State Regulatory Relations

Commissioner Anthony Invites All to Oklahoma City

The following is an open letter from Mid-America Regulatory Conference (MARC) President, Commissioner Bob Anthony inviting all who are interested to attend the 2008 MARC meeting to be held June 15-18 in Oklahoma City, Okla.

NAWC members will have a prominent role in this conference. Larry Schumacher, president & CEO, Utilities Inc., will participate in the opening general session, “Energy-Water Nexus”; Robert Iacullo, COO, United Water, will participate in the panel, “Identifying and Mitigating Risks for Energy and Water Utilities”; David Baker, president, Indiana American Water will participate in the general session panel, “Infrastructure: Energy, Oil/Gas, Utilities, Water, and Financing”; and Terry Gloriod, president, Central Region, American Water will participate in the closing general session, “CEO Roundup and the Federal Perspective.”

As president of the 15-state Mid-America Regulatory Conference (MARC) it is my honor to invite you to our 53rd annual meeting, June 14-18 at Oklahoma City’s Skirvin Hilton Hotel.

As you well know, two of the most critical resource issues facing America today are water and energy. Further, the two are inextricably linked. Indeed, the Department of Energy and the Environmental Protection Agency have established an Office of Energy-Water Nexus. These critical issues will be a focal point of the MARC meeting.

The conference’s opening general session will feature a panel moderated by Fred Butler, commissioner, New Jersey Board of Public Utilities, and former chair of the Water Committee for the National Association of Regulatory Utility Commissioners. Joining Butler will be Mike Hightower, Energy-Water Nexus Program lead, Sandia National Laboratory; and Larry Schumacher, president/CEO of Utilities Inc.

Other panels include Identifying and Mitigating Risks for Electric and Water Utilities; and Financing Infrastructure for Electric, Natural Gas, Water, and Telecommunications companies; as well as a concluding general session on energy and water issues.

In all, MARC’s 53rd annual meeting features a total of over 60 speakers with presentations on cutting-edge topics dealing with water, energy and telecommunications issues. A full list is available at http://marc2008ok.com/speakers.php

In addition to the regular sessions, the conference offers a total of 13 hours of CLE credit to be approved by the Oklahoma Bar Association. There is also an opportunity on Sunday, June 15 to participate in the MARC golf tournament.

To register and/or view the full agenda and activities program, go to: http://marc2008ok.com.

Please act soon because rooms are going fast. The registration fee is $100 lower prior to June 1.

We hope you can join us in June.

Bob Anthony
MARC President

PA PUC Breaks Ground for Infrastructure Improvements to Commemorate National Drinking Water Week

Promoting the importance of “sustainable water infrastructure,” the Pennsylvania Public Utility Commission (PUC) kicked off National Drinking Water Week by breaking ground for one of many improvement projects statewide to enhance service and provide reliability to water customers.

PUC Chairman Wendell F. Holland, Commissioner Kim Pizzingrilli and House Consumer Affairs Committee Chairman Joseph Preston Jr. (D-Allegheny) joined United Water representatives, public officials and consumers to highlight the importance of “sustainable infrastructure,” which provides ratepayers with improved water quality; greater rate stability; increased water pressure; fewer main breaks; fewer service interruptions; and lower levels of unaccounted for water.

“This year, we wanted to get out into the community to highlight a topic that everyone seems to be talking about these days — our aging critical infrastructure and the repairs needed to keep it sustainable and reliable for all members of the community,” said PUC Chairman Wendell F. Holland. “It’s a consumer issue. It’s a reliability issue. It’s an economic development issue. It’s an environmental issue.”

Commissioner Kim Pizzingrilli said, “Working to create a sustainable water infrastructure across our state is vital to promoting reliability for consumers. Many water systems have pipes that are over 100 years old, and large portions have reached the end of their useful lives at the same time.”

Joined by Chairman Holland, crews broke ground on United Water’s latest main replacement project, which is being funded by a Distribution System Improvement Charge (DSIC), used to repair critical water infrastructure. The DSIC allows water companies to use a surcharge on customers’ bills to fund more upgrades of aging infrastructure. The DSIC is a regulatory tool passed by the General Assembly a decade ago and is being used as model legislation for other states and other utility infrastructures. The House Consumer Affairs Committee has held public input hearings on expanding this useful tool to address other infrastructure needs.

“Much of our utility infrastructure is reaching a critical point,” Representative Preston said, “and we must find a way to balance the acceleration of the replacement of aging infrastructure while maintaining the safety and reliability of other utility services.”

NECPUC Symposium a Success

The New England Conference of Public Utilities Commissioners, Inc. (NECPUC) met in Manchester, Vt., May 4-7.

NAWC members Charles Firlotte, president and CEO, Aquarion Water Company and Eric Thornburg, president and CEO, Connecticut Water Company, along with industry analyst Debra Coy, Janney Montgomery Scott LLC, discussed “Sustainable Water Supply and Quality Service — How to Effectively Meet the Challenge.” Commissioner John W. Betkoski, III, Connecticut Department of Public Utility Control, moderated the panel.

This panel addressed the means including best practices needed to ensure a sustainable water supply and quality service. The magnitude of investment needed and the impact of a changing economic environment on a utility’s ability to raise capital was also explored. The recent public interest and concerns about pharmaceuticals in drinking water provided an example of the need for effective customer communication and improving customer service.

In addition, the Deputy Regional Administrator of the U.S. Environmental Protection Agency (EPA) addressed the Symposium and focused on the importance of meeting the challenge of sustainable water supply and infrastructure replacement and the water/energy nexus. He referenced many examples of successful projects that were made possible by good customer communication and interagency cooperation and coordination.

NECPUC's Symposium provides an opportunity each year for regulators, consumer advocates and industry providers, both regulated and unregulated, to discuss emerging and difficult issues in a relaxed and collegial atmosphere. The Symposium routinely attracts more than 300 participants from the electric, gas, telecommunications, cable and water industries. Regulators and senior staff from all six New England state commissions participate in the discussions.

For more information on the 2008 Symposium, please go to http://www.necpuc.org/symposium.htm.

PA PUC Approves Final Rulemaking for the Public Utility Confidential Security Information Disclosure Act

The Pennsylvania Public Utility Commission (PUC) approved the final rulemaking for the Public Utility Confidential Security Information Disclosure (CSI) Act, which is designed to safeguard confidential security information of all public utilities.

The Commission voted 4-0 to implement a comprehensive set of regulations that will apply to all public utilities in the Commonwealth relating to the filing requirements and challenge procedures outlined in the CSI Act. The CSI Act, which was signed into law on November 29, 2006, directs each state agency to create these regulations to ensure the safeguarding of confidential security information from disclosure that may compromise security against sabotage or criminal or terrorist acts.

The rulemaking establishes protocols and procedures that must be followed when public utilities file records with the commission that contain confidential security information and when challenges to the utility’s designations or requests to examine records containing security information are made by members of the public.

In September 2007, the commission adopted proposed regulations. The proposed rulemaking was reviewed by the Office of Attorney General and Budget Office and published in the Pennsylvania Bulletin on December 8, 2007. The commission received comments from interested parties and the Independent Regulatory Review Commission.

Kentucky PSC Approves Treatment Plant/Pipeline Project

On April 25, 2008, the Kentucky Public Service Commission (PSC) approved the application of Kentucky-American Water Company (KAWC) to construct a new treatment plant on the Kentucky River and to build a 31-mile pipeline to connect the plant to the company’s distribution system in Fayette County. Application Of Kentucky-American Water Co., 2008 Ky. PUC LEXIS 494. The PSC’s Order is designed to resolve a long-standing (i.e., 20-year) debate over the best way to address a serious supply deficit in KAWC’s central service area.

The PSC acknowledged that the new facilities, thought to cost upwards of $160 million, would require a significant increase in rates. However, over the objections of the State’s Attorney General, the commission concluded that the estimated cost “will not significantly alter the projected customer demand or otherwise render the proposed Facilities economically unfeasible.” On this basis, the PSC declined to impose a cost cap on future rate recovery.

In approving KAWC’s request, the PSC rejected an alternative project sponsored by the Louisville Water Company, which sought to serve KAWC with a 58-mile pipeline from its facilities on the Ohio River. In so doing, the commission dismissed Louisville’s contention that the new treatment plant would be a “wasteful investment” because it (Louisville) had more than sufficient capacity to accommodate KAWC’s water needs:

We find no requirement that a public utility must exhaust the excess capacity of non-jurisdictional utilities before adding to its own facilities. Such a requirement, moreover, would penalize a jurisdictional utility that prudently and incrementally invests in its supply capacity while rewarding non-jurisdictional utilities that over-invest.

Finally, the commission discussed at length the results of its own net present value (NPV) analysis of the competing pipeline projects. Although it calculated that the Louisville alternative, when viewed in the most favorable light, might have a slightly lower NPV (i.e., about 1 percent) the PSC found that KAWC’s proposal clearly entailed fewer financial and regulatory risks:

Kentucky-American has completed the design and routing of the proposed facilities. It has received bids on all facets of the project and has obtained virtually all regulatory approvals necessary to commence construction. With the exception of obtaining private easements, the project is ready to proceed almost immediately. In contrast, the LWC Pipeline proposal remains a concept that requires considerable work and is rife with uncertainty and risk. No feasibility or siting study for the proposed transmission main has been conducted. No hydraulic analysis has been prepared. No clear route for the proposed transmission main exists. No permits for such route have been obtained and the likelihood of obtaining such permits has not been adequately assessed. The level of public opposition to the transmission main’s route is unknown. The effect of such opposition on the proposed route, the timetable for constructing the proposed transmission main, and on the transmission main’s ultimate cost is also unknown. The entity that will own and operate the transmission main has yet to be identified and may not yet be in existence. The effect of such entity’s organization upon the Commission’s jurisdiction over the price of water that the transmission main will transport is also unknown.