Regulatory Practices & The National Landscape for the Regulated Water Industry

Transcription

1 Regulatry Practices & The Natinal Landscape fr the Regulated Water Industry Michael Deane Executive Directr 1

2 Cst Cmparisn Water is mst affrdable utility expense n average In 2014, U.S. husehld n average spends $4,980 per year n utility services Electricity - $1,851 Telephne and ICT - $1,764 Natural Gas and Fuel Oil - $688 Water and Wastewater - $677 But Water requires significant investment 2

3 Alternative Regulatin Acrss Utilities In 2013, NAWC investigated mechanisms that allw timely recvery fr aging assets and rising csts First study f its kind; data cnfirms assumptins f regulatry treatment f water utilities Cnclusins Significant prgress made in recent years (specifically DSICs & FTY) Water remains well behind regulated energy cunterparts: - electric and natural gas delivery industries have in place a larger number and a greater variety f alternative regulatin plicies cmpared t the water industry.

4 Recent Develpments & Shifting Plicy Mmentum Significant plicy mmentum tward alternative regulatin in the past three years States with infrastructure cst recvery mechanisms has gne frm 9 in 2011 t 15 in Three NARUC Reslutins Passed: Recgnizing rle f alternative regulatin (2013) Recgnizing ROE gaps acrss water industry (2013) Identifying best practices in the regulatin f small water systems (2013) 4

5 Alternative Regulatin Survey Results Electricity Natural Gas Water Revenue Stabilizatin: Mechanisms that adjust base revenues withut addressing csts between rate cases. Examples: Cnservatin adjustments, decupling, LRAM Cmprehensive Alternative Ratemaking: Mechanisms that mve beynd the general rate cases f cst f service regulatin and integrate future csts frm investment prjects and ther surces. Examples: Frmula rates, multi-year rate mechanisms Alternative Ratemaking fr Capital Expenditures: Mechanisms designed t cllect the csts f standard investments t maintain the integrity f distributin systems. Examples: DSIC and CapEx riders

6 Recent Develpments in Best Practices State Best Practice Date Law PA Future test year; wastewater infrastructure mechanism; water and wastewater rate base cnslidatin 2/14/2012 Act 11 NJ Water infrastructure mechanism 10/23/2012 NJAC 14:9 10 CT OH Water infrastructure surcharge expansin; acquisitins; RAM Water and wastewater infrastructure surcharge expansin; future test year 3/7/2013 Public Act # /27/2013 HB 379 TN Allw alternative regulatry methds 4/19/2013 HB 191 ME Water infrastructure mechanism 6/1/2013 Chapter 675 NC Water and wastewater infrastructure mechanism; purchased water pass thrugh 6/6/2013 HB 710 AZ Water infrastructure mechanism 6/27/2013 Decisin NV Water infrastructure surcharge; repressin; decupling 7/1/2013 Bill #436 IN Future test year 7/1/2013 SB 560 6

7 Infrastructure Investment with DSIC Miles f line replaced per year in Pennsylvania since implementatin f DSIC in 1997 Average time between rate cases has increased 66% Utility 1 Utility 2

8 Infrastructure Investment with DSIC (cntinued) Investment in water infrastructure in Missuri has steadily increased since implementatin f ISRS (DSIC equivalent) Average time between rate cases has dubled ISRS Legislatin Passed

9 Prductive Regulatry Envirnment Cperative regulatry practices Cperatin des nt displace diligence r rigr Measured by its utput less frequent rate cases, significant custmer participatin, avidance f rate shck and regulatry lag Custmers receive reliable and safe service frm its utility at the best available price Requires frm the utility: Access t capital Efficient peratin Creativity Expertise Slid management 9

10 Regulatry Stability Wall Street perspective: mst heavily weighted factr in Standard & Pr s Rating Services analysis f a regulated utility s business risk prfile. S&P RatingsDirect, Assessing U.S. Investr-wned Utility Regulatry Envirnments, January 7,

11 Remaining Challenge: Small Systems Affects the majrity f systems acrss the U.S. Small system rate applicatins are very expensive per custmer Small system rate applicatins are cmplicated and time cnsuming limiting timely filings Large percentage f CIAC plant reduces rate base Capital nt readily available fr emergencies 11

12 Small Systems: Breaking the Cycle f Underinvestment Small cmpany facing revenue shrtfall (repairs, envirnmental cmpliance, infrastructure) Discuraged by lengthy, resurce intensive rate applicatin prcess Underinvestment in system; underserved custmers Unsustainable revenues (Inadequate rates limited access t capital) 12

13 July 2013: Reslutin Supprting Regulatry Best Practices fr Small Water Systems Identifies 10 cre regulatry practices and 3 general management practices All mechanisms and plicies are in place in at least ne state Primary aim is t alter the ratemaking effrt t match the scpe f the impact Mechanisms can lessen the regulatry burden n system wners and ultimately help ratepayer Examples: Simplified rate applicatins; use f annual reprt t fulfill majrity f rate applicatin prcess Electrnic filing prcedures Simplified rate-f-return mechanisms Cst f living adjustments Facilitating emergency infrastructure funds Limiting use f CIAC 13

14 Examples f Best Practices in Place Flrida: CPI Adjustment Staff-Assisted Rate Case Applicatin Inter-agency cperatin: DEP-PSC MOU Index Pass-Thrugh 14

15 Examples f Best Practices (cnt.) Califrnia: CPI Adjustment Staff-Assisted Rate Applicatin, simplified prcedures Inter-agency cperatin: Capacity Develpment Prgram fr small systems thrugh DPH Virginia: Direct staff assistance With prper public ntificatin and dcumentatin, rate increases apprved as lng as %increase < 50% f current revenue 15

16 Examples f Best Practices (cnt.) Indiana: Extensive educatinal resurces fr small systems Small Utility Tlkit Excel template fr annual revenue increase prgram (16 lines) Nevada Simplified rate applicatin template in Excel Electrnic filing Autmatic adjustments tied t GDP Deflatr 16

17 Thank yu Dwnlad the reprt and ther resurces: > Knwledge Center > State Utility Regulatin Michael Deane 17