STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF SUEZ WATER NEW JERSEY INC. FOR APPROVAL OF AN INCREASE IN RATES FOR WATER/SEWER SERVICE AND OTHER TARIFF CHANGES BPU DOCKET NO. WR Direct Testimony of Exhibit PT-
Q. Please state your name and business address. A. My name is, and my business address is From Rd, Suite 00, Paramus, New Jersey 0. Q. By whom are you employed and in what capacity? A. I am employed by SUEZ Water Management and Services Inc. (SWM&S) s as a Regulatory Specialist. In this role, I am responsible for compiling, analyzing, and logically presenting supporting data for rate cases. 0 Q. Please summarize your educational background and other qualifications. A. I graduated from William Paterson University, Wayne, New Jersey in 00 with a Bachelor of Science degree in Accounting. Q. Please describe your work experience. A. Prior to joining SUEZ Water rate department, I worked eleven years, since 00, in the SUEZ Water accounting department with a focus on fixed assets and corporate management and services (M&S) costs. 0 Q. Have you provided direct testimony in previous cases on behalf of SUEZ Water New Jersey? A. No, I have not provided direct testimony in previous cases on behalf of SUEZ Water New Jersey Inc.. Q. Have you provided direct testimony before any regulatory commission? A. Yes, before the Rhode Island Public Utility Commission.
0 Q. What is the purpose and nature of your testimony in this proceeding? A. The purpose of my testimony is to provide the Company s comparative income statements and balance sheets, to support the Company s calculation of normalized Depreciation Expense for the Adjusted and Post Test Years, and to support the computation of Rate Base for the Adjusted Test Year ending September 0, 0 and the Post Test Year ending March, 0 for SUEZ Water New Jersey (SWNJ), SUEZ Water Toms River (SWTR), SUEZ Water Matchaponix (SWMX), SUEZ Water Arlington Hills (SWAH), SUEZ Water West Milford (SWWM), and SUEZ Water Princeton Meadows (SWPM) collectively the Company. Q. Please list the Exhibits that you are sponsoring in this rate case. A. I am sponsoring the following exhibits: I. Exhibit P-, Schedule. Income Statements - 0, 0, 0 II. Exhibit P-, Schedule. Balance Sheets 0, 0, 0 III. Exhibit P-, Schedule. Income Statements Twelve months Ended September 0, 0 ( actuals, budget) IV. Exhibit P-, Schedule. Depreciation and Amortization Expense V. Exhibit P-, Schedule. Rate Base 0 Q. Please describe Exhibit P- Schedule. A. Exhibit P- Schedule reflects the Company s comparative income statements for the twelve months ending December, 0, 0 and 0.
Q. Please describe Exhibit P- Schedule. A. Exhibit P- Schedule reflects the Company s comparative balance sheet at December, 0, 0 and 0. Q. Please describe Exhibit P- Schedule. A. Exhibit P- Schedule reflects the twelve months ended September 0, 0 which is the test year in this rate case. This schedule includes months of actual amounts booked to revenues and expenses through March, 0 and budgeted amounts from April 0 through September 0. 0 Q. Please describe Exhibit P- Schedule. A. Exhibit P-, Schedule shows the Company s calculation of its actual test year depreciation expense and pro forma depreciation expense based on proposed depreciation rates as developed by Mr. Spanos. The Pro Forma Depreciation Expense is derived by multiplying the individual plant account components (shown on Exhibit P- Schedule -A) for the Post Test Year with SWNJ s proposed depreciation rates. 0 Q. Please list the Schedules you are presenting in support of UWNJ s Rate Base. A. In all, there are nine () schedules of Exhibit P- that I have prepared in support of SWNJ s rate base. They are as follows: I. Schedule -A: Plant in Service Summary II. Schedule -B: Accumulated Depreciation Summary
III. IV. SUEZ WATER NEW JERSEY INC. Schedule -C: Contributions in Aid of Construction and Customer Advances for Construction Summary Schedule -E: Materials and Supplies Summary V. Schedule -F: Prepaid Expenses Summary VI. VII. VIII. Schedule -G: Customer Deposits Schedule -H: Unamortized Debt Discount and Expense Schedule -K: Cash Working Capital Lead/ Lag Analysis 0 Q. What other rate base related items are sponsored by Company witnesses besides you? A. The Plant Additions and Retirements as shown in Schedule -A. are sponsored by witnesses Emad Sidhom and Michael Willis. In addition, the Accumulated Deferred Income Tax (Schedule -D) shown on line and the Calculation of CTA (Schedule -I) shown on line 0 of Exhibit P-, Schedule are both sponsored by witness James Cagle. 0 Q. Please describe Schedule -A. A. Schedule -A shows how the Company s Utility Plant in Service balance is derived. Column shows the Plant balance as of December, 0. Columns through shows plant additions and retirements both actual and forecasted. Columns through are added to column (Base Year Plant Balance) to arrive at the Adjusted Test Year Plant Balance (/0/0) in column. Using the same method, columns and shows projected plant additions and retirements. These figures are added to the Adjusted Test Year Balance (column ) to arrive at the Post Test Year (//0) Plant balance in column.
Q. Please explain the basis for the Additions and Retirements on Schedule - A? A. The capital additions for the Adjusted Test Year and Post Test Year were provided to me by Company witnesses Sidhom and Willis and are shown in columns and, and computed on Exhibit P-. They represent plant expenditures that will be placed in service by September, 0 and March, 0, respectively. In addition, Messer s Sidhom and Willis provided me with the retirements associated with these capital projects, and I have included these amounts in columns and. 0 0 Q. Please describe Schedule -B. A. Schedule -B shows the calculation of the Accumulated Depreciation balances for the Adjusted Test Year and Post Test Year. Line shows the Accumulated Depreciation balance as of December, 0 (Base Year). Lines and show the depreciation expense, retirements, cost of removal, and salvage actual activity from January through March 0. Line shows six months (April 0 through September 0) of Adjusted Test Year depreciation expense that is added to the Accumulated Depreciation balance. Finally, this balance is adjusted by both the Retirements included in the calculation of utility plant on Schedule -A and the cost of removal/salvage to arrive at the Adjusted Test Year balance as of September, 0. Forecasted Plant Retirements, Cost of Removal, and Salvage were provided by witnesses Sidhom and Willis. The same process was used in determining the Accumulated Depreciation balance as of March, 0 (Post Test Year) shown on line.
0 Q. Please describe Schedule -C. A. Schedule -C shows the calculation of the Contributions in Aid of Construction ( CIAC ) and Customer Advances for Construction ( CAC ) balance. Line shows the CIAC and CAC balance as of December, 0. Line and reflects the actual change in the account balance with January through March 0 activity, line shows the new contributions, and line shows the refunds expected by September 0, 0 to arrive at the Adjusted Test Year balance (Line ). The same method is used to calculate the CIAC and CAC for the Post Test Year (//0). Forecasted CIAC was provided by witnesses Sidhom and Willis - Exhibit P-. Q. Please describe Schedule -F. A. Schedule -F shows a summary of Materials & Supplies used for operating and maintenance purposes. Since it represents an on-going investment by the Company in providing water service to its customers, it is included in rate base. I used a thirteen () month average to calculate this amount since actual dollar amounts vary from month-to-month. 0 Q. Please describe Schedule -G. A. Schedule -G shows a summary of Prepaid Expenses (e.g. prepaid property taxes, franchise taxes and dues). As with the previous schedule above, these expenses represent an investment by the Company in providing water service to its customers. Thus, they are included in rate base. Again, as described in Schedule -F above, I used a thirteen () month average to calculate this amount since actual dollar amounts vary from month-to-month.
Q. Please describe Schedule -H. A. Schedule -H shows a summary of Customer Deposits. Customer Deposits represent funds supplied by the customer that are available for Company use. Hence, it is included as a deduction to Rate Base. Again, as described in Schedule -F & -G above, I used a thirteen () month average to calculate this amount since actual dollar amounts vary from month-to-month. 0 0 Q. How did the Company develop its cash working capital requirement shown on Schedule -J? A. In the United Water New Jersey s 0 rate case Docket WR000, the average of the revenue lag and expense lag days were developed from three leadlag studies performed for New Jersey in 00 under BPU Docket No. WR0000, in 00 under BPU Docket No. WR00, and in 0 under BPU Docket No. WR00. Since there have been no material changes that would warrant a change in the leads or lags from the 0 rate case, except for monthly billing which was adjusted in the 0 rate case, I applied the average lags to the pro forma level of expenses in the current rate case for companies SUEZ Water New Jersey, SUEZ Water Arlington Hills, SUEZ Water West Milford, and SUEZ Water Princeton Meadows. In the United Water Toms River s 0 rate case Docket WR000, the average of the revenue lag and expense lag days were developed from two detailed lead-lag studies performed for Toms River in 00 under BPU Docket No. WR000 and in 00 under BPU Docket No. WR00. Since there have been no material changes that would warrant a change in the leads or lags from the 0 rate case, except for monthly billing which was adjusted in the 0 rate
case, I applied the average lags to the pro forma level of expenses in the current rate case for companies SUEZ Water Toms River and SUEZ Water Matchaponix. I added these six amounts together to develop the total cash working capital requirement. Q. Does this conclude your direct testimony? A. Yes, it does.