on November 12. The 18th Annual Western Utility Rate School will be held April 26-May 1, and the 26th Eastern Utility Rate School is scheduled for October 25-30.
JAIIUARY 18 Pennsylvania Chapter BoD 14 Delaware Chapter Meeting
8 California Water Association Meeting 15 Pennsylvania Chapter BoD BoD Meeting Pennsylvania-American Water Co. Meeting California Water Service Co. Hershey, PA Pennsylvania-American Water Co.
San Jose, CA 23-26 NA WC Government Relations Hershey, PA
13 Delaware Chapter Meeting Fly-In 26- 18th Annual Western Utility 16 New Jersey Chapter Meeting Washington Court Hotel May 1 Rate School
Forsgate Country Club Washington, DC
Jamesburg, NJ "AY 21 Pennsylvania Chapter BoD "ARCH New England Chapter Meeting
Meeting 1-4 NARUC Winter Committee Portsmouth, NH
P ennsyl vania-American Meetings J.W. Marriott Hotel, 3-5 NAWC Eastern Customer Water Co. Hotel Service Conference Marriott Hershey, PA Washington Washington, DC Inner Harbor
25-30 8th NARUC Biennial Advanced 3 Ohio Chapter Annual Meeting Baltimore, MD
Regulatory Studies Program 10 Delaware Chapter Meeting 4-5 NA WC Executive Meeting Loews Annapolis Hotel Washington, DC Annapolis, MD 10 Indiana Chapter 4-6 California Water Association
9th Annual Water Issues Spring Meeting Hyatt Regency 27 Washington Chapter Meeting Seminar Executive Inn at Capitol Park
Fife, WA 11 Florida Chapter Meeting Sacramento, CA
12 California Water Association 8 New Jersey Chapter Meeting
FEBRUARY BoD Meeting Forsgate Country Club Citizens Utilities of California 12 Washington Chapter Meeting
1- 4 A WW A Water Quality Sacramento, CA Executive Inn Technology Conference 13 New Jersey Chapter Meeting Fife, WA Orlando, FL Forsgate Country Club
10 Delaware Chapter Meeting Jamesburg, NJ 13 Delaware Chapter Meeting
12 California Water Association 18 Pennsylvania Chapter BoD 20 Pennsylvania Chapter BoD
Meeting BoD Meeting Meeting Pennsylvania-American Water Co. Dominguez Water Corp. Pennsylvania-American Water Hershey, PA Carson, CA Co.
17 Illinois-Missouri Chapter Hershey, PA
Mid-Winter Meeting JUliE Illinois-American Water Co. APRIL 6-11 57th Western Conference of
Belleville, IL · 9 California Water Association Public Service Commissioners
BoD Meeting Sun River, OR
Suburban Water Systems Covina, CA
9 Delaware Chapter Meeting
e NAWCWATER
r 10 California Water Association 11 Delaware Chapter Meeting 21 Pennsylvania Chapter BoD
BoD Meeting 19 Pennsylvania Chapter BoD Meeting Pennsylvania-American California Water Service Co. Meeting Pennsylvania-American Water Co. San Jose, CA Water Co. Hershey, PA
10 Florida Chapter Meeting Hershey, PA 25-30 26th Annual Eastern Utility
12 New Jersey Chapter Annual 20 California Water Association Rate School
Meeting BoD Meeting Forsgate Country Club Citizens Utilities of CA IIOYEMBER Jamesburg, NJ Sacramento, CA 6 New England Chapter Meeting
17 Pennsylvania Chapter BoD 9-12 110th NARUC Annual Meeting SEP,.EMBER Convention Pennsylvania-American Water Co. 8 Pennsylvania Chapter Annual Marriott's Orlando World Center Hershey, PA Meeting Harrisburg Hilton Orlando, FL
19-22 76th National Conference of Harrisburg, P A 10 Delaware Chapter Meeting Regulatory Utility Commission 9 Delaware Chapter Meeting 11-13 California Water Association Engineers
9 Florida Chapter Meeting Annual Meeting Doubletree Hotel San Diego, CA 10 California Water Association Monterey Plaza Hotel
BoD Meeting Monterey, CA 20-23 Southeastern Association of
California Water Service Co. II Indiana Chapter Regulatory Utilities Commissioners
San Jose, CA Annual Meeting
Grand Casino 15 Pennsylvania Chapter 18 Pennsylvania Chapter BoD Biloxi, MS Legislative Golf Outing Country Meeting Pennsylvania-American
21-24 Mid-America Regulatory Club of Harrisburg Water Co.
Commissioners Harrisburg, P A
Doubletree Hotel at Corporate 18 New Jersey Chapter Meeting DECEMBER Woods Forsgate Country Club 8 Delaware Chapter Meeting Overland Park, KS Jamesburg, NJ 9 Florida Chapter Meeting
21-25 A WW A Annual Conference 20-23 A WW A Distribution System 16 Pennsylvania Chapter BoD Dallas, TX Symposium Meeting Pennsylvania-American
28- Mid-Atlantic Conference of Austin, TX Water Co.
July 3 Regulatory Utilities 22 Washington Chapter Meeting Commissioners Executive Inn The Homestead Fife, WA Hot Springs, V A
All II UAL OC,.OBER JULY 3-7 Water Environment Federation COIIFEREIICES 9-10 California Water Association Annual Meeting
Four Seasons Resort Orange County Convention OC,.OBER I 7-2 I, 1999 Carlsbad, CA Center NA WC Annual Conference
14 Delaware Chapter Meeting Orlando, FL
Charleston Place
15 Pennsylvania Chapter BoD 8 California Water Association Charleston, SC
BoD Meeting Meeting Pennsylvania-American California Water Service Co. Water Co. San Jose, CA SEPrEMBER 24-28,2000 Hershey, PA
11-15 NA WC Annual Conference NA WC Annual Conference 26-29 NARUC Summer Committee The Greenbrier The Westin Hotel
Meetings White Sulphur Springs, WV Boston, MA Westin Hotel Seattle Seattle, WA 13 Delaware Chapter Meeting
19-23 NARUC Basics of Regulation OC,.OBER 7-1 1,200 I A UGUS,. and Rate-Making Process Course NA WC Annual Conference
2-14 40th NARUC Annual New Mexico State University La Quinta Resort and Club Hyatt Regency Hotel
Regulatory Studies Program Albuquerque, NM Palm Springs, CA
I Michigan State University East Lansing, MD
I 1998 •
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