VOLUME 36

NUMBER 3

FALL 1995 The Magazine of Ihe Nalional Associalion o f Waler Companies

OFFICERS STAFF CONTENTS

CHAIRMAN OF THE BOARD James B. Groff President's Message J. James Barr Executive Director 3 American Water Works Company Sharon L. Gascon NAWC History: PRESIDENT Deputy Executive Director 1970-1 995, Ronald S. Dungan Michael J. Horner by T. Ward Welsh ...... 4 United Water Management and Director of Administration and Acquisition Incentives: Services, Inc. Membership Encouraging 1st VICE PRESIDENT Louis Jenny Regionalization Director of Congressional Relations Robert A. Luksa in the Water Industry, Philadelphia Suburban Water Company Jean Lewis by Wendell Holland ...... 15 Administrative Manager GENERAL VICE PRESIDENTS Tri-County (NJ) Water Floyd E. Wicks Bonita J. Hayden Supply Project, Southern California Water Company Finance Manager Audra Zellner by Howard J. Woods, Jr. . .. 18 Eugene H. Owen Executive Ass istant Baton Rouge Water Company Executive Director's Nicole Stec Report ...... 20 Robert A. Dolson Secretary-Government Relations Continental Water Company Regulatory Relations Amy Watson Report ...... • .. 21 Marshall T. Chiaraluce Program Assistant/ Data Processor The Connecticut Water Ca. Recent Regulatory SECRETARY Decisions ...... _ . . 24 James B. Groff Quorum Call ...... _ .. 27 TREASURER Sharon L. Gascon Tax Adviser...... 29 Customer Service Report ...... 30 Copyright 1989, National Association of Water Companies. Corporate Changes ...... 31 The articles printed in this magazine do not necessar· ily represent the position of the National Association Etcetera ...... _ . . . 34 of Water Companies. NAWC d i s d ai m ~ responsib ility for all info rmation prov ided by individual authors or New Members ...... 38 o rgan izations and published in WATER magazine, includ ing technical informlltion which should be in­ Dates to Remember...... 43 dependently verified by scpa r a[t~ soun:cs.

WATER-Published four times each year by the National Association of Water Companies. Su ite 1212, 1725 K Street, N.W., Washington, DC 20006. NAWC is a nonprofit trade as~ociat i ()n dedicated to serv ing the needs of the investor-owned state-regulated. public water supply industry. WATER is circulated 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 se lH to NAWC, Suite 1212, 1725 K Street, N.W., Washington, DC 20006 (202) 833·8383. The President's Message by Jack E. McGregor

This column was written prior to NAWC11995 Annual Conference.

e end of my year as president of NAWC seems Contact your legislators and arrange to meet with them to be a good time to reflect on the past 12 or their staffers to educate them on these critical issues T months and the prospects for our industry and your position on them. Maintain regular communi­ goi ng forward. cation as appropriate to ensu re your voice is being heard. Encourage your employees to contact them through let­ I have mixed emotions as I prepare to step down. ter-writing campaigns. Consider establishing a political On the one hand, I have thoroughly en­ action committee so your employees can help joyed my time in office, but on the other elect those state or federal candidates who hand, Ilook forward to handing the baton share their views on issues of vi tal importance to your next president, Ron Dungan of to the water industry. United Water Management & Services Inc., who will bring a fresh perspective as The lack of awareness is not limited to the NAWC begins its 101 st year. I am highly legislative arena, however, and includes the optimistic about the future of the indus­ financial community, customers and the pub­ try, and I look forward to our benefiting lic-at-Iarge. We need to do a better job con­ from Ron's leadership. veying the industry's strengths to these au­ diences also, correcting whatever As I see it, our biggest challenge has been misperceptions exist, and debunking the and will continue to be communicating to myth of a sleepy, low-tech industry that suf­ all of our various stakeholders the challenges facing fers from a lack of a clear strategic vision. As NAWC the public water supply industry and its dedication to members, we contribute indirectly to this awareness-rais­ meeting state and federal standards to bring a high­ ing effort through the Association's activities in this re­ quality product to customers. While the association gard. But by working independently as well as collectively, has made great progress in this regard, I am struck by we have a chance to make a greater impact. the overall lack of awareness of our industry. The U.S. has the safest, most reliable drinking water At a time when certain special interest groups are in the world. An industry that can make a claim that its increasing their criticism of water utilities, particularly product is unsurpassed on a global scale should com­ through the media, it is more important than ever that mand a high level of awareness and understanding, espe­ our key constituencies are made aware of the prob­ cially when that product is the earth's most precious natu­ lems and opportunities that we face. That is why I urge ral resource. If we all do our part, the increased attention you once again to meet with and brief your state and and recognition can pay dividends, such as in the form federal representatives so they can gain an understand­ of more equitable legislation or a lower cost of capital, as ing of our position o n such critical issues as our primary constituencies become more attentive and regionalization of the Safe Drinking Water Act, what more receptive to our concerns. your company is doing to ensure it meets state and federal safety standards, repeal of the CIAC tax, in­ Thank yo u for allowing me the privilege of serving dustry consolidation and regionalization, and what­ as your president_ I took forward to continuing to work ever local concerns your company may have. with you in the future . •

FALL 19950 NAWC Centennial: 1970-1995

by T. Ward Welsh Former Chairman NAWC Public Information Committee This is the last of four articles about people and events in the water supply business and the National Association of Water Companies since the Association's birth in J 895. It covers [he years since 1970.

here was cause for wh o headed American Water Works Nixon to curb inflation. guarded optimism in the Company's Lexingto n su bsidiar y, was The annual conference that ye ar United States in 1970. elected president at that meeting. attracted about 600 people to Indianapo­ President Nixon h ad lis and included a tribute to John started reducing U. S. A New Identity Murdock, who had headed the orga ni za­ troop strength in Vietnam from a peak The Confe rence changed its name in tion from the 19305 through the mid-'60s. of over 500,000 in 1969. Postal reform leg­ 1971 to the National Ass ociation ofWa­ William Ruckel shaus, administrator of the islation created an independent U. S. ter Companies , which members felt bet­ new Environmental Protection Agency, Postal Service, ending 200 years of gov­ ter reflected the n ature of the organiza­ was a speaker. Conference host Ralph ernment mail delivery. tion, now representing almost 300 Swingley, of the Indianapolis Water Com­ But the economy was in a funk. The companies in 33 states. John Kupferer pany, was elected president. In a singu lar worst bear market in eight years saw the joined the Association as assistant t.O t r agedy, Association director C. Q. Dow Jo nes industrials d rop more than Allen and the Membership and Public Re­ McWill iams, ofthe Roaring Creek Watcr 300 points from the 1969 high . lations committees p roduced a promo­ Company in Pennsylva nia, and his wife The National Water Company Confer­ tional brochure to be used in recruiting were killed in a plane cra~h en route to ence was settling into its new digs on 13th new members, particularly in California the meeting. St., just three blocks east of the White and Florida. HOllse. Administrator Fred Allen was Tropical storm Doria brought flooding Agnes Brings Flooding looking for staff to step up the group's leg­ to the northeast that year, causing power The following year, 1972, four men were islative and regulatory initiatives and help outages, d am failures and the shutdown arrested in a bizarre break-in atthe Demo­ prepare fo r the Annual Conferen ce in of m a ny water plants, including crats' national committee headquarters in Le xington, Kentucky, the first ever west Elizabethtown Water C ompany's main Washington's Watergate complex. Few of Pi ttsburgh. The Executive Committee pl ant at the confluence of the Raritan and foresaw then the ominous implications for felt the o rganization had to do more to Millstone rivers. the Nixon presidency. That also was the conv ince regulators of the un iqueness of The Association leadership was alarmed year the world's airlines, plagued by a rash water companies and the unfairness of when a survey of the nation's water systems of terrorist hijackings, began installing treating them like electric and gas compa­ by the new National Water C ommissio n metal detectors at airpor ts. Hurricanc nies, which enjoyed h igher revenues and didn't even mention investor-owned water com· Agnes caused $1 17 billion in damage and lower capital costs. Two priorities were ar­ panies. They contacted the NWC and were ca used floods that inundated water treat­ ticu lated at the Lexington meeting: put invited to submit data on investor-owned men t plants in seven eastern states. together a data base to su pport t he indus­ suppliers. Jerry Smith met with Secretary The Association was formally incorpo­ try claim of uniqueness, and get industry of Commerce Maurice Stans to try to get rated and adopted a new formula for elect­ speakers on the dais at more regulatory water utilities exempted from a 90-day freeze ing directors on the basis of the number gatherings to make the case. Jerry Smith, on wages and prices imposed by President of customers served by member companies o NAWCWATER j effect that short-sighted regulation and unimaginative management were crippling the nation's utilities. (It was one of the things that brought about the Association's Management Innovations Awards, still a feature of the Annual Con­ ference.)

Promotional Film Debuts Bob Keane was elected chairman of the board of Elizabethtown Water Company about this time and Henry Patterson, his colleague since college days, succeeded him as president. In the biggest business john van C. Parker Gerald Smith transaction in the industry that year, Con­ tinental Water Company bought several in each state (one director for 50,000 cus­ James Kelly invited the Association to help companies ( St. Louis County, Northern tomers)_ Company mergers were skewing set up a week-long seminar for regulators Illinois, Long Island Water, Gary-Hobart representation under the old formula, on water and sewerage issues. The upshot: and smaller subs) formerly owned by the which was based on the number of com­ an annual workshop that was to benefit Charles S. Mott family. panies in a state_ Bob Paszkiewicz joined regulators-and the industry-for years to The 18-minute film, "The Legacy," pro­ the Association as research director, bring­ come. duced by the Association's PR Commit­ ing the office staff to five. John van C. Parker, vice president of tee, was introduced in 1973. It was fi­ At the 75th annual meeting in Pitts­ Consumers Water Company, noted in an nanced by contributions from 10 large burgh that year, John White, of Consum­ article in the Association's magazine, The member-companies and was to be shown ers Water Company, was elected president. Quarterly, that of 19 actively-traded water widely through the 1980s to tell the story And speaker after speaker talked about the companies, all but six were selling at be­ of the nation's investor-owned water com­ need to communicate better. The low book value, indicating the investment panies. It won a gold medal at a '1974 film Association's industry survey was sent community's lack of confidence in the in­ festival in New York. along to the National Water Commission. dustry. To make things worse, Business President Nixon, facing impeachment It covered some 5,900 investor-owned Week magazine published an article to the (continued next page) water companies which served a popula­ tion of 28 million (about 14% of Ameri­ cans) in 7,650 communities. (The commis­ sion was dissolved after it produced a report on the state of the nation's drink­ ing water.)

Oil Prices, Inflation Soar Things got sticky for President Nixon in 1973. He fired a number of his key aides as the Watergate probe got hotter. And his vice president, Spiro Agnew, resigned in the face of tax evasion charges dating back to his term as Maryland governor. Rep. Gerald Ford was appointed to suc­ ceed him. The oil producing nations of the Middle East placed an embargo on exports after an outbreak of hostilities with Israel, causing a worldwide energy crisis. Oil prices- and inflation-soared in the United States, putting more than 100,000 people out of work. Water conservation started to gain cur­ rency about this time as a strategy for ex­ tending water supplies and postponing the costly development of new wells and res­ ervoirs. Pennsylvania PUC Commissioner john L. White u FALL 1995 • Pi ..

Centennial, continued Industry Takes Two Hits The nation's bicentennial activities and William Rosenberg, chairman of the environmental issues made news in 1976. over the Watergate cover-up, resigned in Michiga n PUC, took a poke at utility ex­ The National Academy of Sciences found 1974 and was succeeded by Vice President ecutives that year, saying they weren't that propellant gases used in aerosol cans Gerald Ford. Worldwide inflation brought meeting the challenges of the times, were were damaging the earth 's ozone layer, economic growth to a standstill. Ameri­ "stonewalling" regulators, and considered which protects hu mans from harmful rays cans waited in endless lines for gasoline. rate increases the o nly solution to their of the sun. And a mysterious pathogen at (Fred Allen noted in his Quarterly column problems. He said that mo re innovative large in Ph il adelphia's Bellevue Stratford that he had waited for two hours at a sta­ managers would be able to get thi ngs done Hotel killed 29 American Legionnaires tion near his home in Alexandria.) Allen with fewer resources. As if that weren't meeting there and sickened 151 others. went to the Federal Energy Commission enough, the national media b roadcast that The NAWC would convene at the same to press for special consideratio n for wa­ year the story that chlorine, water suppli­ (but by then renamed) hotel fOllr years ter suppliers who needed fuel to keep their ers' disinfectant-of-choice, might be a fac­ later. trucks and generators funning. The price tor in the increased incidence of bladder The EPA and the American Water of a barrel of crude oil had increased from and colon cancer. Works Association estimated that year $1.75 to $ 14 in less than two years. It was at about this time that Jack Barr, that it would cost from $1.5 to $2 billion president of America n Water Works Com­ doll ars to bring the nation's water supply Safe Water Act Is Passed pany, stepped down as Association chair­ systems into compliance with the new Congress passed the Safe Drinking Wa­ man after seven years. He was succeeded SDWA standards. But t he Association ter Act (SDWA) in 1974, giving the Envi­ by Bob Morris. considered this a conservative figure. "Un­ ronmental Protection Agency the power Communist forces overran South Viet­ less investor-owned systems can qualify for to set maximum contaminant limits for nam in 1975 and the U_ S. pulled out its government assistance/' Fred Allen told scores of naturally occurring and man­ troops, ending 20 yea rs of involvement regulators, Uthcy're going to have to get made substances and to require monitor­ there. Unemployment in the U. S. reached those dollars from increased rates." ing for them. The law would impact the 9.2%, the highest since 1941. Regulators industry through the 1990s and be a key started responding to inflationary pres­ Kelly Heads NARVC focus of NAWC and A me ri can Water sures in t he mid·70s, granting more sig­ Jim Kelly, chairman of the Pennsylva­ Works Association activities in Washing­ nificant rate increases. This triggered nia PUC and head of NARUC's Water ton for 20 years. Association president widespread con sumer protests and de­ Committee almost since its inception , was Bob Morris, of Gene ral Waterworks Cor­ mands that utili ty rates be frozen and that elected president of the regulators' asso­ poration, exhorted members that year to state regu latory commissions be abol­ ciation that year. He warned fellow com­ focus on customer service to reduce the ished. missioners against regulating on a socio­ number of complaints to commission s Ed Healy, of Northern Illinois Water political basis rather than a cost basis and about estimated bills and seasonal taste Company, hosted about 600 people at the said a trend in that direction could ·have and odor problems. 1975 conference in C hampaign. The chair­ ominous consequences fo r the n ation's Association president-elect Charles man of t he Illinois Commerce Commis­ utilities. Woods hosted the annual conference that sion told attendees t hat they'd better start The 1976 annual meeting in Chatta­ year in New Haven. The financial climate regionalizing their operations or the Fed­ nooga included a tribute to Jack Barr, a for utilities was turbulent. Con Ed had eral government would do it for them. key figure in the shaping of the Associa­ passed its dividend for the first time, tion, who was by then retired and a direc­ prompting institutional investors to un­ 'The Bomb' Falls tor of American Water Works Company. load electrics. But all utilities were af­ H ealy said in a later interview that The j .]. Barr Scholarship was establi shed fected. The Association made urgent ap­ "things seemed to be going swimmingly in his name and has been given every year peals to regulators to permi t increased (during hi s presidency) when the bomb since to a coll ege student pursuing a cur­ rates to be imposed under bond so mem­ fell." "The bomb" was the IRS' rule 75- ri culum t hat might lead to a career in t he bers could deal with rising costs. 557, which construed contributions-in­ water business. John Kupferer, director of operations aid-of-construction (CIAC) which builders The Association's new president, Ed for the Association, left in 1975 after fou r gave utilities to extend water mains to Limbach, of Tennessee-American Water years and was replaced by George serve new h ou si ng, as taxable income. Company, noted that more and more com­ Buchanan, who had been with a power These funds had long been viewed as con­ missions were demanding audits of water equipment trade group. Indianapolis Wa­ tributions to capital. The Association utilities' managements. I n another devel­ ter Company employed $1 2 million in tax­ quickly marshaled its forces fora legal and opment that year, a Johns Hopkins Uni­ free industrial bonds to finance a new legislative attack on the proposed change. versity economist, Steve Hanke, made his treatment plant and pumping station. It It succeeded in eliminating it in the Tax debut in The Quarterly, observing t h at was the first use of such bonds by a major Revenue Act of 1976. The victory was later declining block service rates frustrated company and spurred others to pursue leg­ described as the "coming of age" of the the efficient use of financial resources, islation in their states to permit such fi ­ Association. ltclearly demonstrated its po­ d iscriminated against groups of custom­ nancing by investor-owned companies. li tical clout. ers and led to ineffi cient consumption de-

o NAWCWATER --- «

of Connecticut Water Service, voiced con­ cern about the EPA's proposed trihalomethane (THM) standards. He said the agency's call for carbon filtration of all surface water supplies was premature and needed more research. At the 1978 mid-year meeting, members visited their representatives in Congress about the is­ sue. And the Association prevailed on the nation's utility regulators to support its position. Association treasurer John O'Boyle, who was battling cancer, stepped down that year and was succeeded by another American Water Works System executive, Ted Jones. O'Boyle died a few months later. Bob Morris, the Association's chair­ National Associatio n 0 man, left the General Waterworks Corpo­ \V~0S78 1 ~<1 ration to join NAWC full-time as associ­ C. Robert Morris ate executive director. Jim LaFrankie, vice president of American Water Works Com­ cisions. He called for cost-based rates. Regulatory Commissioners in 1976, told pany, replaced him as chairman. That was Hanke was to be an articulate advocate for 700 people at the annual conference in Mi­ about the time the Association moved to privatization and other industry-friendly ami that the water supply industry had its larger, more convenient offices at 1019 causes through the 1980s. work cut out for it. "Only 15 states even 19th St., about a mile northwest of the Jimmy Carter moved into the White pretend to meet the current drinking wa­ Penn Building, where it had been for 10 House in 1977 and called for energy effi­ ter standards," he said. "Twenty three years. ciencies to reduce the nation's dependence million Americans probably drink sub­ on Mideast petroleum. He also called for standard water and, of these, some 8 mil­ Filtration Requirement reform of national water resources policy lion probably are exposed to unsafe wa­ Draws Fire with conservation as a cornerstone. His ter." He said water suppliers weren't In 1978, president-elect Ray Pillow, of actions prompted the Association to form spending anywhere near enough to assure the Baton Rouge (Louisiana) Water Com­ an ad hoc committee, headed by Bob safe water. pany, brought the annual conference to his Gerber, of Hackensack Water Company, Kalinski had other bad news. A recent home town. Bob Paszkiewicz, after six to evaluate various household water-sav­ survey of college students, he said, indi­ years as research director, left to join a ing devices and consider how rates might cated that most young Americans didn't Washington economic consulting firm. be used to promote conservation. A severe understand the concept of free enterprise Fred Allen, speaking to the Western Con­ drought in California was helping to drive and thought that governments could de­ ference of NARUC at Couer d'Alene, the issue. liver better utility services better than Idaho, said the EPA's plan to require GAC profit-making companies. Utilities, with filtration for all surface water ~upplies Industry Efficiency Is Cited their impressive power to communicate via would cost millions but "would;;'t save a The Association took comfort that year bill inserts, ought to be using them to fo­ single life." He called it an overreaction in a study by two Pennsylvania State Uni­ cus on economic education, Kalinski said. to a small group of well-meaning, but mis­ versity professors that found investor­ informed, activists. owned water suppliers to be more efficient Barr Talks Principles The following year the annual meeting than their municipal counterparts. They Jim Barr, president of American Water was in Boston where it coincided with a said the profit motive made the difference. Works Company's Midwestern subsidiar­ nationally televised visit by Pope John Paul Court decisions in Connecticut and ies, and an NAWC director, had already II. Henry Patterson, of Elizabethtown Idaho about this time held that gains from launched his own economic education Water Company, was elected president at the sale of surplus water company land campaign. He told a Marion, Ohio, that meeting. NAWC and AWWA joined should benefit customers, not company Kiwanis Club in 1977 that every govern­ that year to petition for a judicial review stockholders. This issue would cause big ment utility was a reflection of the ero­ of the impending EPA treatment regula­ problems for some land-rich utilities and sion of America's free enterprise system. tions. One of the industry's allies in the would engage NAWC members, regulators Now chairman of the Association, Barr legislative end of that fight was then-Rep. and the courts for the next 20 years. still never misses an opportunity to speak Phil Gramm of Texas, who sponsored a Alexander Kalinski, of New Hampshire, on this subject. bill that would have reined in the EPA. who headed the National Association of Association president Neal McKenzie, (continued next page)

FALL 1995 • Centennial, continued Voters Pick Reagan mined investors' confidence in the utility. Susan Shanahan, chairman of the Penn­ The Association's bylaws were changed sylvania PUC, told that meeting that wa­ Drought (jrips Nation in 1980 to provide for a fourth general ter suppliers in Pennsylvania ought to A prolonged drought gripped parts of vice president. The idea was to enable each merge into no more than eight large com­ the United States in 1980 and' 81. Asso­ year's conference chairman-the president­ panies. She also said water service rates ciation president Earl Graham noted that elect-to pin down a conference site a year should be increased-even to as high as the resultant water shortages had drawn earlier. Bob Gerber, of Hackensack Water, $600 to $900 a year-until they reflected attention to the industry and its problems was elected the fourth vice president. Fred the true value of the service. and had heightened the Association's Allen and other members attended a re­ A month later, Ronald Reagan was chances of winning long-sought legislative tirement party that year for Leo Louis, elected the 40th president of the United and regulatory concessions. president of the Gary-Hobart Water Com­ States. Immediately after his inaugura­ In January, 1981, the Bridgeport Hy­ pany. tion, 52 Americans held hostage in Iran draulic Company put on line an $18 mil­ Association president Patterson spoke for 444 days were released when the U. S. lion state-of-the-art treatment plant it said to a NARUC conference at Hilton Head agreed to return $8 billion in frozen Ira­ it needed to comply with the Safe Drink­ that spring at which consumer activists nian assets. In July, 1981 Reagan signed ing Water Act. Consumer prices had more protested the opulence of the meeting site a bill providing for the largest tax cut in than doubled in 10 years. Regulators in and the fact that they hadn't been invited. U. S. history. A month later, he fired some California and New York and the New York He returned with a warning to members 13,000 striking air traffic controllers Times warned that the low returns utili­ that they had better prepare to deal with when they defied a back-to-work order. It ties were reporting-lower than the cost of a new, more aggressive, consumer move­ sent the U. S. labor movement into a tail­ capital-were going to hurt service and dis­ ment. spin that it still hasn't recovered from. courage capital investment. The Times The 1980 conference was auspicious for The New Haven Water Company sold said that of the nation's 100 largest elec­ its timing, too. The Phillies won the World out to a regional water authority that sum­ tric companies, 98 were selling at below Series and the Eagles beat Dallas during mer after 115 years as an investor-owned book value. (The eight most actively traded the Philadelphia meeting and more than company. President Charles Woods, in a water companies were trading at 76% of . one attendee was injured in the resultant letter that was published in The Quarterly, book, down from 89% in 1977.) pandemonium on Broad Street outside the said hostile regulation and legislation had Carol Egan resigned as business man­ Fairmount Hotel, the meeting site. Earl doomed his company. Particularly, he said, ager after nine years. She was replaced by Graham, of Philadelphia Suburban, was Connecticut's confiscation of the gains Marilyn Miller, who would handle the elected president. from the sale of utility land had under- Association magazine and the annual con-

Water companies shared the spotlight with the World Champion Phillies .

• NAWCWATER ------z

Vational Association of AJ/?\77~8 James McGirr Kelly W Neal MacKenzie Robert A. Gerber

ferences through the 1980s. NAWC's first west coast conference, in patterns in the world's weather and could Ann Gorsuch took over the EPA in 1981 San Francisco, drew nearly 700 people in predict those two curses of the water sup­ with a mandate to reorganize the agency. 1981 and laid to rest a concern that its ply business: drought and floods. For a (She spoke at the 1982 annual meeting in . largely east-of-the-Mississippi membership few years, Browning was somewhat of an Phoenix. Not long after that her manage­ might not travel that far for a meeting. In a industry guru. ment style drew fire from Congress and she fortuitous coincidence, the annual NARUC Mike Zihal, of Long Island Water Com­ stepped down.) In industry management de­ conference was going on a block away so pany, was elected president of the Asso­ velopments, Ralph Lindberg was elected there was cross-participation by both indus­ ciation in Phoenix. And Fred Allen an­ chairman of California Water Service Com­ try executives and regulators. Chairman Jim nounced at that meeting that he intended pany and Charles Stump, executive vice LaFrankie told a NARUC audience that rea­ to step down as executive director in a president since 1975, succeeded him as sonable treatment of water utilities would couple months after 15 years in the job. president. And Bob Dolson became presi­ assure abundant, safe drinking water. Tony He agreed to stay on for a while to assist dent of Continental Water after the death Garnier, of Southwest Suburban Water his successor, Bob Morris, with regulatory of Gerald Presberg. Charles Buescher was Company, was elected Association president relations. named chairman of the company's five op­ at that meeting. He immediately formed a erating subsidiaries. committee to establish five- and 1 O-year goals Meeting Moves to Boca Raton and recommend a strategic plan for meet­ The national news in 1983 was domi­ Association Samples Opinion ing them. nated by the terrorist bombing of aU. S. The Association participated in its first military barracks in Beirut, Lebanon, national public opinion survey in 1981, AT & T Divests Its Subs which killed 237 Marines. As the Asso­ paying to include three questions in the The Association sponsored its first cus­ ciation met in Boca Raton that October annual Roper Poll. The results indicated tomer service seminar in Philadelphia in U. S. troops invaded Grenada to put down that the public rated water shortages third 1982. It would become a popular annual a leftist uprising. Morris reported that the among its concerns, after the new Reagan event. But the landmark development in Reagan administration was proposing administration's performance and the the utility business that year was the court sharp cuts in EPA funding and that threat of inflation. Fewer than half of decision which forced AT & T to divest chances of amending the Safe Drinking those questioned were making any effort its local telephone companies. Water Act were remote. Utility commis­ to conserve water or were even aware that Jim Barr, chairman of the NAWC Gov­ sions continued to authorize rate increases restaurants had stopped serving it unless ernment Relations Committee, told an to offset inflation-driven costs; and con­ requested. A high percentage was satisfied EPA hearing at about that time that water sumer activists began to press for the elec­ with their water service and its cost. suppliers were solidly behind the prin­ tion of regulators. Steve Hanke, now an economist in the ciples embodied in the Safe Drinking The EPA set up its first workshop on Re agan administration, was on the op ed Water Act but that it needed some fine radioactive contaminants and the public page of the Watl Street Journal, urging that tuning. They wanted softer, less alarmist became aware for the first time of a new troubled municipal water systems be priva­ notification requirements, stronger evi­ environmental concern: radon. tiz ed. The concept gained considerable dence of contaminants' adverse health ef­ The Hackensack Water Company reor­ momentum under the Reagan and Bush fects, and treatment decisions left to them. ganized in 1983 under a new holding com­ administrations. The Association that year Dr. Iben Browning, a climatologist who pany, United Water Resources. President challenged a bill that would have created had spoken at the 1981 conference was Bob Gerber assured stockholders that a National Water Utility Bank because in­ back again at the '82 meeting in Phoenix water service would remain the company's vestor-owned companies wouldn't have to update his predictions. Browning and main business but that the new structure been eligible for its loans. others were saying that they could discern (continued next page)

FALL 1995 • Tony Garnier James Groff Dr. tben Browning

would provide long-term organizational to recruit. The EPA began to talk in 1984 about and financial stability. A committee that year analyzed the cost prioritizing its activities according to their The lease on the NAWC's 19th street to water utilities of the SDWA and other effectiveness, delegating enforcement office expired in 1984 and the rent was regulations. It found that mandatory authority to the states and putting more increased. So Morris moved the headquar­ sludge disposal, training, monitoring for emphasis on community input and edu­ ters around the corner to the present of­ impurities, dam improvements and safety cation. The Association met that year in fices at 1725 K. St. where there was more measures had increased operating costs of Washington D . C. for the first time since space ... and better light. The move pro­ a typical10,000-customer company by 37 1969. Morris announced that he would vided a rationale for upgrading the percent. leave the Association in 1985 to head up Association's computers. Jim LaFrankie, Association chairman, PS Water Resources, a non-regulated sub­ That summer, Tom Moses, chairman of was elected president of American Water sidiary of Philadelphia Suburban Corpo­ the Indianapolis Water Company, an­ Works Company in 1984. George ration. And Fred Allen said he'd retire nounced the election of Dale Luther as presi­ Johnstone, who headed American's con­ shortly thereafter. Incoming president dent and CEO, succeeding Ray Williams. tract service subsidiary, became senior Gerber had his work cut out for him. In another move, Jim Kelly, former Pennsyl­ vice president of the company's manage­ New administrative leadership ap­ vania regulator and president of NARUC, ment services arm. He would be a leading peared in the person of James B. (Jim) joined the American Water System as vice­ industry proponent of privatization and Groff, a retired naval officer and decorated president for regulatory practices. public-private partnerships. It was at about Vietnam Water veteran, who succeeded this time that the Association published Morris in the summer of 1985. The Magazine Is Revamped a position paper on conservation which Association's biennial "Financial Facts" Association president John Parker, of called for the continued development of was replaced about that time by a new Consumers Water Company, set as one of supplies, aggressive leak detection and "Financial and Common Stock Report," his goals in 1984 improving the repair, universal metering, consumer edu­ published quarterly by Edward D. Jones organization's visibility and its communi­ cation and rates that reflected the full cost & Co., a brokerage that followed the in­ cations. A visible manifestation was the of service. dustry. Joe Pope, of Hackensack Water renaming and redesign of The Quarterly. Company, chairman of the Finance Com­ It became WATER magazine and was Investor Programs mittee, arranged the move to provide brightened by a four-color cover and more (jain Momentum more timely and more detailed informa­ graphics. The Executive Committee . The large, actively-traded companies tion on the water utilities. changed the bylaws to end the stepped up their investor relations activi­ Within months of Groff's arrival, he faced grandfathering of Board seats so represen­ ties in the 1980s, appearing regularly be­ a financial crisis: $600,000 in Association tation would continue to reflect the num­ fore investment analysts' and brokers' assets, its reserves for emergencies, was fro­ ber of customers served by member com­ meetings coast-to-coast. Widespread media zen in three collapsed Maryland savings and panies in each state. The new election attention to water shortages and incidents loan associations. All the funds were even­ protocol called for a nominating commit­ of contamination heightened interest in tually released in 1989, but at a loss of three tee in each state which would caucus mem­ water utilities. The rate of inflation had or four years' interest. bers and elect an appropriate number of slowed to about 4 percent and water util­ directors. The dues structure also was re­ ity stocks were trading at new highs. Bob lindberg Takes Helm vised to ease the burden on smaller com­ Gerber declared the end of "torture by At the annual conference in Monterey panies, which the Association was trying inflation." that year, Ralph Lindberg of California

• NAWCWATER Water Service Company, was elected As­ sociation president. The House of Representatives introduced a tax reform bill in 1985 that once again construed contributions-in-aid-of-construc­ tion (CIAC) as taxable income. This prompted a flurry of activities to head off the provision and see that it wasn't included in the Senate's tax proposal. It was also about this time that the EPA proposed a new, tougher MCL for fluoride. Insurance premiums were skyrocketing by the mid- 1980's, driven by changes in tort law, by concerns about the grow­ ing number of water borne impurities being enumerated by the EPA, and by the general explosion oflitigation nationwide. Some small companies were losing their coverage and they petitioned the Associa­ tion to address the problem. (The premi­ James V. LaFrankie ums for a policy covering NAWC direc­ tors and officers had increased six-fold, from $800 to $5000.) Lindberg, speaking to Great Lakes regulators the following LaFrankie Steps Down the EPA pressed its THM regs, radon regs summer, said if water companies couldn't At the annual conference in Indianapolis and a new initiative to eliminate even trace get insurance, legislatures would have to that fall Jim LaFrankie stepped down as amounts oflead in drinking water. Gascon limit their liability, as they had done for chairman of the Association after eight years and Groff made it a point to attend all fire departments and other providers of and Bob Gerber succeeded him. La Frankie regional and national meetings of the Na­ public services. The Association began to expressed pride in the Association's work tional Association of Regulatory Utility look for a solution to the insurance prob­ since moving to Washington in the late Commissioners. lem and a couple years later convinced at 1960s, particularly in improving the visibil­ Employee benefit costs were soaring in least one agency that small water utilities ity of the industry and in winning respect the 1980s. One 1986 survey showed that were not an unusual insurance risk. for its professionalism. But he-and other health and life insurance, pensions, So­ The year 1986 was a rough one for the leaders-also noted the frustrations of work­ cial Security, unemployment insurance, va­ industry and the Association: ing with such a large and diverse Board and cations, holidays, sick leave, and educa­ of trying to move legislators and regulators tional benefits represented about 38% of Congress passed a tax reform bill which on industry issues. Dale Luther was elected utility payrolls. reduced the corporate income tax but Association president at the Indianapolis imposed other taxes, including the oner­ meeting. Drought Strikes Again ous one on contributions received from In corporate 'developments about that Much of the U.S. suffered from the worst contractors to help pay for main exten­ time, Jack McGregor was tapped as presi­ drought in 50 years in 1987. In July, half sions (CIAC). Once again, Congress dent of Bridgeport Hydraulic Company, the nation's agricultural counties were de­ construed those funds as income, not succeeding Bill Warner, who remained clared disaster areas. On a brighter note, the capital. chairman; Bob Luksa was elected presi­ 40-year U.S. nuclear stand-off with the dent of Philadelphia Suburban Water USSR began to wane. President Reagan and The EPA proposed Safe Drinking Wa­ Company, and American Water Works Soviet leader Mikhail Gorbachev signed an ter Act amendments which identified Company broke ground for a new 43,000- agreement calling for the dismantling of all new contaminants to be regulated but square-foot corporate headquarters in long range missiles. Gorbachev also ex­ didn't include reforms the industry was Voorhees, New Jersey. tended Russia's moratorium on nuclear test­ seeking. Sharon Gascon joined the Association ing and declared a glastnost, a new open­ in the spring of 1986 a~ assistant execu­ ness in Soviet affairs which permitted more Two esteemed industry leaders passed tive director. The organization adopted a open local elections. away: Frank Dolson, former president new logo, the striated water drop. And the The Stock Market was on a roll in early and chairman of the St. Louis County Good Journalism Award was established 1987. The Dow reached a record high of Water Company, and Tom Moses, chair­ to give member companies a vehicle for 2722 in August, then by October, when man of the Indianapolis Water Com­ recognizing responsible, informative re­ the Association met in Orlando, it pany and, at one time, the Philadelphia porting about industry issues. Through it dropped 1,000 points. There was wide- Suburban Water Company. all, the advocacy work kept piling up as (continued next page)

FALL 1995 • Centennial, continued tain service from one of its two plants tion of federal tax policy and subsidies to spread doubt whether Washington could which was just upstream of the spill. municipal water suppliers was eliminating control either the Federal budget or the In 1988, responding to the growing investor-owned companies' competitive nation's growing trade deficit. Any hope public interest in water issues, Congress edge over municipal suppliers. He said it the Association had of changing the IRS' established National Drinking Water was incumbent upon the Association to treatment of CIAC went out the window. Week, an annual observance to highlight work to "level the playing field." An econo­ But the Association was moving: for the the importance of safe water and to pro­ mist told the meeting that the public had first time, as a result of Gascon's efforts, vide a setting for educational activities. overreacted to the market crash a year ear­ water service issues were on the agenda at Association President Jim Barr told a lier, that the GNP was up nicely in 1988, all regional NARUC conferences. NARUC convention that effective regu­ unemployment was moderate and the Chet Ring was elected president of lation and good management had pro­ prognosis was for continued economic Elizabethtown Water Company in 1987, duced results for investor-owned water growth through 1989. A few weeks after succeeding Henry Patterson, who became companies "that few could have antici­ the meeting, George Bush was elected vice chairman. A NARUC survey released pated five years ago." Member companies president by a comfortable margin. about that time showed that the commis­ were attracting investors and putting capi­ In February, 1989, Abel Wolman, the sions that regulated utilities were chang­ tal into new facilities at a record pace to Johns Hopkins engineer who became an ing. Over the past 20 years their members meet new quality standards, he said. early driving force in AWWA and an in­ had tended to be Democrats (by about 2 ternationally recognized authority on pub­ to 1), but many were now identifying as Customers Voice Satisfaction lic water supply, died at age 96. independents. The percentage of women The Association commissioned its own In the Spring 1989 issue of Water, As­ on the commissions had increased from opinion poll that year, interviewing 1,000 sociation President Chet Ring, of about 2% in 1968 to 20% in 1987, and customers of member companies coast-to­ Elizabethtown Water Company, compared the percentage of regulators who were law­ coast. The results indicated that 90 per­ the business environment with that of yers had declined from 50% to 30%. The cent of customers were satisfied with their 1989 and found these differences: average age of commissioners (51) and water service but about 30 percent thought 1980 1989 their average length of service (5 years) had it cost too much. Many of those inter­ Prime rate 20% 10% stayed the same. viewed wanted more information on the Wage increases 10% 4% The Association grieved the loss of two quality of their water and suggested that Market-to-book more former leaders in 1987. Jack Barr, bill inserts were the best means to pro­ value of selected former president of American Water vide it. Jim Groff participated in a panel water co. stocks 60% 150% Works Company and chairman of the As­ at NARUC's centennial conference on Return on equity sociation, died at age 73. And Fred Key Issues Facing Utilities and Regulators. allowed by Silliman, retired chairman of Bridgeport It represented a new level of visibility for regulators 14% 12% Hydraulic Company and president of water issues. NAWC in the 1960s, passed away at age Association president Barr told a meet­ No question, the environment had im- n. Within months, Barr's son, Jim, be­ ing in Boston that fall that the combina- proved, Ring said. But he noted that the came the organization's president. The EPA published its final rules on vola­ tile organic contaminants that year and they required that all drinking water drawn from surface supplies be filtered unless the sup­ plier were granted a waiver. Mike Cook, who headed the EPA's Office of Drinking Water, warned that the publicity attendant to non­ compliance would erode confidence in the entire industry. This also was the year the Association helped open the doors of CoBank, a cooperative bank that financed worthy community initiatives, to small wa­ ter companies. In January, 1988, an oil company stor­ age tank burst near the Monongahela River above Pittsburgh, releasing thou­ sands of gallons _of fuel oil into the river and threatening the drinking water of some 750,000 people in the city's suburbs. Pennsylvania-American Water Company, o the area's main supplier, managed to main- j. James Barr

• NAWCWATER t(lxation of CIAC as income put investor­ delphia Suburban, was elected president. Board but reduced its size from 141 mem­ owned companies (It a distinct disadvan­ Gerber said later he was pleased by the bers to 35. The Execlltive Committee ap­ tage vis a vis municipal suppliers_ I n the Association's growing visibility in Wash­ proved a plan to expand the Washington next issuc of the Association magazine, he ington but was concerned that its focus office and add staff. One new staffer, Jim commented on the high levels of capital was tilting toward environmental and Good, was brought aboard to energize the spending among member companies: water quality issues at the expense of eco­ government relations program. $125 million at American, $90 million at nomic ones. (In 1995 he said that bias Bridgeport, $50 mil lion at Elizabethtown seemed to have been cotrected.) The As­ The Cold War Ends and at Middlesex Water and $254 million sociation launched an initiative in 1989 The world balance of power shifted in at Philadelphia Suburban. to encourage more public/private partner­ 1991 when Soviet reformers suspended A NARUC study that year indicated ships to address water supply, waste treat­ the activities of the Communist party. that holders of electric and telephone com­ ment and environmental problems. It fo­ Several republics declared their indepen~ pany stocks had realized average total re­ cused on legislative impediments to such dence and the Soviet Union was dissolved. turns of 13.4% and 14.6%, respectively, arrangements and ways to eliminate them. T he bottled water business took a hit in the 1970's and '80s, more than inves­ that year, too, when a New York labora­ tors in non-regulated industries. The regu­ Climatologist Foresees Floods tory revealed that nine of 88 brands it lators said t he study refuted utilities' Climatologist l ben Browning told a tested did not meet the state's drinking claims of miserly regulation. Merry convention in Boston that year that after water standards. Perrier, a premier spring Mosbacher, of Edward D. Jones & Co., three years of drought in some parts of the water, was found to contain 17 parts per noted that summer that the PE ratios of count ry the nation was in for record rains billion of benzene, three times the New the most widely traded water company and floods in the next few years. H is York MCL. It was quickly withdrawn from stocks had risen from 8% to 1l.5% since words would prove prophetic in 1993. market shelves worldwide. George 1984, and their market-to-book value had The U.S. sent troops to the Middle East Johnstone was elected president of Ameri­ increased from 109% to 146(Xl. The in the summer of 1990 after Iraqi forces can Water Works Company that spring Association's liaison with regulators had invaded neighboring Kuwait. American when Jim LaFrankie retired. improved, too. Association representa­ and allied troops invaded Iraq in January Association Chairman Jim Barr told the tives were now invited to attend the an­ and subdued Saddam H ussein's army in NAWC Board that year that the executive nual meetings of the regulatory lawyers, four days of fighting. team of Groff and Gascon h ad made great engineers and accountants. Marilyn Miller retired as NAWC's di­ strides in strengthening the group's legis­ rector of administration in 1990. A news­ lative and regulatory programs Hackensack Cioes Ozone letter, NewsFlow, debuted at about this LaJuana Wilcher, deputy director of the This was the year of the Exxon Valdez time. This was also the year United Wa­ EPA's Office of Drinking Water, told the oil spill in Alaska and the government's ter Resources announced a plan to buy the Association's annllal meeting in Palm savings and loan bailout, which was ex­ water properties of Pennsylvania Gas & Dese rt, California, t hat fall t hat the pected to cost u.S. taxpayers some $400 Water Company. But the deal W

fALL 1995 e • Cen tennial) continued 1992, bringing to 41 the number of states timism that the climate in Washington Consumer's Water Company in 1992, suc­ represented in its membership. might at last be right to get some action ceeding John Parker. And Nick on the taxation of C IAC_ DeBenedictis, a former EPA and Pennsyl­ Officers on Slump In 1994) a Washington receptio n and vania environmental official, was named Association president Bill Holmes dinner for members of congress drew a president and CEO of Philadelphia Sub· spoke out in 1993 about the fact that the record 34 representatives and 125 Asso­ urban Corp. tax law caused investor-owned companies ciation membe rs. And last fall, Jack to raise rates while another law provided McGregor succeeded Tompkins as presi ­ Poll on lead is Revealing low-cost capital for municipal suppliers. dent of the Association at the annual meet­ The Association held its second biggest Don Correll, of UWR, testifying before ing in Scottsdale, Arizona_ annual meeting ever at Hilton H ead in Congress, said that the tax on CIAC was The National Association of Water 1992. Bill Holmes, of Consumers Water causing investor-owned companies to lose Companies' first 100 years culminated at Company, took the helm and vowed to business to municipal systems, increasing a gala centennial reception and dinner in pursue with new vigor three ongoing the cost of a new home by as much as February, 1995, in the spectacular G reat causes: SDWA reform, reclassification of $2,000 and lead ing to the creation of H all of the Library Congress. President contributions-in-aid-of-construction as small , nonviable water companies. Jim Jack McG regor presented awards to four capital, not income, and the promotion of Barr, addressing a NARUC conference, members of Congress who had advanced public/private partnerships. The Associa­ said the cost of water was nowhere near a the interests of the environmentalists and tion polled its membership that year on financial burden o n customers. Millions water suppli ers in recent years: Reps. Bill the EPA's new lead and copper rules. Of were paying $ 1 a gallon fo r bottled water Archer (R., Tex); Tom Bliley (R., Va.); Bob the 43 large companies that responded, he said, while enjoy ing quality tap water Matsui (D., Cal), and Bob Michel (D., Ill.), six percent said they had exceeded the lead for about l/3d cent per gallon. who had just retired as House Majority standard in first·draw tap samples and one Unprecedented floods inundated the Leader. Awards also went to Bob Ander­ percent, the copper standard. One com­ Mississippi and Missouri valleys during son, chairman of the Mo ntana PSC and pany had exceeded both standards. The the summer of 1993, shutting down wa­ president of the National Association of inquiry indicated that the corrosiveness ter treatment plants in some cities, con­ Regu latory Utility Commissioners, and to of household water (which is easily cor­ taminating the drinking water in others. Vice President Al Gore, for his environ­ rected) was more important in determin­ And interest rates hit new lows, inducing mental work while a U.S. senator ing test results than the amount of lead in many companies to refinance debt. This Association chairman Jim Barr, the household plumbing (which is not). was the year terrorists bombed the World principal speaker, expressed his great The Association established the David Tracie Center in New York, killing six and pride in the organization_ He called to L. Owens Scholarship in 1992. The award, injuring more than 1,000. And Federal mind the 16 Pennsy lvania utility operators supported by Utilities, I nc., of Illinois, agents stormed a religious sect's com­ who had traveled by horse and rail to honors the man who was the company's pound near Waco, Texas, killing 72 Cresson, Pennsylvania, 100 years earlier president from 1968 until his death in people, including dozens of women and to form an alliance to advance their COIll­ 1988. It provides a $10,000 grant to a children. man interests. "They had no idea how graduate student in a discipline wh ich In September, 1993, United Water Re· important that meeting was to be," Barr might lead to a career in the water busi­ sources a nd OWC Corporatio n a n­ said. "And this evening we celebrate what ness. nounced plans to merge to form the they began" Bill Clinton defeated George Bush for nation's second largest investor-owned Over the years, Barr recalled, members the presidency that fall in a race in which water utility. It would serve about 14 mil­ have "chewed knuckles, pounded fists, Ross Perot, an independent, garnered al­ li on people in 14 states. Lyonnaise des ancl beaten chests ... but they never wa­ most 20 percent of the popular vote. In Eaux-Dumex, the French company that vered in their beli efin the appropriateness January, Clinton tapped Florida DEP di· held an 82% interest in owe, would own of their work or the fe rvor of their com­ rector Carol Browner to head the EPA. 26% of the new company. In another big mitment." T he National Association of George Johnstone, president of Ameri­ industry development in 1993, a partner­ Water Companies knows exactly where it can Water Works Company, told a New s hip involving IWC Resou rces and is going, he said. "And it is still operating England utility conference that spri ng Lyonnaise des Eaux was selected to on the principles set down at its incep­ about his company's initiatives to acquire privatize Indianapolis' waste water treat­ ti o n. " (In just t he past 10 years, rhe small companies and regionalize services. ment plants. The city said the deal would Association's staff, its budget, its office He romed acquisition as a workable solu­ save taxpayers $65 million over the five­ space and its cash reserve had doubled and tion to the ·problems of small companies. year term of the contract_ its membership had grown by 45%.) (It was abollt this time that American's Barr t hen offe red a toast "to the Midwest subsidi aries bought four utilities Tompkins is Optimistic Association's accomplishment and its re­ serving ahnost 500,000 people in Indiana, Rich Tompkins, of the Middlesex Wa· solve and enthusiasm for the future." And Missouri , Ohio and Mi chigan.) ter Company, was elected president of the each of the 300-or-so guests at the dinner M embers of the Washington Water Associatio n at the annual meeting in raised, then sipped from.. a glass of Utility Association joined the NAWC in Williamsburg that fall. He expressed op- water. • e NAWCWATER .. Acquisition Incentives: Encouraging Regionalization in the Water Industry

NARUC Great Lakes Conference Greenbriar July 17, 7995

by Wendell Holland

Good morning. Fi rst, I am pleased to

FALL 1995 e Acquisition Incen tives, continued sition adju stments which enable the ac­ should be applied to the rates of the quiring utility to amortize the difference acquired company, to the extent that is Accounting Standards Board 106 would between depreciated original cost and reasonable. Under certain circum­ be a barrier to a phase-in or deferred re­ purchase price over a reasonable period stances of extreme differences in rates, covery of plant improvement costs_ of time. Small financially troubled wa­ and/or of affordability concerns, con­ Yet, not all at the Pennsylvania Com­ ter companies often have a book value sideration should be given to a phase­ missioners praised t he new policy. Is this which is extremely low or even zero. in of the rate difference over a reason­ not surprising? One Commissioner con­ Provided that the purch ase price is able period of time. sidered it to be inappropriate to levy a pre­ found to be prudent and the sale was In my opinion, it would be fair and ap­ mium that will be multiplied against all conducted at arms-length, the higher, propriate for the Commission to reflect a of the collective investments of the sur­ actual purchase price can now be rec­ company's regionalization efforts in its viving or acquiring utility. Such an ap­ ognized by the Commission pursuant ROE as it appropriately reflects the in­ proach may create a disproportionate in­ to 66 Pa. C.S. §132 7 (Act 24 of1990)."5 creased risk associated with regional­ ducement. H e further noted that those On balance, I believe that there is no ization. Tradi.tionally, water utili ties, as we customers of the acquiring utility who pre­ jurisdictional imbalance between the two all know, have been relatively risk free, date the takeover or acquisition at issue sections and this Commissioner's con­ hence justifying the lower authorized re­ could end up being penali zed by having cerns should be allayed. turns, relative to their electric and natu­ to pay a higher rate of return to the com­ To accomplish the goal of increasing the ral gas counterparts. However, in acquir­ pany, even though there was no corre­ number of needed mergers and acquisi­ ing a troubled water system, the company sponding improvement in the quality of tions to foster regionalization, the Com­ is Ubuying a bag of bones" as one commen­ service that those customers receive. mission stated further that the following tator aptly put it. Hence it should be re­ parameters should also be considered: flected in rates, particularly as the acquir­ "The legislative approach articulated in 1. T he acquisition will serve the general ing utility is pursuing a valid public Section 1327, 66 Pa. C.S. Section 1327, public interest; purpose that clearly serves the public in­ tends to reflect this distinction. That 2. The acquiring company meets the crite­ terest. section al lows additional costs above ria of viability and such viability will While we are addressing incentives, I depreciated original cost to be included not be impaired by the acquisition; that should add t hat a sound viability policy in rate base under certain circum­ is, it maintains the managerial, techni­ could appropriately include an integrated stances. In so doing, it provides express cal, and financial capabilities to safely resource plan of sorts that would incor­ recognition of the acquired assets which and adequately operate the acquired porate land Llse and development issues deserve to be included in t he calcula­ company, in compliance with the Pu b­ that drive the creation of many new and tion of the acquiring utility's cost of ser­ lic Utility Code, the Safe Drinking small systems in the first place. As my vice, rather than inflating the costs of Water Act, and all other requisite regu­ former assistant often said "had the water service to include costs not related to latory requirements on a short and long planning and growth development pro­ the acquisition or takeover. term basis; cess been historically better interrelated, Of particular interest in this regard 3. The acquired company is notviablci that Pennsylvania would not now be inundated is the relationship between Section is, it is in violation of statutor y or regu­ with the number of smal l troubled water 1327 and Section 523 in defining the latory standards concerning the safety, systems it has."6 Commission's jurisdictional bound­ adequacy, efficiency or reasonableness aries to implement incentives for acqui­ of service and facilities; it has failed to A Case Sludy sitions and mergers of smail, nonviable comply, within a reasonable period of While acquisitions for regionalization water utilities. Section 1327 was en­ time, with any order of the Department is a viable goal, it does not happen with­ acted later in time and is marc specific of Environmental Resources or the Pub­ out burden. Like many regulatory proceed­ than the provisions of Section 523. lic Utility Commission; and that it can­ ings, acquisition proceedings can be Under Section 523 of the Public Util· not be expected to furnish and main­ lengthy, and problems could arise because ity Code, the Commission is expressly tain safe, adequate, efficient or of foreseen or unforeseen circumstances. authorized to make adjustments to spe­ reasonable service and facilities in the For example, in a matter that I recently cific components of a utility's claimed future; handled, an investor-owned utility and a cost of service to reflect relevant and 4. Thc acquired company's ratepayers municipalit y agreed that the company material evidence of "efficiency, effec­ shou ld be provided with improved ser­ could purchase that portion of the tiveness and adequacy." Many believe vice, with the necessary plant improve­ municipality's system that was outside the that Section 523 provides the Commis­ ments being completed within a reason­ municipality and therefore within the ju­ sion with broad latitude to recognize able period of time; risdiction of t he Pennsylvania Commis­ significant regionalization contribu­ 5. T he purchase price of the acquisition is sion. For years residents complained of tions by awarding a higher than normal fai r and reasonable and the acquisition inadequate service, and, the municipality equit y return on certain acquisitions h as been conducted through arm's had failed to comply with a number of and improvement investments. length negotiations; and Commission orders. The situation was Currently, Section 1327 allows acqui- 6. The concept of single tariff pricing ripe to apply the policy of regionalization. e NAWCWATER r

Well, 1 am here to tell you that after southeaster n part of South Africa, and viding water to South Africa, it furthers about nearly two years and about five re­ would be roughly where Tennessee and President Mandela's goals, as stated in his lated legal proceedings later, the deal is northern Georgia are in the U.S.). Reconstruction and Development Plan not ful ly consummated. We were called The main objectives of the project are (RDP) of improving t hat country's infra­ in abollt three months ago to rectify the to supplement the water supply to the structure- particularly the delivery of wa­ situation. What was most bothersome was G reater Johannesburg/Pretoria Region ter to both urban areas and the country's the attempt by t wo dissenting members of (Gat eung Province) and to p rovide rich farmlands. Finally, it serves notice to the Borough Council to use its local Code Lesotho with hydro-electricity. It is the foreign investors that "yes," there are in­ to frustrate the powers of the Commission biggest of its kind under construction in deed significant investment opportunities and kill the deal. Of course, if this matter the world. This major bi-nati onal project in Southern Africa: (1) assuring an ad­ involved any private companies, t his juris­ involves impounding the surplus water equate return (with incentives), (2) of rela­ dictional issue probably would not have from the rivers in the highlands (moun­ tively low risk, (3) in politically stable arisen . H owever, we expect a decision tains of Lesotho) t hrough the existing countries, and (4) with sound economies. soon from the Commission resolving this (Maluti) mountain range and across the jurisdictional matter so that we may move border to South Af rica where it will Conclusion closer to cl osure. supplement t he overtaxed water resources In closing, as I move back to In many respects, this company was of the Uaal River Basin that serve the regionalization here in the States, I would ripe for a take-over under the Mandatory mining and industrial center of Pretoria. note that greater efforts by policy makers, Takeover Act, except for the absence of a The constructio n of the project is spon­ regulators and t he water purveyors will be clear finding by a regularory agency of a sored jointly by the governments of needed in the immediate future in order violation. This standard should be less~ Lesotho and South Africa. A ll water trans­ to better ensure dependable fut ure sup­ ened and not reinforced. The Commission ferred to South Africa will be purchased plies of drinking water. Cooperation by may address this issue while instituting in terms of the agreed royalty payments customers will also be imperative as in­ t he Policy Statement. It states that "it per cubic meter. A n authority h as been frastructure and operating improvements should be the objective of the Commis­ especially created to admi ni ster and run will result in higher rates for this commod~ sion t o encourage acquisition via the project in terms of the international ity, the value of which has often been un­ ratemaking incentives by viable water com­ treaty signed in 1986. The ultimate de­ derestimated.7 The Pennsylvania Commis­ panies of water companies which are in vio· velopment will include up to six major sion, with its Policy Statement out for lation of applicable health and safety stan­ dams. comments, is well on its way toward effec­ dards when sllch acquisitions are in the Now, does it satisfy the definition of tive regionali zation. public inrerest,U I believe t hat t he Com­ regionalization, at least as defined by the Its regulations, in conjunction with mission should not be as rest rictive to in­ Pennsylvania Commission in its Order of other applicable state and federal laws, clude only th ose companies who are in May 11 , 1995, as the consolidation of two provide a workable system of operating actual v iolation. Rather my colleagues or more water systems for the purpose of standards by which its regulated utilities may wish to adopt an alternative standard in c r eased viability (D ocket No. M- must abide. Hopefully, the Commission that only requires "substantial record evi­ 00950686)? ABSOLUTELY it increases will keep its course and continue to strive dence of inadequate service" (v ia sworn viability of water systems in the respec­ toward ensuring that these regulated uti I i­ testimony of witnesses) as an addition (or tive countri es. It would even satisfy the ties uphold t heir responsibilities toward even substitute) to the requirement of an broader industry definition as "being in t heir customers of today which will, in agency finding. Phrased differently, and the range of possible approaches, from the turn, help to enable an adequate, safe and at the risk of sounding like a regulator, actual physical connection of systems to reasonably-priced supply of water for the ratepayers know bad service when they an administrative and management a r­ customers of the future. receive it and should not be frustrated by rangement to provide common technical, THANK YOU. , a higher legal standard that the non-com­ operational or financial services for t wo plaint utility may strategically use to its or more systems." benefit. Second, what are the incentives? The incentives, as opposed to the results are Footnotes I nlel'natiollai Re,gionaliza lion obvious. Lesotho would realize untold rev­ [See Brown, Stanley "Presentation for the A.W.A. I would be remiss if I did not mention enues to what is perhaps one of the poor­ Association Satellite Teleconference" lid. my exposure to regionalization at the in­ est economies in the world, On the other 3See Proposed Policy Statement Re: Incentives for ternational level, particularly as I have li t­ hand, South Africa's incentive is to be able the Acquisition of Small, Nonviable Water Utili· erally just returned from overseas and to further improve international relations ties, Docket No. M·00950686 (Adopted May [ 1 , hnve not dried out yet. South Africa and as it starts to regain worldwide acceptance 1995). the country of Lesot ho have entered into and improve the supply of water to its ag­ ~ Id. See Statement of Chairman Quain. 5Id.; Statement of Commissioner Rolka. an agreement to develop the Lesotho ricultural and industrial base. 6See Allen, Carol J- "Planning and it~ Interrelation­ Highland Watet Project. (By way of geo· As a fo rmer regulator, I must ask, "Is ship to tegionalization and Conservation." Septem· graphical background, the country of this regionalization project in the public ber 14, 1992. Lesotho is wholly surrounded in the interest?" Again, t he answer is yes. By pro- 7See Brown, supra.

FALL 1995 e I I Tri-County Water Supply Project Uses State-of-the-Art Technology to Meet a Region's Water Needs

by Howord j. Woods, jr. Vice President, New jersey-American Water Company Haddon Heights, N.j.

The solution to the southern New Jer­ County Water Supply Project, being built fied and eva luated various unit processes sey region's water supply problem is at near the Delaware River in Delran, New to resolve key issues such as 1) the effec­ hand. After completion at the end of this Jersey, represents the most advanced tech­ tiveness and cost savings associated with year, New Je rsey·American Water nology available in the water industry to­ high r ate clarification and high rate filtra­ Company's TTi·County Water Supply day. Groundbreaking took place in Sep­ tion; 2) selection of the most effective Project will start delivering water to as tember 1993, and the treatment plant is preoxidant/predisinfectant fo r disinfec­ many as 55 communities in Burlington, expected to begin operations in January tion, d isinfection byproduct (DBP) con­ Camden and Gloucester counties in New 1996, with an initial capacity of 30 mgd. trol, taste and odor removal, and color Jersey. The communities wi ll need to The plant design allows for capacity ex­ removal; 3) alternative methods of chemi­ supplement their water supplies as a re­ pansion in 10 mgd increments up to 100 cal spill control; 4) alternative methods sult of a mandate by the N.J. Department rngd to meet future water needs. of taste and odor co ntrol; 5) alternative of Environmental Protection (DEP) to re­ The ultimate 100 mgd plant will be di­ methods for DBP control and disinfec­ duce pumping from the region's aquifer. vided into two separate 50 mgd process tion; and 6) corrosion control. In 1986, the New Jersey DEP desig­ trains that will be combined at the clearwells New Jersey-American also conducted ex­ nated an area of southern New Jersey as a and high service pump station. Each train tensive research in cooperation with other Water Supply Critical Area because the has been designed with provisions for staged water utilities in the region to examine the Potomac-Raritan-Magothy (PRM) aquifer construction to economically meet the in­ effects of mixing treated surface water with that serves the region was being depleted creasing demand. The plant is also designed the ground water supplies now in use_ Re­ faster than nature could replenish it. The to conform to disinfection byproduct regu­ sults of the research were used in the treat­ DEP also identified the Delaware River as lations that may be adopted by the U.S. ment plant design to assure that water from the only reliable long-term alternative Environmental Protection Agency or the the Project wi ll be compatible with and equal water source to the endangered aquifer. N.J. DEP in the future. to the quality of well water. The Tri-County Water Supply Project will draw water from the Delaware: River and Pilot Study and Research Start of the Process: treat it in a state-of-t he-art filtration plant, In 1990, New Jersey-American con­ Delaware River Intake then pUlnp it out through an extensive ducted a pilot study to determine the most New Jersey-American has received a pipeline system. effective method of treating Delaware water allocation permit to allow for the River water to ensure that it will meet or withdrawal of up to 40 mgd from the Dela­ The Treatment Plant be bener than all state and federal water ware R iver. This withdrawal is very small The water treatment plant for the Tri- quality standards. The pilot study identi- compared to the amount of water in the

e NAWCWATER river: the minimum amount of water that showed that ozone provides superior par­ and corrosion controL flows past the intake site during a severe ticle removal while keeping the production A river intake screen backwash system drought is nearly 2,000 mgd; after a heavy of trihalomethanes (THMs) and other dis­ will remove debris from the su bmerged rain, the amount might be as much as infectio n byproducts to a minimum. screens. A filter backwash system will 7,750 mgd. Therefore, ozone will be used as the pri­ clean the GAC filters. The plant also in­ River water will flow by gravity to the mary oxidant. cludes a complete residuals handling and pumping station through two nearly 1800- dewatering facility to treat the process foot-long pipes, both 54 inches in diam­ Clarification and Filtration wastes generated by the water treatment eter. The ends of the intake pipes are con­ After the addition of chemical coagu­ process. structed of wire screens similar to well lants, most of the solid matter in the raw The entire treatment process will be screens and are located in the river about water will be removed by a clarifier called controlled and monitored by a Distrib­ 1,000 feet from the bulkhead line at the a Superpulsator®. This unit is the most uted Control System (DCS). The DCS shore, within the New Jersey state bound­ flexible and cost-effective means of clari­ will monitor the status of equipment, aries and outside of the designated ship­ fication identified by the pilot study. In alarms, and process variables such as lev­ ping channels. Working with the U.S. addition, the unit is much smaller than els, pressures, turbidities, pH, chemical Coast Guard, New Jersey-American visibly more traditional devices. This size advan­ residuals, streaming current, flows, tem­ marked the screens and the intake pipes tage lowered the construction costs of the perature and electrical usage. at the. water's surface with buoys or other treatment plant by reducing the amount In order to meet varying water demands markers. of space needed. without disrupting plant operations, the Single-media, deep-bed, granular-acti­ overall flow control philosophy will be to l Ie Pumping Station vated carbon (GAC) filters will be used maintain an adequate constant pressure The raw water pumping station for the to remove additional solid particles, ab­ in t he high service system by varying the Project is being constructed about 800 feet sorb organics, and control taste and odor. flow of the high service pumps. Also, a from the Delaware River's bank in west­ GAC filters will also give additional pro­ relatively constant flow th rough the plant ern Burlington County. Raw water will tection in case of an oil or chemical spill will be maintained by using the volume flow by gravity through the passive intake in the river. in the clearwells to equalize minimum and screens in the river and the subsequent maximum demands. intake piping into the raw water pumping Final Disinfection station wet wells. Pumps will deliver the The final disinfection process will use The Transmission System water to the treatment plant. Powered by chlorine, the disinfectant currently used An extensive pipeline system, incorpo­ electric motors and controlled by a com­ by New Jersey-American and other water rating transmission mains as large as 54 puter system at the t reatment plant, these utilities that will purchase water from the inches in diameter down to 24 inches, will pumps will be backed up by generators to Tri-County Water Supply Project. The carry water from the treatment plant to supply power during electrical failu res. treatment process is also designed to al­ the communities that purchase water from low ammonia to be added to the filtered the Project. To keep construction and op­ 'he Treatment Site water should the EPA or N.]. DEP change erating costs to a minimum, New Jersey­ From the pumping station, raw water the THM standard. American is using existing infrastructu re from the Delaware River will be pumped wherever possible. In addition, pipeline through a two-mile-long, 54-inch diameter Pumping and Distribution routes were designed to protect the envi­ pi peline to the treatment plant site. Wa­ The filtered water will be evenly distrib­ ronment and to minimize disruption of ter will flow into a 15-million-gallon stor­ uted to the clearwells, where it will flow existing utilities, traffic patterns and pri­ age basin constructed with a flexible mem­ by gravity in a serpentine pattern around vate property. brane liner and located at the lowest point baffle walls for effective disinfection con­ of the treatment plant. In the basin, the tact. At the end of the clearwell, finished At The Tap water will be tested to identify normal water will enter the pumping station wet When residents begin receiving water fluctuations in' the quality of raw water wells from pumping to the distribution from the Project next year, they will be so any irregularities can be detected and system. able to count on receiving enough clean treatment adjusted accordingly. The basin and reliable water to meet their needs. In also provides temporary storage to allow Other Treatment Plant Systems addition, because the water from the time to activate wells in case the intake The treatment plant includes many Project will be mixed with the water they ever needs to be closed for some reason. other process systems including chemical currently drink, most people will experi­ From the basin, water will be pumped systems, backwashing systems, and residu­ ence very little taste difference, if any. The to the highest point of the treatment plant, als handling systems. Various liquid and state-of-the-art treatment processes and where it will flow by gravity through the dry chemical systems are being installed the extensive pipeline system of the Tri­ rest of the treatment process. to handle zebra mussel protection at the County Project will help to ensure that river intake, algicide at the reservoir, the southern New Jersey region will have P e-Oxidation and Disinfection preoxidation, disinfection, coagulation, access to a clean, safe water supply for The tesults uf the 1990 pilot study taste and odor control, pH adjustment, many years to come . •

FALL 1995 e , Executive Director's Report ,! by james B. Groff

As most are awa re, this is my last report to came to our home and my office. A beautiful you as Executive Director of the National As· tribute to a lady who was beautiful internally sociation of Water Companies. and externally. O n behalf of my fam ily, thank At some poi nt in time, each of us has an you, and let me share the following with you, experience that tests our resolve, perhaps even that came from dear friends. our faith. Recently, I've encountered two such experiences within a two·month time frame: I'm Free the aecision that I should leave the NAWC, Don't grieve for me, for now I'm free, and the death of my wife from cancer. Liter· I'm foHowing the faith God laid for me. ally, almost overnight my world, and panicu· I took his hand when I heard him call, larly my future, changed. During rhose diffi­ more to be accomplished, and no one should I turned my back and left it all . cult days, I will always remember and become complacent in this changing world, but I could not stay another day appreciate, the lov ing support of my family and progress and success are evident. I'm proud to To laugh, to love, to work or play. the thoughtfulness and kindness of friends and have contributed to the growth of the NAWC. Tasks left undone must stay that way. neighbors. Progress is not achieved however, through 1 found that peace at d ose of day. But now it is time to look forward. Experi­ the efforts of a single individual, and I would If my parting has left a void, ence suggests, however, it is worthwhile to be more than remiss ifI did not acknowledge Then fil! it with remembered joy. briefly review the past, and take at least a snap­ the particularly signifi cant contributions of A friendship shared, a laugh, a kiss­ Ah, yes, these things, I too, will miss. shot of the present. Sharon Gascon, Mike Horner, Jean Lewis, A little over ten years ago , I joined the Bonnie Hayden and Audra Zellner to the Be not burdened with times of sorrow. 1 wish you the sunshine of tomorrow. NAWC after serving as the American Water NAWC. My life's been full , I savored much- Works Association's Deputy Executive Direc­ Looking to the future, I recommended, and Good friends, good times, a loved onc's couch. tor-Governmenc Affairs. At that time (1985), the Executive Committee agreed, that the As­ Perhaps my time seemed all too brief. the Association's budget was $582,000, the sociation develop a strategic plan to guide the Don't lengthen it with unduc grief. staff numbered five, the office occupied a little NAWC. I believe, once developed, that plan, lift up your heart and share with me: over 2700 square feet of space; there were 237 properly constructed, will be a good blueprint God wants me now. He set me free. active members, membershi p equity was to direct the next 100 years of the Association. Author Unknown $453,000 and approximately $500,000 of the But the future is yours, and you should pro­ Association's funds were frozen in defunct vide your thoughts to the Association's leader­ Maryland S&Ls. ship, so that the plan truly represents the needs I've shared my time in the water industry Between then and now, I made 216 trips, of the membership and can be structured to with some wonderful people, and together, flew in excess of 500,000 miles, and spent respond to those needs. we've accomplished a great deal. But this phase many days "on the road," often traveling on My 25 years as an engineer and officer in of my life is over and it's time to get on with weekends an d holidays to ta ke advantage of the U.S. Navy were exciting, challenging and whatever life has in store. Life is a series of lower airfares, to represent the Association at fu lfilling. Frankly, I never dreamed those days opportunities. O ne experience closes, another numerous meetings and events. could be matched. While not as exciting, I nev­ presents irself. Our best days are still to come. Today, staff has doubled to 10 and the ertheless found my time with the Association While I'm disappointed that I will not be Association's budget is three times the 1985 equally stimulating and falfilling. able to continue, I'm also at peace. It's been a figure, reflecting the Association's expanded Ie's been a full 40 years, and while 1 haven't, good run of over to years, rare in the world of legislative, regulatory and membership activi­ for obvious reasons, focused as yet on my life associations. Most importantly, I am blessed ties. Office space has grown by 70% and mem­ after NAWC, I look forward and to the future. with excell em health and the love, so amply bership has increased by almost 50%. Mem­ .My wife's long, quality ofUfe limiting struggle demonstrated recently, of my family. It's hard bership equity has doubled and happily, none with cancer, the last four years being both ex­ to ask for too mu ch more. of the Association's funds are in jeopardy. More tremely painful and debilitating, was a st ud y The past, the present, the future, ingredi­ importantly, our relations with Members of in courage, faith and love_ Few, except those of ents of life. 1 can only say, as inadequate as ir Congress and particularly with commissioners us who were very close to her, wi tnessed her seems, thanks to all OfYOll for all you have done and commission staff, due to the focus Sharon, anguish, because her strength never let it show. with me and for me. Thanks very mllch. the organization's leadership and I have placed How she did it, I'll never know_ May each of you enjoy fair winds and fol­ on this facet of the Association's charge, have Over 150 messages, most of which were lowing seas as you sail the changing oceans of improved measurably. Certainly there is always handwritten, of condolence and sympathy life. • e NAWCWATER ---

f.{egulatory Relations Report

by Sharon L. Gascon

During t h e summ e r meetings of lation, to honor past commitments, and NARUC, the Water Committee debated to enable utilities to respond quickly to issues relative to the SDWA reauthoriza­ market co nditions. tion and reaffirmed its support for the ef­ Other ge neric strategies addressed the forts of the SDWA coalition. The text of manner in which commiss ions themselves the resolutio n unanimously approved by operate. These strategie s envision a com­ NARUC's Executive Committee, appears missio n that is less judicial, less fo llowing this article. adversarial, and more prone to seek con­ NARUC President, Bob A nderson sensus. They also address the need for (Montana PSC), recently appointed Com· commissioners to educate tbe public and missioner Diane Kiesling (Florida PSC) to Commission 2000 stockholder groups about the changing the Pu blic Council on Water Supply Re­ In April of this yea r, 60 public utility role of commissioners. search of t he American Water Works As­ commissioners from 40 states and Canada Implementation steps identified were re­ sociation Research Foundation and Com­ gathered in Denver, Colorado to discuss flective of some significant changes rak­ missio ner Carmen Armenti (New Jersey what a public utility commission should ing place in state public utility commis­ BPU) to the Public Advisory Forum to the look like in the year 2000. sions. If these steps are implemented, Officers and Di rectors of the American From the array of missions identified pues will become more externally fo­ Water Works Association_ C ommissioner by commiss ioners, it was found that a v i­ clI sed, rely more on d ispute resolution Henry Duque (California Public Utility tal role for state utility commissioners con­ than adjudicator y proceedings, observe a Commiss io n) was appointed to the tinues to exist (1) during the transition to change in staff skills and achieve a better NARUC Committee on Water. more competitive markets, (2) for those understanding on the part of staff of com­ John Borrows has acce pted appoint­ portions of the utility marketplace that petitive markets, become more automated, ment as the senior water researcher at The may not be fu ll y competitive in the short and become more likely to question old National Regulatory Research Institute or medium-term, and (3) even in fully com­ assumptions and definitions. (NRRI). John was prev iously the Director petitive markets. There was no doubt of the Utilities Div ision for the Public among commissio ners that the role of the STATE REGULATORY HIGHLIGHTS Uti li ty Commission of Ohio, and has for state publi c utility commissioner will un­ the past four years been a senior research dergo substantial change. Meter Tampering Cost Recovery specialist at the NRRL He has extensive In defining commission "responsibili­ Baltimore Gas and Electric (BGE) has experience in utility COS t-o f- service and ties to utili ty managers and shareholders" received approval from the Maryland Pub­ pricing issues, quality-of-service, environ­ {redefined by o ne grou p as "financial vi­ li c Service Commissio n to implement a mental issues , siting, and computerized in­ ability"}, commissioners at the conference new tariff all owing it to recover certain formation system s. John has been ap­ emphasized the need for commissioners to costs incurred when a customer improp­ pointed to the NARUC Staff Water provide cl ear direction to utilities, to limit erly acquires electric or gas service because Committee. the use of traditional rate-of-return regu- (continued next /xtge)

FA LL 1995 e >

Regulatory R elations Report, calise for rate·making and (2) imposition notification where the tax equivalent continued of the cost of the "transition obligatio n" amount as a perccntage of revenues is in of unauthorized tampering with meters. (the accumulated but unrecognized obli­ excess of the above percentage factor for The tampering clIstomers will pay a $90 gation to current employees) was an un­ each respective utility industry. The no­ charge to help cover costs of tampering fair t ransfer of responsibilities between tice will advise the Cllstomer that on aver­ investigation, inspection, billing, and COf­ generations of ratepayers and constituted age a certain percentage ohhe utility bill rective action, which costs BO E $ 700,000 impermissible retroactive rate-making. does not support the direct cost of utility per year. {Town of Norwood, Massachusetts v. operation a nd will be paid to the FERC, No. 93-1785, May 12,1995 (D.C. municipality's general fund. Florida Public Service Commission C ircuit)) The Commission's decision in this Reaches Jurisdictional Decision docket will be drafted into an order for On June 19, J 995, the Florida Public Wisconsin PSC Introduces Commission approval. The order will then Service Commission reached a decision Municipal Tax Equivalent be submitted to the legislature for its re­ on its year long investigation to consider Alternatives view. its jurisdiction over Southern States Utili· The Wisconsin Public Service Commis­ ties (SSU), the state's largest investor­ sion took action recently in a rulemaking Incentive Compensation Plans owned water and wastewater utility. proceeding to introduce an alternative While setting rates for Cincinnati Bell The commission voted that SSU's fa­ method of calculating the tax equivalent Telephone Company, the Kentucky Pub­ cilities and land are administratively and for municipal utilities. The tax equivalent lic Serv ice Commission has approved in­ operationally interrelated, thus constitut­ is calculated annually and represents the centive compensation programs used by ing a single system. The commission con­ amount of money that a municipal utility the carrier for its management and non­ eluded that, pursuant to Florida statutes, pays d irectly into the municipality's gen­ management employees. The commission the service provided by this system re­ eral fund. PSC Chairman Cheryl L. found thatthe incentive program for non­ sulted in the commiss ion having jurisdic­ Parrino expressed appreciation to the management employees clearly constituted tion over all SSU's current facilities in all state's municipalities for providing input a part of the normal pay negotiated by the cou nties which SSU currently serves_ and suggestions that allowed the Commis­ workers' union bargaining group. The fact In its investigation, the commission sion to develop a rule meeting the that the management awa rds were shown considered the jurisdictional status of all Commission's objectives yet allow flexibil­ to be at risk, i.e., some employees do not SSU's existing plants and facilities_ SSU ity to tnunicipaiutilities during implemen­ receive, or receive only a portion of the owns and operates 150 water and waste­ tation. allocated award each year-and the over­ water facilities in 21 counties including 5 Rulemaking was initiated in docket l ­ all base salary increases were curtailed counties in which the PSC's jurisdiction AC-I 45 to address concerns that the tax when the incentive plan was put in place, was not previously recognized_ equivalent being paid by municipal utili· supported recovery of program costs from PSC chairman, Susan F. Clark said, "1 ties was excessive when compared to the ratepayers. (Re Cincinnati Bell Telephone want to commend the parties who partici­ gross receipts tax paid by investor-owned Company, Case No. 94-355, May 1995, pated in the proceedings and the staff for utilities. Also, for many water utilities the Ken tucky PSC) their efforts in assuring that the commis­ tax equivalent was becoming a very sig­ sion was presented with all facts and ar­ nificant percentage of the overall utility California PUC's Vision 2000 guments pertinent to our decision. We revenue requirement. In some of the The California Pu blic Utilities Commis­ have reached a considered decision which smaller water utilities, up to 50 percent of sion (CPUC), through a process termed appropriately implements legislative a customer's water bill payment goes to Vision 2000, is taking an unprecedented policy." recover the tax equivalent. look at its structure and processes to as­ Under the proposed rule, municipal of­ scss how it must change to better serve Post-Retirement Benefits ficials may retain the current tax equiva­ the public. Accounting lent method or switch to one based on a According to the commission 's draft re­ The United State C ircuit Court of Ap­ percentage of gross receipts. The percent­ port on "Our Process for Change: Vision peals for the District of Columbia has up­ age factors for gas, electric and water utili­ 2000," shared with members of the legis­ held a Federal Energy Regulatory Commis­ ties are 0.97,3.1 9 and 10.83, respectively. lature recently, "This report is not an ef­ sion policy allowing utilities to recover In addition, a municipality may freeze fort by a government agency trying to find costs associated with a switch from cash their tax equivalent at its existing level a reason to exist. It is the revamping of an to accrual accounting for post-retirement until such time as this amount is exceeded agency with a vital role to play in govern­ benefits other than pensions under SFAS by a calculation based on gross receipts. ing the fu ndamental industries upon 106. The court rejected argurnents by the This flexibility will give municipalities the which the economic and social structure town of Norwood, Massachusetts, a ability to control the adverse rate and tax of the state rest." wholesale customer of the New England impact associated with rapid escalation in As part of its self-examination and cre­ Power Company, that: (1) the forecast of the tax equivalent resulting from major ation of a vision for how it should be or­ future retiree medical costs were too dif­ utility plant additions. ganized and operate by the year 2000, the ficult .to ascertain to qualify as a legitimate The Commission will require customer commissio n sough t candid feedback

e NAWCWATER 4

through "visioning" workshops in both said. monitoring and administration, and by no rthern and southern California to hear She said t hat SPP already had expressed creating programs to assist small water from PUC staff, legislators and state and concern that the premature and incom­ systems, improve source water protection local offi cials, representatives from con­ plete release of details of the proposed and establish a state revolving fund financ­ sumer and industry organizations, utili­ settlement might cause some negative re­ ing mechanism; and ties, labor unions, and residential and action in the financial community. commercial utility customers. More than Shcldrew added that commissioners in WHEREAS, Such reforms and improve­ 300 participated in t hese discussions. other states were concerned over how the ments are intended to enable States, lo­ In the draft Vision 2000 report, the merger savings would be distributed cal governments and water systems to commission summarized the comments among Washington, Idaho, Oregon, Ne­ more efficiently provide clean, safe drink­ received on its strengths as being in its vada, and California. ing water and more effectively safeguard staff, a diverse culture that reflects Cali­ The settlement now before the Nevada public health; and fornia, its regulatory framework and wide PSC is the third one presented to it. The statutory authority, and its public inter· Consumer Advocate had signed the first WHEREAS, The National Association of est mission. Comments pinpointed weak­ two, which were sent back to the parties Regulatory Utility Commissioners nesses in leadership structure and actions, for renegotiation at the request of the PSC, (NARUC), through its Water Committee, internal communications, external rela­ which expressed a need for additional con­ has supported the efforts of the Safe tions, and internal structure and use of sumer projections. Sheldrew stressed that Drinking Water Act Coalition relative to staff and other resources. As the commis­ the present proposal may be sent back to the reauthorization of the Safe Drinking sion proceeds to change, it will annually the PSC in order to assure Nevada Water Act and has been involved with ac­ convene sessions to give staff, those af· ratepayers are adequately protected. tivities of the Coalition to ensure that fected by its proceedings and decisions, water utility ratepayers are provided with and the public the opportunity to com­ NARUC ADOPTS clean, safe and affordable drinking water; ment. RESOLUTION REGARDING and Four critical issues to be addressed as SAFE DRINKING WATER ACT it re-invents itself are identified in the draft WHEREAS, It appears the Congress will report along with suggested action steps The National Association of Regulatory be considering legislation to reauthorize for each, (I) Strengthening the PUC', Utility Commissioners recently adopted the Safe Drinking Water Act during the commitment to customers; (2) improving a resolution at its 1995 Summer Meetings 104th Congress; now, therefore, be it accountability to the public; 0) improv­ held in San Francisco, California, concern­ ing accountability within the PUC and (4) ing Safe Drinking Water Act legislation RESOLVED, That the Executive Com· creating an effective organization struc­ and supporting the efforts of the Safe mittee of the National Association of ture and efficient internal operations. Drinking Water Act coalition . The text of Regulatory U tility Commissioners Four internal task fo rce teams will be the resolutions appears below: (NARUC), convened in its 1995 Summer formed to develop specific implementa­ Meeting in San Francisco, California tion steps for each of the critical areas Resolution to Support NARUC's hereby supports the efforts of the Com­ above. That work is expected to be com­ Participation in the Safe Drinking mittee on Water to work with the Safe pleted by year end. Meanwhile, implemen­ Water Act Coalition and Reaffirm Drinking Water Act Coalition to tation of many of the proposed actions the NARUC Principles Related strengthen and improve the Safe Drink­ outlined above will begin. to the Reauthorization of the Safe ing Water Act through meaningful re­ Drinking Water Act forms; and be it further Nevada Delays Merger The Nevada PSC has postponed indefi· WHEREAS, The Safe Drinking Water RESOLVED, That the NARUC also sup' nitely further hearings on the proposed Act Coalition is an informal consortium ports its ongoing involvement with and merger between Sierra Pacific Power Co. of organizations representing State and lo­ participation in the efforts of the Safe (SPP) and Washington Water Power cal officials, including administrators, Drinking Water Act Coalition; and be it (WWP). regulators and legislators who oversee the further According to Commissioner Judy implementation of the Safe Drinking Wa­ Sheldrew, postponement was warranted ter Act at the State and local levels, and RESOLVED, That the NARUC reaffirms because of a press release issued by the organizations representing the owners and the principles contained in the resolution State Consumer Advocate, which may operators of water utilities of all sizes; and adopted by the Executive Committee of have raised additional issues that need to the NARUC on March 4, 1993, regard· be considered by the PSC. "Since the WHEREAS, The Safe Drinking Water ing reauthorization of the Safe Drinking lPSCJ and many of the other parties have Act Coalition has worked to encourage the Water Act; and be it further not had an opportunity to analyze or re­ Congress to adopt legislation that spond to the contents of the press release, strengthens and improves the Safe Drink­ RESOLVED, That rhe NARUC reiterates we must allow additional time for all par­ ing Water Act through reforms of the Act's its past resolutions and comments concern­ ties to review and comment," Sheldrew requirements related to standard-setting, ing the Safe Drinking Water Act. "

FALL 1995 G Recent Regulatory Decisions by Stephen B. Genzer and Mark L. Mucci LeBouef, Lamb, Greene & MacRae, L.L.I'

MASSACHUSETTS COMMISSION trial finance agency. The debt, to be is­ ject to regula tion by the Department. ISSUES ADVISORY RULING sued by the SPC, would be secured prin­ While noting that it normally declines to CONCERNING SPECIAL PURPOSE cipally by a mortgage o n the facility itself. issu e advisory opinions, the Department CORPORATION TO UTILITY TAX However, in order to bring this about, the stated that the ruling here was requested EXEMPT FINANCING FOR SAFE faci lity must be owned by an entity other in order to give effect to a rel atively new DRINKING WATER ACT than the regulated utility, or else the terms financing scheme, being undertaken in IMPROVEMENTS of the utility's exi sting financing would part to mitigate the effect of rate increases The Massachusetts Department of Pub­ make the facil ity subject to the Company's on t he utility's customers. T he Depart­ lic Utilities (Department) has issued a rare existing mortgage li en. ment co ncluded that , based o n t he advisory ruling concerning a proposal by In order to utilize the facility fo r water Company's representations that t he SPC Massachusetts-Ameri ca n Water Company treatment, the Company proposes to en­ will not distribute or sell water, or own o r (Company) concerning the regulatory status ter into a long-term ground lease and op· lease t ransmission or distribution pipes of a proposed special purpose corporation crating lease with the SPC, under which for the delivery of water to customers, state (SPC) to be fo rmed by the Company's par­ the Company will operate and manage the law granting the Department jurisdiction ent, American Waterworks Company facility, and supply water for treatment at over any company "engaged in the distri­ (American). The Department determined the facility. Revenues received by the SPC bution and sale of water in the common­ that the proposed S.C. would not constitute from lease payments would be used to pay wealth through its pipes o r mains" would a company subject to regulation as a utility the principal and interest on the tax-free not apply to the SPC. As a resul t, the De­ by the Department, under the circu mstances bond s. Furthe[[l1ore, in order to enhance partment advised that the proposed cre­ as described by the Company. The Depart­ the m arketability of t he bonds to be is­ ation of the SPC would not constitute a ment also approved the proposed project sued on behalf of the SPC, t he operating "corporation" or "company" subject to finance approach fo r the funding of this fa­ lease will contain a provision requiring regulation by the Department. cility. Re: Massachusetts-American Water Com­ the utili ty to repurchase the facility from The Company had also requested that pany, Case No. D.P.U. 95Al, 161 PUR 4th the SPC in the event that the Department the Department render a determination 614 (May 3, 1995). approves a level of rate recovery which is as to the proposed fa ll back transaction, The Company proposed to develop a not sufficie nt for the Company to meet the where if necessar y the Company could new water treatment faci lity, made neces· operating lease payments. In such eve nts, purchase the facility from the SPC in the sar y by requirements u nder t he Safe the utili ty would obtain funds from its event that the level of rate recovery ulti­ Drinking Water Act, with an anticipated parents, American Waterworks Company, mately approved by the Department was cost of nearly $40 million. The Company for the purchase of the facility. insufficient for t he Company to meet the proposed to employ a "project finance!! The Company's first request to the De­ operating lease payments. The Company approach, through tax-exempt bond fi· partment was for a ruling that the SPC asked for a finding that the contribution nancing obtained through a state indus- would not be deemed to be a utility sub- of capital by American, its parent, wo·uld e NAWCWATER c not constitute a financing proceeding re­ holders, on the condition that it be lIti­ in water rates for I nter-State Water COIll­ quiring further approval by the Depart­ lized fo r investment in new utility infra­ pany. Among the findings made in approv­ ment. In response, the Department noted structure. ing that increase was t he determination that the financing statutes were designed Under the new law, SB 1025, when a by the Commiss ion that the rate increase "to protect both ratepayers and the invest­ water corporation sells any real property for the utility's largest customer could be ing public from the effects of fraudulent which is no longer necessary for the pro­ li mited to 6%, in light of a threat by that stock or bond transactions_It The Depart­ vision of utility service, the net proceeds Cllstomer to leave the system if its rates ment contrasted the purpose of the stat­ are to be invested in "water system infra· were increased by more than that amount. utes with the cash infusion proposed by structure, plant, facilities, and proper­ The Commiss ion determined that the lim­ the Company, involving the "knowing and ties." Such investment will be recognized ited increase would provide a contribution voluntary act of a sole shareholder, such as sharehold er investment, on which are· to fixed system costs, whereas if the cus­ as American, which is itself not a regulated turn would be payable. The law contains tomer left t h e system the remainin g gas, electric or water company, to infuse specific findings by the legislature t hat r ~ltepayers would face unacceptably h igh capita l into its wholly-owned subsidiary." water corporations in such infrastructure rate increases. Re; Inter-State WQ(er Com· The Department concluded that such in­ will continue to be required by the State. pany, Case 94-0270, 161 PUR 4th (1995)_ fusion of capital would not require addi­ It was fur ther stated: "It is the policy of Inter-State had filed a rate proceed ing tiona l app roval by the Department the State t hat water corporations be en­ on June I , 1994, requesting an increase th rough a fi n ancing proceeding. couraged to dispose of real property that in opef

FALL 1995 e Recent Regulatory Decisions, utility conservatio n programs. The ORA budgcts of the viable water companies. continued stated that it supported the applications Finally, the costs necessary to improve because it v iewed them as cost effective the acquired non-viable systems could make it economically feasible for Teepak measures. amount to an unfair burden on the exist­ to leave the system a nd construct its own The Comm issio n concluded that it ing customers of the acquiring, viable com­ water treatment facilities. The shortfall in would approve the Company's request as pany. rates from lim iting the GST rate sched­ a pilot program , and encouraged other As a result of al l of these concerns, the ule increase was made up for by adjusting utilities to adopt similar programs. How­ Commissio n adopted its proposed policy the usage rates of all remaining customer ever, the Commission stated that its ap­ statement providing incentives for the ac­ classes. Such an adjustment was found proval was only a first step towards giving quisition of small non-v iable water utili­ acceptable by intervenor C ity of Danville, water utilities incentives to invest gener­ ties. The Commission acknowledged the whose residents make up the bulk of In­ ally in water conservation. The Commis­ New York Public Service Commission for tcr-Statcs's customers. sion approved a 10 year amortization of providing a model for such acquisition the investment, fo r calculation of the re­ incentives, Among the parameters out­ CALIFORNIA COMMISSION turn. The Commission concluded that lined by the Commission in its policy APPROVES INCREASE placing water conservation investments statemen t are that the acquiring company TO PAY COSTS OF PILOT into ratcbase wa s only one of several meth­ meets the criteria of v iabilit y, and that CONSERVATION PROGRAM ods which were ava il able to provide water such v iability would not be impaired by The Cali fornia Public Utilities Commis­ uti li ties with appropriate incentives to the acquisition that the acquired company sion (Commission) has approved a request invest in conservation programs, is not viable, incl uding fa iling to comply from Southern California Water Company with any order of the State Department of (Company) for increases in rates fo r two PENNSYLVANIA COMMISSION Environmental Resources or the Commis­ of its districts in order to pay the costs of PROPOSES POLICY STATEMENT sion itself; that the acquisition would re­ the Company's participation in pilot pro­ ON INCENTIVES FOR THE sult in im proved service, wi th necessary grams to conserve water by provi ding free ACQUISITION AND MERGER plant improvem ents being completed ultra low·flow toil ets (ULFT) to low·in· OF SMALL, NON-VIABLE within a reasonable time period; that the come water users in those districts. In re WATER UTILITIES purchase price for the acquisi tion be fair Southern California Water Company, Deci­ In an order iss ued July 10, 1995, the and reasonable; and that si ngle tariff pric­ sion No. 95·06·054 Uune 21, 1995). The Pennsylvania Public Utilities Commission ing should be applied to the rates of the Commission decision was a review and (Commission) proposed the adoption of acquired company, to the extent that such approval of a stipulation reached between a poli cy statement concerning the provi­ is reasonable. The Commission added the Company and the California Division sio n of incentives for the acquisition of that under certain circumstances of of Ratepayer Advocates (ORA). small non-viable water utilities. Docket extrern e differences in rates, or afford­ As a conservation measure, the Com­ No. M·00950686 Ouly 10, 1995). The ability concerns, consideration should be pany proposed to provide and install the Commission observed that small water given to a phase- in of the rate d iffe rence U LFTs w ithou t c harge in custo mers' companies, that is, those servi ng fewer over a reasonable period oftime. Among homes. The Company provided an an aly­ than 1200 customer co nnections, "expe­ the incentives to be provided for acquisi­ sis showing calcu latio ns of water savings ri ence the greatest difficulty meeting vi­ ti o n include additional rate of return equalling the cost of the program within ability criteria." The Commissio n added basis points fo r certain acquisitions, or 2. 7 yea rs. The Company would implement that while over the years it has approved a fo r certain improvement costs, as we ll the program in conjunction with the Ba­ number of acquisitions of non-viable wa­ as allowing the acquiring company to in­ sin Municipal Water District, with the ter companies by larger, viablc water com­ clude reasonable excess acquisition costs District supplying matching funds in or­ panies, it appeared "that only a few addi­ in base rates and amortized as an expense de r to install 15,000 ULFTs. For the ti o nal acquisitions are likely to occur, at a over a 10 yea r period. The Commission Company's costs of$21 7,665, it estimates time when many are sorely needed." The will also consider allowing a plant im­ annual savings fo r purchased water of Commission concluded that it was neces­ provement surcharge to be applied to the $81,860. sary to provide ass istance through "i ncen­ rates of customers of the acquired utility, The Company urged that its expendi­ tives to increase acquisitio ns of sm all in order to offset extr

G NAWCWATER Call by Louis jenny

The new Republican Congress started C hief of Staff and Tax Cou nsel, is close to t he yea r with grand expectations for big the issue.) He gave our chances of passage change and lots of activit y. Though they at better than 50/50. Though this may not certainly have been active, it is looking like sound great, these are probably better the changes will be more moderate then odds than we have seen in years. originally advertised. The reasons for the comparative opti· The Senate in panicuiar seems to be ful­ mism are many. filling its design by being a moderating influence o n the House o f Representa­ First, in July the House Ways and tives. For example. the House has passed Means Committee held hearings on a broad and controversial pieces

FALL 1995 e Quorum Call, continued part of this miscellaneous bill the House Congressional Republicans put in this Finally, our co-sponsorship on the Committee is contemplating, what hap­ bill, and it will become a political foot­ bills has risen to 50 in the House and pens to it then? Answer: It will likely be ball. The President might even veto the 15 in the Senate. In both bodies we incorporated into the even larger "Bud­ first version of it. This could mean shut­ enjoy bipartisan support, and are well get Reconciliation" legislation which is ex­ ting down the government, though, so the represented on the respective tax writ­ pected this fall. This bill will reflect all President will probably have to sign the ing committees (about one-third of both of the various budget savings and tax ad­ bill at some point. the Senate Finance Committee and the justments designed to get the federal gov­ In addition to these, we could see Sen­ House Ways and means Committee are ernment on the path to a balanced bud­ ate activity on a Clean Water Act rewrite, cosponsors of our bills). get in seven years. As you can imagine, this the EPA funding debate in Congress This all adds up to the aforementioned legislation, though not even written, is has been and will remain contentious, optimism, but there are still many hurdles already shaping up to be a controversial work on the 1995 Farm Bill will be com­ to jump before we break out the cham­ package, and its path is uncertain. Con­ pleted, and privatization legislation codi­ pagne on CIAC. For example, if we are gressional Democrats and the President fying Executive Order 12803 could move successful in including CIAC repeal as will probably not like much of what the also. ,

Patrick Laidlaw (c), receives the j. j. Barr Scholarship and the Pennsylvania Chapter of NAWC scholarship. Pictured with james Groff, NAWC Executive Director (t) and Bob Ross, Pennsylvania-American Water Co. (r).

Gary Prettyman (second from right), NAWC New jersey Chapter Chairman, presents one of the Chapter's two 1995 Scholarship Awards of $2,500 to Debra Lynn Lichtenberger, of Long Valley, Nj. Debra is pursuing an Associates degree in Chemistry at County College of Morris, Randolph, Nj. Also pictured are janet Lichtenberger, Debra's mother, and Dr. joseph Mele, Professor of Environmental Sciences, County College of Morris. A scholarship was also awarded to Eugene Fowler, jr., Rahway, NJ, pursuing a Masters Degree in Geoscience at Montclair State University, Upper Montclair, Nj.

• NAWCWATER -

Water Main Installations are N onshareholder Contributions to Capital

by Jorge A. Caballero, Partner De/oitte & Touche LLP- Parsippany, N.j.

Earlier this year, the IRS ruled that an attempt to benefit the general pu blic and replace utility lines. In that situation the amounts paid to a water utility by a tele­ improve its public relations, relocation payment is not considered a communications provider for water main The taxpayer has never provided nor CIAC where the relocation is undertaken installations were nonshareholder contri­ plans to provide water service to the tele­ fo r either reasons of community esthetics butions to capital and therefore were ex­ communications corporation. Also, the or in the interest of public safety and does cludable from the utility's gross income public buildings had their own wells that not directly benefit particular clIstomers (PLR 9503011). supply adequate water for non-emergency of the utility. use, so it is not expected that the build­ In the instant casc, the contributions Background ings will ever require day to day water ser­ to the taxpayer were considered to benefit The taxpayer is a public utility that pro­ vice from the taxpayer. the general public by offering additional vides water service within City Y to the The issue is whether the water service fire protection which is for the benefit of general public and provides water for fire maio and equipment additions constitute all residents. Also, the telecommunica­ protection to the residents of the city with­ a Contribution In Aid of Construction tions corporation was motivated by a de­ out charge. A telecommunications corpo­ (CIAC) and therefore ll1ust be included in sire to fund the project which will benefit ration, which is also a public utility, was the utility's g ross income. the general public in City Y and thus gen­ in the process of installing fiber optic tele­ erate goodwill and favorable publicity for phone cable between various locations Analysis and Ruling itself, but did not anticipate receiving any within the United States and across the Internal Revenue Code (IRC) § 61 pro­ future services from the utility taxpayer. Pacific Ocean to foreign countries. Due vides that gross income means all income The ruling also discussed several court to adverse newspaper publicity, the tele­ from whatever source derived, unless ex­ cases that involved nonshareholder con­ communications corporation decided to cluded by law. I RC § 118(a) provideo that, tributions to capitaL The ruling stated deviate from its original planned route to in the case of a corporation, gross income that the contributions to the taxpayer were an alternative route through City Y. At the does not include any contribution to the more analogous to t ho se situations same time, in an attempt to generate good­ capital of the taxpayer. IRC § 118(b) pro­ whereby the payments were considered will for itself, the telecommunications COf­ vides that the term "contribution to the nonshareholder contributions to capital poration wanted to fund a local project capital of the taxpayer" does not include and therefore the contributions are not that would be beneficial to the general any contribution in aid of construction or included in the taxpayer's gross income. public in the county in which City Y is any other contribution as a customer or located, potential customer. Conclusion There were two public buildings which IRC Notice 87-92 provides additional All transactions that involve payments housed governmental departments that guidance on the treatment of contribu­ for property and contributions of prop­ did not have water mains close enough to tions. In relevant part, it states that a pay­ erty to a public utility should be carefully supply them with water service or water ment received by a utility that does not reviewed to determine if they meet any of for fire protection. Both buildings had reasonably relate to the provision of ser­ the conditions which allow for excluding their own wells for-normal water usage, vices by the utility or for the benefit of such payments or contributions from the The telecommunications corporation ar­ the person making the payment, but gross income of the utility receiving them. ranged to have an additional water main and rather relates to the public at large, is not If they qualify for such an exclusion, care associated equipment installed in the same a CIAC. An example provided in the no" should be taken in planning and structur­ trenches as their telecommunications equip­ tice as a payment benefiting the pu blic at ing the transaction to assure that the COIl­ ment so that water for fire protection could large is a relocation payment received by tractual agreement meets the conditions be available to the two public buildings as a utility under a government program to required by the particular exclusion. ~

FALL 1995 fa Customer Service Report We Do It All For You? Moving Beyond Cue;tomer Service to Cue;tomer Satie;faction

by Lisa P. Oswald Manager, Customer Service, BHC

It was a long day and I needed some taches it to everything the company does. cula te their li fetime value and u nder­ fuel. So I pulled into the drive-thru at a So, given the potential for these quali­ stand their worth to yo ur organization. local McDonalds. The photo on the out­ tative leaps, our challenge is to not view Lead and motivate the service PTO­ door menu made me salivate: big juicy customer service as a task, to not measure 'tJ ideT. The service leader's role is not chicken breast, lettuce, tomato, special the service we deliver by the number of that of a manager, but a coach, a role herb sall ce and, the topper, Monterey Jack telephone calls or service calls we handle model and a cheerleader. To deliver cheese on a sesame seed bun. "Give me every day. The real measure is customer great external customer service, you and one of those," I said. satisfaction. others in your organization must deliver Rushing home, I unwrapped "din ncr "~ It's not enough for a customer service great service to each other. And, you as a dried-out piece of pressed chicken on a representative to say, "my job is to answer the service leader, must be of service to stale bun. OK, I'm not naive enough to the phone eight hours a day." We must your employees. believe everything I see, but this was the move employees' attitudes and actions Plan fOT service recovery. When ser­ third time in less than a few months that from functional measures to qualitative vice breaks down, apologize, fix it (right they McBotched my order. (Hmm, maybe measures. To a place where they immedi­ away) and go the extra step to atone for I'm working too hard.) These bad experi­ ately say, "my job is to create satisfactio n. " yo ur actio ns and regain the customer's ences colored my perception of not only confidence. the local franchise, but of the entire The Elements o[ Excellent Service Create service guawntees. Stand be­ McDonald::; corporation. Several elements must be in place in an hind your product or service, and do it Even with the benefit of mega-millions organization in order to deliver excellent in writing. This can be what differenti­ of dollars of advertising telling me about customer service. They represent the foun­ ates you from the competition. "food, folks and fUll," that one personal dation for a customer-focused organiza­ Never leave well enough alone. Suc­ contact was a more powerful persuader, tion, regardless of size or place on the ser­ cess often prevents organizations from and I haven't been back to McDonalds vice co ntinuum. staying competitive. It can create a sense since_ Build your customer service organi­ of complacency that says, "we know how So what's the connection with drinking zation from the customer up. Remem­ to do it, we've always done it this way water? Let's face it_ A burger is just a ber, your customer is the sole reason for and it's working." Dozens of companies burger. But water is a product people can­ being. Look at the service you deliver who did not pay attention to what their not live without. If our personal contact from the customer's point of view. Ask customers were saying have paid the with the customer isn't always the best it them what they expect from you. price. can be, it can seriously undermine the Market research is essential to mea­ The most compelling reason to deliver customer's confidence in our company_ sure and improve service quality. You excellent customer is, first and foremost, That goes for every single customer con­ must collect information to change for service is important to customers. As the tact, day-in and day-out. the better. Make certain you're asking cost of water rises in respons~ to regula­ Think about the front-line service pro­ the right questions. Then you'll be able tory requirements, price-sensitive consum­ viders your customers meet every day; the to pinpoint where to expend resources ers will demand value. Ask consumers in employees who install meters, answer the in areas that make a difference in your Milwaukee if they'd be willing to pay more telephone and process bill payments. If customer satisfaction index. for quality water, and I believe they'd say your customers believe your people are less Organizational culture change is the yes. I also believe consumers think abollt than the best, they are more likely to be­ driver in a customer-focused com­ water differently than commodities like lieve their water supply is poorly managed. {Jany. Your company's vision, values gas or electricity because it affects their That relationship exists in the customer's and goals must be compatible with that health. And if they do not, the water in­ mind. The mind amplifies the experience of a customer-focused organization. dustry should be working to champion geometrically, bends it, shapes it and at- View the customer a.~ an asset. Cal- that mindset . •

CIt NAWCWATER -

r· :"... corporate changes .

Aquarion Announces Management Succession Plan

Aquarion Company announced a man­ environmental and water-related issues, agement succession plan effective on Oc­ and quality-improvement programs. tober 1, 1995. Under the plan, Jack E. Prior to joining lEA in 1992, Schmidt McGregor will become chairman of the served as president and chief operating of­ board. He succeeds William S. Warner, ficer of Mechanical Technology, Inc. in who will become vice chairman of the Latham, New York, from 1984 to 1991. jack E. McGregor board of Aquarion. Before that, he co-founded and was presi­ Succeeding McGregor as president and dent and chief executive officer of Gundle chief executive officer of Aquarion will be Environmental System, an AMEX-listed Richard K. Schmidt, president and chief company based in Houston. Schmidt be­ executive officer ofIEA, the company's en­ gan his career in 1971 at Ecodyne Corpo­ vironmental testing laboratory subsidiary. ration, where he served in successively David C. Houle, senior vice president and more responsible management and execu­ chief operating officer of lEA, will become tive positions. president of lEA. The company also said Schmidt graduated from Tulane Univer­ that Janet M. Hansen, senior vice presi­ sity, where he received a bachelor of sci­ dent and chief financial officer, will be­ ence degree in civil engineering and a come executive vice president. master of science degree in environmen­ Commenting on the selection of tal civil engineering. He earned a doctor­ Schmidt as CEO, McGregor said, "Know­ ate in environmental engineering from the ing that Aquarion will be in the extremely University of Texas, and completed the Richard K. Schmidt, PhD. capable hands of Rich Schmidt made this Program for Management Development at career transition possible. His strong busi­ Harvard Business School. He currently ness experience in building shareholder serves as a vice president and a member value for publicly traded companies, in­ of the board of directors of the Interna­ volvement with industry consolidation tional Association of Environmental Test­ initiatives and his background with fed­ ing Laboratories. Schmidt and his wife, erally regulated businesses make him Claudette, who have three grown chil­ uniquely qualified to lead Aquarion." dren, will be relocating to Connecticut McGregor noted that under Schmidt from North Carolina. and Houle's leadership, lEA has become His successor as president ofIEA, Dave one of the 1 0 largest environmental test­ Houle, joined lEA in 1991 as vice presi­ ing laboratories in the U.S., despite a dif­ dent of administration. Prior to that, he fi cult market for environmental services. had served since 1982 in positions of in­ W hile at Aquarion, Schmidt has been ac­ creasing responsibility at Aquarion's for­ tively involved in corporate-level matters est products subsidiary, Timco, where he including strategic and financial planning, (continued next page) janet M. Hansen

FALL 1995 • Aquarion, continued IWC Resources Corporation became president in 1985 and helped reo turn the company to profitability in 1986. and I Houle is a graduate of Plymouth State College in New Hampshire. Miller Pipeline Corporation Hansen was elected senior vice presi­ dent of Aquarion in April 1993 and vice Merge president and chief financial officer in April 1992. She has served as treasurer since 1988, has been a vice president of Representatives of IWC Resources Cor­ pects to develop in the future}; and lWC BHe, Aquarion's water utility subsidiary, poration (Resources) and Miller Pipeline Services (the majority partner in the since 1989 and was named its chief finan­ Corporation (MPC) announced today that White River Environmental Partnership, cial officer in April 1991. She joined the they have entered into a definitive agree­ which operates and m aintains the t wo company in 1975, serving in various ac­ ment by which MPC will merge into Re­ advanced wastewater treatment facil ities counting and finance positions of increas­ sources as a wholly owned subsidiary. for the city of Indianapolis). ing responsibility. MPC, headquartered in Indianapolis, The common stock of Resources is A graduate of Salem State College in Indiana, was fou nded in 1953 by Don W. traded on the NASDAQ Notional Mar­ Saicrl1, Massachusetts, she holds an Miller. MPC's business is divided into two ket System under the symbol of IWCR. M.B,A. in finance from the University of major divisions: Construction, and Prod· At p resent, approxin1ately 70% of Connecticut, Hansen, a Trumbull resi­ ucts and Services. T he Construction Di­ MPC's revenues are derived from the dent, is a director of the UST Bank of Can· vision works primarily for natural gas utili­ Construction Division and 30% from the necticut, the Trumbull C h amber of Com· ties, installing, repairing, and maintaining Products and Services Division. MPC has merce, and the Greater Bridgeport Area pipelines used in their transmission and steadily grown over the years to now in· Foundation, and is a trustee of the Con· distribution systems. The Products and c1ude offices in New Jersey, Kansas, Mas­ necticut Policies and Economic Council. Services Division performs technical re­ sachusetts, Illinois, Cali fo rnia, as well as McGregor, who has headed Aquarion pair and installation services and sells its offices in Ohio and Indiana. MPC had during a period of growth and expansion sealing products for the natural gas, wa­ revenues for its latest fiscal year, ended for the company, is stepping down to em· ter, and sewer industries through full-time March 31,1995, in excess of$50 million. bark on a career focused on economic de­ sales personnel located throughout the The company employs more than 600 per· velopment activities in the Bridgeport reo country. sons. gion. During his tenure, he led a dramatic The Millers stated, IIOf the many Founder Don W. Miller will continue restructuring of its water utility subsid­ companies that had approached us over as chairman of the board and Dale R. iaries, and the company develo ped a t h e years, Resources was the beSt fit, Miller will continue as president and chief unique strategy and approach to market­ because of a complementary philosophy operating officer and director of M PC, ing its surplus, off-watershed land to bring of customer service, employee relations, both under employment agreements. extra value to shareholders. Additionally, and local ownership." Don Miller noted Other directors of this new Resources' the company has been recognized for its that employees and customers of MPC subsidiary will include Douglas Banning, excellence in environmental responsibil­ will both benefit from the new relation­ Joseph R. Broyles, James T. Morris, and ity, community involvement and customer ship. j .A. Rosenfeld. service. Approximately 60% of the purchase price James T. Morris, chairman of the board McGregor joined Aquarion's predeces­ to be paid to MPC sh areholders in the and chief executive officer of Resources, sor company, The Hydraulic Company, in merger will be in com mon stock of Re· stated, liThe board and I could not be I 985 as executive officer of the company sources, with the balance in cash. The more excited about t his merger. Don in 1990. He is a graduate of Yale U niver­ merger is subject to certain conditions, and Miller and his associates have built a re­ sity and University of Pittsburgh Law is expected to close before the end of 1995. markable company with an exceptional School, and was a captain in the U .S. Resources is a holding company which commitment to their customers. The long Marine Corps. owns and operates six subsidiaries includ­ history that MPC has achieved with its He is a past president of the National ing the Indianapolis Water Company and technical innovations, high quality ser­ Association of Water Companies and Harbour Water Corporation; SM&P Util­ vice, employee relations, and a remarkable chairman of the Bri dgeport Regional Busi· ity Resources, Inc. (provides underground customer service record, fit perfectly into ness Council, and served as co-chair of facility locating services for the utility in· Resources' philosophy and strategic plan Connecticut Governor John Rowland's dustry); Utility Data Corporation (pro­ to grow the Resources family into a large, transition team. McGregor is a director vides customer relations, billing and other high quality customer service oriented of several companies and organizations data processi ng services for water and utility an d utility-related services busi· and serves o n the Governor's Bridgeport sewer utilities); Waterway Holdings, Inc. ness. This t ransaction will add incremen­ Regio nal Economic Development Com­ (owns real estate primarily related to the tal earnings per sh are for the benefit of mittee. water utility source of supply that it ex· all Resources' shareholders."

fa NAWCWATER IWC Resources Executive Consumers New Changes Announced Jersey Water Company Names James T. Morris, chairman of the board lwe Utilities, is being formed to man­ New President and chief executive officer of IWC Re­ age the direct utility service companies sources Corporation, announced cer tain a nd includes the Indianapolis Water Paul D. Schumann, Senior Vice Presi­ changes in executive responsibilities as a Company; Harbour Water Corporation; dent of Consumers Water Company an­ result of the merger of Miller Pipeline lWe Services, Inc. (the majority and man­ nounced that the Board of the Company's Corporation into Re sources in order to aging partner of the White River Environ­ Consumers New Jersey Water Company effe ctively manage the growing Resources mental Partnership, which operates and (CNjWC) subsidiary is appoinring Sharon family of businesses. manages the two advanced wastewater E. Schulman as President of CNjWC, ef. The operating companies will be di­ treatment facilities for the city of lndia­ fe crive August 14,1995. vided into two divisions according to busi­ napolis)i Utility Data Corporation (which Schumann stated that Schulman's ex­ ness sector lines-utility and utility related provides customer relations, billing and perience in marketing and community re­ services. A new Re sources division, IWC other data processing for water and sewer lations, as well as her regulatory back­ Industries, is being formed to manage the utilities); and Waterway Holdings, l nc., ground, will serve her well in managing utility related services and will include the real estate subsidiary. J.A. Rosenfeld, and growing the New Jersey water utility. Miller Pipeline Corporarion and SM&P executive vice presidenc and ch ief finan­ Schulman most recently was Manager, Utility Resources, Inc. Joseph R. Broyles, cial officer of Resources and its subsidiar­ Community, Governmental and Regula­ currently president and COO of the In­ ies, will become president of this new en­ tory Planning for Atlantic Electric, a large dianapolis Water Company, will become tity, as well as the I ndianapolis Water New Jersey electric utility company. Prior the president of Iwe Industries. Company. to joining Atlantic Electric, Schulman was Chief Executive Officer of the New jersey Board of Regulatory Commissioners and before that, se rved as Chief of Staff of the same Board. Schulman also founded and was a principal of Spe-Schul Communica­ ti ons, a public relations and advertising firm specializing in service industries. Moerbeek Joins Schulman's educational background includes an M.A. in Public Relations and Southwest Water a B.S. in Biomedical Communications. She resides in Vineland, New Jersey.

Southwest Water Co. announced that n ifi cant growth potential in the public­ Peter]. Moerbeek has joined the company private partnership segment of the service as vice president, finance, and chief finan­ industry. I look forward to working with Stoffel Joins cialofficer. In that capacity, he will over­ the team to increase the company's profit­ see the corporation's finance, control and ability and stockholder value." Coopers & Lybrand information systems and provide guidance Moe-rbeek was fo rmerly Executive Vice in strategic planning and growth. President- Finance and Operations for Gerry Stoffel has recently joined the Anton C. Garnier, President and Chief Pico Products Inc., a publicly held manu­ Human Resource Advisory Group at Coo­ Executive Officer of Southwest Water facturer and distributor of electronic pers & Lybrand LLP as a Senior Consult· Company, said, "Pete Mocrbeek's business equipment for the cable television and ant. Prior to joining Coopers & Lybrand, development experience and extensive telecomrnunications industries. Prior to Gerry had his own consulting firm, Saje background in financial management will t h at, he served in fina ncial executive Consulting Group, Inc. Saje has con­ be of great value to Southwest Water. He capacities for Orrel Corporation, ducted an annual compensation and ben­ will playa significant role in the contin­ Eisenman Chemical Compan y and efits survey among NAWC member COln­ ued growth and profitability of our com­ O roweat Foods. Hi s career also includes panies for the past four years. The most pany, both in the utility and contract ser­ public accounting experience with Price recent survey was disrributed to survey vice business divisions." Waterh ouse and Arthur Young. Moer­ participants in September. Gerry will be Comrn.enting on his new pos ition, beek, a certified public accountant, re­ continuing the survey in future years at Moerbeek sai d, "I am exited about join­ ceived his MBA in Accounting and a BS Coopers & Lybrand. Gerry can now be i ng the Southwest Water management in Electrical Engineering from the Uni­ reached at (215) 963·8447 or fax (21 5) tea~. I believe that the company has sig- versity of Washington. 963·3637.

FALL 1995 e Becker Joins Southwest Water Gottschalk

Southwest Water Company announced pany, said, "I am extremely pleased to wel­ Joins AWM that Edward R. Becker has joined ECO come Ed Becker to our organization. His Resources Inc., the company's rapidly broad background and expertise in water growing contract service business subsid­ and wastewater management, process con­ Applied Watershed Management LLC iary, as Director and Senior Consultant. trol, client relations and contract admin­ has announced that Kevin Gottschalk has Becker has more than 25 years of tech­ istration will be of significant value in joined the company as business develop­ nical and management experience in wa­ helping ECO Resources continue its stra­ ment manager. Gottschalk brings 17 years ter supply and wastewater treatment. Cur­ tegic growth in the contract operation and of business development and technical rently owner and president of Novus maintenance of water and wastewater fa­ services expertise to the industrial mar­ Utility Services Inc., Becker is a profes­ cilities." ketplace, with specialization in water and sional engineer. He received his B.S. in Becker said, "I look forward to work­ wastewater systems operation. He is an Civil Engineering from Utah State Uni­ ing with all the fine people at ECO Re­ accomplished environmental consultant versity and his M .S. in Environmental sources. The service industry is a growth whose knowledge spans such environmen­ Engineering from California State Univer­ industry, and I intend to help ECO Re­ tal arenas as oil refineries, chemical plants, sity in San Jose. His career includes 10 sources benefit from this expanding mar­ integrated pulp and paper mills, and elec­ years with Envirotech Operating Services ket." tric utility/cogeneration facilities. Inc. (EOS), a division within the Waste ECO Resources has secured seven new Applied Watershed Management Management Inc. family of companies. At contracts in 1995, which will generate (AWM) is a joint venture of E'town Cor­ EOS, Becker served as president from more than $24 million in revenue over poration and Applied Wastewater Tech­ 1986 to 1991 and guided the company to their initial five-year terms. The subsidiary nology (AWT) that pursues opportunities earn more than 50 operation and safety has recently expanded into three new geo­ related to water quality management in­ awards. graphic markets, including California's cluding design, financing, construction Anton C. Garnier, president and chief Central Valley, west Texas, and New and operation of water and wastewater fa­ executive officer of Southwest Water Com- Mexico. cilities.

etcetera etcetera etcetera

jim Good, Vice President of Corporate Communications and Marketing for California Water Service Company (/), and jim Smith, Manager of the company's Salinas District (r), present Roya Camp, a reporter with the Salinas Californian, with the NAWC Good journalism Award for her coverage of water issues affecting Monterey, California.

• NAWCWATER Water Company Dedicates New Facility

Consumers Pennsylvania Water Com­ pany, Roaring Creek Division, celebrated its new water filtration plant with a dedi­ cation ceremony and open house on Au­ gust 17th. The plant brings customers the latest in water treatment technology and will provide extra protection from harm­ ful bacteria. Built to comply with state and federal regulations, the facility represents the largest investment in the company's The new filtration plant at Ill-year history. Consumers Pennsylvania Water Company, Roaring "In addition to providing multi-barrier Creek Division, went into protection from bacteria like service in june, 7995. The cryptosporidium and giardia, this state-of­ plant filters water, the-art facility will improve the taste and providing an extra layer of smell of the water," said Richard Subasic, protection against waterborne contaminants. vice president and general manager, CPWC, Roaring Creek Division. The new plant will provide more reliable removal of naturally-occurring minerals like man­ solids. After the chemicals are dispersed media which work in harmony to remove ganese and iron, reduced levels of chlo­ in the raw water, the water is slowly mixed the smallest-sized particles. rine, and the flexibility to treat changing to further promote the collection of fine After the water has been filtered, it is surface water characteristics. The facility particles. disinfected with chlorine, providing the is also easily expandable to accommodate The water then flows through one of extra measure of protection against future state and federal regulations. two settling basins to remove the large waterborne disease. The chlorine is added The plant draws water from CPWC's particles by gravity. Each of these basins as water flows to the 1 million gallon res­ watershed, located on over 12,000 acres is equipped with Lamella Plate type set­ ervoir, which allows sufficient contact time of forested land. The raw water can be tlers, which increase the capacity of the to ensure proper disinfection. In addition supplied through the new Bear Gap Pump­ settling basins over that offered by con­ to coagulant, polymers and chlorine, caus­ ing Station or drawn by gravity from a ventional basins and provide superior tic soda and lime are added to the treat­ reservoir in the watershed. Upon reach­ particle removal at a reduced cost. From ment process at various locations to ad­ ing the treatment facility, the raw water is the basins, the water flows to one of four just the pH of the water and make it more injected with small doses of chemicals multi-media filters for removal of any fine treatable. A polyphosphate is added to which promote the collection of very fine suspended particles that remain. The fil­ guard against corrosion of the water mains particles into larger, more manageable ters consist of three separate granular in the distribution system.

Philadelphia Water Commissioner Kumar Kishinchand (J) presents the Samuel S. Baxter Award to Philadelphia Suburban Water Company Chairman Nicholas DeBenedictis. The Baxter Award is the organization's most prestigious award and is given to an individual whose contributions to water resource management exemplify the standards of the former Philadelphia Water Commissioner for whom the award is named.

FALL 1995 • ...... ------~~a 1 Southwest Contract in EI Paso

Southwest Water Company has an­ egy of service business development as the gallons of sewage daily. ECO Resources nounced further growth at ECO Re­ seventh new contract acquired in 1995. will also be responsible for meter reading, sources Inc., its service business division. Most recently, we announced new con­ billing and collection, full district account­ The subsidiary has been awarded a five­ tracts in Rio Rancho, New Mexico and ing, and capital expense planning. year, $4 million contract to operate and Taft, California. Together, they will gen­ Operating under an Agreed Order is­ maintain the water supply and wastewa­ erate more than $20 million in new busi­ sued in April of this year by the Texas ter treatment systems for the El Paso ness revenue over their initial five-year Natural Resources Conservation Commis­ County Water Authority in Horizon City, terms." sion, the Water Authority will issue $8.6 Texas. The contract officially began on ECO Resources' general management million in bonds on August 30, 1995, to August 1. responsibilities under the El Paso County improve water quality, water supply and Commenting on the new contract, Water Authority contract include daily wastewater treatment capacity. ECO Re­ Southwest Water president Anton C. operations and maintenance of the water sources' scope of work under the new con­ Garnier said, "We are excited about this and wastewater systems in a 225 square­ tract will include oversight responsibility opportunity to be of service to the El Paso mile service area with a population of for the development of two water well County Water Authority for two reasons. roughly 8,000. Facilities include nine wa­ fields, construction of a water quality First, this contract marks our entry into ter wells, five water storage tanks, five "blending pipeline," and the planning, the El Paso-area marketplace. Second, it sewer lift stations and a wastewater treat­ design and construction of a new waste­ represents important progress in our strat- ment plant that processes half a million water treatment facility.

Elizabethtown Recognized for Outstanding Safety Record

Elizabethtown Water Company, of Westfield, was recently recognized for its continuing commitment to safety when it was presented the Liberty Mutual Silver Award for its outstanding achievement of having 1 ,000,000 work hours without a lost-time injury. Michael Blancato, Assistant Manager­ Operations Services was presented the 8 x 10 inch satin finished plaque by Liberty Mutual's Dennis Dougherty, Senior Loss Prevention Consultant. Elizabethtown Water Company, re­ ceived assistance from Liberty Mutual in developing safety training, routine safety inspection procedures, employee safety incentives and safety meeting formats, all helping to contribute to its award winning safety record. The Silver Award is one of (J to r) Michael Blancato, assistant manager-operations services, Elizabethtown Water the most prestigious recognitions Liberty Company; Dennis Dougherty, senior loss prevention consultant, Liberty Mutual Insurance; Michael Mutual awards its policyholders in the Keb(es, director-operations services and safety, Elizabethtown Water Company, and Edward area of loss prevention. Cash, vice president-customer services .

• NAWCWATER Suburban Participates in Dedication of Treatment Plant

Suburban Water Systems and several supply, quality and reliability for future still a valuable tool. public agencies dedicated the Big Dalton generations through the support of the "Our experience here in the San Gabriel Wellhead Treatment Plant as part of a pub­ Water Quality Authority, U.S. Congress­ Valley demonstrates that many aspects of lic-private partnership aimed at restoring man Esteban Torres, the Main San the Superfund can work effectively if there and protecting the San Gabriel Valley Gabriel Basin Watermaster and other in­ is innovation and flexibility," Torres said. Basin's groundwater. volved parties." He added that progress on the cleanup In cooperation with the Water Quality The San Gabriel Valley Basin is a 160- shows that "creativity, diligence and co· Authority, a local agency charged with co­ square-mile area that supplies drinking operation can resolve the thorniest and ordinating groundwater clean-up pro­ water to more than one million people. hardest of problems." grams, Suburban will operate and main­ The Basin is listed as a "Superfund" site The project is funded by the State tain the treatment plant. Upon by the U.S. Environmental Protection of California Department of Toxic completion of the project, the plant will Agency. The Big Dalton Well, owned by Substances Control through a $2 mil­ extract and treat approximately 1.3 billion Valley County Water District, was closed lion grant and represents efforts by gallons of groundwater per year, provid­ in 1985 after volatile organic compounds public/private agencies to coordinate ing water to about 6,000 families within were found. To remove these contami­ a cooperative groundwater clean-up Suburban's service area. nants, the treatment plant will use a program. According to Senior Vice President Reg granular activated carbon system. This Michael A. Kaheo, deputy secretary Stone, Suburban is pleased to participate project and similar treatment sites will of the California Environmental Protec­ in a program that is aimed at protecting prevent the movement of contaminated tion Agency, said the project is a signifi· its most vital asset, the San Gabriel Val­ plumes into clean aquifers. cant advance that will help block the ley Basin. "As stakeholders in the Basin, Congressman Torres, who represents a movement of contaminated groundwa­ we are committed to working with other portion of the San Gabriel Valley, told the ter. "This is a good example of people agencies in groundwater clean-up pro­ audience at the dedication that the deciding to move forward and deal with grams," he said. "We will ensure water Superfund program needs reform, but is the problem."

Wayne Shirley Named Chairman

Wayne Shirley was named by Governor also represented residential ratepayers and Gary Johnson as Chairman of the New industrial energy consumers in several Mexico Public Utility Commission on July Commission cases. 17, 1995. Chairman Shirley from Chairman Shirley spent four years with Corrales, New Mexico, a long time regu­ the Albuquerque law firm of Campbell, latory attorney, was appointed by Gover­ Pica and Olson, where he presented the nor Johnson to fill the term of former New Mexico Industrial Energy Consum­ Commissioner Mary Mclnerny. He was ers, a group of the state's largest indus­ confirmed by the New Mexico State Sen­ trial energy users including Intel. ate on March 18, 1995 and his term will The new Chairman was also head of the end January 15, 1999. energy unit for the state Attorney Before coming to the Commission, General's Office under Paul Bardecke C hairman Shirley was in private practice, from 1983 to 1986. The purpose of the primarily in the areas of corporate and attorney general's energy unit is to represent public utilities law. During the 1980's he residential ratepayers in utility matters.

FALL 1995 • Southwest Cal Water Wins Menlo Park

Water The Menlo Park City Council awarded for city residents. It also means savings California Water Service Co . a contract to fo r our existing cu stomers by spreading Announces provide "customer services" for the Menlo fixed costs across a larger customer base," Park Municipal Water System beginning Oc­ sa id Donald L. Houck, President and Contract tober 1. "Customer Services" includes meter Chief Executive O fficer. "With our signifi­ reading, billing, taking customer calls and can t economies of scale and experience investigating customer inquiries. Turn·ons/ operating mun icipally·owned water sys­ Southwest Water Company an~ turn-offs and repairs for the 3,900 custOm­ tems, Cal Water is well positioned to pro­ naun ced that EeO Resources Inc., its ers of the city system will be performed by vide service contracts like these economi­ service business subsidiary, has been existing municipal employees. cally and cfficiently," explained Houck. "I awarded a five-year, $5.3 million con ­ "Under th is contract, everY9ne wins. expect the number of these contracts tract to operate and maintain the waste­ T he city will realize administrative and awarded to Cal Water to increase over the water treatment and sewage collection overhead savings; that means tax savings next few years." systems in the C ity of Barstow, Califor­ nia. T his is the eighth new contract ac­ quired by ECO Resources t his year. These contracts wil l generate roughly $30 million in additional revenue over their initial five-year terms.

T he new agreement was approved by the Barstow City Council on August 21. Under the terms of the contract, wh ich formally began on September I , ECO Resources will oper ate and maintain the city's wastewater treatment plant that Our Newest Member Companies processes 2.75 million gallons of sew­ Aaronrod Co., Inc. W atertek Inc. age daily. In addition, the company wi ll Waverly, PA Salinas, CA be responsible fo r operati ng and main­ taining the wastewater collection sys· Lake Meadows W ater Co. Rose Valley Wate .. Co. tem, including 80 m iles of sewer pipe­ Delmar, NY Green Valley, AZ li ne. W i th a population of Lakeland Estates Water Co. R osemount Water Co., Inc. approximately 23,000, Barstow is lo­ Omaha, NE Reno, NY cated i n California's high desert, roughly 130 miles northeast of Los An­ Trail s End U tility Co. W alloon Lake W ater System, Inc geles. Oak Hall, VA Walloon Lake, MI

South west Water president Anton C. Garnier said, "The $5.3 million Our Newest Associate Members Barstow con tract marks yet another milestone on o u r path of st r ategic Ahmed Akacem Paul S. D aily growth. We are very pleased to be able Transversal Technologies, Inc. O rion Group Software Engineers to provide the C ity of Bar stow with the New London, NH Indianapolis, IN high-quality service that has made ECO Robert V. Arndt A. David D egann Resources an indu stry leader. T h is con· Advance Tank and Construction Co. Alexander & Alexander Consulting tract represents t he fourth new geo­ King of Prussia, PA Group graphic region into wh ich ECO Re­ Lyndhurst, NJ sou rces h a s e xpande d in 1995, Frank S. Brainard fo llowing west Texas, New Mexico and F. S. Brainard & Co. Thomas J. Purven as California's Cen tral Valley. Looking Burlington, NJ P. Moul & Associates ahead, we will con tinue to aggressively Cherry Hill, NJ pursue new business opportunities."

G NAWCWAT ER - DATES TO REMEMBER 1 NAWC NARUC

California Water Association NAWC Eastern/Midwestern Pennsylvania Chapter BoD Meeting NARUC Winter Committee Meeting BoD Meeting Customer Service Conference Hershey, PA Washington, DC San Jose, CA Nashville, TN August 21 February 25-29 January 11 May 6-8 16th NARUC Annual Western Pennsylvania Chapter Water Utility Rate School Pennsylvania Chapter BoD Meeting California Water Association Legislative Golf Outing San Diego, CA Hershey, PA Spring Meeting Hershey, PA April 21-26 January 17 Sacramento, CA September 10 May 6-8 19th National Conference of New Jersey Chapter Meeting Florida Chapter Meeting Regulatory Attorneys Jamesburg, NJ NAWC Executive Committee Meeting Orlando, FL Clearwater Beach, FL January 19 Washington, DC September 11 June 2- 5 May 7 Southeastern Association of Washington Chapter Meeting California Water Association Regulatory Utility Commissioners NAWC Board of Directors Meeting BoD Meeting Olympia, WA Po int Clear, AL Washington, DC San Jose, CA February 6 June 2- 6 May8 September 12 California Water Association 55th Western Conference of BoD Meeting Washington Chapter Meeting New Jersey Chapter Meeting Public Service Commissioners Carson, CA Rfe, WA Jamesburg, NJ Snowbird, UT February 9 May 7 September 20 June 9- 13

New Jersey Chapter Meeting Pennsylvania Chapter Mid-America Regulatory Illinois-Missouri Chapter Meeting Commissioners Jamesburg, NJ Annual Meeting and Dinner Belleville, IL Chicago, Il May 10 Harrisburg, PA February 14 June 16-19 September 24 Pennsylvania Chapter BoD Meeting Pennsylvania Chapter BoD Meeting 74th National Conference of Hershey, PA NAWC Annual Conference Hershey, PA Regulatory Utility Commission May 15 Orlando, FL February 21 Engineers September 29-0ctober 3 Clearwater, FL Florida Chapter Meeting June 17- 20 Florida Chapter Meeting Orlando, Fl California Water Association Orlando, Fl June 12 BoD Meeting 41st Great Lakes Conference of March 13 Public Utilities Commissioners San Jose, CA Cleveland, OH New Jersey Chapter October 10 California Water Association July 7-11 Annual Meeting BoD Meeting Jamesburg, NJ Pennsylvania Chapter BoD Meeting Sacramento, CA NARUC Summer Committee June 14 Hershey, PA Meetings March 14 October 16 Los Angeles, CA Pennsylvania Chapter BoD Meeting July 21- 25 New Jersey Chapter Meeting Hershey, PA Washington Chapter Meeting Jamesburg, NJ June 19 Fife, WA 10th NARUC Biennial Regulatory March 15 November 5 Information Conference California Water Association Columbus, OH September 11-13 Pennsylvania Chapter BoD Meeting Meeting New Jersey Chapter Meeting Hershey, PA Napa Valley, CA Jamesburg, NJ NARUC Basics of Regulation and March 20 July 11-12 November 8 the Rate-Making Process Course Albuquerque, NM California Water Association Pennsylvania Chapter BoD Meeting Pennsylvania Chapter BoD Meeting October 13- 18 BoD Meeting Hershey, PA Hershey, PA Covina. CA July 17 November 20 NARUC Eastern Utility Rate April 11 Seminar Washington Chapter Meeting California Water Association Clearwater Beach, FL Pennsylvania Chapter Ate, WA 55th Annual Meeting October 20-25 Customer Service Seminar August 6 Monterey, CA 198th NARUC Annual Convention Harrisburg, PA November 20-22 San Francisco, CA April 17 California Water Association November 18-21 BoD Meeting Florida Chapter Meeting Pennsylvania Chapter BoD Meeting Sacramento, CA Orlando, Fl Hershey, PA August 16 December 11 Apri l 24 AWWA Pennsylvania Chapter BoD Meeting Pennsylvania Chapter BoD Meeting Annual Conference New England Chapter Meeting Hershey, PA Hershey, PA Toronto Sheraton May 3 July 17 December 18 June 23-27

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