regulatory best practices for small water companies may 6, 2009 john hoy chief regulatory officer...

Regulatory Best Practices for Small Water Companies

Regulatory Best Practices for Small Water Companies

May 6, 2009

John HoyChief Regulatory Officer

May 6, 2009

John HoyChief Regulatory Officer

2

43 years old

Operations in 15 states

Serving over 1 million people

90 subsidiary companies

Provide water, wastewater and reuse water services

About UsAbout Us

3

Reuse WaterReuse Water

18 public access reuse plants in FL, NC, GA & NV (#19 planned for AZ)

Reuse customers include golf courses, nurseries, car washes and residential

10 million gallons per day of reuse capacity

4

Water Utility LandscapeWater Utility Landscape

Fragmented― Over 52,000 Utilities in the US

Regional/Local in Nature― 85% Municipally owned

Minority regulated by State Commissions― 20% compared to 80% Electric

Product is Ingested― Stringent EPA regulation

Capital intensive

Telecom Gas Electric Water$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Capital Invested per $ of Revenue

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Relative Utility BillsRelative Utility Bills

Energy Phone Water$0

$20

$40

$60

$80

$100

$120

$140

$160

$180Average Household Monthly Bill

However, water is priced the lowest of the major household utilities.

Source: U.S. Bureau of Labor Statistics

6

Community Water System BreakdownCommunity Water System Breakdown

System Size(by population

served)<500

501-3,300

3,301-10,000

10,001-100,000 >100,000

% of Systems 56% 27% 9% 7% 1%

% of Population 2% 7% 10% 36% 46%

Source: EPA 2008 Drinking Water Factoids

83% of the total systems serve just 9% of the total population83% of the total systems serve just 9% of the total population

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Aging Water InfrastructureAging Water Infrastructure

System Size Need($Bil)

Large(>100,000) $116.3

Medium(3,001-100,000) $145.1

Small(<3,000) $59.4

Total $320.8

Source: EPA 2007 Needs Survey

The EPA is projecting $320 billion will need to be invested in community water systems over the next 20 years.

Similar need on the wastewater side

8

Aging Water InfrastructureAging Water Infrastructure

Large Medium Small$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000Need /Population Served

The burden will be greatest on small system customers

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Small System Infrastructure NeedsSmall System Infrastructure Needs

Source: EPA 2007 Needs Survey

Distrib

utio

n

Treat

men

t

Stora

ge

Sourc

eOth

er$0

$5

$10

$15

$20

$25

$30

$35

$40

$B

illio

ns

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Small Water Utility IssuesSmall Water Utility Issues

Deteriorating infrastructure

Meeting growing environmental regulations

Access to capital

Spreading costs over small customer base

Regulatory lag and cash flow

Rate case expense

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The Perfect StormThe Perfect Storm

Fragmented Industry

+ Capital Intensive

+ Aging Infrastructure

+ Increased Public Health Requirements

+ Tight Credit Markets

+ Scarce Supply

+ Security Concerns

12

NARUC is Focused on Best PracticesNARUC is Focused on Best Practices

Resolution Supporting Consideration of Regulatory Policies Deemed as “Best Practices”

(Excerpt)

WHEREAS, Small water company viability issues continue to be a challenge for regulators, drinking water program administrators and the water industry; best practices identified by Forum participants include: a) stakeholder collaboration; b) a memoranda of understanding among relevant State agencies and health departments; c) condemnation and receivership authority; and d) capacity development planning;

_______________________________________________Sponsored by the Committee on WaterAdopted by the NARUC Board of Directors July 27, 2005

Product of the 2005 NAWC Water Policy Forum

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Other Regulatory ObjectivesOther Regulatory Objectives

Safe and adequate service at just and reasonable rates

Financially stable utilities

System consolidation

Infrastructure replacement

Minimal rate shock

Streamlined rate proceedings

Conservation

Need Picture

Source: National Draught Monitor Mitigation Center

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Best PracticesBest Practices

Consolidation― Limit new utilities

― Incentives to acquire troubled systems

― Incentives for efficiency improvements

― Single tariff pricing

― Combining water, wastewater and reuse water

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Best PracticesBest Practices

Alternative Ratemaking― Future Test Years

― Indexes/Trackers

― DSICS

― Surcharges

― Phased-in Rates

Expedited Rate Proceedings― Limited Proceedings

― Mediation and Settlement Procedures

― Small Company Filings

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Best PracticesBest Practices

Promoting Conservation― Tiered Rates

― Repression Adjustment

― Reuse Incentives

― Decoupling

Communication, Education and Collaboration

Regulatory Best Practices for Small Water Companies

Regulatory Best Practices for Small Water Companies

May 6, 2009

John HoyChief Regulatory Officer

May 6, 2009

John HoyChief Regulatory Officer