20150521Wyatt Direct.pdf

Dean J. Miller (lSB 1968)
McDEVITT & MILLER LLP
420 West Bannock Street
P.O. Box 25il-83701
Boise, lD 83702
Tel: [phone]
Fax: [phone]
[e-mail]
Attorneys for Applicant
OF UNITED WATER IDAHO INC. FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
DIRECT TESTIMONY OF GREGORY P. WYATT
MAY 201 5
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Please state your name and business address.
Gregory P. Wyatt. United Water ldaho, 8248 West Victory Road, Boise
ldaho.
What is your occupation?
I am the Vice President and General Manager of United Water ldaho
("United Wate/' or "Company").
Please describe your educational background and other
qualifications.
I am a graduate of Bloomsburg University with a Bachelor of Arts degree
in Business Administration Management. I have previously provided
testimony before the !ndiana Utality Regulatory Commission, the
Pennsylvania Public Utility Commission, and the ldaho Public Utilities
Commission.
A. Please describe your work experience.
I have been employed at United Waterworks properties, formerly General
Waterworks, since December 1974. Prior to assuming my current duties
as General Manager of United Water ldaho in late 1999, I worked in
various capacities in several states including General Manager for United
Water Pennsylvania, Area Manager for the United Water lndiana
operations, Assistant Manager of United Water ldaho and various
accounting positions in New Jersey and Pennsylvania.
a. Please describe your duties as General Manager.
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A. My duties are to oversee the Company's activities and responsibility of
providing potable water to the customers of United Water ldaho. I provide
general management direction and oversight to the various departments
of Engineering, Production, Transmission & Distribution, Customer
Service, Billing, lnformation Technology, Finance and Planning, and
Administration in meeting their responsibilities for the delivery of potable
water, maintaining compliance, and providing related services to
customers.
These functions include planning for raw water source,
construction, maintenance and operation of the treatment and pumping
facilities, the distribution system including mains, services, and storage
tanks, responding to customer needs regarding initial service or
discontinuing service by reading customer meters, processing and
delivering bills, and responding to other customer needs through the
C ustomer Service Representatives.
My duties also include oversight and responsibility for the
Company's compliance with all regulations in regard to safety, compliance
with the Safe Drinking Water Act, and other similar requirements.
a. What is the purpose of your testimony?
A. Among other things, I will testify regarding the major reasons for the
general rate relief requested in this filing, and the Company's conservation
and customer service efforts. I will also be available to answer questions
of a general nature. My testimony is organized as follows:
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- Other Witnesses Pg. 3
- lmpact of Rate Change Pg. 4
- Tariff Design Pg. 6
- Rate lncrease Drivers Pg.6
.- Cost Management and Efficiencies Pg. 8
-- Personnel Requirements Pg.'12
- Water Conservation Pg. 13
-- Conservation Plan P9.17
- Customer Service Pg. 20
Other Witnesses
Please identify the other witnesses who will testify on behalf of the
Company and the topics on which they will testify.
Mr. Paul Herbert, consulting expert with Gannett Fleming, lnc. will testify
regarding revenue and associated adjustments.
Ms. Pauline Ahern, consulting expert with AUS Consultants, will
testify regarding cost of capital.
Mr. Kevin Doherty, Director Regulatory Business with the United
Water M&S Company, will testify regarding rate base, revenue
requirement, and depreciation expense.
Mr. Marshall Thompson, Operations Manager with United Water
ldaho, will testify regarding the Company's overall operations, and will
present testimony identifying and explaining the various proposed to the
Company's Rules and Regulations on file with the Commission, excluding
the revenue rate tariff pages, which are included in Witness Herbert's
testimony.
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Ms. Jarmila Cary, Finance Manager with United Water ldaho, will
testify regarding operating expenses and associated adjustments, as well
as all amortization expenses and associated adjustments.
Mr. Roger Greaves, Senior Project Engineering with United Water
ldaho, will testify regarding pro-forma capital additions and retirements,
plant in service, and purchased water expense.
Impact of Prooosed Rate Chanqe
Generally, what is the overall revenue increase requested in this
filing?
The Company is seeking increased revenues in the amount of $5,881,308
or approximately 13.2o/o to be applied in an across-the-board fashion to all
classes of customers and all tariff sheet components.
O. When was United Water ldaho's last general rate filing?
A. United Water ldaho last filed for a general rate increase on August 3,
2011. The case resulted in the Commission granting the Company an
overall increase of $4.0M in two phases, with $3.050M effective February
1,2012,and an additional $950,000 effective February 1,2013.
O. What is the current rate per hundred cubic feet (ccf) of water (748
gallons)?
A. The current volumetric rate for water is $1.4647 under the winter rate
(Sep. to Apr.) and $1.8310 under the summer rate, which means one
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penny will buy 5.1 gallons of water in the winter and about 4.1 gallons in
the summer.
How much water does an average residential customer use per year
and what does that equate to on a cost per day at current rates?
Using the projected test year volumes, an average residential customer
will use approximately 1 14,597 gallons of water annually (approximately
153.2 ccf) which equates to about 314 gallons per day. At current rates,
on average that equals $383.99 per year, or $0.71 per day plus an
additional $0.34 per day for the average residential customer charge.
How would the Company's proposed increase impact the average
residential customer?
Excluding Franchise or IDEQ fees, for the average residential customer
projected to use 114,597 gallons annually this would be an increase of
approximately nine cents ($0.0S1 per day plus approximately five cents
($0.0S1 per day for the customer charge. The total increase at the
Company's proposed rates is approximately $50.62 per year or $4.22 per
month. Considering the Company's last significant increase to base rates
was in February 2012and the proposed rates would not become effective
until approximately mid-December 2015, United Water ldaho's customers
wil! have benefitted from approximately four years of relatively stable base
rates.
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Tariff Desiqn
What is the Company's proposal for adjustments to rates to recover
any revenue increase that may be awarded by the Commission?
As explained in more detail in the testimony of Witness Herbert, the
Company is proposing increases to all rate elements, excluding
miscellaneous service charges and fees, on an across the board basis.
The Company is not proposing, in this case, any change to the current
general tariff design and is maintaining the 25o/o differential between winter
and summer volumetric rates.
Rate lncrease Drivers
Would you briefly explain why the Company is seeking a rate
increase at this time?
A. The increase is necessary for the Company to continue to provide quality
service to customers and to improve service by investing in new and
replacement infrastructure. For these reasons, United continues to make
capital investments in utility plant. The Company's rate base of
approximately $162.9 million as filed in its last rate proceeding (Case No.
UWI-W-I 1-02) has increased to about $173.3 million in this proceeding or
an increase of $10.4 million. Operating costs, excluding income taxes,
have also increased since the last rate filing from approximately $26.3
million to approximately $29.5 million or an increase of $3.2 million. An
increase in rates is also necessary in order to provide sufficient capital
dollars to maintain and improve quality service to our customers, to
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provide adequate operating and maintenance coverage, and to maintain a
sound financial position.
What are the major capital investments the Company has made since
the last rate case that contribute to the increase in rate base?
The Company has made or will be making by the end of the post-test year
period ending November 30, 2015, additional investments totaling more
than $39 million. Almost $17.2 million dollars of that was invested in
replacing aging water mains, services and meters; over $3.5 million in
replacement treatment projects that improve water quality provided to
customers; almost $1.2 million in booster station improvements that
improve system reliability; almost $0.9 million for a replacement storage
tank to sustain pressure and improve fire protection in the Bogus Basin
Road area; more than $0.7 million in a new main to improve customer
pressure in the Hill Road area; over $0.6 million has been invested in a
new water supply well; and over $0.5 million dollars in auxiliary power
equipment at various sites throughout the water system to ensure
uninterrupted water supply to customers during electric power outages.
You mentioned before that operating costs in this current filing
increased by $g.Z million from the level in the Company's last filing.
What are some of the major areas of operating cost increases?
The largest single category of operating cost increase in this case, about
$945,000, arises from increased depreciation expense related to the
capital investments the Company has made. Additionally, personnel
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expenses have increased by about $911,000, with a significant portion of
that associated with medical, pension, and post-retirement health care
cost increases. Energy costs have increased by more than $544,000, and
amortization expenses associated with deferred pension have increased
by almost $496,000. These and other expense adjustments are
discussed more fully in Witness Cary's and Witness Doherty's testimony
and exhibits.
Cost Manaqement and Efficiencies
Please discuss how United Water is managing its costs and seeking
to mitigate the impact of increased costs on its customerc?
United Water is continually looking for ways to reduce the costs of
providing service to its customers and for ways to provide service more
efficiently. An area where United Water has demonstrated efficiency in
operations is in the number of employees required to operate the
business. Here a common measure of efficiency is the number of
customers per employee. The graph below shows the Company's
average number of metered customers per employee from 2000 to 2014.
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Avg. Metered Cust/Employee
875
775
725
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20LL 20L2 20L3 20L4
During the Great Recession (roughly from 2008 to 2010) the
Company's ratio of customers per employee dipped from its high of 898
customers in 2007 to 847 in 2010. However, the ratio has improved every
year thereafter and now approaches the peak from 2007. Much of this
improvement is related to the renewed customer growth since 2010, while
the company has been able to maintain a relatively flat staffing level since
the last general rate filing.
The next graph shows the ratio for a group of regulated companies
for a recent period (2011), and it can be seen that United Water's ratio of
862 customers per employee was well in excess of the average of 629 for
that period, bettering the average by 37o/o. And as seen in the graph
above, the company's customers per employee ratio has improved even
further from 201 1 to 2014.
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?:OLL Customers per Employee
nies Financial &Data for 2011
Additionally, the Company employs various technologies, including
highly sophisticated SCADA and GIS systems, which enable the Company
to operate its facilities without requiring all year long around the clock
staffing. Additionally, these aid in controlling staff overtime as well. For
example, over the three year period of 2012-2014, staff overtime pay has
average just over $142,000 per year, which is an average of only 2.44o/o of
average gross payrollfor the period.
Please identify other areas where the Company has been able to
control costs a nd/or demonstrati ng operational efficiencies.
United Water ldaho, as part of a national Company, has been able to
leverage our Company's size and purchase volume to negotiate favorable
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unit prices (or mitigate the magnitude of price increases) on various
products and services such as chemicals, materials, insurance, health
care, fleet leasing, and other products and services.
A significant measure of a water utility's operational efficiency is
its level of non-revenue water (NRW), or the amount of water the utility
produces, treats and pumps to customers that, for various reasons, does
not return revenue to the utility. ln the U.S., utilities lose on average 20
percent of their water, according to the Black & Veatch Strateqic
Directions Water Report. United Water ldaho has historically maintained a
substantially lower level of NRW than industry averages. Over the past
two years the Company's NRW percentage has averaged about 5.5o/o.
At the Company's Victory Road offices, we have taken various
energy saving measures; including taking advantage of ldaho Power
lighting rebates, to lower electricity use by over 13% from 2008 to 2014.
Additionally, since 2009, the Company has continued its
participation in a Power Demand Response Program Sales and Services
Agreement with EnerNOC, lnc. that provides payments to the Company
for temporarily interrupting the use of certain water pumping facilities when
requested to do so by ldaho Power during high electricity demand periods
in the summer. These payments go directly to reduce the Company's
purchased power expense.
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Also, from 2008 to 2014 the Company reduced by more than 13%
its total gallons of gasoline and diesel fuel purchased for use in its fleet of
vehicles and equipment.
Please describe efforts taken to control costs related to the
Company's pension obligations.
There have been two significant changes to the United Water Resources
Pension Plan. The first, in 2009, was the elimination of the Pension Plan
benefit for all new employees hired into the Company. The second, which
became effective in July 2011, was the introduction of a participation cap
of 35 years of service for existing employees who are covered by the
Company's current Pension Plan.
Perconnel Requirements
The pro-forma payroll related operating expense adjustments
presented by Witness Cary indicate a change in headcount from the
Gompany's test year in this case. Please discuss this change.
ln the test year the Company had a head-count of 98 full-time employees
(FTE). ln its pro forma payroll expenses the Company is proposing 99, an
increase of 1 FTE. The Company has added an Environmental Health &
Safety (EHS) Manager position. The new EHS Manager was hired in
Apri! 2015 to lead the Company's environmental, safety and security
programs, and to support management in monitoring, verifying, and
strengthening compliance with regulations in these areas. Prior to hiring
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the EHS Manager, the Company's EH&S programs and efforts had been
under the responsibility of the Company's Production Manager, but only
on a part-time basis as time allowed. The Company has placed a high
commitment on environmental compliance and a high priority on ensuring
the safety of each employee.
Water Conservation
Would you please provide an overyiew of the Company's water
conservation and demand side management efforts and programs?
For over 20 years the Company has developed and implemented various
customer information, education and awareness programs, and outreach
efforts that promote wise water use and water conservation and that assist
customers in managing their water demand and consumption. Although
some of these efforts have sought to inform customers about water use in
the home, the majority of them have targeted customer water use outside
on lawns, gardens and landscape areas. This focus is designed to enable
customers who use water provided by the Company for irrigation purposes
to benefit the most from the Company's efforts, since irrigation demand is
the largest driver of overallwater system demand in the summer.
Below is a summary of the Company's efforts in these areas:
Water Efficient Landscaping Classes
Historically, in February/March of each year, United Water, in
partnership with the Ada County Extension Office and the City of Boise,
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conducted six, two-and-a-half-hour class sessions focused on the
fundamentals of water efficient landscaping. The classes are now
consolidated into four, two-hour class sessions in response to a more
manageable time commitment for the attendees. At the recently
completed 2015 series, the four sessions averaged 75 attendees per
class.
Summer Water Conseruation Bill lnsert
As customer bills are delivered throughout the spring and summer,
both paper and electronic bills include an insert that provides information
on how customers can reduce their outside water demand during the
summer. ln 2Q14 the Conservation insert was included in the July and
August bills. ln 2015, the Conservation insert is planned to be included in
the June and July bills.
Water Use Management Messaging Through the Media
United Water ldaho conducts a multi-media conservation campaign
annually. The campaign begins in mid-June, and culminates around
Labor Day. The goal is to increase customer's awareness of their water
use and to provide them with concrete reminders and methods to manage
their water consumption. This consists of a coordinated use of
newspaper, television, online media and social media.
From 2005-2013, the Company published an eight page newspaper
insert, distributed in a Sunday edition of the ldaho Statesman. ln 2014,
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the Company transitioned the guide to an online publication, reducing
production and distribution costs, and allowing us to incorporate
interactive features. The online guide featured text, photos and how-to
videos on topics ranging from irrigation systems and lawn care to sprinkler
repairs and a list of low-water plants that customers can plant in their
yards. The 2014 guide was awarded First Place in the Electronic
Communications category in the Pacific Northwest Section of the
American Water Works Association Excellence in Communications
Awards. The Guide also includes coupons which customers can use to
obtain the free outdoor conservation devices mentioned below. The guide
is promoted in bill messages, via online ads on leading local news
websites, on social media platforms, in the Company's monthly electronic
newsletter, and in print ads.
The summer campaign also includes TV commercials to encourage
conservation. ln 2014, the Company launched a student video contest, to
engage the community in the effort. 9th-12th grade students in the Boise
School District and Bishop Kelly High School were eligible to submit a 30-
second Public Service Announcement. The winning entry aired during the
summer on local TV stations.
Additionally, United Water partners with ldaho Rivers United each year
on public outreach campaigns focused on conservation and preservation
of the Boise River water source.
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Xeriscape Demonstration Garden
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ln 2006, United Water installed a Xeriscape, low-water use,
demonstration garden at its main office location on Victory Road. The
garden contains numerous drought-tolerant plant varieties and is
configured with appropriate signage in a walk-through venue. A listing of
plants is available for customers at the office and on our web site, and the
Company's Outreach and Education Coordinator conducts educational
workshops for customer groups using the garden as the centerpiece. ln
2010, the Company financially supported the installation of a new low-
water use garden located at the ldaho Botanical Garden, and a xeric
garden on the Capital grounds upon completion of the Capita! expansion
and restoration project. United Water works with both of these entities to
coordinate messaging, signage, and water conservation educational
materials. The Company is currently in discussions with the Ci$ of Boise
on funding and installing a xeric demonstration garden at the Bown
Crossing Library, slated to open in late 2016.
Educational and Community Outreach
United Water has developed various water awareness and
conservation activities and presentations that are available and presented
to schools, businesses, and community organizations in the area. These
include PowerPoint presentations, topical lectures, and science activities.
The Company has become more involved with STEM (Science,
Technology, Engineering, Math) education outreach; participating in
summer teacher workshops and student activities such as Explore STEM
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Day at Boise State University. The Company also participates in
community events where conservation materials and information are
provided, including Earth Day events, various company green fairs such
as Citibank, Direct TV Expo, ldaho Botanical Garden Landscaping
Symposium, as well as meetings with various neighborhood associations
and many subdivisions throughout the service area.
Gonservation Plan
Please comment on the Company's efforts to implement its
Conseruation PIan.
As a result of the Company's 2004 case (UW|-W-04-04) the Commission,
in its September 20, 2005 Order No. 29871 directed the Company to
prepare an updated conservation plan and submit it to the Commission for
review. United Water prepared and then filed its updated Conservation
Plan with the Commission on December 1, 2006 (UW!-W-06-05), and by
Order No. 30305 dated April 18,2007 and Order No. 30305 Errata dated
May 22, 2007, the Commission approved implementation and associated
cost deferral of four specific programs from the updated Conservation
Plan; specifically Xeriscape demonstration gardens, rain sensor retrofit,
trigger shut-off valves and hose timers, and restaurant low flow spray
nozzles.
Please describe the Company's implementation efforts regarding the
four programs since Commission approval in April 2007.
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A. United Water began promoting the trigger shut-off valve and hose timer
program via a free coupon in its 2007 Conservation Guide. In that first
Guide, and annually since, customers are encouraged to bring the coupon
from the Guide into the office and receive the free devices. The program
is also promoted via signage at the Company's office where extra coupons
are available, at public shows and displays, in the conservation bill insert,
via bill messages, and on the Company's web site. During the 2014
season, Boise City Hall, the Collister Library and Hillcrest Library assisted
the Company as distribution centers for the conservation device program.
Supplies of the outdoor devices are also kept at El-Ada to assist our UW
Cares program recipients. At the end of 2014, 5,692 hose timers and
hose triggers have been provided to customers since the program
inception.
ln the summer of 2008, the Company began implementing the rain
sensor (shut-off device) retrofit on irrigation controllers program. This
program involves purchasing and providing a rain sensor device at no cost
to customers. The device connects to the customer's automatic irrigation
system and interrupts the scheduled watering cycle whenever sufficient
rainfall is detected by the device. This program is promoted in the same
way as the trigger shut-off valve and hose timer program via the annual
Conservation Guide, office signage, public shows and displays, in the
conservation bill insert, via bill messages, and on the Company web site.
This program has been promoted in the same fashion during the summers
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ever since. By the end of 2014,3,291 rain sensors have been provided to
customers.
The restaurant low flow spray nozzle change out program began in
2009. ln this program United Water replaces commercial customer's
existing rinse and clean spray nozzles with low flow units at no charge.
The Company entered into an agreement with a licensed plumbing
contractor in August 2009 for the installation of these devices for
customers. The Company partnered with Central District Health ("CDH")
to obtain their list of roughly 650 customers within our service area (such
as restaurants, hospitals, and group homes) who have commercial kitchen
facilities. The Company sent direct mail invitations to the list of customers
received from CDH on two separate occasions. Unfortunately, the
response from customers has been disappointing with 73 low flow nozzles
replaced in customer's facilities at no direct additional charge to the
customer.
The Company's efforts regarding the fourth program approved by
the Commission in 2007, Xeriscape demonstration gardens, has already
been discussed above.
A. Do you believe the Gompany has implemented the approved
Conservation Plan programs in the way the Gommission intended?
A. Yes. The Company has made a diligent effort implementing the four
approved programs, while at the same time it has maintained and
improved its previous conservation efforts.
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Customer Service
O. Please comment on the Company's customer service efforts.
A. United Water uses various measures and metrics to ensure that it
maintains a high level of service and responsiveness to its customers. For
example, the Company tracks customer complaints it receives relating to
water quality. During 2014, water quality complaints that required a field
visit to resolve have averaged only 0.52o/o of total customers. Complaints
relating to high bills and disconnection have averaged only 0.37% and
0.25o/o respectively as a percentage of bills rendered.
O. Are there other measures used by the Gompany to track customer
seruice performance?
A. Yes. Our Customer Service group maintains various data relating to
customer calls, response time, length of call, and number of dropped calls.
During 2014, the Customer Service office answered 95,523 calls with an
overall average answer speed of 35 seconds. The average length of calls
was 3.07 minutes, and the abandoned or dropped call rate was 2.3o/o of all
calls. In addition, due to the fact that virtually all customer meters are
located in outside pits or vaults, we are able to render bills based on
actual meter readings 98.3% of the time.
a. Does United Water ldaho monitor customer satisfaction?
A. Yes. The Company conducts an annual telephone customer satisfaction
survey with the purpose of measuring customer satisfaction across
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various areas of service as well as overall satisfaction. A third party,
Walker lnformation conducts the survey and tabulates the results.
Samples of the positive satisfaction results for 2014 are:
. Overallsatisfaction:97% (neutral to extremely satisfied)
. Cares about customers:
o Reliability of service:
. Value for money:
Low-lncome Customer Assistance
96% (neutral to excellent)
98% (neutral to excellent)
86% (neutral to excellent)
eQ.
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Does the Company currently have a low-income customer assistance
program in place?
Yes. Beginning in September 2005 the Company initiated UW Cares,
which is the first, and still the only, water utility customer assistance
program in the state. The program, which is administered through the El-
Ada Communi$ Action Partnership social service organizations, provides
up to $65 annual water bill assistance to qualifying customers. The initial
program provided up to $50 annual assistance but was increased to $65
by the Company in October 2011 in response to increased customer
need. Additionally, the Company provides the agencies with indoor water
conservation kits for distribution and installation for qualified customers in
the program. Since UW Cares began in 2005, almost $146,000 in
assistance has been provided to more than 2,800 qualified customers to
help pay their water bills. The Company initially sought customer
Wyatt, Di 21
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donations in support of UW Cares, but abandon that approach in its last
general rate case (UW|-W-11-03) due to lack of customer interest and
support.
Also, during its 2004 rate proceeding (UW|-W-04-04), the Company
supported and agreed to a proposed change in its rate tariff whereby the
first 3 hundred cubic feet (ccf) of consumption used during the summer
rates period (May through Septembefl is priced at the 25o/o lower winter
rate.
O. Does this conclude your direct testimony?
A. Yes. I reserve the right to supplement my testimony as additional issues
arise during the course of this proceeding. Thank you.
Wyatt, Di 22
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