VOLUME 36

NUMBER 1

SPRING 1995

The Magazine of Ihe Nalional Associalion of Waler Companies

OFFICERS STAFF CONTENTS

CHAIRMAN OF THE BOARD James B. Groff President's Message ...... 3 Executive Director J. James Barr NAWC History, 1921-1946, American Water Works Company Sharon L. Gascon by T. Ward Welsh ...... 8 Deputy Executive Direc tor PRESIDENT NAWC Conference at the Ja ck E. McGregor Michael J. Horner Crescent City ...... 16 Bridgeport Hydraulic Company Director of Administration and Testimony of the NAWC Before the Membership 1st VICE PRESIDENT Subcommittee on Government Ronald S. Dungan Louis Jenny Management, Information and Unit ed Water Management and Director of Congressional Relations Technology Concerning Services, Incorporated Jean Lew is Privatization Impediments Administrative Manager and Codification of GENERAL VICE PRESIDENTS Executive Otder 12803, Robert A. Luk sa Bonita J. Hayden by Donald L. Correll ...... 20 Philadelphia Suburban Water Company Finance Manager Regionalizatio n/Collsolidation of Audra Zellner Fl oyd E. Wicks Water Systems in Missouri, Executive Assistant Southern California Water Company by Bill L. Sankpill and Laura Goodw in James A. Merciel ...... 22 Eugene H. Owen Secretary/ Federal and Baton Rouge Water Company T he Financial Challenge of Congressional Relations Water Utilities, Robert A. Dolson by Dr. Ahmed Ka loko ...... 24 Continental Water Company T hank You, NAWC!, A Testimonial, SECRETARY by Michael Baker...... 33 James B. Groff Executive Director's Report. . . 34 TREASURER Regulatory Relations Report. 35 Sharon L. Gascon Recent Regulatory Decisions. . 38 New Members ...... 40 Customer Service Report 41 Copyright 1989, National Association of Water Companies. Quorum Call ...... 44 The articles printed in this magazine do not necessar­ ily represent the position of the National Association Federal Agency Notes ...... • . . .. 48 of Water Companies. NAWC disclaims responsibility for all information provided by inclividuPennsylvania Gas Corporate Changes ...... 49 organizations and published in WATER magazine, and Water Co.'s Accessible Fishing Pier on Lake including technical information which should be in­ Scranton. (see article, page 41) Etcetera ...... 51 dependently verified by separate sources.

WATER-Published four times each year by the National Association of Water Companies, Suite 1212, 1725 K Street, N.W., Washington, DC 20006. NAWC is a nonprofit trade association dedicated to serving the needs of the investor-owned state.regulated, public water supply industry. WATER is circulflted to all Active and Associate Members of the Association, members and staff of public utility commissions, federal and state officials concerned with our industry and will be sent to qualified persons upon written request. Requests and changes of address should be sent to NAWC, Suite 1212, 1725 K Street, N.W., Washington, DC 20006 (202) 833·8383.

_3 The President's Message by Jack E. McGregor

n March 29,1995, itwas announced ata press ment agency to achieve optimum results in protecting conference in Washington that the NAWC drinking water supplies. Ohas agreed to participate in "The Partnership for Safe Water." This innovative, voluntary This decidedly assertive attempt at vol­ program encourages water utilities using untary self-assessment, self-regulation and surface water supplies to take steps de· compliance in advance of regulations, wi ll signed to optimize filtration processes and help to ensure public confidence in our ef­ to increase the removal of microbial patho· forts to improve water treatment. By join­ gens. These strategic actions are designed ing the partnership, you might well improve to improve the quality and safety of sur­ yo ur company's overall operations and be face water supplies around the country, in a better position to inform your custom­ help advance treatment objectives and, ers and the general public about your ef­ most importantly, improve customers' con­ forts. fidence and satisfaction in their drinking Most importantly, you will be helping to water. influence the course of future drinking The U .S. EPA and Administrator Carol Browner, water regulations. The partnership can be an effec­ who made the formal announcement, should be com­ tive tool in this regard, particularly in tandem with a mended for their leadership in this effort. More than strong government relations program at the federal, 260 utilities, representing a total population in excess state and local levels. of 80 million, have made initial commitments to par­ As I mentioned in my last column, government re­ ticipate in what is truly a trailblazing effort to further lations is not a spectator sport, and we need to do a safeguard the nation's drinking water supply. As part better job educating and informing our Congressional of the program, the participating water utilities wi ll representatives on issues affecting the industr y. I can­ assess their operating, maintenance and management not emphasize enough how critical it is that we com­ to make current treatment processes as protective as municate regularly with our federal legislators, espe­ they can be against microbial contamination, includ­ cially with the Safe Drinking Water Act up for ing G iardia and cryptosporidium. reauthorization. Special interest groups are present­ Beyond t he obvious benefits to the public that ing their opposing viewpoints with a wel l-orchestrated should result from the partnership, there are other lobbying and media relations campaign that is impugn­ important considerations for our industry. At a time ing the integrity and operations abi lities of our indus­ when certain public interest groups are attempting to try. discredit the public water supply industry, it is more I urge all of our members to demonstrate their com­ important than ever to become involved in efforts such mitment to water quality by taking part in the Part­ as this partnership, on both a national and local level. nership for Safe Water. By doing so, you will be fur­ As a genuine public-private initiative, the Partnership thering the best interests of your industry, your for Safe Water demonstrates a willingness on our part company and the customers you serve, a win-win-win to do the right t hing and work with the chief en fo rce- situation if ever there was one. 6

SPRING 1995 e The National Association of Wilter dent of the National Associiltion ofRegu­ NAWC at 202/833·8383. Companies celebrated its ce ntennial with latory Utility Commissioners. Addition­ NAWC's Government Relations Fly-In, a One Hund redth Anniversary Dinner, al(y, a member of Congressman Robert held during the week of February 27 held at the Great Hall of the Library of Matsui's staff accepted an award intended through March 3, involved more than 50 Congress in Washington, DC, on February for the Congressman , and Kathleen A. members of NAWC, who participated in 28, 1995. NAWC members, members of McGinty, Chair of the Council on Envi­ more than 150 appointments with Sena­ Congress, Commiss ioners

«» NAWCWATER (! to r) NAWC Chairman of the Board jim Barr (American Water Works (J to r) NAWC President jack McGregor (Bridgeport Hydraulic Co.) Service Co.) and Honorary Member Bob Gerber (United Water Resources) and Commissioner Keith Bissell (Tennessee Public Service Commission)

(! to r) jim Barr and Honorary Members Tony Garnier (Suburban (J to r) jack McGregor and Commissioner William M. Nugent Water Co.) and Ralph Lindberg (California Water Service Co.) (Maine Public Utilities Commission)

(! to r) jack McGregor, jim Gallagher (Southern California Water Co.) (J to r) NAWC Deputy Executive Director Sharon Gascon, Carol Allen and Commissioner P. Gregory Conlon (Pennsylvania Public Utility Commission) and Commissioner (California Public Utilities Commission) Lisa Crutchfield (Pennsylvania Public Utility Commission)

SPRING 1995 • •

(I to r) NAWC Executive Director jim Groff, NARUC President Bob (I to r) Jack McGregor and Commissioner F. S. Jack Alexander Anderson (Montana Public Service Commission) and former (Kansas Corporation Commission) Commissioner David S. Williams (Illinois Commerce Commission)

(I to r) Jack McGregor, Evelyn Corban and Commissioner NAWC President Jack McGregor addressing attendees. Frederick Corban (Indiana Utility Regulatory Commission)

NAWC Executive Director jim Groff welcoming guests. NAWC Chairman of the Board jim Barr, offering a toast to 700 Years of Drinking Water Achievement.

NAWCWATER james Billington, Librarian for the Former Congressman Bob Michel, one of the evening's honorees. Library of Congress, greeting participants.

Kathleen McGinty, Chair of the Council on Environmental Quality, NARUC President Bob Anderson accepted an award on behalf of the White House. greeted attendees on behalf of NARUC.

Congressman jim Slattery, another one of the evening's honorees. Congressman Bill Archer, an honoree, addressing the audience.

SPRING 1995 • NAWC History: 1921-1946 by T. Ward Welsh

This is the second part of NAWC's history, prepared in conjunction with NAWC's Centennial. The next half­ century of NAWC's history will be presented in the next two issues of WATER.

The 19205 were heady years in America. put off during the war years, was moving and was financially sound, even though it The World War was over. The economy again.) Pittsburgh lawyer joseph Beck, hadn't raised its dues in 26 years. The big­ was gaining momentum. Movies, jazz and who often briefed the conferences on gest problems facing members that year, ragtime were all the rage. About o ne in court cases that impacted water suppliers, Purdy said, were a severe drought, which three American families owned automo­ delivered a paper on "Value, Cost, the Law had left reservoirs low, and a shortage of biles. Telephones and radios we re chang­ and Justice" that was lavishly praised. In coal, the result of a miner's strike. In fact, ing society-in a sense, shrinking the na­ it he argued that the then-current system the governor had set up a committee to tion. The first baseball game was of regulating-by the Public Service Com­ allocate coal to utilities. broadcast from the Polo Grounds in New mission with rightof appeal to the cOLirts­ One piece of good news at the meeting York in 1921, beginning the age of sports was the best for all concerned. While not was that re lations between companies and as a national pastime. Athletes like Babe perfect, Beck said, it generally benefited municipalities seemed to be improving. Ruth, jack Dempsey and Red Grange be­ water utilities. The fact that many munici­ There had been very little litigation that came heroes coast-co-coast. pal leaders in Pennsylvania were calling for year, partly because the PSC was encour­ As the Pennsylvania Water Works As­ the dissolution of the PSC, calling it a tool aging one-on-one meetings to settle util­ sociation (PWWA) marked its 25th anni­ of the utilities, would seem to support ity-community d isputes. Someone com­ versary in 1920, William C. Hawle y, of the Beck's assessment. mented that the PSC was a fine one to be Pennsylvania Water Company, the group's George Davison, also of Pittsburgh , giving advice: the World War was wo n in historian, observed that one of the great­ took exception to some of Beck's remarks. less time than it took the PSC to make est contrasts between "the old days" and He said the Pennsylvania PSC had been some decisions, he said. the present was that now "when we appear stingy in setting rates and in valuing com­ before a legislative body it can not only panies. Its members, Davison said, had Employee Training Noted hear the evidence, but it can make its own scant experience in utility matters and Many companies reported they had be­ investigatio ns by its own agents." Appar­ came to the commission with an anti-utH· gun training employees in human rela­ ently legislative committees in Pennsylva­ ity bias. The average household in the tions "to create friendlier feelings by cus­ nia were getting staffs. commonwealth spentless than $15 a year tomers." for water, he noted, less than it spent on Speakers at the meeting took no note Focus on Depreciation, Financing "cigars, sodas, movies and chewing gum." of clouds on the horizon abroad that year: The PWWA, meeting in Atlantic City The following year, 1922, jesse Purdy Benito Mussolini had formed a fascistgov· in 1921 , focused on nuts and bolts mat­ of Connellsville, chairman of the execu· ernment in Italy. The states in Russ ia es­ ters: methods of depreciation and of fi­ tive committee, told the conference that tabli shed the Union of Soviet Socialist nancing main extensions_ (Construction, the Association was" stronger than ever" Republics, and Adolph Hitler's storm o NAWCWATER Board, which had been established to en­ erty runoff was a property right. The court force stream pollution laws. W. R . found polluting an "enjoinable nuisance." Voorhis, a vice president of American Hawley called the court's decision the Water Works and Electric Company, told most important in his lifetime. the group about its subsidiaries' success The meeting also discussed the circum­ in offering their preferred stock in their stances under which a company would be service areas. He said investments ranged bound to extend its mains to serve outly­ from $50,000 to $5 down and $5 a month ing households. Members cited a New Jer­ by locals attracted by the stocks' safety of sey PSC rule which required a developer principle and reasonable return. to deposit with the water company the cost The U.S. Supreme Court in 1923 ruled of extension less 31h times the anticipated in the case of the Bluefield (West Virginia) revenue at its completion. Some thought Water Works & Improvement Company it was an approach the Pennsylvania PSC vs . the Public Service Commission of West should look at. Virginia. The court, finding for the plain­ A member from South Pittsburgh re­ tiff, asserted that a public utility is entitled ported on the first few months' operation to a return on its investment that is "equal of an innovative water softening plant to that generally being made ... in other there which was serving 180,000 people. business undertakings which are attended He said the plant was using less than 60% by corresponding risks and uncertainties." of the amount of chemicals required by the The return, the court added, should be conventional lime and soda ash treatment adequate to maintain and support the for softening utility's credit and enable it to raise money In 1924, the Association adopted a six­ necessary for the proper discharge of its point code of ethics, which called on mem­ troopers were terrorizing political oppo­ public duties. The case set a precedent that ber utilities to: nents in Germany. would be cited in virtually every utility 1. Safeguard the public health By 1923, the Flapper Era was in full rate case from that time on. 2. Employ the most progressive technol­ swing. With Prohibition in force, speak­ The postwar boom was really gaining ogy easies were proliferating. The Ku Klux momentum by 1924, when a 36-year-old Klan, which was menacing blacks and de­ Lancaster County, Pennsylvania, entrepre­ 3. Be fair to employees, granting promo­ stroying property in the South, moved neur, John H. Ware, Jr., sold for $1 mil­ tions only on the basis of merit into the Midwest. A Klan rally in Kokomo, lion an electric generating and distribu­ 4. Demand fair and ethical dealing with Indiana, drew 200,000; marshal law had tion system he had built, then agreed to customers been declared in Oklahoma to protect citi­ stay on to manage it in return for stock in 5. Be open and above board in all purchas­ zens. the acquiring company. The properties ing and contracting arrangements were sold again two years later, netting 6. Support the communities they serve. 1923: The Bluefield Decision Ware another fortune and positioning him The PWWA noted at its October meet­ for his entry into the water business. Printed copies of the code were made ing that the year had been one of" general available for 5 cents the following year and prosperity and comparative peace" for its Attendance Increases members were urged to distribute it to all members. PSC decisions had given satis­ That year, the Association meeting was their employees. faction to the public and lessened antago­ marked by a significant increase in the The group that assembled in Atlantic nism toward utilities, Jesse Purdy noted number of registrants (192) and the num­ City for the Association's 30th meeting, in his final report as executive committee ber of non-operators in attendance. The in 1925, was about 10 percent smaller chairman. William Hawley, in his 14th list included representatives of meter, pipe than the previous year's. That might have and final address as president of the As­ and valve companies, consulting engi­ been because it was a quiet year, described sociation, said the only blotch in the eco­ neers, municipal and state officials and by the new president, W. B. McCaleb, of nomic picture was the cost of labor and regulators. William Hawley, now chair­ Philadelphia, as "the most peaceful since materials, which hadn't declined after the man of the executive committee, reviewed 1895." McCaleb noted that water compa­ war. But, he added, "we seem to be get­ the performance of the PSC, now 10 years nies in Pennsylvania were building vigor­ ting rates to meet these." old, and concluded that it had lessened ously-including several dams. Several Hawley noted the increasing emphasis conflict, gained public acceptance and member companies had issued new secu­ on public relations at the meetings-and generally benefited association members. rities for the first time in years and the within member companies-now that ser­ He also applauded the state Supreme market, he said, reflected the stable char­ vice, not rights, was the organization's Court's reversal of a decision that had held acter of the business. Mergers also were main focus. (PR discussions took up about that water companies that wanted to stop occurring at a brisk pace, thanks to a 1923 25 percent of the 1923 meeting.) He also mining companies from polluting streams law that made them easier. praised the state's new Sanitary Water had better purchase them because prop- (continued on next page)

SPRING 1995 • History, continued Murdock Joins Association out rules and principles to be applied in Among those mourning the valuing utilities for rate making purposes. Broader Membership Rejected Association's loss at the conference was a It was the death knell of the then com­ McCaleb also broached an idea that fell new attendee, a lawyer and vice president mon practice of basing va lu e on prices flat: opening Association membership to of Citizens Water Company, in Washing­ over the previous 10 years. Executive municipal water departments and rheir ton, Pennsylvania, a Community Water Committee Chairman William Hawley officers. Service subsidiary. His name was John H. cited the decision in his report to the 1927 Leonard Metcalf, of Metcalf and Eddy, Murdock, Jr. In a year he would join the conference. He also noted that member the Boston consulting engineers, prepared executive committeej two years later he companies were gaining recognition as a paper that year on the impact of popula­ would ascend to the presidency, a position solid investments and were attracting new tion growth and rate increases on water he would hold for 37 years, during which investors and supporters. consumption. Metcalf was taken ill just he transformed the Association into a re­ Association President H. D. Brown before the meeting, however, so a partner, gional, then a national, organization. An­ spoke only briefly that year, noting that Frank A. Marston, read his report. Metcalf other death mourned at the meeting was he was in a peculiar position of no longer found that consumption increased one· that of Boston engineer Leonard Metcalf, being a member in good standing because tenth the rate of population growth, so only 56, who had missed the previous he had left the industry. He said the ex­ an 80% growth in population brought an meeti ng because of illness. He had been ecutive committee hadn't decided whether 8% consumption growth. As to rates, he an associate member of the Association for he should serve out his term or f< be shot." found, 20 years. He said they probably would keep him on Increase in rru~~ Drop in consumption Things were changing at the big water because "outsiders always know more than 20% companies in northern New Jersey in insiders about how to run an organiza- 13% . " 60% 29% 1926, too. Robert DeForest, president of non. 100% 40% Hackensack Water Company for over 40 Farley Gannett, president of the Har­ years, stepped aside at age 79. In an unex­ risburg engineering firm that was to be­ While the minutes of the meeting pected-and somewhat controversial­ come Gannett-Fleming, presented a long don't show it, there almost certainly was move, DeForest selected the company's report on the ownership of Pennsylvania's discussion that year of the acquisition consulting engineer, Nicholas S. Hill, as water suppliers that documented the trend of the Springfield Consolidated Water his successor. DeForest had to coax Hill toward consolidation. Gannett noted that Company, outside Philadelphia, by to give up a lucrative practice, then pla­ "Wall Street" had about a $100 million Clarence Geist, and its being renamed cate senior insiders, one of whom was as­ interest in member utilities, mostly the Philadelphia Suburban Water Com­ sumed to be his heir apparent. But he through six holding companies. He iden­ pany (PSC)_ Geist moved a vice presi­ pulled it off and Hill led the company for tified them, by the size of their Pennsylva­ dent and financial officer of his India­ 10 years. A few miles to the south , nia holdings, as: napolis Water Company, Harold S. Elizabethtown Water Company formed 1. Federal Water Service Company, whose Schutt, east to run PSW. When Schutt the Union Construction and Holding eight subsidiaries in the state were arrived, one employee recalled later (for Company to build and operate a much­ worth $36 million and served 600,000 a company history), "everything began needed regional t reatment plant at the people. to move": acquisitions, construction, confluence of the Raritan and Millstone 2_ American Water Works & Electric hiring ... everything. Schutt would be· Rivers. T he plan was complicated by the Company, whose seven Pennsylvania come PSW's president in the 1940s. untimely threat by the City of Elizabeth companies were worth $20 million and The following year, 1926, was marked to take over E'town's system in the city. served 30 communities. (Gannett said by an auspici ous departure and an equally That eventually happened just as the plant AWW&E's successes had led to the significant arrival. Jesse H. Purdy, who was completed five years later. It cut the other consolidations in the state.) rose from washing railroad cars in company's city sales in half. 3. Community Water Service Company, Connellsville, Pennsylvania, to become a The York Water Company was pioneer­ whose 13 subsidiaries were worth $15 community leader, a principal-with the ing in reforestation at this time. It proudly million and served 20 communities. Kuhn brothers-in the construction of the showed conservationists hundreds of acres 4. North American Water Works Corpo­ town's water system, a senior vice presi­ of pines it had planted around its man­ ration, a new company with 11 proper­ dent of American Water Works & Elec­ made reservoir, Lake Williams. President ties in the state worth $6 million and tric Company and a founding member of Calvin Coolidge called it the best ever­ serving 19 communities. the PWWA, died_ He had served as both green reforestation in the world. 5. Consumers Water Company, of Maine, president and chairman of the executive which had recently bought two compa­ committee of the Association and was Indianapolis Water Wins Appeal nies in western Pennsylvania, which probably its most influential member in About this time, the U.S. Supreme served about a dozen towns. its early years. He was eulogized at the Court ruled on an important and contro­ 6_ Philadelphia Suburban Water Com­ meeting as a man of exceptional intelli­ versial case involving the Indianapolis pany, the $20 million Geist property gence and integrity and "an inspiration to Water Company. The decision upheld the that was buying up neighboring utilities his colleagues." company against the Indiana PSC and set west of Philadelphia_

I G NAWCWATER ~ • city installed water meters, Hawley said, sis appears in the meeting minutes, which and hotel owners found that they were were frequently sprinkled with trivial losing thousands of gallons of water daily comments and asides. Stock losses across through the hoppers, so they "got rid of the U.S. would reach $50 billion in the them." He added that he was embarrassed next two years. Unemployment would that companies went to court over toilet soar. Many companies-including water leaks. utilities would cut employee pay to reduce In 1928, American States Public Ser­ layoffs. The day before the crash, General vice Company of Delaware began acquir­ Water Works & Electric Company ac­ ing water and other utility properties quired the San Jose Water Works for $5.1 around Los Angeles. Within a year it had million. (General would buy California's put together 34 companies at a cost of$5.8 largest supplier, Cal Water Service, 10 million and merged them as U.S. Water years later.) Service Company. In the' 30' s the group At the Association's 35th meeting, in was renamed Southern California Water 1930, President Murdock, with a direct­ Company. ness that was to mark his tenure, deplored w C. Hawley the fact that only 12 members had at­ Headquarters Moves East tended the formal business session. He The 1927 meeting also addressed the The Pennsylvania Water Works Associa­ told his colleagues that their organization Commonwealth's earnest-but largely fu­ tion moved its headquarters in 1929 from was losing its vitality, that debate and tile-efforts to control stream pollution. Pittsburgh 200 miles east to Harrisburg spontaneous discussion were flagging at A national environmental r~pdrt had re­ to be within walking distance of the of­ the meeting, that they were "resting on cently described the condition of the fices of the PSC, the legislature and the their oars." He said it might be time for "a state's rivers as "scandalous," and claimed state Health Department. It rented space change for the sake of change" and sug­ that only 5% of them were fit for domes­ in the Telegraph Building, built by a by­ gested that they break up the meeting at tic use. then-defunct newspaper. Its next move, the next conference into separate sessions This was about the time, incidentally, beyond anyone's vision at that time, would for accountants, engineers and lawyers, that 25-year-old Charles Lindbergh flew be to Washington, D.C. managers and plant operators. The idea nonstop from New York to Paris, winning John Murdock, Jr., took over as presi­ was applauded-and adopted. a $25,000 prize, and a place in history­ dent that year and delivered the first of William Hawley, chairman of the execu­ and in the hearts of Americans. Al Jolson some 37 annual conference-opening re­ tive committee, read a paper on advances made the first "talking picture," "The Jazz marks. He said one would have thought in water treatment written by one Abel Singer." His record, "Sonny Boy," sold 12 that in 34 years the Association would Wolman, chief engineer of the Maryland million copies in a month. More impor­ have addressed all the problems of Department of Health and editor of tant for the world, a Britisher, Dr. Pennsylvania's investor-owned water com­ AWW!\s technical journal. And Isaac Alexander Fleming, discovered penicillin, panies. But new issues kept surfacing, he Walker, a Philadelphia consulting engi­ which was to bring more progress in pre­ said, citing some 20 bills introduced in neer, reported on a trip to Russia and an venting and curing infectious diseases the legislature that year that could have inspection of Moscow's water system. He than any other advance before or since. been harmful or prejudicial to water sup­ was impressed by the modern plants he In 1928, attendance at the annual meet­ pliers. Fortunately, thanks partly, he said, saw, powered by huge diesel and electric ing was down by about 25%, to 130. Presi­ to the hard work of the Association, none motors. But what garnered the most atten­ dent John Reading noted that 15 members had passed. tion-and questions-were his observations had dropped out when their companies This was the year American Water on Russian life: widespread literacy, lib­ were acquired or merged. A committee Works & Electric Company bought the eral divorce laws and the surprising num­ that was studying the implications of Alexandria (Virginia) Water Company. ber of women doing jobs-including respon­ charging a fixed customer service fee And nearby, in West Virginia, powdered sible ones-that only men did in the U.S. found that it was clearly a rational and activated carbon was being introduced for The 1930 meeting heard a paper on businesslike thing to do. But it advised the first time in treatment plants to ad­ regulation by F. Herbert Snow, chief en­ against the practice because of the hostil­ sorb bodies causing disagreeable tastes gineer for the Pennsylvania PSC, who, ity such charges caused and the difficulty and odors. in a few years would become the secre­ of collecting them. tary of the Association. Also at the A court case involving a toilet leak and Minutes Silent on Market Crash meeting for the first time was a quiet an unpaid water bill triggered a discussion Coincidentally, the 1929 meeting was young Cornell-trained engineer, of a water closet called the Philadelphia convened on Tuesday, October 30, just Lawrence T. "Bill" Reinicker, of the Hopper. Executive Committee Chairman two days after the stock market crash that National Water Works Company, in Hawley recalled that this particular toilet marked the end of the post-war prosper­ Reading. He would one day be president had been in use at one time in hotels in ity and the beginning of America's worst of American Water Works. Atlantic City, the meeting site. Then the depression. But not a word about the cri- (continued on next page)

SPRING 1995 • History, continued Founding Secretary Dies In 1933, the Association mourned the 30's Mood Is Grim death of Francis S. Purviance, a founding I As if the Depression wasn't enough of member and PWWA secretary since day a problem in the '30s, Pennsylvania suf­ one. It was Purviance who ran the office, fered a serious multi-year drought. Cus­ recorded and published the minutes of I tomers who couldn't get water some days meetings, tracked, annotated and distrib­ couldn't pay for it when they did. Millions uted all relevant legislation and rate deci­

I were jobless. It was clear many companies sions and generally kept the organization needed to develop new sources and new going. To the Association's relief, Dr. storage and distribution facilities. But, Herbert Snow, the PSC's chief engineer, given the economy and the scarcity of capi­ who had addressed the conference the pre­ tal, no one was building anything. It was vious year, agreed to come aboard to suc­ to address the shortage of capital that the ceed Purviance. He would serve until his five-year-old St. Louis County Water Com­ death in 1942. Other eulogies that year pany sold out in 1930 to Commonwealth remembered Morris Knowles, of the Con­ j. H. Purdy Utilities, of Philadelphia, a subsidiary of solidated Water Company in Pittsburgh, Geist's United Gas Improvement Com­ and John Ladoux, of the Lehigh Water ber of the Association's executive commit­ pany. Company in Easton, both long-time mem­ tee, but never was recorded in the min­ The dark mood in the U.S.-and in the bers of the Executive Committee. utes as a conference attendee. In New Jer­ Association-lasted for several years. The Association was instrumental in sey, Elizabeth lawyer Frank Bergen, the Murdock told the 1932 conference that 1933 in defeating a proposed $8 million founder of Middlesex and its president for they had not seen any "sunlight" in three state tax on water company assets that 35 years, died at age 82. His company paid years. What with the extended drought would have cost members $200,000 a year. healthy dividends right through the De­ and the crippled economy, credit condi­ Murdock estimated the lobbying cam­ pression. tions were the worst he'd ever seen, he paign cost $6,000. John Murdock warned his colleagues in said, and small companies had to "juggle Franklin Roosevelt took office that year, 1934 that times were changing, that there and manipulate their books" just to stay having convinced voters that he could was a great deal of public resentment of afloat. He kidded that everything had col­ bring the government's resources to bear private property, profits and, especially, lapsed "the year I was elected" and said if to get the nation back on the road to pros­ monopolies. "Where is the line to be the Association had any sense it would perity. He would soon be assisted by world drawn at which a profit is antisocial?," he make someone else president. events: Adolph Hitler, appointed chancel­ asked. Murdock urged that the PWWA That was the year some of the most abu­ lor in Germany, seized dictatorial powers support a movement to bring municipal sive-and most leveraged-utility holding and stepped up his reign of terror. Ger­ water suppliers under the control of the companies, like Samuel Insull's $4 billion many and Japan withdrew from the PSC. Such a move would improve the im­ Middle West Utilities, collapsed, costing League of Nations. U.S. industry, produc­ age of private suppliers, he said. investors millions and undermining con­ ing at half its 1929 level, must have sensed The Association's budget was stretched fidence in all utilities. Murdock decried there would be new demand for arms. One that year so it moved into a smaller office the abusers' "indefensible practices" and bright note for some: Prohibition ended. in Harrisburg to save $190 a month. The the toll they were taking on responsible budget provided $5,200 for salaries, $475 utilities. Industrial revenues were falling; Wary of Roosevelt for the annual conference, and $729 to uncollectible accounts, mounting; rates, Most Pennsylvania Water Works Asso­ reimburse Dr. Snow for a Ford he had frozen. "It's going to take diplomacy and ciation members were wary of Roosevelt. bought for work. Murdock said he would kindness to avoid disaster this winter," There was increased political talk of the take on more of the Association's corre­ Murdock told his colleagues. need to curb the concentration of wealth spondence and opened an office in west­ The conference discussed loans being and prevent the accumulation of economic ern Pennsylvania to do so. He urged the made available through the Reconstruc­ power in the hands of a few. But business­ purchase of a mimeograph machine to save tion Finance Corporation, an ambitious men also knew that the economy would the secretaries' time. It could be used to ~government effort to assist troubled farms be paralyzed until the ordinary working produce the Association's new monthly and businesses. Applications had just be­ man regained some purchasing power and newsletter. come available in Pennsylvania and mem­ some supported Roosevelt's programs to­ Members reported for the first time on bers were briefed on how to apply. ward that end. pension and life insurance programs fo r About this time, Julian Kean, president One person who was moving boldly in employees. of the Elizabethtown Water Company for those dark years was John H. Ware, Jr., The Public Utilities Holding Company 18 years, passed away. He was succeeded the electrical entrepreneur. He gained con­ Act was passed in 1935 and, as a result, by a nephew, John Kean, addressed as trol of three Philadelphia-area water com­ the Securities and Exchange Commission "Captain" because of his World War I ser­ panies and set his sights on larger fish. directed many diversified utilities, like vice. He would serve through the 1940s. He was listed in the early 19 30s as a mem- Federal Water & Gas, American Water

• NAWCWATER Works & Electric, General Water Works bers' wives fe lt more welcome ... and for American involvement in the war in & Electric and Commonwealth Utilities, more attended in the years ahead. Europe. Members feared involvement to concentrate on one service and divest The Association attracted 100 members would hurt utilities because it would af­ themselves of any others. Utility execu­ to a mid·summer meeting at Hershey in fe ct the availability-and cost--oflabor and tives, including H. Hobart Porter, pres i­ 1937 to discuss proposed legislation that supplies. James A. Garfield, an Ohio util· dent of AWW&E, went to Washington to would li mit the workweek to 44 hours ity lawyer and the son of the 20th presi­ testify against it. Most of the divestitures (passed and later ruled unconstitutional), dent, addressed the conference. H e at­ occurred in the 19405 after considerable regul ate steam withdrawals and toughen tacked the new Tennessee Va lley maneuvering and negotiating. pollution laws. Murdock and Pittsburgh Authority, which he saw as a government attorney Joseph Beck spent many days in subterfuge to force the region's power 1936 Floods Cause Havoc H arrisburg that year testifying and lobby­ companies to reduce their rates. He Problems caused by the March floods, ing. At the October meeting, William C. warned his audience to watch out for such the worst ever recorded in Pennsylvania, Hawley stepped down as chairman of the government intrusion under Roosevelt. dominated the discussion at the annual Executive Committee after 12 years. He The meetings also heard that year how meeting in 1936. Homes were under wa­ also had been the Association president well fie ld yields were being improved by ter in 350 communities. Every water plant for 12 yea rs. E. R. Hannum, of Windber, more effi cient screens, a new screen-clean­ south of Pittsburgh was shut d own. succeeded him as chairman. Murdock, ing technique employing dry ice, and an Countless wells were contaminated. More taking a lead from other trade associa­ innovative strategy: recharging aquifers than 5,000 miners were out of work and tions, appointed nine working committees from streams. unable to pay their bills. This, on top of in addition to the executive committee to T he United States began to get o n a the ongoing pall of the Depression. work in special areas like finance, legal serious war footing in 1939. FDRdeciared After a long discussion on the advisabil­ affairs and consumer relations. a limited emergency-calling for increased ity of shutting off service to idled wo rkers Murdock described the envi ronment arms p roduct io n- but emphasized the with delinquent bills, conference attend­ that year as "a world gone mad." War raged nation's neutrality. (Polls showed that ees were unanimo us: it would be bad in Spain and Asia. "I hope we can just keep 67% of Americans opposed involvement policy. But they resolved to keep records our poise and ... keep our businesses in the war after Germany invaded Czecho­ of "free service" fo r the PSC. sound ," he said despite rising interest rates slovakia and Italy moved into Alb ani a.) The New Dea l was moving in high gear and labor costs and falling stock prices. Murdock told the conference that year now. The Social Security Act had passed. The Association estimated there were 600 that while all were concerned about the Unemployment insurance was introduced. private or invescor-owned water suppliers hostili ties, Association members had their Business was beginning to chafe, but FDR in Pennsylvania and about 200 municipal businesses to run and should concentrate was elected by a landslide. Murdock said systems. on that. Turning to tbe PSC, Murdock that year that he resented the way Ameri­ T he industry lost a colorful personal­ urged support for its requests for more cans were being categorized as either New ity in 1938 with the death of Clarence budget and staff, then said the Commi s ~ Dealers, those who believed the free en­ Geist, president of the Indianapolis and sion was doi ng Pennsylvanians a disservice terprise system had failed, or Stand Pat­ Philadelphia Suburban Water Companies by not regul ating so as to reward efficiency. ters, who "resist all change" and defend and the United Gas Improvement Com­ All utilities, good and bad, are treated the business in every instance. He said he was pany. A Geist protege, Harold Schutt, said same, he said , providing no incentive to neither. A staunch Republican, Murdock to be just as tough and testy as his boss, cut costs. In fact, Murdock said, compa­ believed businessmen had to open their succeeded him as head of the three com­ nies that cut their costs were "rewarded" eyes and respond to social change by im­ panies. Almost im mediately, Schutt took with rate reductions. He said it wasn't just proving employee benefits, curbing layoffs o n the city of Indianapoli s, which moved a Pennsylvania problem, that commissions and being more socially conscious in their to buy that company. H e refused to sell in Massachusetts, New YorkJ Ohio and policies. and the Geist estate continued to control Cali forn ia operated the same way. This was the yea r American Water IWC until the 1950s. Another budding Works & Electric, with 44 water proper­ tycoon, John H . Ware, company rich and Fix Rates, Not Profits, PSC Told ties, bought Community Water Service, cash poor, sold six of his Pennsylvania "In no other business does efficient with 43, most of them in Pennsylvania. water companies to payoff debts. The operatio n go unrewarded,lt Murdock told Po r ter stepped down as president of terms provided for long-term contracts for his coll eagues. llAnd no system that fa ils AWW&E the foll owing year but stayed on a Ware subsidiar y to manage the proper­ to reward efficiency can be expected to as chairman of the board until 1946 when ties. survive. My advice to the commission is he was fatall y injured in an elevator acci­ to concentrate on fixing fair rates, not on dent. War Clouds a Concern regulating profits." The Association's Economic Trends Lorenzo UBunny" Semple, a senior vice Wives' Tea is a Hit Committee reported that year that busi­ president of American Water Works & An innovation at the] 936 annual con­ ness activity was picking up as demand Electric Co., spoke to the conference that ference was the first organized activity for grew abroad fo r U.S. commodities. There yea r on liThe Kind of Boss I Like." He spouses: a ladies' tea. It was a hit. Mem- was still uneasiness about the prospects (continued on next page)

SPRING 1995 equated the CEO of a company to the cap­ Freeland Water Company. He would one tain of a ship and said his style created day head both American Water Works either a "happy ship" or a "madhouse." He Company and the National Association of urged CEOs to keep their workers in­ Water Companies. formed, avoid paternalism, capriciousness During the summer of 1941, Roosevelt and, especially, nepotism, and to employ and Churchill met to coordinate the Al­ constructive criticism, not blame, to mo­ lied war effort. The lend-lease program tivate people. was implemented, largely to assist Russia, Federal Water Service sold California which was fending off a German invasion. Water Service Company to General Wa­ U.S. military recruiters were finding that ter Works in 1939. Cal Water would be­ thousands of young men failed the induc­ come an independent company, listed on tion physical because of dental cavities. the New York Stock Exchange, in 1945. That experience eventually led to the wide­ Two months after the 1939 meeting spread practice of fluoridating public wa­ William C. Hawley died. He had been ei­ ter supplies. ther president or chairman of the execu­ Murdock's address to the conference John H. Murdoch tive committee of the Association for 24 that year was a call to arms. He said a years. In a eulogy published in the "shooting war" was inevitable (this was six Association's newsletter, Murdock said weeks before Pearl Harbor) and that the guards to watch plants and reservoirs; Hawley, an engineer and AWW&E execu­ defense establishment would have first call many bought war damage insurance on tive, was a man who believed one's educa­ on manpower and materials. But, he noted plants and dams. In December that year, tion never ended and was always seeking that thousands of unemployed were being the day after the attack on Pearl Harbor, information and insights. "He was at his called back to work ... and were paying the governor and the chairman of the PSC best at our meetings," Murdock said. One their utility bills again. "But we must asked Murdock to convene a meeting of of the projects Hawley had worked on, the guard against inflation," Murdock said, the largest water suppliers to review their acquisition of the Greenwich (Connecti­ "for war doesn't produce wealth, it de­ anti-sabotage preparedness. The state was cut) Water and Gas Company, was com­ stroys it." divided into 15 water supply districts and pleted a couple of months after the death. "The difficulties we face are real and a mutual aid plan devised to minimize any serious," Murdock concluded, "but they supply interruptions in the event of an Company Exhibits Introduced should bring out the best in all of us." incident. The Association's 45th meeting fea­ The 1942 meeting of the Association tured an exhibit room where six compa­ CEO Won't Serve Neighbor was scheduled for October in Atlantic nies set up displays illustrating some as­ The meeting wasn't all that grim. T urn­ City but was moved to Harrisburg after pect of their operations: a training ing to regulatory decisions that year, at­ the Army and Air Force took over the program, an ad campaign, a record-keep­ tendees heard about a small company shore hotels and coastal defense and train­ ing technique, etc. The war was a real pres­ whose president, the owner, had discon­ ing purposes. The session focused mainly ence at that meeting. The Nazis had en­ tinued service to his neighbor "because his on the exigencies of the war: an increased tered Paris and were bombing London. driveway was unsightly." He told the Com­ demand for water, increased stream pol­ Churchill had taken the helm in England. mission he didn't intend to serve anyone lution and limited materials and man­ The U.S. Congress passed the Selective who didn't take pride in his property. The power to cope. Murdock outlined the new Service Act, setting the draft in motion. Commission fined him $50, ordered him Water Production board priorities. Mem­ And Major General Edwin Martin, the to restore his neighbor's service and told bers exchanged stories about their new adjutant general of Pennsylvania, ad­ him if it happened again, he'd be in real roles as air raid wardens and auxiliary dressed the annual meeting on the impli­ trouble. policemen, about their "victory gardens," cations of a war for the state's water sup­ A more serious bright note was a report and shortages of sugar, gasoline and tires. pliers. He got off to a great start by on the new Federal Housing Program that There was widespread confidence that announcing that he, personally, didn't was expected to finance 35,000 new low­ now that the moral indignation of the U.S. think that government, at any level, income homes in Pennsylvania and create had been aroused, it would be over pretty should be in the water business. new accounts for PWWA member compa­ quickly-perhaps in a year-for Germany The session also included a panel dis­ nies. The Housing Authority and the utili­ and Japan. cussion on depreciation and an appraisal ties were working together to implement of the Municipal Authorities Act, which the program, Murdock said, and there Secretary Succumbs John Ware had supported to advance his might be something to be said for estab­ Dr. F. Herbert Snow, secretary of the plan to sell properties. Some members lishing special rates for these accounts. Association for 19 years, missed the meet­ thought it was at odds with the objectives An FBI agent spoke to the group about ing because of illness and Lillian E. Wolfe, of the Association. A new attendee that precautions against sabotage: floodlights, assistant secretary and treasurer, filled in year was John J. Barr, a young financial security fences, employee background for him. Snow died a week after the 1942 lieutenant of Ware's who represented the checks, etc. Companies hired security meeting and was succeeded temporarily by

• NAWCWATER • Baton Rouge Water Co. (center) with Louisiana State Capitol Building in background (October 6,7936).

E. R. Hannum, of Windber, who, in turn, just completed its 2000-acre, $2.5 million to chair the meeting. Gen. Edwin Martin, yielded the chairmanship of the executive Geist Reservoir, the company's first. who as state adjutant general had ad­ committee to 70-year-old Carleton E. The summer meeting of the American dressed the 1940 meeting, was the lun­ Davis, vice president of Philadelphia Sub­ Water Works Association in 1943 heard cheon speaker. This year, however, he was urban. Davis was an almost legendary fig­ three papers on the subject of fluoridation introduced as Pennsylvania's governor. ure in the business. An engineering gradu­ of water supplies. One, by Abel Wolman, Also at the meeting were 11 PSC com­ ate of MIT, he had helped develop New urged more research on its safety. The missioners and staff and nine other senior York City's upstate reservoir system, Pennsylvania association met in Harris­ state officials, an indication of the worked for the Panama Canal Commis­ burg again that year because the Atlantic organization's growing clout and im­ sion, headed the Philadelphia Water De­ City hotels were still being used by the proved relationships with government. partment, been lured to Indianapolis in military. Remarks focused on the need to upgrade the '20s by Geist to run the company In 1944, the United States Supreme facilities after a six-year wartime hiatus there, then moved east in the 30s to be Court ruled in a case that would be sec­ and on the high cost of materials and la­ the senior operating executive at Ph illy ond only to "Bluefield" in its importance bor, which had members concerned. The Suburban. to utility operators: the Federal Power Pennsylvania PSC had been reorganized This also was the year John Ware had Commission vs. Hope Natural Gas Com­ after a nasty investigation of ineptitude, bought the Northeastern Water Company, pany. The "Hope" decision expanded on malfeasance and misconduct. There was which Samuel Insull had divested in the the principles set forth in "Bluefield." It optimism that the "new" commission early '30s. The 37 water companies and stated that utilities can be given "enough would speed up rate decisions, which took two electric companies brought Ware's revenue not only for operating expenses, years on some cases. This, they hoped, holdings to 56 companies worth about but also for the capital costs of the busi­ would facilitate financing. But time would $26 million. All the big northeastern com­ ness (including) service on its debt and tell. On the horizon was the biggest build­ panies were working feverishly to meet dividends on its stock." ing boom the world would know. new war production demand and In an almost unnoticed event that year, Elizabethtown was beefing up its service '44 and '45 Meetings Canceled the city of Newburg, New York, began to Camp Kilmer, a training camp that had The 1944 and '45 meetings were can­ fluoridating its water under the supervi­ become the Army's main east coast debar­ celed because of wartime restrictions on sion of the state Department of Health. kation center. Bridgeport Hydraulic Com­ travel, but when the Japanese surrendered Nearby Kingston, whose water had no pany completed its 11.9 billion gallon in August of'45, the executive committee traces of fluoride, would be the control Saugatuck Reservoir just in time to meet hastily put together an October meeting in the experiment. war production demand. The 870-acre in Harrisburg. Murdock was battling lar­ Next: The post-war boom, fluoridation, lake doubled BHC's surface supply. In yngitis so he asked Association vice presi­ the Cold War, proliferation of regulation Indiana, Indianapolis Water Company had dent W. F. O. Rosenmiller, of York Water, ... and environmentalism. ,

SPRING 1995 - - NAWC CONfERENCE AT THE CRESCENT CITY

Carriage in front of St. Louis Cathedral. © Ron Calamia

New Orleans, Louisiana, is the site of Situated at the mouth of the Mississippi of the Cajun people and drawing your at­ NAWC's 1995 Annual Conference, held River, much of New Orleans is below sea tention to the inhabitants of the swamp­ October 29 through November 2, 1995, level, guarded by levees, pumps and ca­ alligators, nutria, snakes, egrets, herons at the Inter-Continental Hotel. Embracing nals. The river is an active one, filled with and more-and the subtleties that the ca­ a wide range of cultljres and interests, merchant vessels, steam boats catering to sual observer may otherwise miss. New Orleans-also knqwn as the Crescent sightseers and, the latest addition, casino City-is one of the most exciting cities in boats. If you prefer the peacefulness of a The Sound of the City the United States. There truly is some­ swamp to the activity of the river, though, Visitors to New Orleans are immedi­ thing for everyone in New Orleans, a des­ you need not travel far from the hustle and ately introduced to the rhythms of the city. tination that is consistently rated as a fa­ bustle of downtown New Orleans to visit Music is synonymous with New Orleans, vorite by conference-goers from around swamplands, where the only hustle and and, again, with a little bit of effort, some­ the world. NAWC aims to provide Con­ bustle is caused by alligators sneaking up thing for everyone can be found. Mardi ference attendees with the opportunities on unsuspecting waterfowl. Cajun guides Gras-style parades are punctuated by brass to get as large a dose,9f New Orleans cul­ take visitors out in the swamps and bands blaring Dixieland Jazz. All styles of ture as they desire. ,,,,, ..; marshes, providing insight into the story jazz can be heard at the clubs and lounges

• NAWCWATER of New Orleans, which can boast of such po' boy sandwich, another New Orleans day, and offers a variety of light breakfast favorite sons as pianist Harry Connick, Jr., specialty. Dinner time is a busy-and fra­ items, soups, salads, sandwiches, fabulous and clarinetist Pete Fountain. Bourbon grant-time in the French Quarter, as visi­ deserts and non-alcoholic beverages. And Street clubs provide country line dancing tors often follow their noses to a mouth­ if the idea of in-room dining is appealing and karaoke, and everything in between. watering meal. And you'll probably want to you, fear not, as room service is avail­ Clubs such as Dan Ackroyd's House of to squeeze in a champagne brunch at some able 24 hours a day, seven days a week. Blues have their roots in the music of such point during your stay, just to be sure that blues heroes as Robert Johnson and you don't miss anything. Assorted Highlights Muddy Waters, with an eye to contempo­ The Hotel Inter-Continental provides If shopping is what you're interested in, rary variations provided by current artists. a host of dining options, if you feel like well, you guessed it-New Orleans has Zydeco musicians play their accordions like staying on property. The Veranda is the that, too. New Orleans overall, and the nothing you have seen on Lawrence Welk, hotel's signature restaurant, open for French Quarter in particular, include all and are accompanied by a good old fash­ breakfast, lunch and dinner. Breakfast and kinds of little shops containing treasures ioned washboard, scraped by a spoon. luncheon buffets are offered during the that you may not have known even existed. week, and a champagne brunch is served Everything from antique munitions, to Hotbed of Creativity on Sundays. Light food service is available cooking supplies, to designer furniture, New Orleans is also home to more than from the Lobby Lounge, where there is to the supernatural (from the Historic its share of artists. Royal Street, in the also musical entertainment. Pete's Pub is Voodoo Museum shop) can be found in French Quarter and a quick cab ride from open for lunch and evening cocktails. The the French Quarter. Jackson Brewery, lo­ the Inter-Continental, is home to twenty Sweet Car is open Monday through Fri- cated on the river, is in the middle of the art galleries, featuring everything from antique classics to original paintings by world-renowned artists. Magazine Street, uptown, is also replete with antique stores. The atmosphere of the city clearly brings out one's creative juices. William Faulkner wrote his first novel, Soldier's Pay, while living in the French Quarter, next to St. Louis Cathedral. The house is cur­ rently a book shop, specializing in Faulkner and other classic literature. Ten­ nessee Williams' home was New Orleans when he wrote A Streetcar Named Desire. And among the current crop of literati that calls New Orleans home is popular novel­ ist Ann Rice (The Vampire Chronicles).

Cooking Capitol It is rare that a discussion of New Or­ leans doesn't eventually turn to food. New Orleans relies on its access to fresh seafood, its unique blend of cultural back­ grounds, its willingness to embrace the unconventional and, some say, even its topography (die-hard New Orleanians maintain that it is impossible to cook a proper red beans and rice at any altitude different than their own) to make the city one of the culinary capitals of the world. Restaurants like Brennan's, Commander's Palace and Arnaud's, to name just a few, are internationally famous. Chefs such as Paul Prudhomme of K-Paul's Louisiana Kitchen are among the most well-known chefs in the world. Days begin with steam­ ing mugs of cafe au lait and beignets, a New Orleans cousin of the doughnut. New Orleans jazz trio. © Susie Leavines Lunch is a good time to down an oyster

SPRING 1995 French Quarter, and features 75 shops rooms in the house, runs the length of with the unique above-ground burial and restaurants. The Riverwalk includes Nottoway and is known as the white ball­ vaults. Many of the early settlers, victims 140 places to spend your money, with a room. The structure is adorned with crys­ of the dreaded yellow fever epidemic, are nice balance of retailers, traditional and tal chandeliers, two white marble hand­ buried there. unique. carved mantels, Corinthian columns and Rest assured that a city that is so intent New Orleans is also home to one of the intricate and lacy plaster freize-work. on enjoying the finer things in life has its finest aquariums in the country. The Another "must-see" in the famous Gar­ share of golf courses and tennis courts. Aquarium of the Americas, located where den District of New Orleans. Amidst lush The NAWC Golf Tournament will be held Canal Street hits the Mississippi River, reo foliage, mansions, with leaded glass doors, on Sunday morning at the Bayou Barriere, creates the aquatic environs found in the balconies and stately columns, are often owned by current PGA Senior Touring Pro Western Hemisphere-Caribbean Reef surrounded by picturesque iron fences. Jim Colbert. An NAWC tennis tourna­ Environment, Amazon Rainforest Habi­ Surrounding these prestigious residences, ment will also be held. tat, Mississippi River and Delta Habitat. are gardens with magnolias, oak trees, aza­ The Aquarium is home to more than leas and camellias, fragrant sweet olive and Registratian lI\aterials 7,500 specimens of marine life, represent­ jasmine. A stroll through this residential The activities provided by our host city ing 420 species. area will give you glimpses of the homes are supplemental to a full-slate of profes­ If you've got an appreciation for live oak of prominent New Orleanians, many of sional sessions and seminars, linked to trees, you won't want to miss City Park. whom have reigned as kings and queens NAWC's Centennial theme, "100 Years of Ancient live oaks provide a lush canopy of Mardi Gras. Within the Garden Dis­ Excellence." So be sure to block October for this urban park, the fifth largest in the trict, visitors will see Lafayette Cemetery, 29 through November 2 on your calendar, country, where, in earlier times, duels were fought. The park is home to the New Or­ leans Botanical Gardens, with its Art Deco fountains and native Louisiana flora. If you're traveling with children, they'll enjoy the Carousel Gardens, an amusement park known for its antique wooden carousel and miniature train. The Farmer's Market, once used by Choctaw Indians as a trading post, is open 24 hours a day, and is the country's old­ est public produce market. It features the best of local and imported fruits, veg­ etables, seafood and spices. If you're there early, don't be surprised to run into the chef that prepared your dinner the night before. The Farmer's Market is located by the French Quarter Market Place, which itself is also home to a vast flea market, open seven days a week. Outside of the city, history and archi­ tecture buffs will appreciate a visit to his­ toric homes and plantations. Popular sites include Houmas House Plantation, built in 1840. Nestled in a bend of the river, the plantation is still a frequent stop for steamboats cruising their way up-river as in by-gone days when Houmas House was the prime producer of sugar cane in America. Up-river from Houmas House, Nottoway Plantation, built in 1865 by a sugar cane planter, covers 53,000 square feet making it the largest antebellum home in the South. Saved from destruction dur­ ing the War Between the States by a Northern soldier, and restored in 1980, it is one of the finest restorations in the Cafe au lait and beignets. area. Its massive ballroom, one of 64 © Ron Calamia

• NAWCWATER and keep on the lookout for registration days until you can join us to "Pass a A likely place for this to be a possibility is m aterials, which will be distributed in good time," as the Cajun people would found in the Ozark region of the state July. In the meantime, count down the say. ~ where high quality ground water is abun­ dantly available. Wells can be drilled at reasonable distances apart which allow distribution systems to be interconnected, thus allowing multiple sources of supply. Interconnection of small systems to large systems for emergency use is also practi­ cal in some cases such as subdivisions in proximity to a larger city. Pressure reduc­ ers and backflow prevention may be needed in such situations. To summarize, there is a great need for regionalization of water supplies in parts of the state. In other parts of the state, there is a need for consolidation of man­ agement and operation. In areas of the state where small private investor-owned water systems are concentrated, there is a need for a consolidation of ownership. The State has a group of regional planning Commissions. The people in those agen­ cies, being familiar with problems in their area, could be ,very helpful in establish­ ing regional water systems. They would also know where management and opera­ tion consolidation is needed. The Staff of the Water and Sewer Department of the PSC will know where consolidation of ownership or management of investor­ owned water systems is needed. Perhaps it will require new legislation to accomplish this. Communities need to cooperate, and the State needs to take some action to promote regionalization, otherwise there will continue to be many nonviable water systems, and in some ar­ Cajun man with crawfish. eas poor quality water available to some © Ron Calamia customers and high quality expensive wa­ ter available to others. Proper planning can benefit the entire area. In order to Regionalization, continued from page 23 study in the various regions of the state benefit the taxpaying citizens, public fund­ this past year regarding rural water sys­ ing of water systems by the state should these ventures. Clarence Cannon Whole­ tems. Joe Lopez of that department did the be determined based on regionalization of sale Water Commission, as successful as study and wrote the Final Report of the consolidation as discussed where it is it is, took nine years to develop, and that Rural Water Systems Project. (3) It describes needed and is practical. was the result of a community leader will­ problems and the need for regionalization, Footnotes ing to push hard for its success. You can and contains some very useful informa­ 1U.S. Environmental Protection Agency, Memoran­ readily see how much more time it might tion that can be used to promote dum to Drinking and Ground Water Protection take to get several communities together regionalization or consolidation of water Branch Chiefs, Regions 1-10, from James R. Elder, and cooperate to form a large regional systems. Director, Office of Ground Water and Drinking Water. water district, whereas a private company One thing that should be mentioned is would need only to sell its program to in­ the interconnection of small water systems 'Small Systems-Uniting to Become Stronger by Elizabeth Grove, CCWWC, and Harry Morrow, dividual city councils and water district where it is practicable. This is another JMM Operational Services, Inc. boards. form of consolidation in that systems that 'Department of Economic Development, Final Re­ The Department of Economic Develop­ are physically connected can help each port of the Rural Water Systems Projects, Febru­ ment, of which the PSC is a part, did a other meet the needs of their customers. ary, 1995.

SPRING 1995 Testimony of the National Association of Water Companies before the Subcommittee on Government Management Information and Technology Concerning Privatization Impediments and Codification of Executive Order 12803

presented by Donald L. Correll Chairman and Chief Executive Officer United Water Resources

March 14, 1995

Good morning Mr. Chairman and 100th Anniversary as an organization, members of the Subcommittee. My name is with many of our members having been Don Correll. I am Chairman and Chief in business for even longer periods. Our Executive Officer of United Water Re­ 380 members in 41 states provide safe, sources, an investor-owned water utility reliable drinking water to over 22 million holding company which provides water ser­ Americans every day. vice to two million Americans in 14 states. By contrast, approximately 80% of the I am also a member of the Board ofDi­ population in the United States receives rectors of the National Association of its water service from various governmen­ Water Companies (NAWC) and Chair­ tal agencies and authorities. For wastewa­ man of its Government Relations Com­ ter services, the percentage of governmen­ mittee_ The National Association of Wa­ tal ownership is greater than 95%_ Many ter Companies is the trade association of these municipal water and wastewater representing the nation's investor-owned systems have aging infrastructure and are water utilities. We recently celebrated our now facing the daunting task of comply- e NAWCWATER ing with the mandates of both the Safe tate private sector investment in wastewa­ (OMB) if the facility is sold or leased. The Drinking Water Act and the Clean Water ter treatment facilities. presumption by OMB is that the asset's Act. All of these factors are placing enor­ CIAC-Contributions in Aid of Con~ use would change with private ownership. mous strains on the funding and techni­ struction. Investor-owned water utilities However, unlike housing and other gen­ cal capabilities of many systems. EPA's are taxed on capital contributions from eral purpose structures, water and waste­ 1992 needs survey estimates that the developers for system expansion. This tax water facilities are almost never converted Clean Water Act will cost federal, state creates competitive advantages for govern­ to some alternate use. and local governments $137 billion over ment systems and indirectly discourages Executive Order 12803 requires the lo­ the next 20 years. This was $57 billion privatization efforts. cal government to repay the undepreciated more than the 1990 estimate. Further, an The NAWC has sought relief of this portion of the grant. The local govern­ estimated $49 billion will be required to provision since 1986 and supports H.R. ment, however, is allowed to recover its meet the requirements of the Safe Drink­ 957 sponsored by Congresswoman Nancy costs before any funds are used for grant ing Water Act through the year 2000. To Johnson which would repeal (and pay for) payback. The Executive Order also places address these growing financial responsi­ this tax. restrictions on the use of proceeds re­ bilities, government systems across the Rev. Proc. 93·19. This IRS ruling se· ceived by the city as a result of the sale or country are exploring various privatization verely limits the abilities of governmental lease. The Executive Order directs federal alternatives, often with NAWC compa­ bodies to contract with private operators agencies to adopt rules to carry out its re­ nies. However, while exploring for water and wastewater management ser­ quirements. To date, implementation has privatization, localities regularly encoun­ vices. It limits the term of the management been very disappointing and clearly has ter legislative and administrative ob­ contract to periods of three years if tax­ not achieved the order's intent of stream­ stacles. My company and the other mem­ exempt debt of the government entity is lining privatization efforts. bers of the NAWC have the experience outstanding. This time limit precludes sig­ The NAWC supports legislation to and resources to professionally operate nificant investment by private contractors codify an improved version of Executive first class water and wastewater facilities. to attain operating efficiencies or to make Order 12803. Under the plan as envi· The private sector has proven that it is system improvements. The NAWC is cur­ sioned: capable of providing safe, reliable drink­ rently both working with the Administra­ 1) A city would not be obligated to repay ing water to the public in an efficient man­ tion to address this concern and pursu­ federal grants provided the grant­ ner. ing a possible legislative remedy. funded facility continues to be used for For these reasons, on behalf of all the Congressional attention to timely resolu­ its original purpose. Long-lived invest­ members of the NAWC. I applaud this tion of this matter would expedite ments in water and wastewater facilities subcommittee's efforts to investigate the privatization activities. that continue to be used as such sh,:=mld issues affecting privatization and am USC Section 1926 (b) This section of not require repayment. pleased to be able to offer this testimony. the U.S. code was written in 1961 to give 2) Local governments could use the pro­ The NAWC members have encountered protection to rural water associations in ceeds it received as a result of the trans­ many privatization impediments, some of repaying Farmers Home Administration fer without the restrictions found in Ex­ which have existed for many years. Under­ Loans. It has since been broadly inter­ ecutive Order 12803. standably, resolutions of these problems preted to provide complete protection may fall under the jurisdiction of many against competition regardless of whether The water service business is perhaps different committees. However, I will the integrity of the loan is in any way jeop­ the most basic of enterprises. That is why briefly describe the significant issues for ardized. Though this was not the legisla­ it is often taken for granted. But contin­ your information and elaborate on those tive intent of the provision, it has proved ued economic growth or other larger high­ which may be within the purview of this to be a significant impediment to profile privatization ventures likely pre­ subcommittee. privatization efforts in rural areas. The sented before this subcommittee will be NAWC supports not only the repeal of academic discussions if aging government Summary of Issues this provision but opposes any attempts infrastructure concerns remain unre­ POTW-Publicly Owned Treatment to extend it into other areas. solved. Examples of increased water sup­ Works. The regulatory requirements for ply and operating problems, including municipally-owned treatment facilities are Executive Order 12803 here in Washington, D.C., have been re­ less stringent than those for industrial dis­ This Order issued by President Bush in ported in the media with increasing fre­ chargers. Due to how facilities are defined, 1992 was designed to facilitate the sale of quency in recent years. Support for private this has resulted in confusion when a pri­ government facilities that had received sector participation in this basic service vate company assumes ownership 6f a mu­ funding through federal grants. is vital. nicipal facility or POTW. This confusion Many municipal drinking water systems Mr. Chairman, on behalf of the has existed since enactment of the Clean and most wastewater systems were fi­ NAWC, we stand ready to assist this sub­ Water Act in 1972. The NAWC supports nanced during the last several decades in committee in its endeavors to promote a uniform definition of a POTW based on whole or in part with federal grant money. privatization activities, and I am grateful purpose rather than ownership within the Grant repayment conditions are imposed for this opportunity to testify before you Clean Water Act Reauthorization to facili- by the Office of Management and Budget today.,

SPRING 1995 e Regionalization/Consolidation of Water Systems in Missouri

by Bill L. Sankpill and james A. Merciel, Missouri Public Service Commission

presented at the Missouri Section and Kansas Section AWWA joint Conference, AprilS, 1995, Kansas City, Missouri

Regionalization and consolidation of spread over a large customer base; director. However, there are two points water systems is not a new idea. It has been 4. The larger regional suppliers can af­ that need to be addressed. One is consid· going on for a long time. However, today, fo rd to hire a higher level of expertise eration of the positive impact with the advent of the demands of the Safe and maintain a larger work force; regionalization can h ave on the entire Drinking Water Act (SDWA) as amended 5. Additional capacity provides another community. Elimination of one or more in 1986, combined with the fact that many incentive for economic development; jobs in the community unfortunately is water systems are 80 to 100 years old, a 6. Local officials are not burdened with something that must simply be weighed great number of water utilities are operat­ meeting State and Federal standards with all other considerations and not ing with inadequate systems. Water sys­ applicable to source of supply; made an emotional issue. Still, it may be tems which may have been well designed 7. Allows capital to be freed up in the an emotional issue to some citizens and and" state of the art" when they were new small systems, which can then be used local officials need to keep this point in may now be inadequate to meet water qual­ to improve distribution system infra· mind when making their decisions. But ity and demand requirements. Water utili­ structure; the second point is that changes resulting ties with such systems may need to reha­ 8. Ftees up bonding capacity of small from reg ionalization would not always bilitate or even replace source of supply municipalities, which can then be used negatively impact local jobs. For example, facilities as well as distribution mains, for other infrastructure needs such as the local operator may, well have the op· valves and hydrants. This is basic water streets, storm sewers, etc.; portunity to work in a new, well-designed system infrastructure replacement, and 9. Provides an avenue for the state to as· facility instead of struggling with the old the issue has nationwide attention. sist local communities to cooperate for plant. Or, perhaps, the utility or commu­ In northeast, north-central, northwest funding eligibility, encouraging long nity would decide to retain its people to and west-central parts of Missouri, ground term areawide planning; work on other pressing matters such as dis­ water is very scarce or not available at all. 10. Provides common goals for communi­ tribution or other municipal services, es­ The sources of supply for most of these ties; pecially if additional funds become avail­ areas are either shallow wells or small sur· 11 . Requires less oversight of compliance able as described earlier. It may be human face reservoirs. It is going to become very review monitoring; and nature to fear change in our lives, whether expensive co treat water from these sup­ 12. Provides a good avenue for private· it pertains to our jobs or our utility rates, plies to meet new drinking water stan­ public partnerships. but we must keep an open mind and ob· dards. Thus, the need exists for the devel­ The cons include: jectively evaluate the possibilities in order opment of regi onal water suppli es. 1. Some local control is lost; to serve our communities and ourselves Available sources of water include the 2. Small systems must meet requirements in the best manner. Missouri and Mississippi Rivers, the allu­ of the regional system such as pressure Viability, a popular buzzword in the vium along these rivers, U.S. Army Corps and hydraulic requirements; small water supply field, is a good reason of Engineers reservoirs, or other relatively 3. Rates will be increased, though not as for regionalization of water systems, since large impoundments. In these areas, a re­ high as for improvement of individual many small systems are not viable as stand· liable, good-quality and adequate source systems; alone operations. Some small private utili­ of water, which can be treated at a reason­ 4. Will require additional meetings and ties, for example, are not viable without able cost, is available to supply water to coordination activities to plan and being operated along with a teal estate or service areas the size of several counties. implement regional systems; and, development business; some small munici­ What are the pros and cons of such a 5. The "fear of change"-from the point palities could not operate a water utility " regional water supply? The pros are as fol· of view of customers, and from utility without also providing additional city ser­ lows: officials and employees. vices. Regionalization of the source of 1. Will provide a reliable, adequate, qual· A significant !Cfear of change" as pect of supply can relieve a great deal of the bur­ ity source of water supply; regionalization is impact on local jobs. The den on nonviable utilities. Besides 2. Will make a public water system avail· operator of a water plant eliminated by regionalization of supply, consolidation of able to more people, and encourage regionalization may experience a negative utilities provides the same viability advan· long·range planning; impact. A similar impact could be experi· tage. Consolidation can either be limited 3. The fixed costs of operations are enced by a utility manager or public works co management and/or operation of sev·

e NAWCWATER eral small water systems, or in the case of panies generally have national contacts to water dist ricts, water companies, and con­ private investor owned water systems, it purchase pipe, meters, va lves, etc. T his can t ract operators, large and small, working can be a consolidation of ownership. be a real economic incentive to a commu­ together to provide good water service to It is difficult to talk about nity. their customers. Private-public partner­ regiona li zation without also talking about State and Federal financing could be ships do indeed work. privatization , which could mean a trans­ limited to communities that are willing to We started by talking about the regions fe r of ownership of a publicly-owned util­ be a part of a regional plan where it is of the state where regional water systems ity, or merely utilizing a contractor for day­ deemed necessary. There is indication the are most needed. However, there are sev­ to-day operation and/or management. Federal governmen t is already promoting eral areas in the state where there are small Privatization of public·owned utilities is a this. As an example of the Federal systems, either privately-owned or munici­ topic of discussion all by itself. We will Government's activity in this regard, a pally-owned, that could benefit by regional save that for another time except to say memo was sent to the Drinking Water and management and operation or consoli­ privatization could go together with Ground Water Protection Branch Chiefs, dated management and operation. We regionalization, and also to talk about pri­ Regions 1- 10 ofthe EPA III from James R. believe the same pros and cons apply to va te·public partnerships. One might ask Elder, who was then Director, Office of these situations. There are several large how private-public partnerships will be Groundwater and Drinking Water. It was private companies that have expressed a promoted by regional water systems. The received at the Missouri Public Service desire to either consolidate the ownership answer is privately-owned or investor­ Commission on July 29, 1994. The memo of several small companies or provide the owned utilities are certainly in a position basically promotes the concepts of management and operation under con­ to plan and implement regional water sys­ regionalization and consolidation, as well tract. The management and operation of tems. as looking at the viability of any system to small municipally-owned systems is a real 1£ there is a need to develop a regional be funded. State planning agencies may possibility as well. Here again, we believe plan, la rge privately-owned water compa­ want to think seriously about how they some encouragement by the state will re­ nies have the expertise and the financial might fund some of the transmission main sult in more consolidation, which will in resources to do this planning. With some that might not be feasible with private or turn result in better water quality, reduce incentive, we believe some of these com­ other public fu nding because of the capi­ lost water, and improve service to the cus­ panies would be willing to do these kinds tal cost. tomers. Several smaller utility/operations of studies. Of course, they must have an C larence Cannon Wholesale Water firms have already accompli shed consoli­ opportunit y to recover the cost sometime Commission is an excellent example of a dation work. Consolidation is not always in the future. Most county governments way to develop a regional water supply a smooth road. Taking the action required and small cities do not have the funds or system and how a private company can to improve run-down facilities, implement­ the expertise, at least not without outside operate the system. Elizabeth G rove, Oen­ ing more aggressive operations, the result­ funding and hiring of consultants. T he eral Manager of t he Clarence Cannon ing rate increases, and sometimes even State may have to take the lead in encour­ Wholesale Water Commission, wrote a ci rcumstantial events cause hard feelings aging these regional studies. paper about the development of that re­ and personality cl ashes to emerge. C us­ Large water companies also have the gional system (2) and presented it at the tomer service may suffer if the operator, funds and financial backing to construct AWWA National Conference in New York owner, or manager is not careful to keep regional treatment plants and transmis­ last year. Operating at the Mark Twain the proper perspective under such circu m­ sion mains. Most of them are involved Lake in northeast Missouri, Clarence Can­ stances. Still, our experience shows water with regionalization today by being whole­ non Wholesale Water Commission is an service is much improved, even if more sa le suppliers. They are li kely to be will­ entity comprised of thirteen member-cus­ expensive. ing to do this provided they can earn a tomers at present, all of whom are small Consolidation of operations in most reasonable return on their investment and municipalities or rural water districts. It areas, from a practical standpoint, may have the cooperation of communities or has a 4.5 MOD plant and about 155 miles inherently need to be a public/ private other smaller private water companies to of t ransmission main supplying water in partnership because a municipality may be served. Of course la rge public-owned seven counties. That regional utility was not be legally in a position to contract with water utilities can and do supply water well organized. It will satisfy a large por­ another city or publi c utility to manage wholesale as well if, again, they can recover tion of the water supply needs in north­ and operate the water system. Possibly a money invested in plant and have the co­ east Missouri. The contract operator is large regional water district could be de­ operation of communities and small com­ JMM Operational Services, Inc., from veloped for the purpose of providing this panies served. Denver. t ype of service. However, we believe it Another way private-public partnership There are two private companies in could usually be done quicker and more works is the private companies can pro­ Missouri each of wh ich own and operate easily by a private company, and public­ vide operations and/or management for a water treatment facility and supply wa­ owned utilities need to consider the pos­ public owned regional water systems. ter only as a wholesale supplier. One has sibility. As mentioned earlier about the Another real advantage of utilizing man­ two water districts and the other has two pros and cons of regionalization, it takes agement and operation by a large privately­ cities as customers. There are numerous a lot of cooperation and meetings to plan owned water company is that these com- additional examples of municipalities, (continued on page 19)

SPRING 1995 e = The Financial ~ Challenge of ------' water utilities

by Dr. Ahmed Kaloko Chief Economist Pennsylvania Public Utility Commission

INfRODUCTlQN erated funds for financing large capital the Pennsylvania Infrastructure Invest· The Pennsylvania Public Utility Com­ investments, water utilities are small and ment Agency (PENNVEST), the Office of mission (PUC) recognizes the economic economically disadvantaged by compari­ Consumer Advocate, the State Legislature and financial impacts that the Safe Drink­ son. Water utilities are relatively more and water companies. This year, the Com· i\1g Water Act of 1974 and subsequent capital intensive than the electric and gas mission released for public comment a amendments have on its jurisdictional counterparts. Having inadequate levels of draft Comprehensive Plan for Water In· water utilities. internally generated funds, water utilities dustry Regulation, an action·oriented Current and future requirements of the are forced to finance most of their huge guide for achieving dramatic regulatory Safe Drinking Water Act (SDWA) present capital debts in the marketplace. and ratemaking changes. Continued reo a major challenge to Pennsylvania water In Pennsylvania there are 2,800 commu· search has revealed that many of the same systems and regulators. In response, the nity water systems. The Commission regu· economic and financial problems faced by Commission has undertaken a broad and lates 258 or 9.2% of these systems, which the small water utilities also apply to the proactive initiative to identify the specific include private water utilities and portions larger revenue-producing water utilities. economic and financial issues concerning of 80 municipals. Most of the jurisdic­ This study of the financial challenges water utility regulation and to provide tional water systems are small; about 236 facing water utilities begins with a profi Ie solutions or opportunities for change. or 91.5% of all jurisdictional water sys­ of Pennsylvania water companies, identi· From an economic and financial point tems serve populations of less than fies their capital needs for the next twenty of view, water utilities are vastly different 10,000. years, addresses their financial condition from the electric and natural gas indus­ To address the specific problems and and the major regulatory issues impacting tries. These differences are even more pro­ opportunities of small water companies, water utilities' economic status. The pa· nounced when the economic impact of the the Commission mobilized its bureaus: per concludes by offering prospects for SDWA is taken into account. Throughout the Bureau of Conservation, Economics future planning. this report the differences between the and Energy Planning; Office of Special water industry and the energy utilities will Assistants; the Bureau of Consumer Ser­ PROFILE OF THE be highlighted. vicesj Law Bureau; Safety and Compli· PENNSYLVANIA WATER The electric and natural gas industries ance; Office of Trial Staff; Commission· INDUSTRY face critical issues in the 19905, but water ers Offices, and Bureau of Public Liaison. The U.S. Environmental Protection utilities face far more serious problems. This group developed a cooperative part­ Agency and DER identify the size of com­ Unlike the energy utilities that have avail· nership with the Pennsylvania Depart· munity water systems by population able millions of dollars of internally gen- ment of Environmental Resources (DER), served. For example, a small system is one

e NAWCWATER that serves a po pulation o f less than In Pennsylvania, there is a total of2,800 served), so most regulated water utilities 2,500. The Penn sylvania Public Utility water systems; only 258 or 9.2% of these are small operations. In fact, in every re. Commission dete rmines the size of a wa· are regulated water systems. Many of the spect, all of Pennsylvania's water compa· tel' company by a class system based on non regulated water utilities are managed nies are quite small for utility operations. total annual ope rating revenues, e.g. a by special purpose districts, authorities or For comparison, consider that the largest small water utili ty is a Short Form (SF) nonprofit water companies. water holding company in Pennsylvania utility with a tot al operating revenue of Fifty three or 20.5% of the total juris· has gross assets of $655 million. less than $5,000. Table 1 presents a sum· dictional water utilities in Pennsylvania Table 2 compares aggregate net plant n'lary of water u tHi ties regulated by the operate within municipal authorities. Not investment with gross revenues for the Commission by n umber of customers and counting municipalities, there are approxi. water, gas and electric utilities in Pennsyl· total operating re venues. mately 186 or 72.1 % of the total regulated vania for 1993. It is important to state that, while we water utilities that have annual revenues Table 2 shows that water utilities' total do not necessaril y di sagree with the EPA of less than $750,000. Only 15 or 5.8% annual revenues are $395 million- a small , or DER's definiti on of a small water sys· of all regulated water utilities are t he statistic, considering it is about 19% of the tern, the Commis sion takes into consider· larger, Class A companies. The largest total net plant investment of $2 billion. ation the net plan t investment in addition C lass A water utilities serve approximately The gas utilities' revenues are one billion to the number 0 f customers served and one fifth of the state population (based on dollars or approximately 16% of their net total operating re venues. an estimate of 2.6 persons per customers plant investment. Table 2 also displays

TABLE I Classification of Water Systems by customers & Revenues

C LASS CUSTOMERS REVENUES

Class A 894,750 Over $750,000

Class B (New ) 62,905 $100,000-$750,000

Class C 14,782 $5,000-$50,000

S hort Fo rm (B) 620 Under $5,000

Note: Municipali ties are nol included in Tobie 1 data.

TABLE 2 Pennsylvania Utility Net Plant Investment vs Revenues (1993)

INDUSTRY NET PLANT REVENUES

Electric $22 billion $ 1 1 billion

Natural Gas $3 billion $2 billion

Water $2 billion I $395 millio n

Total $27 billion $ 13 billion

Sou rce: Pennsylvania Public Utility Commission 1993 data Notes: (1 J Best estimate dala jrounded off) based on Closs A, Band C companies' reported fjgures. Municipalities not included.

(continued on next page)

SPRING 1995 Challenge, continued In a related action affecting water utili­ for the seven major Pennsylvania electric ties' capital needs, the Rural Development utilities was approximately $22 billion and electric utility revenues. The electric util­ Administration (RDA) has recently issued $1 1 billion, respectively. The projected ity revenues are $11 billion or 50% of a natio nal policy stating that loan and O&M expense for the electric industry is their total net plant investment. The elec­ grant funding only be made available to estimated at $250 million. This data tric utili ties revenues are nearly 28 times viable water systems. RDA calls upon the shows that water utilities face a tremen­ the revenues of water utilities. State Farmers Home Administration to dous financial challenge in the 1990s and Table 3 presents a percentage break­ coordinate viability assessments and fund­ beyond. down of fixed cost ratios for the water, ing decisions with State officials to deter­ The Pennsylvania Public Utili ty Com­ natural gas and electric utilities in Penn­ mine that the system "has the financial, mission has greatly assisted the water in­ sylvania. Fixed cost ratios provide a strong technica l, and managerial capability nec­ dustry, but morc needs to be done. Regu· measure of economic efficiency. Fixed cost essary to consistently comply with the lators need to keep in mind that water ratios show how many revenue dollars SDWA or Clean Water Act and pertinent utilities compete with the electric and gas support fixed costs required to deliver one State requirements."l utilities fot capital. When it comes to bor­ unit of product, i.e., a gallon of water, one Additionally, the water utility infra­ rowing money, the financial industry pre· md of gas or one kwh of electricity. structure in Pennsylvania is deteriorat· fers to lend money to the most profitable Table 3 shows that water utilities spend ing- not necessarily a product of age, but, industry. C urrently, the electri c and gas more dollars to deliver one gallo n of wa­ nevertheless, costs of replacing t ransmis­ industries are perceived to be more prof· ter than the gas or electric companies sion and distribution lines are growing itable. It is, therefore, important for regu­ spend to produce one thousand cubic feet daily. One st udy indicates that between lators to view water utilities the way Wall of gas or one kilowatt hour of electricity. 70% and 80% of total infrastructure ex· Street views them. penses will go into water distribution sys­ CAPITAL NEEDS tems at an estim ated cosr(1980s) of$1 1 0 THE FINANCIAL CONDITION FOR 1990-2010 million. 2 OF PENNSYLVANIA WATER There is significant need for capital in­ The current aggregate cost of SDWA UTILITIES vestment by water utilities in order to compliance in Pennsylvania, including re­ There are six important factors that bring about full compliance with the placement of infrastructure, is $1.8 bil­ should be examined when reviewing the SDWA, and water utility standards and li on. As stated previously, water utilities fi nancial stat us of water utilities: enforcement are getting more complicated are small, with a total net plant investment 1. Internally Generated Funds and expensive each year. Sources of sup­ in 1993 of$2 billion as compared to $22 2. Cash Flow From Depreciation ply are under greater scrutiny, and filtra­ billion for the electric utilit y industry. Rates tion and open reservoir cover require­ Water utility operation and maintenance 3. Ratio of Dividend Payout to Net ments are only two examples of capital expenses for the next ten years is estimated Income needs which apply to surface sources only. at $519 mi ll io n; their 1993 combined an­ 4. Capital Expenditures and There are approxi mately 83 maximum nual revenues were only $395 million. Relationship to Revenues and contaminant levels o r MCLs that water In contrast to the water utilities' capi­ Depreciation utilities must monitor and test fo r, and the tal needs, it has been estimated that the 5. Pre-Tax Interest Cover age numbers of MCLs will grow over time. aggregate cost of the electric industry's 6. Realized Return on Common Water utilities have to comply with DER's compliance with the federal Clean Air Act Equity (ROE) and include engineering specifications for Amendments of 1990 is $2 billion. The the construction of treatment facilities. 1993 total annual net plant and revenue

TABLE 3 Percentage Breakdown of Fixed Cost RatiOS for pennsylvania Utilities

INDUSTRY PERCENTAGE

Electric 28_0%

Natura l Gas 13-4%

Water 58.5 %

Source: Industry records

G NAWCWATER In t ernally Generated Funds continue to rely on external financing in jor utilities' annual depreciation rates for Internally generated funds are defined order to meet the requirements of the 1993 shows that water utilities again fa ll as retained earnings, depreciation, de­ SDWA. With the exception of West Penn short of the regulatory t reatment of the fe rred income taxes and other sources Power, electric utilities in Pennsylvania arc electric companies. In 1993 t he rate of such as operating cash flow. Records show able to meet the requirements of the fed­ depreciation fo r water utilities was 2.46%, that for 1989 through 1992, water utili­ eral Clean Air Act Amendments (CAAA) compared to 84.90% for electricity. A sig­ ties have generated less cash internally with internally generated funds. nificant generator of cash flow for the elec­ than the electric utilities. Table 4 provides tric utilities, depreciatio n rates for water t he aggregate financial data for the major Cash Flow From utilities have been a disincentive to inves­ Pennsylvan ia electric, gas, and water com­ Depreciation Rates tors. Depreciatio n terms have spanned panies for 1989 to 1993. Another important distinguishing fi­ lo nger periods for water utilities. Table 5 Without regulatory changes, water utili­ nancial factor for comparing Pennsylvania presents aggregated financial d ata con­ ties will continue to experience difficulty water utilities and energy utilities is the ce rning the depreciation dollars received in generating cash from internal sou rces. ability to generate cash through deprecia· by the major water and energy companies For t he next ten years, water utilities will tion rates. A comparative an alysis of ma- in Pennsylvania.

TABLE 4 Internally Generated Funds for ElectriC, Gas and Water Industries (In cash and cash equivalents: $ Thousands)

1989 1990 1991 1992 1993

Electric $171,770 $93,946 $143,166 $90,878 $69,389

Gas 89,400 205,500 260,200 206,900 196,400

Water 75,621 65,586 92,145 83,446 81,402

Total $336,791 $365,032 $495,511 $381,224 $347, 191

Source: Industry records; all waler data from Nationa l Association of Waler Companies' records.

TABLE 5 Cash Flow from Depreciation Rates for ElectriC, Gas and Water Industries ($ Thousands)

1989 1990 1991 1992 1993

Erectric $634,537 $910,106 $997,654 $978,173 $1,041,462

Gas 80,996 85,483 1 10,256 1 16,794 105,030

Water 18,075 ' 24,501 27,716 31,121 35,857

Total $733,608 $1 ,020 ,090 $1,135,626 $1,126,088 $1 , 182,349

Source: Pa. Public Utility Commission; water data includes Class A and B utili tie s only. Note: ' National Association of Waler Companies' records.

(continued on next page)

SPRING 1995 _ p

Challenge, continu.ed TABLE 6 Ratio of Dividend payout to Net Incom e for Electric, Gas and water Industries (lib)

1989 1990 1991 1992 1993

Electric 78.50% 93.40% 70.40% 75 .90% 80.00%

Gas 69.60% 129.70% 79.30% 80 .00% 75.80%

Wate r 68.28% 107.92% 76.72% 76 .28% 72.72%

Average 72.13% 110.34% 75.47% 77 .39% 76. 17%

Source: Industry records; water doto from Notional Association of Water Companies' records.

TABLE 7 Capital Expendlturesl for Electric, Gas and water Industries ($ Millions)

1989 1990 1991 1992 1993

Electric $26,048 $31,244 $26,700 $31 ,503 $32,589

Gas 3 ,045 3,248 3,477 3 ,549 3 ,836

Water N/A 1,050 1,501 ,609 1,780

Total N/A $35,542 $31,678 $36 ,661 $38,205

Source: Po . Public Utility Commi ssion; water data includes Closs A and B util ities only. Notes: 'Does not include leased capital expenditures . N/ A Not Available

Dividend Payout Ratios industry asking for frequent and signifi­ water utility stockholders arc getting as The ability of a company to payout high cant rate increases to pay for construction high a return as the stockholders of local d ividends is very important to stockhold­ projects required by the SDWA and to distrib utian companies (LOes) and clec- ers. During the 1970s and 1980s, when improve infrastructure_ t ric utiliti es. This analysis raises a very the electric industry was involved in the A comparative analysis of d ivid end fu nda mental concern: Why arc investors construction of generating units, many payout to net income for 1989 to 1993 was less likely to lend capital to water utilities? utilities experienced difficulty paying out conducted for the energy and water utili­ O ur re sponse to this is that water utilities dividends to stockholders. State Public ties_ Table 6 presents aggregate financial are pc rceived to be more rrsky than other Utility Commissions were uncler pressure data on the dividend payout ratios as a fixed u tilities because of the SDWA and to approve frequent and significant rate percent for the major electric, gas and their Iow rate of depreciation. requests to assist utili ties in payments of water industries in Pennsylvania_ It is important to restate that water utili- d ividends. In the 1990s, we see the water On the basis of dividend payout ratios, ties ar e constantly competing for capital

fat NAWCWATER with the natural gas and electric utilities. diture increased 42.9% to about $1.5 bil­ Table 9 provides the ratio of capital ex­ The dividend payout ratios apparently are lion, then increased annually by 7.2% and penditures to revenues for the major elec­ not the reason why investors are keeping 10.6% in 1992 and 1993, respectively. tric, gas and water companies. at Harms length" from the water utilities. By comparison, the electric and gas In Table 9, we see that for 1990 through utilities had higher capital expenditures 1993, water utilities have been spending capItal ExpendItures than water utilities over the same period three to four times their annual operating As discussed earlier in this study, wa ~ of time. However, an exami nation of data revenues on capital expenditures. Com­ ter utilities are small when compared to for revenues and ratios of capital expen ~ pared to the electric and gas industries, the electric utilities. The total net plant ditures to revenue illuminates a more ac­ water utilities have consistently spent in­ investment is $2 billion for water utilities curate picture of the financial condition creasing amounts on capital expenditures, and $22 billion for electric utilities; yet, of the utilities. Table 8 presents aggregate whereas gas and electric utilities' capital water utilities are spending a substantial fina ncial data for annual operating rev­ costs rise and fall. The level of percent­ amount of capital relative to their small enues for 1989-1992 for the major elec­ ages in Table 9 high li ghts how dependent size. eric, gas and water utilities. water utilities are on external funds for Table 7 gives the aggregated financial In Table 8, revenues for 1990 through constructing capital projects mandated by data on capital expenditures for the ma~ 1993 for the electric companies consis­ regulators. The data also emphasizes the jor electric, gas and water compan ies . tently exceed water utility revenues by at intense competitive pressure on all the Table 7 shows that in 1990, capital ex­ least twenty-nine times. Gas company rev­ major utilities to attract outside investors. penditures for water companies were enues exceed water revenues consistently As we are concerned about availabili ty about $1. 1 billion. In 1991, capital expen- over the same period by at least six times. of internal sources of fund ing for major

TABLE 8 Annual operating Revenues for ElectriC, Gas and water Utilities ($ MIllions)

1989 1990 1991 1992 1993

Electric $9,279 $9,670 $10,511 $10,719 $10,661

Gas 2 , 233 2,098 2,725 2 ,850 2,389

Water N/A 305 360 363 388

Total N/ A $12,073 $13,596 $13,932 $13,438

Source: Po . Public Utility Commission; waler doto includes Closs A and B utilities only.

TABLE 9 Ratio of capital Expenditures to Revenues for ElectriC, Gas and water Utilities (%)

1989 1990 1991 1992 1993

Electric 28 1% 323% 254% 294% 306%

Gas 136% 155% 128% 125% 161 %

Water N/ A 344 % 417% 433% 459%

(continued on next page)

SPRI NG 1995 _ Challenge, continued lated counterparts. As a consequence, requirement s of the SDWA. If an indus- capital projects for utilities, we examined water utilities are captives of the external try is going to rely on long, term debt, it the actual aggregate data for depreciation financial marketplace fo r locating capital is importan t for that industry to have and determined the ratio of depreciarion investment dollars. good credit ratings. A primary measure to capital expenses for the major electric, of long-term bond performance is pre-tax gas and water companies forl989 to 1993. Pre-Tax Interest Coverage interest cove rage. Pre· tax interest coverage In Table l a, the data reaffirms that be­ To fully understand the financial sta· is an important iss ue of regulators because tween 1990 and 1993, water utilities have tus of water utilities, it is important to it has a majo r effect on customer rates for consistently had less internal dollars avail­ know that long-term debt will be the rn a· many yea rs into the future. able for capital projects than their regu- jar source of capital needed to meet the An exam ination of the pre-tax interest

TABLE 10 Ratio of Depreciation to capital Expenses for Electric, Natural Gas and water Utilities (%)

1989 1990 1991 1992 1993

Electric 2.44% 2.91% 3.74% 3.10% 3 . 19%

Gas 2.66% 2.63% 3.17% 3.29% 2.73%

Water N/A 2.33% 1.85% 1.93% 2.01%

TABLE II Pre-Tax Interest coverage for Electric, Natural Gas and water Utilities

1989 1990 1991 1992 1993

Electric 2.8 2 .2 2.8 2.9 3.3

Gas N/A N/A N/A N/A N/A

Water 2.3 2.2 2.2 2.0 2.4

Source: I ndustry records; all water data from National Association of Water Companies' records. Note: N/A Not Available.

TABLE 12 Realized Return on Common Equity I for Electric, Natural Gas and water Utilities (%)

1989 1990 1991 1992 1993

Electric 13.20% 9.00% 12 .30% 11.60% 12.70%

Gas 11.20% 7 . 10% 9 .40% 11.50% 10.80%

Water 12.20% 9.62% 10.14% 9.78 % 10.05%

Source: Industry records; 011 woter data from National Association of Water Companies' records.

CD NAWCWATER •

coverage for Pennsylvania utilities shows cant and interrelated events have occurred The second significant event that oc­ that the water utilities lag behind the elec­ which had serious effects on the way wa­ curred in the last ten years was the pas­ tric utilities. Records for the past five years ter utilities provide service to their cus­ sage of the Pennsylvania Safe Drinking show that water utilities have consistently tomers. The first of these events was the Water Act in 1986, which gave the Penn­ had lower coverages, with the exception passage of the federal Safe Drinking Wa­ sylvania Department of Environmental of 1990 when water and electric company ter Act of 1974. The second of these Resources (DER) primacy fo r the 1986 pre-tax interest rates tied at 2.2 percent. events occurred on June 19,1986, when federal State Drinking Water Act In 1993, the pre-tax interest coverages for President Reagan signed into law Amend­ (Amended), The term "primacy" means electric and water were 3.3% and 2.4%, ments to the Safe Drinking Water Act of that DER has the responsibility and legal respectively. Although rates rose in 199J 1974. These amendments made signifi­ obligations to implement and enforce all over 1992 rates for both utilities, the com­ cant changes to the way public water sup­ provisions of the federal SDWA. parative difference in rates still show that pliers treat and deliver water to consum­ Pennsylvania DER has implemented water utilities will continue to find it dif­ ers. The following is a chronological several programs specific to the State Safe ficult to attract new investors. Currently, summary of the main provisions and new Drinking Water Act. For example, permits investors are indifferent as to whether they rules concerning the Safe Drinking Wa­ are reviewed each time a public water sup­ should invest in water or energy industries ter Act as amended: plier wants to build a water system or to because theif pre-tax interest coverages are • In 1986, the EPA was given permission make changes to an existing water supply close. Table 11 provides actual aggregated to establish 83 new drinking water stan­ source. DER has established many design financial data for pre-tax interest coverage danis within three years, standards that public water suppliers must for the major electric and water utilities • Since water utilities are not able to dem­ meet in order to upgrade a plant, DER also for the period 1989 through 1993. onstrate historically that certain chemi­ requires public water suppliers to put in cals are already monitored or regulated, place emergency response plans, operation Realized Return On Congress added a special provision in and maintenance plans and, in some cases, Common Equity (ROE) 1986 which requires water utilities to cross connection control plans. In addi­ An examination of realized return on monitor unregulated contaminants, tion to this, DER requires public water common equi\y (ROE) from 1989 through Monitoring of unregulated maximum suppliers to update their distribution sys­ 1993 shows that the electric utilities contaminant levels (MCLs) will begin tem maps every year. These maps must be earned higher annual returns than the gas at the end of 1995. sent to DER along with an annual water and water utilities for four outof five years In 1987, eight new drinking water stan­ supply report, The objective of the report (see Table 12 below). In that five-year pe­ dards were established, These standards is to provide facts and data on operating riod, the electric utilities' ROE ranged regulate volatile organic chemicals conditions for the preceding year. between 9.0% and 13,2%; natural gas (VOCs). DER has very stringent regulations for utilities earned between 7.1 % and 11.5%. • In June 1988, 40 new drinking water implementing the SDWA. For example, During the same period, water utilities standards were established by EPA. public water su ppliers are required to no­ earned between 9.6% and 12.2%, exceed­ In June 1989, 30 new drinking water tify DER within one hour if the supplier ing natural gas utilities' return in 1989, standards were established by EPA. A fails to meet the limits of their regulations, 1990 and 1991 . Nevertheless, water utili­ minimum of 25 new MCLs are to be Public water suppliers are to report to DER ties are at a disadvantage when competing established every three years, if spills or contaminations occur in any for capital with the other utilities as noted • On July 1, 1992, EPA established stan­ public system, in previous discussions, Investors are in· dards for 37 inorganic and synthetic The economic impact of t he SDWA is terested in companies that can provide organic chemicals, Formal monitoring greatly effecting the financial condition of them with the highest returns on their of these chemicals began on January 1, all Pennsylvania water utilities, In addition investments, 1993. to the regulatory problems, water utilities Historical data shows that those water • EPA established secondary MCLs for are suffering disparate financial invest­ utilities that have invested significantly in aluminum and silver. ment opportunity, as compared to the plan t and facilities have general ly • On July 17, 1992, EPA prepared rules electric and natural gas utilities, Other underperformed water utilities that have for 23 VOCs, pesticides and organic problems of water utilities include econo­ spent little or no money on improvements chemicals and monitoring requirements mies of scale, low rates, lack of appropri­ to their systems. The irony is that all wa­ for these were implemented January 1, ate water technologies, lack of well-trained ter utilities will face the difficult require­ 1993. operators, droughts and other environ­ ments of the SDWA and, if not this year, • In 1994, the EPA proposed regulation mental impacts on adequate water supply. will find costly replacement and repair of of disinfection by-products, EPA is in Regulators should expect frequent and sig­ transmission and distribution systems the early stages of this work. nificant rate requests from water utilities necessary in the following years, • CURRENT HIGH PRIORITY ISSUES: because their rate base and operating costs 1) Surface Water Filtration Criteria: are growing faster than consumption over r-iE SDWA AND 2) Lead Ban and Copper Rule; 3) Radon the next 15 years. RfGULATORY/SSUES Rule; 4) Disinfection By-Products, and In the last ten years, two very signifi- 5) Groundwater Protection. (continued on next page)

SPRING [995 e Challenge, continued • Encou rage and foster the development In order to address the financial chal· of reg ional ties. lenges of water utilities due to the direct PROSPECTS OF THE • Infuse capital into water utilities. impacts of the SDWA, the following rec­ INDUSTRY • Incorporate quali ty of service standards ommendations are proposed: Where is the water industry going to within the ratemaking process. • Separate SDWA costs from other costs get the capital to meet the requirements • Pl an fo r and review the pro fessional in rate cases. of the SDWA and DER? Will the indus­ management of companies . • Establish a joint Task Force to include try be able to generate adequate interest • Consider all sources of supply in rate the Commiss ion staff and staff at the by investors in order to attract new capi­ cases, especially the possibility of a util­ State Department of Environmental Re­ tal for meeting mandated requirements? ity intercon nection to a larger supply sources; the two reg ulatory bo dies In review of our previous discussions and/or another utility. should pl an and exerci se an Info-Share of the financial challenges of water utili­ • Increase fu nding avail able through process with all routine and special ties as compared to the electric industry, PENN Vest loans. regulations. Table 12 below summarizes the differ­ • Reorganization. • The Commiss ion should develop a spe· ences betwee n the water and electric utili­ • Simplify rate filings for the smallest cial surcharge for construction projects ties in Pennsylvania. companies . that are directly attributable to the • Develop alternative financing. SDWA _ Proposed Solutions to • Partici pate and conduct educational ses­ • Consider shorter depreciation period for Water Utlllty sions. water utili ty investments in plant. • Financial Problems • Require DER to testify in rate cases. The proposed solutions to the financial • Eliminate u nnecessary informatio n, ego 'Memorandum from James R. Elder, U.S. EPA Di· problems of Pennsylvania water utilities duplication of forms, irrelevant infor­ reCfor of Office of Ground Water and Drinking apply to both regulatory oversight and mation in case proceedings , etc. Water to Regiona l Branch Chiefs, July 18, 1994. ratemaking treatment. Fo llowing are the • Work toward increas ing gross revenue l"Wacer Distribution System Performance Assess· Commiss ion's recommended solutions for limitati ons. ment, ~ Presentation to Pa. PUC given August 1, 1994 , by Dr. Arun De b, Vice President, Roy addressing the economic and financial • Increase utilities' access to "Options" Weston, Inc. Paper to be published by American problems of its jurisdictional water com­ filin gs. Water Works Associatio ll . panies: • Limit hearings to one round.

TABLE 12 Summary comparison of PA water and ElectriC utility Financial Status

Item Water Electric

Internally Generated Funds Inadequate Adequate

Cash Flow fro m Deprecia ti on Rates Small Large

Ratio of Dividend-Payout to Net Income Adequate Adequate

Ratio of Capital Ex p e nditures to Revenues Very Large Large

Ratio of Depreciation to Capital Ex penditures Small Large

Pre-tax Interest Coverage Adequate Adequate

Realized Re turn on Common Equity Adequate Adequate

e NAWCWATER 'Ihankj)ou, We!

by Michael Baker

Thank you, NAWC' Though my thank Water Works become a much morc sophis­ W ashington and Al bany on many occasions, you is tempered with a bit of remorse for ticated organization. Today we can reflect From my numerous trips to PSC offices no longer being able to be included in the on our work and be proud to claim we did in Albany and New Yo rk, I met m any ranks of its membership because of the become a better company that had enough people and built relationships with PSC recent sale of my company. I feel obliged sophistication to see that our future was staff and other NAWC members_ This to express my appreciation because my de­ best served by trying to get out of the wa­ exposure built both knowledge and con­ parture can be directly related to the as­ ter business and claim some fi n ancial re­ fidence in my management skill s, In the sociatio n doing its job. wards for our effort. end the realization that a small company For someone to understand the va lue Membership alone in NAWC was not like mine could surv ive and be healthy of my membership in NAWC, a brief de­ a pan acea in itself because we had to be­ directly resulted from my association with scription of my company is necessary. -Lake come involved in t he organization to gain NAWC. The added bonus was that I could View Park Water Works was built in the t he benefits_ Our first exposure to other control our destiny and sell my company early 40's utilizing a surface water supply members was in response to Don 's inv i­ for a fa i r pri ce. and constructed with water mains pur­ tation to corne to a joint meeting spon­ There is some irony in that the last chased used from the 1939 World's Fair. sored by the New York Public Service NAWC/PSC project I worked on was a The ori ginal development was for about Commission on coping with the SDWA. study of the viability of the small water sixty homes, which grew to the current This meeting resulted in many other meet­ company in the current reg ulatory envi­ base of one hundred over the next ten ings which finally produced an important ronment. One conclusion was that some years_ In 1976, I purchased the system paper, and- more importantly- intro­ companies (perhaps like mine) are not vi­ which coincided with the rapid deteriora­ duced me to the fruits of active NAWC able and would be better off if they were tion of the pumping and distribution sys­ membership. taken over by a town or larger company. tem. All 1 need to say about the next ten Networking seems to be an oftcn over­ In the end my company was via ble because years is that they were very frustrating and used word, but my involvement with I sold it for a fair price. Selling your busi­ unprofitable. NAWC resulted in valuable associations ness is a good demonstration of viability In 1986, with the urging of Don Glass, th at educated and matured me in the wa­ but, fo r me, if it were not for NAWC, the the NAWC New York Small Company ter industry. My first meetings lead to outcome could have been a lot differen t. Chairman, I broke from custom and spent other projects that were spearheaded by Again, thanks NAWC, yo u're a fine or­ a few extra dollars to join NAWC. It was Don G lass' replacemen t, David Ash. I ganization, o ne that any size company the best decision 1 ever made for the com­ became David 's unofficial "Small Com­ would benefit from. Though I am depart­ pany because, as it turned out, the jolting pany Assistant" and became a committed ing, perhaps my success will encourage effect of the Safe Drinking Water Act was member of NAWC which required many another "little company" to join and reap about to demand that Lake View Park extra hours but allowed mc to travel to the benefits I leave behind_ •

SPRING 1995 Executive Director's Report by James B. Groff

Let me recall the ways-we've served our Tompkins, to investigate potential utility membership lately! liability associated with such a partner­ There is little question that since my last ship. article in this esteemed magazine, a sig­ As is apparent, activities such as those nificant amount of my time, and that of described above don't just happen_ There staff, was devoted to the first event com­ is a great deal of staff and member time memorating the 100th anniversary of your devoted to arranging for facilities, prepar­ Association. Complicating the effort to ing reference material, obtaining and co­ insure that the evening of February 28 ordinating speakers, etc., etc. In this re­ would be a success, was the Association's gard, there are many to be congratulated, annual "Fly-In" and meetings of the for it was their hard work and commitment NARUC and the NAWC's Nominating that ensured the success of each of the Committee, Executive Committee and on the Nominating Committee's sug­ above events. In this regard, I want to Boa rd of Directors, all of which demanded gested candidates for General Vice Presi­ publicly acknowledge the contributions of a certain amount of preparation. dent and the Member-at-Large vacancy on each member of the staff to the success of Regardless, by all accounts, all events, the Board of Directors. As well as becom­ the aforementioned and thank them for to the great relief of yo urs truly, were ing apprised of the current status of such all that they accomplished. widely acclaimed successes. In all, over items as the Association's finances, mem­ The success of the Centennial reception 200 attended the black-tie optional recep­ bership, regulatory relations efforts and and dinner was in part due to the setting tion and dinner, including 24 Members of government affairs initiatives, the Execu­ in which it was held, the historic and ex­ Congress, 47 Commissioners' and 67 of tive Committee approved pursuit of lan­ quisite Library of Congress, which is par­ our members, as well as spoll ses and other guage that would provide exclusion from ticularly beautiful at night_ For the use of guests. Forty of the Association's member tort claims for utilities that comply with this facility, the Association is deeply in­ companies sent 52 of their finest on over federal and state water quality regulations. debted to Wilkes Coleman, who prevailed 160 appointments with Senators and At Jim Morris' invitation, Rep. David upon the former Minority Leader in the members of the House of Representatives Mclntosh (R-IN), Chairman, House Sub­ House of Representatives, Congressman to not only improve their representatives' committee on National Growth, Natural Bob Michel, to sponsor our commemora­ general knowledge of the investor-owned Resour~es and Regulato ry Affairs, ad­ tion. We not o nly appreciate the industry, but to also make them aware of dressed the Board of Directors during Congressman's spo nsorship, we also a few of the industry's specific concerns. their luncheon meeting the fo llowing day, thank him for taking time from a very The NAWC's Third Vice President, and discussed his plans for h is committee busy schedule to join us and speak to Floyd Wicks, in his capacity as the Chair and some of the initiatives of the 104th those in attendance_ In addition, we are of the Association's Committee on Chap­ Congress, touching upon the Republican's deeply indebted to the Librarian of the ters, hosted a breakfast fo r Chairpersons ClCont ract for America." During its busi­ Library of Congress, Dr. James Billington, and members of the Executive Committee ness meeting, the Board heard represen­ and his superb staff, who granted us use on the morning of February 28. All agreed tatives from the U.S. Chamber and Mor­ of the building and guided our work, and that the quality of the exchange of infor­ gan, Lewis and Bockius speak on such to the firm of Hayes, Domenici and Nunn, mation suggested that such meetings issues as unfu nded mandates, regulatory who so ably assisted all of our efforts. should occur on a regular basis. First Vice reform, product liability and privatization. Whil e another event of the magnitude President Dungan strongly concurs and is Subsequently, they heard Tom Curtis of and nature of the Centennial reception setting aside time for additional dialogue the National Governors' Association and dinner is hopefully another one hun­ of this nature to take place during the present an overview of the SDWA reau· dred years away, the impressive attendance Association's Annual Conference in New thorization efforts to d ate and Diane by Members of Congress, NARUC', lead· Orleans, O ctober 29 to November 2, VanDe Hei and Tom Schaeffer of the As­ ership and Commissioners from around 1995. sociation of Metropolitan Water Agencies, the country, attests to the growing recog­ During a somewhat abbreviated Execu­ d iscuss the "Partnership for Safe Water" nition of the Association and its members. tive Committee meeting, President Jack proposal. Concern regarding the latter Certainly, we all share in the responsibil· McGregor led the deliberations on a host prompted the establishment of an Ad-Hoc ity to ensure that this very positive trend of subjects, not the least of which focused committee, chaired by Past President Rich continues into the future. e NAWCWATER , egulatory Relations Report

by Sharon L. Gascon

Late February brought not only strong NARUC WINTER MEETING winds to the Washington area, but also a HIGHLIGHTS swirl of activity for the Association. Feb­ With assistance from the National ruary 28 marked the evening NAWC held Regulatory Research Institute, NARUC its anniversary celebration at the Library regulators are meeting in April to address of Congress in Washington, DC. The the questions of what qualities commis­ event was specifically timed to coincide sioners should have in the year 2000. Spe­ with the NARUC Winter Meetings and cific recommendations will follow and offered the maximum opportunity for may include guidelines that address expe­ regulators from across the country to par­ rience and other qualifications that should ticipate in NAWC's celebration of 100 be taken into consideration prior ro PUC yea rs of achievement. NAWC was honored appointment. by the attendance of nearly 100 public util· Several months ago, Jim Gallagher, of ity regulators, including NARUC's Presi­ seeking to improve the quality and effec­ Southern California Water Co., addressed dent, Bob Anderson, who accepted an tiveness of public regulation in America. the subject of financing approval proce­ award on behalf of the organization. Quite fittingly their motto is 'Dedicated dures with the NARUC Staff Committee NAWC's President, Jack McGregor, pre­ to Public Service.' The Association, and on Water and the Finance and se nted the award to NARUC for their ac­ particularly the NARUC Committee and Technology's Subgroup on Finance. As a complishments in public service stating, Staff Committee on Water, has played an result, the Finance subgroup undertook a "For over 1 07 years the National Associa­ important role in issues that have a sig­ USu rvey of Commissioner Practices Re­ tion of Regulatory Utility Commissioners nificant impact on the industry and the garding Approval of Utility Financing." has untiringly served consumer interest by ratepayers it serves." (continued on next page)

SPRING 1995 s Regulatory Relations, continued evaluate executive performances or to de­ a few, although an increasing number, of cide if particular compensation packages instances where a Compensation Commit­ The survey found that no problem ex~ are reasonable. The study, which began tee is directly involved in the development isted in the majority of states responding in 1993, was designed to obtain data and of a company's executive compensation with approvals normally processed in 30 gain an understanding of the utilities' programs. days or less. Some state specific problems methodologies in setting executive com­ With regard to incentive plans, the con­ were found to exist, however. Commis­ pensation programs of the chief executive sultant found that they can be improved sions responding indicated that when there officer and the next four most highly com­ by more directly linking an appropriate is a potential problem they are willing to pensated officers from 1990 through 1993 degree of risk to reward, so that the plan work with the company to resolve it. at the 12 utilities. becomes more of an effort to motivate spe­ A copy of the survey can be obtained The report cautions that just because cific actions and less of a guarantee. The by contacting NAWC at 202/833-8383. an executive's or officer's package falls goal should be to increase payouts that are NARUC's Staff Committee on Water within a utility industry range of "aver­ more a function of credible executive ac­ is presently preparing a White Paper dis­ age" or "median" compensation levels tions than fortuitous circumstances. The cussing Single Tariff Pricing. John Will­ does not mean that it is justified. In fact, consultant determined that incentive iams with the Florida Public Service Com­ the study concludes that the basis for as­ plans should demonstrate a clear linkage mission, is the lead preparer. The paper sessing the reasonableness of total com­ with the strategic goals and objectives of should be available in July. pensation must go beyond simple com­ the company in serving all stakeholders. NARUC's Public Information Commit­ parative analysis and should include a host The study focused on the compensation tee working with the U.S. Environmental of other factors, including: packages at The Brooklyn Union Gas Protection Agency, has published a bro­ Company, Central Hudson & Electric • an examination of the link between ex­ chure for ratepayers titled "Safe Drinking Corporation, Citizens Utilities Company, ecutive pay and company performance Water-Health/Safety Requirements and Consolidated Edison of New York, Inc., in serving customers and other stake­ Resulting Costs." The brochure will be Long Island Lighting Company, National holders; distributed to commissioners across the Fuel Gas Distribution Corporation, New • consideration of the different sources of country to respond to ratepayers' ques­ York State Electric and Gas Corporation, compensation paid or earned (e.g., base tions regarding the SDWA and increasing New York Telephone Compa~y (NYNEX), salary, annual incentive, long term in­ cost of water service. For a copy of the bro­ Niagara Mohawk Power Corporation, Or­ centive, stock-based compensation, chure, contact NAWC. ange and Rockland, Inc., Rochester Gas supplemental benefits and perquisites, During the winter meetings of and Electric Corporation, and Rochester . and other compensation); and NARUC, the organization reaffirmed its Telephone Corporation. • any other special circumstances influ­ commitment to the repeal of the tax on A copy of Report: Executive Compensa­ encing total compensation. Contributions in Aid of Construction and tion Study of New York State Utilities can approved by resolution, the text of which The consultant determined that its re­ be obtained from: Files Offices, New York can be found following this article. view of actual compensation levels should State Public Service Commission, 3 Em­ serve as a starting point for further analy­ pire State Plaza, Albany, New York, 12223. HIGHLIGHTS FROM sis, but is insufficient, by itself, to either • Water Rate Surcharge COMMISSIONS AROUND permit a thorough understanding of the T HE COUNTRY reasons for the levels or to constitute a The Arizona Corporation Commission • Study on U tility Executive complete evaluation of executive compen­ and the Arizona State Legislature have Compensation Completed sation practices. The consultant's study disagreed on how to address problems The New York State Public Service reveals that there is a wide variation encountered by water utilities with mount­ Commission announced that it has re­ among the New York State utilities in the ing operating costs. The commission has ceived a consultant's study of executive proportion of fixed and variable aspects objected to a proposed law that would re­ compensation at the t 2 largest stock­ of compensation and in the year-to-year quire commissions to approve a water rate holder-owned utilities in New York State. changes in variable elements as a percent surcharge for any costs outside the con­ The Report on Executive Compensation sup­ of a compensation package. trol of water utilities such as electric power ports the Commission's position that such The report, over 200 pages long, con­ or gas costs, as well as purchased water compensation programs should be based tains individual analyses of each of the 12 and tax assessments. Commission Chair­ on incentives designed to improve both utilities' compensation programs, cites man Jennings felt that an automatic cost executive and company performance in their strengths and makes recommenda­ recovery proposal would tilt the playing , I serving ratepayers. tions for improvement. In general, the field significantly in favor of water com­ While the Commission took no action consultant found that utility Board of Di­ panies over their customers. In addition, with regard to the study, it indicated that rectors' Compensation Committees are he felt it might require additional regula­ information from the study may be used not as familiar, in all instances, with the tions to make sure that rates would go in individual utility rate cases to address specific approaches used to determine all down if surcharge costs should fall. Com­ executive compensation packages. elements of compensation as would be missioner Jennings also expressed his feel­ The purpose of the study was not to ideally desirable. Further, there are only ing that the bill was an unlawful intru-

G NAWG: WATER sion on the ratemaking powers of the increase as a condition for allowing com­ tax return; and commission granted in the state consti­ petition in the state wide toll market, WHEREAS, The Tax Reform Actof1986 tution. earned the commission a liD." T URN be­ treats C IAC funds as income to the utili­ lieves that the two cases signal a danger­ ties; and • W isconsin PSC Accepts Jurisdiction ous precedent for the California Over Compla int Against M llwaukee commission's pending electric industry WHEREAS, Water and sewer utilities are Metropolitan Sewerage restructuring. severely impacted by the increased taxa­ tion due to the large amounts of C IAC The Wisconsin Public Service Commis­ • Environmental Externalities sion determined that it would accept ju­ funds they receive; and risdiction over the latest complaint filed The Illinois Commerce Commission against the Milwaukee Metropolitan Sew­ has reaffirmed earlier findings that the WHEREAS, The result of the Tax Reform erage District (MMSD) by a number of state's least cost planning laws require con­ Act of 1986 was to unfairly increase the surrounding communities. The complaint sideration of the adverse external environ­ cost of providing water and sewer utility filed by the cities of Brookfield, Mequon, mental cost of providing utility service_ service to the public; and New Berlin, Butler, Menoninee Falls and However, the commission rejected a pro· WHEREAS, OnJuly 24, 1991, the Execu­ Elm Grove (the Communities) claims that posal to require, through the adoption of tive Committee of the National Associa­ MMSD misrepresented the manner in new rules, monetization of the externali­ tion of Regulatory Utility Commissioners which the costs are to be recovered from ties using a method based on, projected (NARUC) adopted a "Resolution Regard· the Communities for the construction of costs of complying with future environ­ ing Contributions in Aid of Construction MMSD's $2.2 billion Waste Water Pollu­ mental regulation. The commission said for Regulated Public Utilities" at its Sum· tion Abatement Project (WWPAP). The that it could not impose regulations that mer Meeting in San Francisco, California, Communities also raised a number of con­ even suggested acquiescence in the reliabil­ encouraging and supporting an amend­ cerns regarding accounting and interest ity of tentative government regulations as ment to the Tax Reform Act of 1986 which imputation. a basis for forecasting in the least cost plan would exempt contributions in aid of con­ The complaint represents the latest process. In additio n , the commission struction from income taxes utilities; and battle in what has been a long running noted that state law did not require mon­ and costly war between the MMSD and etization of the values or consideration of WHEREAS, No action has yet been taken its neighboring communities. A prelimi­ futuristic environmental laws and regula­ by Congress to amend the Tax Reform Act nary prehearing conference will be sched­ tions. of 1986 to exempt CIAC from income uled to clairfy and consolidate the unre­ taxes; and solved issues_ At the prehearing WHEREAS, H.R. 957 and S. 448 have conference, the PSC will try to determine NATIONAL ASSOCIATION OF been introduced in the 104th Congress whether some issues can be decided on REGULATORY UTILITY to exempt from taxation under the Inter­ briefs without a hearing. The burden of COMMISSIONERS investigation and presentation of evidence nal Revenue Code of 1986 contributions rests solely with the parties in the case. Resolution Regarding in aid of construction made to regulated water and sewer utilities; now, therefore, • Consumer Group Evaluates PUC Contributions in Aid of Construction for Water be it Toward Utility Rate Normalization and Sewer Utilities RESOLVED, That the Executive Commit· (TURN), a California consumer group, tee of the National Association ofRegula­ WHEREAS, Contributions in Aid of Con­ recently issued its Fourth Annual Consumer tory Commissioners (NARUC), convened struction (CIAC) finance substantial Report Card on the California commission. at its 1995 Winter Committee Meetings amounts of the capital costs for water and TURN gave the PUC an overall average in Washington, DC, supports the exemp­ sewer utilitiesj and ratingofIID-" for 1994. Subjects that were tion of C IAC funds received by regulated graded ranged from specific regulatory WHEREAS, State regulatory commis­ water and sewer utility companies from decisions to general regulatory trends. Of sions do not allow CIAC to be included income tax liability; and be it further the ten subjects, TURN graded four fail­ in the investment base upon which the ures and five "D's" with the commission RESOLVED, That the NARUC Executive utility is allowed the opportunity to earn receiving one IIA." The liN' was given for Committee encourages and su pports an a returnj and the PUC initiative to assert California's amendment to the Internal Revenue Code right to continue to regulate cellular tele­ WHEREAS, Regulatory commissions au­ of 1986 which would exempt contribu­ phone rates and decide how to apportion thorize the collection of C IAC to reduce tions in aid of construction from income the cost of providing video dial tone. An the utility's investment which serves to tax for regulated water and sewer utilities. I

SPRING 1995 - Recent Regulatory Decisions by Stephen B. Genzer and Mark L. Mucci LeBouef, Lamb, Greene & MacRae, L.L.P.

The Pennsylvania Department of Envi­ cant must also provide a management plan nual stand-by charge. Ohio-American took ronmental Resources (DER) has issued which includes details of "the commit­ the position that the agreement would amendments to its rules concerning the ments th at are needed to provide for ef­ benefit all its customers by providing wa ­ issuance of permits for the construction fective management and operation of the ter for a substantial customer which would of public water systems. As part of these system/' and finally the applicant must assist Ohio-American in spreading the cost regulations, the DER will require commu­ provide a financial plan including balance of its service over greater sales of water. nity associations and developer-owned sheets and income statements for a pro­ OWS, as the purchaser, took the position systems (which are not under the jurisdic­ jected five-year period. that the agreement would benefit its cus­ tion of the Pennsylvania Public Service The provisions in the new rules are the tomers by providing a stable source of sup­ Commission), to provide a demonstration result of a study originated by the DER's ply at reasonable rates. of system viability prior to the issuance of Small Water System Viability Committee, Under the proposed Agreement, the a permit for construction. (Pennsylvania which operated in the late 1980s and early rate paid by OWS would increase by the Bulletin, Vol. 24, No. 52 at 6407 IDecem· 1990s. same percentage as any overall percentage ber 1994]). The intent of these regulati ons increases granted to Ohio-American in is to manage the proli feration of small OHIO COMMISSION APPROVES base rate proceedings. The PUC Staff took water systems, in response to the large WATER SUPPLY CONTRACT WITH the position that the terms of the agree­ number of non-viable small water systems MODIFICATIONS ment were reasonable, except with regards currently existing in Pennsylvania. Under In a decision on a water purchase agree­ to future rates. The Staff took the posi­ the new regulations, systems which are not ment between Ohio-American Water tion that the future rates should be based subject to PSC jurisdiction will still be Company (Ohio·American) and Ohio on costs specifically attributable to the subject to requirements similar to those Water Service Company (OWS), the Ohio customer and recommended that the cost which must be demonstrated by an appli­ Public Utilities Commission (PUC) con· of service study performed in future O hio­ cant for a certificate of public convenience ditioned its approval on a modification of American rate applications set forth the issued by the PSC. the terms of the agreement so that the costs associated with servicing OWS, and Under Section 109.503(3), all appli· rates paid would be based on costs attrib­ that such costs be considered in setting cants for construction permits for new utable to the customer, OWS. In the Mat· the usage rate for OWS. The PUC adopted community water systems must provide a ter of the Joint Application of Ohio-Ameri­ the Staffs reco mmendation, and ap­ business plan to the DER. That business can Water Company and Ohio Water Service proved the agreement with the modifica­ plan must contain a facilities plan, identi­ Company for Approval of a ContractJ Case tion proposed by its Staff. fying the scope of the water service to be No. 94·1535·WW·AEC (December 29, provided, providing "an assessment of 1994). The applicants, O hio·American CALIFORNIA COMMISSION current and reasonably foreseeable com­ and OWS, had submitted the agreement ISSUES RULING IN J pliance requirements J ' describing alterna­ to the PUC for approval. The agreement PRIVATIZATION PROCEEDING tives considered and the rationale for the provides for the sale and purchase of wa­ The California Public Utilities Commis· approach selected for water service, and ter for a 20 year period, with the option sian currently has before it a matter in· providing an engineering description of to terminate at the end of any 5 year pe­ volving the proposed privatization of a the facilities to be constructed. The appli- riod J with continued payment of an an- water district in Orange County, Califor-

G NAWCWATER nia. California-American Water Company charge for future water and sewer services, issues arising under this privatization, will (Cal-Am) filed a request for a certificate assessed on the owner's unimproved prop­ be foll owed. of public convenience and necessity (Cer­ erty, as well as a connection fee equal to tificate) to operate facilities to be acquired the fee now charged by the District. CALIFORNIA COMMISSION from the Santa Margarita water district The PUC stated that Cal-Am's applica· RULES ON PRUDENCE OF (District). Cal-Am proposed that, ifit took tion did not contain sufficient facts for the UTILITY'S ACTIONS TO over those facilities, it would establish in­ issuance of a Certificate, but the PUC re­ SAFEGUARD ITS WATER SUPPLY terim rates for a three year period, in or· fused to dismiss Cal-Am's petition for a The Southern California Water Com­ der to produce the same revenue now pro­ Certificate. Instead, the PUC determined pany (SCWC) provides water to the C ity d uced by water rates, property to hold the application in abeyance until of Barstow, California in San Bernadino assessments and taxes paid by Santa such time as a determination was made County through its Barstow district, from Margarita customers. After three years, on the application to dissolve the District. a supply consisting of subsurface flow and Cal-Am would file a rate proceeding to set In the event that such a determination was percolating ground water drawn from the new rates for those customers. In a deter­ made, Cal-Am is to amend its submission Mojave River basin. In the la st few years, mination dealing with motions to dismiss, and provide additional required informa­ SCWC has joined with the City of the PUC determined that it could enter­ tion. Barstow in litigation concerning the allo­ tain the application, and held the proceed­ Although the PUC was ruling to hold cation of water by the Mojave Water ing in abeyance pending a determination the matter in abeyance, the PUC did pro­ Agency (Agency). SCWC is concerned on whether the public water District vide its preliminary assessment of Cal­ that increasing water usage upstream will should be dissolved. In its determination, Am's proposal to charge a standby fee on impair the ability of SCWC to protect its the PUC outlined its views concerning its undeveloped property, equal to the fees ability to continue provision of water ser­ ability to set rates covering such a now charged by the District. The PUC vice to its Barstow area customers. In a privatization. In the Mauer of the Applica' noted that it had not previously authorized proceeding filed with the California Pub­ tion of California-American Water Company private utilities to charge standby charges lic Utilities Commission (PUC), SCWC for a Certificate of Public Convenience and for future water and sewer services. Op­ sought recovery of its litigation costs as­ Necessity, Decision No. 95·01·014, Appli· ponents of such a charge argued that the sociated with the dispute over supply with cation No. 94·06-019 Oanuary 5, 1995). PUC did not have the authority to allow the Agency. The PUC had originally ap· The District currently provides water a private utility to assess a charge which proved a sharing arrangement of such service to 28,000 connections, with an was effectively in the form of a tax, simi­ costs, and SCWC filed for a rehearing. additional 40-50,000 connections lar to thc type of charge which the Dis­ The PUC issued an order modifying its planned at full build-out of planned de· trict assessed. The PUC replied to such determination, but granted a rehearing of velopments located within the District. arguments, stating that it has sufficient that determination in order to obtain com· An application to dissolve the District and statutory authority to approve such a ment on three issues: "Are the litigation turn its operation over to Cal-Am is cur­ charge. It noted that the California Public expenses reasonable?"; "Was the litigation rently pending before the Local Agency Utilities Code authorizes the PUC to timely?," and "Were there any options Formation Commission of Orange "consider, and ... authorize, a water cor­ other than litigation?" After considering County. Cal·Am filed its application for a poration to assess a fee fo r future water the comments on those issues, the PUC Certification concurrently with the PUC, service, or a reservation charge for future has determined that SCWC may recover al though a decision on the dissolution of water service, for persons or entities oc· its anticipated litigation expenses, up to the District has not yet been rendered. In cupying or owning property within the $150,000 annually. In, [he Ma[[er of the fili ng for the Certificate, Cal-Am proposed service territory of the water corporation." Application of the Southern California Wa· interim rates, with rates set pursuant to The PUC dismissed arguments that this ter Company for an Order Attthorizing it co standard ratemaking principles to be set provision was only intended to address Increase Races for Water Service in its Barstow at the end of an initial 3 year period, when the problems of small water companies, District, Decision No. 94-12-005, Applica· costs and revenues would be known defi­ and held that the plain language of the tion No. 91 -02-101 (December 7,1994). nitely. Cal-Am proposed thatthe rates set statute is not limited in its application. The PUC noted that SCWC had joined would be such as to develop an equivalent The PUC noted that a final determina· with the C ity of Barstow in the allocation amount of revenue as currently received tion on the proposed privatization of the litigation, using the law firm originally by the District from not only water and District was imminent, and therefore Cal­ engaged by Barstow for the proceeding. sewer charges, but also from property Am would not be requi red to refile its Barstow had selected experienced coun­ taxes, bond issue assessments, service con­ application, but instead could amend its sel and expert witnesses, with extensive nection fees and landowner charges lev· application. The PUC stated that, while and appropriate backgrounds in the area ied within the District. -.. it could nOt rule on the standby charge at of water rights allocation. As for the pru· In order to set rates equal to revenues that time, it did have authority to approve dence ofSCWC's timing in beginning liti· currently received by the District, Cal-Am such a charge as part of the privatization gation, the PUC noted that the issue of asked for authority to collect special fees under California law. In a future article, water rights allocation in California can which the California PUC had not previ· further details of the progress of the depend on the current usage by a claim- ously authorized, including a standby privatization, and the PUC's resolution of (continued on next page)

SPRING 1995 Recent Regulatory Decisions, continued gain for tax purposes. Other parties to the transferred to the related company had ant. Over the last 20 years, usage by proceeding argued that the amount of the been considered part of Barnstable's util­ SCWC's customers had increased, and apparent gain on the transfer, $524,049, ity plant, ratepayers have been paying while in the past SCWC had more than should be removed from Barnstable's rate both the return and property taxes on the enough water to meet its then existing base to reflect the gain on the transfer of land as plant-in-service, and now the land needs, the combination of the lower us­ the land. The proposal was made that was no longer available to provide utility age by SCWC's customers, and the as-yet when the land was actually sold to any service. An adjustment was therefore nec­ not increased usage of upstream users, third parties and the cash proceeds were essary to provide Barnstable's customers would have disadvantaged SCWC in a available, Barnstable could flow the gain with the appreciation on the assets that dispute on allocation. SCWC's expert back to the ratepayers consistent with past they had supported in rates. The DPU did explained it as follows: uThe more water DPU precedent, and the amount removed provide thatthe reduction in Barnstable's they took and the worse the basin got in from rate base then restored. cost of service, by amount equal to the net terms of overdraft, the better off they were In ruling on this matter, the DPU noted gain of $524,049 on the transfer, would going to fare in an ultimate adjudication, Barnstable's argument that a recent deci­ be returned to customers through an am­ if that should come to pass." The PUC sion by the California PUC, providing ortization of the DPS's settlement inter­ concluded that SCWC was prudent in the shareholders the right to the gain on the vention staff. timing of its challenge on allocation. sale of appreciated la nd (the Suburban Thanks to Walton Hill of United Water Finally, the PUC concluded the SCWC Water Systems case), was not applicable as Resources, Louise Knight of Malatesta, had appropriately explored options, in­ precedent. In Suburban, the land was Hawke & McKeon, S.B. Givens of Indian a­ cluding a proposed $50 million pipeline, transferred under the threat of condem­ American Water Company, and Frank 1. additional wells at Barstow, and limits on nation, and the utility use of the land was Miller of Huber, Lawrence & Abell, for sub· growth. The PUC concluded that none of continued without change. The DPC mitting items of interest. these were either realistic or achievable noted that the land which Barnstable had options, given the costs of the improve­ • ments, and the low possibility that devel­ opment limits would be approved. As a re sult, SCWC's pursuit of the water allo­ WEL(JOMtJ TO cation litigation was considered appropri­ . -- ate. The PUC determined that SCWC fhlr Nt'll't'sl IUc'mllers Yermo Water Co. should be permitted to recover its esti­ ('omplmil's Las Vegas, NV mated litigation costs of $ 150,000 annu­ East Lake Utilities, Inc. ally. Altamonte Springs, FL nur XI',nsl .\ssodah' IUI'Ddu~rs MASSACHUSETTS COMMISSION Elk River Utilities, Inc. RULES ON DISPOSITION OF Charlotte, NC Michael Bake,· GAIN ON SALE OF LAND Foxfire Utility Co. Lakeview Park Water Co. As part of a rate proceeding filed by the Branson, MO Mahopac, NY Barnstable Water Company, the Massa­ Green Ridge Utilities, Inc. chusetts Department of Public Utilities John M. Bennier Upper Marlboro, MD (DPU) was asked to consider the issue of A. Y. McDonald Manufacturing Co. the treatment of the gain on the transfer Northern Hills Water & Sewer Co. Dubuque,lA ofland by Barnstable. Re: Barnstable Wa· Joliet, IL ter Company, DPU 93·223·B (October 28, Painted Apron Water Co. Greg Girard 1994). In 1990, Barnstable had trans­ Ellenville, NY Shook, Inc. ferred land to a related company, which Dayton,OH Peeble Creek Utilities, Inc. land was appraised at $835,000, but which Altamonte Springs, FL had an acquisition cost from 1940 of Pauline Newberg $6,951. After recording a deferred tax li­ Rosebrook Water Co. Deloitte & Touche LLP ability, the gain on the transfer amounted Meredith, NJ San Diego, CA to $524,049. Since the land was ex­ Seaview Water Co. changed for common stock of the related Longport, NJ Greg Paula company, Barnstable did not realize any AIC Conferences Silvis Heights Water ga in in cash for the transfer. Barnstable New York, NY Silvis, IL stated that, if the land was sold in the fu­ ture, or if the stock of the related com­ Water Utility of Greater Satish K. Sachdev pany was transferred by Barnstable, Tonopah, Inc. Klein & Hoffman, Inc. Barnstable would at that point realize a Phoenix, AZ Chicago,IL

CD NAWCWATER -

.. Customer Service Report

Educating Youth About Nature's Precious Resource

written by Donna M. Adballa submitted by joseph F. Butcher Pennsylvania Gas and Water Co.

"'- r-

Ready for fishing, the Accessible Fishing Pier and its gazebo sits surrounded by the tree lined shore of Lake Scranton.

Every day, with the turn of a wrist, nature's precious resource. In particular, about a wide variety of water issues such water splashes into our showerstalls, baths we are targeting a very special group of as the water supply, purification and con­ and basins. As a matter of fact, it is just water users -youngsters. Through two dis­ servation. Early each Spring, PG&W in­ taken for granted that clean drinking wa­ tinct programs, PG&W is educating our vites schools throughout its service terri­ ter will flow into our homes and busi­ future customers about water. tory to tour any of our six water treatment nesses. Rarely does one stop to think plants. These six plants are part of about this process. However, at Pennsyl­ Water Education Program PG&W's family of newly constructed vania Gas and Water Company, through PG&W's first community effort is an water treatment facilities. In October several community efforts, we are raising educational program geared toward 1993, PG&W marked a significant accom- people's consciousness about water- school-aged children where they learn (continued on next page)

SPRING 1995 Educating Youth, continued plishment in our water operations. Upon ~()nM ~O completion of our eighth and final plant, nO u CftS~'1 f Q; ,T we reached our goal to provide each and rn (. (Y)S. (Y) i I n e~ . every customer with filtered water. Fur­ Olaf~5 thermore, these plants were designed to assure high quality drinking water for gen­ JchCX)(,( erations to come. Thus, we believe it is ih an~ Y0u.,"For important to educate the public about water issues, from the source to the tap. ~ our ~(n n ("'5,' From a community relations standpoint, the company believes an understanding and appreciation for water benefits all of hL our consumers, old and young alike. IJ ,i:-;f 'j With the coordination of PG& W's " -, un oJ Customer Services. and Water Resources I Divisions, students from grades 5 through ..(" 'JO' - I 12 are invited to tour our plants. Arrange­ ments begin with open invitations sent to all the area schools. Commenting on the program, Harry Dowling, Vice President of Customer Service and Human Re­ sources, states, "Our Water Education Pro­ gram has been very well received in the community. Our tours are viewed as ex­ A creative version of "Roses are red, violets are blue" is just one of the many thank you notes cellent field trips and exciting learning ex­ received from students in response to PG&W's Water Education Tour Program. periences. The Program which started in 1990, has grown significantly every year." Statistics prove Dowling's point. In the dergarten through fourth grade, an in­ Calabro, Manager of Water Quality, who Spring of 1994 alone, the Program school presentation is given by represen­ has an excellent rapport with his listen­ reached nearly 4,000 students. For the tatives from PG& W. One of the ers. According to Dr. Calabro, "Children very youngest of students, those in kin- company's resident experts is Dr. Joseph so young take such an interest since water is very real and understandable to them - it is something they touch and see every day. The children never fail to impress me with their attentiveness and questions." At the treatment plant, the one and one­ half hour tour begins with an introduc­ tion video about PG&W's water opera­ tions and highlights of the treatment plant. The group then moves into the master control area where graphic layouts indicate the path that water takes from the reservoir through the plant and to homes. While walking the students through the plant, the tour guide explains what is h ap­ pening to the water at each stage of the purification process. These stages include flocculation, clarification, and filtration. Outside the plant, students see large sedi­ I.. .il mentation basins containing the particles which were removed during the filtering process. Also outside are the large water storage tanks which hold clean, filtered T water before flowing through the distri­ Commission Paul Mahon of the Pennsylvania Fish and Boat Commission assists participants from Allied Services in the ribbon-cutting ceremonies at the bution system into customers' homes and Lake Scranton Accessible Fishing Pier for People with Disabilities. businesses. The tour concludes in t he plant's laboratory where students see firs t-

• NAWCWATER -

Presenting a tour to a group of students from Wilkes-Barre Academy is PG&W's Allen Novatski, Water Treatment Plant Supervisor.

hand water quality testing and analysis ting ceremonies were held July 21, 1994. its participants have received numerous demonstrations. According to David Kaufman, Vice Presi­ awards. Allied Services presented the What do students conclude about our dent of Water Resources, "Paul, a physi­ company with a Corporate Achievement Water Education Program? From the ques­ cally challenged individual himself, ap­ Award for "inspiring the ideals of National tions asked throughout the tours, company proached PG& W with the idea of Rehabilitation Week" and the local Cham­ representatives believe the response to the building a recreational facility for the se­ ber of Commerce presented a consolidated tours is very positive. Other indicators of verely disabled. Because these individuals award to PG&W, Allied Services, and the the success of the program are the numer­ have limited recreational opportunities, Pennsylvania Fish and Boat Commission. ous thank you notes the company receives PG&W agreed with Paul that an accessible In addition, the Pennsylvania Environ­ from the students and the growing num­ pier would enable them to enjoy fishing." mental Council awarded PG&Wits 1994 ber of inquiries from teachers about the An old boathouse located on the shore­ 'Northeastern Pennsylvania Environmen­ Program. line of Lake Scranton served as the per­ tal Partnership Award for achieving excel­ fect foundation for the pier. Through the lence in environmental protection and Fishing Pier cooperative effort of Allied Services of conservation. PG&W, like past recipients Continuing with the subject of educat­ Northeastern Pennsylvania, an organiza­ of the award, had to demonstrate the qual­ ing youth is another PG&W community tion with expertise in rehabilitative ser­ ity of involving and working successfully program which enables children and oth­ vices; the Pennsylvania Fish and Board with others in pursuit of the accomplish­ ers of all ages to appreciate the great out­ Commission; PG&W; and fifty organiza­ ment. doors of Mother Nature. PG&W's beau­ tions and individuals within the commu­ "PG&W is fortunate to have the natu­ tiful Lake Scranton reservoir, home to a nity who contributed time, energy, and ral resources to provide a facility for the three and a half mile shoreline pathway material, the fishing pier at Lake Scranton community such as the fishing pier," adds for joggers and walkers, now also boasts a became a reality. The fishing pier, with Kaufman. Continuing, he comments, fi shing pier specifically designed for the its railings and direct access from the path­ "PG&W's educational tours give students severely disabled. way, picnic area and gazebo, offers indi­ an understanding and appreciation for Through the determination of Paul viduals with wheelchairs a place to enjoy water. PG&W stresses that it is important Mahon, a Commissioner with the Penn­ nature. It is surely regarded as a special for future generations to have the same sylvania Fish and Boat Commission, a place for special people. Following the quality of resources that are available to­ dream became a reality when ribbon-cut- opening of the fishing pier, the project and day." ,

SPRING 1995 Quorum Call

by Louis jenny

NAWC's Annual Congressional Fly-In CIAC was held the last week of February, 1995. In February, two new bills which would The Fly-In provides members of the repeal the tax on Contributions in Aid of NAWC with the opportunity to meet with Construction (CIAC) were introduced in their elected representatives in both the both the House and the Senate. Further­ House and Senate and discuss issues of more, there are new sponsors for the bills concern to the investor-owned water in­ which reflect the new Republican majori­ dustry. ties. Congresswoman Nancy Johnson (R­ The Fly-In was a huge success. Fifty-two CT) introduced H.R. 957 in the House of NAWC members attended over 160 ap­ Representatives on February 15, and the pointments on Capitol Hill. NAWC mem­ next day Senator Charles Grassley (R-IA) bers and lawmakers discussed legislation extensive congressional activity when try­ introduced S. 448 in the Senate. Both of to repeal the tax on Contributions in Aid ing to keep their appointments. Through­ our champions are senior majority mem­ of Construction (CIAC) and the reautho­ out the days of the Fly-In there were con­ bers of the respective House and Senate rization of the Safe Drinking Water Act tinual votes in both chambers, plus votes tax writing committees. This greatly in­ (both of which I will discuss in greater were taking place in Committees and Sub­ creases our chances of attaching the CIAC length later). Based on these meetings committees at all times of the day and tax repeal language to a larger tax bill as there can be no doubt that the visibility evening. In the Senate an historic vote on an amendment. Both Congresswoman of the industry was raised with veteran the Balanced Budget Amendment took Johnson and Senator Grassley will be "at lawmakers and with the many new Mem­ place. All of this activity only added to the table" when these tax bills are being bers of Congress. Further, co-sponsorship the excitement of being in Washington, written, and throughout the legislative of the new CIAC tax repeal bills is on the and underlined the importance of taking process. They will be in prime position increase. the time to meet and stay in contact with to shepherd our bill through this maze. Veterans of Fly-Ins past undoubtedly elected officials. In years past, one of our largest prob-' found a very different Congress. Partici­ We saw that week that Congress regu­ lems with CIAC passage has been that pants found many new members of Con­ larly deals with questions that have enor­ there has not been the appropriate larger gress and new Republican majorities, and mous, permanent, sometimes global im­ tax "vehicle" (or tax bill moving through were also surprised to find out how busy plications. Unless we are there on a the legislative process) to which we could the Congress was. regular basis presenting our concerns, it attach our bill. It is fairly certain that this Typically, the Halls of Congress are is very easy to get lost in the fray. There­ year there will be an appropriate tax bill fairly quiet in February. However, this year fore, I encourage you to come to town next moving through the committees, therefore due to the "Contract with America" and year during the Fly-In, or sometime this we must be prepared to attach CIAC tax the new Congressional Leadership, year to meet with your Congressman, if repeal as an amendment. NAWC members had to compete with you have not done so already. Much of the preparation has been done, I:'

• NAWCWATER and at this point we need to increase the number of co-sponsors on these bills. Co­ I99a Fly- In sponsorship is merely when a Representa­ tive or Senator puts his or her name on the bill, signalling their support of it. Broad bipartisan co-sponsorship demon­ strates support for the bills in their respec­ tive bodies, thereby increasing our lever­ age in ultimately passing the bills. Therefore, please contact your Senators and Representatives and ask that they co­ sponsor these bills. If you need addresses, draft letters, information on the bills, or have any questions, please do not hesitate to contact me at the NAWC. Preparations for tax legislation moving through Con­ gress is going on now, and we need to dem­ onstrate our support for the CIAC bills as soon as possible. (! to r) Rich Roth (Sans jose Water Co.); * * * Senator Max Baucus (D-MT) and Dick Balocco (San jose Water Co.). The reauthorization of the Safe Drink­ ing Water Act (SDWA) is progressing at a surprisingly slow pace, largely due to many other exciting bills and initiatives moving through the process and absorbing Congress's attention. It had been expected that since SDWA reauthorization bills were passed in both bodies last year, work on reauthorization would start early in the session. That has not been the case. We still expect reau­ thorization of the SDWA during this Con­ gress, however. The NAWC, along with a Coalition of elected officials, state admin­ istrators, the National Association of Regulatory Utility Commissioners (NARUC), and associations representing (! to r) Stan Ferraro (California Water Service Co.); water utilities, have and will continue to Congressmen Tom Lantos (D-CA), and jim Good (California Water Service Co.). work for an SDWA which assures Ameri­ cans of a safe, reliable, and efficiently run drinking water supply. Instead, Congress has been engrossed with initiatives and ideas radically revamp­ ing the regulatory process, product liabil­ ity law, the relationship between the state and federal governments, the tax code, privatization issues, how Congress runs itself, and others. Most of this has not yet been passed into law, so where most of this will end up is uncertain. But, this has been an exciting time. Often an entire session of Congress goes by without as much ac­ tivity as we have seen in just the first 100 days of this session. If you would like any of the specifics on these initiatives, again please contact me. , Karla Olson Teasley (Southern States Utilities, Inc.) and Congressman Charles Canady (R-FL).

SPRING 1995 • (! to r) Randell Vogel (Southern California Water Co.); (! to r) Congressman Lane Evans and Congressman Steve Horn (R-CA); jim Gallagher (Southern California Duane Cole (Northern Illinois Water Co.). Water Co.),and joe Young (Southern California Water Co.).

(! to r) Dennis Sullivan (Middlsex Water Co.); David Monie Rich Roth (San jose Water Co.); Senator Max Baucus (D-MT), (Logan Wells Water Co.); Wendy Davis (7994 New jersey NAWC and Dick Balocco (San jose Water Co.). Scholarship winner and EPA intern); Congressman Bob Franks (R-Nj), and Henry Patterson, III (Elizabethtown Water Co.).

Gary Prettyman (American Water Works Service Co.); joe Simunovich (United Water Resources); Dennis Sullivan Henry Patterson, III (Elizabethtown Water Co.); Congressman Robert (Middlesex Water Co.); Gary Prettyman (American Water Menendez (D-Nj); Dennis Sullivan (Middlesex Water Co.) and Works Service Co.); Bill Bradley (D-Nj); Henry Patterson, III David Monie (Logan Wells Water Co.). (Elizabethtown Water Co.) and Don Correll (United Water Resources).

NAWCWATER -

Briefing For Congressional Staff Members

On January 30, approximately 50 House and Senate staff members gathered to learn about the investor-owned water industry and NAWC's legislative issues to reform SDWA and to repeal the tax on CIAC.

Congressional Staffers at the briefing. Don Correll, providing some background on the industry.

Karla Olson Teasley, explaining NAWCs stake in the SDWA. jim Good, providing background on CIAC.

SPRING 1995 .rr------

Federal Agency Notes

by Mark Planning

EPA's Office of Groundwater and treatment technology, health assessment, Drinking Water recently identified a num­ analytical methods, source water protec­ ber of challenges and deficiencies in the tion, small systems capacity building, and drinking water program_ Documents pre­ focusing and improving implementation. pared by Agency staff for a December 1994 These eight areas fall within three major presentation to the Office of Water de­ categories of activities which EPA is high­ scribed a number of problems facing the lighting as part of the initiative-regulatory program_ improvement and research realignment, • Program priorities and resource com­ prevention and management innovations, mitments are being driven by court nificant changes in the nation's drink­ and implementation improvements. deadlines rather than risk reduction ing water program. The purpose of the public meetings is considerations or the critical needs of • Stakeholders have expressed a desire for to provide EPA with ideas, suggestions stakeholders_ greater involvement in the development and options for proceeding with specific • Program demands have outstripped of drinking water research, policies and activities that the Agency can undertake available resources_ regulations. within existing resources constraints. The • There is widespread and strong oppo­ The EPA report concludes that dramatic meetings will also serve as the basis fo r sition to major portions of the program. changes are necessary to address these strategic decisions on program directions • There are a number of questions about problems and meet fundamental program­ and resource allocations. In some cases, the validity of the scientific, analytical, matic and public health concerns. Pro­ the two approaches will be combined in a data and implementation aspects un­ gram priorities and investments should be single meeting. derlying specific regulations and the redirected to achieve maximum potential The Agency will convene a senior man­ program. Currently, there is inadequate risk reduction and to strengthen the un­ agement group to review the public meet­ time and resources for EPA to do more derlying program foundation. ing summaries. That group will assemble than piecemeal responses to address In January 1995, NAWC and other the information and develop a program these concerns. water supply organizations met with EPA action plan consistent with available re­ • Recently, there has been significant to hear about a new initiative to reform sources. The plan will be submitted to the media and public questions on the ad­ the drinking water program. Since that National Drinking Water Advisory Coun­ equacy of protection provided by EPA's briefing, Agency officials have begun work cil for comment. Final decisions on pri­ Drinking Water program and its cost­ to develop a more effective, efficient drink­ orities will be made by Assistant Admin­ effectiveness. ing water program. istrator Robert Perciasepe. • The SDWA reauthorization has high­ As part of this effort, EPA started hold­ NAWC applauds these efforts and looks lighted congressional concern about ing public meetings in March 1995 to dis­ forward to working with EPA on activi­ program direction. Reauthorization cuss subjects in eight separate areas: regu­ ties that provide maximum benefits and could bring new requirements and sig- latory reassessment, scientific data needs, risk reduction_ ,

• NAWCWATER r corporate changes Luksa Elected Vice Chairman of PSW

At its February meeting, the Philadel­ For many years Luksa has been very ac­ phia Suburban Water Company (PSW) tive in water industry trade organizations Board of Directors elected Robert A. including: NAWC; AWWA (former Penn­ Luksa to the position of Vice Chairman. sylvania Section Chairman and recipient Luksa joined PSW in 1955 and held vari­ of both Fuller and Baxter Awards); the ous positions of graduated responsibility American Public Works Association; the in the company's Operations Division Pennsylvania Water Works Operators As­ until being appointed President and Chief sociation (where he served on the Water Operating Officer of PSW in 1986. Dur­ Quality Committee and chaired the Au­ ing his tenure, Luksa developed the dit Committee); The Water Resources company's drought contingency plan and Association of the Delaware River Basin; conservation program, and negotiated and The Pennsylvania Municipal Authorities prepared several interconnection agree­ Association; both the Pennsylvania and ments for the purchase and sale of water National Societies of Professional Engi­ with other utilities. One of his key respon­ neers; the American Society of Civil En­ sibilities was the preparation of the gineers, and the Philadelphia Engineers company's long range plan and capital the requirements of the Safe Drinking Club_ budgets. Much of the company's multi­ Water Act have been completed under Luksa is a graduate of Drexel Univer­ million dollar building program to meet Luksa's direct control. sity and holds a BS in Civil Engineering_

.New Position for Boyle

Joseph v. Boyle has been named direc­ held key financial positions with OWC to United Water as we continue to break tor-project analysis and development for Corporation. The companies merged new ground in the water service industry," United Water Management & Services, a last year in one of the largest transac­ said Correll. In 1994 United Water subsidiary of United Water Resources. He tions in the history of the water indus­ launched a major public-private partner­ was also named secretary-treasurer of the try. United Water is continuing to pur­ ship with Hoboken, New Jersey. Negotia­ United Water-Lyonnaise des Eaux Partner­ sue growth through mergers and tions for several similar agreements are ship. In his new capacity, Boyle will pro­ acquisitions, public-private partnerships underway. vide financial expertise, coordination and and a variety of operations and mainte­ Boyle, a certified public accountant, support to the company's new business nance contracts. holds a B.S. in accounting from St. development efforts. "Boyle was a member of the team that Joseph's College and an M.B.A. from the "During the last two years we've com­ developed a successful public-private part­ Wharton School of the University of mitted ourselves to expanding our core nerships proposal with the city of India­ Pennsylvania. He is active in numerous water service businesses," said Donald L. napolis. As a result, one of our affiliated associations, and serves as Chairman of C orrell, chairman and CEO of United companies operates the city's wastewater the Tax Committee of the National Asso­ Water. "Boyle will playa key role in carry­ treatment plants-the largest contract op­ ciation of Water Companies. Boyle is also ing out our company's strategic growth erations project in the United States. With a member of the Financial Executives In­ plan." 22 years of diversified financial manage­ stitute and the American and Pennsylva­ Prior to joining United Water, Boyle ment experience, Boyle will be invaluable nia Institutes of CPAs.

SPRING 1995 New VPs Ron Williams Joins Middlesex at Artesian Ronald F. Williams has been named Assistant Vice President of Operations for Middlesex Water Co. Williams will over­ Artesian Resources Corp. and its sub­ see the company's engineering, distribu­ sidiary, Artesian Water Co., Inc., have tion and metering operations. He is also named three new vice presidents. David responsible for the upgrading of the B. Spacht, Vice President, Treasurer and company's distribution system and the ex­ Chief Financial Officer of Artesian Re­ pansion of its Carl J. Olsen Water Treat­ sources Corp. and Subsidiaries, joined ment Plant, two major initiatives the com­ Artesian Water Company as a Utility Plant pany is planning as it approaches its Accountant in 1980, after graduating from centennial anniversary in 1997. Goldey Beacom College. His newly-added Williams was formerly employed by the responsibility includes the Information New Jersey Department of Environmen· Systems Department. Spacht has served tal Protection, Bureau of Potable Water, as Treasurer and Chief Financial Officer where he began his career in 1971. He of Artesian Resources Corp. and subsid­ served in various environmental engineer­ iaries since July, 1992. Prior to that time ing capacities before being named Acting he was Assistant Secretary and Assistant Bureau Chief responsible for the admin­ Water Company. "This varied background Treasurer. istration of the Federal and State Safe coupled with his planning insight make Joseph A. DiNunzio, Vice President and Drinking Water Act. Williams most re­ him a welcome addition to our manage­ Secretary of Artesian Resources Corpora­ cently served as President of Garden State ment team." tion and Subsidiaries, joined Artesian in Water Co., which he joined in 1980. He A graduate of the Newark College in 1989. He has been Secretary of Artesian held increasing responsible positions with Engineering, Williams holds a B.S. in since July 1992. DiNunzio's added respon­ the company and was promoted to Vice Mechanical Engineering and is a licensed sibilities include Customer Relations and President of Operations and named Presi­ professional engineer, planner and water Administration. Prior to joining Artesian, dent in 1991. treatment operator. His professional affili­ DiNunzio was employed by Price "Ron Williams has acquired extensive ations include the New Jersey Section of Waterhouse. DiNunzio graduated from operations and engineering experience the American Water Works Association the University of Virginia in 1984. throughout his impressive career," said J. with which he serves as incoming Na­ Bruce P. Kraueter, P.E., Vice President Richard Tompkins, President of Middlesex tional Director. and Chief Engineer of Artesian Water Company, Inc., was named Manager of Engineering in 1994. He has been in­ volved with water resource management Good Elected Vice President for almost 24 years. Kraueter will oversee all supply operations in addition to engi­ At its monthly meeting on December gressional Relations for the National As­ neering. Prior to joining Artesian's engi­ 21, 1994, the Board of Directors of the sociation of Water Companies, where he neering staff in 1989, Kraueter was em­ California Water Service Co. elected represented the views of the investor­ ployed by the New Castle County Water James L. Good III, an officer of the com­ owned water supply industry before Con­ Resources Agency and the Department of pany effective January 1,1995. gress. From 1985 to 1991, Good held vari­ Natural Resources & Environmental Con­ Good was elected Vice President, Di­ ous staff positions with United States trol. Kraueter received his Bachelor of rector of Corporate Communications and Senator Harry Reid, most recently as As­ Engineering degree in Chemical Engineer­ Marketing. Good replaces Kenneth J. sistant Legislative Director. Good gradu­ ing from Stephens Institute of Technology Roed, who retired on December 31, after ated from Cornell University in 1985 with and a Master of Science degree in Chemi­ 18 years with the company. From 1991 to a B.A. in Government. cal Engineering from the University of 1994, Good served as Director of Con- Kentucky.

• NAWCWATER ...

Donatoni Joins PSW

Anthony Donatoni has joined Philadel­ owned and two private water systems in Secretary's Office of Policy where he was phia Suburban Water Company as Senior the past two years. responsible for long range policy and the Manager of Marketing and Corporate De­ Before joining PSW, Donaten i served development of regulations to carry out velopment. Donatoni will assist and ex­ as an executive for U nited States Pollution the Department's programs. Previously, pand the company's acquisition efforts as Control Industries, a subsidiar y of the he spent 12 years with the U.S. Environ­ well as develop strategies for its entry into Union Pacific Corporation, which devel­ mental Protection Agency in Philadelphia other water-related revenue opportunities ops and markets hazardous waste disposal where he held a variety of technical and such as bottled water, filters, and the sale services_ In 1987, he helped form and was managerial positions. of administrative and management water President of Environmental Management Donatoni earned a BS in Civil and services to municipal governments. Services, a small environmental consult­ Environme ntal Engineering from Donatoni will further expansion efforts ing firm. From 1984 to 1987, he worked Villanova University and has completed already set in motion by the company, for the Pennsylvania Department of Envi­ graduate work in water resources. man­ wh ich has purchased three municipally- ronmental Resources as Director of the agement.

etcetera etcetera etcetera

American to Purchase PG&W's Water Ops

American Water Works Coo, Inc_. an­ currently provides water service to ap­ chief executive officer of American Water nounced that its subsidiary, Pennsylvania­ proximately 1.5 millio n people in 218 Works, said, "The purchase of the PG& W American Water Co.) has agreed to pur­ communities. PG&W provides d rinking water system continues our strategy of chase the regulated water utility water service to about 400,000 people in growing the company and shareholder o peration s of Pennsylvania Gas and 62 communities in northeastern Pennsyl­ value through acquisitions. American Water Co. (PG&W), a subsid iary of Penn· vania, including the cities of Scranton and Water Works and its 23 water utilities have sylvania Enterprises, Inc. (PEl), for ap­ Wilkes-Barre. always taken pride in their ability to pro­ proximately $409 million. The acquisition is contingent on, among vide outstanding water service atcompeti­ The purchase represents the largest ac­ other things, the approval of the Pennsyl­ tive rates. Our financial resources, our quisition of its kind in the history of the vania Public Utility Commission and the staff of water supply professionals and our water utility business and enhances stockholders and certain debt holders of commitment to this single water service American Water Works' presence in Penn­ both PEl and PG&W. mission will be at the disposal of these 62 sylvania where Pennsylvania-American George W. Johnstone, president and communities."

SPRI NG 1995 New Contracts for CWS

Donald L. Houck, President and CEO greenbelt irrigation and industrial pro­ San Carlos to the company in exchange of California Water Service Co., an· cesses will grow. This b rings to three the for infrastructure improvements. The nounced four new contracts awarded to number of recycled water projects in which County wil l be seeking approval of this the company. They include a contract with Cal Water is involved. action from the Local Agency Formation the City of Visalia for sewer and solid Palomar Park Country Water District # 3; Commission. San Carlos, a largely built­ waste billing; King City for sewer billing; San Mateo County, the local home­ out suburb of San Francisco served by the West Basin Municipal Water District for owners' association and the company have company's Mid-Peninsula District, has operation and maintenance of the recycled agreed on the terms for transfer of this experienced little growth in the last de­ water distribution system, and transfer of 200-account County water system located cade. Thus, the Palomar Park Water Sys­ the Palomar Park County Water System in the unincorporated part of the city of tem is a welcome addition. to the company. HOlick said, "The award of these con­ tracts shows that Cal Water is continuing to expand its burgeoning contract opera­ tions business. Opportunities in both the municipal utility billing sector and the New Logo for UWR recycled water sector hold great promise for growth. We intend to aggressively pur­ sue these opportunities wherever they oc­ United Water Resources has introduced water challenges." cur." a new corporate identity and logo that will The growing standards of the federal be used by the company's water-related Safe Drinking Water Act and the Clean Delails of the four subsidiaries, which serve over two million Water Act are making it increasingly ex­ contracts arc as follows: people in 14 states. The company also an­ pensive for municipalities to operate their Visalia Billing' Startin g January 1,1995, nounced that its 25 utility subsidiaries own utilities. "Rather than raise taxes to Cal Water took over the billing of sewer have adopted the "United Water" name comply with the new standards, munici­ and solid waste charges on beh alf of the as part of an overall strategy to use a uni­ palities are forming partnerships with pri­ city. While Visalia will still provide the fied corporate naming system. vately owned companies that have both services, Cal Water's monthly bills will "United Water's new corporate logo, the capital and expertise to meet their now include a charge for the municipal ser­ which portrays a star formed by drops of needs," said Correll. vices. Visalia chose Cal Water because of water coming together, symbolizes ollr He pointed to United Water's recently the company's award winning, state-of-the­ mission to become the premier water ser­ fo rmed public-private partnership with art automated billing capabilitie s. Con­ vices company in the U.S.," said Donald Hoboken, New Jersey. United Water now tracting with Cal Water for the billing L Correll, chairman and chief executive operates and manages the city's water dis­ services was more cost effective than up­ officer. "The 'water star' represents the tribution system. The city retained own­ grading their own facilities. Cal Water has company's commitment to the highest ership of the system and received an up owned and operated the water system in standards of quality, innovation and cus­ front cash payment of $5.5 million. Visalia since 1926. tomer service. The logo also portrays the United Water has promised to make an King City Billing: For the reasons cited company's sound financial standing and additional $4 million of capital improve­ above, Cal Water will begin sewer billing excellent dividend payment record." ments to the system over a 10 year span. in King CIty for industrial customers ef­ "Our new logo and naming system po­ Correll explained that elected officials fective January 1, 1995. Residential cus­ sition United Water to attain greater na­ find that public-private partnerships arc tomers will begin receiving consolidated tional visibility as we pursue growth op­ responsible solutions to providing cost water and sewer bills on July 1. Cal Water portunities," added Correll. "This puts effective services and tax stability. Com­ has been in King City since 1962. the spotlight on the marketing team that munities benefit from capital infusion, West Basin Recycled Water: Cal ,Water we've formed to build shareholder value rate stabilization, ownership retention and has been awarded a contract by the West by expanding our core water and waste­ system improvement. Basin Municipal Water District {located water businesses. We envision the United As part of the new naming strategy, in Southern California} to operate and Water logo becoming a powerful symbol United Water's principal utility subsidiar­ maintain a portion of the distribution sys­ as our team enters ptomising new markets ies, Hackensack Water Co., Spring Valley tem for recycled water from their El and integrates future acquisitions and Water Co. and General Waterworks Cor­ Segundo Treatment Plant. As water sup­ merger partners, or forms public-private poration have been renamed United Wa­ plies in California tighten, the use of re­ partnerships to help municipalities resolve ter New Jersey, United Water New York cycled water for non-potable uses such as their water supply. water quality and waste- and United Waterwotks, respectively. e NAWCWATER PSW Main Cleaning and Lining Program

Philadelphia Suburban Water Co. re­ cently kicked off its 1995, $2 million main cleaning and lining program to rehabili­ tate approximately 33,000 feet of cast iron mains in two of the four counties in south­ eastern Pennsylvania. C leaning and cement-mortar lining mains restores aging pipe to "like new" condition, improves water flow to custom­ ers, and reduces the potential for water quality problems by removing iron oxide build-up from the interior of the main. Prior to actual construction, mains are flushed and customers' outside spigots are checked to make sure they are in working order. During construction, customers get their water from previously-chlorinated, temporary bypass mains through hoses which are connected to their outside spig­ ots. To ensure continued fire protection, temporary fire hydrants are also provided during the construction. After the mains are lined and allowed to dry for 24 hours, the newly lined mains must be chlorinated and pass stringent quality tests before being placed back into service. C leaning and lining mains generally costs about half the amount of installing new mains and is an option that is avail­ able when the structural integrity of a main is still intact. In addition to the cost savings, cleaning and lining mains does customers and vehicular traffic. Only two, of the company's 1995, $30 million capi­ not require the extensive excavation four-by-six-foot holes are made for every tal program, a substantial portion of needed for main replacements and, there­ 500 feet of main to be cleaned. which is being spent to rehabilitate the fore, poses only minimal inconvenience to The cleaning and lining program is part company's distribution system.

PSC Selects Grundy

Philadelphia Suburban Water Corpo­ Five years of market analysis has re­ the plan for extended coverage. Group ration has secured liability coverages for sulted in a comprehensive insurance pro­ underwriting success has resulted in the 1995 policy period from The gram designed specifically for privately­ highly competitive rates. Grundy Agency. The program offered held, investor-owned water companies. The Grundy Agency services the wa­ by The Grundy Agency resulted from Program benefits have clearly defined ter industry as Managing General Agent work between NAWC's Small Compa­ the exact insurance needs of utilities and for Reliance Insurance Company. The n ies Committee and The Grundy now provide for historically unrecog­ combined effort currently underwrites Agency, to develop a program geared to nized perils. Policy gaps in standard cov­ the most responsive insurance program, the needs of NAWC member compa­ erages are filled by the Grundy program, available exclusively to NAWC member­ nies. causing companies like PSC to turn to ship.

SPRING 1995 •

------~-~ . - ~ -~ - Watermaster Elects Stone

Watermaster, a local agency in the San Gabriel Valley responsible for the manage­ ment of the Main San Gabriel Basin, elected Suburban Water Systems Senior Vice President Reg Stone as its new chair­ man at a board meeting on January 4. The nine-member Watermaster board was created in 1972 by court order and is charged with adjudicating water rights and establishing Basin operating criteria and management principles aimed at protect­ ing the water quality and supply of the Basin. Stone has served on Watermaster's board for 9 years and has been actively involved in the board's ongoing efforts to address the issue of groundwater contami­ nation, which has occurred in specific ar­ eas of the Basin. He plans to further this effort by working with key public/private agencies and businesses who are also seek­ distribution. Valley Water Association and the Central ing a workable solution to the cleanup of In addition, he is a prominent water Basin Water Association. Stone is a state­ the Basin. industry professional and is a member of certified water treatment and distribution "Only through cooperative partner­ several organizations, including the specialist who holds a bachelor's of science ships and collaboration can we develop a American Water Works Association, Un­ degree in business management from Cali­ viable solution to clean up our Basin," derground Service Alert, the San Gabriel fornia Coast College. Stone said. "Through an approach that emphasizes cooperation, we will be better able to ensure the continued reliability and quality of our water supply." Artesian Begins Construction The Basin, a large underground aqui­ fer holding approximately 8.6 million acre feet of water, covers a 167 square-mile area Artesian Water Co., Inc., has an­ future growth. According to Dian C. Tay­ within the San Gabriel Valley. In 1979, nounced that construction of a new two­ lor, President and Chief Executive Officer, volatile organic compounds (VOC's), in­ million-gallon per day water treatment "Artesian will achieve a 40% increase in dustrial solvents used as degreasers, were facility and wellfield on Old County Road, our own water supplies over the next five discovered in the Basin. near Glasgow, Delaware, has begun. In­ years, reducing our reliance on neighbor­ Although water currently drawn from vestment in the project is expected to ex­ ing utilities dramatically. the Basin meets all state and federal wa­ ceed $2.5 million. Representatives of the "Investment in the new facility will ben­ ter quality standards, Watermaster and Artesian and Hydro Group Groundwater efit existing customers by increasing pres­ several other private and public agencies Associates, who are responsible for the de­ sure in the area and reliability of service are committed to supporting a plan that sign and construction of the treatment by reducing reliance on purchased water. would eliminate and prevent the migration plant, attended a ground-breaking cer­ The facility will also benefit homeowners of the VOC's. emony Friday, March 17,1995. near and around the station who currently Stone currently works in operations at The new treatment facility and wellfield rely on residential wells owned and main­ Suburban Water Systems, a water utility will initially produce a total of two mil­ tained by the homeowners by bringing company based in Covina that serves lion gallons per day when construction is safe, reliable supply to their doors. about 230,000 people in the San Gabriel completed mid-summer, increasing the "Artesian's investment in Delaware over Valley and Whittier and La Mirada com­ company's groundwater supply by almost the next five years will exceed $26 million munities. He has been employed at Sub­ 20%. The station is engineered to be ex­ for new water facilities and equipment to urban for 35 years, directing vital opera­ pandable to three million gallons per day assure a long-term, safe supply of quality tions in water supply, management and of supply production to meet demands of water for our customers."

• NAWCWATER ps ates to Remember 1 • 9 • 9 • 5

---NARUC ------NAWC ------

Southeastern Association of Regulatory California Water Association BoD California Water Association BoD Utility Commissioners Meeting Meeting Williamsburg, Virginia Sa n Jose, California San Jose, California June 4-7 June 8 October 12 54th Western Conference of Public Florida Chapter Meeting Washington Chapter Meeting Service Commissioners Orlando, Florida Fife, Washington Jackson Hole, Wyoming June 14 October 17 June11 - 14 Pennsylvania Chapter BoD Meeting Pennsylvania Chapter BoD Meeting Mid-American Regulatory Harri sburg, Pennsylvania Hershey, Pennsylvania Commissioners June 21 October 18 Indianapolis, Indiana New Jersey Chapter Annual Meeting NAWC Annu al Conference June 11 - 14 jamesburg, New Jersey New O rl eans, Louisiana New England Conference of Public June 23 October 29-November 2 Utility Commissioners Washington Chapter Meeting Pennsylvania Chapter BoD Meeting Mystic, Connecticu t Fife, Washington Hershey, Pennsylvania June 11-14 July \I November 15 73rd National Conference of Regulatory Pennsylvania Chapter BoD Meeting California Water Association Utility Commission Engineers Harr isburg, Pennsylvania 54th Annual Meeting Boise, Idaho July 19 Monterey, California June 12-15 November 15- 19 Pennsylvania Chapter BoD Meeting 40th Great Lakes Conference of Public Harrisburg, Pennsylvania New England Chapter Meeting Utilities Commissioners August 16 November 17 White Sulphur Springs, West Virginia July 9 California Water Association BoD New Jersey Chapter Meeting Meeting jamesburg, New jersey NARUC Summer Committee Meetings Sacramento, California November 17 San Francisco, California August J 7 July 23-27 Florid a Chapter Meeting Florida Chapter Meeti ng Orlando, Florid a National Regulatory Symposium on O rlando, Florida December 13 Computer Information Systems September 13 Colorado Springs, Colorado Pennsylvania Chapter BoD Meeting October 1-3 California Water Association BoD Hershey, Pennsylvania Meeting December 13 23 rd Annual Eastern Rate School Sa n Jose, California Clearwater, Florida September 14 October 8-13 ---AWWA--- New Jersey Chapter Meeting NARUC Basics of Regulation and AWWA Annual Conference Jamesburg, New Jersey Rate-Making Process Course Anaheim, California September? Albuquerque, New Mexico June 18-22 October 22 Pennsylvania Chapter Annual Meeting AWWA Distribution System and Dinner 107th NARUC Annual Convention Symposium Harrisburg, Pennsylvania New Orleans, Louisiana Nashville, Tennessee Septemb er 25 November 13-1 6 September 10-13

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Mr. Robert L. Kelly Sun City Water Company 15626 Del Webb Blvd. P.o. Box 1687 Sun City. AZ 85372