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November 3, 2009
     
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State Regulatory Relations


Mark Your Calendars for the NARUC Annual Convention

The NARUC 121st Annual Convention will be held Nov. 15–18 at the Chicago Marriott in Chicago, Ill.

The Committee on Water will meet Monday, Nov. 16, from 9 a.m. to noon.

NAWC members will be well represented at the Committee meeting. Nicholas DeBenedictis, chairman of the board and CEO, Aqua America, Inc., will present on the panel, “Incorporating Renewables into Water/Energy Management.” Paul Foran, vice president of regulatory programs, American Water, will present on the panel, “National Drinking Water Symposium Summary Remarks and Recommendations for Future Actions.” Lisa Sparrow, vice president and COO, Utilities Inc., will provide an update on the National Drinking Water Advisory Council. William Varley, president, Long Island American Water Company, and Walton Hill, senior vice president of regulatory relations, United Water,, will present on the “Value of Water Educational Initiative-New York NAWC Chapter.” Walton Hill will also present on the panel, “United Water's MTBE Class Action Litigation and Unique Regulatory Treatment of Settlement Proceeds.” Michael Deane, executive director, NAWC, will provide an update on the association.

NARUC’s Presidents Reception will be held on Monday from 5:30 to 7:30 p.m.

On Tuesday, Nov. 17, there will be a concurrent session at 11 a.m. on “Water Scarcity to Aging Water Infrastructure: Consumer Impacts and Possible Solutions.” It is one utility that we cannot exist without. Clean, abundant, fresh water has been a resource that Americans have taken for granted since the Revolutionary War. But times and circumstances are requiring us to take a fresh look at the most basic necessity for our existence. From water shortages in the West and the South to the aging water infrastructure in the Northeast and Midwest, the problems for this industry are complex and long term. In this panel, attendees will learn about the challenges and possible solutions facing the water industry, and what problems regulators will likely be asked to resolve. Panelists will discuss public policy actions that may be required so future generations can enjoy the same water quality we do now. Commissioner Jack Betkoski, vice chairman, Connecticut DPUC, will moderate the panel. Panelists include Dr. Jan Beecher, director, IPU, Michigan State University; Peter Shanaghan, EPA; and Paul Foran, American Water.

The Committee on Critical Infrastructure will meet Sunday, Nov. 15. The open session will begin at 1 p.m.

At the committee meeting, Nicholas Santillo Jr., senior manager, Operations Security, American Water, will present on the panel, “Securing Critical Infrastructure/Key Resources for Utilities.” To help communities better protect the nation's assets, the Department of Homeland Security has placed Protective Security Advisors (PSAs) in metropolitan areas throughout the country. Upon request, PSAs facilitate and coordinate vulnerability assessments of local CI/KR through:

  • Site Assistance Visits (SAVs)
  • Buffer Zone Plans (BZPs)
  • Comprehensive Reviews (CRs)
  • Characteristics and Common Vulnerabilities/Potential Indicators for Terrorist Attack/Protective Measure Reports
  • Risk Mitigation Courses (Surveillance Detection/Soft Target Awareness)

These resources are voluntarily offered to utilities. The panelists will discuss how, in times of economic constraints, these resources could assist utilities in their security effort, including how utilities might utilize these resources to their advantage.

Cade Clark, director of state relations, NAWC, will present on chemical security legislation as introduced in Congress and how it may impact state's various utilities, including new costs and regulatory requirements.

For the latest information on the meeting including agenda, please click here.

 

NARUC Urges Partnership in Cyber-Security Debate

A strong federal-state and public-private partnership is essential to ensuring the continued reliability and security of the transmission grid in the face of cyber concerns, the National Association of Regulatory Utility Commissioners told Congress.

In Oct. 27 testimony before the House Energy and Commerce Committee Subcommittee on Energy and the Environment, NARUC Electricity Committee Chairman Garry Brown of New York said cyber-security concerns are a new paradigm for the utility industry in general, but the industry, with proper regulatory oversight, will respond.

"Cyber security is an emerging area of risk for our utilities and State commissions as well, and although it is unique in some respects, this is not the first time our utility systems have faced new reliability threats," Chairman Brown said. "Through a strong public-private partnership, we have overcome past risks, and it is my belief that overall, [the] merging of information systems into the electric and other utility sectors improves their resilience, reliability, and efficiency."

State commissions are actively engaged in this area, Chairman Brown said, noting that protection of Supervisory Control and Data Acquisition (SCADA) systems have long been a focus of industry and regulators alike. In recent years, vulnerabilities to SCADA systems have been highlighted but are well managed.

But as communications networks become more intertwined with electrical systems through smart-grid projects, state commissions are turning their attention to these issues as well. With utilities seeking cost recovery of new technologies and Smart-Grid deployment, state commissions want to make sure that these investments are as secure and prudent as possible, Chairman Brown said.

"In concept, the smart grid has the potential to provide many improvements in situational awareness, prevention, management, and restoration," Chairman Brown said. "In spite of introducing new vulnerabilities, smart grid fundamentally makes the electric system more secure. Still, this technology brings with it new vulnerabilities and points-of-access to create intentional disruption, which should be taken extremely seriously."

Focusing on legislative solutions, Chairman Brown recommended that Congress must ensure strong communication between federal and state authorities, and the utility industry. "Any legislation in this area should focus on the ability for federal agencies with information identifying priority vulnerabilities and imminent threats to communicate with the various electricity providers, State and federal law enforcement entities, and State regulatory authorities," he said.

 

Oregon PUC Responds to Ruling

PUR Utility Regulatory News reports that the Oregon Public Utility Commission (PUC) has responded to an Oregon Court of Appeals ruling by issuing a formal decision, reasserting jurisdiction over the Crooker River Ranch Water Company, a cooperative operating in central Oregon. Crooked River management had challenged the PUC’s initial decision to assert jurisdiction. The Oregon Court of Appeals decision upheld the petition process used by the commission but directed the PUC to make an additional finding to determine whether there are compelling reasons for the commission to regulate the water company. The commission found “overwhelming” factual circumstances and policy considerations for assuming oversight of Crooked River. These include widespread member dissatisfaction, inappropriate ratemaking practices, excessive management compensation, conflicts of interest and concerns of withholding service to members.

 

Ruling Leaves Las Vegas High And Dry

On Oct. 15, a Nevada Senior District Judge vacated and remanded for further proceedings a permit granted the Southern Nevada Water Authority (SNWA) to tap vast quantities of groundwater in east-central Nevada and to transfer the water through a new 250-mile pipeline to the City of Las Vegas. Carter-Griffin, Inc. v. Taylor, Case No. CV-0830008. The Judge criticized the State Engineer’s ruling approving the project as “arbitrary, oppressive and a manifest abuse of discretion:

In the past, the State Engineer required specific empirical data before taking the significant step of allowing existing water to be transferred out of basin. In Ruling No. 5875 however, the State Engineer was satisfied by normative, predictive data without detailing why that change was acceptable. While this may have resolved the water management problem presented by the applications, the sudden resolution of simply “printing money” or mining for water by declaring that more afa [acre-feet annually] was available when viewed through a new prism, without explanation as to what changed to allow the new approach, presents the essence of an arbitrary decision.

The pipeline project is considered by some a critically important insurance policy given the SNWA’s extensive reliance on the drought-stricken Colorado River as its source of supply.

 

Iowa Utilities Board Endorses Single Tariff Pricing For Iowa-American Water

In an Order issued Oct. 8 the Iowa Utilities Board (IUB) approved a settlement agreement authorizing Iowa-American Water Company (Iowa-American) to increase its annual operating revenues by $6.06 million, or approximately 22 percent. Re Iowa-American Water Company, Docket No. RPU-2009-0004.

According to the IUB, the settlement rates will produce a return on equity of about 10.5 percent and, in addition, reflect a $200,000 annual expense amortization attributable to Iowa-American’s transition from a cash (ERISA) to an accrual (SFAS 87) method of recovering its pension costs. Of particular note, the IUB agreed that the time had come for Iowa-American to equalize the general service rates charged in its Clinton and Quad Cities Districts:

The Board believes now is the time to equalize most of Iowa-American’s rates; the different costs of serving each district do not appear to be significant enough in the long term to justify the additional effort and administrative expense necessary to maintain them as separate groups. Because of Iowa-American’s relatively small size, as rate-regulated utilities go, the additional expense of administering separate cost and rate structures for each district and the additional rate case expense of preparing and presenting two separate class cost-of-service studies are not justified by the identified cost differences and the rate impact of future plant additions can be spread over a broad customer base . . . . Allowing Iowa-American to file a single class-cost-of-service study in future cases, where warranted, will result in rate case expense being less than it would have been if two studies were required.

It is important to spread the impact of future plant additions over a broader customer base in order to provide customers with greater rate stability and lessen the impact of major construction projects on customers in a particular district. The most current information provided to the Board by Iowa-American indicates that capital projects projected for the Quad Cities district are not proportionately greater than those projected for the Clinton district over the next 3-5 years, meaning that rate equalization will provide greater rate stability for customers than if the districts remained separate. Also, a single rate structure would be more understandable to customers. Iowa-American reports that its customers frequently question why rates are different between the two districts.