CPTL-Hearing-Details

Detailed Summary Of The Complaint Hearing

Introduction

Hearings for “Formal Complaints” are very formal procedures. They are run by and Administrative Law Judge (ALJ). This is not a judge in the sense of a branch of government, but is an employee of the PUC. I saw somewhere that they are tenured positions giving them some degree of independence. There is a court reporter transcribing the entire proceeding. And, of course, there are the two parties to the case. The hearing is a public event and anyone is welcome to listen in. In fact, there was another member of KWA listening to the whole procedure.

I was the only one speaking on my behalf. Aqua had a lawyer and their Manager of Rates as an “Expert Witness”. The process began with the ALJ laying out the process and expectations of the parties. Then she turned it over to me to make my case.

My Introduction

“What I intend to show today is that Aqua did not meet its obligation to provide factual and correct data for its New Garden sewer operation, and it was done in a way that a normal rate-setting litigation process would never uncover and that it would increase the profitability realized by Aqua beyond what was approved by the PUC”.

The Trucking Complaint

I then proceeded with the trucking complaint. That was basically a presentation of the three elements of evidence that Aqua started their pipeline up and stopped trucking well before the deadline for making rate case adjustments. That meant Aqua had a legal obligation to remove that cost from the rate case.

During my trucking presentation Aqua objected seven times. After the seventh objection the ALJ indicated she did not like all the interruptions. I suspect Aqua had several objectives here:

Several of the objections were “hearsay’ relating to Aqua’s Operations Manager’s presentation at a New Garden Township meeting November 21, 2022. I think Aqua really wanted to keep that out of the case record. In the end it was admitted into the record and most of Aqua’s objections were overruled.

My favorite “hearsay” objection was my statement about a 35% loss of capacity at New Garden’s South End treatment plant. That 35% was “hearsay”. In a sense that was true. But, the one I heard saying it was Aqua’s Operations Manager at the New Garden Township meeting. And, it was available for all to hear. Was Aqua’s Operations Manager an unreliable source? In any event, the 35% had zero significance to my case.

I also think that Aqua may have been trying to rattle me. However, I had carefully prepared my presentation and never had a problem picking up where I left off.

I concluded the trucking phase with a statement that the PUC should investigate when trucking ended and take appropriate action.

At that point the ALJ wanted Aqua to cross examine me. Aqua deferred saying it wanted to cross examine the two complaints together. The ALJ agreed and I began my presentation of the consumption volume complaint.

The Consumption Volume Complaint

The consumption volume complaint is difficult to understand. There are a lot of numbers involved and you must understand how those numbers relate to setting rates. The key steps are:

It starts with six pages of detailed Aqua consumption data for New Garden. LINK

Those six pages get distilled down to a table of just twelve numbers that are fully equivalent to Aqua’s six pages of data. LINK

An analysis showing how that table of twelve numbers does not represent actual use by New Garden customers. I presented this as a series of “Major Issues”.

That was a lengthy process. Looking back at the transcript of the hearing, I do not believe that the ALJ really understood the significance of the consumption volume issues. Added to that were another six objections by Aqua.

After I completed my consumption volume piece, the ALJ asked me a series of questions about my experience. She acknowledged that I was not your average layman. It appeared that she was trying to determine if I was an “Expert Witness”.

Aqua Cross Examines Me

Cross examination started with a series of questions that I believe were intended to discredit me. For example:

“Have you ever been responsible for the preparation of an allocated cost of service study in a base rate proceeding before the Pennsylvania Public Utility Commission?” Clearly, the answer was “NO”. This also set up a contrast with Aqua’s witness who would later answer “Yes” to the same questions.

A second line of questioning was whether or not I participated in the public hearing for Aqua’s 2021 rate case. I believe the intent was to establish that participating in the public hearings disqualified me from filing my two complaints. That was not overtly stated during the hearing but was part of Aqua’s replies to my complaint filings. The issue was if I had challenged the trucking cost during public hearings that would disqualify me from filing my complaint. Indeed I had participated in the public hearings. And, I asked what was a $1.2 million/yr cost called “Purchased Wastewater”. Aqua in its Main Brief answered it was the trucking cost. I did not challenge the cost as being inappropriate, but only wanted clarification of the vague term “Purchased Wastewater”.

Aqua concluded its cross examination with this: “Is it your position today that Aqua has not charged you consistent with its tariff at any point, at any point in providing you service?” Of course, the answer was “NO”. The rate case ultimately produced billing rates that Aqua accurately applied to my bills. The real issue was that the data that went into setting those billing rates did not fairly represent costs and use for New Garden customers.

That ended Aqua’s cross examination. However, the ALJ wanted to further pursue Aqua’s question about whether Aqua had correctly billed me. That discussion helped confirm my belief that the ALJ really did not understand that eliminating a major cost from a rate case would change the billing rates that resulted.

Aqua's "Expert Witness"

The next phase of the hearing introduced Aqua’s “Expert Witness”, their Manager of Rates. Aqua’s lawyer asked a long series of questions that basically established that the 2021 rate case went through all the standard steps in arriving at an outcome. A few highlights:

Aqua made a big deal that they did not collect “The Full Cost of Service” from New Garden customers. The full cost was about $5.4 million/yr while New Garden customers actually paid about $4.4 million/yr. I found that quite deceptive. Aqua DID collect the full $5.4 million/yr. Via Act 11, the PUC permitted Aqua to collect the $1.0 million/yr difference from other customers.

Aqua addressed my allegation that the consumption volumes were understated. The answer was that Aqua used annualized number provided by New Garden from the acquisition. However, that data was never entered into evidence. It was merely a statement by Aqua’s witness.

The ALJ asked Aqua’s witness a couple of questions and then turned it over to me for cross examination.

My Cross Examination of Aqua's Witness

Highlights include:

I started by asking about the $1.2 million/yr trucking cost. Aqua’s witness replied that it was a “Purchased Wastewater Expense” and that it was $800,000 trucking and $400,000 other stuff. I noted that Aqua’s Main Brief clearly stated it was the trucking expense, so where in Aqua’s filings was it otherwise defined. She stated it was not.

I asked if she knew Aqua was working to activate the pipeline to eliminate trucking. I believe the answer was most evasive: “At the time of filing, I was aware that there was an enormous purchased wastewater expense that we were incurring for hauling that and that we were actively searching for a solution, but that no solution had been found yet.”

I asked if it was company policy for the operations department to communicate important milestones for a project that would impact rate setting. The question was not answered.

I asked whether Aqua had formally authorized a project for the dryline activation. I feel there was some evasion here. There was never a direct answer about the pipeline project. With some questioning Aqua’s witness finally admitted only that Aqua had a project approval process.

I asked if the New Garden volume data was publicly available. She said it was part of the New Garden acquisition settlement agreement. Again, I believe this is a deception. The settlement agreement contains a table with the consumption volumes (PDF page 38 of the Settlement Agreement: LINK), but that is an Aqua document, not New Garden data.

Finally I ask if having correct consumption volumes is important to rate setting. There was a clear “Yes” to that one, however, Aqua called them “billing determinants”.

Aqua "Redirects" Questions To Its Witness

This is important: Aqua stated that if there was a significant change in expense during the rate case, the filing would be corrected if the record was still open. But, Aqua did not become aware of any significant change.

Finally, Aqua’s lawyer tried to make the point that if the PUC granted my complaint on consumption volumes, New Garden rates would increase. I believe the answer was another significant deception by Aqua. My complaint had two elements, under stated volume and incorrect distribution. Aqua's answer was that if the volume was unchanged, [emphasis added] then the rates would be higher. Which is true, but it side steps the critical point about a higher volume.

The ALJ then asked Aqua’s witness a couple of additional questions and then turned it back to me to ask additional questions.

My Second Cross Examination of Aqua's Witness

A couple of important things came out:

I asked what was the cut off date for making corrections in Aqua’s 2021 rate case. The answer was December 21, 2021. (I believe the docket record indicates it was January 21, 2022. See page 4 of this docket filing: LINK). This is important because there is strong evidence that the trucking stopped before year end 2021.

I then noted that she testified rates would go up if the correct distribution was used, but total volume remained the same. So I asked what “if the total volume was significantly higher, would that change the result?” It appears she dodged the question by saying she did not think that would be the case and that Aqua used the best information available. I pressed the question about IF the volume was higher could the rates be lower. Aqua’s lawyer jumped in and objected at that point. The objection was not sustained, but somehow I did not get back to the question – a mistake on my part.

Entering Exhibits Into The Official Record

That ended the testimony phase of the hearing. The next order of business was to identify all the exhibits that would be entered into the record. There are almost 1,000 pages of exhibits, only 47 of which are mine. Aqua filed a ton of rate case documents. A table of contents of the exhibits can be found here: LINK

My Closing Statement

I made a very short statement that I believed I clearly had made my case about both complaints and that the PUC should investigate.

Aqua's Closing Statement

Aqua started by saying they were prepared to make a closing statement, but preferred to file “full merit briefs”. That did not excite the ALJ. She said: “I would love that, but we already had close to five hours of testimony and a lot of exhibits. I don't really see how merit briefs would contribute more than what's already been contributed”. The ALJ asked if I was okay with filing “merit briefs”. I was concerned that Aqua might be trying to pull something here. For example, the issue of “collateral estoppel” that was a “new matter” in Aqua’s reply briefs. The ALJ concluded she had all the information needed and Aqua's lawyer agreed to proceed without additional filings.

Aqua then proceeded with a closing statement. With my comments in brackets, key points included:

I did not carry my burden of proof, therefore, the complaints should be dismissed. [Naturally I disagree]

The rate case was fully litigated and I had not disputed any of the actions of the proceeding. [true, but not relevant to my complaints]

Once the tariff was approved, Aqua was legally bound to apply those tariff rates. [again, true, but not relevant to my complaints]

There are general prohibitions against “retroactive rate making” and “single issue rate making”. And, my complaints are classic “single issue rate making”. [true but there are exceptions to those prohibitions. Utility misbehavior is one of them]

Aqua testified that it did not collect the full revenue allowed by the 2021 rate case. [True, but irrelevant. Aqua was not entitled to that revenue. It was a parameter from which to set rates. Actual revenue would vary depending on how well Aqua performed against the many assumptions that went into setting that revenue.]

Aqua demonstrated that if my consumption volume complaint were granted, rates would go up. [only because Aqua assumed that their estimated total consumption volume did not change. A major part of my complaint was that the volume was understated.]

With that the hearing was essentially over. The ALJ summarized the next steps the PUC would take and ended the hearing.