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PA Statement 3 BEFORE THE PHILADELPHIA WATER, SEWER AND STORM WATER RATE BOARD ) RE. APPLICATION OF THE ) PHILADELPHIA WATER ) Fiscal Years 2019 - 2021 DEPARTMENT FOR INCREASED ) RATES AND RELATED CHARGES ) ) ) DIRECT TESTIMONY OF ROGER D. COLTON ON BEHALF OF THE PUBLIC ADVOCATE April 20, 2018 Table of Contents Part 1. Structure and Operation of TAP 7 A. TAP Enrollment Dates 7 Credit and Collection Activities Directed toward TAP B. 14 Applicants. C. The TAP Application Form has Unacceptable Terms 17 D. Simplifying the TAP Application. 24 TAP Outreach and Eligibility Determinations Should Use City E. 28 Income-Eligibility Determinations. The Affordability of TAP Payment Plans should be Compared F. 32 to Total Bills, Not Merely to Bills for Current Service. G. TAP Should Include an Arrearage Forgiveness Component. 36 H. TAP Should Improve its Outreach and Intake Methods. 46 Part 2. TAP Cost Recovery 58 A. TAP Cost Offsets in Revenue and Expenses 59 B. Administrative Costs 66 C. TAP Rider 72 1. The Problems with PWD’s Proposed TAP Rider 72 2. An Appropriate TAP Rider 85 Part 3. Public Fire Protection Costs 89 Part 4. Barring Unfair and Deceptive Shutoff Notices 103 Colton Schedules 109 Appendix A: Colton curriculum vitae Appendix B: TAP application form Appendix C: PECO CAP application form Appendix D: March 2, 2018 letter to PWD regarding fire protection costs Appendix E: PWD Disconnect Notice 1 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 2 A. My name is Roger Colton. My business address is 34 Warwick Road, Belmont, MA 3 02478. 4 5 Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT POSITION? 6 A. I am a principal in the firm of Fisher Sheehan & Colton, Public Finance and General 7 Economics of Belmont, Massachusetts. In that capacity, I provide technical assistance to 8 a variety of federal and state agencies, consumer organizations and public utilities on rate 9 and customer service issues involving telephone, water/sewer, natural gas and electric 10 utilities. 11 12 Q. ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING? 13 A. I am testifying on behalf of the Public Advocate of the City of Philadelphia. 14 15 Q. PLEASE DESCRIBE YOUR PROFESSIONAL BACKGROUND. 16 A. I work on rate and customer service issues, as well as research into low-income usage, 17 payment patterns, and affordability programs. At present, I am working on various 18 projects in the states of Rhode Island, Maryland, Pennsylvania, Michigan, Wisconsin, 19 Illinois, Iowa and California, as well as in the provinces of Ontario and British Columbia. 20 My clients include state agencies (e.g., Pennsylvania Office of Consumer Advocate, 21 Maryland Office of People’s Counsel, Iowa Department of Human Rights), federal 22 agencies (e.g., the U.S. Department of Health and Human Services), community-based 23 organizations (e.g., Energy Outreach Colorado, Natural Resources Defense Council, Public Advocate Statement 3: Colton Direct 4 | Page 1 Action Centre Tenants Ontario), and private utilities (e.g., Unitil Corporation d/b/a 2 Fitchburg Gas and Electric Company, Entergy Services, Xcel Energy d/b/a Public 3 Service of Colorado). In addition to state- and utility-specific work, I engage in national 4 work throughout the United States. For example, in 2011, I worked with the U.S. 5 Department of Health and Human Services (the federal LIHEAP office) to advance the 6 review and utilization of the Home Energy Insecurity Scale as an outcomes measurement 7 tool for LIHEAP. In 2007, I was part of a team that performed a multi-sponsor 8 public/private national study of low-income energy assistance programs. My professional 9 background is further described in Appendix A. 10 11 Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND. 12 A. After receiving my undergraduate degree in 1975 (Iowa State University), I obtained 13 further training in both law and economics. I received my law degree in 1981 (University 14 of Florida). I received my Master’s Degree (regulatory economics) from the MacGregor 15 School in 1993. 16 17 Q. HAVE YOU EVER PUBLISHED ON PUBLIC UTILITY REGULATORY 18 ISSUES? 19 A. Yes. I have published three books and more than 80 articles in scholarly and trade 20 journals, primarily on low-income utility and housing issues. I have published an equal 21 number of technical reports for various clients on energy, water, telecommunications and 22 other associated low-income utility issues. A list of my publications is included in 23 Appendix A. Public Advocate Statement 3: Colton Direct 5 | Page 1 2 Q. HAVE YOU EVER TESTIFIED BEFORE THE PHILADELPHIA WATER, 3 SEWER AND STORM WATER RATE BOARD OR ANY STATE UTILITY 4 COMMISSIONS? 5 A. Yes. The Philadelphia Water, Sewer and Storm Water Rate Board (Board) was 6 established by an ordinance, which became effective January 20, 2014. The 2018 rate 7 proceeding is only the second rate proceeding to come before the Board. This is my 8 second time testifying before the Board; however, I have testified on numerous occasions 9 regarding Philadelphia Water Department rate cases prior to the establishment of the 10 Board. In addition, I have testified before the Pennsylvania Public Utility Commission 11 (“PUC” or “Commission”) on numerous occasions regarding utility issues affecting low- 12 income customers. I have also testified in regulatory proceedings in more than 30 states 13 and various Canadian provinces on a wide range of low-income utility issues. A list of 14 the roughly 250 proceedings in which I have testified is listed in Appendix A. 15 16 Q. PLEASE EXPLAIN THE PURPOSE OF YOUR DIRECT TESTIMONY. 17 A. The purpose of my Direct Testimony is as follows. 18 First, I examine the structure and operation of the income-based Tiered 19 Assistance Program (TAP) (also known as the Income-Based Water Rate 20 Affordability Program, IWRAP) to determine whether the rate which the 21 Philadelphia City Council has mandated be pursued is, in fact, being made 22 appropriately available to PWD customers; 23 Second, I examine the funding of that TAP program; and Public Advocate Statement 3: Colton Direct 6 | Page 1 Third, I examine the proposal of the Water Department to begin collecting the 2 costs of providing public fire protection through water rates rather than 3 through the municipal tax structure; 4 Finally, I examine a customer service issue involving the disconnection 5 notices rendered to customers of the Philadelphia Water Department.1 6 7 Part 1. Structure and Operation of TAP. 8 Q. PLEASE EXPLAIN THE PURPOSE OF THIS SECTION OF YOUR 9 TESTIMONY. 10 A. In this section of my testimony, I examine the Tiered Assistance Program (TAP) 11 implemented by the Philadelphia Water Department.2 In this section, I consider a variety 12 of issues presented by the manner in which the Department has implemented and 13 currently operates the TAP rate. These issues are appropriately considered in this rate 14 case given that TAP is a rate, TAP directly affects the rates charged to a substantial 15 number of PWD customers. 16 17 A. TAP Enrollment Dates. 18 Q. PLEASE DESCRIBE THE TAP IMPLEMENTATION AND OPERATION ISSUE 19 YOU DISCUSS IN THIS SECTION OF YOUR TESTIMONY. 1 My Direct Testimony will not distinguish between the Philadelphia Water Department and the Water Revenue Bureau. References to “the Department” and to “the City” should be broadly construed to incorporate the entity providing the relevant service. 2 Throughout my testimony, the “IWRAP” program (Income-Based Water Rate Affordability Program) and the “TAP” program are considered to be the same program. While the City Council legislation refers to IWRAP, the PWD refers to TAP. Nonetheless, both references are to the same bill affordability initiative. Public Advocate Statement 3: Colton Direct 7 | Page 1 A. In this section of my testimony, I address the question of when low-income PWD 2 customers who apply for TAP should start receiving a TAP bill. I conclude that once a 3 TAP applicant is enrolled in the program, that customer should receive a TAP bill 4 retroactive to the first complete billing cycle subsequent to that customer’s TAP 5 application. 6 7 Q. WHAT PROBLEM ARE YOU SEEKING TO ADDRESS IN RECOMMENDING 8 THIS PROCEDURE? 9 A. There is a substantial delay between the time that PWD customers submit their 10 applications for TAP and the date on which those applicants are being enrolled in TAP. 11 As of March 31, 2018, PWD had received 17,097 TAP applications. (PA-III-2). An 12 unreasonable delay occurs between the time an application is submitted and the time an 13 applicant is enrolled in TAP, should the application be approved. Enrollment data by 14 quarter for approved applications is set forth in Table 1 below. As can be seen, in the 15 first quarter of enrollments in 2017 (July – September), more than half of all approvals 16 (53.1%) occurred more than 60 days after an application was approved. Nearly half 17 (48.7%) of all approvals occurred more than 90 days after an application was submitted. 18 In the second quarter of enrollments (October – December), more than 60% of all 19 approvals occurred more than 60 days after an application was submitted. In the most 20 recent quarter, insufficient time has elapsed to determine the proportion of applications 21 that are being approved in a timely manner.3 3 This is true as a matter of arithmetic. For example, as more time elapses, more and more approvals will fall into the buckets of approved within 61-90 days, approved within 91-120 days, and approved within 121 or more days.

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