PENNSYLVANIA

PUBLIC UTILITY COMMISSION

Harrisburg, PA 17105-3265

Public Meeting held June 14, 2017

Commissioners Present:

Gladys M. Brown, Chairman

Andrew G. Place, Vice Chairman

John F. Coleman, Jr.

Robert F. Powelson

DavidW. Sweet

Petition of Suez Water Pennsylvania Inc.
for Approval of its Long-Term Infrastructure Improvement Plan / P-2017-2589724

OPINION AND ORDER

BY THE COMMISSION:

Before the Commission for consideration is the Petition of Suez Water Pennsylvania Inc. (Suez) for approval of its Long-Term Infrastructure Improvement Plan (LTIIP). The Commission required all water utilities that have implemented a Distribution System Improvement Charge (DSIC) pursuant to the repealed 66 Pa. C.S.§1307(g) to file a LTIIP by March 20, 2017.[1] The Commission established a filing schedule for the required LTIIPs via a Secretarial Letter dated October 31, 2016, and directed Suez to file a its LTIIP on February 20, 2017.[2]

Suez filed its LTIIP on February 17, 2017. Copies of the LTIIP were served on the statutory advocates and parties of record from Suez’s last base rate proceeding. Suez filed a letter on March 20, 2017, noting a typographical error regarding the number of services to be replaced per year.

On March 20, 2017, the Office of Consumer Advocate (OCA) filed comments on Suez’s LTIIP. The OCA did not request hearings, but suggested Suez provide additional information to the Commission to ensure Suez’s LTIIP accelerated infrastructure repair and replacement in a cost effective manner as required by Act 11. The OCA also requested the Commission reaffirm in this Order that inclusion of property in the LTIIP is not dispositive of whether the costs of that project will be afforded DSIC recovery. The Commission, as noted below, requested additional information from Suez that addressed most of the concerns raised by the OCA. As to the request for reaffirmation, this is unnecessary as the Commission has made itself clear on the matter.[3]

On April 12, 2017, via a Secretarial Letter, the Commission issued a request to Suez for more details regarding Suez’s historical baseline infrastructure replacement and capital spending for the categories of eligible property in the LTIIP. In addition, the Commission noted more information was needed to determine the cost-effectiveness of the LTIIP as required per 52 Pa. Code § 121.4(e).

On April 24, 2017, Suez filed a response to the data request.

BACKGROUND

On February 14, 2012, Governor Thomas Wingett Corbett signed into law Act 11 of2012(Act 11),[4] which amends Chapters 3, 13 and 33 of Title 66. Act 11, inter alia, provides utilities with the ability to implement a Distribution System Improvement Charge (DSIC) to recover reasonable and prudent costs incurred to repair improve or replace certain eligible distribution property that is part of the utility’s distribution system. The eligible property for the utilities is defined in 66 Pa. C.S. §1351. Act 11 states that as a precondition to the implementation of a DSIC, a utility must file an LTIIP with the Commission that is consistent with 66 Pa. C.S. §1352. The Commission’s LTIIP Regulations are codified at 52 Pa. Code Chapter121.

On April 5, 2012, the Commission held a working group meeting for discussion and feedback from stakeholders regarding its implementation of Act 11. On May 10, 2012, the Commission issued a Tentative Implementation Order addressing and incorporating input from the stakeholder meeting. Stakeholders filed comments to the Tentative Implementation Order on June 6, 2012. On August 2, 2012, the Commission issued the Final Implementation Order via Docket No. M20122293611 which established Act 11 implementation procedures and guidelines.

The Final Implementation Order adopts the requirements established in 66 Pa. C.S. § 1352, provides additional standards that each LTIIP must meet, and gives guidance to utilities for meeting the Commission’s standards. The Final Implementation Order of Act 11 requires the inclusion of eight elements in the LTIIP.

SUEZ’s LTIIP PETITION

Suez is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania and is a wholly-owned subsidiary of Suez Water North America Inc. Suez is a public utility as defined by the Pennsylvania Public Utility Code, 66 Pa. C.S. § 102, and is subject to the regulatory jurisdiction of the Commission.

Suez owns and operates water treatment plants, wells, storage facilities, and water distribution and transmission systems throughout Pennsylvania. Suez serves approximately 60,000 customers in eight counties. Suez’s distribution system is made up of approximately 881 miles of main, 12,200 main line valves, 3,352 fire hydrants, 60,325service lines, and 60,109 meters. Suez has four operating areas, the largest of which is Harrisburg/Newberry, which serves 64% of the Company's customer base. Suez’s Mechanicsburg system provides service to 22% of customers, and the Bloomsburg and Dallas systems in northeast Pennsylvania serve the remaining 14%.

Suez’s LTIIP is a five year plan, spanning the years 2017 through 2021 and its Petition addressed the eight LTIIP elements required in the Final Implementation order of Act 11 as discussed below:

(1) TYPES AND AGE OF ELIGIBLE PROPERTY

Suez Position

Suez’s LTIIP includes only distribution plant that is DSIC-eligible. Suez has been replacing and repairing DSIC-eligible property since it received approval to charge a DSIC in an Order entered March 2, 1998, at Docket No. R-00984265. The DSIC-eligible property includes mains and appurtenances, services, fire hydrants, and meters.

Suez's distribution system is made up of approximately 881.74 miles of main ranging in size from less than 2 inches up to 24 inches in diameter. Pipe material varies from cast iron, asbestos cement (AC), ductile iron, and polyvinyl chloride (PVC). Galvanized pipe, glued plastic, polyethylene (PE), steel, and wrought iron are other materials included in Suez’s distribution system. The age of the mains in Suez’s system range from new to 100 years old with the average age of the mains being 33 years old. Suez provided a detailed breakdown of its main materials, ages, and diameters in the LTIIP.

Suez states that since the 1980's, they have been installing both ductile iron and PVC pipe that represent 49.2% of the total mains. Recently Suez has shifted to ductile iron as its primary choice, particularly when: high pressure is encountered; mains are installed in state highways; or any stream crossings or critical intersections are involved.

Suez avers that the valves in its system consist of main line valves, hydrant valves, fire line valves, and pressure-reducing valves. Suez’s LTIIP provided detail on the number and types of its valves. Suez states it replaces valves under one of the following conditions: as a part of Suez's main replacement program; or, a valve identified as needing replaced as a part of Suez's valve maintenance program. Suez avers that the 12,200 main line valves are exercised and inspected via Suez's valve maintenance program. Currently, Suez is in the process of utilizing its hydraulic models to perform a valve analysis that will identify which valves are critical and should be inspected on a more frequent basis and potentially replaced. Suez states it has 25 pressure reducing valves that ensure proper pressures are maintained in areas that experience high pressure.

Suez’s service lines extend from the main to the curb stop located at the customer's property line. The customer-owned service line extends from the curb stop to the meter. Suez’s services consist of copper, plastic, and galvanized material. Suez states they do not have any inventoried lead services but it plans to file a petition with the Commission in 2017 to seek recovery of the cost to replace a customer's lead service line when encountered. Suez’s policy is to replace and not repair Company-owned service lines as a part of its main replacement program or as a part of its non-revenue water (NRW) reduction program. In supplemental information filed with the Commission, Suez avers that it currently does not have any costs included in the LTIIP for replacement of customer-owned lead service lines.

Suez states that although 28,068 services are constructed with unknown material, it has interviewed long-term field employees to determine their experience in encountering lead services. Suez avers its field employees have indicated that, while they on occasion encounter lead goose necks, they have not come across any lead services. Goose necks are a type of connector between the main and the company-owned service section. Suez states its policy is to replace any lead goose necks when encountered.

Suez states it has 3,352 fire hydrants in its system and they are replaced under one of the following conditions: as a part of the Suez's main replacement program; when a fire hydrant is made inoperable due to being struck by a vehicle; relocation of a hydrant from a smaller diameter main to a larger diameter main so as to improve fire flow; or, a hydrant identified as needing replaced as a part of the Suez's hydrant maintenance. Suez states hydrants located throughout the system are inspected and exercised at least once per year during the Suez's flushing program. Suez utilizes hydraulic models to identify hydrants that could be relocated to an adjacent larger main which would improve fire flows.

Suez states it has initiated an aggressive meter replacement program. Suez’s program is designed to ensure that the meters are in compliance with Commission regulations on testing as well as replacing meters due to age. Radio frequency end points are also installed on all meters as part of the program. Suez states that in addition to reducing meter reading time from the equivalent of eight full-time employees to the equivalent of one-full time employee, the replacement program allows Suez to focus more on preventative maintenance, customer service, and NRW efforts. Suez notes it has installed smart meters on its top 50 customers as well as another 100 strategic accounts. This enables Suez to track their water usage daily utilizing a program called Water Scope.

Comments

The OCA recommended that Suez clarify that no dollars are included for customer-owned lead service line replacement in the LTIIP period or quantify the amount by year and by operating area.

Resolution

Upon review of Suez’s LTIIP and all supplemental information filed, the Commission finds the types and ages of eligible property requirements of element one of the Final Implementation Order have been fulfilled.

(2) SCHEDULE FOR PLANNED REPAIR AND REPLACEMENT OF ELIGIBLE PROPERTY

Suez Position

Suez states it prepares a five-year strategic capital plan which includes all DSIC-eligible properties. The budgets are based on “blanket” approvals but include specific project categories and include the following DSIC-eligible property projects:

·  Replacement Fire Hydrants – Suez States that replacement of fire hydrants are not included as part of the main replacement projects. Suez budgets hydrant replacements utilizing historical trends and any known new initiatives, based on their performance characteristics, main break frequency rates, and expected service level unless there are other overriding factors such as structural, water quality or capacity concerns.

·  Replacement Short Main and Valves – Suez states this project category is for the replacement of valves and capitalized main breaks. While historical trends are used, there has been an increase from the past in this category due to Suez’s increased NRW efforts in locating leaks as well as the cost of repairs due to increased restoration costs required by the local municipalities.

·  Replacement Services – Suez states this project category is for the replacement of services not included as a part of the main replacement projects. Suez's policy is to replace the company-owned service in its entirety as opposed to repairing a service leak. Suez states that because of a more-aggressive NRW initiative, there has been an increase in this project category as compared to the past years.

·  Replacement Fire Services – Suez states this project category is for the replacement of fire services not included as a part of the main replacement projects. The Suez avers it has initiated an aggressive fire line survey of its unmetered fire services and, if unauthorized use is occurring, Suez is requiring the customer to retrofit the fire line with a meter.

·  Replacement Meters – Suez states this project category is for the replacement of aged, damaged and stopped meters as well as meter pits (moving the meter from inside the house into a meter pit) installed as a part of the main replacement projects.

·  Main Replacements – Suez states this project category is for the replacement of DSIC-eligible mains. Suez evaluates current assets to arrive at a detailed list of projects which in turn are rolled into a single-number budgetary number. Suez avers that in the past, a scoring system was used to determine what mains should be replaced. Suez states it will be transitioning to a computer software program called "Infomaster," as well as its hydraulic model, to determine which mains are high priority mains for replacement. In supplemental information filed with the Commission, Suez averred that they are still in the process of implementing Infomaster and expects it to be completed and in use by the third quarter of this year. Suez is currently compiling the necessary GIS and hydraulic model data which is required input for Infomaster.

·  Highway Projects - Suez states that this project category is difficult to budget as it depends heavily on PennDOT and local municipality projects. Suez meets with representatives of these agencies to formulate a more-accurate plan. Suez states by the end of the first or second quarter of each year, it knows what highway projects are going forward for that given year.