Thursday, March 16, 2017
Rate shock is a subjective measure of the assumed impact on utility customers of a proposed rate increase. It is a claim that can pop up in a ratemaking proceeding of any public utility, including water and wastewater utilities.
For example, in an Illinois case involving a drinking water utility, a witness for the regulatory commission testified that a rate increase of over 30% could be considered rate shock.* In that case, the commission approved a consolidated rate structure applicable to several water utilities having a common owner. The commission stated that the consolidated rate structure would enable capital costs to be "spread over a larger base of customers, thus mitigating rate shock to a smaller stand-alone division's base when infrastructure improvements are necessary."
In an Arkansas case, a witness for the Attorney General argued that a 22% gas utility rate increase to the residential class of customers would cause rate shock and, therefore, was unreasonable.** The commission did not address the argument.
Commonly, rate shock assertions arise when a large rate increase is proposed due to a sudden increase in a cost of service. Examples could be storm damage to facilities, unexpected failure of infrastructure and need to repair or replace it, new regulatory requirements, and the like. Sometimes, large rate increases arise because a utility has postponed seeking needed rate relief.
Generally, rate shock is not a basis for denying a rate increase that is justified by cost of service analysis. Rather, rate shock may be a basis for mitigating the impact on customers of a large rate increase. When potential rate shock is perceived, a rate increase may be phased in over two or three years. Or, as illustrated in a Connecticut case, an increased cost be recorded as a deferred expense or regulatory asset and amortized in rates over a period of years.*** The court quoted "A regulatory asset is a liability of a utility's ratepayers. Utility companies may incur large expenses in various ways--storm damages, installation of new facilities, increased taxes and so forth. These expenses, if passed immediately on to ratepayers, could create havoc. An immediate recovery of such expenses could cause sudden upward increases in rates, commonly termed 'rate shock.' In order to avoid rate shock, [public utility] commissions often will permit utility companies to recover their expenses from ratepayers on a deferred basis, listing the ratepayers' debt as a 'regulatory asset.' A regulatory asset is, therefore, a future debt of the ratepayers that can be passed on, together with interest, to the ratepayers."
Perhaps the best way for utilities to avoid claims of rate shock is to avoid, as much as possible, cost factors that can give rise to such claims. For example, regular and frequent review of costs of service and regular resulting incremental smaller increases in rates may avoid deferred large increases. Long range planning for repair and replacement of infrastructure along with establishment of reserves for such work in rates may also mitigate future sudden large proposed rate increases. Finally, phasing in of rate increases or using deferred expense and amortization procedures may enable more "gentle" rate adjustments.
Of course, there may be times when a large rate increase cannot be avoided because of a risk to continuity of good service. However, shock may be diminished when the utility adequately explains to its customers the reasons for the increase. There is no substitute for good communication.
*Lake Holiday Property Owners Association v.
Illinois Commerce Commission,2016 Ill.App3d
150816-U (3rd Dist 2016)
**Winston v. Arkansas Public Service Comm.,
984 S.W.2d 61 (Ct.App.1998)
***Office of Consumer Counsel v. Department
of Public Utility Control, 905 A.2d 1,
© 2017 Daniel J. Kucera
Monday, February 27, 2017
The article also asserts that human activities, such as fossil fuel burning, increased temperatures, but also blames the effects of a strong El Nino which released heat from the ocean. The article does not allocate the temperature increases as between the two mentioned causes.
Interestingly, another report in the same publication states that Earth's ocean surface temperatures 125,000 years ago were comparable to the current reported temperatures.** In fact, it is estimated that the prior global warm period was 2C degrees warmer than today. According to the article, average global ocean surface temperatures 125,000 years ago were "indistinguishable" from the 1995-2014 average. Although the report does not mention it, one presumes human activity contributions to global warming 125,000 years ago would have been modest.
About ten days ago, my midwest area experienced several February days of record-breaking temperatures of at least 60F degrees. This warm period was, of course, quite unusual. But, before I could hyperventilate over climate change, I heard on local television news that this warm period could not hold a candle to a more extensive similar unusually warm period in February of 1898.
So, it was hot 125,000 years ago, it was hot in February, 1898, and it was hot in February, 2017. I put away the snow shovel and windshield ice scraper, watched daffodils pop up and snow drops bloom sooner than usual, noticed honey bees burdened with pollen from somewhere, and dared to exit the house without a coat. Maybe, some of us like it hot.
* Sumner,"2016 Shattered Earth's Heat Record,"
Science News, February 18,2017, P.9
** Sumner,"Earth's Last Major Warm Period Was
As Hot As Today",Science News, February 18,
© Daniel J. Kucera 2017
Friday, February 3, 2017
The problem is this is no easy task. Many of the photos are not only old but also are of assumed ancestors which I cannot identify. You know, people are dressed in unfashionable black clothing of the sort seen in dull PBS documentaries and historic coffee table books that no one looks at. But--I dare not throw away a single photo because it may be of an unknown great grandfather or his third wife. So, photos go back into bags and boxes to live on.
A few years ago, a producer of a brand of whiskey advertised its virtues as having both age and ancestry. My futility with old photographs of unknown ancestors caused me to think about water. Does water have age and ancestry? When I fill a glass of water from a tap, is that water "new" or "old." Does the water in my glass have ancestor water?
Yes, water as a general substance is tied to Earth history, although there is no single agreed scientific explanation as to how it got here. But is the water in my glass water that dates back to the formation of Earth? And, yes the polar and glacial areas contain water frozen at some prior time. And yes, aquifers may contain water from a prior time but also may contain water from more recent surface water inflows.
So, what makes water "old". What makes water "new"? Is old water any different from new water? Is old water like a vintage wine that has matured into a fine taste or has turned sour from too much age? Is old water somehow an ancestor of new water?
Thinking about the age and ancestry of water has given me a headache. It has been as fruitful as sorting through old photos of grumpy looking unknown assumed relatives or almost relatives. So, I am going to put these water thoughts with the photos going into the dusty closet of my mind. Frankly, water in this regard is no different from my photos--it may have age and ancestry, but I cannot identify them.
© 2017 Daniel J. Kucera
Friday, January 13, 2017
My question: why should there be a lock on a residential bathroom door? I understand a desire for privacy. However, if a toilet or shower is in use, the door will be closed. If the door is open, the bathroom should be unoccupied. An open door policy is not at play here.
A few years ago, my wife and I stayed at a bed and breakfast house. Our room was large and recently remodeled. A full bathroom was within the room. However, the bathroom had no door. Locks and privacy were not an issue. Body sounds were.
On the outside of a locking bathroom door it is common to find a keyhole in the knob by which the door can be unlocked. When I enter a bathroom and lock the door, I begin to shake with fear that the lock will fail to reopen, making me a captive in the bathroom. This fear is compounded by the additional fear that no one will hear my calls for help, or that the owner cannot find the key to open the lock, or that locksmiths are on holiday. Instead of locking others out, I become locked in.
Is there a societal solution? Ralph Waldo Emerson said: "Be an opener of doors." Elizabeth Taylor is quoted as saying: "I feel very adventurous. There are so many doors to be opened, and I'm not afraid to look behind them." Finally, A>J> Darkholme explained: "Every man walks his own path, and every path has its fair share of locked doors. You never know who holds the key to a door you'll need to open one day, so you best treat people as if they all are key holders."
Is there a legal solution? There are court decisions that hold that residential bathrooms are entitled to privacy. For example, the U.S. Supreme Court has referred to the "century-old principle of respect for the privacy of the home."* This principle appears to go back to William Pitt's speech to Parliament in 1766: "The poorest man may, in his cottage, bid defiance to all the forces of the crown." More specifically, there is a reasonable expectation of privacy for a person in a single toilet bathroom.** As one state court decision put it, "An occupant of a closed bathroom is entitled to an expectation of privacy far greater than those persons in the common areas of a house, such as the living room and kitchen."***
However, in one federal court case, the court held otherwise. A husband and wife had an argument. The man retreated to a bathroom and locked the door. The wife called police. Officers entered the house with her consent. They ordered the husband to come out of the bathroom. When he refused, they forced the door open. In his complaint, he alleged that the officers acted unreasonably by unlawfully entering and searching the bathroom without his consent or a search warrant. The Court concluded that there was no constitutional violation because officers had the wife's consent to enter the house to protect a resident from possible domestic violence. "It is obvious from the Complaint that the officers couldn't see the Plaintiff behind the closed bathroom door and that, for some unapparent reason, he refused to present himself. The officers' duty to determine if a crime of violence had occurred and to ascertain whether Plaintiff posed a danger to their safety justified the officers' entry into Plaintiff's bathroom to address him directly."****
So, why do residential bathroom doors have locks? As Charles Dickens once said, "A very little key will open a very heavy door."
*Wilson v. Layne, 526 U.S. 603 (1999)
**United States v. Esparza, 162 F.3d 978
(8th Cir. Minn. 1998)
***Young v. Superior Court of Tulare County,
57 Cal. App. 3d 883 (5th Dist. 1976)
****Trull v. Smolka, U.S. Dist Ct., E.D. Va.,
© 2017 Daniel J. Kucera
Friday, December 30, 2016
Just what is a New Year's resolution? According to the Cambridge English Dictionary, it is defined as "a promise that you make to yourself to start doing something good or stop doing something bad on the first day of the year." No wonder such resolutions can be broken so easily. If a promise to oneself is not kept, who does one sue?
So, perhaps New Year's resolutions can be summarized as simply feel good statements of intentions having little chance of becoming reality. Oscar Wilde said: "Good Resolutions are simply checks that men draw on a bank where they have no account." Mark Twain put it this way: "Now is the accepted time to make your regular good resolutions. Next week you can begin paving hell with them as usual."
I think I found one resolution that really makes sense for everyone. Luther Standing Bear, an Oglala Sioux chief, said of the Lakota:
"Conversation was never begun at once, nor in a hurried manner. No one was quick with a question, no matter how important, and no one was pressed for an answer. A pause giving time for thought was the truly courteous way of beginning and conducting a conversation. Silence was meaningful with the Lakota, and his granting a space of silence to the speech-maker and his own moment of silence before talking was done in the practice of true politeness and regard for the rule that, 'thought comes before speech.'"
Simply stated, resolve to "think before speaking." While it may be a challenge to make and keep this resolution, the resulting silence will speak words for a more peaceful world.
©Daniel J. Kucera 2016
Wednesday, December 14, 2016
Ghost-like water rights also can arise under different scenarios. One reported example is the dispute between the states of West Virginia and Maryland over water rights in the Potomac River.* West Virginia has sought to take additional water from the river for a proposed new manufacturing plant in that state. Maryland has objected to such an additional take. In 1933, Maryland began regulating
withdrawals from the river by users out of state. West Virginia has claimed that such control is limited by a 1785 compact negotiated by George Washington and a 2003 U.S. Supreme Court decision which enabled the state of Virginia to have water rights in the river.
Earlier this year, a South Dakota tribe of native Americans living along the Missouri River filed suit against the United States seeking $200 million as compensation for alleged violations of water rights.** The complaint is premised on a 1908 U.S. Supreme Court ruling that the establishment of a land reservation for native Americans includes an implied reservation of water rights for the benefit of the tribe. The claim is alleged that water rights to the river given by the United States to others were not legal.
Fresh water is a scarce but indispensable commodity. Accordingly, what these examples illustrate is that sharing of water sources can be a contentious exercise. If sharing cannot be accomplished by agreement or compact, governmental regulation and ultimately litigation appears to be a necessary and likely consequence.
*Terlep, "P&G Caught in Water-Rights Feud",
Wall Street Journal, November 26-27,2016,
**Tupper, "SD Tribe Wages $200M Water Fight",
Rapid City Journal, November 13, 2016,
© Daniel J. Kucera 2016
Tuesday, November 29, 2016
Now, it appears that there may be ghost water rights in rivers and lakes on earth. In the 1600s, colonists in America began to use water from rivers to power their mills. In doing so, they also assumed rights to use water for these purposes. The formation of states, and the United States, occurred some 100 years later, and the formal regulation of water rights even later.
A recent news story focuses on a thorny issue: do pre-regulation water rights, sometimes called "ghost water rights", survive subsequent governmental regulation of water rights?* According to the article, two pioneer landowners in the Black Hills of South Dakota obtained water rights in 1896 to divert substantial flow from Rapid Creek. The then stated purpose of the water diversion was "for milling, manufacturing, irrigating, domestic and other useful purposes." These water rights were recorded prior to the the adoption in 1907 of state water use laws providing for regulation and permitting of water rights. According to the article, there were hundreds of water rights recorded prior to state regulation.
The article states that the subject water rights, if exercised, would divert almost one-half of the entire flow of the Creek in a typical year. In 1908, a state engineer surveyed pre-existing water rights and found that they claimed large amounts of water. He wrote "the natural tendency was to make the claim large enough to cover all possible requirements, and in most cases greater than there was any expectation of using...This resulted in many instances in absurd and speculative claims, and the records show numerous cases where each of a number of claims to the water of a stream, filed in accordance with the former statutes, involved a larger quantity of water than had ever flowed in it, even during flood periods."
Now, the state board regulating water rights is considering termination of ghost water rights. However, such termination presents several potential issues. For example, do pre-existing water rights ever expire or can they be terminated? If water rights were never used, do they still exist? Do they run with the land benefited from the water rights? Can water rights be abandoned, and if so, what evidence establishes abandonment? If a water right is used partially, does the unused balance still exist? Can a pre-exisist water right be reduced in scope?
Another issue may be Constitutional. If a state terminates or reduces a pre-existing water right, is this a taking under the Fifth and Fourteenth Amendments, requiring compensation?
Ghost water rights appear to be both daunting and haunting. Allocation of the rights to divert water from rivers and lakes can be a complex and contentious exercise. Indeed, to reference the song, ghost rights in the water can be spooky.
*Tupper,"'Ghost Claims'Haunt SD Waters,"
Rapid City Journal, September 25, 2016,
© Daniel J. Kucera 2016