EXHIBIT 18-A
Non-Revenue
Water
California
American Water Company
Monterey Main System
February
2017
History
November 2006
In the proceedings in California Public Utilities Commission (CPUC) Application A.05-02-012 by California American Water for its 2006-08 General Rate Case,
much discussion took place in regard to Unaccounted for Water (UFW), also
called Non-Revenue Water (NRW) and the appropriate percentage to use for that
purpose. In fact, in the final decision D.06-11-050 in that proceeding, the
CPUC discussed the UFW percentage and agreed to allow the settlement
percentages to be used for ratemaking. The
UFW percentage adopted
in D.06-11-050 for the Monterey Main System was 8.5%.
July 2009
In CPUC
decision D.09-07-021, (2009-11 General Rate Case) the CPUC addressed
non-revenue water (NRW), also referred to as “unaccounted-for water.”
Historical NRW in
Cal-Am Monterey Main System
|
|
2003 |
2004 |
2005 |
2006 |
2007 |
|
Percentage |
11.2% |
9.5% |
13.2% |
10.7% |
13.3% |
|
Acre-Feet |
1,666 |
1,418 |
1,866 |
1,523 |
1,899 |
In the
decision, the CPUC stated that:
“California-American Water Company shall develop and
implement a program consistent with the highest engineering standards for
reducing unaccounted for water in its Monterey Main District and associated
subsystems, and shall include a comprehensive report on its efforts in its next
general rate case filing.”
The CPUC
adopted an allowance for UFW as a 9.0% target for the Cal-Am Main System,
authorized a meter replacement program, and adopted financial incentives
through a penalty/reward program based on the most recently calculated annual
UAW percentage.
In April
2011 Cal-Am released a “Report on Non-Revenue Water” which evaluated their
system and made recommendations to address NRW issues. Cal-Am investigated several areas: main breaks and service leaks, conducted an
assessment of current leak detection efforts, the benefits of sub-metered and
reduce pressure zones, large meter testing program, and AWWA non-revenue water
reporting tools.
July 2011
In the midst of the
2012-14 General Rate Case, Cal-Am, the CPUC Division of Ratepayer Advocates,
and the National Resources Defense Council adopted a Non-Revenue Water
settlement agreement seeking to authorize converting NRW targets for ratemaking
from percentages to volumes, establishing annual NRW reporting, adjusting the
penalty/reward calculation methods, and additional commitments by Cal-Am to
address NRW.
Historical and Proposed
NRW in Cal-Am Monterey Main System
Adopted by CPUC in Rate
Case Decision
|
|
2009 |
2010 |
2012 est |
|
Acre-Feet |
1,261 |
1,419 |
1,025 |
|
Percentage |
9.9% |
12.0% |
9.0% |
The estimated amounts
were the targets established for ratemaking.
The settlement also established action plans for Cal-Am NRW activities. The settlement also attempted to use one
calculation of NRW for ratemaking and a slightly different version for the
penalty/reward calculation – a request that was rejected by the CPUC in its
decision D.12-06-016.
It was this rate case
where it was agreed to begin using the term “Non-Revenue Water” instead of the
outdated term “Unaccounted for Water.”
Cal-Am was directed to use American Water Works Association (AWWA)
nomenclature and terms defined by the AWWA Water Loss Audit. Generally, the AWWA “Water Balance” and
components of NRW are as shown on the chart below:
|
System
Input Volume (corrected for known errors) |
Authorized
Consumption |
Billed
Authorized Consumption |
Billed
Metered Consumption (including water exported) |
Revenue Water |
|
Billed
Unmetered Consumption |
||||
|
|
Unbilled
Authorized Consumption |
Unbilled
Metered Consumption |
Non-
Revenue Water (NRW) |
|
|
|
Unbilled
Unmetered Consumption |
|||
|
Water Losses |
Apparent Losses |
Unauthorized Consumption |
||
|
Customer
Metering Inaccuracies |
||||
|
Systematic Data
Handling Errors |
||||
|
Real Losses |
Leakage on
Transmission and Distribution Mains |
|||
|
Leakage and
Overflows at Utility’s Storage Tanks |
||||
|
Leakage on
Service Connections up to point of Customer metering |
Unbilled
unmetered consumption might include fire fighting,
flow testing, system flushing, and sales to customers
as "free water.”
Recent Rate Design Case
(A.15-07-019)
In December 2016, the
CPUC issued decision D.16-12-003 which noted that under the penalty/reward
mechanism Cal-Am was penalized in 2011 and 2013 and rewarded in 2012 and 2014.
Current Rate Case
(A.16-07-002)
The direct testimony of
Eric Sabolsice filed July 1, 2016 stated the total
water loss for the Monterey Main System was 250 AF for Calendar year 2015. By Cal-Am’s
calculation the NRW percentage is 2.7%.
State Water Resources
Control Board Hearing – July 2016
At the July 2016 hearings
on the extension of the Cease and Desist Order, Cal-Am showed the following
chart of its efforts to reduce NRW.
CPUC Resolution W-5119 – December 1, 2016
This
CPUC resolution was adopted in support of four recent Executive Orders by
Governor Brown related to water and drought.
The resolution acknowledges the work the Class A investor-owned water
utilities have done in keeping non-revenue water percentages stable since the
Rate Case Plan Decision was adopted in 2007 and encourages further work that
will accelerate actions to minimize leaks as system leaks are just one
component of non-revenue water. Actions that shall be proposed by
investor-owned utilities to reduce non-revenue water and minimize leaks
include, but are not limited to: water loss audits; accelerated meter and main
replacement programs; increased inspections of service connection meters and
mains; installation of leak-detection sensors in the distribution system;
timely and efficient pipeline repairs; pressure management; and deployment of
advanced meter infrastructure (AMI).
These actions shall be reviewed in each utility’s upcoming general rate
case or by separate applications.
Monterey
Peninsula Water Management District Definition
The definition for Unaccounted for Water is the difference between what is recorded at the
production meters and the consumption recorded through system
meters or reported as estimates of reasonable uses.
Unaccounted for Water is made up of the following: Unknown leakage, stolen
water, unreported fire department usage, unreported street sweeping (and other
municipal uses), unrecorded construction water, customer meters registering low.[1]
One identified issue between past District
practice and the AWWA method, is that AWWA (see table above) starts with “System
Input Volume” whereas the District typically looks at metered production data
at the well or the Sand City desalination plant. There is a 476 AF difference between well
production and “system delivery” in 2015 which is not included in the Cal-Am calculation.
The
International Water Association (IWA) Definition
The International Water Association (IWA)
has developed a detailed methodology to assess
the various components of Unaccounted for Water.[2] Accordingly, Unaccounted for Water
has the following components:
· Unbilled authorized consumption
· Apparent losses (water theft and metering inaccuracies)
· Real losses
Unbilled authorized consumption is measured water that
is knowingly delivered by the utility without charge. This may include scheduled
flushing operations, operational distribution and other non-revenue applications
of water.
Apparent losses are
the paper losses that occur in utility operations due to customer inaccuracies, billing
system data errors,
and unauthorized consumption. Apparent
losses also include meter inaccuracies or meter under-registering. In
other words, apparent losses represent water that is consumed, but not properly
measured, accounted for, or paid for. These losses cost utilities and distort data on customer
consumption.
Real losses
are the physical losses of water from the distribution system, including leaks, and storage tank overflows. These
losses inflate the utility's production costs, since they represent water that is extracted and treated yet never
reach the customer for beneficial use.
In many utilities the
exact breakdown of Unaccounted for Water components is simply not known, making
it difficult to decide about the best course of action to reduce water loss.
Metering of water use at the level of production (wells, bulk water supply), at
key points in the distribution network and for consumers is essential to estimate
levels of Unaccounted for Water.
In most
developed countries, the share of real losses is much higher than apparent losses. In many developing countries, apparent losses
- in particular theft through illegal connections - are higher than real
losses. Reducing apparent losses from illegal
connections is often beyond what a utility can achieve by itself,
because it requires a high level of political
support.
From a public health
and drinking water quality point of view it is being argued
that the level of real water
losses should be as low as possible, independent of economic or financial considerations, in order to minimize the risk of drinking water contamination in the
distribution network.
Industry Standards in Relation to Monterey District NRW
Percentage
The most commonly used
indicator to benchmark NRW is the percentage of NRW as a share of water produced. While this indicator is easy to understand
and has been widely used, it has increasingly been recognized that it is not an
appropriate indicator. If absolute losses are constant the percentage of NRW varies
greatly with total water use.[3]
This problem can be eliminated by measuring
NRW, not as a share, but in terms of absolute losses per connection per day, as
recommended by the IWA. Nevertheless, the use of percentage figures to compare levels
of NRW remains common despite its shortcomings.
The industry standard was 10 percent twenty years ago.[4] The 10 percent benchmark was adopted by the American Water Works Association in 1996 through a study conducted by the AWWA Distribution and Operations Divisions Leak Detection and Water Accountability Committee. Achieving 10 percent NRW is also listed as a Best Management Practice for water providers in the Memorandum of Understanding Regarding Urban Water Conservation in California (as amended December 11, 2002).
By water industry and
California state regulatory standards, a level lower than 10% is now targeted
for most utilities. The District 7%
standard per Ordinance No. 92 is significantly lower.
Ways to reduce Non-Revenue Water
1. Capital replacement of distribution infrastructure will reduce real water loss, thus saving water and reducing production costs.
2. Investments in meter replacement programs reduce apparent water losses. This action will more accurately record consumption use. With more accurate consumption data, the individual customer will pay for actual usage instead of passing the cost on to all consumers because of meter under-register.
3. With Automatic Read meters, we can save additional expense with less billing errors and faster reading times.
4. Volumetric data allows us to evaluate true costs associated with unaccounted for water. Percentage measurements will move with volume delivered. Percentage is not an indicator of the condition of the system or cost of water loss.
5. Water pressure reductions in systems will lower leak casualties, thus saving water and repair costs on distribution mains.
U:\staff\Boardpacket\2017\20170222\DiscussionItems\18\Item-18-Exh-A.docx