Water is a valuable public asset which should be available to all, not sold to the highest bidder to exploit for profits.
Consumption Volume Complaint
This complaint focuses on the issue that Aqua’s consumption volumes for New Garden Township customers differs substantially from actual use by those customers. The complaint involved two aspects of the customer consumption volumes Aqua used to calculate the increased billing rates for New Garden customers:
First, Aqua forecast a total consumption volume of 104 million gallons per year. That is substantially less than the 126 million gallons New Garden reported during the last year they owned the system. When setting the per gallon billing rates, the lower volume results in higher rates. This difference could have a significant impact on rates.
Second, Aqua charged New Garden customers different rates depending on consumption volume. The problem was that the forecast volume in each rate band bore no relationship to actual use by customers. Accurate rate setting depends on using accurate data.
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The discovery of the consumption volume issues came almost by accident. That story is not a core part of the issue, but this page tells the story if you are interested: LINK
Here is the actual complaint as filed:
What follows covers the main issues one by one.
Background
The issues of my complaint result from Aqua’s consumption volume data in the following table:
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Table #1 - Aqua’s Consumption Volumes
The above table is my consolidation of six pages of Aqua data. Six pages of what I consider very opaque consumption data (LINK). This LINK shows the steps required to consolidate Aqua’s six pages into the above table. Aqua will probably dispute that this table really depicts their compliance data, but the following link shows how it matches gallon for gallon and dollar for dollar with their filing data: LINK
Total Volume Issue
The first issue with Aqua’s data is the total volume. The table shows an annual forecast of 104 million gallons. There are two pieces of evidence that indicate 104 million gallons significantly understates actual New Garden consumption.. The first is a communication with the then Chairman of New Garden’s Board of Supervisors, Stephen Allaband. During a meeting with him, he gave us the following:
The source is credible and shows a wide divergence from Aqua’s number. The above is also Exhibit H of my complaint. No surprise, during the complaint hearing Aqua objected to that exhibit as “hearsay”. It could not be admitted as evidence because Aqua did not have the opportunity to cross examine the source of the data. Indeed, the ALJ excluded that exhibit from the evidence record.
The second data source disputing the 104 million gallons is Aqua’s own filing data. Their data was broken into two parts: a “consumption analysis” for the twelve months ending 3/31/2021 and “Billing Adjustments”. Since the New Garden sale closed 12/20/2020, that “consumption analysis” essentially represents first quarter 2021 consumption. That consumption volume = 31,238,100 gallons. Annualizing that number = 112,890,163 gallons. That is lower than New Garden’s data but higher than Aqua’s. What we do not know is how complete Aqua’s 1Q2021 data was.
So what happens if Aqua sets rates based on 104 million gallons and customers actually use 125 million gallons? If Aqua’s data accurately represented customer use patterns then Aqua would see a 20% bump in revenue. Given the $4.4 million/yr authorized revenue that would yield Aqua almost $900,000 extra revenue.
Impossible Consumption Patterns
Aqua used three rate bands to charge New Garden customers increasing rates for higher consumption volumes. There were three rate bands:
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0 – 5,000 gallons/quarter
5,000 – 15,000 gallons/quarter
Greater than 15,000 gallons/quarter.
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Aqua then applied those rate bands to three different category of customers:
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Residential
Commercial #1
Commercial #2.
Table #1 above shows Aqua’s forecast for each category of customer. The problem is that those volumes do not reflect actual customer use. To realize why these volumes do not reflect customer use patterns, you need to understand how the volumes in each rate band interact with each other. This page explains it in detail: LINK
Impossible Consumption Patterns - Residential Customers
For residential customers, Aqua’s consumption data skews use heavily towards the >15,000 gallon band. This is shown by the following chart:
The green bars are Aqua’s first quarter 2021 data noted above. The red bars are Aqua’s full year forecast. It is obvious that Aqua’s forecast is weighted much heavier towards the >5,000 gallon customer. What is not obvious is that Aqua’s forecast use pattern requires that 2/3 of New Garden customers use zero water – unrealistic for anything other than a ghost town - and, New Garden is no ghost town.
There is considerable math involved in arriving at this conclusion. It is documented here: LINK
Commercial Customers
For commercial customers, the issue is even more clear cut: the consumption forecast is actually mathematically impossible. For the Commercial 1 customers Aqua has 171 customers using 13,149,400 gallons in the 1,667 – 5,000 rate band. However, it would require 329 customers using the full 5,000 gallons to use that volume – almost twice the actual number of customers. And, those 329 customers would have to consume over 6.5 million gallons in the 0 – 1,667 rate band. That is 7.5X Aqua’s stated consumption for that rate band. Clearly an impossible situation.
It is the same situation for Commercial 2 customers. Aqua tabulates 27.7 Commercial 2 customers. However, the middle rate band would require 49 customers using the full 5,000 gallons for that band. And, those 49 would have to use 10X the stated consumption for the lowest rate band.
Clearly, both Commercial data sets are impossible. And, Aqua used that data to set rates.
The detailed math for commercial customers is documented here: LINK
It is not possible to set fair and just rates using data that does not reflect actual consumption.
Conclusion
I believe the evidence clearly shows that Aqua understated New Garden’s consumption volume and used a totally unrealistic consumption pattern to set rates. I figured that the PUC would be outraged to learn what had happened and would take corrective action. I was wrong.