DECISION 2016 NSUARB 73 M07147 NOVA SCOTIA UTILITY AND REVIEW BOARD IN THE MATTER OF THE PUBLIC UTILITIES ACT. and -

Transcription

1 DECISION 2016 NSUARB 73 M07147 NOVA SCOTIA UTILITY AND REVIEW BOARD {*Y f IN THE MATTER OF THE PUBLIC UTILITIES ACT and - IN THE MATTER OF AN APPLICATION by HALIFAX REGIONAL WATER COMMISSION for approval of revisions to its Cost of Service Manual and Rate Design for Stormwater Service BEFORE: APPLICANT: INTERVENORS: Peter W. Gurnham, Q.C., Chair KulvinderS. Dhillon, P.Eng., Member Murray E. Doehler, CPA, CA, P.Eng., Member HALIFAX REGIONAL WATER COMMISSION John C. MacPherson, Q.C. CONSUMER ADVOCATE John Merrick, Q.C. DARTMOUTH CROSSING 4 MASTER GP LIMITED Robert G. Grant, Q.C. Maggie Stewart, LL.B. HALIFAX PORT AUTHORITY Robert G. Grant, Q.C. Maggie Stewart, LL.B. HALIFAX REGIONAL MUNICIPALITY Peter Duncan BOARD COUNSEL: HEARING DATE(S): FINAL SUBMISSIONS: DECISION DATE: DECISION: S. Bruce Outhouse, Q.C. February 16 and 17, 2016 March 23, 2016 May 12, 2016 Application approved as amended by this Decision. See paragraphs 145 to 157.

2 TABLE OF CONTENTS 1.0 INTRODUCTION and BACKGROUND ISSUES Background Components of the New Definition Stormwater from the Property enters into HRWC s System Findings Stormwater for Upgrade Lands is Intercepted by and Directed around the Property by HRWC s Stormwater System Position of the Intervenors Findings The property is Accessed Directly by a Driveway which Crosses Over an HRWC Culvert Findings Site Visits Findings Stormwater Services Operating Procedures Findings OTHER ELEMENTS OF PROPOSED RATE DESIGN Stormwater Service Charges Finding Exemption for Properties Less than 50 m2 and Billing Increments Finding Amendment to Adjustment of Bills - HRWC s Rules and Regulations Finding Exemptions and Properties outside the Stormwater Boundary Findings Tiered Residential Rate Structure and Timing of Implementation Findings TIMING AND METHOD OF IMPLEMENTATION Timing/Implementation of Proposed Changes Findings Proposed Credits for Non-Residential Customers Credit System for Best Management Practices (Proposal 11) Billing Adjustment Mechanism (Proposal 12) Findings Changes to the Cost of Service Manual for Stormwater Service Findings Five Year Stormwater Operating and Capital Budgets OTHER ISSUES Sullivan s Pond - Dartmouth Findings Charitable Rate Findings Resource Property... 38

3 5.3.1 Findings Dispute Resolution Officer Findings SUMMARY OF BOARD FINDINGS... 40

4 INTRODUCTION and BACKGROUND [1] This is a Decision of the Nova Scotia Utility and Review Board ( Board ) in respect of an application dated October 30, 2015, by the Halifax Regional Water Commission ( HRWC, or Utility ), for approval of revisions to its Cost of Service ( COS ) Manual for Stormwater Service and associated rate design ( Application ). [2] HRWC provides water, including fire protection, wastewater and stormwater services to customers located within a specific boundary in the Halifax Regional Municipality ( HRM ). [3] In May 2011, HRWC applied to the Board for approval of the COS for Water, Wastewater and Stormwater Service. In January 2012 the Board approved the COS and directed that a COS Manual be developed. The Manual was submitted to the Board in October 2012 as part of a rate application. [4] On January 9, 2013 HRWC submitted a two year rate application to increase rates for Water, Wastewater and Stormwater Services effective July 1,2013, and April 1, This was the first rate application based on the new COS Manual and proposed separate rates for Stormwater Service. [5] The Board, in its Decision of June 24, 2013 [2013 NSUARB 127], approved separate rates for stormwater effective July 1, 2013, and an increase in those rates effective April 1,2014. [6] After two years of implementation and experience in administering the stormwater rates, HRWC conducted a review of the current COS and Rate Design Methodology for stormwater service, including a comparison to industry norms and best practice, with a view to enhancing equity and improving administration of the charge.

5 -3- Based on the results of this review, HRWC proposed modifications to the COS Manual and rate design as more fully described in this Application. [7] The hearing with respect to the Application was held February 16 and 17, John MacPherson, Q.C., represented HRWC at the hearing. John Merrick, Q.C., represented the Consumer Advocate ( CA ). Robert G. Grant, Q.C., and Maggie Stewart, represented Dartmouth Crossing 4 Master GP Limited ( Dartmouth Crossing ) and Halifax Port Authority ( HPA ) and Peter Duncan appeared on behalf of the Halifax Regional Municipality ( HRM ). [8] Board Counsel consultant was Mel Whalen, president of Multeese Consulting Inc. ( Multeese ). [9] The Board received five letters of comment. An evening session was held on February 16, 2016 and eight members of the public spoke. [10] The Final Issues List for the Application, established after circulating a Preliminary Issues List for comment, included the following: 1. Appropriateness of HRWC s current Stormwater Rate Design; 2. Review of various rate designs proposed by HRWC including its preferred option; 3. Review of any other options proposed; 4. Rate and revenue implications of all options; 5. Timing and method of implementation; 6. Changes to the Cost of Service Manual for stormwater; 7. Proposed credits for non-residential customers; 8. Five year stormwater operating and capital budgets; 9. Stormwater Services Operating Procedures. 2.0 ISSUES 2.1 Background [11] Under the current definition of stormwater service, if stormwater from a property enters HRWC s system, the property is billed for the service based on the

6 -4- impervious area of the property. Residential properties have a predetermined assumed impervious area. Commercial properties are billed on their actual impervious area. [12] HRWC noted the rate is based on the cost causation principle that if stormwater generated from a property utilizes HRWC s system, then the customer is charged the fee to pay for that service. However, the administration of the rate has been the subject of a great deal of controversy. HRWC noted that one of the significant challenges with respect to the current rate design is the administrative costs associated with defining which properties received stormwater service and also in investigating and responding to notices of objection and complaints to the Board. The estimated cost to date related to administration of the notice of objection process alone is $835,000. HRWC attributed that to the complexity of the definition of service. [13] The Board notes that it is currently dealing with 10 times more complaints against HRWC than against Nova Scotia Power Inc. ( NSPI ) yet NSPI has many more customers. In response to an Information Request ( IR ) from Multeese Consulting, HRWC identified the top three challenges with respect to administration of the current charge as: The volume of notices of objection (appeals) and the administrative burden of dealing with them; Dissatisfaction from non-residential customers on the lack of a credit system; and Perceived inequities - the use of a residential average making it difficult to explain to customers why a big house does not pay more than a small house or a small property and the lack of a mechanism to address properties that are only partially within the stormwater service boundary.

7 -5- [14] HRWC sees this Application as an attempt to improve the service definition. 2.2 Components of the New Definition [15] HRWC proposed a broader approach to stormwater service which it argued aligns with industry practice elsewhere in North America. HRWC noted it is responsible for the stormwater systems located in the HRM streets within the service boundary and that properties and users of properties located within it benefit from the stormwater service. [16] HRWC went on to say that stormwater management within the street network helps enable safe transportation of people, goods and the provision of services. HRWC suggested that properties within the stormwater boundary be charged in a way that better reflects the use and benefit enjoyed by the various properties in the stormwater service area. In recognition of that, HRWC proposed that properties within the service boundary, which receive one or more of the following services from HRWC, be considered a customer: (a) (b) (c) Stormwater from the property enters into HRWC s stormwater system; Stormwater from upgrade lands is intercepted by and directed around the property by HRWC s stormwater system; and The property is accessed directly by a driveway which crosses over an HRWC culvert. [17] The Board will review each of the components in turn Stormwater from the Property enters into HRWC s System [18] This continues the current definition. As noted by Mr. Whalen, in his testimony, this criteria is relatively straightforward, albeit not without controversy.

8 Findings [19] The Board finds that it is logical and appropriate to continue with this element of the definition of stormwater service. Clearly, the principal beneficiary under this criteria is the property being billed for stormwater coming from that property Stormwater for Upgrade Lands is Intercepted by and Directed around the Property by HRWC s Stormwater System [20] This was the most controversial of the criteria. [21] The number of additional customers that will receive only the interception service with regard to stormwater is small but, despite that, HRWC argued that the interception service is a best practice as it relates to the definition of stormwater service utilized elsewhere in North America. HRWC argued that the interception of stormwater diversion around the properties is a service being provided by HRWC for which it incurs a cost. HRWC relied on four of the principles from James Bonbright in justifying its rate design: 70. HRWC submits that the principal attributes to be considered in this instance are numbers 6, 7, 9, and Fairness of specific rates and apportionment of total costs of service amongst different ratepayers. 71. HRWC understand this criterion to require that like situated customers be charged the same amount for the service provided to them. In essence, this is the criteria which supports the "equity" arguments being advanced by HRWC in this matter. 72. As noted throughout this Submission, HRWC submits that it is inequitable for certain property owners to receive stormwater service and to not be charged for that service. Therefore it has proposed adding two additional elements to the definition of Service to ensure that those property owners who receive stormwater service from HRWC are required to pay for that service. 7. Avoidance of undue discrimination in rate relationships 73. HRWC understands this criteria to require that rates should be, to the extent possible, "subsidy free". 74. In this instance, if certain property owners are receiving service from HRWC but are not paying for that service, they are being "subsidized" for 100% of the cost of

9 -7- the service they are receiving. HRWC submits that this is contrary to the appropriate attributes for rate design as noted by Bonbright. 8. Practical attributes 75. Concerns have been expressed during the course of the hearing in regard to the "simplicity", "certainty", "understandability" and "public acceptability" of the various proposals advanced by HRWC. 76. In regard to a broader definition of service, HRWC submits that there is great certainty and simplicity in the determination of whether a customer has a culvert for which HRWC has responsibility for its operation, maintenance and replacement. This is understandable to the customers and will promote public acceptability of the charge. 77. The proposed addition of the "interception/diversion" element to the definition is, HRWC acknowledges, less "simple" and "understandable". However, it does represent a "real" service being provided by HRWC to the customer, as noted by Mr. Whalen in the excerpt from his evidence noted above. HRWC acknowledges that there have been difficulties with the "public acceptability" of the stormwater charge as was apparent from some of the submissions received from the public at the evening session held February 16, However, HRWC is of the view that a broadened definition of service will, over time, lead to greater, rather than lesser, acceptance of the part of the public of this charge. 78. HRWC submits that the benefits of this element of the definition, particularly when viewed in the light of attributes 6 and 7, outweigh any difficulties which might flow from the communication with customers of the nature of the charge. 9. Freedom of controversies as to proper interpretation 79. There have been a significant number of Notices of Objection filed in regard to the stormwater charge as currently defined. However, it is important to note that the number of Notices of Objection is small in the context of the total number of stormwater customers. The reasons for those Notices of Objection, as discussed above, can be considered to be "historical" in the sense that individuals are required to pay for a service which they either believe they were not receiving or was paid for in some other manner Position of the Intervenors [HRWC Post Hearing Submission, pp ] [22] HPA disagreed with HRWC s proposed service definition based on the interceptor benefit. HPA submitted the charge is contrary to established common law regarding liability for run-off and that introducing the intercept benefit will lead to further confusion, additional appeals and little benefit in terms of capturing customers that are not currently stormwater customers. HPA went on to say:

10 -8- HPA submits that there is no logical or cost-causative connection between the impervious area of a property and the value of the "interception benefit" and that it is unjust to use impervious area as the billing determinant when a customer is only receiving "interception benefit." HRWC should be directed to develop a more just and cost-causative approach to billing for this service. [HPA Closing Submission, p.2] [23] Referring to Bonbright s Principles, HPA submitted the interception benefit violates the following principles: The related (practical) attributes of simplicity, understandability, public acceptability and feasibility of application; Freedom from controversy as to proper interpretation. [24] HPA noted that the Application does not provide sufficient detail regarding how the proposed intercept benefit definition of stormwater will be implemented and, without further clarification, it will violate these Bonbright s Principles. [25] HPA also cited a couple of cases which outline the common law situation with respect to run-off: Loring v Brightwood Golf & Country Club Ltd, 1974 Carswell NS 106, 44 DLR (3d) 161,8 NSR (2d) 431 (NSSC AD); and Kennedy et al. v Parsons, 1992 Canlii 7308 (NL SCTD). [26] HPA noted that under common law, when development on an upstream property results in increased run-off to a neighbour s property, the owner may be held liable in nuisance. The downgrade property owner is under no obligation to accept the run-off. HPA went on to say: HRWC's proposed "interception benefit" definition of stormwater service is directly contradictory to these established legal principles. The "interception benefit" is not a benefit to a downgrade property owner (who is protected by law from increased runoff), it is a benefit to the upgrade property owner who, but for the interception, would be at risk for a claim in nuisance. Overall, HRWC's proposal to include "interception benefit" in the definition of stormwater service is contrary to established law and violates several of Bonbright's criteria for ratemaking. Even if it were a legitimate basis for a charge, HPA states that the burden to HRWC

11 -9- of introducing the "interception benefit" will outweigh any benefit, given the very small number of new customers that will be added to the HRWC rolls as a result. As discussed above, impervious area is a billing determinant in the present stormwater rate because it provides a rough proxy for a property's contribution to stormwater runoff. However, the same logic does not apply to a property that only receives "interception benefit." There is no connection or cost causation between impervious area and the "interception benefit." [HPA Closing Submission, p.9] [27] In its Reply Submission, HRWC noted that it is a regulated utility and has an obligation to serve within the service boundary, saying: 12. HRWC is a regulated utility. It has an "obligation to serve" within the service boundaries for which it is responsible. Individuals who receive the benefit of that service have the concomitant obligation to pay for the service received. 13. The circumstances in which a down gradient property owner may commence an action at common law against an up gradient property owner for the deposit of excess amounts of stormwater on the down gradient property are entirely irrelevant to the matters in issue in this proceeding. Infrastructure constructed, maintained and operated by HRWC prevents stormwater from being deposited on down gradient lands. In order to do so, HRWC incurs costs. Similarly, the down gradient property owner receives a benefit both in not being required to deal with the deposit of stormwater on its property through mitigation measures on the property and also not being required to engage in civil actions against up gradient property owners. [28] HRWC submitted: [HRWC Reply Submission, p. 3] 18. The obligations of the state are also discussed in the Loring decision at para 49: Farnham on Waters and Water Rights, supra, at p summarizes the American law respecting surface water in a statement which in my opinion also would describe the present state of Canadian law: "With respect to water as it falls from the clouds the burden must rest where it falls so long as the water remains in a diffused state, without being gathered into any channel. In such condition the water will, ordinarily, do no particular harm, and if it is necessary to obtain drainage for it, resort must be had to the aid of the state by means of public drainage proceedings, (emphasis added by HRWC) 19. The role of the state was further considered in para. 58: Fleming thus accepts, as I respectfully do, that the principle exempting owners from liability for natural flow of surface water is too well entrenched in our law to be dislodged or affected by general statements, albeit pronounced by the highest authority, laid down in quite different circumstances. I am, respectfully, not convinced that the Goldman case or any principles of urban planning in Canada in the twentieth century require the owner of vacant urban land to take positive steps to ensure that surface

12 - 10- water on his land does not run off to the possible injury of his neighbour, so long as he does nothing materially to increase or change the direction of the flow. That burden, especially in areas with heavy winter snows, would often be onerous. The neighbour acquires his property knowing the risk. He knows also that the municipal authorities have the primary responsibility of disposing of run-off. The City of Dartmouth, indeed, assumed this responsibility in installing the drains on Brightwood's boundary, in maintaining them, and in clearing them of snow, ice and other debris on the flood days of April 2, 1967 and May 12, [emphasis added by HRWC] 20. HRWC therefore respectfully submits that HPA's assertions that the inclusion of the "interception benefit" is "contrary to established law" is incorrect. [HRWC Reply Submission, pp. 4-5] [29] Board Counsel consultant Mel Whalen initially supported the service definition as recommended by HRWC. However, upon hearing all of the evidence and, in particular, the small number of customers added by virtue of this criteria and that notices of objection would likely increase rather than decrease (Mr. Whalen had assumed notices of objection would decrease based on the original evidence of HRWC), Mr. Whalen recommended that HRWC give some consideration as to whether, from a practical standpoint, and from an economic standpoint, this charge is justified Findings [30] With respect to the legal question, the Board agrees with HRWC that it has an obligation to serve and provide stormwater service within the service boundary. While the Board does not doubt that HPA correctly cited the common law as it relates to property owners concerning any potential civil law actions between downgradient and upgradient properties, that law does not preclude HRWC from adopting this service criteria if, in the view of the Board, it was otherwise appropriate. The Board does not believe that the inclusion of the intercept benefit in the definition would be contrary to established law. [31] The more troubling question is whether this is an appropriate criteria from a number of standpoints. It is not apparent to the Board that there is a direct connection

13 -11 - between the intercept benefit and the service supplied to the downgrade property. The service being provided upgrade is to that upstream property with run-off that reaches the HRWC system. That property should pay for the service based upon the impervious area of the property. It is not readily apparent to the Board why the downstream owner should pay as well for that diversion, particularly in circumstances, as could happen, where there is no run-off into the HRWC system from the downstream property. Having regard to Bonbright s Principles, in the Board s view, the rate is being made more complicated rather than less complicated, less understandable rather than more understandable, and less logical rather than more logical, by the inclusion of this intercept criteria. [32] HPA made the valid point, in the view of the Board, that there is no connection or causation between impervious area and the intercept benefit. HRWC tried to deal with that argument by saying that the definition of service and the billing determinant are completely different issues. With respect, they are connected in the minds of the ratepayer. The Board does not believe that this criteria meets Bonbright s Principles of simplicity, understandability and public acceptability or freedom from controversy as to proper interpretation. Indeed, it was conceded by HRWC that there are likely to be, at least in the short term, more appeals rather than fewer. [33] Finally, the Board appreciates Mr. Whalen s very practical comment, given the controversy that will be generated, and given the small number of customers added when he wondered, from a practical point of view, it is worth including. [34] For all of the foregoing reasons the Board is not prepared to include this upstream intercept criteria as part of the service definition.

14 The property is Accessed Directly by a Driveway which Crosses Over an HRWC Culvert [35] HRWC noted that there are two ways in which this proposed criteria come into play. The first is that the property owner uses the HRWC culvert to access the property if the driveway runs over it. Otherwise, the owner receives the benefit of the stormwater system through the ditches over which the culvert passes. HRWC believes the inclusion of its ownership of a culvert in the definition of service will assist in explaining to property owners how they are receiving service from HRWC. HRWC has the financial responsibility for maintenance and replacement of the culvert. Mr. Whalen noted that if there are customers who are not contributing stormwater to the system and not paying a fee, but have a culvert which HRWC is required to maintain, this means that everybody else is paying a bit more to cover that customer, so it is a question of equity. He noted that all else being equal, one would try to make the rate as equitable as one could. [36] HRWC concluded: 65. In the situation described, HRWC is responsible for both the maintenance and replacement of the culvert. While the timeframe within which the replacement of the culvert may vary, it is a "real" and considerable expense to HRWC to replace these culverts. Given that situation, it is appropriate, HRWC submits, that those customers should be charged the stormwater charge. 66. While driveway culverts exist primarily for the benefit of the private property, they also provide some benefit to the ROW. HRWC submits that this is appropriately recognized in the current allocation of culvert related costs 31.06% to ROW and 68.94% to Site Generated Flows. [HRWC Post Hearing Submission, p. 16] [37] No party appeared to take a position objecting to the inclusion of this criteria Findings [38] Unlike the intercept criteria there is clearly a cost causation if HRWC is maintaining the culvert or replacing the culvert if it becomes unusable. This is a service being provided to a property owner.

15 -13- [39] Having said that, there are two beneficiaries of the culvert as the culvert would be, in many cases, unnecessary if the ditch it traverses were not required to serve run-off from HRM streets. That is recognized in the current allocation of the cost of service as noted by HRWC in the paragraph noted above. There was little or no evidence on the appropriateness of the allocation and the Board wonders whether indeed HRM should be assigned a greater share, but has no evidence upon which to order a change in allocation. [40] Accordingly, as part of the next rate application, HRWC is to address the appropriateness of the cost allocation as between the right-of-way and the site generated flow and provide evidence in that regard. [41] The Board approves inclusion of this criteria. 2.3 Site Visits [42] HRWC identified a number of changes to the administration of this service which it felt will improve administration including: a communication and public education program with those customers affected to ensure they understand the basis on which they are receiving stormwater service; and a self-assessment tool on the HRWC website to assist the customer in determining whether they are in receipt of stormwater service. Obviously, the Board encourages anything that will assist customers in understanding this service. An issue of controversy over the last number of years, however, has been site visits. Many of the notices of objection, at the first level, are considered without a site visit by HRWC. HRWC believes this is the appropriate approach as tools are available for a determination to be made in regard to whether a customer is receiving service, often without a site visit. HRWC believes mandatory site visits will further increase the cost of the stormwater service, while providing little or no information that is needed to adjudicate

16 -14- a notice of objection. Mr. Yates described it as an engineering judgment, saying that where there is some doubt there will be a site visit Findings [43] The Board is prepared to leave it to HRWC s engineering judgment as to whether a site visit is required; however, HRWC should be sensitive to the point that many customers feel their notice of objection has not been properly processed unless a site visit occurs. [44] As part of its administration HRWC also suggested the implementation of a notice of objection fee, which would be refundable if the customer has a valid complaint. The Board is not prepared to approve a fee at this time, believing it will further alienate HRWC s customer base. 2.4 Stormwater Services Operating Procedures [45] In its Application HRWC advised of steps taken to improve the delivery of stormwater service. Mr. Whalen spoke to this in his direct evidence: WHAT IMPROVEMENTS ARE BEING IMPLEMENTED WITH RESPECT TO SERVICE DELIVERY? Based on its experience with stormwater customers since 2013, HRWC is implementing a number of improvements to service delivery. These are independent of any changes to rate design. They include: a) Having all stormwater service calls go directly to HRWC (rather than through HRM's 311 call center) to be screened with respect to jurisdiction and tracked from initiation to closure through a Customer Relationship Management (CRM) system. This will facilitate more direct and improved communication with customers, As per HRWC (UARB) IR-41, this is expected to go live in February, b) The implementation of a Computerized Maintenance Management System (CMMS) to allow HRWC to better manage its stormwater maintenance and repair activities. As per HRWC (UARB) IR-41, this should be complete by June, c) The provision of an on-line, self-assessment tool to provide customers a better understanding of the components of stormwater service and permit them to assess for themselves whether they are receiving service or may be eligible for exemption.

17 d) Modifying staffing and organizational structure to provide greater focus on the provision of stormwater service. DO YOU SUPPORT THESE CHANGES? Yes. These changes reflect a continuing focus on stormwater as a stand-alone service, separate from water and wastewater; they are designed to provide better service to stormwater customers; and will make service delivery more efficient Findings [Exhibit H-12, pp. 5-6] [46] The Board does not believe these operating procedures require Board approval, but applauds any attempt on the part of HRWC to improve both the understandability and service delivery of the stormwater service and encourages HRWC to make whatever changes it feels are required in this regard. 3.0 OTHER ELEMENTS OF PROPOSED RATE DESIGN 3.1 Stormwater Service Charges [47] HRWC provides service which has a two part rate. The first is for the street right of way and the second is for site related flows. In the present COS Manual the second part is referred to as site generated flows. HRWC is proposing definitions for these two parts. The proposed wording is as follows: Site Related Flow Charge refers to the charge for the services and benefits the customer is receiving including any or all of stormwater flows being intercepted or diverted from a property, access to a property over an HRWC owned culvert, and management of stormwater from a property that enters any part of an HRWC stormwater system. Right of Way Charge refers to the charge to the municipality for the impervious area in the street right of way. [Exhibit H-1, p. 81] [48] There was no evidence led by any of the parties or any comments made about the addition of these definitions. It was also noted by HRWC that HRM will still be responsible for the right of way charge.

18 Finding [49] The Board accepts the revised definitions as presented with the exception of a change to the services for the site related flow charge to properly reflect the criteria of stormwater service, as has been found by the Board earlier in this decision. Any additional references to the site related flow charge within the COS Manual must also be adjusted. 3.2 Exemption for Properties Less than 50 m2 and Billing Increments [50] In the Application, HRWC proposes no charge for those properties that have an impervious area less than 50 m2. The reason for the exemption was explained in the Application as follows: The Chargeable Impervious Area on the property is less than 50 square meters. Other stormwater utilities commonly have a minimum billing threshold at this level. Impervious area of less than 50 square metres is not usually a residential property or commercial building but is typically a small relic foundation or small pad often related to or owned by another (often contiguous) parcel. In any case, such small impervious areas are nearly invisible to the drainage system and costly to administer compared to the revenue generated. [Exhibit H-1, p. 17] [51] This will result in 2,675 parcels of land (out of a total of 104,429) being exempt from the stormwater charge. [52] No evidence was led by any of the parties or any comments made about the proposed exemption. [53] HRWC is also proposing to change the billing increments for impervious area to 10m2. Scott Rubin, the CA s expert, when asked if he agreed about the billing increments, said: Yes. HRWC indicates that the accuracy of its measurement of impervious surface area is ± 5 m2. IR-20NSUARB part (c). Given this level of accuracy, it is reasonable to round the calculated impervious area to the nearest 10 m2 and to bill in units in 10 m2. Billing in smaller units would mislead customers into thinking that the measurements were more

19 - 17- accurate and could result in customers seeking minor billing adjustments that would use HRWC resources without any significant benefit in accuracy to either customers or HRWC. [54] The CA, in its closing submission, noted: [Exhibit H-8, pp. 4-5] Changing to a square metre of measurement will not have a significant impact on the present method of calculating of rates for residential properties but it would make a difference when residential rates are tiered. The change could be implemented at that time Finding [CA Closing Submission, p. 1] [55] The Board finds that properties with an impervious area less than 50 m2 should be exempt from the stormwater charge and that HRWC should round impervious area to the nearest 10 m Amendment to Adjustment of Bills - HRWC s Rules and Regulations [56] HRWC is proposing to submit a change to Regulation #11 to allow it to adjust bills if, upon review of a Notice of Objection, the original determination of impervious area was proven to be inaccurate. This inaccuracy can be caused by either natural or temporary impervious surfaces that need to be corrected for the property. The natural occurrences could be such things as rock out croppings, water surface, a watercourse or a manmade pond or swimming pool. The temporary surface could be caused by plastic sheeting and/or frozen ground. None of these issues are pertinent to either water or wastewater, and are specific to stormwater services. [57] Ms. O Toole commented upon this saying:... And we were particularly concerned with whether our satellite imagery if it picks up something that s not a permanent impervious area, if you will, something that s temporary, we wouldn t want to be billing upon that basis, it might result in an inequitable result. [Transcript, February 16, 2016, p. 131] [58] No evidence was led or comments made about this request for an amendment to this section of the Regulations.

20 Finding [59] As the actual wording for this proposed amendment is not before the Board at this time, no finding will be made; however, the Board agrees with the concept. This request will be considered when it forms part of a future application to adjust stormwater rates. 3.4 Exemptions and Properties outside the Stormwater Boundary [60] In determining a list of properties that would be exempt from the stormwater charge HRWC has excluded pits, quarries and refineries. The reason given was that they had stormwater management facilities on the property. They are now proposing to treat these properties like all others and will only consider an exemption based on specific circumstances on or near the property. When asked if the number of these considerations would be an administrative burden on HRWC, Ms. O Toole responded: There are only a few really complex properties where I think we need that level of discussion, and we reference them separately in our proposal. [Transcript, February 16, 2016, p. 240] [61] There are properties, both residential and non-residential, which are on the stormwater service boundary. For residential properties HRWC is proposing that if any portion of it is within the service boundary then it shall be charged the full site related flow charge. For non-residential properties, that part which is outside the service boundary will be exempt from that portion of the charge. [62] Ms. O Toole explained:... If it was further complicated by being split by a watershed and only a portion of the stormwater from the impervious area inside our boundary was getting to our system, then under our proposal for credits or bill adjustments there would be a further adjustment to make their bill proportionate to the service they re receiving. [Transcript, February 16, 2016, p. 198]

21 - 19- [63] No evidence was led or comments made about this change in defining which properties generate stormwater flow Findings [64] The Board finds that the exemption of properties was an internal practice which had not been defined in the Board approved Rules and Regulations. The Board approves the concept of treating all properties the same, with exemptions based on the specific circumstances, including when part of a non-residential property is outside of the service boundary. 3.5 Tiered Residential Rate Structure and Timing of Implementation [65] The fundamental billing determinant for stormwater site generated flow is the impervious area of a property (referred to sometimes as a parcel ). For ease of administration HRWC has determined the total impervious area for all residential lands and divided that by the number of residential properties. This then determined the residential rate. HRWC is suggesting that the impervious area of many of the residential properties vary greatly in size and that there is an inequity with smaller areas paying the same as larger ones. To create a greater equity in this charge and, at the same time, minimize administrative burden, HRWC is proposing that all residential properties be slotted into one of five tiers. HRWC has calculated what they refer to as an Equivalent Residential Unit ( ERU ) of 295 m2. They then proposed intervals to develop the five tiers with the middle tier, which goes from 224 m2 to 369 m2 to pay 100% of the average residential parcel rate. The first tier, which is zero to 50 m2 will, as has already been discussed in this Decision, be rated at 0%. The tier below the average would have a rate

22 -20- of 50% whereas the two tiers above the average have rates of 200% and 300% respectively. [66] Overall, Mr. Rubin, agreed with implementing a tiered approach for residential stormwater rates stating as follows:... Properties with smaller amounts of impervious area should pay less than properties with large amounts of impervious area because smaller properties contribute less to the costs of managing stormwater and maintaining the stormwater system. I also agree with HRWC that it would be administratively complex and expensive to bill each residential property based on an individual calculation of impervious area. Such a system, even if the calculation were rounded to the nearest 10 m2, could result in numerous requests for billing adjustments that would have a relatively minor effect on system revenue requirements. While tiered rates are not perfect, they would represent a significant improvement in the current method of billing residential properties. Tiered rates also appear to strike an appropriate balance between accuracy and administrative efficiency. [67] Mr. Whalen, in his evidence stated: [Exhibit H-8, pp. 5-6] I am generally supportive of the tiered approach for residential customers because it has the potential to be more equitable and appears to be a common approach among larger stormwater utilities [Exhibit H-12, p. 8] [68] Mr. Rubin expressed a concern about the present determination of the tiering intervals. He recommended the tiering intervals be expressed in units of 10 m2 and rounded appropriately. This also received the support of Mr. Whalen. [69] In the rebuttal evidence of HRWC [Exhibit H-18], it accepted the proposal from Mr. Rubin to base the intervals rounded to 10 m2. The intervals suggested by Mr. Rubin would have the customers in the lower tiers paying more than the equivalent non- residential customers with similar impervious areas. HRWC noted that the median impervious area of residential properties is 200 m2 (not the average of 294 m2). Using the median, the intervals became 50 m2, 100 m2, 300 m2, 400 m2 and above. [70] When asked if the median tiering was a better approach, Mr. Whalen responded:

23 -21 - No, I am not particular to one or the other. I think the median approach, you know, certainly could be an appropriate approach. Just in terms of what s on the record here, I would note, you know, that it probably exacerbates the issue of what happens with larger customers, but that would need to be addressed. [Transcript, February 17, 2016, p. 401] [71] When asked how the tiering would relate to non-residential customers as far as equity is concerned, HRWC s consultant, Andrew Reese, responded:... We generally treat residential properties as a class. And as a class, the rate structure is targeted toward the typical property within that class. By far, the greatest differentiator between residential and commercial is the fact that residential property has a typical average imperviousness of in the 30 percent range, whereas commercial is in the 60 to 70 percent range. That is sometimes recognized in a tiering sort of a structure,... [72] In particular he also added: [Transcript, February 16, 2016, p. 92]... There is no one above the lowest tier who is charged more for their impervious area than they would be a commercial property. They are all charged less. [Transcript, February 16, 2016, p. 221] [73] Depending in which tier a property was placed there will be a change to the billing. Ms. O Toole responded that the changes would be as follows: We know that 86 percent of residential customers would see a decrease, 14 percent would see an increase. The maximum increase that a customer in a residential Tier 5 would see would be $3.97 a month. [Transcript, February 16, 2016, p. 145] [74] Throughout the evidence there was some confusion as to when HRWC would like to implement a tiering for residential properties. At times they indicated that they would defer implementation until further direction was given. However, when asked at the hearing whether they want this tiering to be approved, Ms. O Toole responded: Ms. O Toole: That s what we d like you to approve [Transcript, February 16, 2016, p. 144]

24 -22- [75] The CA, in his opening statement mentioned his understanding that HRWC had agreed to defer consideration of the tiering proposal. In his closing submission he acknowledged that improvements have been made, but:... Nevertheless the proposal needs further consideration. HRWC acknowledged that it would be satisfied to receive reactions to the concept and leave it to a subsequent application to put before the Board a considered and more detailed proposal. [CA Closing Submission, p. 1] [76] Mr. Whalen, while being supportive of the tiered approach, had reservations about implementing it now as it may not be equitable across urban and rural residential customers. As he explained:... And so it may be that an impervious area in a rural setting versus an impervious area in an urban setting on a square-foot basis, may not be totally comparable in terms of what a discharge is. [77] He further elaborated as follows: [Transcript, February 17, 2016, p. 398] I was not suggesting that the Commission should develop different rates for urban versus rural. I was suggesting that a tiered system for residential customers would apply to all residential customers. But there may be justification for making an adjustment to the impervious area of rural customers so that they would be in a tier that is different from the one that they would be in if you counted the impervious area as 100 percent. [Transcript, February 17, 2016, p. 419] [78] In HRWC s rebuttal evidence the differences in service and costs for rural and urban properties was highlighted. These differences were described as follows: The cost of the provision of stormwater services on a per-person or per-unit of revenue generated basis is significantly higher in rural areas than in urban areas. While the density of drainage system is far less, the density of revenue generation is even less. The revenue generated from rural areas is less than the cost to HRWC to service those areas.

25 -23- If HRWC were to attempt to develop rates for piped storm sewer systems versus ditch and culvert systems, the rates for service for rural customers would be higher than the rates for customers on a piped storm sewer system. HRWC does not believe this would be beneficial as it would be contrary to the regional approach the utility employs, and akin to calculating different costs of service for different types of water production and distribution or wastewater treatment and collection. HRWC feels that the modification of the rate structure for rural areas as a class is contrary to the postage stamp rate approach employed for water and wastewater services Findings [Exhibit H-18, pp ] [79] The Board finds that the tiering by impervious area of residential rates, as subsequently amended by HRWC, is a more equitable way to bill properties (or parcels) within this class of customers. [80] The Board finds the evidence of HRWC on the differences between rural and urban properties to be persuasive, and does not see any reason to delay the implementation of residential tiering. If there are issues that arise upon implementation they could be resolved through a future application. 4.0 TIMING AND METHOD OF IMPLEMENTATION 4.1 Timing/Implementation of Proposed Changes [81] HRWC s Application sets out that one of the Orders sought is: (b) To approve changes to the rate design for stormwater rates to become effective following a future hearing to adjust rates. [Exhibit H-1, p. 28] [82] HRWC noted that it anticipates filing a stormwater rate application with the Board in the Fall of 2016, which will incorporate any of the changes approved by the Board as part of the current Application. It explained that any rate impacts which result from the approved changes will not be effective until the date set out in the Board s Order associated with the future stormwater rate application. It added that any additional

26 -24- research or consultation which may be required with respect to any aspect of the issue is proposed to be completed prior to filing the stormwater rate application. [83] With respect to the Notice of Objection process, it is HRWC s position that any Notices filed prior to the date of Board approval of changes to the service definition be dealt with under the current definition, while any appeals filed after such approval date be dealt with under the new definition. [84] Both Dartmouth Crossing and HPA expressed concerns with the timeline proposed by HRWC to implement any changes. Dartmouth Crossing stated: Dartmouth Crossing has been engaged with HRWC regarding the stormwater rate since Fall It had reasonably expected that this hearing would result in the implementation of changes to the stormwater charge that would redress the unfair and unjust application of the charge to certain ICI properties, including its own. Although HRWC has stated that it intends to further delay the implementation of needed changes to the stormwater rate, Dartmouth Crossing respectfully submits that there is ample evidence before the Board to justify implementing the changes immediately. [85] HPA noted: [Dartmouth Crossing Closing Submission, pp ] HPA intervened in this matter with the expectation that a hearing focussed exclusively on stormwater issues would result in meaningful changes to the stormwater rate. However, in the course of this hearing, it became evident that HRWC is merely requesting permission to explore billing adjustments for properties that do not drain to the HRWC system, residential tiering and credits for stormwater mitigation. HRWC intends to develop each of these and bring them back to the Board at subsequent hearings. It is apparent that stormwater rates are a low priority for HRWC and this has languished for far too long in a costly, time consuming process with little end in sight. There can be no doubt that the present stormwater rate charged to non-residential properties is unjust and is in immediate need of adjustment. Halifax Port Authority respectively requests that the Board order the changes that are needed to make the stormwater rate just and equitable. [HPA Closing Submission, p. 11] [86] With respect to the timing and implementation of any approved changes to the stormwater charge, HRWC stated that there are stakeholders other than Dartmouth Crossing and HPA who might be impacted. It added that it would be inappropriate to

27 -25- implement any changes at this stage, prior to obtaining their input, which may differ from the views expressed in the current Application Findings [87] The Board understands the concerns of Dartmouth Crossing and HPA with respect to the amount of time involved in the ongoing development of the stormwater charge. The Board further notes that the Application, which has been presented mainly to receive Board opinion or approval of concepts to be used in the preparation of a future rate application, has only added to these concerns. [88] HRWC has separated the two concepts of service definition and billing adjustment mechanisms in terms of its proposed receipt of Board approval. The Board has made its findings with respect to service definition, as discussed above. While the billing adjustment mechanism will be discussed below, the Board is of the opinion that as these billing adjustment mechanism proposals have rate implications, which are not currently known, they should be included in the next rate application. In addition, all stakeholders should have the opportunity to be involved in any discussions leading up to the preparation of the rate application, as well as in the rate application review process. Therefore, the Board agrees that changes to the rate design be incorporated in the future stormwater rate application. [89] It is further noted that any Notice of Objection appeals filed with the Board will be reviewed based upon provisions of the Schedule of Rates, Rules and Regulations effective at the time of its filing.