Vol 33, No. 4
Transcription
Vol 33, No. 4
Volume 33, Number 4 - WINTER 1992 OFFICERS STAFF CHAIRMAN OF THE BOARD james B. Groff j . james Barr Executive Director American Water Works Company PRESIDENT William D. Holmes Consumers Water Company 1 st VICE PRESIDENT j. Richard Tompkins Middlesex Water Company GENERAL VICE PRESIDENTS jack E. McGregor Bridgeport Hydraulic Company Ronald S. Dungan General Waterworks Company Robert A. Luksa Philadelphia Suburban Water Co. Floyd E. Wicks Southern California Water Co. Sharon L. Gascon Deputy Executive Director . Michael j. Horner Director of Communications and Conferences james L. Good Director of Government Affairs jean Lew is Executive Assistant Bonita j. Hayden Bookkeeper Deana Bursell Secretary Audra Zellner Program Assistant SECRETARY james B. Groff TREASURER Sharon L. Gascon Copyright 1989, National Association of Water Companies. The articles printed in this magazine do not necessar~ ily represent the position of the National Association of Water Companies. NA we disclaims responsibility for:-lll information provided by individual authors or organizations and published in WATER magazine, including technical information which should be independently verified by separate sources. About the Cover: Intake stmcture for White River North Water Treatment Plant, Carmel, IN, owned by Indianapolis Water Co. and constructed by Bowen Engineering Corp. Photo by Dan Francis, Mardan Photography. CONTENTS The Presiden t's Message .... Annual Conference Wrap Up Presentation of J.J. Barr Scholarship Award .. . ...... . Management Innovation Con test ... . NA WC's Board of Directors . 1992 Conference in Photos ....... . . Opportunities for Investors, by Wendell F. Holland .. T riumph out of Chaos, by James W. Shaffer. . .. . .... . NAWC Water Technology Committee Report .. . ......... . Potential Consequences of Abandon ing Cos t~ Based Declining-Block Rates, by Thomas R. Stack . . ...... . W ater Treatment: A Joint Effort Adding to Your Comrntmications Reach, by Larry L. Bingaman . Preserving Primacy in Missouri, by T efry L. Gloriod H urricane Response, by Roger Ytterberg . System T rends in the 90's for Utility Companies, by Barry Strock .. Radio Watch in Action, by Roger Ytterberg . . The Dilemma of Taxation of Contributions In Aid of Construction, by Steven J. Densberger ... Executive Director's Report Regulatory Relations Report. Recent Regulatory Decisions Customer Service Report .. . Tax Adviser ............ . Public Relations . .. ........ . Corporate Changes .....•.. . ..•.. Etcetera ... . ............... . 3 4 10 11 13 14 18 21 26 30 35 36 39 40 41 43 44 46 48 51 56 59 60 62 68 WATER-Published four times cflch year by the National AssociaTion of Water Companies, Suite 1212, Ins K Street, N.W., Washington, OC 20006. NA we is a nonprofit trade association dedicated to serving rhe needs of the investor-owned state-regulated, public water supply industry. WATER is circulfltcd to fill Active find As~oeiate Members of the Association, members and st'dff of public utility commissions, federal and state officials concerned with our industry and will be sent to qualified persons llpon written request. Rcquests and changes of address should be sent to NAWe, Suite 1212, 1725 K Stred, N.W., Washington, DC 20006 (202) 833-8383. The President1s Message by William D. Holmes O ur Annual Conference is behind us and we are into a new year for our Association. It is an honor and privilege for me to serve as President of this Association, and it will be a challenge to continue the progress and accomplishments of the Association under my predecessors' leadership. With the help of a lot of people, we had a great conference. The H yatt Regency provided an excellent facility for our group. and Hilton Head Island proved to be a sufficient attraction to draw the second largest attendance in our Conference history. Although the weather did not cooperate with our plans to have a seaside reception and cookout, the indoor arrangements turned out to be quite satisfactory and it appeared all had a good time. We certainly want tD thank our twenty corporate sponsors of the event. The political satire of the Cap itol Steps got the Conference off to a fast and lighthearted start. Unfortunately, the real political campaign that ensued was often as comical as their satire. My special thanks to Our four moderators of panel discussions, Rich Tompkins, Jay Weinhard[, Paul Foran and George Johnstone. Given the general subject matter to be covered, they each put together a panel of knowledgeable pre1:ienters and coordinated the subject matter to provide informative and provocative panels. Certa inly one of the highlights of the Conference was the naming of Mike Zihal as our new Honorary Member. Mike and his wife Dorothy have become familiar and fa~orite people to all who have been a part of our Association for any length of time, and they richly deserve this honor. While on the subject of Honorary Members, we had sixteen Honorary Members and/or Past Presidents, most of whom are no longer active in the day~to~day affairs of their companies, attend the Conference. It is always good to see and vis it with these folks who have contributed so much to our Associat ion and industry, and I hope they will continue to return to future conference1:i. The importance of the committee structure within our organization was amply illustrated at the Conference with the excellent General Session Program on effective legislative relations organized by the Government Relations Committee and the Wednesday afternoon sem inars put on by the Small Companies, Employee Relations, and Public Information Committees, all of which were well attended and received. Our Association has completed its first year of operating under its new by~laws with the significant reduction in the number of directors. A[ the Board Mee[ing held a[ [he close of [he Conference, we had 34 of the 35 directors in attendance. I feel this was an indication of the interest and commitment of the decision makers of our industry to our Association. Our officers and Washington staff must rema in cognizan t of the importance of maintaining thCi interest and direction from this board in establishing Association policies and goals. At the Conference, NA WC officially introduced its newest chapter, the Washington Chapter, in Wash ington state. We look forward to participation from our new Washington members. I'U end my comments on the Conference with thCi acknow ledgement. To my Consumers Water Company associates, 1:iome fifty strong; to the three lovely ladies from Middlesex Water Company who served their apprenticeship in preparation for Rich Tompkins' C onference next Fall in Williamsburgi and to Mike Homer and Bonnie Hayden from the Washington office (collectively [he folks in the green blazen;), my special thanks for your able assistance. Hopefu lly, "many hands made light work!" This was Mike Homer's first conference as Coordinator and he performed flawlessly. I could not have asked for an eas ier person to work with or a more professional approach to his job. In his President's message to the membership, Jay Weinhardt reported that the goals the Executive Committee had set for our Association several years ago have essentially all been met. He presented to the Board of Directors, and they adopted, ten new, or in some cases expanded, fivc~year goals for die Association to pursue. T hey are: • Become mme proactive in the re~authorization of the SDW A. • Establish a pre1:ience in EPA to address those issues that impact the investor~owned industry. • Encourage and facilitate privatization of municipal systems and public/private partnersh ips. • Aggressively pursue tax issues to provide greater equity between investor~owned, and munic ipally owned, water utilities. • Improve communications within the organization, with emphasis on strengthening ties between the national and its chapters such that the overall organ ization becomes more effective in its legislative and regulatory initiatives. • Increase membership, and further consider inclusion of investor~ owned wastewater utilities in the Association. • Aggressively pursue organization of additional state chapters. • Con tinue a strong, assertive regulatory relations program. • Maintain a sound financial position and reserve. • Promote investo[~owned water utilities' contributions to the nation's public health and economic viability. With the continued support of our Executive Committee, our Board of Directors, our Committees, our Chapters and our very capable Washington Staff, 1 am committed to moving our Association toward the meeting of these goals. , W INTER 1992 3 c NAWC Members Flock to Hilton Head for Annual Conference Thanks to NAWC's Public Information Committee for contributing to this article. NA WC's 96th Ann ual Conference, Ocrober4-7, at the Hyatt Regency in Hilton Head, South Carolina, goes down in NAWC history as its second most well,attended Conference, with 733 attendees. Many at' tendees were welcomed to Hilton Head by torrential rains on October 3, but as the Conference began, the weather improved. On Sunday, the rain subsided long enough fo r NAWC's golfers to get in eighteen holes. fu o ne golfer said, "It was like a miracle. Just as we had gotten into our cans and began driving to our starting holes, the sun appeared," Tennis players were not so forru, nate, as the downpours of Saturday and Sunday morning soaked the courts. Courts were playable by the aftemoon , but play was halted by another downpour prior to the end of the tournament, which was con' eluded later on during the Conference. The rains of Sunday afternoon forced relocating the evening beach party to an inside ballroom. NAWC attendees (and hotel employees, who saw their outside set,up ruined by driv ing rains, and had to rc,set Following the Cap ito l S teps, the Conference's in itial General Sess ion was kicked off by Cunference Chairman Bill Holmes introducing The Honorable Henry Yonce, Chairman of South Carolina's Pub: li c Service Co mmi ss ion . Commissioner Yonce gave a welcoming address, including an extensive h istory of Hilton Head and o ther areas of South Carolina. sible. NA WC President l ay Weinhardt fol- Commissioner Gordon also spoke of en, vironmental concerns. He noted that we need gcxxf science and a sense of proportion lowed with his welcom ing statement, and Chairman of the Board Jim Barr continued wid1 the presentation of the Honorary Mem, using these huge amounts of money to meet environmental goals. ber Award, to Michael Zihal, formerly of Long Island Water Curp. A feature on the Honorary Member presentation begins on page 8. The Honorable Kenneth Gordon, Presi, dent, National Assoc iation of Regulatory Utility Commissioners, brought his message to the convention and spoke of the excel, lent, cooperative relationsh ip between the water industry and NARUC. He pointed out that the Water Committee of NARUC meets annually with rep resentatives of everything inside in less than two hours) NAWC. showed their adaptive spirit and had a won, derful time, enjoying the food and drink Commissioner Gordon indicated that water regulation is moving into the main' provided by the party's sponsors, and meet, stream with a higher and highet profile. He ing NA WC friends, old and new. spoke of the water industry spending huge sums of money to meet the Safe Drinking Water Act Regulations, but indicated that Monday Morning that is being used in the telecommunication industry may be a natural for the water industry. He agrees that these incentive sys, terns are no t perfect systems, but in indus, tries as wcll,defined as the water industry, incentive programs may be altogether fea, in reasonably handling risk as a basis for Forrest Presentation During the second part of the morning session, Keith Forrest, Vice President and Director of Economic Research of the Unum Life Insurance Company gave participants an excellent insight into the economic out, look for the 1990's. Forrest believes that the 90's will be a mirror image of the 80's, ai, though we will spend less than we eam during this decade. We will, as a nation, revere savings, investments and pnxluctiv, ityand will begin to take down both public and private debt. This will be the trend of the decade. This would also suggest a very slow growtb posture for the first half of tbe 1990's. According to Forrest, American business is being restructured to meet the new chal , this spending must be well-founded. In those lenges of the 1990's. Businesses will be forced who prov ided their irreverent musical in, te rpretations of the latest political develop, areas of the country where water has been underpriced, rate structure changes will meet with resistance-someth ing we in the in, dustry have know for many years. Commis, sioner Gordon also discussed least cost plan' to become more effic ient. A merican con' sumers are sca red. They are not buying, causing economic cc ilings-or caps---on economic growth. American consumers arc ments. The Steps were buoyed by the up- ning as a method that may be used by the coming election and the previous week's re, entry into the race by Ross Perot, and gave a memorable performance to a full,hollse of water industry in meeting the new regula' country is sacrosanct. There are some favorable s igns as busi, ness does get leaner and meaner. Produc, tivity is slowly but definitely increasing. On Monday morning, the Conference officially opened with a presentation of the colors by the U.S. Marines, of Paris Island. They wcre followed by the Capitol Steps, NA WC attendees. 4 NAWCWATER tions of the Safe Drinking Water Act. According to Commiss ioner Gordon, incentive- also ca lled price regulation- primarily afraid of layoffs. No job in this The last five years of this decade are , predicted to take off like a rocket. Forrest discussed the health care cost problems of this country. Medical inflation has o utstripped n o rmal infl at io n since Methuselah, and will continue to do so. The significance and reasons that we look at something like the medical inflation rate are as follows: If you have a commodity or a sClVice that continues to outstrip normal inflation, it invites further public sector in~ volvement. The water industry has a com~ modity that every single person requires or needs. This industry, according to Forrest, is now looking at a yellow caution flag. Infla, rion throughout this industry is begiruling to outsrrip the CPI, which could invite additional public sector involvement, as has happened in the health care industry. This could mean more regulations and other fonns of management by the federal and state governments. The public sector is replacing the pri~ vate sector rapid ly due to the grow th of entitlements, or transfer payments. Wel~ fare entitlements in this country have grown at the rate of 11 .1 % over the last thirty years. The geometri c growth of the National Debt has outpaced the economy two to one over the last twelve years. In 1980, the National Debt was one trillion dollars, or 37% of the U.S. eco nomy. It is now fou r tr illion dollars and accounts for 60% of the economy. The deficit is widening, and by 1997, it wi ll be six trillion do llars and will account for 75% of th e economy. Interest on the National Debt is now three hundred billion dollars annually. In 1997, the interest will be four hundred fifty bi llion dollars. The government does not think that the National Debt matters, but it does matter, accord~ ing to Forrest, particularly to the private sector. TI1e outlook for the economy is good if we as a nation make some difficult choices now by continuing the restructuring of the balance sheers of American businesses and demanding a slowdown of the National Debt. If productivity continues to increase and if market discipline against inflation continues as it presently is, there will be real growth to the economy during the last half of the 90's. All the Water You Need The Monday afternoon Business Session started with a panel discussion on "All the Water You Need." The moderator for this panel was J. Richard T ompkins, C hairman and CEO of Middlesex Water Co. Panel members were Kenneth Miller, Director of Water Supply and Treatment of CH2M Hill; Dr. Kenneth Gordon, Chairman of the Maine Public Utilities Commission, and John Palko, Vice President of AUS Consultants. Tompkins kicked in the discussion by stating that this panel wou ld deal with the areas of conservation, efficiency, de~ mand side management and least cost plan~ ning. Tompkins stated that he had recently heard a simple definition of conservation and efficiency from Richard Cowart, Chair~ man of the Vermont Public Service Commission. Cowart stated that "Conservation is doing with less; efficiency is doing more with less." Miller stated that he thought that the NA WC definition ofwaterconser~ vation was one of the best he had seen. NA WC defmes water conservation as "the application of prudent demand management strategies to reduce the inefficient use of water." Prior to the presentation, panelists had been asked to write down their defmitions of conservation, efficiency, financia l~side management and least cost planning. The definitions provided are as follows: Conservation Gordon: Conservation, at a superficial level, means using less of the water source. M iller: Water conservation implies wise use of water with min i ~ mum waste. Conse rvation is a carefu l Palko: systematic protection of resou rces accomplished by elimi~ oating unnecessary usage and red ucing waste. Efficiency Gordon: Diffic ult to define efficiency around one resource since all resources must be considered. M iller: Efficiency relates to producing quali ty water for the least cost with minimum expense, waste or effort. Palko: Efficiency is effective operation as measured by a comparison of production with cost. Demand Side Management Gordon: Simply put, demand side man~ Mi ller: Palko: agement requires the utility to be involved in the optimiza~ tion of the customer's opera~ tions concerning water services. Demand s ide manageme nt re lates to managing peak hour and peak day demands of water util ity customers (domes tic, in ~ dustrial and municipal, agri cul ~ tural). Demand side management en~ compasses any strategy or pro ~ gram empl oyed by a ut ility to influe nce the use, or pattern of use, of its product by its cus~ wmers. Least Cost Planning Gordon: Leas t cost planning is the care with which firms opti mi ze their supply (and demand side p lanning) in order to ass ure that utility services are provided at the lowest possible cost. Miller: Least cost planning relates to water utility planni ng to meet customer needs with least cost service solutions. Palko: Least cost planning can be simply a combination of supply~ side and d emand~side options which creates a resource mix which reliably meets custom~ ers' short-term and long~term utility needs at the lowest pos~ sible cost. Each of the panel members were given the opportunity to expand on their writ~ ten definitions, and the discussions were thought~provoking. It was in teresting to hear how both the political and business minds view these matters. SDWA Panel The second afternoon session addressed the increasing Safe Drinking Water Act regulations facing water suppliers nation~ wide. The moderator of th is panel was Jay Weinhardt of San Jose Water Co. Oth ers on this panel were James Elder of the EPA Office of Groundwater a nd Drinking Water; Scott Rubin of the Pennsy lvania Office of Consumer Advocate; Gera ld Smith of the A merican Water Works Ser~ vice Co., Inc., and Velma Smith of Friends of the Earth. (continued on next page) W INTER 1992 5 Annual Conference l continued Each pane list gave their impression of the regul atory compliance of the Safe Drinking Water Act and the effect of the cost of implementing these new regulations. Some of the comments were personal opinions and did not always refl ec t the views or policies of the organization s the panelists represented. Jim Elder stated th at this area produced two questions. First, "Should there be stoppage of the addition of monitoring 25 new con taminants every third year?'l and second, "Sh ould there be some priority established to focus on those contaminants having the highest risk?" Elder went on to explain why these qu estions should be answered. Scott Rubin posed a different qu estion that he considers fundamental: "Should the Safe Drinking Water Act be considered a public health program or an environmental program ?" His personal opinion is that the Safe Drinking Water Act should be considered a public health program. The Act is trying to serve two masters, which he believes is not feas ible. Rubin's comments were well-received and well-founded. He advocates sound investments to assure safe and reliable water. Gerald S mith stated that a moratorium is not needed on drinking water standards; however, stand ards should be prioritized, and drinking water stand ards sho uld definitely be universal in nature. R isk should be addressed in order of public health benefits. Velma Smith stated that she was satisfied with the present Safe Drinking Water Act and could accept no change in the monitoring prov isions of the A ct. She contended that there should be some pooling of resources, and cost-sharing measures should be implemented to assist smaller systems in complying wi th the Act. She assured eve ryone that there would be an inevitable increase in the cost of water rates and that the piper has to be paid in those communities where it is necessa ry. Smith is also adamant in her con tention that radon has to be moni tored in all dri nking water, knOWing full we ll that the risks of radon in drinking w~lter are minimal. Commissioners' Panel T uesday mo rning's General Business Session opened with a panel of regulators 6 NAWCWATER moderated by Illino is Comm issioner Paul Foran. Commiss ioners Linda Bisson Stevens of New H ampshire, C harles H. Hughes of North Caro lina, Patricia Perkins of Missouri and Dav id E. Ziegner of Indiana were the panelists that provided their perspectives on a wide range of curren t issues. The commissione rs agreed that their ab ility to fulfill their responsibilities is enhanced when utilities build meaningful avenues of communication, and that it is qui te proper to do so whi le observing caveats on ex parte communications. In some states there are few forma l mechanisms for these communications. Commissioner H ughes suggested quarterly discussions of industry issues. In Illino is, commissioners engage daily in informal contact with utility companies. Commissioner Perkins suggested that active staff contact can fill voids created by restrictions on commissioners themselves. Commissioner Ziegner cited a desire to learn about the implications of federal legislative mandates and interesting leg; islative ini tiatives in other states, and added that utilities may be the best source for this information. Site visits, such as plant tours, are a va luable method of commllilication that water utilities should use more often. Commissioner Ziegner added that the costs of communicat ion activities need not be a big issue, since informal (low-cost) communications are preferred. Commissioner Hughes commented that utilities should use their NAWC chap ter and national offices more to alert commissioners to industry issues. The commissioners agreed that utili; ties can be informative without lobbying the commissi o~. A lthough the commissioners agreed that in most cases lobbying is inappropriate, Commissioner Hughes remarked that when the goal benefits all customers and is unrelated to a docketed case, it is proper for a utility to lobby the commission . A li ve ly discussion co ncerned t he reauthorization of the Safe Drinking Wate r Act and whether a commissioner's proper role is making policy or si mply implementing policies. Commissioner Hughes suggested that a moratorium be placed on further water qu ality regulations until more scientific data are ava ilable. The alternative is that regulations so severe as to force small wa- ter companies out of business could induce a proliferat ion of unregulated private wells and hurt the ca use of water quality. He argued that commissioners should speak out aga inst bad policy. Commissioner Ziegner stated the belief that commissioners must implement legislative policies. Commissioner Perkins noted that wh ile SDW A has its problems, it may be better to work with flawed policy and try to reform it than to work for its to tal repeal. Commissioner Fora n suggested that regulators have an obligation [0 edu cate legislators when they believe lawmakers are pursuing wrong di rections. The panel's consensus was that extreme legislati ve mandates are not good for an yone, and that decisions on water qua li ty should be science-based, not emotional or political. Generall y, the panelists beli eve th e water industry is beco min g riskier, especially for smaller utilities or those fac ing large ca pital fund ing requirements under SDW A. Commissioner Perkins said that while water industry authorized returns once trailed behind other utili ties, higher returns granted by the late 1980's to water companies in M issouri began to recogni ze these higher risks. Although the U .s. water industry leads the world in water treatment and quality, Commissioner Stevens noted that fo rces from outside the industry have imposed the perception of higher risk. S he suggested tha t water utilities work for corporate culture changes in how the industry deals with innovation , the potential for least-cost planning, etc. Should water utilities be statutorily re qu ired to meet various planning criteria that apply to electri c and gas industries, such as least-cos t planning, mandatory demand-side management programs and integrated resource planning? Commissioner S tevens asserted that rather than mandating certain practices, commissions should encourage companies to adopt those they believe are good and prudent management approaches. Commissioner Perkins added that pro~ grams should not be imposed without as' surance of the results and benefits-which can be difficult to quantify. Legislative reactions requiring some of these mea~ures for the electric industry were prompted by public outrage gener; ared by rate sh ock in n uclear construc~ tion programs, said Commissioner Foran. If custom ers ever believe that a company cares mo re about profits than service, and that regulators canno t regulate fairly, then the water industry could expect the "meat~ axe approach to legislation )) that has been imposed on the electric industry. He noted that the water ind ustry has generally don e a good job of communicating needs for construction and increases, h ence the ab~ sence of public outcry, even in cases involving very steep rate increases. Water companies must stay in close touch with th eir communities. Several commiss ion ers said moves to automatically require conservation without regard for specific conditions are unwise: Commissioners Ziegner and Foran stated that with no real water sh ortages in their states, it makes no sense to require conservation programs across the board. \ Commissioner Stevens said that it is a popular belief that conservat ion is good for its own sake. Yet New H ampsh ire's abundant water supply is a competitive regional advantage, and the commission wou ld not want to create the opposite impression. While North Carolina advocates metering and increasing block rate structures, Commissioner Hughes ech oed th e opinion that with no water sh ortage, further conservation measures are unnecessary. Power-short times taught regulators ways to usc fi nanc ial incentives for conservation, said Commissioner Steven s. Even in times of abundant supp ly, to prepare for water-sh ort times, the water industry should learn from practices that have been successful in the energy field, including va lu able studies on customers' response to various motivations and incentives. W h en conserva tion does curtail revenues, the panelists agreed that the com- panies should be made whole through ra tes. Commission er Ziegner cited rate structures that separate commodity and consumption charges and automat ic adjustment mechanisms as useful too ls to add ress conservation-induced re venue shortfalls. Practices on commissioners personally presiding over water cases varied among the states represented. In North Carolina, a minimum of three of the seven commissioners preside in every rate case involving more than $300,000. In Illinois , commissioners never formally preside, although they often informally monitor ev identiary h earings. Commissioner Ziegner sa id each of the five Indiana co mmiss ioners specializes in an industry and at least one tri es to preside over every rate case, even though an administrative law judge is also assigned. Com mi ssioner Steven s said New H ampshire believes that cases should be presented to the decision makers. To allow commiss ioners to manage the ir time, mi crophon es pipe h earing testimo ny into commiss io ners' offices Responding to an audience question , the panel generally believed commissioners may take advocacy positions with other regulatory bodies in support of construction permits, programs o r vario us legislati on . Foran said the Illinois commission often works with oth er state agenc ies at the st aff level in a coordinated approach to address safet y or service issues. Pre-approval of construction plans was cited by some speakers as a way to reduce perceived risk on plant construc tio n, guarding against the pitfalls of "after-thefact prudency." W hile some of the panelists' states allow the practice, oth ers are still formulating policies. Safeguards are required to ensure that pre-approval does not hamper a commission er's ability to rule objectively at a later time on admissibility of expenses, After the conclusion of this panel, C harles A. Buescher, Jr., chairman of NA WC's Regulatory Relations Committ ee, made a specia l presentation saluting Commissioner Foran's important contribution s as ch airman of NARUC's Water Committee in foc using the regulatory community's attention on water issues. • Politics is a business where the bottom line is votes. You must respect the o ther side's issues. • In any clash between the facts and votes, the votes will wi n , • Not every vote is a vote of conscience. • Elected officials get information from the capitol; they get heat from home, • W h en poli ticians feel the heat, th ey t end to see the light-so make sure you're generating enough h eat on issues that are important. Among 20 practical canons Dowd offered, h e said, "Face-to-face communications is more effective than a phone call; a phone call is better than a lett er .. , and anything beats a petition," And he stressed that often business leaders fail to use proven sales techniques in dealing with elected officials: "Ask for the order; learn to count; and be a closer. [Senator, h ow do you plan to vote on this issue? When do you expect to decide? I'll call you on that day. W hat information can I provide you with to help you make your dec ision?]" Finally, Dowd said, "Remember, th ere are no friends, only allies in the process. Never burn a bridge." Wednesday Presentations Wednesday mo rning began w ith a session entitled "Opportunity for Investors," moderated by George Johnstone, of American W ater Works Service Co. Pan- elists were W. R. Elliott of Bechtel Corp., Michael D. Basham of Smith Barney and Wendell E. H olland of the Pennsylvania Public Utility Commission . Commission er Holland's presentation is provided beginning on page 18 of this magazine, Wednesday morning's sessio n was con- cluded by NAWC's Annual Meeting. Outgoing Committee C h airmen Gerald Smith (). J. Barr Scholarship Award ComDowd Presentation The second morning session on T uesday featured Thomas ] . Dowd, Jr., a former Connecticut state senator who was o nce mittee) and David Smeltzer (Rates and Revenues Committee) were h onored for their contributions to NA WC as Co m; employed by Bridgeport Hyd rauli c Co., ship was given to Kirk Gavel, a student at University of No rth Carolina at who o utlined why executives must know how the political process works and understand h ow to work effectively in that arena, Dowd cited five maxims that executives must follow to successfully lise the political process: mittee Chairmen. The J. J. Barr Scho lar- W ilmington. NAWC Vice President Rich Tompkins made presen ta tions to winners of the Management Innovatio n Awards. More information on t he Management Innova tio n Compe ti t io n begins on p. 11. (continued on next page) W INTER 1992 7 Annual Conference, continued Wednesday afternoon was devoted to seminars. Seminar I, by the Public Information Committee, was devoted to "Selling Water Conservation to the Customer, the Utility and the Reglator." Participants were Moderator Dick Balocco of San Jose Water Co., Commissioner Jeremiah F. O'Connor of the New Jersey Board of Regulatory Commissioners, Tim Searchinger of the Environmental Defense Fund, Bruce Adams of the South Florida Water Management Division, Ken Roed of California Water Service Co. and Fred Meyer of San Jose Water Co. The Employee Relations Committee presented a seminar entitled "Managing Diversity in the 90's: A Mandate for the Disabled." The panel was moderated by Walter Brady of Middlesex Water Co. Panelists were John Krampf of Morgan, Lewis & Bockius, Henry Coleman of Philadelphia Suburban Water Co. and Jim Robins of General Waterworks Co. A paper entitled "Summary of Major Provisions of the Americans with Disabilities Act" was prepared and distributed by John Krampf. If you would like a copy, please contact Mike Horner at NA WC Headquarters (202/833-8383). The Small Companies Seminar addressed several topics of concern for small companies. Small Companies Committee Chairman John Alexander updated attendees on the Committees' efforts over the past year. Jim Grundy, of The Grundy Agency, discussed insurance issues relating to small companies. Reginald Lindsay discussed the economic and practical issues raised by the efforts of the town of Edgartown, MA, to acquire the assets of Edgartown Water Co. Supplemental information distributed at the seminar on this issue is available by contacting Mike Horner at NAWC Headquarters. The Small Companies Seminar contin- ued with an update on financing issues. This discussion was moderated by David Monie of Logan Wells Water Co. Panelists were Paul Gioia of First Albany Corp., David Ash of Ocean Bay Park Water Co., andJ. B. T rew, II, of CoBank of Denver. The Conference came to an exciting conclusion on Wednesday night, with the Dinner Dance. Following a reception, attendees entered a ballroom featuring a southern plantation home, an antique carriage, and a stage backdrop that portrayed a night sky. After a delicious dinner, NA WC Vice President Rich Tompkins, accompanied by a fifer and a drummer, encouraged attendees to attend the 1993 Annual Conference, in Williamsburg, VA, October 17- 21. Next, attendees were introduced to The Impressions. The Impressions put on a memorable show, that had NA WC members on the dance floor instantaneously. It was a fitting close to another excellent Annual Conference. , Honorary Award Presentation The following is the soundtrack of a slide presentation made at NAWC's 1992 Annual Conference to honor NAWC's newest Honorary Member. Speaker-Jim LaFrankie, recently retired President, American Water Works Co.: "When I learned of the selection of this year's Honorary Member, I was shocked. Had the committee lost its senses? The nominee is an individual I've known for some 30 years and have witnessed his poor golf game, cigar smoking and other numerous disturbing characteristics such as soliciting money for the political action committee. "I've spent the last few weeks trying to convince the selection committee to reconsider their choice. Apparently this individual knows where the skeletons are buried regarding utility executives. The selection committee ~as unanimous in its selection NAWC Chairman of the Board of j . james Barr (r) presents Honorary Member Award to Mike Zihal and his wife, Dorothy. 8 NAWCWATER and wouldn't consider changing its choice. "After exhausting all efforts, I can only say the nominee and his saintly wife are two of the nicest people Nancy and I have known. Let me welcome him into the Honorary Society of NAWC and thank them both for their many contributions over the years as we all work to improve the image of the water utility industry." Speaker-Bob Morris, former NAWC Executive Director: "I'm delighted to give this testimonial to this year's recipient of honorary membership in NAWe. "I have known the awardee since my early days in the waterworks business. We both started at the same time and our paths paralleled each other as we progressed through our careers. "I first met him at the bar following a conference meeting and we had a lively discussion, as you always could with him, into the wee hours of the morning. As most of you know I had the privilege of serving as Executive Director ofNAWC for an 8 year period in the late 1970's and early 1980's. It was during this time that I had the opportunity to work closely with the representatives of member companies, particularly those who served as President of the Association. "Also you will remember this was the time when the association was actively seeking amendments to the Safe Drinking Water Act and our activity on Capitol Hill heightened considerably. This year's honorary member played an active role in this process. He spent countless hours in Washington trying to accomplish the goals of the association. I will never forget his participation in the frustrating discussions with the ultra-liberal groups in the House espousing Representative Henry Waxman, nor will I ever forget the love affair he developed with the extreme opposition of those with whom we were negotiating our position. To the right was the very conservative Anne Gorsuch Burford and on the left was the ultra liberal Jackie Warren. How he was able to keep his composure is still a wonderment to me. I've known and admired this awardee for a good many years and I'm delighted with his selection. He richly deserves this great honor." Speaker-Chet Ring, former President, Elizabethtown Water Co.: "He was highly respected as a heavy hitter in utility management, engineering and government affairs. He's also a heavy hitter on the golf course, but rarely knows where the ball is going." Speaker-Dorothy Zihal: "I'm the awardee's better half. Can you imagine a farmer's daughter from the midwest marrying a big city Brooklyn boy. We were working at the Collegiate Cap and Gown Co. in Champaign, Illinois, and my boss said the marriage would never last. But we proved him wrong by celebrating 41 years of marriage. "I have been very fortunate to be part of his work in the water industry all these years. I'm proud that NAWC has selected him for this recognition. He's demonstrated a dedication for his family as well as for his work and successfully balanced both over the years, marking for a happy transition into our retirement life." Speaker- Charles Buescher, Executive Vice President, Continental Water Co.: "This year's Honorary Member likes to refer to h imself as a country boy. I first met this country boy over 30 years ago when he was revisiting the home of the University of Illinois in Champaign from the Big Apple. It was winter and I was the engineer in charge of a new water plant being built. I was told to take this visitor on a tour of the construction site. As we were touring the new plant we were climbing up a steep snow NAWC Honorary Members and their spouses were recognized at the Annual Conference. covered embankment when I noticed a commotion as our honoree slid down the snow covered hill. I found that the country boy has been in the big city too long and forgot about winters in Illinois. "All kidding aside, I have worked with our honoree very closely during the last 15 years and can say that he has provided leadership wherever he has been, whether it was within his utility, his community, or the various national and state water organizations with which he was associated. This year's honoree helped focus and lead their endeavors to meet their goals and this has been true with his long relationship with NAWC." Speaker-Jim Barr, NAWC Chairman of the Board and Senior Vice President, American Water Works Co.: "My early recollection of this year's Honorary Member precedes meeting him. I'd just assumed the manager's position of New Jersey American's Monmouth County operations in the early 1970's. We were about to undertake union contract negotiations with the Utility W orkers Union. People in New Jersey told me we had to talk to a guy in New York before we started. Even John Wynn, president of the union, wanted to know if I had talked with him. "I learned early on that there was a person on Long Island who had made an impact on the water utility industry. Somehow he had found a way to overcome his shy and retiring personality. "In later years I watched him in Washington work with congressional committees representing NAWc. He just loved to walk up to a particularly aggressive staffer and put his arm around him and explain that he was just a country boy who happened to be from New York who was there to help Congress do its job. All he wanted to do, he would explain, was to keep the staff from making a big mistake. "Always with a sparkle in his eye and just a touch of devil in his approach, he dared to do things others backed away from. Yet he'd be the first to admit with a hearty laugh that things did not quite work out the way he expected. Meet his wife and you know the one person who can tell him with just a look to sit down and shut up and he does it, and that's just one of the reasons they're such a great team. "In the NFL, they would have called him an impact player. In NAWC we call him an Honorary Member." Speaker-Lou Mirando, President, Long Island Water Co.: "By now, yo~ know who the "Country Boy" is. He's my predecessor, Mike Zihal. Mike's career at Long Island Water Corporation spanned 35 years when he retired in 1991. "This extraordinary man's life began in Lower Manhattan where he was born, then shifted to Brooklyn where he was raised. During World War II, he served in the U.S. Army in the Philippines, then attended the University of Illinois on the GJ. Bill of Rights where he received a degree in civil and sanitary engineering. "It was there in Illinois that Mike met Dorothy, his wife of many years. After Mike graduated, he worked as an engineer for the City of Freeport, Illinois, and then joined Northern Illinois Water Corp. In 1956, he returned to the New York area when he joined Long Island Water Corporation as head of the Engineering Department. Subsequently, he was made chief engineer and assistant general manager, then vice president and general manager. In 1975, he was named president. "Everything you've heard about him today from his wife, friends and associates is a true accounting of Mike's impressive career. "Michael Zihal, on behalf of the many friends you have here today, and those you have made through the years, congratulations on being named NAWC's Honorary Member for 1992." , WINTER 1992 9 • Presentation of J. J. Barr Scholarship Award by Gerald C. Smith, Chairman, j. j. Barr Scholarship Committee at the 7992 NAWC Annual Meeting, National Association of Water Companies Good morning. There are a few of us here this morning who have been around long enough to really appreciate what NAWC has grown to become today, because we can clearly recall its beginnings. I am referring to the early 1960's-the formative years of the Association. One individual who was instrumental in this Association during those years-and someone to whom we owe an enormous debt of gratitude for his tireless work and astute guidance-is J. J. Barr, former President and Chief Executive Officer of the American Water Works Company. Mr. Barr served as Chairman of the Board of the Association until 1974. He took office at the time NAWC was formed by the merger of two other organizationsthe Pennsylvania Water Companies' Conference and the Eastern Water Companies' Conference. He was very active in both these organizations, and it was because of his vision that they were merged into one strong, clear voice for the national community of investor-owned water utility companies. In memory of J. J. Barr, each year at the Annual Conference, NAWC awards a scholarship to a junior, senior or graduate student from an educational institution in the vicinity of the conference city. The purpose of the award is to make the student aware of the potential of a rewarding career in the investor-owned water utility business and to recognize achievement in scholarship, leadershippotential, initiative and promise. The Award consists of a check in the amount of $2,500 and a certificate. 10 NAWCWATER I would like to take a moment to acknowledge the other members of the 1992 J. J. Barr Scholarship Committee and to thank them for their efforts. They are: Bud Stump of California Water Service Co., San Jose, CAj Tom Cawley of Elizabethtown Water Co., Westfield, NJj and Ronald Dungan of General Waterworks Co., King of Prussia, PA. Thank you, gentlemen, for your fine work. This year, seven colleges and universities were contacted by the Scholarship Committee and invited to select their most qualified candidate with interests closely matching those of the scholarship requirements. This resulted in five outstanding candidates, each with impres- sive credentials and each a real credit to his or her institution. Ladies and gentlemen, as most of you know, I have been involved with the selection process for this award for the past several years. Let me assure you that each year I am more and more impressed with these young people. Each year the Committee has a difficult decision to make. Fortunately for us, each year there seems to be one student candidate who stands out from the others, exceptional as their credentials may be. This one candidate is distinguishable by a multitude of small factors that sets him or her apart. This year is no exception, and as a result I have the pleasure to Gerald C. Smith (I) presents J.j. Barr Scholarship Award to Kirk Gavel. announce that the winner of this year's J. J. Barr Scholarship is Mr. Kirk Gavel from the University of North Carolina at Charlotte (UNCC). Kirk holds a Bachelor of Arts Degree in Economics from Davidson College in Davidson, North Carolina. But he was unfulfilled working in finance and so he returned to school in 1989 to study civil engineering. He is now a senior at UNCC, with a 3.88 grade point average. This Fall, Kirk is both an undergraduate and graduate student at UNCC. Kirk's graduate work will focus on water resources engineering. As his senior design project, he plans to construct a water filter model for use in the introductory environmental engineering lab where he will be employed as a graduate assistant. Kirk plans to seek employment with a consulting firm in the Greater Charlotte area, and complete his Master's Degree on a part-time basis. It is Kirk's ultimate desire to establish an engineering consulting firm specializing in water treatment design. These are lofty goals for any student, but the Scholarship Committee was just as impressed by the letters of recommendation about Kirk by the UNCC faculty. Dr. David Bayer, professor of Civil Engineering, wrote: "Kirk Gavel is the best all around student I have ever had ... " Since Dr. Bayer has taught for over 25 years, I think you will agree this is indeed an impressive recommendation. Dr. Bayer goes on to say Kirk is "The best at oral presentations ... one of the best at written reports ... and he possesses 'common sense,' which is the single most important asset an engineer can have." Helene Hilger, an instructor in the Department of Civil Engineering, told us, "I suspect much of Kirk's motivation and direction come from the fact that he has a sense of purpose. He is financing his education himself, and he has made a conscious decision to sacrifice in order to earn his engineering degree." She goes on to say, "He is a relaxed, sociable, unassuming fellow, well liked by the faculty and his peers. He is viewed by his classmates as someone who always knows what is going on and who will willingly extend himself to explain a difficult concept. He does not have a competitive attitude about his success. He sets his own goals and is led to perform accordingly .. . The fact that he is bright, diligent and a good team player should lead to success for him professionally. I recommend him to you without reservation." Ladies and gentlemen, now that I have had the opportunity to meet Kirk Gavel personally and spend some time talking with him, I am even more confident that this young man epitomizes the highest standards of the J. J. Barr Scholarship. Kirk is intelligent and has the determination to succeed in life. Kirk, it is my pleasure to present you with this certificate and a check for $2500. Congratulations! ~ Managetnent Innovation Contest This year, there were 13 entries in NAW C's Management Innovation Contest. Winners were selected by a committee comprised of J. Richard Tompkins of Middlesex Water Co., Jack McGregor of Bridgeport Hydraulic Co. and Ronald Dungan of General Waterworks Co. The committee selected three first prize winners. New Jersey-American Water Co. won for its project "Utility Partnership Reduces Operating Costs." This was submitted by Daniel Kelleher. Bridgeport Hydraulic Co. won for its project "Take the BHC Inventory Plunge," submitted by Twig Holland. Citizens' Utilities Co. of Illinois won for its project, "Quantitative Customer Service Perception Measurement on an Ongoing Cost-Effective Basis." This was submitted by William Kuzia. A list of all entries submitted follows. If you are interested in receiving copies of (continuned, next page) j. Richard Tompkins (/) presents Management Innovation Award to Daniel Kelleher of New jersey-American Water Co. WINTER 1992 11 • Management Innovation, continued any of the entries, please send a list, by number, of the entries that you would like to Mike Horner, NA WC, 1725 K St., N.W., Ste. 1212, Washington, DC 20006. I. Be Winter Wise PA-American Water Co. submitted by Margaret Philbin 2. Learning Efficiency through Advanced Procedures Missouri Cities Water Co. submitted by Lynn Bultman 3. Quantitative Customer Service Measurement on an Ongoing, CostEffective Basis Citizens Utilities Co. of IL submitted by William Kuzia 4. Hold the Line Campaign Westpac Utilities submitted by Charles Fletcher j. Richard Tompkins (I) presents Management Innovation Award to janet Hansen of Bridgeport Hydraulic Co. 5. Blending Water to Meet Drought Water Resource Needs Westpac Utilities submitted by Charles Fletcher 6. In-House Video Training Lake View Park Water Works submitted by Michael Baker 7. Innovative Management Through Postal Service Cooperation California Water Service Co. submitted by Ray Worrell 8. Water Conservation Rangers Hazardville Water Co. submitted by Steve Klobokowski 9. Leak Detection Program Southern California Water Co. submitted by Joseph F. Young 10. Take the BHC Inventory Plunge Bridgeport Hydraulic Co. submitted by Twig Holland II. Wellness Program Indiana-American Water Co., Inc. submitted by Cheryl Chalfant 12. Water is Precious New Jersey-American Water Co. submitted by Daniel Kelleher 13. Utility Partnership Reduces Operating Costs New Jersey-American Water Co. submitted by Daniel Kelleher ~ 12 NAWCWATER j . Richard Tompkins (I) presents Management Innovation Award to Ronald Walsh of Citizen's Utilities. NAWC Board of Directors II Maurice L. Arel Pelmichuck Water Works, Inc. Peter L. Haynes Consumers Water Company Robert H. Nicholson San Gabriel Valley Water Co. David Ash Ocean Bay Park Water Corp. William D. Holmes Consumers Water Company Eugene H. Owen Baton Rouge Water Works Co. 1· 1ames Barr American Water Works Svc. Co. Donald L. Houck Califomia Water Service Co. Utilities, Inc. C harles A. Buescher George W. Johnstone Continental Water Company American Water Works Svc. Co. Bert T. Phillips Topeka Group Thomas J. Cawley Elizabethtown Water Company Robert E. Johnstone General Waterworks Company Michael O. Qu inn Suburban Water Systems David E. Chardavoyne lamaic. Water Supply Co. David R. Kaufm.n Pennsylvania Gas & Water Co. Philip G. Seges Westpac Utilities Co. Marshall T. C hiaraluce Connecticut Water Co. Daniel L. Kelleher American Water Works Svc. Co. Gerald C. Smith American Water Works Svc. Co. Donald L. Correll Hackensack Water Company Edward W. Limbach American Water Works Svc. Co. C harles H. Stump California Water Service Co. Robert A. Dolson Continental W ater Company Robert A. Luksa Philadelphia Suburban Wtr. Co. Ronald S. Dungan General Waterworks Company James S. Mclnemey Bridgeport Hydraulic Company Citizens Utilities Company Robert B. Gordon Avatar Utilities,lnc. David Monie Logan Wells Water Company lay w. Weinhardt San lose Water Company Martha C. Green Hackensack Water Company lames T. Morris Indianapolis Water Company Floyd E. Wicks Southern Califomia Water Co. Perry B. Owens 1. Richard T ompkins Middlesex Water Company Ronald E. Walsh WINTER 1992 13 1992 Conference: The Capitol Steps provided a little levity to open up the Conference. The Honorable Paul Foran (Illinois Commerce Commission) moderated the Commissioner's Panel. The Honorable Kenneth Gordon (Maine Public Utilities Commission), NARUC President, provided a message from NARUC. 14 NAWCWATER Robert Reinert (Malcolm Pirnie, Inc.), AWWA President-elect, provided a greeting from AWWA. Pictorial Review The Honorable Wendell E. Holland (Pennsylvania Public Utility Commission), a participant on the Opportunity for Investors Panel. Th e Honorable Charles H. Hughes (North Carolina Utilities Commission) participated in the Commissioner's Panel. PartiCipants in the Small Companies Seminar (clockwise from center, top): David Monie (Logan Wells Water Co.), j.B. Trew, " (CoBank of Denver), David Ash (Ocean Bay Park Water Co.), and Paul Gioia (First Albany Corp.). OutgOing NAWC President jay W. Weinhardt (San jose Water Co.) turns the gavel over to Incoming President William D. Holmes (Consumers Water Co.). Participants in Selling Water Conservation to the Customer, the Utility and the Regulator Seminar (I to r): Bruce Adams (South Florida Water Management Division), Fred Meyer (San jose Water Co.), jeremiah O'Connor (New jersey Board of Regulatory Commissioners), Timothy Searchinger (Environmental Defense Fund), and Ken Roed (California Water Service Co.). WINTER 1992 15 Outgoing NAWC President jay Weinhardt congratulates outgoing j.j. Barr Scholarship Committee Chairman Gerald C. Smith (American Water Works Service Co.) on a job well done. GER The Honorable David E. Ziegner (Indiana Utility Regulatory Commission), a participant on the Commissioner's Panel. The Honorable Patricia Perkins (Missouri Public Service Commission), a participant on the Commissioner's Panel. 16 NAWCWATER Participants on the All the Water You Need Panel (I to r): john Palko (AUS Consultants), The Honorable Kenneth Gordon (Maine Public Utilities Commission), Kenneth Miller (CH2M Hill) and j. Richard Tompkins (Middlesex Water Co.). Participants on the Technical and Environmental Regulation Horizons Panel (I to r): Velma Smith (Friends of the Earth), Gerald Smith (American Water Works Service Co.), Scott Rubin (Pennsylvania Office of Consumer Advocate), jim Elder (EPA Office of Groundwater and Drinking Water), and jay Weinhardt (San jose Water Co.). Opening day speaker Keith Forrest (Unum Life Insurance Co.). The Honorable Linda G. Stevens (New Hampshire Public Utilities Commission), a participant on the Commissioner's Panel. The Impressions helped attendees end the Conference on a harmonious note. Incoming NAWC President William D. Holmes (I) presents a token of appreciation to outgoing President jay W. Weinhardt. WINTER 1992 17 Opportunities for Investors by Wendell F. Holland Commissioner, Pennsylvania Public Utility Commission presented at the NAWC Annuol Conference, 1992 "Where there is no vision the people perish. n (Proverbs 29:18) Former chairman of the Pennsylvania Public Utility Commission Bill Shane delivered those remarks last week before a packed (stand ing room only), excitable crowd during a public input hearing on a case determining whether an electric utility may construct a half billion dollar transmission electric line that would transverse the vantages, strengthen our infrastructure and make our economy attractive .... We can only grow by building upon our competitive strengths. AblUldant energy resources, vast suppli es of water, prime sites for industrial and com~ mercial development and a strategic location are the competitive advan~ tages of Pennsylvania. state. Then, he continued to add ress the need for improvement in infrastructure by fur~ ther stating th at: I have a vision of Pennsylvan ia with its abundant energy and water resources as the eastern industrial~technical hub of the 2 1st Century. I see the lemmings leaving the water parched Sun Belt returning to the Appalachian G reen Belt early in the 21st Century. Water and energy are ou r trump cards for the future. We must seize opportu~ nilies to exercise our competitive ad~ 18 NAWCWATER Policymakers should be deeply committed to the development of infra~ structure which makes [us] economi~ cally competitive. Regulation [should] strongly promote the development of new markets for [water and] energy. His statement talks of improving our in~ frastructure to deliver a fundamental utili ty service and the attendant opportunities and risks for the investor, regulator and ratepayer.' As Bill Elliot has drawn a parallel between the electric and water utilities, I believe the fanner chairman's remarks tie in well with this morning's panel discussion. If we are going to improve our water infra~ structure, regulators should be mindful of the opportuni ties for investors, and we must act. In his opening remarks, George Johnstone spoke of the public/private partnership that could be formed to upgrade large water systems. I will address that issue. Me. Johnstone recounted the story of the Orrstown BoroughAuthority who was look~ ing to the Shippensburg Borough Authority as a savior to resolve its overwhehning prob~ lems. Did the adjacent system agree to solve the problem? From all aCCOlmrs, not yet. Unfortunately, or fortunately in the eyes of some, the Pennsylvania Commission does not have jurisdiction over this case as it involves two municipal authorities. More importantly, this scenario raises three re~ lated issues. First, it raises the question of privatization. The privatization approach can fit in neatly with Pennsylvan ia's need to increase irs rcgionalization of drinking water providers. Whether privatization takes place in the form of an experienced investor-owned water utility purchasing a troubled municipal wa ter system outright, or whether a service contract is the chosen methoo, either can resolve the customers' service woes permanently. In Pennsylvania, there are many opportunities for the investor for this type if privatization. So too are the opportuni ties for vastly improved economies of scale, along with markedly improved water service for customers whose options are likely to be very limited otherwise. Here again, regulators may require a degree of creative thinking, but I believe privatization holds tremendous prom ise provided the appropriate contractual safeguards are implemented. Second, the scenario again asks when we should apply our newly-enacted mandatory takeover legislation. Enacted in April of this year, Pennsylvania's mandatory takeover legislation aggressively addresses the proliferation of troubled small water utilities that are incapable of or unwilling to render safe and adequate selVice to their custom-ers. Patterned after similar legislation in New Jersey and Connecticut, the framers intended the statute to act as a deterrent to recalcitrant owners who blatantly refuse to comply with orders by economic or environmental regulators. It is a measure oflast resort. Mr. Johnstone's case study is an ineligible candidate, as we lack jurisdiction over the authority. However, we keep a keen watch over our troubled water companies and "anxiOllsly" await the first test case. TI,ird, the average annual bill for these customers of Orrstown Borough is $168. At $ 14 a month, rhis can be compared to the $20 or $30 we pay for monthly cable TV service. Which service is more essential? Further, compare the Borough's rates to the statewide average of $260, and at the same time recall that several water companies charge well over $300 annually. Customers should understand that high quality water that meets federal and state standards comes with a price. Rura l, or small, water systems are not the only systems facing challenges. Water systems serving large cities or their sprawling suburbs face comparable challenges. As George stated, "many [big city water] systems need new treatment plants and/or plant upgrades." He con tinued that any public agency program designed to upgrade plant will require safeguards-whether regulated or contractual-which should include provisions such as; 1. Long--term co mm itments and, if regulated, the inclusion of special provisions th at bind future commissions to create a non-revocable revenue stream; 2. Long-term cap ital prov ided by th e private sector which will be secured by the reven ue stream begi nning when the project is comp leted and prov id ing proper se rvi ce; and 3. The cons tru ction loan will be tied to guarantees that th e project will be constructed and placed into service within budget and on time. I wholly and emphatically agree with his observations. However, I wi ll only comment on the binding effect on futu re commissions and loan guarantees. First, it is important that any transaction that is intended to bind future commissions be carefully crafted. Let me explain. [n my early days as a prosecutor, one of my colleagues remarked that utility law is a "living law": it constantly changes. Years la ter, I heard the same concept from a commissioner but phrased differently-namely, "regulatory policies change as Commission-ers change: don't expect me to be bound by what some prior Commission did." T o be sure, that last comment is arguably regulation at its worst. Indeed, it creates an unfair movi ng target for the regulated communi ty. Second, let's talk about "guarantees that the project will be constructed and placed into service 'within budget and on time.'" Bill Elliot drew the analogy between the maj or construction programs in the electric and water utility industries. TIlere are a few observations that I too wou ld like to make. First, I hope we can all work together to avoid the difficulties that the regulatory com~ munity experienced in the electric industry during the '80s. S horeham , Seabrook, W.l-l.O.O.P.S. and Limerick Nuclear Construction Projects should be case studies on what not to do. Coverage ratios, AFUDC, CWIP and "risk" itself, (business, financial and regulatory) took on new or strained meanings in the complex proceedings that grew from these construction projects. What was "within budget and on time?" As a special assistant at the New York Commission, I was assigned to Niagara Mohawk Power Corporation's Nine Mile 2 N uclear Unit rate case. T o make a long story short, in hindsight it seems that there were just as many extensions as there were guarantees that the project would be con~ structed and placed into service within bud~ get and on time. On a larger scale, cost overruns became an enormously expensive ordeal for the electric industry as "$13 billion in plant invest~ ment> we re disallowed from 1984 to 1988, representing about 14% of the total capital costs for these (mostly nuclear) plants." (Naill & Dudley IPP Leveraged Financing: Unfair Advantage, Public Utili ties Fortnightly, January 15 , 1992 at 17). 1 re iterate, 1sincerely hope that regulators and the wa~ ter utility industry can work cooperatively to avoid a similar experience. While we are drawing parallels between the two industries, it is obvious that environmental exposure is a very important is~ sue in both industries. O ne commentator contrasted rhe resulting financial stress as follows: Unlike the C lean Air Act's impact on a select number of electric uti lities, the SDWA requires virtually the entire industry to improve existing treatment and related facilities. This will result in significant capital add itions on top of already escalating spending on [improving] distribution infrastructure. Financing these large rate~base additionswhich are nonrevenue-producing assets-will be difficult. Internal cash generation is weak, with low deprecia~ tion rates (usually about 2% versus around 3% for electric utilities), and low authorized return on equi ty. As a result, dependence on external financing and rate relief requirements will intensify. Moreover, low authorized return may affect the industry's ability to attract neces-sary capital to develop new water supplies and upgrade the quality of existing supplies. Regulatory Concerns Poor internal cash generation along with modest demand growth of under 1% wi ll require state utility regu lators to play an even more significant role in the future fj-nancial well-being of rhe industry. Traditional rate~making policy has not provided sufficient credit support during the construc(continued on nexl page) W INTER 1992 19 Opportunities, continued t ion cycle of the electric industry over the past 15 years. To avoid a repeat in the water industry, regulators must be aware of the increased challenges the industry faces. With large rate~base additions, along with increas~ ing non~revenue~prcx:Jucing assets to meet future and current water needs and man~ dated water quality standards, regulators will need to implement innovative regulatory policy to allow for reasonable financial protection measures. (Bilardello, Leung. Water UtiUty Benchmarks Revised, Standard & Poor's C reditweek, May 25, 1992, pp. 48, 49) Second, while the projects may be co m~ pieted timely and within budget, the amount of the attendant rate request and relief may place regulators on the horns of a dilemma. Phrased differently, improvements to water systems-large, medium or small-brought about by the SOWA or other factors may result in rate spikes and shocks even though the projects are timely and within budget. Triple digit rate increases for large systems are a reality. Just about two years ago, one of our large jurisdictional utilities sought a 185% rate increase, essentially for major improvements that were completed timely, within budget and in response to regu latory mandates. The parties-including the public advocates-agreed to a 105% increase, which the commission granted and heard the expected public outcry. The same utility has recently filed for a 235% increase for improvements to another filtration plant that was timely, within budget and in response to regulatory mandates. In response to this dilemma, that same commentator believes that management could playa significant role in resolving this problem: Water utility management must do its part by continuing to aggressively file for timely rate reHef so that the finan~ cial profiles of their utilities are not negatively affected by regulatory lag. Moreover, management must continue to educate the public and regulators about the whole range of challenges facing the water industry. Beyond these steps, it is even more important for management to position thei r uti lities financially by maintain~ ing reasonable capital structures during the construction phase to limit fi nanc ial deterioration. This will he lp 20 NAWCWATER utilities maintain their financial pro~ files in line with S&P's revised benchmark guidelines and may prevent credit qua lity erosion. (Bilardello, Leung. Water Utility Benchmarks Revised, Standard & Poor's Creditweek, May 25 , 1992, pp.48,49) I stress the public education role. uAs rates continue to rise, we can expect more customer [particularly large volume industrial users] and political involvement in the rate-setting process as water bills become more significant portions of household and business budgets. The increased in volve~ ment in the rate-setting process will lead to new and innovative rate structures that try to meet the sometimes conflicting goals of various interest groups." (Russell, Woodcock, C.P.M., What Wiu Water Rates BeLike in the 1990's, AWW A Journal, Sept. 1992) T o quell the consumer activism which may ultimately lead to increased business fmancial and regulatory ri sk, it has been suggested that utilities: Develop a public relations campaign for all rate increases. It should include early and frequent warnings to CllS~ tomers concerning needed changesj in~ formation releases to all media to explain the need for the increase, what will change, and how it will affect individua l customerSi and provisions for implementation and customer assis~ tance throughout the trans ition. (Russell, Woodcock, C.P.M., What Will Water Rates Be Like in the 1990's, A WWA Journal, Sept. 1992) Most importantly, the public should know that improving the infrastructure means jobs. It is a concept that is not often bandied about in the debate over improving our water systems. However, from my exposure to the 20 or so public input hearings that I have attended on the multi-million dollar trarumission line case that I alluded to ear~ lier, I sense a strong sentiment that the public- particularly ratepayers and legislators-want something in return for higher utility costs. Jobs, or the prospect of employment, particularly in rust belt states or areas hardest hit by the recession, could be that quid pro quo. As we are talking of opportunities for investors, let me say a word about Project Financing. Project Financing is ne ither gcxxl nor bad: you must apply it to the specific; of the case. I am told that the goi ng theme in the financial community is the "D" word, de-leveraging-i.e., bringing debt/equity ratios back into more of a balance, redUcing debt and increasing equity. Nowadays, rating agencies closely scrutinize project financings in both the electric and water industries. There are two characteristics of project fmancing-namely: 1. Extraordinar~ ily high debt leveraging (although some savings are produced) and 2. T mnsfer of risk. Regulators should not reject project fmanc~ ing outright in these de~leveraging days. To be sure, Uin the aftermath of the fi~ nancial impropriety of the 1980's, leverage is a bad word. But any analogies between the leveraged project financings [affecting the utility] industry and unstable industries which have been devastated by extraordinary debt burdens are facile and invalid." (Naill, Dudley, IPP Leveraged Financing: Unfair Advantage?, Public Utilities Fortnightl y, Jan. 15, 1992 at 18) Regu lators should consider the many in~ ter-related factors which include a sure rev~ enue stream-such as the customers of a municipal system-and a proven designcontractor with, as Bill Elliot says, uA his~ tory of successful work and a long term financial strength to back up the guaran~ tees." In closing, I refer again to the remarks of the fonner chainnan as he spoke of risk, improving our infrastructure and opportu ~ nities for investors: In debating the future, we can be grateful that we are planning for opportunity. We should not allow exaggerated perceptions of risk to make us fearful of the future. The financial management books defme risk as variability. Change is [unsettling] to all of LIS. We must define reasonable risk and act. Otherwise we are paralyzed by every real and imagined fear and might as well assume a fe tal position and let the world go away.2 lThis author merely recasts the testimo ny ofMr. Shane. 111is recital should not be construeJ. nor is intended. [Q be an endorsement of these comment... or to sup"' port any issue in the proceedings in which thc tcstimony was given : nor should it have a bt..>aring o n the outco me of the proceeding in whic h this testimony was given. Triumph Out of Chaos A Chronicle of the Breach in the Indianapolis Water Company Canal by james W. Shaffer Consultant, IWC Resources Corp. T he Storm "Showtime"- Wednesday, lune 17, 1992. Approxi mately 11:30PM. Admission was free, but by the time the curta in fell on Mother Nature's fury much of Central Indiana, Indianapolis in particu~ 1ar, would pay a significant price for the complimentary production. The area certainly had experienced its share of severe rhundersmrms and assorted weather-related episodes in the past. The intens ity of this storm's driving rain, clapping thunder, and howling wind; its spectacu lar lightning show) were effects even most life-long Indianapolis natives had difficulty comparing to past "Act> of God." The storm became downright insulting. Even the duck population must have noted the rain rolling off their backs may have established a new precedent. Survival during this blast became difficult for any crea~ ture without access to some remnant of a shelter. Monsoon? Tidal wave? Hurricane? T a m ado? These descriptions certainly came to mind, although the latter was believed the only one previously experienced or pos~ sible in America's heartland. Severe thunderstorm? While the wcath~ ennen groped to classify it, the brlUlt of the storm's ugly head quit rearing at approxi~ mately 12:15AM Thursday, lune 18. The violence that had tra.nscended the previous night calmed to an acceptable thunderstorm. If one's nerves were not totally frayed and no evidence of property damage existed, the thought of returning to bed appealed to most citizens. The Aftermath Dawn brought the familiar "calm after the storm." The devastation was obvious as Ind ianapolis began its daily bustle. The damage bypassed the fortunate, who perhaps experienced only downed minor tree limbs. The unfortunate confronted toppled trees and power lines, loss of power, flooding, damage to their homes or businesses. All in all, the metropolitan area was extremely blessed that injuries were minimal and the storm caused no reported loss of human lives. Trees were uprooted everywhere. An es~ t imated 5,000 to 10,000 trees were damaged or destroyed on ci ty streets and parks prop~ erty, accordin g [0 an Indianapolis Parks and Recreation Deparnnent official. Indianapolis Water Company (IWC) officials later speculated a large tree in the earthen bank of it> 8.8mile water canallikcly was becoming unrooted due to the storm. Further speculation wou ld surmise other felled trees, debris and surging water hastened the erosion process where the tree eventually toppled. The canal's integrity had withstood Mother Nature's and man's as~ sorted challenges fo r more than a century~ and-a-half. The faithful diversion from the White River supplies the IWC's water treatment plant> with 70 to 80 million gallons of water da ily, or approximately 60 percent of the city's consumption. It is the backbone, the major resource from which the IWC sup, plies its nearly 210,000 customers with di~ versifted water requirements. With this v i~ tal artery becoming totally paralyzed, so too would the city's water supply if swift action had not eruued by the Indianapol is Water Company, numerous city, COlUlty and state agencies, and private contractors. Despite continual monitoring by the IWC, the breach was not a total surprise considering the man~made canal had en~ durcd a colorful and somewhat con trover, sial past. It had served Indianapolis since 1836 after construction by the State ofIndiana as part of an intrastate water system which never developed. The canal was ac~ quired in 1871 by the W ater Works Company of Indianapolis, a predecessor to the IWe. Canal Heritage For nearly 160 years, the ca nal h ad survi ved criticism during numerous eras in the growth of Indianapo lis. Its storied past includes several ownership transac~ tions, a dispute over righ ts to sell canal ice formed during winter months, and company stockho lders being indicted for rnaintainence of a public "nuisance" in the late 1800s. It also served as a recre~ at ion al haven for boa t rides on lazy Sun~ day summer afternoons durin g Indianapolis's "Go lden Years" of rile 1880s and 1890s. A beautiful park on ce graced its banks near wh ere the breach occurred, today the site of Butler University. Under a court order in 188 1, th e Water Wo rks Co mpany of Indianapo lis was sold to pre~ decessors of the current IWC . The canal's banks had suffered some difficulties early in its history, but none in mod, em times had affected today's sophisticated water treatment and purification procedures. The prospect has always concerned 1WC offkials, whose strategic plans include phas~ ing out dependence on the canal for much of the city's water supply. The breach which was developing in the canal bank soon pre~ sentL-ci the company with one of the great~ est challenges in its storied history. tlWe recognize the important role the canal plays and that is one reason we con~ tinually monitor its level," said Joseph R. Broyles, president and 27 ~year veteran of the Indianapolis W ater Company. UA canal fail ure is something everyone cOfmected with m e company is always concerned about be~ causc of a commitment to provide uninter, ruptcd water service to our customers." (continued on next page) WINTER 1992 21 Triumph, continued Discovery of Breach O n Friday, June 19, nearly 30 hours after the storm had subsided, lWe employee Roger Edlin was conducting his normal earlymorning responsibilities monitoring the White River Station treatment plant on the city's northside when he noticed a slight reduction in the water level of the canal. These fluctuations are normally caused by the lWC's ''headgates'' that control the flow of water into the canal from the White River located several miles north in me quaint Broad Ripple Village area. By 5:00AM, the gauge continued to plummet. Another Iwe employee was summoned to check the headgates and detected nothing wrong. The situation had become extremely perplexing. Some~ thing obviously was wrong, but where? "Where" soon would be d iscovered by Iwe personnel approximately three miles down the canal from the headgates. TIle felled tree, debris and turbulent wa~ ter erosion speculated, by IWC officials, likely, had caused the breach during Friday's early, moming hours. The combination had punctured a nearly l OO,foot wide opening in the canal behind Butler U niversity. The water was rushing over the 100 yards or 50 of flood plain mat separates the canal where it parallels the White River. It was a nigh tmare of nigh tmares for the Indianapolis Water Company. O ver the next two~and ,a, ha lf days un~ prccedented effort was made to repair the crippled canal. It would restore service to app rox imately half of the nea rly 21 0,000 IWe customers or 450 ,000 people affected. Triumph, ultimately, evolved from the chaos that brought together represen~ tati ves from the IWC, city, county and state agencies, private contractors, Butler University, and most importa ntly, the citi ~ zens of Indianapo lis. Assessing the Damage "After I was notified of the breach and arri ved at the scene, it appea rcd as 1 had always visualized," Joe Broyles stated . "It was not a panic situation , but one we were prepared to handle because of disas~ ter planning procedures, We had to de~ termine how bes t to get the job done as effi ciently, yet producti ve ly, as possible to preserve th e IWC 's first priority in providing water to our customers." 22 N AWCWATER By approximately 8:00AM , Broyles and several IWC staff members had converged at the breach site to assess the situati on. The lWe Distribution Department already was attempting to fill the breach wi th soil and "riprap" (large stones ). Pumping and Purification Departmen t personnel were cutting and removing the large tree and debris on the north siJe of the breach. Wa ter con tinued rushing through the breach both from the no rth and south ends of the canal as it flowed toward the White River. It soon became evident these initial efforts were fruitless in solving the problem. A major crisis had developed. The IWC's Distribution Department bega n building a dam south of the breach to stop water flow from that direction of the canal. It would take a monumental effo rt to restore service to the water system. Considering the Options Tim K. Bumgardner, IWC's vice pres i ~ dent of operations, had assumed the re, sponsibility to make the difficult dec isions on how best to repair the violated cana l. Bro yles had co nfidence in Bumgardner and everyone involved from the water company. "It was remarkable how our employees functi oned during this ordeal," noted Broy les. "Every day I marvel at the dedi cation and way they personally approach their jobs to provide quality water service to the citizens of Indianapolis. It was no surprise th ey accepted this crisis in the sam e professional manner and developed ideas o n their ow n, used their knowledge and ingenuity, and simply took the initi a~ tive to function as a tea m th rough th eir own indi vidual rcsponsibilities.1J Broyles recognized his primary role was to manage the water company and main, ta in continuous service to its customcrs. "I realized that long before the canal would be repaired the city potentially could be in real trouble/' Broyles said. "I had con~ fidence in Tim to coordinate the canal's reconstruction , while I left to marshall our company's forces and communicate to customers to diminish water con sump~ tio n while the canal was under repair." Bumgardner consulted with several people from the IWC's Engineering Depart ment, Mayo r S tephen Goldsmith, those representing city agencies such as the Department of Public Works, as well as Dr. G erald Leonards of Purdue Univer~ sity , a consul ta nt to th e IWC. Dr. Leonards, ironically, had been in the pro, cess of completing a study on the effects of an earthquake hitting the canal at a site considered more vuln erable t han where the breach occurred. Several reconstruction alternatives were discussed. One idea was proposed by repre~ scntatives of Kenneth Smock Associates, Inc., who a lo n g wi th Tho mpso n Contruction Company, were summoned to the site and retained to assist in the recon, struction. It called for utilizing steel "H pil, ing" to be driven at eight~foot intervals and installing road or street plates between the pilings to stabilize the bank. This way the levee could be reinforced with clay soil on either side of the plating to make it stronger than prior to the breach. The bottom of the canal also had become eroded four, to,six feet deep over approx imately 150 feet because of specu, lated dragging of debris and turbulent water escaping toward White River. Thom p, son Construction represen ta tives recom, mended using clay to rebuild the bcttom of the canal. S tanley Graves, IWC's principal planning engineer and 21 ~year co m~ pan y employee, suggested building an access road approximately 300 feet down the east side of the canal fro m street level on property owned by Butler Unive rsity. The Decision Bumgardner considered the various op' tions to repair the breach, at this point realizing nothing was 100% positive on how to approach rhe situation. He de~ cided to use the "H piling" method , along wi th repairing the canal's eroded bottom by bringing in truckloads of clay via the p roposcd access road. Three major tasks had to be completed prio r to actu al repair of the canal- l} close th e headgatcs from Whi te River into th e canal at Broad Ripple, 2 ) stop the flow of water north and so uth of the breach, and 3) construct the access road. T he Iwe had assessed its problem, selected options to solve it, and began imple~ menting a plan within a few hours of the breach's discovery. "Scveral ideas were tossed out to repa ir the breach, but the 'H -piling' and steel sheeting appeared to be the best alte rna~ tive/' said Bumgardner, an 18~yea r IWC stalwart. "Nothing was absolutely 100 per- .r :1 r- • cent gua ranteed. The ava ilability of ma; teria ls and rapid installation time had as much to do with the decision as an y; thing. We had to do something qu ickly without knowing exactl y what wou ld work. I dec ided this was the best opti on avai lable and went with it. 1I Bumgardner gave the ICgreen light." IWC, Smock Associates and Thompson Construction began mobilizing their forces to implement repair of the canal. S mock Associates was ass igned to work on the "H;pil ing" and levee construction, while Thompson Construction assumed respon; sibili ties to secure the headgates, con; struct the access road, and bring in the tons of clay requi red to repair the breach. Thompson Constructi on also was assigned to bui ld an earthen da m north of the breach to stop the flow of water. The IWC's Distribution Department contin~ ued building the dam south of the breach for the same purpose after initial efforts failed to fill the breach itself. Butler U niversity granted permission to construct the temporary access road th rough the efforts of Mayor Goldsmith. Construction crews began work at ap; prox imately 4:00PM. The headgates were secured by 6:00PM. P rophetic Result it took approximate ly three hours to can; struct the access road, which was completed by 7:00PM. Triaxle trucks began hauling in clay to repair the breach. Truck after truck lined up from about 7:00PM Friday and continued for approximately 31 hours until 2:00AM Sunday, June 21. Did the decision to construct the access road on the steep eastside bank cause more problems? Q ui te the contrary. Despite the delay, the only other alternative would have been to build a different access road from a flatter area on the west side of the canal occupied by Butler University softball fields. Construction would have been over a flood plain that pamllels the canal about 100 yards from the White River. T he road that, ulti; mately, was constructed provided faster ac; cessibility to repair the breach. W ithout this access it, perhaps, would have taken the IWC longer to repair the canal at a more ted ious and risky pace. Bumgardner had made the right decision. 141 was very suspicious about the sugges; tion at first," Bumgardner admitted. "It was very steep, but it did offer a much easier access to get materials in and out, plus we were not sure of the problems we migh t face in building the alternative road across the flood plain." By late Friday evening, it proved pro; phetic not to build the other access road from the softball fields through the flood plain. By the time the canal had been dammed and drained, backwater from the rising White River spilled over the flood plain and back into the breach. This, likely, would have wiped out a newly~constmcted road. Soil had to be moved from the nowdry canal into the breach and onto the flood plain to push the water back toward the W hite River. Ironicall y, it was soil which had already been dumped in the canal via the newly,constru cted access road Bumgardner had dec ided upon. Cooperation by Citizens Broyles, meanwhile , had called a midmorning press conference at the iWC's corporate offices. The media was informed of the scope of the problem and assisted quickly in getting the word out concerning the breach. "Mayor Goldsmith attended on very brief notice and stressed the severity of the problem to the media," Broyles noted. "His prompt attention to our problem was outstanding. He and the various city, COLUlty, and state agencies that assisted our efforts were remarkable in that everyone pulled together to solve a problem that affected the citizens of Indianapolis." Broyles also stressed the importance of the cooperation by the citizens of India; napol is. "Hats wen t off to our customers," he stated. "Without the incredible coopera~ tion by the people of our city, the water compan y would have had a difficult time maintaining adequate water pressure to pro~ vide even essential resources for services such as fi re protection." By Friday after; noon, ove rall water usage had dropped al; most 30 percent (150 million to 110 million gallons), according to Broyles. Pressure Begats Pressure John Sutton, assistant director of the IWC's Pumping Department and a 21year compan y emp loyee, made his no r~ mal early- morning stop by the Fall Creek Station around 7:30AM. He was requested to call the Central Control System at compan y headquarters across from River~ side Station along the W hite Ri ver. "Wh en I called they said the canal had breached," Sutton recalled. "I remember saying, 'This is not something you wa n t to joke about, people.' O nce they con~ vinced me it was no joke, the Pumping Department's ro le was to maintain the best pressure it could since we realized we were losi ng millions of gallons of water o ut of the canal." Sutton and his colleagues began recl uc; ing load on the Riverside and W hite River Pump Stations dependent on canal wa; ter. At the same time, they worked to shift load to Fall Creek Station, which is supplied by a separate water supply from Fall Creek, and to Eagle Creek Station . The Riverside reservoir was stabilized by !0:00PM Friday, according to Sutton . Several other rese rve sources such as auxiliary we lls and reservoirs were acti; vated to mai ntain at least minimal pres; sure in the water system. "Basically, our job waS to juggle the water pressure bc~ tween shutting down certain sup ply sources, while activating those we knew were ava ilable," Sutton said. Th roughout the day, into the evening and over the weekend, Sutton and his crews worked to maintain water pressure to provide at least minimal service as much as possible. Their collective years of ex; perience and familiarity with the system were key factors in the lWC's effort to deal with the crisis at hand. "We acti; vated one we ll line near Bush Stad ium (home of the Class AAA Indianapo lis Ind ians Baseball Club) close to our building that we had shut down in 1988. Once we flushed out the li ne, it provided us another source to maintain the system." "This was the type of ingenuity ourpeopJc used in working to solve a very complex situation," Broyles said. "I continue to look back at how well th ings worked under very stressful circumstances because no matter how well we were prepared, it still could not be dealt with from a reference book." Sutton fe lt the IWC was never in im; minent danger of losing the total water supply. Like Broyles, he credits the c itizens of Indianapolis for their outstanding water conservation. "What made the dif; ference was the way our customers can; served water usage/' Sutton said. "I t was a blessi ng that the weather was cool, plus the fact we were heading in to the week, end and normally reduced usage in down~ town offi ce bui ld ings." (continued on next jXlge) WINTER 1992 23 Triumph, continued Contamination Order By late-morn ing, Broyles had attended a meeting of local and state officials at t he offices of the Indiana Emergency Management Agency. A cooperative decision was made to encourage those affected by the breach to conserve water usage and boil water to avoid any potential of contamination. This was annou nced in the early-afternoon at the day's second press conference. "It was in everyone's best interest to take this step as a precaution against contamination," Broyles said . Many downto wn bus inesses a nd high rise apa rtmen t complexes had closed by mid-afternoon out of concern for fire safety and to conserve water. Indiana Governor Evan Bayh closed all downtown state governmen t offices shortl y after noon due to water pressure dropping 30 percent below normal pressure, and to conserve water consumption. The city closed traffic on Michigan Road, a major north-south traffic artery, for approxi mate ly a mile-and-a-half to facilitate the canal's repair. The city had mobilized to assist the Indianapolis Wate r Company to deal with one of the biggest challenges in its h istory. Importance of Relationships "I am convinced the relationships we have established with the various agencies in the city and state were a key factor in the cooperat ive attitude exte nded throughout this crisis," Broyles emphasized. "Each city and water utility is unique. The IWC has developed outstanding relationships with our important public sector partners. They had the confidence in our company to get the job done right, and we, likewise, had a mutual respect for the ir outstanding roles in supporting ou r efforts." Improvisation A temporary water line also was installed at Wh ite River Station to pump water from Fall C reek into the treatment plant to service both White River and Riverside Pump S tations. Construction crews began at approximately 2:30PM to install 1,300 lineal feet of 12-inch pipe. This work was completed by approximately lO:OOPM . W ork began on a second line around midnight, and was completed by approx imately 24 NAWCWATER 2:00PM Saturday. After completion of this line, the W hi te River reservoir was stabilized and started to fill. Ed Malo ne, assistant director of the IWC's Distribution Department, a sevenyear company and 15 -year water industry veteran , indicated it was "business as usual" for h is crews. uThis was one of the bigge r jobs because it affected so many customers, but our guys have had bigger ch allenges," Malone said. "The maintenance and construction people are used to doing jobs like this, bu t we also realized it was a huge problem for the water company as a whole, especially our engineering people at the canal site." "Distribution's quick work to lay mains and secure pumps provided a sizable amount of water supply that truly prevented us from going 'dry,'" said Tim Bumgardner. "Maintenance personnel working around the clock to repair water mains and 'troubleshoot' also played a major role." As their jobs became completed, Malone and his crews assisted in other efforts such as cleaning out debris which had accumulated on the bottom of the canal. Pitching In Most of Friday's activities also involved several IWC employees handlin g a huge number of calls from customers inquiring about the problems stemming from t he breach . They also notified several businesses, fire departments and schools to inform them of the status of water service because of the breach. Throughout the weekend, literally hundreds of employees fro m the IWC, ou tside agencies and contractors, and volu nteers partic ipated in repairing the breach to make it truly a "team effort." Typical of the attitude of people invo lved was that of Steve G rant, a civil engineering assistant and 21-year IWC colleague, who worked with construction crews at the breach throughou t the weekend. G ran t was on vacation early Friday morning when he received a call about the breach. H e ad mitted feeling some guilt like he may ha ve ucrashed the party," and being a little overzealous in his rush to get to the site. As he sat in h is car at a stopligh t south of Indi anapo lis next to a sheriff's deputy prior to getting on the interstate, the thought of requ esting an escort crossed his mind. "I thought about it, bu t he looked like he was off duty or getting rcady to do so," Grant said. "Well , I 'gunned it,' not thinking he would notice. Wrong! I looked in my rear-vi ew mirror and it took him abou t five seconds to turn on his flashers and pull me over. He was totally perplexed as to why I would speed away right in frOnt of him. After explaining I had almost asked him to escort me and why I was in a rush, he let me go without a ticket." Just one of the many stories th at will be told by those in vo lved in the canal breach when asked, "How did you find out about the canal?" Repairing the Breach The access road was completed by Thompson Construction by approxi~tely 7:00PM Friday. Smock and Associates had begun driving the "H-piling" and steel plates into the bank throughout the day. C rews worked all night hauling in clay down the new access road. It was stored in two separate drop-off staging areas in the canal while the "H-piling" process con tinued throughout the night. Cooperation by the Indianapolis Police Department kept curious spectators at a distance, while the Washington Township Fire Department provided emer~ gency lighting. A ll day Saturday, June 20, and into the night, truckload aftet truckload brought the much-needed fill in via the access road. Progress accelerated as HH_ piling" and steel plates were being driven into the canal bank. Clay was compacted into the eroded canal bottom. Backwater from the White River had been pushed back. "We had things pretty much under con~ trol by ea rly Saturd ay morning," said Stanley G raves. Graves spent much of the weekend at the site working with Thompson Construction as it built the access road and brought soil and clay to the site. "Starti ng at about 7:00PM Friday, th roughout Saturday, and earl y Sunday morning, things became somewhat rou ti ne as soil and clay were deposited in two separate drop-off areas," Graves noted. "We had a few minor setbacks, but once the water was drained from the ca nal and the White Ri ver backwater controlled, we were able to make very good progress." A sufficient amount of soil and clay had been delivered to the site by approximately 2:00AM Sunday, June 21. T he constant stream of trucks had stopped. Thompson Constru ction was ab le to as' sist Smock and Associates with the uH~ pil ing" and sheet plating. Installation of the "H-piling" and sheet plating continued throughout early Sunday morning. By 11:00AM, the tons of soil and clay finally could be put to use to cover the steel~ reinforced levee. A special protective lining was placed part way into the canal and tied into the steel wall prior to being covered and packed with soil. An end was actually in site as the water company and construction crews worked furiously to re~ store service to customers by early Sunday evening. Exactly 300 loads of soil and clay had been brought in to repair the canal. "I thought at one point we may not have enough, then as we neared completion of the repair, I thought we might have way too much," Graves admitted. "It proved to be just the right amount. It was kind of amaz~ ing because we basically had to look at the breach and take an educated guess. n By late Sunday afternoon, word. was cir~ culating that the water company would meet its deadline to complete the project by around 6:00PM. People who live along the canal, and other Indianapolis citizens who had never seen the canal dry, were anxious to see the water start flowing again. Soil was compacted over the liner and the finishing touches were completed by the construction crews. Much of the com~ pacted clay placed in the erosion channel in the bottom of the canal wac; smoothed over to minimize scouring once water was re ~ leased into the canal. The canal bed was reshaped between the two temporary earthen darns. O pening the Headgates Just before 6:00PM Sunday, the temporary darn which had been constructed south of the breach was removed and water began flOWing into the repair area. The north darn located near Butler University's scenic Holcomb Gardens was removed around 6:30PM as the headgates were being reactivated in Broad Ripple. The city ofindianapolis soon would have its full water supply restored. By Monday, June 22, the canal was full. 11,e White River Treatment Plant went back to nor~ ma l rates. By approximately 4:00AM, IWC resumed nonnal operations. It took most of Monday before the total system operated under normal conditions. "We were very fortunate," said Jo1m Sutton. "If we had gone into Monday w ith~ out water in the canal, I feel we would have had more serious problems because the con~ sumption rate in downtown buildings would have put a strain on the system." Contamination Order Lifted IWC officials continued monitoring for possible contamination, and as a precau~ tion, encouraged people to continue boil ~ ing water. Officials also encouraged cus~ tomers to use as mu ch water as desired to help flush out the system. After consulting with state and Marion County health offici als, the Indianapo lis Water Company tescinded the boil otdet fo r most of its customers on Monday, June 22. The boil requ est remained in effect unt il Wednesday, June 24, as a precau~ tion fo r cllstomers located in two small areas on the far reaches of the system, where pressure had fallen below 20 pounds per square inch. Future of Canal The Indianapolis Water Company has had a goal to redu ce its dependence upon the canal in its operati ons. "We recognize th e canal was built ove r 150 years ago and has served the Indianapo lis Water Com~ pany for well over 100 years," said Joe Broyles. "Even though the breach was an improbable occurrence, it reinforced our priority in studying alternative sources and commitment to build more facilities." Serving as an Example Did the canal breach serve as an ex~ ample for o ther wate r utilities? "Our com~ pany was able to react to this crisis qui ckly as a private entity and because of our size and resources, especially in difficult eco~ nomi c times," Broyles continued. "We are fortunate that our public sector partners recognize we are good at what we do in providing quality service. Their assistance in the breach effort allowed us to do what we know best, while they did what they know best. "Dealing with the canal breach was an outstanding example of systems, people and relationships wo rking together," Broyles continued. "Because systems were in place, dedicated people from our com~ pany, as well as from ou tside agencies and contractors, utilized the relationships we work so hard to cultivate to do a job in se rvicing the people of Indianapolis. In the end, our customers are the heart and soul to justify our purpose of existence." Thank You's IWC officials sent hundreds of "thank you" letters to company employees, city, county, and state agencies, Butler Uni ~ ve rsity, Smock Associates, and Thomp~ son Construction. Special "thank you" advertisements recognizing these var ious constituencies, and specifically the citi ~ zens of Indianapolis, were published in the Indianapolis Star, Indianapolis News, Indianapolis Business Journal, and several Indianapolis suburban newspapers. A special tribute picnic was conducted the afternoon of July 12 on the grounds of the Indianapolis Water Company to thank its employees and invited guests from the various agencies and contractors that helped in the effort. Everyone received a t~shirt emblazoned with "I Survived the Chaos on the Canal," and was treated to an India~ napolis Indians baseball game that evening. John Sutton and a few of his crew mem~ bers perhaps snickered in recalling the well line they had reactivated near the stadium two weekends earlier to help maintain wa~ ter pressure during the canal breach. Reflections "This was an incredible story in ou r city's and company's history," said James T. Morris, chairman, chief executive offi ~ cer and president of IWC Resources Cor~ po ration , the parent company of the In ~ dianapolis Water Company. "We have attempted to adequate ly thank everyone who was invo lved in the repair of the canal, but only they ca n truly apprecia te what was done to restore water to the citizens ofInd ianapolis in such a remark, ab ly short time period. "TI1e great people of Indianapo lis were outstanding in cooperat ing with us while we repaired the canal," Morris continued. "Without their cooperation, there is no qu estion the problems we confronted could have escalated and become mu ch more sevete. They sho uld be proud of their role in this crisis and proud to be a citizen of Indianapolis. 1 know I am." The summer storm of 1992. I t will be remembered by many people for a lo ng, long time. It also should be remembered as "Triumph Out of Chaos" for the India~ napolis Water Compan y and the citizens of Indianapolis. , WINTER 1992 25 # National Association of Water Companies Water Technology Committee Report Lead and Copper Survey Results results summarized by Terry L. G/oriod, Vice President, Production and System Operations, St. Louis County Water Co. Thanks to participating NAWC Companies, and Paul Keck, of st. Louis County Water Co., for his work in compiling data and drafing the report. The first six-month monitoring period for the Lead and Copper Rule began for systems serving over 50,000 people in January 1992. Systems serving greater than 100,000 people were required to collect 100 first draw samples, and systems between 10,001 and 100,000 were required to collect 60 first draw samples. Sample locations were targeted by the EPA to those locations where the risk of leaching lead or copper would be highest. These high-risk sites included single-family residences with lead service lines, lead interior plumbing, or post-1982 copper plumbing with lead solder. Multi-family residences and public buildings were allowed to be used for sample sites if there was an insufficient number of single-family residences. The ratio of these different types of sites to one another determined a systems sample pool and tier classification. Systems that exceed the action limit of 15 ppb lead or 1300 ppb copper at the 90th percentile are required to optimize corrosion control treatment, perform public education, and possibly replace lead service lines. NAWC Survey To get an early assessment of the results of EPA's first draw corrosion monitoring program, NA WC distributed a survey to its members with populations over 50,000 who were required by EPA to collect data for the first six months of 1992. Information on system size, water quality, monitoring logistics, and individual first draw results were collected and entered into a database. There are approximately 660 systems in the United States which provide populations over 50,000 with drinking water. Sixty-three NA WC members fall into this category and surveys were distributed to these members. Fortythree NA WC utilities, serving approximately eleven million in 18 states completed and re turned the survey. The 26 NAWCWATER Table 1 Survey Respondents 90th Percentile Levels fig/I 43 Utilities Jan.-Jun. 1992 Ranked by Lead Ranked by Copper Lead Copper Lead Copper 44 36 20 15 15 15 15 14 14 13 13 150 1800 450 1100 980 360 150 760 730 1100 720 1060 180 150 127 560 440 400 320 180 593 560 320 260 271 170 341 1360 380 100 51 850 540 493 280 271 210 200 200 195 100 70 40 36 5 13 15 12 15 <5 14 14 13 8 9 8 <5 <5 20 9 9 5 15 6 8 9 <5 7 <5 8 <5 <5 <5 <5 9 11 7 44 15 10 10 5 <5 <5 5 <5 1800 1360 1100 1100 1060 980 850 760 730 720 593 560 560 540 493 450 440 400 380 360 341 320 320 280 271 271 260 210 200 200 195 180 180 170 150 150 150 127 100 100 70 51 40 12 11 10 10 9 9 9 9 9 8 8 8 8 7 7 6 5 5 5 5 <5 <5 <5 <5 <5 <5 <5 <5 <5 <5 <5 <5 ... Table 2 NAWC Corrosion Survey Summary January 1, 1992-June 30, 1992 Results Participating Systems Statistics Number of systems participating Number of ground water sources Number of surface water sources Number of mixed ground/surface sources Number of consecutive systems Number of service connections Population served by surveyed systems Number of states covered System greater than 15ppb on 90th for lead System at 15ppb on 90th for lead System at or greater than 1300 on 90th for copper 43 14 19 7 3 3,033,473 11,273,174 18 3 4 2 Sample Pool Distribution Number of systems collecting sample pool A Number of systems collecting sample pool B Number of systems collecting sample pool C Number of systems collecting sample pool E 20 7 14 2 Sample Site Type Distribution Total number first draw samples Total number samples with post 1982 copper Total number samples old copper Total number samples with lead services Total number samples with other services Total number samples with lead interior majority of the systems polled in the survey were utilities located in the northeastern quarter of the United States. Systems using either surface water, groundwater, or both are represented. The survey results and discussion present how this group of companies fared in the first six-month monitoring period, and give some insight to the factors that influenced the results. Sampling Sites Every system successfully collected all samples from single-family residences. Targeted sample pools of the survey participants fe ll into one of four ofEPA's sample pool designations. Twenty systems used sample pool A, which basically indicates the system successfully collected 50% of their samples from sites with lead services and 50% of their samples from sites with post-1982 copper-lead solder or lead interior plumbing. Seven systems reported using sample pool B. Sample pool B includes systems which could not locate sufficient lead service lines, and therefore were required to choose more than 50% of the samples from sites with copper plumbing and lead solder installed after 1982, or sites with lead interior plumbing. Fourteen systems reported no lead service lines and the use of sample pool C. Sample pool C consists entirely of sites with either copper plumbing and lead solder, or sites with lead interior plumbing. Two systems reported that their sample pool could best be described as sample pool E. Sample pool E allowed collection 4021 2573 6 1328 101 13 100% 64% 0% 33% 3% 0% of copper plumbing sites with lead solder before or after 1982. Survey Results Forty of forty-three systems reported lead results less than 15 ppb at the 90th percentile. For copper, 41 of 43 of systems were below 1300 ppb at the 90th percentile. Only one system exceeded both the lead and copper action levels. Of the fortythree utilities responding, ten systems reported 90th percentile levels between 15 ppb and 10 ppb, fourteen systems reported 90th percentile lead levels between 10 ppb and 6 ppb. Sixteen systems reported 90th percentile levels which fell at or below 5 ppb. The 90th percentile results are presented in Table 1 for the (continued on next page) WINTER 1992 27 Survey Results, continued forty-three respondents. Tables 2 through 5 list the survey results by functional category. A total of 4,021 first draw results for lead and copper were entered into a database and examined. As a group, 844 (21 %) samples had lead levels above the 5 ppb quantitation level. T wo-hundred thirtyfour (6%) of the samples had lead levels over 15 ppb, the action level for lead. Quantifiable levels over 30 ppb of copper were found in 3,050 or 76% of the samples. The copper action level of 1300 ppb was exceeded in only 51 or 1 % of these samples. Ninety-seven percent of all samples were collected either from sites using copper plumbing and lead solder (post-1982) or sites with lead service lines. The copper and lead solder sites predominated with 2,573 or 64% of all samples. Lead service line sites contributed 1,328 or 33% of all samples. These two sample groups were analyzed to determine if one group inherently produced higher lead or copper results. Discussion of Results Lead service line results from all fortythree systems show lead levels greater than 5 ppb in 28% of the samples. The 15 ppb level for lead was exceeded 6% of the time. Copper was found 65% of the time above the 30 ppb quantitation level, but never above the copper action level in these lead service line site samples. All post-1982 copper and lead solder sites showed lead levels to exceed the 5 ppb quantitation level 18% of the time, and the lead level to exceed the 15 ppb action level 6% of the time. Copper levels above 30 ppb were found in 83% of the samples, and copper levels above the 1300 ppb level were found in only 2% of the samples. The 5 ppb practical quantitation level for lead was exceeded 18% of the time in samples collected from post-1982 copper Table 3 Distribution of Lead and Copper Levels Total Samples Exceeding Action Level Total number samples greater than 15 ppb lead Total number samples greater than 1300 ppb copper 4021 Total Sites 234 51 6% 1% 844 3050 21 % 76% Total Samples Over Quantitation Level Total number samples greater than 5 ppb lead Total number samples greater than 30 ppb copper Lead Services Sites Exceeding Action Level I I Total number samples greater than 15 ppb lead Total number samples greater than 1300 ppb copper 1328 Total Pb Sites 78 1 6% 0% 367 863 28% 65% Lead Services Sites Over Quantitation Level Total number samples greater than 5 ppb lead Total number samples greater than 30 ppb copper Post 1982 Copper Sites Exceeding Action Level Total number samples greater than 15 ppb lead Total number samples greater than 1300 ppb copper 2573 Total eu Sites 156 50 6% 2% 476 2131 18% 83% Post 1982 Copper Sites Over Quantitation Level Total number samples greater than 5 ppb lead Total number samples greater than 30 ppb copper 28 NAWCWATER services and 28% of the time in samples collected from lead services. The 15 ppb action level was exceeded 6% of the time for both the post-1982 copper services and for the lead services. Similarly, results from the A sample pool, (50% lead service and 50% copper service) show lead levels over the 15 ppb again at the same rate, 6% of the time. This indicates that the service line material may be less important than water quality characteristics in determining if first draw lead results exceed the action level. In the three systems that exceeded the 15 ppb lead action level, the highest pH was 7.6, the highest conductivity was 188 micromho's, the highest alkalinity was 32 mg/L as CaC03, and the highest calcium was 36 mg/L. In addition, phosphate to inhibit corrosion was not used or used only in low levels. Systems which are at 15 ppb or approach 15 ppb at the 90th percentile, tend to have lower phosphate levels (less than .10 mg/L) than systems who are much lower than the 15 ppb level. This may indicate the success of systems who use phosphate as a corrosion inhibitor. Of the forty-three systems surveyed, 28 reported the use of a corrosion control chemical. Twenty-two systems fed phosphate and six systems reported using lime addition. The average cost of phosphate was $9.31/MG, excluding two systems which fed hexametaphosphate at a much higher cost (approximately $75/MG). The average dose of phosphate was 2.3 mg/L. The reported data was insufficient to determine the cost for lime addition. Sample Collection and Analysis Systems were given the option by the EPA to have customers collect samples or have their own personnel collect samples. Systems had no recourse to challenge results if sample collection was believed to be in error. Customer collected samples were used in twenty-seven of the thirty-six systems who reported their sample collection mode. Nine systems utilized utility personnel to obtain the first draw samples. Twenty-two systems performed their own laboratory analyses; twenty-one systems reported using outside laboratories. Of the thirty-two systems reporting costs, the estimated average cost per sample analysis was $23. No difference in cost was noted between in-house and outs ide laboratory analysis. , +' NAWC Corrosion Survey Participants Table 5 Table 4 Average Cost/Sample Sample Analysis Number Systems Which Have 90th Percentile Lead Levels Over 15 ppb Sample Pool Make-Up Pool A PoolC 2 1 $23.10 $22.50 Systems Analyzing Own Samples 22 Systems Using Contract Laboratories 20 Average Total Cost Sample Pickup Samples in This Group Which Exceed 15 ppb Lead Service Copper Service 18 49 Systems Picking Up Own Samples Systems Having Customers Pickup Samples 9 $20,962 27 $8,528 High Bounds Of Water Quality Parameters For The Group Calcium Conductivity Alkalinity pH Phosphate 37 mg/L 188 32 mg/L 7.6 0.04 mg/L Average Average Cost/Mg Dose Corrosion Chemicals Fed Phosphate Lime 22 6 9.31 * 2.3 mg/L NO NO * Excludes Hexametaphosphate WINTER 1992 29 Potential Consequences of Abandoning Cost,Based Declining,Block Rates by Thomas R. Stack Illinois Commerce Commission' presented at the Eighth NARUC Biennial Regulatory Information Conference September 7992 1. Introduction This paper examines a declining-block rate structure that was adopted for a large investor-owned water utility regulated by the Illinois Commerce Commission. The current rates for that utility (developed after examining an embedded cost-of-service study utilizing the Base-Extra Capacity Method set forth in the American Water Works Association (AWWA) Manual M1 2) are compared with rates resulting from application of both a singleblock rate structure and an inverted-block rate structure. Bills for water service for various customer classes are then compared using the cost-based declining-block rates currently in effect and rates that would result if the rate blocks were eliminated or inverted. Finally, the potential reactions of large customers are considered if rates were to be modified in such a manner. II. Changes in Rate Design in the Water Industry When the water supply industry first began in this country, customers were charged for water service based not directly on water usage but on various criteria serving as proxies for water usage including the number of people in the building, the width of the house, the size of the yard and the number of water using devices. Viewed today, many of those old rate schedules appear almost comical. However, the lack of inexpensive, accurate meters required such rates in an attempt to recover costs fairly from customers. With the introduction of meters that could accurately measure the volume of water usage in the late 1800s,3 charges began to be based directly on water usage. A s meters became more economical, the 30 NAWCWATER vast majority of systems installed meters and changed to usage-based rates. In 1917, the noted water authority Allen Hazen wrote, "In the last sixteen years the increase in the use of meters has been rapid and the number of completely metered systems at the present time is much greater."4 As rate design became more sophisticated, declining-block rates together with a minimum bill or service charge were utilized in recovering the cost to provide water utility service. Over time, the declining-block rate structure became common and "for many years, a single schedule of declining-block rates applicable to all customers classes was the predominant water rate form in the United States."s In 1954, the American Water Works Association (AWW A) published the report "Determination of Water Rate Schedules" which subsequently was issued as Manual M1.6 Beginning with that report and subsequent revisions to the Manual, the recommended size of the rate blocks became more defined. The current version of Manual Ml (Fourth Edition) uses a rate structure consisting of three rate blocks as an example. 7 Recently, due primarily to conservation considerations,Sthere has been some movement toward reducing the number of blocks in declining-block rate structures or even eliminating the decliningblock rate structure entirely and moving to a single-block rate structure.9 In some instances, inverted-block rates have been advocated and adopted. A survey of large water systems found that 51 % of those systems utilized declining-block rates, 32% had a uniform (single-block) rate, and 17% had inverted-block rates. lO Of water systems in the midwest, 22 out of 28 had declining-block rates while in the west only 2 out of 20 had declining block rates. l1 III. Analysis of an Illinois Utility A. Description of the Example Utility The utility'2 used in the example provides water service to some 65,0 00 customers-including 57,200 residential, 7,600 commercial, 280 industrial, and 38 sale-for-resale customers. Public and private fire protection services are also provided. This is one of the older water systems in Illinois; the initial water system was constructed in 1885. The source of raw water supply is the Mississippi River. Extensive treatment of the water is provided before it is pumped into the distribution system. The service area consists of some 500 square miles and includes 927 miles of transmission and distribution mains and numerous storage tanks and booster stations. Much of the service area is in the valley lowlands of the Mississippi R iver and overlays extensive sand and gravel water bearing formations. 13 This area contains numerous industrial firms including divisions of a number of the nation's large corporations. Actual revenues for the water company for 1990 were approximately $23,300,000, based on sales of 18.54 1 billion gallons of water. B. Current Water Rates for the Example Utility The rates used as an example for this paper are on file with the Illinois Commerce Commission as a result of a formal rate case. 14 During the course of that case the Utility presented its testimony and exhibits. Witnesses for the Utility were + cross-examined by parties to the case which included the Commission Staff, a number of municipalities served by the utility, and a group of industrial interveners. Witnesses for Staff and the industrial water users presented testimony and were cross-examined by the utility and other interested parties. Rebuttal testimony was filed by the utility and subsequently by the Staff. At the conclusion of the evidentiary portion of the case, a stipulation was reached whereby all active part ies accepted Staffs position in its Rebuttal testimony with one minor modification with which Staff acquiesced. The utility presented a full cost-ofservice study utilizing the Base-Extra Capacity Method contained in A WWA Manual Ml. Staff also presented a full cost-of-service study which utilized the Base-Extra Capacity Method. The rates adopted by the Commission's Order were stipulated to by all of the parties and were based on Staffs cost of service study. (It should be noted that the Utility's and Staffs studies resulted in very similar rates.) The rates filed pursuant to the Commission's Order, usages by class, and the number of service connections by meter size are set forth in Table l.IS As can be seen, the rates for general service consist of a service charge based on meter size and a charge for usage consisting of a declining-block rate structure. In addition, revenue results from public and private fire protection and miscellaneous services. The quantity of water allowed in each rate block was determined in a previous rate case and was not changed as a result of this case. The quantity of water contained in the first block (usage of the first 3,000 cubic feet or 22,500 gallons per month) was selected so that virtually all the residential usage (97%) would be billed in that rate block. The second block (57,000 cu ft or 427,500 gal) was chosen so that it includes substantial commercial usage along with small industrial usage. (continued on next page) Table 1 Revenues with Cost..Based Rates Base..Extra Capacity Method AWWA Manual Ml Item Service Charges, Monthly Rates Meter Size $6.50 34" 12.00 20.00 1" 45.00 1 ~" 70.00 2" 135.00 3" 225.00 4" 445.00 6" 710.00 8" Bills 685,971 264 414 48 24 0 0 0 0 Residential Revenue $4,458,812 3,168 8,280 2,160 1,680 0 0 0 0 TOTAL Usage Charges Bills 75,921 1,469 5,808 861 3,180 59 108 0 0 Commercial Revenue 493,487 17,628 116,160 38,745 222,600 7,965 24,300 0 0 $4,474,100 Rate Per 100 CuFt. First 3,000 Cu Ft/Mo Next 57,000 Cu Ft/Mo Next 1,240,000 Cu Ft/Mo Over 1,300,000 Cu Ft/Mo Bills 747 72 396 61 1,188 168 672 72 36 Industrial Revenue 4,856 864 7,920 2,745 83,160 22,680 151,200 32,040 25,560 Public Authority Revenue Bills 1,068 6,942 132 1,584 981 19,620 8,640 192 110,880 1,584 24 3,240 36 8,100 0 0 0 0 Sales for Resale Bills Revenue 0 0 0 0 12 240 0 0 96 6,720 36 4,860 204 45,900 37,380 84 24 17,040 $331,025 $159,006 $112,14 $920,885 Usage Revenue Usage Revenue Usage Revenue Usage Revenue Usage Revenue 1.450 4,709,034 $6,828,099 953,011 $1,381,866 51,701 $74,966 72,830 $105,604 4,637 $6,724 0.989 116,311 115,032 890,973 881,172 442,179 437,315 334,418 330,739 88,864 87,886 0.851 8,306 7,068 386,125 328,592 2,093,569 1,781,627 203,476 173,158 1,606,668 1,367,274 0.611 0 0 0 0 3,723,388 2,274,990 0 0 2,856,919 1,745,578 Total Revenue by Class Total $5,997,155 $6,950,199 $2,591,631 $4,568,899 $609,501 $3,207,462 $17,927,692 $11,424,299 $3,512,515 $4,899,923 $768,507 $3,319,602 $23,924,846 Other Revenue Private Fire Protection Public Fire Protection Other Operating Revenue $84,888 $1,237,598 $31,936 $1,354,422 Total Revenue $25,279,628 WINTER . 1992 • 31 , Potential Consequences, continued The third block (1,240,000 cu ft or 9,300,000 gal) includes substantial usage from smaller industrial customers and some very large commercial customers. The fourth block (usage in excess of 1,300,000 cu ft or 9,750,000 gal) was selected so that it includes usage by very large industrial and resale customers. III III C. Resulting Single-Block Rate and an Inverted-Block Rate Table 2 sets forth the declining block rates adopted by the Commission's Order in 91-0100. Also set forth on Table 2 is the resulting single block usage rate, assuming the same revenue requirement and maintaining all other rates at the same level as found appropriate in the Commission's Rate Order. Finally, an example of an invertedblock rate is included. The inverted-block rate assumes a first block of 3,000 cubic feet which is probably higher than would normally be used but was chosen as an example for this paper since the usage information is available. Information needed to calculate the usage units for a rate block of 700 cubic feet per month which would be more typi- cal of a lifeline usage that might be chosen for the first block of an inverted-block rate structure is no longer available to the author. D. Comparisons of Bills With Various Rates To understand the effect of eliminating rate blocks or inverting the rates, it is necessary to compare water bills at various levels of usage for each class of customer. Table 3 compares the bills (excluding add-on-taxes and public fire protection charges 16 ) for residential customers using the currently effective rates, the single block rate, and an inverted-block rate. For this utility, the average residential usage is 700 cubic feet (5,250 gallons). Table 4 contains a comparison of bills for commercial customers, while bills for industrial customers are compared in Table 5. E. Discussion of Bill Impacts with the Various Rates 1. Residential Customers If a single-block rate were to be utilized for this utility, the resulting usage rate would be $0.9668 or $0.4832 (33.3%) less than the current $1.45 rate in the first block of the cost-based rate design. Although the elasticity of water use may not be high for relatively small changes in water bills, especially for water use inside the home, decreasing the usage rate by one-third and the bills by 20% or more sends a rather clear price signal to the residential class that additional usage is appropriate. A usage rate of $.97/100 cu. ft. could encourage customers to water lawns when they might not have watered at a rate of $1.45 per 100 cu. ft. While a particular utility may have sufficient supply and treatment capacity to support a reasonable amount oflawn watering, such watering, unrestricted by price considerations, can cause low pressure conditions during peak periods due to the inability of the distribution system to deliver sufficient quantities to meet watering demands beyond what is typically contemplated. Inverting the rate for the entire residential class, as in the example, would aggravate the price signal even further. Even if the rate were inverted for all usage beyond 600 or 700 cubic feet, there might be a signal to residential customers to use water wisely, but the rate would still be less than Table 2 Comparison of Usage Revenue Under Various Rate Structures Keeping Service Charge and All Other Rates Constant RATES Residential Usage Revenue Commercial Usage Revenue Usage Industrial Revenue 51,701 442,179 2,093,569 3,723,388 $74,966 437,315 1,781,627 2,274,990 Public Authority Usage Revenue Sales for Resale Usage Revenue Total COST-BASED RATES-From Table 1 First Block Second Block Third Block Fourth Block $1.450 0.989 0.851 0.611 4,709,034 116,311 8,306 0 $6,828,099 115,032 7,068 0 953,011 890,973 386,125 0 $6,950,199 $1,381,866 881,172 328,592 0 $2,591,631 72,830 334,418 203,476 0 $4,568,899 $105,604 330,739 173,158 0 4,637 88,864 1,606,668 2,856,919 $609,501 $6,724 87,886 1,367,274 1,745,578 $3,207,462 $17,927,692 SINGLE-BLOCK RATE First Block Second Block Third Block Fourth Block $0.9668 0.9668 0.9668 0.9668 4,709,034 116,311 8,306 0 $4,552,694 112,449 8,030 0 953,011 890,973 386,125 0 $921,371 861,393 373,306 0 51,701 442,179 2,093,569 3,723,388 $49,985 427,499 2,024,063 3,599,772 72,830 334,418 203,476 0 $70,412 323,315 196,721 0 4,637 88,864 1,606,668 2,856,919 $4,483 85,914 1,553,327 2,762,069 $4,673,174 $2,156,069 $6,101,317 $590,448 $4,405,793 $17,926,801 Difference from Cost-Based Rates (2,277,025) (435,561) 1,532,418 (19,053) 1,198,331 ($891) INVERTED-BLOCK RATES First Block $0.788 4,709,034 Second Block $1.048 116,311 Third Block $1.048 8,306 Foruth Block $1.048 0 $3,710,719 121,894 8,705 0 Difference from Cost-Based Rates 32 NAWCWATER 953,011 890,973 386,125 0 $750,973 933,740 404,659 0 51,701 442,179 2,093,569 3,723,388 $40,740 463,404 2,194,060 3,902,1ll 72,830 334,418 203,476 0 $57,390 350,470 213,243 0 4,637 88,864 1,606,668 2,856,919 $3,654 93,129 1,683,788 2,994,051 $3,841,317 $2,089,371 $6,600,315 $621,103 $4,774,623 (3,108,882) (502,259) 2,031,416 11,602 1,567,160 - $17,926,72 9 ($963) the rate currently in effect. Thus, there would be at least an initial price signal to use more water. Table 3 Monthly Bill Comparisons Residential Customers Single-Block Usage Level Cost-Based (CCF) Rates 300 500 Inverted-Block Bill $ % Diff Diff Bill $ % Diff Diff -18.3% $10.85 $9.40 ($1.45) $13.75 ($2.42) -13.4% -17.6% $10.44 ($1.99) ($3.31) ($3.38) -20.3% $12.02 ($4.63) -27.8% -23.0% $14.38 ($6.62) -3 1.5% -27.2% -29.0% $22.26 ($13.24) $30.14 ($19.86) -37.3% -39. 7% 700 1,000 $16.65 $11.33 $13.27 $21.00 $16.17 2,000 $35.50 $25.84 ($4.83) ($9.66) 3,000 $50.00 $35.50 ($14.50) $8.86 -24.1% Assumption: '1," meter for all usage levels Table 4 Monthly Bill Comparisons Commercial Customers Inverted-Block Single-Block Usage $ $ % Diff % Diff Diff Diff 1,000 $21.00 $16.17 ($4.83) -23.0% $14.38 ($6.62) -31.5% 3,000 5,000 $50.00 $35.50 $54.84 ($14.50) -29.0% $30.14 ($19.86) $69.78 ($14.94) -21.4% $51.10 ($18.68 ) -39.7% -26.8% $117.00 $536.20 ($15.73) -1 1.9% Level (CCF) Cost-Based Bill Rates 10,000 $132.73 $116.68 ($16.05) -12.1% 50,000 $528.33 $503.40 ($24.93) 100,000 $967.63 $986.80 $19.17 -4.7% 2.0% Bill $1,060.20 $7.87 1.5% $92.57 9.6% Assumption: 'I/meter for usage to 5,000 ccf. I" meter for usages in excess of 5 ,000 ccf. Table 5 Monthly Bill Comparisons Industrial Customers Usage Cost-Based (CCF) Rates Bill $1,017.63 $4,421.63 $1,036.80 $4,904.00 100,000 500,000 Inverted-Block Single-Block Level $ % $ % Diff Diff Bill DiH DiH $19.17 1.9% $1,110.20 $482.37 10.9% $5,302.20 $92.57 $880.57 19.9% 9.1% 1,000,000 $8,831.63 $9,893.00 $1,061.37 12.0% $10,697.20 $1,865.57 21.1% 3,000,000 $21,991.63 $29,449.00 33.9% 45.0% $34,476.63 $49,050.00 42.3 % $31,877.20 $53,102.20 $9,885.57 5,000,000 $7,457.37 $14,573.37 $18,625.57 54.0% 10,000,000 $65,736.63 $98,100.00 $32,363.37 49.2% $106,212.20 $40,475.57 61.6% Assumption: 2" meter for 100,000 and 500,000 ccf 4" meter for 1,000,000 ccf 6" meter for 3,000,000 ccf 8" meter for 5,000,000 ccf (2) 8" meter for 10,000,000 ccf 2. Commercial Customers Small commercial customers will receive the same price signal that residential customers receive since they purchase in the same block. The effect on usage for most commercial customers would not be expected to be as great as on residential customers since many small commercial customers simply don't have the ability to use considerable amounts of outside water. Also, commercial customers view water as a business expense, and, in an attempt to maximize profits, can be expected to restrict usage. Larger commercial customers presumably would be fairly neutral since their bills would change very little under either a single-block rate or the inverted-block rate used in the example. 3. Industrial Customers Recovery of the revenue requirement of a utility can be thought of as a teeter-totter in a horizontal position with a large number of small use customers on one end and a small number of large use customers on the other end. If one end of the teeter totter is pushed downward, the other end must rise. If declining-block rates are eliminated, rates to residential and small commercial customers have been pushed downward. The rates to large users rates must then go up to maintain the same overall revenue from the usage charges. This is exactly what happens in our example. Industrial customers will experience a substantial rate increase if a singleblock or inverted-block rate structure is adopted. In moving from a cost-based declining rate structure to a single block rate structure, the resulting increase to industrial customers would be in the range of 33 to 49% depending on usage. This sends a very clear signal to reduce usage. This is especially true for an industrial firm that is competing with firms located in different parts of the country and throughout the world. For a firm using 10,000,000 cubic feet (75,000,000 gallons) of water a month, the elimination of declining-block rates would cost that customer an additional $32,000 per month for its water use. Presumably, that customer has already installed water reuse equipment in (continued on next page) WINTER 1992 33 Potential Consequences, continued an effort to reduce costs to compete with other firms in other locations. However, an increase of this magnitude will send a strong price signal to take further action. The situation is aggravated if invertedblock rates are employed. While the exact impact will depend on how low a rate is established in the initial block and the quantity of water included in block, the large user always will be effected more by inverted-block rates than by a single-block rate. F. Expected Response to SingleBlock or Inverted-Block Rates 1. Residential Customers With a usage rate reduction of one-third, if a single block rate were to be adopted, residential customers can be expected to be less concerned about the cost implications of watering their lawns. Accordingly, it is reasonable to expect that residential customers will have less incentive to restrict outside water use and therefore outside use will continue at the same or higher level than experienced with cost based rates. 2. Commercial Customers Small commercial customers would see the same price incentive as residential customers so they can be expected to remain at the same usage level with perhaps some increased usage. However, the increase can be expanded to be less than that for residential customers since the price decrease will allow increased profits and therefore commercial customers can be expected to take advantage of the decreased price. 3. Industrial Customers What type of response can be expected from industrial customers? For a very large customer a rather severe response can be expected. Assuming that a large firm has already taken actions to reduce water usage through recycling and-similar activities, that firm will look at additional ways to reduce usage which were not economical with cost based rates. Firms can also be expected to consider developing their own supply. Most industries are reluctant to commit their scarce capital resources to water production equipment. However, several industries have clearly indicated to Commission Staff that 34 NAWCWATER they will install their own water systems if the incentive is sufficiently high. For this utility as well as for a number of other utilities in Illinois, large industries have an alternative to receiving water service from the utility. They can drill wells to obtain water. In some instances, they can obtain water from the same river from which the utility takes its supply. Also, many utilities do not require as high a level of water quality as must be provided by a public water supply. These industries may be using the water primarily for cooling purposes and potable quality is not required. Industries also have the option of purchasing their domestic water from the utility while obtaining process water from their own supply. In areas with plentiful groundwater, the threat by an industrial customer to develop its own supply must be seriously considered. One Illinois water utility was faced with just such a threat from a large industrial firm. That firm was a steel company facing considerable foreign competition. Although the Commission is always concerned by the threat of the loss of a customer, when a firm purchases 25% of the water sold by a utility any threat to discontinue service gets considerable Staff attention. In this particular case, representatives of the steel company came to a meeting armed with construction plans and cost estimates. The utility was convinced that they were serious. After examining the plans and cost estimates, the staff was also convinced that the threat was real and the steel company should be taken seriously. A special contract rate was developed to retain that firm as a customer of the utility because of the substantial contribution to fixed cost that would be made even at the reduced rates. With that contribution to fixed costs, the other customers were in a much better position than if that firm ceased being a customer altogether. The utility filed a special contract rate for that one customer and staff recommended that it be approved. The Commission allowed the rate to become effective- thus keeping that firm as a customer of the utility. A similar threat was made by a major industrial concern of another water utility. That firm used 13% of the total water sold by the utility. Again the firm was able to convince the utility that it was serious about developing its own water supply and would do so if some rate reduction was not made. The utility and the firm reached an agreed rate and after reviewing the specifics of the calculations, staff supported the rate. The rate order entered by the Commission approved the lower rate in an effort to retain the firm as a customer. Those rates were approved since the other customers would benefit from the retention of the firm, even though that firm would pay rates somewhat lower than those at full cost of service. Depending on how much water is used and how much the cost of water impacts the bottom line of the particular business, industrial firms sometimes have another option. If the firm is a part of a national corporation, the national corporation can sometimes shift production to another less costly site. The corporation can even cease production at a particular site. In extreme cases, a firm can simply be driven out of business by the high cost of water. G. Potential Undesired Results of the Elimination of Cost-Based Rates The reason given for the elimination of a declining-block rate structure is that it promotes usage and therefore is anti-conservation. However, in the short run, the elimination of declining-block rates in instances where major industrial customers are served will initially reduce the rates to the residential customers, the very group that is most likely to use vast quantities of water for discretionary outside uses. In the long run, elimination of declining-block rates may severely reduce overall sales of a utility that has adequate supply and treatment capacity by encouraging the industrial users to develop their own supply or to transfer production to other plants. The utility's sales may be reduced as contemplated by the new rate design. However, overall water usage for the area could remain at the same level due to industrial firms drilling their own wells, thus defeating the intended goal of the rate design. In addition, there are potentially dire consequences for the utility and the remaining customers since costs will be reduced relatively little (typically in the range of 1O¢ to 25¢ /1000 gal due to reduced electrical and chemical use) while revenues will be substantially reduced (approximately 70¢ /1000 gal. for the example utility). This leaves the residential, commercial, and smaller industrial customers to bear a much higher percentage of the fixed costs that were formerly spread over a much larger base. ----------------- --------------------------------------~~ IV. Conclusion For the utility used as an example in this paper, replacing the declining-block rate structure with a single-block or invertedblock rate structure is not in anyone's best interest. It is not in the best interest of the industrial customers who will incur additional costs and consume precious capital to develop their own supply. It is not in the best interest of the remaining residential and commercial customers since they will have to bear a much larger percentage of the fixed costs and may be without a job if the industrial customer shifts production or closes the plant. Elimination of the declining-block rate structure is most definitely not in the best interest of the utility who will see sales shrink and who must absorb reduced earnings until rate case proceedings can be concluded. Even then, complete recovery is not assured since intervenors and perhaps Staff could argue that plant is now under-utilized and therefore a portion of the utility's investment in plant should be deducted from rate base. If such an argument were to be successful, there is a potential for a financially ailing utility with bankruptcy as a real possibility. The old saying, "If it ain't busted don't fix it," certainly seems to fit in this instance. The elimination of declining-block rates may be appropriate in some instances, but for the example utility and in much of the water-rich midwest, "fixing" the currently used cost-based declining-block rates will lead the utility and all of its customers down a very uncertain path. 1The views and opinions of the author do not necessarily state or reflect the views, opinions or policies of the Illinois Commerce Commission, individual Commissioners or other members of the Staff of the Commission. 'American Water Works Association, Water Rates-Manual M1 (Denver, Co : American Water Works Association , Fourth Edition , 1991). 3American Water Works Association,. Water Meters-Selection, Installation, Testing, and Maintenance- Manual M6 (Denver, Co: American Water Works Association, Second Edition, 1972), Chapter 1. 4Allen Hazen, Meter Rates For Water Works (New York, NY: John Wiley & Sons, 1918), 10. sAmerican Water Works Association, Alternative Rates-Manual M35 (Denver, CO: American Water Works Association, First Addition, 1992), iv. 6American Water Works Association, Water RatesManual M1 (Denver, Co: American Water Works Association, Fourth Edition, 1991), 1. %id,41. BAmerican Water Works Association, Alternative Rates-Manual M35 (Denver, Co: American Water Works Association, First Edition, 1992),3. 9Massachusetts & California IOGeorge A. Raftellis, The Arthur Young Guide To Water And Wastewater Financing And Pricing (Chelsea, MI: Lewis Publishers, Inc., 1989), 168. "ibid, 167 "Illinois-American Water Company, Interurban Division, a wholly owned subsidiary of the American Water Works Company,Inc. 13G.E. Reitz, Illinois State Water Survey, Groundwater Levels and Pumpage In The East St. Louis Area, Illinois 1962-1966 (Urbana, II: State of Illinois, Department of Regulation and Education), 1. 14Illinois-American Water Company, Proposed General Increase In Water Rates, Docket 90-0100, order entered by the Illinois Commerce Commission on November 20, 1990. IsICC Staff Exhibit No. OPP 1.02 sponsored by the author in Illinois Commerce Commission, Docket No 90-0100. 16In Illinois, municipal taxes, franchise fees, and the Public Utility Fund tax are addea to the customer's bills as separate line items. Also, by law municipalities have the ability to choose the amount they are willing to pay for public fire protection. Any public fire protection costs not paid by a municipality are added to the bills of customers within that particular municipality. Since the taxes and fire protection charges vary by municipality they are not included in the bill comparison. ~ Water Treatment: A Joint Effort reprinted from California Water Association News C alifornia's first jointly-funded project between the Department of Health Services and a private water utility to improve an area's water quality was officially recognized in ceremonies held in Chino, CA. Representatives of California Water Service Company (CWS) and the Califo rnia Environmental Protection Agency's Department of Toxic Substance Control joined together to commemorate the completion of a cooperative effort to install a carbon adsorption system designed to treat water from a company-owned well. T he cost of constructing the facility, approximately $162,000, was shared equally between the company and the state. Under the agreement, Cal Water will assume all operational and mainte- nance costs for the life of the system. Participating in the ceremonies was Val Siebal, regional administrator for the state's EPA Department of Toxic Substance Control. Siebal said that construction of the new treatment facility will not only provide ' the community with a source of clean drinking water but also a cost effective means for treating contaminated groundwater in the area. The carbon adsorption system was constructed at the Cal Water well to treat ground water which had been contaminated with perchloroethylene (PCE), a common dry cleaning solvent and a suspected human carcinogen. The well had been shut down since 1986 because samples had revealed levels of PCE above state drinking water standards of five parts per billion. Ray Taylor, Cal Water's vice president of water quality and environmental affairs, told state and local dignitaries who attended the on-site ceremonies that the Company appreciated the opportunity to work with the state's Department of Toxic Substance Control in helping to alleviate underground contamination problems. As a related project, also funded by the state as part of the agreement, Cal Water has completed the installation of a residential water line to provide 14 residents, who have had contaminated private wells, with safe drinking water. Some of the residents have agreed to abandon their wells in an effort to stop the spread of contamination. WINTER 1992 35 Adding to Your Communications Reach by Larry L. Bingaman Vice President, Marketing & Communications, Aquarion Company Advertising has long been regarded as a communications technique used by com ~ panics to generate sales, build images, in~ fluence buying decisions or educate its publics about products and issues. For a water utility that wants to communicate more aggressively with its customers and others, advertising also can be an effec~ tive tool, when used as part of an overall strategy and a sustained communications campaign. Background In the spring of 1991, Bridgeport H ydraulic Compan y's parent changed its name fro m The Hydraulic Company to Aquarion Company. The new name and a new logo were adopted to better reflect the water,qu ality orientation of our prin, cipa\ businesses- public water supply and environmental testing laboratories. A key component of this process was planning a communications program to announce the name change and position Aquarion as a water~qua lity~related, environmentally concerned compan y. The campaign was designed not on ly to reinforce the new name and corporate identity, but to inform our customers and others about the company's key environmental and community relat ions programs. During this time, BH C was gearing up to comply with the new lead and copper rule, partnering with two local hospitals to edu cate the public about the hazards of lead ex posure to children and beginning to aggressively market selected parcels of 2,000 acres of its surplus, offwatershed land. W ith this as a backdrop, we designed and implemented targeted communica36 NAWCWATER tions programs, incl udi ng advertising, based on the following objectives and strategies: Ob jectives A. Increase customer and target audience awareness of the new name of BHC's parent company and its new corporate identity. B. Increase target audience awareness of key BHC communi ty rel ations programs. C. Increase customer awareness of BHC 's program to comply with EPA's new lead and copper rule. D. Inform customers and target aud iences of BHC's efforts with two local hospitals to provide lead exposure education throu gh bill stuffers, hospitals and phys ician offices. E. Educate cusromers, elected officials, land trust and opinion leaders about BHC's surplus land sales program. F. G enerate sales leads for advertised parcels of land. St",-ategies A. Position the name change for BH C's parent and its new corporate identi ty to reinforce the company's 'diversification into water~quality-rela ted businesses and its concern for the en vironment. Inco rp o rat e th e n ew identity system in each advertisement to increase targe t audience awareness. B. Incorporate BHC's community rela~ tions program in issue ads and other communications to demonstrate th at BHC not only complies with the spirit, but meets or exceeds regulatory requirements. c. Create an education program that not only explains BHC's land sales program, but positions it as one way to help the company make the capi tal investments necessary to meet the filtration requirements of SOW A. D. Incorporate the key messages of the land sale education ad in the display ad listing parcels for sale. Changing Your Identity In early 1990, the board of directors of Aquarion Company, formerly The H ydraulic Company, adopted a new strategic plan that called for the company to capitalize on its strengths as a public water supplier by diversifying its operations into water~qllal~ ity~ rel ated businesses. Following a year of working with a design fum, the new corporate name, logo and corporate identifY sys~ tem were developed. Following shareholdet approval at the company's annual meeting in the spring of 1991 , the name Aquarion Company was adopted. The move was de~ signed to signal to the investment conuTIU~ nity that Aquarion was diversifying into environmental testing laboratories as a natu~ ra l outgrowth of its utility subsidiary's water-quality orientation. A comprehensive communications pro~ gram was designed and implemented to announce the ch ange to our various stakeholders-employees, custo mers, shareholders, regulators, ana lysts and porti folio managers, and state and local elected officials. Actions included briefing em~ ployees before the change was implemented, issuing a news release foll owing approval at the annual meeting, givi ng employees a memento imprinted with the (continued on page 38) This is not just a sale. It's a solution for the next century. Some used for recreational purposes. Some for development. We are interested in discussing our land sale policy, and our available land with city, town and state governments, with civic groups, community clubs and developers. Because we are all neighbors in this together. The money we get for this land will be invested in improvements in our water supply system. Improvements needed to guarantee the quality of your water supply well into the next century. And, it will allow us to make those improvements while keeping any necessary rate increases to a minimum. Over the years, more than a hundred now, land has always been a part of our business that we've loved. We've bought a lot of it. We've sold a lot of it. And, all of it has been better off because we owned it, if even for a little while. We preserved it. We cut scrub and undergrowth. Always being aware of our responsibility to the environment. Sometimes even in awe. For we have learned much about how man and nature can nurture each other. Today we have about 2000 acres of land for sale, land that we no longer need to insure the quality of our water supply. Land that the Connecticut State Department of Health Services and we call "off-watershed" land. Land that we intend to offer for sale in a gradual and orderly process like we always have, taking the time to establish environmentally sound and sensitive priorities. Land that could be better used. Some kept, as it is, forever. For more information, or to arrange for your corporate, civic or community group to view a slide presentation of our land sales policy, write or call: Ms . Maureen Shea , BHC Land Management, One Canal Street, Westport, CT 06880, (203) 227-2345. Aquarion's principal businesses are public water supply and environmental testing laboratories. BHC customers and community leaders were concerned that the company was selling land that contributed to its water supply or could affect water quality. To correct this misconception, BHC embarked on an aggressive advertising and communications program to inform the public it was selling offwatershed land which was no longer needed to ensure the quality of the company's water supply. The ad also generated requests for presentations on the subject from community groups. WINTER 1992 37 Communications Reach , continued new name and logo, and designing a spe~ cial customer bill insert describ ing the change and the reasons behind it. The capstone to our communications program was an adve rtisement that ran in the New York Times, Wall Street Journal, and in newspapers serving BHe's service territory. It emphasized our commitment to public water supply, explained our wa~ ter~quality~related diversificatio n and showed how the new name and logo con~ veyed these themes. As part of the communications effort, we mailed reprints of the ad with a cover letter explaining the reasons behind the name change to opinion leaders, elected officials and other targeted audiences. The resu lts? The name change was implemented without a hitch and our tar; geted audiences were fu lly informed abou t the name change. A lthough some people are still not fully aware of the change, we have made great progress in achieving a broad unde rstand ing. Getting The Lead-And The Word-Out In the fall of 1991, BHC and its SWC subsidiary were already testing various treat; ment add itives to reduce the corrosiveness of its wdter to comply with EPA's new lead and copper in drinking water standard, which became effective January I, 1992. As an outgrowth of our community relations activ ities, we also were discussing at this time how we could "partner" with Bridge; port and Stamford hospitals in a project that would be of interest to both our cus; tamer groups. In light of the attention being given to the effects of lead exposure on children, a lead education pamphlet was a natural choice. Through a partnership with the Bridgeport and Stamford Hospitals, the company made information about lead and its effect on children ava ilable to every pediatrician, obstetrician, family ph ysician and internist in the communities we each served as well as our customers. In Bridgeport, the city's health department had received a grant to conduct blO<Xl tests on inner;city children to detennine if they had elevated lead levels in the ir blood. Unfortunately, the city's sur; face lead testing device, which is used to locate sources of lead in the home of a child whose tests show high lead levels, was 38 NAWCWATER broken. BHC and Bridgeporr H ospital jointly made a contribution to the city to have the machine repaired. T hrough the advert isi ng campaign, we were able to allay ou r customers' concern that their d rink ing water could con ta in high levels of lead and show how our community relations activities supported the company's business activities. The ads and our customer bill inserts made our customers aware that they could have their water tested for lead for only $10 per sample, half of the cost of a commercial lab test, and receive a pamphlet about preventing lead exposure in the home. The resu lts? The company recclved solid publicity about its actions and the water qua lity control department received hundreds of calls requesting tests for lead. There's More to Water Quality Than Meets The Eye Beginning in 1991, BHC began a massive capital spending progmffi, totaling some $90 million, to build or design two filtration plants to comply with the Safe Drinking Water Act and its amendments. Knowing that these projects, along with the company's ongoing capital expenditures, could cause customers' water bills to almost double by the end of the decade, BHC began communicating the impact of compliance on future water rates. In add ition to the normal commun ica; tions ac tivities, such as news releases, ground;breaking ceremo nies, ongoing news articles in the local press, and infor; mational bill stuffers, BHC produced an advert isement. The ad con veyed that BHe was not only anxious to improve water quality, but interested in improv~ ing the quality of life in its community. So, in addition to highlighting our filtration construction program, we also noted BHe's involvement in th e city's Adopt; A;School Program and "Proj ect Santa." The Good Eat·tl, A lthough, over the years, buying and selling land has always been a pa rt of BHe's water supply business, some BHe customers and community leaders became concerned that the compan y was selling land that contribu ted to its water supply or could affect water quality. To over; come this misconception, we developed a comprehensive communi cations plan to support our land sale program. Our goal was to accomplish three things: Diffuse public opposition to our land sales ; s.llland; and support BHC', business objectives. O ur communications program consisted of briefmg company employees and those who act as liaisons to our service towns so they could explain the issue one;on.;one with town leaders; bulletin board posting; coverage in the company newsletter; creat· ing a slide presentation for town officials and community groups; creating a brochure that summarized our presentation; and, ed i; torial and news reporter briefmgs. But the corn erstone of our communications plan was an aggress ive advertising campaign to educate and inform all of our publics about our land sales program. The advertisements were designed to run in two phases: an education ad to fully inform and educate our publics about our land sales program and to generate presentations to town officials, interested civic and environmental groups; and, a display ad that not only listed the parcels of land for sale, but contained key information from the education ad to ensure that our message reached the broadest audience possible. T o keep our employees informed after their briefing sessions, cop~ ies of the ads were placed on company bulletin boards. The result? The education and display ads, placed in the local news media, ge nerated more than 120 calls for informa~ tion on specific parcels listed for sale. SHe is currently in negotiation or under contract for several parcels of land. And the land sales were accomplished without public opposition. In additi on, numerous requests were received for presentations to town offi ~ cials, land conservation and environmen; tal groups. Conclusion When used in conjuction with a full commun ications plan, advert ising can be a hi ghly cost;effective method of achiev; ing you r objectives. It is the most visible strategy, with the broadest reach, and can pave the way for other communications efforts. Aquarion wi ll continue to use ad; vertisi ng as a key part of its marketing communicat ions program, based on our success in reach ing its targeted audiences. And by con ti nuing to use the new logo and name in each ad, the new corporate identity will be reinforced. ~ Preserving Primacy in Missouri by Terry L. Gloriod Vice President, Production & System Operotions St. Louis County Water Co. HB 1393 was signed into law on July 29, 1992 by Missouri Governor John Ashcroft. The bill established a customer connection "primacy" fee to be collected by wate r suppliers for depos it in the Missouri Safe Drinking Water Fund. The bill sign ing culminated an effort that had begun months earlier when representatives of six different organizat ions met with the State Department of Natu- ral Resources (DNR) to discuss the issue of funding the State Primacy Program. The DNR reported that they would be forced to give up Primacy after 1993 unless a funding mechanism could be put in place. With a fai led attempt in the prior legislative session, the DNR believed a new leg islative effort cou ld only succeed if initiated by water suppliers. Even then, chances for success were estimated to be very slim. The organizations interested in preserv, ing Primacy included the Missouri Chapter of NAWC, Missouri Section of A WW A, The Missouri Association of Municipal Utilities, Missouri Rural Water Association (MRWA), Missouri Watcr and Wastewater Conference, Missouri Wa ter Pollution Contro l Federation and Missouri ASDW A representatives. From this group, Frank Pogge of the Kansas City Water Department, then Chair of Missouri Section A WW A, established a Missouri Water Industry Coordinating Committee (MWICC). An Ad-Hoc Legislative Committee of the MWICC was appointed. The Ad-Hoc group consisted of Frank Pogge, Kansas City Water Dcpartment; John Witherspoon, Springfield Utilities; Dennis Flanery, Jackson County Water District; Jerry Lane, Mis- souri DNR; and Terry Gloriod of St. Louis County Water Company. The Ad-Hoc Committee produced a draft bill, and then relied on the com- professionals such as W illiam Gamble, who has worked avidly for the Missouri Chapter ofNAWC for the past five years. While his efforts and the efforts of the Chapter have most often focused o n avoiding "bad" legislatio n! the Primacy Fee Bill required "pushing" a bill through inches in size shalt not exceed five dollars; for customers with meters greater than two inches but less than or equa l to four inches in size shall not exceed twenty-five dollars; and for customers with meters greater than four inches in size shall not the legislative process. NAWC and the exceed fifty dollars. other organizations had managed to draft a bill that gai ned the unan imous support of all organized interest groups. The only opposition that ex isted came from within the legislature itself. Gamble's efforts focused on education of the State Representatives and Senators about primacy, the desire to retain it, and the need for resources that had not been forthcoming fro m Genera l Revenue approp riat ions. During the critical Committee hearings (4) Customers served by multiple connecti ons shall pay an annual user fee based on the above rates for each connection, except that no single facility served by mu lti ple connec~ tions shall pay a total of more than five hundred dollars per year. 7. Fees im posed under subsection 6 of this sectiun shall become effect ive and floor debates, the MWICC organiza- on August 28, 1992, and shall be tion proved essential in gett ing the mes, sage of support to Missouri Legisla tors. collected by the public water system serving the custome r. The commission shall promulgate rules and regulations on the procedures for billing, coll ection and delinquent payment. The fee portion of the bill is best described by the actual language contained therein: Fees collected by a public water sys(2) The annllal fee per customer se r~ vice connection for unmetered customers and customers with meters not greater than onc, inch in size, tem under subsection 6 of th is section are state fees. The annual fee shall be enumerated separately from shall be based upon the number of lected in monthly, quarterly or annual increments. Such fees shall be transferred to the director of the de~ partment of revenue at frequencies not less than quarterly . Two percent of th e revenue arising from the fees service connections in the water sys, tem serving that customer, and shall not exceed : 1 to l ,OOO connections 1,001 to 4 ,000 connections 4,001 to 7,000 connections 7,001 to 10,000 connections 10,001 to 20,000 connections 20,001 to 35,000 connections 35,00 1 to 50,000 connections 50,001 to 100,000 connections More than 100,000 connections $2.00 $ 1.84 $1.67 $1.50 $1.34 $ 1.1 7 $1.00 $ .84 $ .66 all other charges, and shall be col- shall be retained by the public water system for the purpose of reimburs, ing its expenses for bill ing and col, lection of such fees. While the suppleme ntal fees will cer- bined work of the leg islative liaisons of (3) The an nual user fee for custom- ta inly help in preserving Primacy, a con, ti nued effort will be needed to ensure that funding from general revenue keeps pace wi th the increasing requirements. NAWC and MRWA to carry the bill. This effort proved the worth of skilled ers hav ing meters greater than one inch but less than or equal to two (continued on next Ixtge) WINTER 1992 39 annual testing was eliminated , favoring instead testing at the frequency required Preserving Primacy, continued has rule making authority over the Safe Drinking Water Program. The nin e· mem, ber Commissio n has four water suppli er represen tatives and five representatives of changed the State Drinking Water law. The under the Federal SOW A. The final provision of HB 1393 wor- former statute required that all water sys~ thy of no te related to the administra· the general public. Rulemaking and en- tems be tested on an annual basis for all contaminants regulated llllder the Federal 1986 SDWA. The annual testing requirement had been championed during the late tion of the Public Drinking Water Program. Prior to HB 1393, the Department fo rcemen t of rules is now ex pected to be accomplished o n a mo re equitable and can· sisten t basis with the Commission in place. O ther provisions of the bill materially 1980's by environmental interest organiza~ tions. At that time, water suppliers had ar. . gued against testing at frequencies different from the Federal monitoring requirements, pointing out the extreme resource require . . ments. We lost the argument and annual testing was enacted into law. With HB 1393, of Natural Resources had complete au· tonomy in administering the Missouri Drinking Water Law. A State Safe Drinking Water Adv iso ry C ommittee was in place to discuss and make recorn· mendations, but the Commi ttee had no authority over the Department of Natu, ral Resources. HB 1393 pu ts into place a Safe Drinking Water C ommiss ion that HB 1393 serves as an example of what can be accomplished when the Public Water Supply Industry and other public organizations work togethe r in a common cause. The strength of the Missou ri WICC will undoubtedly co ntinue to be a corner' stone of support for water supplier inter, es ts within the Missou ri Legislature. t Hurricane Response by Roger Ytterberg Regional Manager, South Florida Region Florida Cities Water Company Some utility systems resort to mock disaster to test the efficacy of their eroee. . gency operations plans. The problem with mock d isas ters is that the c ircum . . age tanks and to fill other tanks lest they float in high water. Lift/pumping In [esponse to a plea from Florida Department of Env ironmental Regula. tion (DER), FCWC was in a position to offer help to Collier County Utilities, stances are generally textbook in their station voice reporters were deactivated to prevent them from dominating the radio system. We were as ready as we predictability and the response o mits the knew how to be! Copeland. The latter was especially grati, Everglades C ity, and th e "city" o f adrenaline factor. We had no such defi- When the hurricane roared through cienci es in o ur dri ll when Hurricane South Collier County, sparing Lee County, fy ing because their power was down and had been down since the hurricane A ndrew visited South Florida. T he cir- we were, thankfully, in a position to help struck Monday morning. We brought cumstances were all too real and the adrenaline rush, sustain ed for an ex· tended period , generated an extraord i. nary ability to accomplishment as we ll as a genuine let, down when the crisis others. We quickly focused our attention on Golden Gate (one of our divisions lo, cated in Collier County) which was with, them sufficient generating capacity and staff to get the ir water/wastewater util~ ity up and running until their no rmal power was finally restored. What did we learn from the exercise ? The lessons were numerous and diverse had passed. The drill began on Friday, August 2 1, when the hurricane warnings had to be taken seriously. Throughout Friday and Saturd ay as A ndrew continued it's ad· vance to the Florida coast, materials were J au[ power, then Miami, then others. The Saraso ta Division supplied us with genera, tors and tar paper. Other generators came fro m Po inci ana, Barefoo t Bay and Hillsborough County as they couldn't be begged or bo rrowed locally . Paul Bradtmiller, Executive Vice President of Florida Cities Water Company (FCWC), including such things as: in the wake of a d irect hit fro m a hurrica ne, th e onl y vehicles mov ing are those with four wheel dr ive and they had better be offered his time (and his ability to speak diesel po wered o r they wo n't be mo v· ing long; aluminum fasc ia and soffits can be cheap and attractive but they become flying razor blades when a hu r~ ricane hits. Then, too, we demonstrated so me deficiencies in our communica· ti o n system, including the n eed for Green Meadows and Fiesta Village in S panish) to ass ist. O ur crews came back portable cellular phones, and the fact the eve nt the plan ts were inaccessible after the hurricane hit. Emergency food supplies were d istributed , and the signal was sent to top·off all of the water stor, with tales of everything from National that the staff mem bers who function best are the ones who have peace of mind as far as the safety and security of their families are concerned. collected and assembled, tanks filled, emergency equipmen t was tested once again. By Sunday afternoon, the attack was eminent. The battle plan was drawn , staff ass ignments confirmed. Individuals were ass igned to spend the night at 40 NAWCWATER coordinated some activities out of Sarasota. We took generators, chain saws, food, wa, ter, gasoline, propane, lumber and roofmg materials to Miami. Michael Acosta, se, nior engineer, was on vacation but he G uard roadblocks to road "pirates" who were relieving Good Samaritans of their supplies. System Trends in the 90's for Utility Companies by Barry Strock Barry Strock Consulting Associates, Inc. This is the tenth anniversary of the release of the IBM personal computer. In the 1970's and 1980's it was necessary to ha ve experienced programmers to use computers. T oday, accountants and clerks are able to use personal computers with; out much formal training. In the 1990's utility co mpanies will be searching for total information solutions, not just hard~ ware. A total information solu tion incor; porates the software of choice, the hard~ ware required, and extern al devices such as bar code reader/ printers and handheld meter readers to fur ther support the software. There are several issues needing consideration with planning to purchase a computer system: H ardware Hardware prices over the last 10 years have plummeted and are continuing to drop. The price performance (or bang for the buck) of current hardware was non imagined a decade ago. Consequently, hardware cost is be; coming a less important component of total information system solutions. Software Software developers are more often using new tools such as fourth gen; eration languages, open architecture for operating systems (e.g., Unix), relational databases, ad hoc report writers, and various other tools to provide more flexible system solu ~ tions for utili ties. Systems People Data processing people are being rei placed by end users. Data processing professionals were dedicated to main; taining the computer and its soft. . ware first, with secondary emphasis on the users. Most emerging systems are designed for end users and the clients they serve. An end user could be a utility customer service repre; sentative or the meter reader in the field. Utility customers are seeking more sophisticated budget payment plans which require utility compa; nies to know more about the indi~ vidual consumption patterns of eli; ents over several years of service. Utility Operations Philosophy Utilities are being forced to run more efficiently and to provide more in ~ formation to their cListomers and to regulatory agencies. Systems with integrated work orders and service orders are serving as tools to increase productivity and reduce costs within the processing of information and work tasks within the utilities. Functionality With more consumer advocacy and rules mandated by public service commissions, the traditional func .. tionality of utility software packages is beginning to change significantly. For example, some utilities must go through a notification process prior to turn ing off service and need to be able to more thoroughly track and document activities such as inspec; tions or shutting off services. Peripheral Devices A peripheral device is any device not included in the main computer. Relatively common peripheral de; vices such as laser printers, scanners, bar code readers and hand held meter reading devices are no longer luxu; ries but necessities. Innovations in information processing are allowing utilities to be much more efficient and cost effective. For example, one utility with less than 10,000 customers had ant iquated infor~ mation technology which was not pro~ viding good accounting of costs and ex~ penses. Its system needed 11 full-time programmers. This company should need no more than three systems professionals (continued on next page) WINTER 1992 41 Systems Trends , continued with a modern end user sys tem, thereby red ucing its annual operating costs by more than $ 1 mi llion dollars. Another utility had in ves ted several million do llars in a hom e~grown system which needed ano ther $ 1.3 million in systems enhancements after the state pub~ lic service commission mandated new re~ quirements. After a thorough research of the market with the use of a consultant, it purchased a turnkey system for slightly over $500,000. This was less than 40% of the ori ginal es timate of $1.3 million as provided by the incumbent firm who wrote the software. Just as most people would not th ink about building th eir own car from scratch, it is equally unthinkable to consider building or maintaining a uti lity computer sys~ tem from scratch. Except fo r a very large company, mos t ut ilities may be be tter ser~ viced by end ~ user turnkey da ta processing solutions. Downsizing or ri ght~siz ing the data processi ng staff and expense is a con ~ ccpt that is quickly being considered by utilities. Utilities should have indepen~ dent professionals look at any system up~ grade OJ' purchase. Often in~house da ta processing professionals with a ves ted in~ terest in jobs, budget and infl uence may not recommend inexpensive and less la~ bor intensive systems. In some cases, in~house professionals are not aware of the abu ndant ava ilability of mode rn system solutions. One com~ pany was printing hundreds of pounds of paper every night as an auxiliary backup to its mainframe. A local area networked fil e server could have been a cost~effec~ tive backup, but the mainframe orienta~ tion of this in-house staff had precluded this contemporary technology as not be~ ing adequately designed to meet th eir needs. Most hardware becomes obsolete within about five years. O bsolescence does not happen because the systems are no longer function ing, but ra ther because new tech ~ nology is making maintenance costs more expensive than the purchase of a new system with much reduced maintenance CO!-its. A lso, what you can purchase in th e new systems so Significantly exceeds that of existing hardware that it may be more costly to n urse old h ardware along than 42 to replace it. Finally, older hardware in many cases needs large ai r conditioned rooms whereas newer equi pment may re, quire a smaller n on~air cond itioned space. For example, one company had a roo m filled with hard ware to store 2 million pages of data, whereas a new tape backup device smaller than a pack of cigarettes can store 5 million pages of data. This reduction in hardwa re and space require ~ ments is drastically changing the role that data processing operations have had in the past. When a utility plans either to upgrade an existing sys tem or purchase a new sys~ tern it should undertake at a minimum the following steps to ensure a successful systems procurement and installation pro~ cess: 1. Management Plan A sho rt analysis to determine man~ agement goals vis a vis the quali ty and cost of service of management's data processing operations. 2. Inventory: Needs-Hardware/ Software .. Process Procedures .. Forms~ Vo lume T his process is often overlooked but is essential to understand what you have and why you are using what you are. Too often, antiquated sys~ terns are being used because we a1~ ways did it this way. 3. Needs Assessment An independent assessment of needs to determine the company's overall requ irements. Ma ny utilities just buy new equipmen t because their o ld hardware is too slow and a salesper~ son talks them into upgrading. Do not upgrade without asking competi~ tors in to at least learn what they have to offer and at what price. 4. Request For Proposals Write a request for proposals. Even if you want to do business only with the incumbent vendors (hardware and software), you may be su rprised at what price and functi onality they propose if they think the RFP is going ou t to their competitors. 5. Evaluation of Vendor Proposals When evaluating the vendor pro~ posals be sure to have at least three to five on~si te demonstrations of the software and the n be sure to visit at least twO comparable client instaUa~ tions from two vendor finalists. Dem~ onstrations and o n~s i te vis its have produced some very in teresting and surprising results. 6. Contracts and Negotiations Typically vendors tell clients that their standard con tracts cannot be changed. Do not believe them. I f a system is competitively purchased, most vendors will fi nd a way to ne~ gotiate a contract with more favo r~ able terms and conditions if they thin k th ey may lose the business. 7. Preparation for Installation Prior to any installation a formal fit analysis should take place in which all parties agree in writing about how the client will change to fit the new hardware/software and how the software vendor will change to fit the client's needs. No system will fit any one client without any changes. The hardware installation may require less physical space but different commu~ nications. Do not assume that it is best to save money by using old wir~ ing, old power supplies and old proced ures. O ne client had a seven~part purchase order with its old system, whereas with the new system it needed only a three part~form. It was diffic ult to persuade clients to elimi~ nate the addi tional four parts of the fo rms. Conversion will be a critical task in the installation of a new sys~ tem. Be sure the options that are available to convert data have been thoroughly though t about and priced. 8. Monitoring the Installation System changes do not happen auto~ matically and without pain and suffer~ ing. A very structured installation pro' cess should be instituted that includes regularly scheduled meetings between the vendors and the client at routine intervals with formal written min utcs and agendas. This will make the process much more orderly and will pro' vide legal documentation as to what everyone agreed to throughout the i l1 ~ stallation process. , NAWCWATER ? Welcome to • • • Our Newest Active Member Companies Moongate Water Co., Inc. Organ,NM John F. Guastella Guac;;tella A ssociates, Inc. Peapack, NJ Champion Hill Development Cotp. Carthage, NY Nittany Water Co. Howard, PA Crystal Bay Water Co. Stockton, CA Rand Water Co. Fishkill, NY Duke Power Co. Anderson, SC Sunhill Water Cotp. Garden City, NY UNUM Life Insurance Co. of America Portland, ME Dutchess Estates Water Co. John Kiernan Poughkeepsie, NY Swan Lake Water Co. Garden City, NY Hilton Head Plantation Utilities, Inc. Hilton Head, SC Technology/Hydraulics, Inc. Austin, TX Francis A. Hutchinson Jewett City Water Co. Needham, MA Marrk-V Water Co. Elida,OH William S. Howard Camp Dresser & McKee Edison, NJ Our Newest Associate Members Rick Albani Meyers Water Co. W ade Miller Assoc iates, Inc. Napa,CA Arlington, VA lonic5, Inc. Watertown, MA Robert Kosian C itibank, NA New York, NY Tom Pickens T. B. Pickens & Co. Locust Valley, NY Jay Shutt Floyd Browne Associates, Inc. Marion,OH Radio Watch In Action by Roger Ytterberg Florida Cities Water Co. In co njun c tion wit h NAWC's Radio Watch program, Deputy Carol Crews of th e Fort Myers S heriff's Departme nt h e ld three training ses~ s ions for Florid a C iti e s Water Co mpany's Fort Mye rs staff o n Octo- ber 20, 22 and 23. A to tal of 52 people recei ved o ne ho ur train ing. Shortly after the fin al session, one of the trainees had a c hance to put the program in to ac ti on. O n Frid ay afternoon, October 23, within hours of complet ing the training, one of our meter readers was out on routine assignment when she noticed two men in a van who appeared to be "casing" houses in the gating the suspects. S ubseque ntl y, they we re handcuffed and removed from th e n eighborhood. neighborhood. The mens' behav ior might End of story. Except th at this see ms not have been so susp icious had not the meter reader's consciousness been raised by the training. Fee lin g so me thin g was "j ust not quite right/' she called th e d ivision o ffice (fo ll owing direc tions received to be a textb ook case of the Rad io t hat day), the dispa tch er ca lled 9 11 , and within five minutes the sheriff's department wa s on th e scene in terro; Watc h program at work. A t the ve ry least, misch ief wa s ave rted; perhaps muc h mo re than th at. At any rate, the public was o nce aga in well;se rved , and we had a part in it. As the me ter reader sa id, "It was scary. J d idn't wa nt to get in volved, but it fel t goo d to be able to do somethin g positive." , WINTER 1992 43 The Dilemma of Taxation of Contributions . . In . . Aid of Construction (ClAC) by Stephen j. Densberger Vice President Pennichuck Water Works, Inc. The T ax Reform Act of 1986 changed the tax status of Contri butions~In~Aid of Construc tion (CIAC) received by ut ilities. The 1986 Act requires that CIAC be recognized as revenue in the year the util ~ ity receives the contribution. In doing so, the Federal Government has created a situation wh ich discourages the takeover and operation of small , inefficient, poorly run satellite water systems by larger pro~ fessionally operated invcstor~owned pub~ lic water utilities. Failure to re move this barrier may create serious public health and safety problems in the future . Con ~ gress must insure that the collection of revenues by the Federal Government does not conflict with, nor se rve as a disincen~ tive to, achieving more important public health and safety goals, namely, compli ~ ance with the Safe Drink ing Water Act. Pennichuck Water Works is an inves . . tor~owned public water utility in Nashua, New H a mpshire. The company was incorpora ted in 1852 and grew with th e comm unit y of Nas hua. Today , Pennichu ck provides water service to a population of about 100,000 and to business and industry in seve ral communi ties in the greater Nashua area. Pennichuck's origina l service area was contained within the city limits of Nashua. In the 1960's the neighboring community of Merrimack needed a larger supply capability to se rve an industri ally zoned area of the town. The area abutted the franch ise boundary of Pennichuck. Local and state officials 44 supported the expansion of the Pennichuck franchise and distribution sys~ tern to serve this growing area. This effort began the regionalization of water service by Pennichuck_ In morc recent years, Pennichuck has acquired sma ll, satellite systems in neigh~ boring towns in southern New Ha mp~ sh ire. Thcse satellite systems were typi~ cally constructed by developers to serve residential subdivisions in areas where no municipal,scale water service was avail, able_ Community Water Systems (CWS) were constructed instead of individual wells because a community water system was more economical to build and, in many towns, property may be developed more densely when community water and/ or waste sys tems are constructed. Some of the community water sys tems which Pennichuck acquired were in bad shape. Interruptions to service, extended outages and bacteria outbreaks were n ot uncommon. In some pumping stations equipment was inadequate or improperly installed. Homeowners frequently co m~ plained to the N. H. Department of En v iron mental Servi ces (DES) (formerly the Water S upply & Pollution Control Commission) and to the New H ampshire Pub~ lic Utilities Commission (NHPUC) about the poor se rvice. DES asked some of the larger, municipally operated water utili ~ ties to resc ue some of these small satellite systems but the municipali ties declined to get involved. In 1978, the Chairman of the NHPUC informally asked several of the State's larger investor~owned water companies to consider acquiring the satellite systems and restoring them to proper operation. The Chairman indicated that the NHPUC would provide adequate incentives to make it worth taking on the liability assoc iated with the acquisitio n of the smale satellite systems. Pennichuck responded affirmatively to the request and became actively and aggressively involved in the acqu isition of satellite systems in the southern New Hampshire area. Other in vestor~owned water utiliti es responded as well and in 1987 the Nashua Region al Planning Commission and the NHPUC established the Southern New Hampshire Water Supply Task Force to address regional wate r supply planning; assess the competing interests of the investor-owned utilities; and look ahead at how new, developing areas shou ld be served. By 1990, many of the small, poorly run sys tems had been acqu ired and the frequent complaints and public h eal th concerns were substantially reduced. As new systems have been planned and con ~ structed, the investor~owned public u t il ~ ity companies frequently acquire these new systems, thereby insuring proper co n~ struction and operation at reasonable rates from the outset. In an effort to keep water rates reason~ able, the utility compan ies typicall y do not pay for the full replacement cost of these utility systems. An acquisition price NAWCWATER i is generally established which allows for some capita l recovery by the owner hut also reflects the risks and liability of owning and operating a small water sys~ rem. The lower negotiated price is gener~ ally accepted by the NHPUC as the rate base for the CWS and that value becomes the investment component in de~ tennining the appropriate level of water rates for that CWS. The lower negotiated price generally results in lower rates to the customers than the rates which would result if the Company paid the replacement cost value for the system. The ini~ tial cost of the supply and distribution system not paid for by the utility com~ pany is recouped by the developer in the price of the dwelling units. The Taxation Dilemma The 1986 Tax Reform Act reversed the position establis h ed in Revenue Ruling 77-177 which had exempted contributions of capital to a utility from income tax. The Act required property contributed to a utility, particularly new water main extens ions in stalled by developers to se rve new subdivisions and then turn ed over to the local utility company, to be included in gross income. The water utility is responsible for payment of the tax. In some states, the utility is allowed by the public utility commission to gross up the con tribution and collect the tax on th e contributed property from the developer. In New Hampsh ire, the utillty is required to pay the tax. The NHPUC allows the tax to be capitalized and included as part of the utility's rate base in setting water rates. In New Hampshire, the tax on CIAC leads to a higher utility rate base which, in turn, leads to higher water rates. This tax is detrimental to a utility company's cost of service regardless of the size of the population served. How; ever, the tax becomes extremely burden; Some when applied to the acquisition of small satellite water systems in New Hampshire. In fact, due to cus tomer backlash to high rates and the inherent resistance of the NHPUC to allow the necessary high rates, the tax on CIAC becomes a disincentive for acquisition of small, inefficient, poorly run sys tems by larger private utility companies. The government's objective of h av ing private industry respond to the public health and safety issues attendant with small water systems is being thwarted by the negative effects of the tax. The Case Stud y attached illust rates the negative impact of the tax on the utility company's cash. flow and on the ultim ate water c h a rg es to the h o meowner. Richardson Estates was acq uired by Pennichuck prior to the repeal of the exe mpti on of tax o n C IAC. Under today's tax regulation, Pennichuck wou ld be forced to invest $31,000 more into a system than the company or ig inall y deemed prudent. Homeowners who are already snug; gling to make ends meet would be forced to pay an additional $2 18 per year for their basic water service . The re-authorization of the Safe Drink; ing Water Act will result in many changes in the water ind ustry. Small systems will be particularly hard bi t as they work to meet many of the new requirements being set forth by the EPA. Water rates wi II increase dramatically as small syste ms implement changes to comply with the new rules. Many of the new regulations are important to public safety and health. Capital from private industry will be needed to make many of these important changes. For example, the proposed new rules for radionuclides in drin king water will result in significant additional in; vestment in treatment equipment and water system modifications for the removal of radon gas. Private capital will be critically important to implement many of the needed changes. The tax on C IAC diverts utility cap ital away from other important needs. The tax on C IAC is bad legislation and must be repealed. • Pennichuck Water Works, Inc. Richardson Estates Case Study of the Impropriety of an Income Tax on Contributions in Aid of Construction (CIAC) Richardson Estates is a residential subdivision in East Derry, N.H. The project consists of 18 duplex structures. The h omes were built in 1986 and a community water supply was constructed to provide water service because no municipal water service was ava ilable. The community water system consists of two deep bedrock wells, a pumping station and 3,000 feet of 4-inch pipe. The housing units are owned by people who are in the low-midd le to low income bracket. The developer of the project was encouraged by the State ofN.H. Division of Environmental Services (DES) to turn the water system over to a utility or certifi ed operator. Whereas there were several investor-owned public utility water companies operating other water systems in the area, the developer decided to "sell" the system to a utility company. He negotiated a contract with Penni chuck Water Works of Nashua, N.H. to sell the system to Pennichuck for $12,600. Pennichuck's investment, or rate base, is predicated on the negotiated pri ce plus additional investment for acquisition costs and metering. The estimated replace; ment cost for the system is $90,000. Under today's scenario of taxation on contributions in aid of construction, Pennichuck would also be required to pay federal and state income taxes of $30,960 a:; a consequence of acqu iring this system. Present average annual water cost per household $620 Average annual water cost after tax on CIAC = $838 Homeowners will be forced to pay an additional $218 per year for their water service which is purely the result of the tax. The Safe Drinking Water Act require ments are already placing a huge burden on small water systems in the U.S. It seems unforgivable that the federal gove rnment would add the burden of th is unnecessary tax to already over-burdened home owners. = WINTER 1992 45 Executive Directorls Report by James B. Groff Writing this (relatively) short article every three months for WATER gives one pause to reflect on the importance of such musings. Frankly, I'm awed by the work of syndicated columnists whose efforts are broadcast far and wide. In our own little world of NAWC, the distribution of W ATER magazine to the Association's membership, regulators, members of Congress and their staffs and various offices within EPA, issufficientto command (my) respect and, undoubtedly, engenders a ce rtain amount of trepidation. Sometimes, those who have the oppo rtu~ nity to use power mightier than the sword, perhaps because of the press of business, have a tendency to focus on their own world. There is, in fact, a responsibility to address the relationships with the much larger sphere of national, or even international, activities in which all have an interest and can play an important role. For example, in NAWC's world, the Association with the adroit leadership of (now) President Bill Holmes, held a most successful Annual Conference in Hilton Head , South Carolina. Program content and par~ ticipants were superb, and despite weather that was less than perfect, I heard no complaints, thanks to the hard work of the dedicated individuals of Consumers Water Company and staff efforts guided by Mike Homer. Parti cipants in this 96th conference in . . eluded , in addition to our members, ind iv idu a ls rep resenting b us iness, t h e U.S.E. P. A., environmental interests, consumers, regulators and others. Excellent attendance at the general sessions and seminars demonstrated the investor-ow ned industry's interest in sub. . jeers debated both formally during panels and presentations, and informally during social and recreational events. The sub . . stance of the commun ication that took place, ca rries far beyond the world of Hilton Head , and what occurred there, 46 NA WC W ATER will h elp promote und erstanding and progress as these iss ues are pursued in other forums throughou t the nation . Yes, the annual conference was an important event for NA W C . A nother important event occurred on November 3, when the people of th e United S tates elected a new president and a new parry to run the Executive Branch of th e governmen t. Historians, hopefully obj ectively, will evaluare the 1992 elec tions and its impact upon the country, and perhaps the world. T oday is what is important for NA we, fo r now is th e time to integrate our uni verse with the " new world)) evolving in W ashington, D.C ., and state and local centers of government throughout the country, to ensure that the in terests of our industry and its customers, are effi ciently and reli ably se rved. The American political system is fascinating. World leaders, historians, poli tical practitioners and analysts of all stripes and nationalities have studied it from all sides. Far from perfect, most agree (although 1 had a few bad moments the other day) it is still the best system in the world today. Regardless, Americans have bee n qu ite vocal about their discontent with its performance. Members of Congress, as well as the president, have been subj ected to significant criticism. While much of this has been earned , certa inly the vo ters must accept a share of the re sponsibility for those instances where it is felt that the process has failed. Regard less, th rough the individuals elected to offi ce and the messages sent to them by personal contact, letters, telephone calls, and FAX, A mericans ca n play a role in the management of the co untry's affairs. 1993 will be a year of great change. Significant turnover in both the Senate and the House, as well as in the Admin istration (as many as 8,000 polirical appointments will be made ) charges our Association with both a responsibility and an opportunity. NA WC is building its reputation on Capitol Hill. But with many new members of Congress, the NAWC must now cultivate a strong sense of con tinuity. It is important [0 be among the first on the doorsteps of the new members and to be a part of their early education. A t the same time, those who are returning [0 Congress cannot be forgotten. As they prepare for the new session, we must be sure that they are reminded of who we arc and what we expect. There arc roles both for the staff and for the members of NAWe. Certainly, the Association's government affairs office and Government Relations Committee will play key roles, but the assistance, effort, adv ice and foundations that the Association's members have with both returning and new members of Congress, as well as the Administration, are the key to success. The N A WC's members, the voters, the constituents, are the ones that can ensure the success of the Asrociation's legislative objectives, and there are a number of them. Members of Congress-new and reelected- will be hearing from a multi tud e of organizations. N A WC, for its part, will target those members who are key to tax and drinking water initiatives. Accordingly, involvement by all of NAWC's members is essential. NAWC A number of positive things occurred at the N A WC Board of Directors' meeting at the annual conference in Hil ton H ead. The Board not only approved a 1993 budget, balanced with income equaling expenses that total $1.5 million, it also elected for the 1992- 93 year, a new slate of officers headed by Bill Ho lmes (Consumers Water Co. ). A t the Execu tive Committee's recommendation, the Boa rd also adopted ten new, o r in some cases expanded , five yea r • goals for the Associa tion. They are: (1) Become more proactive in the reauthorization of the SDW A. (2) Establish a presence in EPA to influence those issues that impact the inve5tor~owned industry. (3) Encourage and faci li tate privatiza; ri on of municipal systems and pub, lic,private partnerships. (4) Aggressively pursue tax issues to pro' vide greater equity between invcs, tor,owncd and municipally,owned water utilities. (5) Improve communications within the organizatio n , with emp hasis on strengtheni ng tics between the na, tion a I and its chapters, such that the overall organization becomes more effective in its legis lative and regu, latory initiatives. (6) Increase membership and further consider inclusion of investor,owned waste water utiliti es. (7) Aggressively pursue organization of ad dit ional state chapters. (8) Continue a strong, assertive regul a; tory relations program. (9) Maintain a sound financial position and rese rve. (10) Promote investor-owned water utilities' contributions to the nation's public health and economic viability. To acco mplish the above and recognizing th at NAWC's members would benefit by the Association focus ing more fo rt on the b us iness aspect of th e investor-owned water supply and related management initiatives, the Board ap . . proved the addition of on e professional to NA we staff. The duties fot this individual will allow NA we to be more invo lved with EPA and other government agencies such as OMB, Treasury, ctc.; purslle privatization (wh ich seems to be ga ining momentum in EPA); and allow greater involvement in the reauthorization of the Safe Drinking Water Act. In regard to membership and chapter de~ ve lopment, at the time of this writing, NAWC's membership st::mds at 359 active members and, with the recent addition of the statc of Washington, twe lve chapters. Further, in addition to the j.j . Barr Scholarship, the Association now, due to the generosity of Utilities, Inc. and its chairman, Perry Owens, has awarded a second scholarsh ip, the David L. Owens Scholarship, to a deserv ing student in cr 1992. Our congratulations to both Kirk T. Gavel and Bruce A. Utne. Government Relations In addition to the significant potential for major tax legislat ion in 1993, it is very likely that major steps will be taken in the reauthori zation of the SOW A, as well as a myriad of other legislative initiatives de~ signed to gain revenue for the Treasury. To ensure that NA WC's members' business in~ terests are not compromised in this proccss, the staff in Washington and the members of the Association must recognize that it is now more important than evcr to strengthen relationships with members of Congress. With that in mind, the Association hac; a number of activ ities, detailed in the report from the Director of Government Affairs, to be pursued by both staff and Association members. EPA The change in the Administration wi ll mean that approximately 22 individuals hol ding ap pointed posit ions in the U.S.E.P.A., at th e assistant administrator level and above, will leave in the near future. (Resignations were requested just prior to the election .) The vacancies thus created will be filled with new appointees who will require time to become familiar with their new responsibilities. The pos i~ tion of Director, Office of Ground Water and Drinking Water will not be affected except that, at least for the immediate future, the water industry can anticipate seeing less of Jim Elder due to his involve ~ ment in the education of the new Agency hierarchy. One only has to recall that Democrats were pa rticul arly crit ical of the lack of enforcement by the Agency, to anticipate that enforcement will be a too l to make th ings happen more quickly un~ der the new Administration, and that the Agency will be perceived to be taking a harder line on a number of env i ronmen~ tal issues. Given the num ber of new regu~ lations addressing such complex issues as radian uci ides, dis infection/d is in fec tion by~prodllcts , ground water disinfection, lead and copper, etc., the water industry could be in for an interesting time. As most arc aware, EPA is facing a num~ ber of legislative, as well as court ordered, regulatory deadlines. A major impediment to meeting these deadlines, to say nothing of the quality of the product to be delivered, is resources. For example, the amendment to the enacted appropriation legislation, re~ quires the Agency to provide a detailed report to the Congress on implementation of the SDW A amendments of 1986, including cost impacts, the regulatory process, etc. However, Jim Elder's office has received neither add it ional funds or people to ac~ complish this report, and there is a concern that the study ultimately delivered will essentially be an old book with a ncw cover. In a similar vein, an analysis that would address th e nation's capacity to analyze drinking water for current and evolving wa~ ter quality parameters, has not occurred in a timely manner. The result is a perception that there is sufficient laboratory capacity to meet demand, when in reality the Agency believes the opposite to be true. The ongoing disinfection/di sinfection by-p roducts (D/DBP) negotiated ru lemaking is giving participants repre~ senting industry, utility, regulator, envi~ ronmental and consumer interests insight into the problems EPA faces as it attempts to develop reasonable water quality regu ~ lations. Missing is adequate science. Some~ how, Congress and the Agency must be ~ come aware, and positively address, the need for more researc h in th e drinking water area. NA we is anticipating a great deal of activity in the regulatory arena champi ~ oned by EPA, and must become a greater influence in th e process. Thanks During his remarks at the annual meet~ ing of the Association's membership in Hilton Head, President jay Weinhardt described the progress the Association has made over the past five years. I know that all the Assoc iation 's membership recognizes that that progress would not have been made without the dedication and commitment of people like jay. jay, as well as most of NA we's leadership, are already very busy as senior executives of investor~owned water utilities. In Jay's case, as President of San Jose Water, he was deeply involved with a maj or merger. Regard less, he was always there for the Association and some~ how always found time to superbly repre~ sent the NA we when meeting with law~ makers, regulators, chapter members and numerous other occasions. It was a great year, and Jay deserves all of our thanks for his commitment. • WINTER 1992 47 Regulatory Relations Report by Sharon L. Gascon Regulators Speak Out at NAWC's Annua1 Conference NA WC's 96th Annual Conference was attend ed by 41 pu blic utili ty commission regul ators. This continues the trend of increased interest in this event by com~ missioners and commission staff, who look to our conference as a means of providing information and a forum for communica~ tion with the private and investor~owned water industry. Communications-Can We do Better? O n the subj ect of communications, regulators provided a number of sugges~ tions to the industry during a panel d iscussion on Tuesday. Commissioner Linda Stevens, of N ew Hampshire, suggested that th e industry become more proacti ve. For instance, working collectivel y in a state, or through NA we in Washington, compa nies co uld develop seminars to prese nt to their PU C on topics of special interest. These seminars could be pat~ tcrned after the one on the SDW A and financial status of the industry presented by N A W C to a number of commissions this year. Commissioner Stevens also suggested sending commissioners, on a regu~ lar bas is, articles and papers that discuss curren t issues confro nting the industry. Commissioner C harles Hughes, from North Carolina, also recognized the be n ~ efits of special seminars. He po inted ou t that they are a pa rticularly helpful mea ns 48 NAWC WATER of providing generic information since they do not interfere with ex parte rul es that ban certain communications. He also suggested that companies use N A W C as a clearinghouse to transfer innovative ideas that may have worked in other states to the attention of other commissions. Commissioner David Ziegner, from In~ diana, also felt that the industry needs to wo rk harder at communication. H e pointed out that the Indiana commission has minimal contact wi th water compa~ ni cs, compared with other utilities. For example, he has been asked to tour a number of utili ty facilities but never a water plant. He emphasized that the commission cannot regulate in a vacuum and pointed out that companies should not wa it until they have a rate case in progress to bring techno logical and regul atory mandates to the commission's attention . I n closing, Commiss io ner Steve ns stated t hat when NA W C's Executi ve Director, Jim G roff, asks stud ents at th e NARUC Water Rate Seminar how man y had ever visited a water t reatment plant, very few raised their hands. When the sam e question was asked about a winery, brewery or distillery, almos t every hand in the audience went up. What is the Difference Between Communication and Lobbying? Commissioner Hughes feels that the type of generic information N A we pro~ vides is essential communicati on for regu~ late rs and the industry. With respect to NAW C dues, he feels they should be considered as an allowable expense. This affi rmed the o pinion ex pressed by NARUC's now immediate Past-Presiden t Kenneth G ordon, during his opening re~ marks, who commented that the work of trade associations is an essential part of condu cting business by an industry and, therefore, a reasonable expense. What about the SDWA Reauthorization? The A ct has gone too fa r in Comm is~ sioner Hughes' opinion. In North Carolina, compliance will pu t some water CO ITI ~ panies out of business and in many cases, encourage people to use priva te we lls again. He sees a need to educate the state's legislators and plans to address this need during a conference in 1993. Con versel y, Commiss ioner Zieg ner views his mandate to be one of policy implementation and therefore it is inap~ propriate to participate in legislation de~ ve lopment. N A RUC W ater Commi ttee Chairman Paul Foran felt that PUCs do have an important policy formul at ion role and must put thei r expertise forward to legislative entities. He noted that, while PUC's must ultimately enforce the rules, they should still make their views on proposed legisla ti ve an d regul ato ry initiatives known. H e opined that this is the pri~ mary role ofNARUC. Commissioner Stevens agreed that some aspects of the SOWA, while aimed at protecting health, may be the wrong answer and commissions should weigh in on the issues. She fe lt that it was the industry's responsibil ity to provide legis~ lators with information that will assist commissioners and their staff to partici ~ pate in the process. What is the Element af Risk for the Indust ry? In Missouri, Commissioner Perkins noted that return on equity for water has exceeded that for gas and electric. Com~ miss ioner Hughes, noting that small companies carry a lor of risk, commented that his state water hearings generate a great deal af interest due ta the health aspects associated with providing a con~ sumed product. This factor, in itself, is a unique risk. Commissioner Stevens then suggested that additional pressures on the industry, such as least cost planning, uncertainty regarding regulations, and construction mandates also have contributed to in ~ creased risk. Commissioner Ziegner agreed that com~ missions mList be cognizant of risks when they address water company rates. Commissioner Foran noted that, in Illinois, least cost planning is a require~ ment for electric companies. If water utility risk is similar to that of electric utilities, some feel this requirement should alsa apply. Commissioner Hughes responded that leas t cost planning concepts for electric utilities may not be applicable to water. Commissioner Perkins added that costs are many times difficu lt to qualify and quant ify, and there remains a question as to whether least cost planning would be considered a prudent approach or if it would actually provide a savings. Illinois has statutory provisions for pre~ approval of CWIP as a result of the public outcry from nuclear plant constructi on. W hile Commissioner Foran felt that the water industry has done a better job of documenting the cost impacts of capital improvements, he cautioned that, if the industry loses the ability to communicate the facts to rate payers, the industry will be subjected to the same type of statu tory requ irements as the electric utilities. Conservation-Should Lost Revenue be Recoverable? In the U.S., conservation is considered to be a good idea, frequently without to~ tally thinking the process through. Water is plentiful in the northeast, and Com~ missioner Stevens expressed her belief that conservation mandates should be differ~ ent from those applied in water~short re~ gions of the country. Commissioner Hughes felt that co n~ servation techniques should be applied in such a manner to ensure that companies are kept viable. Commissioner Ziegner suggested that a commod ity charge, or an automatic ad~ justment clause, be applied to compen~ sate companies for any decrease in rev~ enues resulting from conservation. The above attests to the quality and knowledge af a panel that provided valuable insigh ts relative to current regu la~ tory trends and needs of regulators and rate payers alike. Throughout the discus~ sion, one point was emphasized again and again: The industry has a responsibility to keep both their regulators and their cus~ tomers well informed. Water Products of the NRRI The proliferation of nonviable small water systems is one of the most pressing issues with respect to water utility regula~ tion. "Viability Policies and Assessment Methods for S mall Water Utilities" is the most recent product from NRRI address~ ing small water systems and their regula ~ tion by state public utility comm issions. The report is 276 pages in length and is available for $41 from the NRRI publication office, 1080 Carmack Road, Columbus, Ohio 43210. UMeeting Water Utility Revenue Re~ quirements: Alternative Financial and Ratemaking Mechanisms" is planned to be a research and policy report to state public utility commissioners and staff that is designed to help them assess cost im~ pacts and changing revenue requirements, and make informed choices concern ing a lternativ e financial and ratemaking mechanisms available to water utilities. The report is expected to be available by winter of 1993. Available in the fall of 1993, "Water Conservation Responses" will be a re~ search and policy report which wlll iclen~ tify existing data bases and exam ine e l as~ ticity estimates. It can be used to assess the impact of conservation upon water utility revenues. NARUC Goes International International issues regarding the regu ~ lation of utilities are becoming increas~ ingly important. They are inter~related to state regul at ion, particularly with respect to economic development, commerce, e n~ vironmental protection and other aspects of the global economy. Recognizing the need to add ress these issues and strengthen their focus and policy development, NARUC has formed an Ad Hoc Committee on Internation al Relations. The com~ mittee will be composed of 12 commis~ sioners, o ne from each of the e ight standing committees and four appointed by NARUC's president. NARUC Awards Utility Companies for Excellence in Education through Community Partnerships NARUC immed iate Past-President, Kenneth Gordon, presented the Thomas P. Harwood, Jr. Excellence in Education Award to the Entergy Corporation (New O rleans, Louisiana) for its outstanding uti lity \education partnership program. During NARUC's 104th Annual Conve ntion, Entergy Chai rman and CEO, Edwin Lupberger, accepted the award for his company's program, "Entergy's Lit~ eracy Effort." The NARUC last year established the Excellence in Educat ion Awards program to provide national recognition to exem~ plary utility/educat ion partnerships that show significant progress in achieving the National Education reform goals. Re~ sponding to the challenge that all Americans become involved in the effort to improve and reform local schools through implementing these goals, the NARUC encourages local utilities to support these efforts through establishing educati onal partnerships in thei r communities, which will effect sweeping ed ucational change. In addition to presenting the award to Entergy, Commiss ioner Gordo n an~ nounced awards of merit to Duke Power Company (Charlotte, North Carolina) for its "Power in Education Program"; the East Ohio Gas Company (Cleveland, (continued on next /Xlge) WINTER 1992 49 ........------------------------------ ~ I Regulatory Relations, continued Ohio), for its "John F. Kennedy High School/East Ohio Gas Partnership"; Cajun Electric Power Cooperative, Inc. (Baton Rouge, Louisiana), for its "Gift of Learning Partnership"; and Southern California Edison Co. (South El Monte, California), for its "Concept 2000 Partnership." Entergy's literacy programs addresses the fifth of the National Education Goals: "Every adult American will be literate." The program involves an 800 literacy hotline; four automated literacy laboratories and three mobile automated literacy laboratories. As oOune 1992, over 10,000 calls have been received over the hotline and a total of 5,170 persons have completed literacy programs in the automated labs. The success of the labs led to expanding the program to including high school equivalency diploma or GED classes. To date, 242 GED certificates h ave been awarded to the participants. NARUC Encourages Commissions and Public Utilities to Provide Greater Employment Opportunities for Women and Minorities During the Summer NARUC Com- mittee meetings, the following resolution, sponsored by Bruce Hagen, President of the North Dakota Public Service Commission, was adopted by the NARUC Executive Committee on July 29, 1992. WHEREAS, There is a need to encourage greater employment opportunities for women and minorities in all sectors of the economy, including the public utility and carrier sectors; and WHEREAS, The U.S. Bureau of Labor Statistics reports that unemployment rates for minority groups are n ationally higher than the rates for other population groups in the United States, and the unemployment situation for these groups has been made worse by the recent economic recession the country h as faced; and WHEREAS, The Bureau of Labor Statistics also report that the percentages of women and minorities that are employed in the public utility and carrier sectors are less than the percentages of women and minorities employed Nationwide; and WHEREAS, Many higher educational institutions throughout the country have programs designed to encourage minorities and women to study in the fields of accounting, economics, engineering and law; and WHEREAS, The N ational Association of Regulatory Utility Commissioners (NARUC), through its Office of Public Relations, conducts surveys on member State commissions concerning current employment opportunities and makes this information available to higher educational institutions across the country; and WHEREAS, Most State commissions responding to these surveys h ave indicated that they have adopted equal employment opportunity policies that encourage the hiring of women and minorities for all levels of employment at State commissions, and some State commissions encourage their utilities and carriers to contract with women-owned and minority-owned businesses; now, therefore, be it RESOLVED, That the NARUC encourages all its member commissions and the utilities and carriers they regulate and the NARUC W ashington office to adopt (or in the case where they h ave already done so, to update) policies for promoting the recruitment and employment of women and minorities, and encouraging contracting with women-owned and minority-owned businesses. , NAWC's New Jersey Chapter presents awards to those who have made significant contributions to the water industry in the state of New Jersey. Shown above are first year recipients of this award (I to r) : Chester A. Ring (Elizabethtown Water Co.), Robert A. Gerber (United Water Resources), James V. LaFrankie (American Water Works Service Co.) and Loren Mellendorf (American Water Works Service Co.). Additional honorees were The Honorable Brendan T. Byrne (former NJ Governor and Commissioner), William R. Cobb (New Jersey-American Water Co.) and George M. Haskew, Jr. (Hackensack Water Co.). 50 NAWCWATER r Recent Regulatory Decisions by William R. Holzapfel LeBoeuf, Lamb, Leiby & MacRae Supreme Court of Nevada Upholds P ublic Service Commission Discretion in Valuation of Water Rights In a decision dated December 20, 1991, the Supreme Court of Nevada upheld the Public Service Commission of Nevada in a The Supreme Court refused to remand the case to the Commission for further hear~ ings on the valuation of the water rights stating: The Commission was given no means case involving the valuation of water rights. by which to detennine the cost of Sil- Silver Lai<e Water Distribution Company v. The Public Service Commission of Nelllllia, 823 P.2d 266. The Supreme Court of Nevada upheld the decision of the Public Ser- ver Lake's water rights at anything other vice Commission to use original cost in valuing water rights. S ilver Lake Water Dis~ than $732,000.00. In essence, Silver Lake has gambled on its $732,000.00 figure, wagering that this court would find the $75.00 award unconscionable and send this case back to the Com- Trustee contended that (1) the exclusion of contribution s in a id of constru ctio n ("CIAC') was unreasonable and unlawful and unsupported by substantial evidence; (2) that the Federal Bankruptcy Law preempts the Commission's use of the CIAC doctrine; (3) that he was a bona fide purchaser under Section 544 of the Bankruptcy Code and thus able to void the CIACdesignation; (4) that the rate increase granted by the Commission amounts to a confiscation of properry without due process of law and (5) that the First Na t ional Bank of Alamogordo would be prohibited by federal tribution Company, in the course of an in; vestigation into its rates by the Commis; sian, had included water rights valued at mission. However, by remanding this case, we would be endorsing a gam~ $732,000 in its rate base based on a valuation of $1,000 per acre foot. The water company based this value on an appraisa l in fails-a utility company could then re, tum to the Commission and provide responsible evidence. This we will nO[ by an attorney do. Silver Lake has had sufficient op- proximately $2.3 million wasCIAC because estimating the value of a $1 ,(x)() an acre foot portunity to demonstrate its costs in developing the water rights. S ilver Lake's "all or nothing" proposition has left the Commission, the district court and this court with no choice but to conclude that the "original cost" of its of testimony in an earlier ratemaking pro~ ceeding. The Court rejected the Trustee's preemption argument after a rev iew of fed~ the form of a letter sent for the water rights. This figure was placed on the books of Silver Lake. The only cost evidence placed before the Commission was $25.00 each for three pennits paid by the developer. Also, the water company placed in evidence a stipulation of the lnterna l Revenue Service as to the value of the water rights in the Estate of W illiam Lear, the developer who fOlU1ded the water company. bling mentality where-if the gamble water rights is $75.00. The Supreme Court held that there was no basis for reversing the Commission's de, cision on the valuat ion. A lthough there were undoubtedly other water right development costs, such as well drilling, engineering, legal and other expen, dituTes, the water compa ny submitted no such costs to the Commission, in spite of being given a two month continuance to submit documentation of such costs. The Supreme Court approved the deci~ sion of the Public Service Commission in using the original cost of $75.00 for rate base, instead of the $732,000 submitted by the water company. The Supreme Court said that the Commission had broad discretion in valuing utility assets and was not required to use any particu lar valuation method. New Mexico Supreme Court Upholds Commission's Determination of Contributions in Aid of Construction and Rejects Appeal of Trustee in Bankruptcy on law from operating the water company if it bids its interest in the water company at a foreclosure sale. The Court derermined that the Commission was correct in determining that ap- eral bankruptcy law: ... we believe that Congress in no way intended to preempt the ratemak ing proceedings of this case, or the widely accepted C IAC doctrine used as part of the calcu lation of a fair rate of re~ tum. ill fact, we believe that Congress specifically provided for this sort of standard ratemaking proceeding in §362(b)(4)-(5), which excepts policy and regulatory proceedings from the automatic stay. Bankruptcy and Rate Issues On August 5, 1992, the New Mexico 135 PUR4th at 181. The Court further re- Supreme Court issued a decision in the case jected the Trustee's argu ment that as a bona of Daniel J. Behles v. New Mexico Public Service Commission, 135 PUR4th 176. This appeal was by the Trustee in Bankruptcy of the Timberon Water Co. appealing the fi - fide purchaser h e could void the nal order of the New Mexico Public Service Commission denying the Tmstee's requested rate increase for the water company. The Commission's C IAC designation pursuant to §544 of the Bankruptcy Code. The Court stated that the Trustee c ited no precedent for such a novel propos ition and that this proposal was U a stretch of common sense (continued on next page) WINTER 1992 51 ) Regulatory Decisions , continued and reason." The Court detennined that the rates set by the Commissio n were within the zone of reasonableness and therefore not confiscatory. The Commission had the right to exclude CIAC from rate base and the Commission also could not set rates designed to raise capital for deferred main; tenance. The Commission's function is to set prospective rates only. In regard to the appeal of the T rusree concerning the First National Bank of Alamagordo, the Court determined that a decision on this issue would be an advisory opin ion and that the Court does not give advisory opinions. Illinois Appellate Court Affirms Trial Court Ruling that Municipal Public Health Ordinances Were Preempted by the lllinois Public Utilities Act On July 24, 1992, in the case entitled Village of 13oUngbrook v. Citizens Utilities Co. ofIUinais, 231lll. App. 3d 740; 597 N.E.2d 246; 1992 Ill. App. LEXIS 1195 ; 173 Ill. Dec. 538, the Appellate Court of Illinois, Third District, upheld the trial court ruling which dismissed complaints when it found the Village's public health ordinances were preempted by the Illinois Public Utilities Act. Citizens is a public utility which pro~ vides water and sewer service to the Village. Citizens is alleged to have discharged untreated sewage from its plant onto prop~ erty located in the Village. The Village filed complaints against Citizens for violating mu~ nicipal o rdinances. Citizens moved to dis~ miss all complaints on the basis the Public Utilities Act preempted the Village from enforcing its public health ordinances. The trial court agreed and granted the motion to dismiss. The court detennined that the Leg~ islature had conferred upon the Illinois Cnmmerce Commission the power and author~ ity to comprehens ively regulate all public utilities within the state and that the gen~ eral regulation of public utilities by the Illinois Commerce Commission has been since 1913 a matter of statewide, not local, con~ cern. The Court detennined that the Public Utilities Act grants to the Illinois Cnmmerce Commission regulatolY authority over Citizens' operations of its sewage service and preempts such regulation by the V illage. The Court noted that its holding in no way precludes local municipal regulation over public utility matters which do not interfere with or overlap the regulatory 52 NAWCWATER authority of the Illinois Commerce Com~ mission. Justice Barry dissented stating that he found nothing in the Public Utilities Act expressing a legislative intent to preempt the local ordinances at issue which were enacted pursuant to the Village's police power in the interest of public health. In his dissenting opinion he reviewed the Public Utilities Act and reasoned that the act gave the Illinois Commerce Commission com~ prehensive regulatory control of the busi~ ness aspects of public utilities. He was of the opinion that the ordinances were a reason~ able exercise of the home rule municipality's police power for the protection of public health, which did not impede or overlap the Commission's regulation of the business as~ peets of the defendant's services. revenues for a customer at a new site wou ld be 20 percent of the cost of such new facilities. 4. Conservation audits to le velize de~ mands and reduce water usage and corresponding meter size, and rec~ ommendati ons o n appropriate con ~ servatio n equipment at no charge. 5. Flexible decision making, on a project~by~project basis, tmder ob~ jective and non~discriminatory cri~ teria, to determine whether the u til ~ ity or the c ustomer shou ld pay the income tax on Contributions in Aid of Construction ("CIAC"), wh ich may add approx imate ly 60 percent to the cost of new extensions and adversely affects economic de velop~ ment. Connecticut Department of Public Utility Control Approves Long Term Economic Development Rate Proposals On April 16, 1992, the Connecticut Department of Public Utility Control approved economic development rate proposals put forth by regulated utilities, including water utilities, as part of a decision in a reopening of their last rate cases. 111is decision in Re Connecticut Natural Gas Corporation, 132 PUR4th 277, approved deferred accounting treatment for expenditures in support of economic development programs and ap~ proved certain rate proposa ls. The water utilities (Bridgeport H ydraulic Company, Connecticut~Amcrican Water Company and tl,e Cnnnecticut Water Company) filed a consolidated plan for economic develop~ ment rates and terms and conditions that allow each company to negotiate additional inducements depending on the circum~ stances of the prospect and the water com~ pany involved: The proposed economic develop~ ment meas ures submitted by the Water Utilities include offering a 20% reduction to the tail block volumetric rate , a 25% reduc ti on to pri~ vate fire service tates and reducing the level of guaranteed annua l rev~ enues required under guaranteed main extensions contracts to 20%. The volumetric and private fire rates would gradually increase, reach ing parity with the rates for the remain~ ing customer base, over ten years. The proposed economic development measures include the following: 1. A volumetric rate equal to 80 percent of the tail block rate. This rate would increase over the ten year contract period to achieve equalization with the tail block rate. 2. Private Fire Protection Service priced at a discount from current rates. This rate would be gradually increased to reach parity with existing fire rates at the end of ten years. 3. A reduced G uarantee Contract Rate, whereby the level ofguaranteed annual 132 PUR4th 277, 286. The program is a coordinated program with the Connecti~ cut Department of Econom ic Develop~ me nt . Although ex penses are being deferred until the next rate case, the Depart ment of Public Utility Control retains the right to review any pre~approved program or project and the amoun t of rate recovery will be determined in each utility's general rate case . The rate pro~ posals and economic development pro~ posals are intended to benefit the public by increasing jobs and capital investment in the state, while also benefit ing utility rate payers by expanding the customer base. Missouri Commission Approves Surcharge to Pay Carrying Costs of Bond Issue for Construction Program O n September 8, 1992, the Public Service Commission of the State of Missouri issued a decision in the case of In the Matter of the Raytown Water Company's = tariffs to provide a permanent increase in rares for water service, Case No. WR~92~ 85. O ne of the issues was whether or not an interim surcharge should be made per~ manent and, if so, on what terms and conditions. The company had determined that it needed $3 million for the construc tion of additional storage and water line replacement, and it did not have sufficient cash fl ow to borrow the $3 million. The company had previously received permission from the Commission to issue $3 millio n of tax exempt water facility revenue bonds under a program of the Missouri Environmental Improvement and Energy Resources Authority ("EIERA"). The Commission had approved interim tariffs to produce annua l gross revenues of $425 ,000 in order to pay the carryin g charges on a temporary basis. In discussing its approval of the surcharge on a permanent basis, it noted that normally one of three methods is used for compensating a utility for its capi~ tal costs or carrying costs incurred during the cost of construction. These include an adjustment in the overall rate of re~ tum, the inclusion of construction work in progress ("CWIP") in the rate base and the allowance for funds used during co n~ struction ("AFUDC"). A ll three of these traditional methods were rej ected and the temporary surcharge was made permanent and the surcharge funds are to be placed in an escrow account and the design of the surcharge is to "zero out" the cash flows of th e surcharge fo r the period of time when construction takes place. The Commission determined that the mecha~ nism it established afforded the fairest and most reasonable treatment for the ratepayer of the company. In providing the money for the carry~ ing costs, the ratepayer is not getting the benefit of any present use of the new construction. What the ratepayer does get is the surcharge clearly designated as carrying costs and eliminated from future rate base so that future rates do not include double payment by the ratepayer. A lso, the ratepayer, due to the surcharge being escrowed and the EIERA funding, benefits from a lower debt service coverage requirc~ ment and lower costs of capital that in effect allow fo r the lowest possible nonsurcharge rates. The order also provides that any difference between the total carrying charge (income expense, letter of credit fee and income taxes applicable to the surcharge) and the amount collected by the company under the surcharge, will be treated as a contribu~ tion in aid of construction ("CIAC"). This ClAC treatment is allowed because any such payments are truly contributions that would be in addition to the amou nts necessary for carrying charges. In concept, such amOlmts could either be refunded or used by the company for payment of principal or new construction and as such would be true con~ tributions in aid of construction. Washington Commission Denies Application for Authority to Issue Securities and Implement a Surcharge in Order to Fund System Upgrades and Improvements Because of Inadequate and Insufficient Water Service to Customers O n April 10, 1992, the Washington Utilities and Transportation Commission issued a decision in the case ofWashingron UTe v. Alderton-McMillin Water Supply, Inc., 133 PUR4th 46. The Commission denied an application for authority to issue securities and implement a surcharge in order to fund system upgrades and improvements. The Commission found that the company had been providing inadequate and insufficient water service to its customers for a number of years. N umerous complaints had been made to the company, but it had been largely inaccessible and unresponsive to its cus~ tomers and not taking reasonable and ad~ equate steps to remedy any of the multitude of problems with the system. At a public hearing on the proposal, ratepayers appeared and vigorously objected to the water utility's proposals. The Commission fOlmd that a surcharge in the face of the company's disre~ gard of ratepayer interest is not appropriate. The company had taken an ineffective piece~ meal approach to planning which had resulted in its customers paying for an interim plan which has not been implemented in any respect and was already ohsolete. Although the utility is in desperate need of facility upgrades, it could show no specific plan and such lack of commi tment com· bined with a very poor quality of service and inferior responses to customer complaints, justified disapproval of the appli cation. The Commission wac; unconvinced that the sur~ charge wou ld lead to necessary improve~ ments in water quality and system opera~ tions. The company had not met its burden of demonstrating that the surcharge was just and reasonable. Indiana Commission Grants Indiana Cities Water Corporation Full Recovery of Federal Income Tax Expense In Indiana Cities Water Corporati on's previous rate case, the Indiana Utility Regu~ latory Commission had disallowed the recovery of current federal income tax ex~ pense because Indiana C ities participated in a consolidated tax return with non~utility affiliates with tax loss carryforwards which offSet Indiana C ities' tax liability. The Commission contended that Indiana law prohib~ ited the recovery of income taxes unless actually and currently remitted in cash. This issue is presently on appeal before the indiana Court of Appeals. Meanwhile, Indiana Cities commenced filing a separate tax return. The filing of a separate return was required because a newly~ created direct parent company of Indiana Cities sold voting preferred stock to a non~ affiliated person. Under the Internal Revenue Code, a corporation may not join in a consolidated return unless 80% of the total voting power of the corporation's stock is held by an includable corporation. The Office of the Utility Consumer Counselor (the "QUCC") contended that Indiana C ities should continue to be treated as if it were in the consolidated return because the trans~ action had not been approved by the Commission. The OUCC argued that the crcation of the new parent company consti ~ ruted a transfer of the "franchise, works or system" of lndiana Cities, an event requir~ ing Commission approvaltmder Indiana law. The OUCC also alleged the new parent company was a "sham" which should be disregarded. OnJuly 8, 1992, the Commission in Cause N o. 39166 rej ected the OUCC's position and held that Indiana Cities was entitled to recover the federal income tax expense as~ sodated with its own stand~a lone taxable income. The Commission found that dlere was a legitimate reason for removing lndi ~ ana Cities from the consolidated return be~ cause use of the tax loss carryforwards to offset the positive tax liability of Indiana Cities depleted the assets of the non~ utility affi liates and, in effect, required the affi liates (continued on next page) WINTER 1992 53 Regulatory Decisions, continued re~ The Board in rejecting the Initial deci- su ited in a high bill rather than actual sion of the Administrative Law Judge found that there was no precedent on this issue. It stated that it cou ld be argued that a remote reading device is a convenience to both the utility and the customers by eliminating the company's defective equipment had to sa tisfy Indiana Cities' tax liabili ty. Fur~ thermore, Indiana C ities needed the rev~ en lie stream associated with federal in~ come tax expense to ma intain its pre ~tax interest coverage at a level necessary to attract capital. In interpret ing for the first ti me a re~ consumption. The water company's posi~ tion was that it was seek ing th e entire bill cent Court of Appeals decision holding ence could not reso lve the dispute, the case was referred to the Office of Admin~ istrative Law after the customer filed a forma l petition. The principal issue be~ fore the Administrative Law Judge was whether or not the remote register was considered a part of the meter since the that the Commission had jurisdiction to review the format ion of utility holding companies, the Commission concluded that the Court decision did not mean that a holding company formed without Commission approva l was a legal nullity or that a ho lding company was a "public utility" unde r Indiana law. In any event, the Commission found that Indiana law prohibited the Commission from ignoring income taxes actually paid by Indiana Cities and from basing tax expense for ratemaking purposes on hypothetical cor~ porate structures or tax returns. The Com~ mission concluded that it was not reason~ able to hypothesize that Indiana C ities par~ ticipates in a consolidated tax return simply because it once did. New Jersey Board of Regulatory Commissionel's Determines that Remote Register is not a Part of the Meter for the Purposes of Adjustment of Charges In an Order Rejec ting Initial Decision dated April 23, 1992, BRC Docket No. WC9 101 008 1U, OA L Docket No. PUC3457-9 1, the New Jersey Board of Regu latory Commiss ioners determined that a remote reg ister which malfunc~ tioned was not a part of the meter for the purposes of adjustment of charges; how~ ever, the Board did not require the bal~ ance to be paid because of the billing procedures used in this specific case, George E. Magley v. New Jersey American Wa ter Company. The custo mer asserted that the bill of $2,076.53 was too high in compa rison to prio r bills he had received at the premises. The water company main~ tained that the amount in question was the result of a malfunctioned remote reg~ ister and reflected an adjustment for pre~ viously unbilled consumption for the prior four year period. When the bill was questioned, the water company reduced the amount, but the customer refused to pay the reduced amount maintaining that the 54 NAWCWATER and that the credit of $ 1,505.68 which reduced the bill to $570.85 was only for the purposes of settlement and negoti a~ tio n. Since the customer disagreed with the adjusted bill and an informal confer- adjustment of charges rules, N.J.A.C. 14:3-4.7(c) provides tha t: necessity of estimated bills. The Board found that since the meter would still function and register usage if the remote is removed, that the remote dev ice should not be con~ sidered an integral part of the meter. "This evidences that a remote register is a conve~ nience designed to eliminate estimated bills.)) Re Middlesex Water Co., Docket No. 7411847 (june 19, 1975). The Board determined that the offer of $ 1,505.68 was a credit adjustment rather than a settlement offer which left a remain~ ing bill of$570.85. The determination that No adjustment shall be made for a meter that is found to be registering less than 100 percent except in the case of meter tampering, n o n~regis~ tering meters or in circumstances in which the customer should reason~ the remote register was not part of the meter under the rule would allow for the collection of the remaining amountj however, the Board cou ld not determine if the amount of $570.85 was an accurate amount for water consumption and therefore directed the wa~ ably have known that his bill did not ter company to credit the $570.85 to the reflect his usage. customees account. In th is instance, the exceptions did not ap~ ply. Therefore, if the remote register was found to be a part of the meter, no adjust~ ment could be made of the customer's bill based upon the fact that the remote register had been malfunctioning for over a four year period, even though the water meter of Regu latory Commissioners iss ued a decis ion and order allowing the Vernon itself, when tested, fell within the prescribed Valley Water Company to discontinue fire requirements of accuracy. The Administra~ tive Law Judge defined a meter as "an in~ strument for measuring and usually for re~ cord ing automatically, the quantity mea~ hydrant service to a condominium develop~ ment in its franchise area because the con~ sured." quoting 57 C .].S., Meter at 1075 (1 948) . The Administrative Law Judge reasoned that from this definition it could be inferred that the measuring instrument not only includes the internal components but also includes the dev ice for registering or record ing the amount or quantity. He rea~ soned further that if the face, dial or register of a meter are integral parts of the meter, the reliance upon the remote device to measure consumption includes it within the defini~ tion of a meter and makes the remote an integral part of the meter. The Administra~ tive Law Judge concluded since the remote was part of the metcrI that no adj ustment could be made and that, therefore, the bills rendered by the water company should be withdrawn. New Jersey Board of Regulatory Commissioners Allows Termination of Fire Hydrant Service to Condominium Development On May 7, 1992, the New Jersey Board dominium development had failed to pay the tariff charges. In the Matter of Vernon Valley Water Company v. Stonehill l'rope1·ty Owners Association-Discontinuance ofFil~ Hydrant Service, BRC Docket No. WC92010003U. T1,is decision was issued over the objections of the homeowners as~ sociation which claimed it was not respon~ sible for past fire protection charges, and that the Township of Vernon was the proper customer for the fire protection service. In the alternative, the homeowners associa~ tion proposed that the water company should bill the individual condominium owners. The Board held that the Vernon Valley Water Company was entitled to discon~ tinue fire protection service unless the asso~ ciation paid the past due charges or entered into an appropriate deferred payment plan. The Board noted that the homeowners • associat ion had been involved in appealing a prior Board decision which, among other things , approved initial rates and in that appea l, the ho meowners association had never challenged the fire protection tariff. The Board agreed that the estab lishment of the ta riff rate did not necessarily obligate the homeowners association to contract for or accept fire protection service. However, the Board held that in this case, the associa~ don was responsible for past charges on a quas i contract basis. The association had received the benefits of the fire protection service and had never challenged the rate in the prior proceeding. The ho meowners as~ sod ation said it had never <Ctouched the hydrantsj" however, the Board held that the association rece ived the benefit from fire insurance savings. The homeowne rs assoc iation argued that the township was the appropriate customer fo r fire protection service; how~ ever, th e township has refused to pay and the Board held that there was no legal requirement for the township to provide and pay for fire hydrant servi ce. In this factual s ituat ion, there was no basis for holding the township liable on a quas i contract basis. The provision of fire pro~ tcction service by a municipality is per~ miss ive and no t mandatory. The homeowners association also ar~ gued that, in the alternative, if the town ~ ship was not the appropriate customer, then the ind ividual condominium own ~ ers should be billed. However, the Board refused to accept this proposa l stating that if indiv idual ho meowners refused to pay, it would be imposs ible to terminate the fire protection service. Since the notice of discontinuance had already been served, the Board held the re was no need to give a new notice. In subsequent decisions rendered in Au~ gust 3, 1992, the Board denied a motion for reconsiderat io n of the notification re~ quireme nt and denied a motion for stay holding that there was no irreparable harm and that if the homeowners associatio n won on appeal , there would be a rate adjustment or refund. The ho meowners associat io n has taken an appeal to the Appellate Division of the Superior Court. T he Appellate Division has granted the association's motio n for a stay of the Board's decis ion provided that the association posts a supersedeas bond. New Jersey Board of Regulatory provided that this did not result in a manifest injustice or interfere with a vested right since was determined that it was the intent of the rule to have this retrospective applicat ion. The Board stated it was clear from the new PAWC rules that the intent is to include all deferred purchased water costs. The new rules provide a definitio n for deferred accOLU1ting treatment. The Board held that there was no manifest injustice in giv ing the ru le th is retroactive applica; tion, and that ratepayers have no vested Commissioners Issues Written Order Approving First Increase Under Purchased Water Adjustment Clause and Dismissing Arguments of the Division of Rate Counsel The increase granted to Shorelands Wa~ ter Company for increased purchased water costs onJuly 8, 1992, was reported. OnJuly 30, 1992, the Board of Regulatory Commissioners issued the written order approv ing this increase which order detailed its dis; missal of the arguments of the Divisio n of Rate Counsel as follows: 1. Rate Counsel had argued that the company had failed to file within 30 days 3. Board's order approving the water company's deferred accounting did no t after notification of the increased charges by the water purveyor as re~ quired in the new Purchased Water note the possibility of PWAC rules, but stated that Rate Counsel lVould have an opportunity to fully test the Adjustment Clause ("PWAC') rules. The Board held that since the rules had increase costs in the context of a full not been adopted during that time pe~ rioel, it was impossible for the company base rate proceeding. The Board held that the intent of the new PAWC rules make its filing within the 30 days notice period. The Board noted that is to provide timely recovery of increased purchased water costs and modified the deferred accounting o rder to allow re~ to the water company had made its filing within two weeks of the effective date of the new ru les. The Board held that, given the intent of the Board's PWAC 4. rules to provide for timely recovery of increased purchased water costs, it would be inequitable to refuse to can; sider the effect of the increase in pur~ chased water charges until there is an~ other increase by the water purveyor or the Board waived the 30 day notice covcry of the 1991 deferred costs using the new PW AC ru les. Rate COlmsel argued that to allow these costs would be retroactive ratemaking. The Board disagreed and held that the use of an adjustment clause on an interim basis when tied to a base rate proceeding where there is a proper vali; dation of the costs incurred is not impermissible retroactive rdtemaking. until after the filing for additional rate relief in a ful l base rate case. Therefore, 2. right which is violated by the order. Rate Counsel also stated that the 5. Rate Counsel also argued that the Board should use more recent consumption requirement of the rules. data fi-om 1991, rather than the base Rate Counsel objected to the granting of relief under the PW AC rules for the consumption data as defined in the deferred cost incurred prior to the adop~ tion of the PW AC rules. The water company had previously requested de~ ferred accounting treatment and the Board had approved this request for certain costs incurred between March 1, 1991 and November 7, 1991. The Board stated that the water company had met the other requirements of the PW AC rules; that is, there was a base rate case within the previous three year period and its purchased water costs exceeded 10% of its total operating and maintenance budget. While rules are generally applied prospectively, the Board stated that it was clear that the rules may be applied retrospectively, PW AC rules (in this case, last base rate consumption). The Board held that the defmition of consumption set forth in the rules would govern . California Public Utilities Commission Directs Southern California Gas Company to Reopen 12 Branch Offices Previously Closed Witbout Commission Approval In a decision which will have an effect o n watercompanies 1 theCalifomia Public Utili; ties Commission on August 1J, 1992, in a case entitled Corona City Council et at. v. Southern California Gas Co., D. 92-08-038, Case No. 91-05-042,1992 Cal. PUC LEXIS 563, the California Public Utilities Com(continued on next page) WINTER 1992 55 , case where it said: Regulatory Decisions, continued mission determined that SoCalGas' d o; su re of 12 bnm ch o ffi ces w ith inadequa te no t ice a nd with o ut reasonab le altern ative services in place was unjust an d unreason able and a clear vio lat ion of Pu blic Utilities Code *451. Al though SoCalGas had argued that it co uld not find a single case whe re the C o mm ission had defined the utili ty's respon sib ili ty to prov ide payment offi ces, th e Commission listed precedents for the determination of location and services of public ut ili ty compan y fi ces and quoted from a 1977 telephone or I n sh ort , as we said in D.88232, the utility "should n ot be the sole an d final arb iter of wh ere and wh en pu blic paymen t agencies arc to be established." A pp. of PT& T Co. 1977; 83 C PUC 149, 244-245. In rev iewing rhe co mpany's basis fo r its dec isio n for c losing the 12 branch offices, the Commiss io n de termined tha t its formula was neither an accurate nor an obj ecti ve basis for making decisions abo ut bra nch offices. The formula was simply a mathematical expression of a predeterm ined policy decision to close a ll branch offi ces in smaller rural communi ~ tics. The Commission also found that th e impac t of the office closures fell dispro, portionatcly upon poor, e lderly and mi ~ nority custo mers. The co mpany was or . . dered to reopen the 12 branch offices in the sam e location , or, if not in th e sa me location , in a location whi ch is at leas t as conven ien t and accessible as the office which was closed. The company was also directed to report on the offi ce reopenings, as well as provide more de ta iled informa, tion concerning the office closures. , Customer Service Report Electronic Debiting: The Automatic Payment Plan by Richard j. Johnson and Rebecca Nilsen Rio Rancho Utilities Corporation Mary C ustomer loves being a snow bird and takes of( every winter fo r warmer cli~ mates. Far~sighted Freddie can't see well enough to read his bill and hates to wri te checks. Absent-minded Ma tilda would pay her bill on time every month if I would just call her up and remind her. Frugal George doesn 't want to pay the post office $.29 to mail his payment and doesn 't want to pay a day sooner than the due date. What do. these typical custo mers in Rio Rancho, New Mex ico have in commo n ?They have signed up for automatic bank clmfts and don 't have a worry in the world. That's right! Rio Rancho U tilities Corporation hac; listened to its customers and responded with an automatic payment plan. The auto matic payment plan allows a customer's checking or sa vings aCCQlmt to be debited automatically each month on the due date. In this modem world where the customer wants to max iInize bank float, pinch pennies, and have a hassle,free method of payment, RRUC makes it as easy as fill . . ing out one short form. As far as the cus, tomer is concerned, he has the best of all worlds in that he still receives a bill but does not have to make any effort to pay it. If 56 NA WC WATER there is a question , or (probably impossible) a mistake on the bill, he just calls customer service and we take care of the "problem" before his account is debited. 111e customers who use this service are thrilled with the con venience and we at RRUC are proud to offer the service. One of the first questions usually asked by company personnel is how much of a hassle is this? With a big grin we can answer that this service is a win . . win,win situation . The customer obviously wins because he likes the service. The employees handling the Automated Clearing HOllse (AC H) transaction likes it because they have on . . line control of that account. The company likes it because it is cheaper than lock,box, cash flow is excellent from these customers, and chances for errors are minimized. There were initial computer and development costs but our happy customers have already made up for that. C urrently, RRUC has about 400 customers on this new service and is adding CllS'" ta mers daily. We expect to eventually have about seven to eight hundred of our cus. . tomers, or between seven and eight percent of our total customers on . . line. The cost to the company is about seven cents per trans, action , or about three cen ts cheaper then a lock,box customer. Also, take into consid ~ eration the fact that these customers are never late and no urgent notices will ever be sent to them. W e also think that these customers hardly ever allow the ir bank ac~ counts to have insuffkient fu nds. The process for se tting a customer up on this system is very simple . The c us'" tomer comple tes an au thori zation form either in the office or by mail. The fo rm includes the customer's name, address, bank transit number, bank account nllln . . ber, name of financial institution, type of account, and customer's water acco un t number. The customer must then sign and date the form. The information taken from this form is entered into the local co mputer sys tem. This is accomplished by selecting t he ACH Processing option o n the ma in menu. This informati on is then transm it . . ted to the mainframe system during th e normal e nd of day procedure. When th is information is updated it is transmitted back to the local compan y's system. At this time the custome r is given a pre, authorization status code depend ing on the type of account being drafted. A ll data is updated on the ACH master file and transmitted to the hank on a weekly basis. You can enter your informa~ tion all during the week but it is only transm itted once a week to the bank. The bank will send this informat ion to th e clearing hOllse and verifies the informa~ tion for each customer. A report is sent to the local company if, for any reason , a n account is rejected. The turn around for th is information is approximately two weeks. After the two week period, if the hank has not rejected the customer's a uthoriza~ tion, the local company updates the customer's account. This update is called pre~note approval from the bank. This is prepared in the same manner as the pre~ authorization batch. The customers are now authorized to have their next bill drafted from their checking or savings account. W hen the account is billed the bill ing register will signify the ACH customer. The local company's computer wiU show an ACH payment line above the payment amount. If th e customer is on bank draft, there will be a yes on this line, if the customer is not on bank draft there will be a no on this line. Th is file will be sent to the bank at least two days prior to the due date. The money will not be drafted from the customers ac; count lUltil the due date. The customer wil! receive a bill as normal, except that the re will be a message noting that the bill will be drafted and not to pay it. If the amount of the bill being drafted needs to be changed for any reason such as a high bi ll, the cus; tomer already paid the bill, or for a canceled bank draft, the payment amount can be changed before the information is sent to the bank. There are also provisions made in case an amount needs to be changed afte r the file is transmitted to the bank. A special ACH cash batch is created and entered into the mainframe system on each due da te. A report is produced to show the beginning balance, rhe batch total, and the closing balance. The day after the transmis~ sion to the bank, the bank will veri fy the money amount transmitted and how many customers are on the file. The daily bank draft amOlUlt is shown as a sepamtc line item on the daily cash report and the daily transmittal report. It is very important to keep a control between the local company and the bank. Any items rejected by the bank, for insufficient funds or a closed ac; count, and returned not paid to the local company arc handled the same way as a returned check. C hanges to a customer's ACH account can be made through the ACH customer file. A customer can change their bank, account number or accoun t type. This type of change however requires a new pre~au; thorization to the bank. Once a customer is on th.e service, the bill carries a message not to pay it as it will be automatically deducted from the speci~ fied account. Call Rick Johnson or Becky Nilsen in Rio Rancho (505/891-1200) if you want to find out more about our new service to the customer. .t Who Is Customer Service? by Clyde V. Webb Baton Rouge Water Works Co. Those of LIS in Customer Service should think about the following story: In the days when an ice cream sun; dae cost much less, a ten~year old boy entered a hotel coffee shop and sat at a table. A waitress put a glass of water in front of him. "How much is an ice cream sundae r' "Fifty cents," replied the waitress. The little boy pulled his hand out of his pocket and studied a number of coins in it. "How much is a dish of plain ice cream ?1I he inquired. Some people were now waiting for a table and the waitress was a bit impa; tient. "Thirty;five cents/' she said brusquely. The little boy aga in counted the coins. "I'll have the plain ice cream,1I he said. The waitress brought the ice cream, put the bill on the table, and walked away. The boy finished the ice cream, paid the cashier, and departed. When the waitress came back, she picked lip the empry plate and then swallowed hard at what she saw. There, placed neatly beside the empty dish, were two nickels and five pennies- her tip. How does this compare to the customer that slows down our cashier line because it takes time to write a check, or COlUlt out the last coins in their pocket or change purse? Another situation may be the customer whose paying habit is not real good and gives the customer service representative a difficult time. What about the person on the telephone that just does not lU1derstand anyth ing? How aoout the customer that states, "M y meter is never read." These situations and many others consti; tute the primary rea'iOn for our existence, without which Customer Service would not be necessary) placing us in the list of unem; played. Instead of addressing these situations as "PROBLEMS," we should view these as "OPPORTUNITIES OF SERVICE," opportunities to show how professional Customer Service can be. Developing skills to produce professional Customer Service personnel is a never end; ing process. Situations, available equipment, programs and people change. causing meth; ods to chan ge. The C ustomer Service COIll; mittee continues to develop programs for the annual C ustomer Service Conferences that will be rewarding and informative. The Committee welcomes any feedback that can cause our conferences to be better. The 1993 WestelTI C ustomer Service Conference will be held March 23-24 in Redondo Beach, Califonlia and the Eastem/Midwcstem Con; ference will be at the Warwick Hotel in Philadelphia, Pennsylvania, May 3-5. Make plam to attend one ofour conferences if at all possible. The more participation we have, the better 01lZ programs will be. When the next customer contacts you, thi nk about the ten-year old boy, his tip and the waitress, before giving your response. Who is C usto mer Service? EVERY EMPLOYEE!! • W INTER 1992 57 Quorum Call by james L. Coao The Clinton Presidency: What it Will Mean for Investor..Owned Water Utilities The numbers are in for all to see, On Tuesday, November 3, 1992, William Jefferson Clinton, Governor of Arkansas, was elected the 42nd President of the United States. C linton garnered 43 percent of the vote, 32 states and 370 electoral Yotes. Sena~ tor Al Gore of Tennessee is the Vice Presi~ dent··deer. For the first time in 12 years, both branch es of the government are con~ trolled by the same party. Meanwhile, across town on Capitol Hill , the H ouse of Representatives will h ave 110 new membe rs jo ining it for the l03rd Congress when it convenes in Janu; ary. A lthough th is is the larges t fres hman class since 1948, it is smaller th an the 150 seat cha nge predicted by many. While the co mplexi on of t h e House wi ll change-with 46 women, 38 blacks, 16 Hispanics and five Asian~Americans the party composit io n remains virtually unchanged with the Republicans pickingiup n ine seats. The Senate will have 11 n ew members, including four n ew women bringing the tota l to an all time high of six. If Sen ator Wyche Fowler (D-GA) wins his run-off election on November 24 , the Democrats will pick-up one scat in the Senate. O therwise, the ratio of De mocrats to Republicans will remain unchanged at 57 to 43. "The economy, stupid" What does this jumble of numbers mean for the industry? Not much at first. James Carville, a leading political advisor to President-elect Clin mn, h ad a sign on h is desk read ing "The economy, stupid ." That was the centerp iece of th e Clin ton ca mpaign and will be the centerpiece of his early initiatives. 58 NAWCWATER Im med iately upon his inauguration and for th e first lOa days thereafter (or until abou t the end ofJ ul yL his ad ministration will focus on the eco nomy, h ealth care reform and little else. C li nton has already been at work on these initiatives. For the last month or so, C li n ton h as been consulting with key Congression al leaders on a weekly basis to discuss his proposals and ways to move them qu ickly. C lin ton 's success at moving a jobs an d health care package will determine the ultimate suc~ cess of his administration. In a book entitled Putting People First (PPF), Clinton and Go re outline their agenda. In addition, Senator Gore in h is book, Earth In The Balance (EITB), provides his description of and prescription for th e wo rld 's environme ntal challenges. Together, these works provide a clear pic~ ture of the issues the C lin ton administra~ tion will address. As part of this plan to "Put A merica to Work," Clinton h as several ideas orga~ nized under the rubr ic "Rebuild A merica." Two of these are relevant to the industry. First, he wants to create a Rebuild America Fund, to provide $20 billion a year over five years for the repair and con struc tion of co mmuni cations, transportation and environmental in frastructu re. It appears these funds can be used for public/pri vate partn erships and user fees can be charged to guarantee the in vestments. He also wou ld like to promote th e development of new environm ental technologies fo r use h ere and as a way to boost exports. Issues Specific to the Industry By this time n ext yea r, you will be tired of reading about the economy and health care reform. But there are many other issues described in both Putting People First and Earth In The Balance that sh ould interest members. O n the environmenta l fron t, Putting People First is silent on the Safe Drinking Water Act. It docs, however, call for th e enactment of a new Clean Water Act with standard.s for non~point source pollution and incentives for the development of methods to reduce and prevent run~off at its source. C linton's environmental policy wLll also rely heavily on market~based incentives that rc~ ward conservation and "green" business prac~ tices while penalizing polluters. He also em~ braces the principle of pollution preven~ tion. Beyond these broad goals, it is difficult to predict the impact of a Clinton/Gore administration on water suppliers. Vice Presi~ dent-elect Gore is widely expected to be the point,man on environmental issues. Such issues have been a central focus of h is Sen~ ate career. He wi ll have great influence on the choice of EPA Ad ministrator and Assistant Administrators and a more active EPA is to be expected. Gore's book devotes sca nt attention to th e issue of water quality or the Safe Drinking Water Act. It states that water qu ali ty h as gen erally improved, and then goes on to me nti on lead contaminat ion , the cho lera epidemic in Peru, nitrate con~ tamination of groundwater in Iowa and t he cos t to treat groundwater (but n ot surface water) contaminated by pesticide run~off. Like most lawmakers, h e has n ot devoted much attention to the Safe Dri nk ~ ing Water Act and is an open book on the issue-both a conce rn and an oppor~ tunity for the industry. » • Again, keep in mind , the early focus of the C linton administration will be on the economy and health care reform. Mos t oth er issues will no t receive se ri o us consideration until late 1993 or 1994. Furthermore, C lin to n will not pursue policies that may jeopardize the economy o r job c reation. Given the histori c al tension between environmental protec~ tion and economic performance, some internal administration conflict over the direction of env ironm ental policy is not out of the question . O ther Issues Putting People First also lists numerous other issues which effect the industry. It calls for a targeted investment tax credit for small businesses. So far, the details concenl~ ing the parameters of this credit have not been forthcoming, but it is not inconceiv~ able that many of our member companies will be eligible for the credit. In the "only Nixon can go to ChinaJ) vein, a capital gains reduction for new, long-tenn investments is not out of the question. You can also expect labor to receive a war mer embrace from the C linton Admin istration than it has over the past 12 years. Some of the objectives in th is area include: worker empowermentj increases in the minimum wage to keep pace with infla tion j enac tment of the Family and Medical Leave Acti requi ring employers to spend 1.5 percen t of payroll fo r worker training and retrainingj and support fo r a chemical right-to-know law. Conclusion: Don't Panic NA WC members should not pan ic at the onset of the Clinton Administration. O n numerous occasions over the past two years, you have demons trated your ability to wo rk successfull y with Congress to ac- complish the industry's objectives. Victories on lead and radon and progress on the C IAC issue resulted from your willingness to seek common ground with your legislators rega rdless of party affi liation . This same attitud e will serve the indust ry we ll in the years to come. NAWC "FLY IN" Please set aside the week of February 22nd fo r a trip to W ashington, D.C. During this week, we wou ld like you to "flyin" to meet with your Senato rs and Representatives concerning issues of importance to the NAWC. We hope to have at least one representat ive from each member company in each state make this important trip. If you haven 't already, please call me at (202 ) 833-8383 to inform me of your ava ilabili t y. Thank you for your cooperation , I look forwa rd to seei ng YOll in February!! " Tax Adviser $$$$$$$$$$$$$$$$$$$$$$$$ IRS Issues New Guidelines for Deferred Compensation by Catherine E. Grein Arthur Anderson & Co., Boston Defe rred compensation arrangements have long been used by employers to achieve a var iety of objectives, such as employee motivation, tax deferral, and cash flow management. The usual dilemma that arises in connection wi th nonqu alified deferred compensation plans is how to prov ide the employee wi th a reasonable assurance of future payment without causing the income to be constructively received and therefore immediately taxable. Over a period of several years, the socalled "rabbi trust" has evolved as a funding vehicle that, under the right conditions, can result in the designation of certain assets to be used for the paymen t of deferred compensation benefits without cu rrent tax to t he employee, Typi- cally, these trusts permit the contribution of funds to a trust by an employer with terms specifying their intended usc and requ iri.ng that the trust's liability to pay deferred compensation must be fulfilled before any funds ca n revert to the employer from the trust. However, it should be noted that the trust's assets remain subject to the claims of general cred itors. Because of the fact that such trust are not expressly provided for in the Internal Revenue Code or regulat ions, taxpayers have frequently sought advance determinat ions from the IRS as to the tax treatmen t of these funding mechanisms. The result has been a large number of private letter rulings that are employer-specific based on stipulated facts, but with many ·common characteristics. Since the letter ru ling process can be time-consuming and expensive, the IRS has recently issued Revenue Procedure 92-64, wh ich is intended to serve as a model for rabb i trust arrangements and presumably streamline the steps involved in setting up these funding arrangements. The IRS states that taxpayers who re ly on the safe harbo r language provided in Re v. Proc. 92-64 can be assured that the maintenance of a trust veh icle will not ca use employees to be in constructive receipt of compensat ion. However, it should be noted that, if the actua l plan for defe rring compensation (which is typicall y separate from the trust document) does not substantively defer the em ployee's access to th e funds, the use of these safe harbors (continued on next page) W INTER 1992 59 Tax Adviser, cominued for the trust itself will not cure the prob~ lem in the underlying plan. The model trust language provides that the trust will be a grantor trust (and therefore taxable to the employer). The trust can be either revocable or irrevocable from the outset, or it can convert automatically to irrevocable status on the occurrence of some contingency, such as a change in control of the employer or a decision by the Board of Directors. Trust principal and income are to be kept separate from other funds of the employer and used exclusively for the pur~ poses of plan participants (subject only to the condition that they can be accessed by general creditors in the event of an insol~ veney). The trust document can state that contributions will be made at the discretion of the employer, or it can make them man~ datory in case of a change in control in connection with an irrevocable trust. This Revenue Procedure also provides specific guidelines as to the responsibilities and pow~ ers of the trustee, as well as the terms gov~ eming the appointment and replacement of trustees, who must be independent third parties. This Procedure states that taxpayers who previous ly obtained private rulings concerning rabbi trusts need not modify them to conform to the model trust terms unless the existing trusts ha ve been amended since the receipt of the ruling. Employers who have modified rabbi trusts subseq uent to securing rulings, or those who have established these types of funding arrangements without obtaining rul~ ings, should carefully review the terms of Rev. Proc. 92-64 to determine whether to make conforming amendments at this time. The stated effecti ve date of the Procedure is Jul y 28, 1992, so all such trusts set up since that date should be reviewed in light of the model trust provisions. For employers who have previously con~ sidered the use of this type of trust for deferred compensation and may ha ve dis~ missed it as too costl y or cumbersome to set up, the issuance of Rev. Proc. 92-64 may make this a more realistic alternative to consider. In a companion release, Revenue Pro~ cedure 92-65, the IRS has outlin ed clarifications to its formal ruling position with respect to nonqu alified deferred compen~ sation plans, whether or not they operate in conjunction with a trust funding ar~ rangement. The Service reiterates its offi~ cial policy that the deferral election must generally be made before the year when the compensation is earned, but provides two exceptions in cases of plans that are newly formed part way through the year, or in stiruations where employees first become eligible to participate part way through the year. The Procedure also defines limited circumstances when a de~ ferred compensation plan may distribute funds prematurely to deal wi th an Ulln~ foreseeable emergency." Employers who maintain sta ndard nonqllalified deferred compensation pro~ grams should consider whether this Pro~ cedure suggests any potential changes to existing plans. It should be noted that, while Rev. Proc. 92-65 describes the IRS's ruling criteria, it may still be possible to avoid constructive receipt concerns in some factual situations that do not con~ form in all respects to this set of s tan~ dards. However, any significant variation from the guidelines set forth by the IRS should be evaluated to ascertain the de~ gree of potential risk of cu rrent taxation of employees. , Public Relations Youth Education-Business Goes Back to School by Lisa P. Oswald Manager, Public Relations, Bridgeport Hydraulic Company In 1991, in support of America 2000 national ed uca tio n reform goals, the National Association of Regulatory Utility Commissioners adopted a resolu~ tion urging its members to advance programs to improve education in the ir communi ties, saying: "'he safe,y, reliability and efficiency of our future utility service will depend heavily on the success of sweeping fundamental changes in our education system. " 60 NAWCWATER Certainly, concern for the future of o ur nati on's education system is not peculiar to the utility ind ustry. Nor ca n we a lo ne solve its problems. Ev~ ery business across Amer ica fa ces the same challenge- to develop a nation of wel l ~ed ucat ed citizens, co n sumers and employees. So why sh ould we be in the business of education reform? The answer is obvious, but bears rep ea ting. The re is a symb iotic relationship between business and ed ucation. Today's s tu ~ dents will grow up to be o ur emp l oy~ ecs, our custo mers, our contractors. The y will enter the wo rk force and staff our industry. And, the y will vote o n matte rs crucial to the way we do business. The reason is more compelling if we consider the alternative. The cost of doing no thing is high, and is getting higher, .. the cost of recruiting candidates, the cost of training and development, and so on. It's really quite simple-we can pay now or we can pay more later. The ABCs of Going Back To School Getting involved in your community's ed ucation system is simple--one step at a time. W h at you can do runs the gamut, and more often than not, you r in volvement doesn't require a large infusion of time or money. The key ingredient is commitment. Bridgeport Hydrauli c Company, a $100 million investor~owned water compan y with 240 employees, took its first step by making a company, wide commitment to ed ucation. It's a co mmitment that says we believe community education is an important way fo r BHe to achieve its long~tenn strategic goals. In doing so, it made education a vis ible part of the co mpany's day-to-day operations, not simply a feel-good publi c re lat ions program. The program works because it operates under these basic tenets: • Build in an in ce ntive at the topbecause education is identified as a means of achieving our long~term corporate goals, there's a mandate fo r every department to design and implement an ed ucation program or support another department's edu~ cation goals. • Foster a corporate culture that says: "It's important to be a socially re~ sponsible company." It's part of who we are, as indi viduals and as a team. • Define your objectives clearly. Who do you want to reach and why; what infonnation is most important to im~ part and how will you measure success? • Make a bottom~ line connection with employees. Be certain they know the answer to the question , "What's in it for me?" We will benefit in the longrun as a company if we teach our you th about water conservation, re~ cycling, etc. • Form publi c~private partnerships. If you don't have the staff or resources to implement a program, find some~ one who does and for m a partner~ ship. It doubles your firepower and you r goodwill. Ma king the Grade BHC has crafted its community edllca~ tion program to support its lo ng~ term cor~ pora te goals, and, specifically, as a com~ pany based in the state's largest city, to se rve the inner~city school populati on . Some of BHC's current programs illu s~ tntte the di ve rse activities to which com~ panies ca n commit resources: • The AquQ1·ion Environmental Studies. r m e r Scholarship. Because our business has a need for people who excel in math, 'science and engineering, we established a scholarship fund in the name of our parent company at our area co mmu ~ engineering in 1935 from the University nity fou ndation to encourage minority of Colorado at Boulder. For the firS[ 15 years of his career he he ld engineering youth to study these disciplines at the college or lliliversity level. posts with seve ra l e n ergy util it ies, including eight years with O hio Public • Teacher Training Workshops. WorkService Co. ing wi th the Board of Education, in In 1950 he joined Arizona Edison Compartnership with a local non~profit organization, we des igned and pre~ pany of Phoenix , as a vice president. Two sented a one~half~day training pro~ years later when a merger created Ari~ zona Public Service Company, Lucking gram on env ironmental science for was designated general superintendent of teachers in grades three to five to enhance the science curriculum in power supply. In 1952, he advanced to vice president, operat ions. In 1955 at age the Bridgeport public schools. 41 , Lucking was elec ted president of Ari• Partnerships with Public Schools . The zona Public Service Co. H e became chair~ Adopt~A~School Program, active in man of the board eleven years later, and many communities, matches local served in that capacity until 1972. businesses with a publi c school as a Active throughout his career in nu ~ resou rce to share ti me, ta lent and merous business and civic organizations, financial su ppo rt to enhance thi Lucking served as a director of the Boy school environment. O ur cu rrent Scout councils in bo th Phoenix and partnersh ip with an inner~c ity ell Bergen County, New Jersey. He was a ementary school is in its third yead director of the In ternational Solar Energy and has spawned innovative pro J grams to motivate and reward stu~l Associat ion and was named an honorary d irector in 1971. H e served on the boards dent performance. Two such pro~ of directors of the New Mexico and Ari~ grams are t he BH C Buddies after-' zona Land Company and United Jersey school men tor program and the in~ Bank of H ackensack, New Jersey. H e was stallation of a 1 2~s ta tion computer t also chairman of the Commerce and In~ lab, made possible through a part- l dustry Association of Northern N ew Jer~ nership with ou r computer supplier, sey in 1977- 78. Digital Equipment Corporation. His family would welcome memorial • Environmental Education. BHe was I contributions in his name to the A ll Saints among the fi rst water companies to Episcopal Day School, in care of All Saints allow limited public access to its wa~ Episcopal Church and Day School, 6300 tersh ed lands for hiking and fish ing. North Central Avenue, Phoenix, AZ In April 1992, we dedicated a 40850 12. mile trail system called Saugatuck Va lley Trails. Special emphasis is placed on the tra ils as an educational reso urce, and as a destination for in ~ ner-cit y youth for guided field trips. The water utili ty industry, by its pres~ . • ence in virtually every community in the cou ntry, is well positioned to support our education system th rough schoo l~business Economics, University of North Caro~ partnerships. Our conce rn for education !ina, an MSEE in Environmental Eng i ~ should be a natural extension of our con~ neering, Johns Hopkins University, and a cern for our employees and our c us tom~ BES, Engineering Science, John Hopkins ers. We have an obligatio n to our indus~ University. try and the communities we serve to bring He will be located in the Philadelphia, about a change-and the sooner we all PA, office. begin, the better. ~ 1992 vICeS Expert W INTER 1992 63 PSWC's Vice President Retires Jerry A. Sacchetti, Vice President-Public Relations for Philadelphia Suburban Water Company retired on October 1 after more than forty-six years of service to the company. Sacchetti, from Havertown, PA, is well known for his work in many community and civic organizations in Delaware and Montgomery Counties. He served as Chairman of the Main Line Chamber of Commerce, President of the Bryn Mawr Business Association, and is a past president of the Haverford Township Rotary Club. He served on the Delaware County Economic Development Authority and is currently the Chairman of the Haverford Township Planning Commission. Sacchetti started his career with Philadelphia Suburban Water Company in 1946 as a meter reader. Over the years, he has held positions in construction, distribution and administration. He served as executive assistant to the President of the Johnnie M. Overton has been named Senior Vice President of Florida Cities Water Company (FCWC) and Poinciana Utilities Inc. (PUI). With headquarters in Sarasota, FCWC and PUI constitute one of Florida's largest private water and wastewater utilities. company from 1974 to 1978 and was elected Vice President-Public Relations in 1979. Mr. Sacchetti plans to remain in the area and reside in Haverford Township with his wife, Joanne and their two children. Pishkur President of Ohio Water Service Co. Ohio Water Service Co. is pleased to announce that as of August 1, Walter J. "Buzz" Pishkur has assumed the duties of President due to the retirement of Wallace E. DeArment. Pishkur is a native of Hubbard, OH, who began his utility career working as a meter reader, chemist and biologist for the Hubbard Water Department in 1970. He was originally employed by Ohio Water Service Co. in 1980 as Office Manager of the Struthers District, and then moved to the Columbus area to assume the position of District Manager at the Company's former Marysville District. In 1986, he accepted the position of Vice President and General Manager of Inter-State Water Company in Danville, IL, a subsidiary of Consumers Water Co. Pishkur is a 1986 cum laude graduate of Ohio State University and received his MBA from the Univer64 NAWCWATER New VP at FCWC sity of Illinois at Urbana-Champaign in 1992. He is an avid golfer, a basketball referee and active in community affairs. He and his wife currently reside in Poland,OH. ~ In making the announcement, Paul H. Bradtmiller, Executive Vice President and Chief Operating Officer of FCWC/PUI, stated that "Johnnie brings a unique blend of utility engineering and operating experience and financial management skills to the job." In his capacity as Senior Vice President, he will be responsible for staff management of operations, engineering and budget development for the six divisions that comprise the corporation serving 33,911 water customers and 27,440 wastewater customers in Central and Southwest Florida. Prior to joining Florida Cities Water Co., Overton was the Senior Utility Construction Manager with the City of Cape Coral Utilities where he managed the design and construction of the City's $200 million utility capital improvement program. Overton began his career in utility operations and management at ITT Palm Coast Utility Corporation where he was Vice President, Director of Engineering and Field Operations prior to joining Cape Coral Utilities. He holds a Bachelor of Civil Engineering Technology from Southern Technical Institute, Marietta, Georgia, and is a registered Professional Engineer. Overton and his wife, Judy, reside in Sarasota, Florida and have three grown children. BHC Announces Two Executive Appointments James S. McInerney, president of Aquarion Company's Bridgeport Hydraulic Company (BHC) subsidiary, announced the appointment of two executives to new positions effective December 1, 1992. Glenn Thornhill, 45, has been named President of BHe's Stamford Water Company subsidiary. Thornhill succeeds Mark L. Johnson, who announced in September his intention to leave the company to pursue other opportunities. Thornhill will challenge and help our company realize its strategic goals." Thornhill, who lives in Bethel, joined SWC in 1972 as a staff engineer. He left SWC in 1975 to become engineering liaison for water operations for Citizens Utilities in Stamford, and returned to SWC in 1979 and then held various positions of increasing responsibility. He was promoted to vice president of engineering and development for BHC in 1990. Glenn Thornhill Charles V. Firlotte continue as BHe's Vice President, Engineering and Development, along with responsibility for division operations in Litchfield County and the Valley. C harles V. Firlotte, 38, has been appointed vice president, operations, and will assume responsibility for supply operations, water quality control services and environmental management. These functions were formerly under the direction of Johnson, who also is vacating his position as vice president of environmental management, BHe. Firlotte continues his current responsibility for customer and administrative services and as vice president, administration and human resources for Aquarion Company, a post he has held since 1991. "Weare pleased to announce these management changes," said McInerney. "Both Glenn and Chuck have clearly demonstrated the leadership qualities necessary to lead our regulated business through this decade of increasing regulatory and financial He holds a bachelor of science degree in civil engineering from the University of Connecticut and an executive master's degree in business administration from the University of New Haven. He is a member of the Board of Directors of the Housatonic Valley Association and the Advisory Board of the Connecticut Pre-Engineering Program, a trustee of the Connecticut Section of the American Water Works Association and past president of the Connecticut Water Works Association. Firlotte, a Huntington resident, joined BHC in October 1987 as director of human resources and administrative services. Prior to that, he was director of human resources and labor relations at Combustion Engineering Canada. He was graduated from St. Thomas University in New Brunswick, Canada and received a master's degree in social sciences from the University of Ottawa. He is a member of the Board of Directors of the Science Museum of Connecticut. Aquarion Appoints Eugene D. Jones to its BOD Aquarion Company announced the election of Eugene D. Jones to its Board of Directors. Jones, 67, is senior vice president of Greiner, Inc., in Wallingford, Conn., a consulting engineering firm specializing in transportation-related facilities. His election expands the Board to 11 members, and his current term will run until the 1994 Annual Meeting of Shareholders. "Speaking for the Board and management of Aquarion Company, we are delighted to welcome Gene Jones as a director," said Jack E. McGregor, president and chief executive officer. "With 42 years of professional and managerial experience, he will bring a strong sense of leadership and vision to the company's operating strategy." A registered professional engineer in several states, Jones has directed largescale engineering projects both in the U.S. and abroad, including supervising the $300-million Downtown Urban Renewal Project in Stamford, Conn. Prior to joining Greiner in 1981, he was senior vice president in charge of transportation projects for Frederic R. Harris, Inc., consulting engineers. "His 19 years as a member of the Northeast Utilities board, combined with his considerable experience in project management, will serve us well as our utility subsidiary completes the construction of two major filtration plants over the next several years," McGregor noted. Jones is a member of several professional societies, including the American Society of Civil Engineers, the American Consulting Engineers Council, and the Accreditation Board for Engineering and Technology. Among his academic affiliations, he has served as a trustee of Clarkson University since 1989 and was a trustee of Sarah Lawrence College from 1975- 1985. Jones holds a bachelor's degree in civil engineering from New York University, and an honorary doctorate from Green Mountain College. He resides in Wilton, CT, with his wife, opera singer Betty Jones. WINTER 1992 65 IWC Elects Senior VP The board of directors of IWC Resources Corporation has elected J.A. Rosenfeld senior vice president, treasurer, and chief financial officer of the corporation and its subsidiary, the Indianapolis Water Company. He has been the corporation's financial consultant since January 1992, and currently is president and director of MSA Realty Corporation, a publicly traded real estate investment trust. Rosenfeld was executive vice president and chief financial officer of Melvin Simon & Associates, Inc., the nation's second largest shopping center developer, from 1984 to 1990. A graduate of Syracuse University, Rosenfeld is a certified public accountant in the states of Texas, Louisiana, Michigan and North Carolina, a member of the American Institute of Certified Public Accountants, and a member of the Texas Society of Certified Public Accountants. Rosenfeld is a member of the boards of Mid-Central Advisory Board of Protection Mutual Insurance Company, Indianapolis Entrepreneurship Academy, Indiana/ World Skating Academy and Research Center, and Junior Achievement. Suburban Appoints New Communications Administrator Suburban Water Systems, La Puente, CA-based water utility serving approximately 65,000 households and businesses within the San Gabriel Valley and La Mirada/Whittier area, announced the appointment of Marci Ramirez as communications administrator. "We are pleased to welcome Marci as part of the Suburban team, Chief Operating Officer Mike Quinn said. "Marci's background and skills in marketing communications will contribute to Suburban's on-going commitment to work as a neighborhood partner with the community." "As a company also dedicated to being number one with its employees and customers, Suburban looks forward to enhancing its communications activities through Marci's efforts," Quinn added. As former communications director for The East Los Angeles Community Union, an economic development corporation with 600 employees, Ramirez was responsible for spearheading several new internal and external communications marketing programs for the company and its 15 subsidiaries, in addition to developing and establishing its first annual scholarship banquet and directing company-wide promotional activities. Active in community affairs, Ramirez serves as a board member for the Hispanic Women's Council, the Los Angeles County Parks and Recreation Big Event Foundation, and is a member of several other business and professional organizations. A native of East Los Angeles who majored in journalism, Ramirez attended East Los Angeles College and California State University, Los Angeles. Ramirez said she was particularly pleased to work for a company recognized for its strong business ethics, commitment to excellence and progressive management. "I look forward to contributing to Suburban's continued growth by developing and managing innovative programs that will have a bottom-line impact," she said. Severn Trent Expands Severn Trent (U.S.), Inc. (STUS), the U .S. based management and service headquarters of Severn Trent Plc, announced the appointment of John (Jack) D. Bonomo as President of its recently formed subsidiary, ST Environmental Services, Inc. (STES). In announcing the appointment, Thomas P. Gorman, President of STUS, said, "Bonomo's charge will be to expand the firm's market throughout the U.S. STES will offer a wide range of operational and management choices to municipal utilities in the water and wastewater management business." These include: contract operations; utility management; build, operate, and management programs; operations and maintenance services; and training. "J ack Bonomo brings 20 years of expe66 NAWCWATER rience in the municipal contract operations and privatization market to our expanding efforts in the U.S. which we hope will help municipalities solve their management, operations and maintenance problems." In an earlier move, Severn Trent acquired an Eastern Pennsylvania contract operations firm and now operates seven facilities in the mid-Atlantic region and South Carolina. "STES's goal is to bring the parent company's extensive utility and privatization experience to the U.S. market," says Bonomo. "The U.S. economy has forced municipalities and state agencies to take a hard look at the private sector as an option to help alleviate their financial woes." "The timing of Severn Trent's entry into the U.S. privatization market could not have been better as municipal and state governments have been more receptive to the concept," adds Bonomo. WATER For PEOPLE Names New Executive Director and Program Director WATER For PEOPLE has named two top executives to manage the organization's international assistance programs. C harles C. Johnson, Jr. will guide WAT ER For PEOPLE activities as executive director. Paul A. Sobiech will be project director for the organization's Eastern European Initiative. WATER For PEOPLE is a non-profit organization created and sponsored by the A merican Water Works Association (A WWA). The organization conducts programs to assist less-developed countries increase the quality and availability of local drinking water supplies. As executive director, Johnson will manage the organization's programs and volunteer structure. More than 2,500 people from the water supply community have volunteered to assist WATER For PEOPLE. The organization is currently conducting four projects including building a gravity-fed distribution system in south central Mexico and rehabilitating a well that supplies 800 households in Guatemala. Johnson was president of c.c. Johnson & Malhotra, Inc., a Washington, D.C.based consulting firm. Prior to that, he was assistant surgeon general of the U.S. Public Health Service and assistant commissioner of Health in New York City. Johnson's international experience includes representing the U.S. Government at the World Health Assembly meetings, the Pan African Water Conference, and India's first National Water Survey. A graduate of Purdue University, Johnson sits on the Board of National Sanitation Foundation International and the Water Science and Technology Board of the National Academy of Sciences. He is past chairman of the National Drinking Water Advisory Council, a Distinguished Engineer, Purdue University, and an A WW A Fuller Awardee. Sobiech will lead a WATER For PEOPLE initiative in eastern Europe and work with A WWA Section projects. Under a twoyear grant from the U.S. Environmental Protection Agency, WATER For PEOPLE will provide technical assistance to Poland, Hungary, Czechoslovakia, and Bulgaria on drinking water issues. Prior to joining WATER For PEOPLE, Sobiech spent two years as a water resource engineer with the U.S. Peace Corps in Thailand. Sobiech holds a bachelor of science degree in Civil Engineering from Purdue University and a master's degree from the Indiana University School of Public and Environmental Affairs. WATER For PEOPLE was created as an international assistance program through which water supply professionals from around the world can volunteer their time and expertise. The organization was designed to help governmental and nongovernmental organizations that are unable to provide any type of effective drinking water and basic sanitation systems for their local populations. WATER For PEOPLE actively seeks donations of equipment, supplies, and services from individuals, water and sanitation utilities, consultants, manufacturers, etc., for use overseas. , Aquarion Appoints Manager of Shareholder Services Aquarion Company has announced the appointment of Patricia M. Johnson as manager of shareholder services. In this position, Johnson will have responsibility for such shareholder-related functions as compliance reporting to the Securities and Exchange Commission and the New York Stock Exchange, proxy solicitation and annual meeting preparation, stock transfer, and shareholder assistance. In addition, she will administer the company's dividend reinvestment and common stock purchase plan, and attend to corporate housekeeping matters related to the board of directors. Prior to joining Aquarion, where she had been a consultant since 1991, Johnson held senior paralegal positions with several major corporations in Stamford. She served as assistant secretary and legal administrator for General Host Corporation from 1986 to 1990, as a legal assistant for shareholder services with The Singer Company from 1985 to 1986, and as assistant to the general counsel of Unidynamics Corporation from 1977 to 1985. Johnson received a B.A. in English from Sacred Heart University in 1975. She is a volunteer with Make-A-Wish Foundation. Lau Joins CDM Camp Dresser & McKee Inc. (CDM), the international environmental consulting engineering firm, announces that Daniel Lau has joined the firm and will direct CDM's stormwater management projects in the midwestern U.S. A specialist in stormwater management, Lau has more than 17 years of experience in stormwater, flood control, and water resources. Based in CDM's Chicago, Illinois office, he also will oversee stormwater projects and business development in Minnesota, Wisconsin, Iowa, and Missouri. A registered professional engineer in Illinois, Iowa, Michigan, Minnesota, and Wisconsin, Lau holds a bachelor's degree in civil engineering from Michigan State University and a master's degree in hydrology and water resources from Colorado State University. He is a member of the American Society of Civil Engineers, the American Water Resources Association, and the Consulting Engineers Council of Illinois. WINTER 1992 67 etcetera • etcetera • etcetera • etcetera Haskew Tapped By US Water Supply Community George M. H askew, Jr., retired presi~ dent of Hackensack and Spring Va lley water co mpani es, will represent the n ation's water ut ility industry in negotia~ [ions with the US Environmental Protcc, tion Agency (EPA) on an important future drink ing wate r q uality regulation. H askew was selected by the American Wa ter Works Association (A WW A) to part ic ipate in negotiat io ns o n a standard limiting by,products of disinfection in dr inking water. "Modern water treatment using c h lo, rine and other disinfectants has vi rtually eliminated waterborne d iseases like tv' phoid and cho lera in t his country," Haskew said. "Our negotiating effort will be aimed at balanci ng this known benefit against the pote ntial long-term health effects of disinfect ion by,products, which still are not well understood by scientists. The onl y d isinfection by-products li mited by cu rr ent reg ula t ions a re trihalomethanes, related to chlorine dis~ infection." "This is the firs t time a drinking water rule will be negotiated this way," Haskew sa id . "But it's necessary because EPA doesn 't have the kind of scientific evi~ dence to support the traditional rule~mak ~ ing process." He added that EPA hopes the process will res ult in garnering public consensus prior to the new rul e's proposal. The ne~ gotiating team, co nsisting of representatives of health agenc ies, the water suppl y communi ty, en vironmen tal and citizens groups, will meet over the next six months. Haskew said the resulting rule would be promulgated around June of 1993, and wou ld go through public comment and possible revision, with the fi nal rule going in to effect in 1995. Haskew, who retired September 1 as president of the Hackensack and Spring Valley water companies, continues to serve as vice chairman of the board of the ir parent firm, United Water Resources. 68 NAWCWATER Drake Named Honorary Member of AWWA Camp Dresser & McKee Inc. (COM), the international en vironmenral consult~ ing enginee ring firm, announced that Ri~ chard C. Drake has been named an hon~ orary member of the American Water Works Associatio n (AWWA), the nonprofit scientific and educational o rgani~ zation whose membership exceeds 54,000 drinking water professionals worldwid e. Drake, a vice president of COM, serves as a business development coordinator for th e fi rm's Northeast Division . Drake accepted the honor in June at the associat ion's annu al conference in Vancouver, B.C. He was cited for his dedi~ cation to A WW A across a broad s pec~ trum of regional and national act ivities, and specifically fo r his leadership and contribut ions to the assoc iation's annual confei'ence while se rving as chair of the Confe rence Manage men t Committee. Drake previously se rved as an internationa l d irector of A WW A and is a past recip ient of the association's prestigious George Warren Fuller Award , which recognizes distinguished service in the water supply field. Drake is also active in the America n Public Works Association, the National Association of Water Companies, and the Water Environment Federation. He is a resident of Cohasset, Massachusetts. Sierra Pacific Power Opens HHomework Hotline" A II elementary and middle school students in Washoe County, NY, now have a free, va luable learning resource at their d isposal thanks to a program introduced by Sierra Pacific Power Co. ul-lomework Hotli ne" reinforces classroom learn ing by providing after~school homework assistance to students and their parents. The new program is endorsed by the Washoe Co un ty School Di stri ct . Those in need of ass istance may call and reach certified teachers who can help answer homewo rk questions, ass ist students in und erstanding and completing ass ign~ ments, and hel p parents more effectively aid the ir children at home. The "Hotline," a pilot program in 15 area schools last year, answered more than 10,000 homework questions and improved the q uality of the educati onal experience. It is the first program of its kind in the West, and only the second such program in the coun t ry. "In establishing the Homework Hotline, Sierra Pacific has taken the lead among utilities in the West by committing to help improve America's primary and secondary education systems," said William L Keep~ ers, president of SietTa Pacific Power. 'We see this program as an invesunent in the futu re of our community." H omework Hotline is located at Roger Corbett Elementary School and operates from 4 to 7:30 p. m., Monday through Thursday. The Hotline staff has access to textbooks cu rren tly being used in the school district. With the books and other reference materials, teachers are able to provide quick and accurate guidance to callers. In addi tion, one teacher fluent in Spanish is ava ilab le each evening. O n a typ ical evening, calls for assistance begin as soon as the phones are switched on . As the teacher works with t he caller, he or she completes a short ch ecklist, including infor mation on whether the caller is a child or an adult; grade and school attended; and the con tent or subject of the call. The checklist information will be used by the school district for fut ure planning to determine trends or problem areas. For those calling in before 4 p.m. or after 7:30 p.m., a voice mail featll re will record the call and direct the next ava ilable teacher to the call~ ing stud ent or pa rent. Aquarion CEO Testifies Before Congressional Commitiee Testifying before a Congressional sub~ comm ittee hearing in Milford, CT, Aquarion Company President and Chief Executive Officer Jack E. McGregor voiced his company's strong support for pend ing legislation on water quality. Com~ menting on H.R. 5070, the DeLauroLowey Water Pollution Control and Estuary Restoration Financing Act of 1992, McGregor said, "We believe this bill will strengthen the Clean Water Act by providing the needed environmental and eco~ nomic incentives to restore and protect our estuaries from any more deterioration and will provide munic ipalities the help they need through re~ autho riz ing the Na~ tiona I Estuaries Program and State Re~ votving Funds Program to implement es~ tuary management pLans. n Sponsored by Congresswomen Rosa DeLauro (D-Conn.) and Nita Lowey (DN.Y.), H.R. 5070 is designed to clean up 11 of the country's most precious and endangered estuaries, including Long ls~ land Sound, through the National Estu- T he York Water Co. Honored The York Water Company's 1991 Annual Report, commemorat in g the Company's 175thanniversary, has beendou~ bly honored in regional graphics design competitions. The Arulllal Report was given a flgold" in the annual Lancaster Ad Club Cameron Awards competition and it received a merit award from the Ad Club of Central Pennsylvania ADDY judges. This special commemorative Annual Re~ port presented biographies of the nine fOllnders of The York Water Company whose common goal was to reduce the dam~ age caused by fires within the rapidly growing community of York, PA. In fact, most of the founders were members of the local vol~ unteer fire departments. A unique 175th ann iversary seal was designed and produced from gold foil to close the cover of the brochure. The York Water Company Annual Report was designed and produced by Kelly Adams Advertising Inc. of York, PA. ary Program (NEP), a comprehensive management plan offered under Section 320 of the Clean Water Act. "As an environmental company and a partner with the Long Island Sound T askforce, we support re~authorizing Sec~ tion 320 ... to protect threatened estuar~ ies," McGregor added. flLong Island Sound is the largest and most densely populated of these valuable bodies of warer and shou ld serve as a national model for inno~ vative clean~up so lutions." In his testimony, McGregor offered the Water Resources Subcommittee two addi~ tions to the proposed legislation that would "help improve water quality and stretch federal dollars so the clean-up of Long Island Sound can continue on schedule." First, by strengthening the Clean Water Act, require a reduction in non~point source pollution that cou ld place drinking water suppliers in violation of the standards of the Safe Drinking Water Act. "Adoption of this change will also have the salutary effect of reducing the level of pollutants reaching estuaries'" he nmed. According to McGregor, the same pollutants that damage Long Island Sound-nitrogen and other harmfu l nutri~ ents due to, among other things, run~off from streets, highways and overfertilized lawns-also threaten Aquarion's public wa~ ter supply watershed land. Second, the bill should modify the Clean Water Act to permit state funds to be used in conjunction with private funds, which would "encourage the establish~ ment of public/pri vate partnerships to cons truct and manage sewage treatment wo rks/' he said. In his closing comments to the Subcom~ mittee, McGregor said: "1 make these sug~ gestions for one simple reason: I share your desire to improve the water quality of Long Island Sound. Passage of your legislation will strengthen the NEP, a necessary step in the process. Another important step is se~ curing adequate financial resources. Autho~ rizing public/private partnerships under the C lean Water Act is one way to make in~ creased ... funds go further." Public ..Private Partnership In California contributed by C. W. Porter President, Dominguez Services Corp. The West Basin, a source of ground water in the South Bay region of Los Ange les County, is inundated with saline water. "Over pumping" of the basin occurred years ago, lowering the ground water level to below sea le ve l, thus enabling sea water to encroach into the basin. Although that leakage has been largely stopped, this plume has spread over the years as saline wells are shut down and new wells are drilled outside the plume, which tends to draw the plume ever wider. All programs to correct the situation were deemed "gigantic" and "too costly." However, a pilot project was started by the West Basin Municipal Water District using a $1 million grant, to construct a $2 million plus desalter to pump two wells previously closed down by Dominguez Water Corporation. The Basin will sell this treated water to Dominguez Water Corporati on, but in turn contract, i.e., privatize, the opera~ tio ns to Dominguez Water. While not large in scope, it will demonstrate the feasibility of continued pumping from within the plume to avo id hav ing more wells pumping from outside the plume. If successful, the solution to the problem can be attacked with many smalle r plants. Instead of waiting forever for the financing of a gigantic plant wh ich might or might not do the job, a start has been made. WINTER 1992 69 First Annual IWC "Crystal Awards" Recipients Announced Recipients ofIWC Resources Corporation's first annual "Crystal Awards," recognizing outstanding service by its employees, were announced by James T. Morris, chairman, at a special awards banquet held over the past weekend. IWC Resources Corporation is the holding company for the Indianapolis Water Company and six other subsidiaries. "The Crystal Awards were conceived and developed by the employees ofIWC Resources Corporation to recognize and reward superior employee service both inside and outside the company," Morris said. All nominees for these prestigious awards were selected by their fellow employees, which then were forwarded to an independent, outside panel of judges, who selected the winners. The Crystal Award, presented for the company employee-of-the-year, was given to Thomas F. Plummer, a fire inspector in the Customer Service Department. This award represents the "one person who has achieved the extraordinary, and who deserves the utmost in praise." Plummer, who last spring was struck by lightning while restoring water service to a customer, is a 13-year employee. Susan E. White, a Customer Service representative, received the 1992 "Sapphire Award," as the employee who "consistently has provided superior service while in direct contact with company customers." Melissa L. Berry, Human Resources representative, earned the 1992 "Ruby Award," honoring the employee who has "provided consistent outstanding service to his or her fellow employees." A.D. Murphy, a laboratory assistant in the Purification Department, was the recipient of the "Emerald Award," which honors the employee "who has demonstrated consistent superior job performance in a solitary atmosphere, without the benefit of day-to-day employee or customer contact." Burnice Head, security guard, received the "Amethyst Award," presented to the employee, "who has voluntarily provided outstanding service to the community, through school, church, charitable or civic organizations." More than 300 employees of IWC Resources Corporation were eligible to nominate their peers for the Crystal Awards. Management was specifically excluded from the selection process. Over 150 nominations were received by the awards committee, which is made up of company employees. "Each of these employees is an outstanding representative of the quality of dedicated individuals who serve IWC Resources Corporation and its customers. Weare indebted to each person for their service, and respect what they represent in the highest qualities as employees of this company," Morris added. New Plant in WV There was a cool crispness in the air on September 29, as the mountains were starting to take on their bright yellow, orange and red fall colors; the sound of bagpipes added a certain mystique to the afternoon. All in all, it was a picture postcard day as the West Virginia-American Water Company dedicated it's new Water Treatment Plant in Gassaway, W.va. On hand for the dedication, and the luncheon that preceeded, were various state and local officals which included Patricia Hill from U.S. Representative Bob Wise's office, and Bob Brunner, Communications Director for West Virginia Governor Gaston Caperton. Representing the American Water Works System Inc. was G.c. Smith, Executive Vice President; Dillard Edgemon, Regional Vice President of the American Water Works Service Company Inc.; and C.E. Jarrett, Vice President and Manager of the West Virginia-American Water Company. The dedication of the $3.5 million treatment plant started at 1:30 p.m. and was open to the public. Posting the U.S. and W.Va. colors to start the afternoon activi70 NAWCWATER Gerald Smith addressing attendees at plant dedication. ties was a Color Guard Unit from Company A, 1092d Engineering Combat Battalion (Corp) of the National Guard Unit in Gassaway. Tours of the new facility were offered along with refreshments. Providing the entertainment for the ceremony was the West Virginia Highlander Band from Elkins, W.Va. "The new treatment plant will serve the cities of Gassaway and Sutton, and has the additional capability to serve future growth in Braxton County," said C.E. Jarrett. The Gassaway Water Treatment Plant is one of the largest construction projects in Braxton County in 1992. The new facility is computer automated and equipped with the latest in water treatment technology. It has been programmed to initiate daily start-up procedures and monitor the entire water treatment process, giving readings on the slightest change in the water. The new plant treats an average of 200,000 gallons of water a day with the capability of producing three times that amount if necessary. Dates to Remember 1993 NAWC CWA BoD Meecing San jose, CA j anuary 14 NAWC Pennsylvania Chapter BoD Meeting Hershey, PA january 20 NA we New Jersey Chapter Meeting jamesburg, Nj January 22 CWA BoD Meeting San Jose, CA February 11 NA we Pennsylvania Chapter BoD Meeting Hershey, PA February 17 NAWC Illinois;Missouri Chapter Meeting Belleville, IL February 18 CW A BoD Meeting San jose, CA Mareh II NAwe Pennsylvania Chapter Meeting Hershey, PA March 17 NA we New Jersey Chapter Meeting jamesburg, Nj March 19 NA we Western Customer Service Conference Redondo Beach, CA March 23-24 CWA BoD Meeting San j ose, CA April 8 NA we Delaware Chapter Meeting April 14 NA we Pennsylvania Chapter BoD Meeting Hershey, PA April 21 CW A Spring Meeting Sacramento, CA May 3-4 NA we Eastern/Midwestem Customer Service Conference Philadelphia, PA May 3- 5 N A we New England Chapter Meeting May 7 NAwe Pennsylvania Chapter BoD Meeting Hershey, PA May 19 NA we New Jersey Chapter Meeting Jamesburg, NJ May21 NARUC NA we Pennsylvania Chapter Annual Meeting & Legislative Reception Harrisburg, PA june 1-2 NARUC Winter Committee Meetings Washington, OC February 2S-March 4 CWA BoD Meeting San j ose, CA june 10 Mid-America Regulatory Commissioners Austin, TX june 5-8 New Jersey Chapter Annual Luncheon jamesburg, Nj june 25 Southeastern Association of Regulatory Uti lity Commissioners Orlando, FL june 13- 16 CW A BoD Meeting San jose, CA july 8 NA WC Pennsylvania Chapter BoD Meeting Hershey, PA july 21 CWA BoD Meeting San jose, CA August 12 CWA BoD Meeting San jose, CA September 9 Pennsylvania Chapter BoD Meeting Hershey, PA September 15 NA WC New Jersey Chapter Meeting jamesburg, Nj Scptember 17 CWA BoD Meeting San jose, CA October 14 NA WC Annual Conference Williamsburg, VA October 17- 21 NA WC New England Chapter Meeting November 12 NA WC Pennsylvania Chapter Meeting Hershey, PA November 17 CWA Annual Meeting Monterey, CA November 17-20 NA we New Jersey Chapter Meeting jamesburg, Nj November 19 CWA BoD Meeting San josc,CA December 9 NA WC Pennsylvania Chapter BoD Meeting Hershey, PA December 15 Westcrn Conference of Public Service Comm iss ioners Anchorage, AK june 13- 17 16th National Conference of Regulatory Attorneys Whitefish, MT june 13-16 71st National Conference of Regulatory Utility Commission Engineers Portland, ME june 14-17 New England Conference of Public Utilities Comm issioners Dixville Notch, NH june 27-30 38th Great Lakes Conference of Public Utilities Commissioners White Sulphur Springs, WV july 11- 15 NARUC Summer Committee Meetings San Francisco, CA july 25-29 105th NARUC Annual Convention New York, NY November 15-18 AWWA A WWA BoD Meeting New Orleans, LA january 27- February 1 A WW A Annual Conference San Antonio, TX june 6-10 A WWW Distribution System Symposium San Diego, CA September 25- 29 WINTER 1992 71 § E BULK RATE U.S. POSTAGE PAID Permit No. 8846 Washington, D.C. Published by the National Association of Water Companies Suite 1212, 1725 K Street, N.W. Washington, DC 20006 Return Postage Guaranteed Address Correction Requested I; NAWC Officers and Chairman of the Board: Floyd E. Wicks, Ronald S. Dungan, jack E. McGregor, j. Richard Tompkins, jay W. Weinhardt, William D. Holmes, j . james Barr, Robert A. Luksa, Sharon L. Gascon and james B. Groff.