RATE SHOCK

What is "rate shock"? It is not a jolt of electricity, but it is a jolt of sorts. It is not a rule of utility ratemaking, but it is a concept within it.

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,
(2006)

© 2017 Daniel J. Kucera

GHOST RIGHTS TO WATER CAN BE SPOOKY--PART 2

In my previous post, I discussed "ghost" water rights held by landowners. These are rights to divert water from streams and lakes that were established prior to governmental regulation and permitting of such diversions.

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,
p. B3

**Tupper, "SD Tribe Wages $200M Water Fight",
Rapid City Journal, November 13, 2016,
p. A1

© Daniel J. Kucera 2016

GHOST RIGHTS TO WATER CAN BE SPOOKY

In 1948, the classic song "Ghost Riders in the Sky" was published. Depicting a haunting cowboy legend, it became popular first in 1949 by the deep voice of Vaughn Monroe, but subsequently recorded by over 50 performers.

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,
page A1

© Daniel J. Kucera 2016

REGULATION AND AN ARCHIMEDES' MOMENT

Shortly before this month's presidential election, a Wall Street Journal article discussed impacts of excessive regulation upon economic growth.* Citing Brexit and G-20 leaders, it stated "Recent developments suggest a new recognition by voters and governments that excessive regulation is responsible for the slow economic growth of the past eight years." The article concluded "There is solid evidence that excessive regulation since the financial crisis has kept the U.S. and other developed economies from growing faster."

Since the dramatic results of the election, media sources have hastened to speculate over actions the new federal administration may take to mitigate or rescind perceived excessive regulation , not only in the financial arena but also particularly in environmental and energy related matters. Rulemaking in such areas obviously can have impacts on manufacturing, job loss and creation, wage growth, etc.

Moreover, aside from economic impacts, recent regulatory developments have extended federal reach to minutia of daily personal living. For example, there now are rules governing who can use what gender of public bathroom, the type of toilet one can have in a home, the kind of faucets and shower heads one can have, the kind of light bulbs to turn on in a bathroom, the amount of water a toilet can flush, etc. One can expect that a federal rule may be proposed governing the type and amount of toilet paper that can be used.

In addition to potential negative impacts on the economy, excessive regulation can distort the federalism structure inherent in the U.S. Constitution. As a reminder, the 10th Amendment states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved by it to the States respectively, or to the people." So, for example, should any regulation of bathroom usage be a federal or state issue?

Regulation can also become "excessive" when, under the guise of legitimate rule making it has a hidden agenda such as wealth redistribution or other social engineering. Or, it may become abusive when enacted by fiat without due process benefits of notice, opportunity to be heard, and balancing of costs and benefits.

The result of the recent election, to reference Archimedes' discovery, is a "Eureka!" moment. It has created a timely opportunity to review the current regulatory patterns and to modify rules which may be suffocating economic growth on both national and personal levels. One of the drivers of this country's exceptionalism in the past has been the freedom of ingenuity and hard work to rise above the common denominator. Excessive regulation can be a damper and limiting factor which create only negative inertia. Some positive inertia now is in order and welcomed.

______________________________________

*Wallison, "The Regulatory Tide Recedes",
Wall Street Journal, October 10, 2016,
Page A15

© Daniel J. Kucera 2016

FLUSHING OUT PUBLIC BATHROOMS

Recently, there has been a great deal of movement involving public bathrooms after the federal government issued "guidelines" that would enable users in public schools to access public toilets based upon the gender with which they identify instead of the gender specified on their birth certificates.

Schools, public institutions and businesses face the prospect of accommodating these or similar guidelines. Issues of privacy or even safety could arise with multi-stall restrooms previously designated by "original" gender, such as "men" and "women." With movement to so-called transgender facilities, multi-stall toilets likely will be phased out in favor of single-user restrooms.

It has been reported that one large airport plans to remodel its public restrooms to convert them to single-user rooms which will be labeled separately for woman, child, man, transgender and wheelchair.

Single-user bathrooms formerly known as as "unisex" now are said to be called "gender neutral" or "all genders."

Creating new public single-user bathrooms to accommodate perceived gender identity could conflict with another important cause--control of climate change. All the resulting remodeling construction and energy demand could contribute to global warming. Accordingly, toilets and climate change may merge into a global issue.

Another issue is what to call single-user facilities. They can be called "bathrooms", but no one can bathe in them. They can be called "restrooms", but no one enters them to rest. They can be called "water closets" or "WC", but no one goes into them to obtain water. They can be called "powder rooms", but there is no powder in them. They can be called "toilets", but the room is not a toilet. So, in addition to the issue of gender identification, there also is an issue of room identification. Perhaps, a solution for both issues could simply be to have a door with a question mark.

The ultimate concern may be whether the federal government should be involved with who can use a public toilet. Thirteen states have filed suit against the guidelines contending that public bathrooms are a matter only for state and local law. In an opinion released August 21, a federal judge in the litigation temporarily enjoined the federal guidelines, finding that, in effect, they were binding regulations, and that the government failed to follow applicable procedures for adoption of regulations.

Admittedly, the federal government already regulates toilets. However, a quick reading of the U.S. Constitution fails to disclose an enumerated federal power to regulate their usage.

POWER PLAYS

Last week, the U.S. Supreme Court issued a stay of the EPA's new carbon emissions regulation targeting coal-fired power generating plants. There are more than 30 lawsuits challenging the rule, filed on behalf of some 25 states and others. The stay of the enforcement of the rule allows the lawsuits to work their way through the lower courts before the matter, in all probability, winds up back before the Supreme Court.

Such a stay in the Supreme Court is rare. Some pundits in the press have opined that it means the Supreme Court likely will reverse EPA'a carbon emissions rule on the merits. In a broader sense, some have asserted that the stay is a significant blow to the President's environmental agenda.

Perhaps these comments arise from the typical requirements for a court stay, such as a showing of likelihood of success on the merits and denial of a stay would result in the threat of irreparable harm.
However, the grant of a stay is not a ruling on the merits of a case, and there is no assurance that the Supreme Court ultimately will reverse the rule.

In theory, there are two primary grounds that could justify any reversal of the regulation: (1) a finding that EPA exceeded its statutory authority under the Clean Air Act and/or (2) a finding that EPA did not find and consider the costs, including economic impacts, and benefits of the carbon emissions rule. For example, does causing the shift away from coal-fired power plants result in substantial economic impacts on the coal mining industries, utilities, jobs and ratepayers?

In addition to such "traditional" arguments against a rule, there may be more subtle issues at play here. They may arise from the concept of federalism established in the U.S. Constitution.

First, while Congress may have delegated to EPA regulation of air pollution, they may have not delegated authority to enact major national policy decisions such as policy on climate change, what fuels can be used for power generation, and impacts on the coal industry. Policy issues of substantial economic and political significance would be expected to be determined by Congress, not by an administrative agency.

Second, there is the federal-states relationship inherent in the 10th Amendment to the Constitution. Powers not delegated to the United States by the Constitution, or prohibited to the States by it, are reserved to the states, or the people. There has been a long recognition of states' role in regulation of electric utilities, generation and transmission assets and reliability of service. While a federal agency seeks to phase out coal-fired power plants, the result is to shift to states the burden to assure that lights will still be lit when those plants are retired. In a way, the carbon emissions rule is directed to the states as much as to the power plant owners, as it is the states that will have to reorganize their energy economies and regulatory oversight. In that sense, states seem to be called upon to implement a federal administrative agency policy decision.

GONE! WHAT HAPPENED TO SANTA CLAUS?

BREAKING NEWS.....Dateline December 25, 2050

Officials announced today the climate change agreement of all nations to ban Santa Claus from the Earth.

Under the agreement, authorities also have closed down Santa's workshop, seized his sleigh, and deported his reindeer from the North Pole to Finland.

Reached for comment, Santa declined comment on advice of his attorney. Mrs. Claus was quoted as exclaiming "What am I going to do? That old man now is going to be hanging around the house all day." One of Santa's elves, an officer of the Elves Union (EU) who asked not to be identified, said "We elves are now are unemployed and are in shock. We are short but have a long history. We will review our options."

Prior to 2015 and Climate Change Agreement I, carbon was pervasive. When Santa Claus made his rounds of houses, he came down the chimney with clothes all tarnished in ashes and soot. After the 2015 agreement, which banned carbon, Santa was able to come down chimneys free of pollutants.

Now, 35 years later, international governmental leaders have adopted Climate Change Agreement II to resolve additional issues with Santa Claus. Scientists have determined that, as Santa travels around the world, his reindeer produce excessive methane from belching and pooping, resulting in increases global warming. It is estimated that by the year 2100, the reindeer will have caused an increase in earth temperature of 0.01 degrees, unless remedial action is taken.

Even more serious, officials state, is that Santa's reindeer are leaving their chips and pies (poop) on top of mandatory rooftop solar panels of homes he visits. These deposits then block the production of electricity for the homes. Since there no longer is an electric grid or natural gas service, the result is that homes are without electricity for heating, cooking and lighting.

Therefore, government leaders concluded, it was necessary to ban Santa Claus in order to save the Earth.

For those who embrace the tradition of Christmas gift giving, governments are providing alternatives to Santa Claus. In the United States, the Affordable Gift Act was enacted, which provides for regional gift centers operated by government agency staff. Children will be able to select gifts from the centers, The centers will be funded by cash donations from adults, who then will receive tax credits as their gifts. Adults who decline to fund gift centers will pay an income tax penalty surcharge.

Authorities commented that under the terms of the Affordable Gift Act, the public will not miss Santa Claus at all, and the environment will be saved. "Those who once believed in Santa Claus can now happily believe only in government," one said.

One official was heard to say to an inquisitive little girl, "Yes, Virginia, there is no Santa Claus."

FIXING RATES TO RECOVER FIXED COSTS WHEN WATER USAGE IS DECLINING

Historically, public utilities--particularly water utilities--have designed rates to recover most, if not all, their costs of service through volumetric usage charges. Under such a rate structure, for example, customers pay a rate per 1,000 gallons, or per 100 cubic feet, of water delivered. Some water utilities also impose a fixed flat rate called a customer charge, designed to recover meter reading and billing costs. Except for the customer charge, which typically is quite small, all costs of service are sought to be recovered under rates which vary with usage.

This historical rate design can be problematic today. First, it assumes that almost all of the costs of water service are variable costs and that fixed costs are minor. In a water utility rate case before a state regulatory commission, the president of the company testified that 90% of the utility's costs actually were fixed costs, not variable costs. He said that variable costs were only such items as power, chemicals and possibly some labor and maintenance. Therefore, he argued for a larger customer charge to recover fixed costs. Regulatory staff in the room laughed and opposed any increase in the fixed rate. Was he correct? Are not depreciation, debt service, return on rate base and some labor and maintenance incurred regardless of the volume of water delivered?

A second issue with the historical rate design is declining revenue due to conservation,more efficient water appliances and usage restrictions. If most of the costs of water service are designed to be recovered from usage charges, and usage has declined, then revenue necessary to recover costs of service has declined as well.

Recently, the Wall Street Journal reported that electric utilities across the country are experiencing these issues and are seeking to resolve them by substantially increasing their fixed customer charges.* Regarding customer charges, "the utilities argue that the fees should cover a bigger proportion of the fixed costs of the electric grid, including maintenance and repairs." One utility official is quoted as saying "Since our cost to provide service is mostly fixed, we think our rate design ought to reflect that more accurately"

The Journal article stated "The problem for utilities is that many consumers are using less power these days, in large part because appliances and equipment are getting more energy efficient....The rise of rooftop solar power in some parts of the country also is chipping away at power sales."

The article cites an opposing view that a higher customer charge to recover fixed costs would be a disincentive to customers embracing rooftop solar power or cutting down on their usage of electricity. This assertion, however, would seem to beg the question as to the adequate recovery of fixed costs of service in view of declining revenue. Water rates, as well as electric rates, should be designed to enable recovery of all costs of service, not to satisfy social or political agendas. Substantial fixed costs are incurred by water utilities to enable them to provide water service to customers on demand.
Fair rate design should reflect that reality and obligation.

_________________________________________

*Rebecca Smith,"Electric Utilities Seek
To Raise Fees As Usage Declines", Wall
Street Journal, October 20,2015,p.B5

A SOLUTION FOR CLIMATE CHANGE

Some political leaders and scientists have asserted that climate change is the most critical issue facing the world today. Assuming this admonition to be true, perhaps the solution is at our feet.

This photo shows a fresh, dried cow chip, in situ. It is sometimes also called a cow pie or meadow muffin. Cow chips, simply stated, are the waste products of bovine digestive processes, or dung, if you will. They may contain undigested plant matter residue. The pictured chip, which I barely avoided stepping on, is about 10 inches in diameter and 2 inches high. Sort of gray-tan in color, the chip has the consistency of cooked oatmeal left on a plate to harden. (This why I have corn flakes for breakfast).

Cow chips are the successor to buffalo chips, which became obsolete when buffalo all but were exterminated by hunters. Buffalo chips, and cow chips when cows arrived, facilitated the settlement of the American Great Plains and the migration of settlers to the West Coast. Travelers through the prairies seeking the Oregon Trail and other trails through the Rocky Mountains soon discovered that there were no trees on the Plains. Homesteaders staying on the prairies had the same discovery.

Because wood and coal were not available for heating and cooking fires, buffalo chips became the fuel of choice. If a settler or traveler was accompanied by a cow, cow chips also were used-- unless the cow was used for food when game was sparse. "As a fuel, cow and buffalo chips offered the advantage of not throwing sparks into bedding or clothing, which was especially important in military tents and tipis. One early settler reported, 'Don't feel sorry for us cooking with cow chips. They had their advantages--didn't need to use pepper."*

Plains Indians also used buffalo chips for heating and cooking fires. In addition chips sometimes were used on the prairies as a building material, as a cure for various medical issues, as landmarks when piled high, and more recently for recreational cow chip throwing.

Since cow chips have a proven and important history as a fuel for heating and cooking, perhaps they can offer a solution in modern times for mitigation of concerns over perceived climate change. For example, under appropriate legislation such as the Affordable Cow Chip Act ("ACCA"), the government would provide each homeowner with one cow per member in the household. Thus, a house with two people and a two car garage would become a house with a two cow garage. Each home owner would be required to disconnect from the electric grid and from natural gas service. Instead, the home owner would be required to harvest his/her cows' chips and burn them in cook stoves, furnaces and fireplaces as the fuel for cooking and heating. Waste heat and gases would be recycled to in home generators to produce electricity. In the case of apartment buildings, where keeping of cows could be impractical, landlords or their tenants would be required to purchase chips from government operated exchanges. Commercial and Industrial facilities also would disconnect from the grid, and use cow chip independent generation, solar or wind power for energy needs.

Homeowners unable to afford maintenance of their cows would receive subsidies from the government for feed. Parties failing to participate fully in the ACCA program would be assessed a substantial monetary penalty, which would be called a tax.

Under the ACCA, therefore, all carbon related fuels would be eliminated from use as energy sources, thereby eliminating carbon emissions and stopping climate change. In addition, another benefit of the ACCA is that milk would be a byproduct of chip production from all those cows. Homeowners could sell surplus milk to the government for incorporation into the government milk grid.

Clearly, when the chips are down, governmental regulation will solve all our problems, including climate change.

________________________________________

*"Buffalo Chips", Encyclopedia of the
Great Plains

THE FOURTH MAN

The Mount Rushmore National Monument often is referred to as the "Shrine of Democracy." Four historic faces are carved by Gutzon Borglum in a granite Black Hills mountain.

Three of the "heads" were obvious choices, as they represent defining moments--game changers, if you will--in the history of the United States. Thomas Jefferson and the Declaration of Independence; George Washington and the Revolutionary War; and Abraham Lincoln and the Civil War to save the Union.

For the fourth man, Borglum selected Theodore Roosevelt, a not so obvious choice it would appear. Although Roosevelt had been a president, and even had a stuffed toy bear named after him, it did not seem that he represented a defining moment in history or even a game changer. Yes, he was a naturalist, a Rough Rider, and a rancher in the North Dakota badlands. In 1901, he became vice president under president McKinley. When Mckinley was assinated later that year, Roosevelt became president and was elected for another term in 1904. As president, he became known as a conservationist, setting aside some 280 million acres for national parks, monuments and forests, and as a "trust buster" for aggressive enforcement of antitrust laws.

However, Borglum may have picked Roosevelt for Mount Rushmore for a less visible but more important reason. Roosevelt was the first "modern" president, the first to exercise his executive powers to impose broad regulatory authority. In other words, his defining moment was his expansion of presidential power, particularly in relation to Congress.

For example, he wrote to historian George Trevelyan "I have a definite philosophy about the presidency. I think it should be a very powerful office, and I think the President should be a very strong man who uses without hesitation every power that the position yields."

In his autobiography, Roosevelt wrote: "The most important factor in getting the right spirit in my administration...was my insistence upon the theory that the executive power was limited only by specific restrictions and prohibitions appearing in the Constitution or imposed by Congress under its constitutional powers...Under this interpretation of executive power I did and caused to be done many things not previously done by the President and the heads of the departments. I did not usurp power but I did greatly broaden the use of executive power."

So, Roosevelt may have become the inspiration and model for the future aggressive broadening of executive power of the president, particularly through the use of administrative agencies, beginning with relative F.D.Roosevelt and continuing to this day. Indeed, regulatory agencies controlled by the executive are limited only when courts find that they have exceeded their statuary authority or have acted unreasonably.

Therefore, the fourth man on Mount Rushmore may have influenced and changed the United States as much as the other three men, but in more subtle ways.

THE AUDACITY OF ASSUMPTIONS

Last month, the EPA announced its new regulation requiring a 32% reduction from 2005 levels in emissions of carbon dioxide from power plants. According to media reports, U.S. power plants produce 5% of global carbon emissions, but the current Administration assumes other countries will follow and that the U.S. reduction will counteract assumed climate change. However, media have quoted the Senate majority leader as saying that the regulation would not meaningfully affect global climate, and several states have initiated litigation challenging the regulation.

One problem with regulations can be that they may be predicated upon assumptions of fact rather than evidence of actual fact. Proposed climate change regulations may be no exception, as they appear to be based upon the following assumptions:

Assumption No.1: Global Climate Is Changing

If an assumption is repeated enough times in media or by politicians, it can take on the color of fact. Assertions that global climate is changing appear to be based upon selective temperature readings and computer modeling. While some scientists have suggested that Earth is experiencing global warming, others have pointed out that global temperatures have not changed in several years. In turn, some have proposed that somehow warmth has been sucked into the bottom of oceans, so that surface temperatures have not changed. And, so the debate goes on. But regulatory climate change proposals appear to be based upon the assumption that global climate change is fact.

Assumption No. 2: Assumed Climate Change Is Caused By Humans

Climate change is a natural and repetitive process of Earth. Climate has changed countless times and can be expected to continue to do so. History evidences such ongoing change, as continents have shifted, lush lands have become deserts, and glaciers have frozen and thawed. For example, according to a recent report, 252 million years ago, climate change caused by volcanic eruptions caused extinctions of 90% of marine species and 75% of land species. "Volcanic gases prompted environmental changes that made the planet uninhabitable for most life".*

Another report explained that during the Ice Age abrupt climate changes caused mass extinction of large native animals such as the wooly mammoths."** Even the 18th Century Christian leader Jonathan Edwards believed that the Earth experiences "continuous creation." That is, the Earth was created. has changed over the years, and is constantly changing. "Tis certain with me that the world exists anew every moment," he said.***

Nevertheless, the assumption is being made by those proposing so-called climate change regulations that climate is changing due to human activity such as emissions from power plants and other sources.

Assumption No. 3: Government Has Power To Regulate Climate Change

Regulatory proposals to control hunan activities assumed to cause climate change also assume that government has legal authority to adopt and enforce such regulations. Because such regulations can have restrictive effects on activities, this assumption can have serious adverse impacts on business and jobs. Thus, in the case of the U.S., the focus can be expected to be on Constitutional issues, relations with the states, and statutory authority of administrative agencies proposing regulations.

Assumption No. 4: Benefits of Climate Regulation Exceed Costs

A finding, and weighing, of the costs and benefits of any regulation is essential. This should be particularly applicable to regulations adopted to control such activities as air emissions when a substantial negative impact could result from such action. It apparently is assumed that U.S. carbon emission limits will cause a significant reduction in global climate change. Will that assumption become fact if other countries do not enforce similar rules? Will it be fact even if they do?

On the other hand, significant costs can result from such regulations. such as the write-off of abandoned existing infrastructure, reduction in service reliability, loss of jobs and increased costs to consumers.

Assumption No. 5: Government Can Control Climate

Perhaps the most audacious and speculative assumption is that humans, through their government, can change climate change by reversing or reducing the change. If all the emissions from all the sources ceased, and humans returned to living in caves without fire, would the climate change assumed to be now occurring cease?

It may be that too much of modern secular culture is based upon assumptions, and too little on Truth.
___________________________________________

*"Volcanism Convicted In Permian Die-off",
Science News, September 19, 2015, p.10

**"Climate Change Drove Ice Age Die-offs",
Science News, August 22, 2015, p.9

***Moody, The God-Centered Life (2007),
pp. 98-99

FREE FOR THE TAKING

Shortly before the U.S. Supreme Court set aside EPA's mercury emission rules, the Court also set aside the federal government's raison crop regulatory program.*

Under the Agricultural Marketing Agreement Act of 1937, the government established the Raison Administrative Committee. Each year, the Committee required raison producers to give to the government, free of charge, a percentage of their crop. According to the Court's opinion, in 2002-2003, for example, the percentage of free taking was 47%. If a producer refused to give the government its raison, the producer would be fined the fair market value of the raisons, plus civil penalties.

In the case before the Court, certain raison producers fined by the government for refusal to give raison away sued, asserting that the requirement to give raisons to the government was an unconstitutional taking of their property contrary to the Fifth Amendment requirement of payment of just compensation for any taking.

The Supreme Court held that the government cannot take raisons without paying just compensation, measured as the market value of the raisons taken. The Court also said that there is no distinction between a taking of personal property and a taking of real property. A physical taking of either is a per se action that requires payment of just compensation.

The Court did make a distinction between a per se physical taking of property and a so-called regulatory taking, such as a use restriction on property. An example of a use restriction could be imposition of a condition on issuance of a land use permit. In the case of a regulatory taking, the Court said, just compensation was required only if the regulation went "too far." Going "too far" would require an ad hoc factual inquiry , according to the Court, "considering factors such as the economic impact of the regulation, its interference with reasonable investment backed expectations, and the character of the government action."

What may be evolving now could be judicial restraints on administrative agency regulatory actions perceived to cross the line into unfairness. In the case of the mercury emission rules, discussed in my prior posting, the Court stated that EPA rulemaking required consideration of costs and benefits. In the raison decision, the Court stated that regulation may require just compensation if is a physical taking or a regulatory taking that goes "too far."

These Court decisions may provide precedent beyond certain air emission rules or raisons. For example, they may be relevant to regulation of water and wastewater utility services and to regulations on the use of water resources.
________________________________________________________

*Horne v. Department of Agriculture, 576 U.S.___(2015)

DROUGHT: CAN GOVERNMENTS LEGISLATE CLIMATE CHANGE?

At an early age, school children probably learn that the age of a tree can be determined by counting rings in a cross section of its trunk. These rings reveal more than just age, however. By their width, they also reveal good years when rainfall enabled expanded growth, and bad years when conditions were less favorable.

Researchers have examined tree rings in Mongolia to study changes in climate as revealed by the rings.* As of the late 12th Century, Mongolia had been experiencing extensive drought. However, in the early 13th Century, the legendary Genghis Khan marched across Asia to establish his huge empire. Analysis of tree rings appears to show that Genghis benefitted a dramatic climate change that facilitated his rapid conquests. The climate change yielded a wet period that produced hearty grasslands for horses and livestock. "Wetter, milder conditions than the previous decades of drought would have given Genghis and his army significant advantages, including a constant supply of horses, increased agricultural production and other resources needed to support a centralized government and large military."**

Interestingly, after many years of favorable climate conditions, beginning in the 1990s, drought has returned to Mongolia. This climate change, in turn, has produced large livestock losses, soil degradation and migration from the countryside to cities.

The climate changes in Mongolia are just one example of the many documented climate changes in the Earth's history. In effect, they appear to be a natural attribute of the Earth, caused without any human activity connection. Whether climate changes are occurring today continues to be debated. If in fact climate changes are occurring, whether they are caused by human activity continues to be debated.

It seems that those who perceive that human activity is causing climate changes propose to change climate by legislation and regulation. Genghis Khan did not change climate to produce conditions favorable to his plans. He benefitted from a climate change that occurred naturally. If historically climate change is a natural phenomenon of Earth. can governments legislate climate change? If they could, that indeed would be climate change caused by human activity.

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*Juskalian,"Climate and the Khan",Discover,
July/August 2015, p.31

**Id.at p.34-35

DROUGHT: ROUNDING UP THE UNUSUAL SUSPECTS

"But I don't want to go among mad people", Alice remarked.
"Oh, you can't help that," said the Cat: we're all mad here. I'm mad. You're mad."
"How do you know I'm mad?" said Alice.
"You must be," said the Cat, "or you wouldn't have come here."

----Lewis Carroll, Alice in Wonderland

In the 1930s, the center of the United States became the "Dust Bowl" due to prolonged and pervasive drought. The dust was farmland topsoil wind eroded and blown away in dust storms, along with hopes and livelihoods of farm families. As memorialized in John Steinbeck's "Grapes of Wrath", migrant workers and farmers displaced by years of Dust Bowl misery relocated to perceived better times in California.

Now, portions of California and several other western states are experiencing prolonged and pervasive drought which is stressing and displacing lifestyles and livelihoods of residents. Moreover, much of California is naturally dry, and is dependent upon external water sources to sustain population centers and irrigation agriculture. So, the choice now is becoming one of serious reduction in water use or migrating elsewhere, perhaps even back to the center of the country.

The usual approaches to reducing water use have been well publicized, such as
* recycling wastewater
* prohibiting yard watering
* mandating utilities to reduce water deliveries
* mandating reductions in farm irrigation
* requiring installation of low flow water appliances
* adopting inverse rate blocks that rise with volume

These "usual" approaches may produce some success, but perhaps some more "unusual" approaches could also help.

For example, on June 24, the U.S. Department of Agriculture announced a partnership that would invest millions of dollars to restore the Sierra-Cascade California Headwaters, which is the water source for agriculture and some 25 million residents.

One of the most dramatic periods of conservation in the Unites states was during World War II, when many materials and foods were needed for the war effort, forcing citizens to conserve. Two aspects come to mind: (1) citizens were well educated as to the need to conserve resources; and (2) many items were rationed, a form of mandatory conservation. Could these two aspects be applied to help reduce water demand in drought environments? For example, could a per capital standard of average daily water use be established for households, with high volumetric rates applied to excess monthly use?

Agriculture can pose a more difficult issue. There is a significant difference, obviously, between land that produces annual crops such as corn and land that is used for orchards of fruit and nut trees that take years to mature. Perhaps some land can be taken out of temporary production, with governmental financial assistance. Or, irrigation rights temporarily waived or reduced. However, some farms may have contractual water rights which would likely require mutual consent for reductions.

One unique source of additional water could be human sweat. A Swedish engineer created a device to harvest sweat from clothing and to purify it to drinking water. A sweaty T-shirt is said to have produced two teaspoons of clean water. However, sweaty socks may be more productive. A pair of human feet is said to yield a half-pint of sweat every day. If true, sixteen pairs of socks could yield one gallon a day. Perhaps, here is an opportunity for another government program to establish a sock exchange where people would bring in dripping socks and pick up dry ones.*

Two other solutions may be available. If people in California do not like the drought and water use limitations, they might consider moving to the Midwest, where there has been so much record-breaking rain this year that it is a "Flood Bowl."

Or, if people want to stay in California and want more rain, why not just ask God?

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* Festa, "Sweat", Discover, July/August,2015, p.98

DROUGHT: WATER UTILITIES CONFRONT CONFLICTING POLICIES

"If you don't know where you are going any road can take you there."

---- Lewis Carroll, Alice in Wonderland

The photo depicts the arid wonderland of the South Dakota Badlands. They are a drought stricken moonscape that stands in dramatic contrast to the verdant Black Hills 50 miles to the west.

The Badlands once were full of rich vegetation and animal life also. Fossils evidence now extinct critters such as sabre tooth tigers, sheep-like oredonts, rhinos and miniature horse. At another time, the landscape was under water.

Some have asserted that parts of California naturally are arid and subject to drought--where farming must depend upon irrigation and cities on water sources located elsewhere. Whether current drought conditions in California and other states may be due to climate changes or temporary weather conditions, water utilities must deal with drought in some rational manner. Unfortunately, they can confront conflicting policies that make rational solutions difficult. Some of these policy conflicts include the following:

* Legal Duty To Serve vs. Service Restrictions. Generally, water utilities have a monopoly in their given service areas. This is because of the costly infrastructure required to provide water service; rarely are there competing water utilities within the same service are. For their monopoly status, water utilities incur certain obligations: whether by statute or by court decision, water utilities generally are required to satisfy the water demands of customers within their service areas. This obligation likely can be expected to apply to both investor-owned utilities and to municipal-owned utilities.

However, there can be a conflicting policy when, for example, state or local governments seek to impose restrictions on the amount of water utilities may deliver to their customers. The restrictive regulation limiting water delivery can clash with the legal obligation to serve customer water requirements.

* Higher Rates To Force Conservation vs. Cost Of Service Ratemaking. Some have urged dramatic increases in rates, such as inclining rate blocks as volume of water delivered increases, as a way of forcing reductions in water usage. However, while such measures may appear to have merit from the standpoint of objective, they can clash with applicable legal requirements that to be reasonable, rates must be based upon costs of service.

* Higher Rates To Force Conservation vs. Affordability. Some have argued that higher rates will enable "market forces" to naturally enable the desired reductions in water usage, and thus conservation. However, such a policy may well conflict with the notion of affordability of water. While "affordability" is not a precise concept, one can assume that higher water rates will take a larger chunk out of low income earner budgets. Moreover, affluent customers may feel no pain from higher rates and continue to use their typical amounts of water, thereby reducing the effectiveness of the conservation effort.

* Higher Rates To Force Conservation vs. Reductions In Revenue. Assuming that increased rates are successful in creating reductions in usage, the end result of conservation may also be a reduction of needed revenue to the utility as eell as excess treatment and delivery capacity that still must be funded--pushing rates still higher or forcing excess capacity to be abandoned as no longer used and us full.

* Contracts vs. Abrogation Of Contracts. A water utility serves customers pursuant to contract, which includes the tariffs of a regulated utility and ordinances of a municipal utility. However, if a governmental authority imposes service restrictions, does such an action also abrogate the contracts between utility and its customers?

For water utilities in limited source water environments, determining the best road to travel can be perplexing and full of potholes of policy conflicts. Indeed, the best destination may not be clear. It may seem that the only road available could be a circle.

OWNING WATER?

According to a recent report, a wastewater utility in Texas has asserted that it owns treated effluent from its facility and retains ownership even after the effluent is discharged into a river.* The ownership claim was made in an application for a "bed and banks" authorization to help support uses of the river.

Ownership of water, or the lack of ownership, can be a complicated and inconsistent issue across the United States. And, ownership of water does not necessarily mean control or permitted use of water.

For example, in Texas it appears that ownership and control of water depends upon the source of water. Groundwater below land is the property of the landowner, but withdrawal of the water is subject to controls by the state. Surface water is owned by the public and controlled by the state. Storm water is the property of the landowner until it enters a natural watercourse.

Another example is the use of Lake Michigan as a drinking water source. The water may be held in trust for the benefit of the public, but withdrawal of water is subject to control by a US Supreme Court decision in the case of Chicago area; state allocations; an international compact, and other law.

Still another example may be the ownership of a tract of land on which there is a wetland. Te landowner may own the wetland, but may be prohibited from draining or developing it by federal or state law.

If a water utility takes raw water from a source, whether groundwater or surface water, and treats the water to USEPA standards, does it "sell" the treated water delivered to a customer? A sale would imply ownership of the water first by the utility and then by the customer. Some oourts have held that a utility does not sell water. Rather, its charges are for providing a service--finding source water, treating it and delivering it to a customer. In turn, it would appear to follow that a customer has use of the water but not ownership.

Along the same lines, when a drinking water customer flushes wastewater delivered to a sewer, does the wastewater utility (often the same utility that delivered the drinking water) acquire ownership if the influent? Or, does the utility merely provide and charge for a service--receiving and treating wastewater to enable it to be delivered to a waterbody?

In many ways, issues of use or control of water may of greater importance than ownership. At best, the issue of ownership would seem quite fluid.

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*"Water Rights...Even After It Leaves The Pipe?",
WEF Magazine, Nov. 2014, p.19

A HARVEST OF FRUSTRATION

The year has passed quickly, from a mean-spirited Winter to a Spring that was an extension of Winter to a Summer that was a Spring, and now to Autumn. I watch my lawn disappear under a blanket of discarded leaves falling as a gentle rain of from tired limbs. Today, I came across a poem by Robert Frost, fitting for the season, called "Gathering Leaves":

Spades take up leaves
No better than spoons,
And bags full of leaves
Are light as balloons.

I make a great noise
of rustling all day
Like rabbit and deer
Running away.

But the mountains I raise
Elude my embrace,
Flowing over my arms
And into my face.

I may load and unload
Again and again
Till I fill the whole shed,
And what have I then?

Next to nothing for weight;
And since they grew duller
From contact with earth,
Next to nothing for color.

Next nothing for use,
But a crop is a crop,
And who's to say where
The harvest shall stop.

What does this have to do with water and wastewater utilities? Substitute "regulations" for "leaves".

THE OTHER CLIMATE CHANGES

We hear much discussion about climate change these days--the purported changes in earth weather patterns. Many assert that such climate change is caused by human activity. Governmental agencies increasingly seek to regulate such activities under the assumption climate change can be controlled. Others assert that such regulation is misplaced because either climate change does not exist or, if it does exist, climate change results from the earth's natural cycles over time.

Regardless, another type of climate change appears to be causing discussion: increasing concern over intrusion by administrative agencies and their regulatory power into details of private lives of the public.

For example, Senator John Thune (R. South Dakota) recently expressed concern about a proposed rule that would enable EPA to garnish wages to pay for fines levied by EPA for violation of its compliance orders.* He said, in part, "The EPA has been busy trying to expand its authority over the lives of Americans by arbitrarily imposing a multitude of new and expensive regulations that are leading to higher costs for middle-class families."

Along similar lines is a recent editorial from the Bismarck Tribune.** It asserts that EPA has compiled detailed maps of not only permanent waterways but also of intermittent streams and wetlands as a means to expand its regulatory power over a wide range of canals, ditches, reservoirs and wetlands. It stated, in part, "Burdening private landowners and the farming and ranching community by extending the EPA's jurisdiction to include seasonal waterways would come at a price. If the EPA is allowed to make a new ruling defining temporary waterways as being within its control, private landowners' rights will be diminished. The EPA's approach is problematic in many ways. The lack of transparency from yet another government agency further erodes public trust. The intent of the maps strongly suggests an underlying motive to expand reach and control--another troubling example of government overreach."

A recent editorial commentary in Barrons discussed concern over the regulatory fallout from the Affordable Care Act ("Obamacare").*** It pointed out that today regulations promulgated by administrative agencies and subsequent court decisions are more overreaching than the actual legislation enacted by COngress. It said, "We really can't know what a bill will mean until long after passage, when the courts tell us what the regulations mean." The commentary added:"Although the doctrine of enumerated powers was paramount for more than a century and a half, few Americans now living can imagine the restraints on federal power that held sway as late as the 1920s. Nowadays, the ninth and 10th amendments are "dead letters" in a country that does not even remember what a dead letter office was....What we now know is that we have lost our constitutional government of laws enacted by our elected representatives. Now we are governed by rules and judges."

When governmental agencies dictate what students can eat for lunch and what kinds of toilets and light bulbs people can have in their homes, one can understand a growing climate change of concern over what may seem to be unfettered regulatory expansion over private activity. From a constitutional standpoint, perhaps we have moved from a government of enumerated powers to one of enumerated prohibitions--if the constitution does not say government cannot do something, then it has the power to do it. That is climate change in and of itself.

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* Rapid City Journal, July 21, 2014, p.B4

** Reprinted Rapid City Journal
September 5, 2014, p.B3

*** July 28, 2014, p.39

SHOULD EPA REGULATE YOUR URINATION?

What's in your urine? Generally, human urine contains three macro-nutrients: nitrogen, phosphorus and potassium. Typically, urine comprises only about one percent of residential wastewater streams, but it contains about eighty percent of the nitrogen, fifty-five percent of the phosphorus and sixty percent of the potassium, as well as other nutrients such as sulphur, calcium and magnesium.

According to a recent report, attention now is being focused on the harvesting of such nutrients by means of "urine diversion" ("UD"). * UD is the separation of human urine from the wastewater influent stream at the point of urination. Interest in UD appears to be growing because urine can be used for agricultural fertilization and because at least two of the nutrients--nitrogen and phosphorus--when discharged from wastewater effluent contribute to over-enrichment of waterbodies. In particular, such over-enrichment causes algae blooms which result in adverse impacts on aquatic life.

Residential UD systems will require installation of urine diverting toilets and separate piping to channel urine to a storage tank somewhere in the front or back yard. Generally, a UD toilet has a split personality design, with a partitioned bowl. The front section of the bowl receives urine, which along with a small amount of water is flushed to the urine storage tank. On the other side of the partition, the back half of the bowl collects feces and toilet paper, which is flushed to the regular wastewater sewer the old-fashioned way or can be sent down a chute to a different tank in the basement or yard for eventual composting. In public buildings, urinals would be connected to UD systems.

While residential UD systems may have benefits, one wonders how practical is the design of a UD toilet. Specifically, a user necessarily will need to have accurate aim to make sure deposits reach the correct compartment of the toilet bowl. Such aiming could cause issues for some users. In addition, some homeowners may not appreciate having a urine storage tank in their front yard. However, the UD tank could be disguised by yard decorations, such as a small windmill, a small pagoda or a plastic deer, and some perennials.

One wonders whether implementation of UD systems in a step forward or a step backward for humankind. Would it be simpler just to walk into the garden and urinate on the tomato plants or the zinnias? Or in an urban setting, would it be simpler to empty a chamber pot out the window on to the street, where the accumulated flow eventually would be flushed from the streets into appropriate destinations? Possibly, houses could have mobile urination outhouses, disguised as potting sheds, that could collect urine and discharge it to different parts of the yard to nourish grass and plants.

UD systems, and their installation and use, would seem to be a likely subject for regulation by EPA. Water saving toilets and other water appliances already are regulated in some fashion by the government. Perhaps government grants can be made available for retrofitting UD systems in neighborhoods. Best to be pro-active and start practicing your aim.

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*See Emerging Issues, Spring/Summer 2014

A SHOWER STALLED

Recently, the Chicago Tribune published an article written by travel guru Rick Steves captioned : "European Loos Not Made For Lingering."* The gist of the article is that European bathrooms, and particularly the shower stalls, can be quite quirky.

However, the article does not mention an issue that my wife and I repeatedly have encountered during travel in Europe and stays at hotels: how does one turn on and turn off the showers and adjust the water temperature. While using shower controls should seem an easy enough exercise, the controls tend to be rather unique and foreboding, and no hotel provides instructions as to how to use them.

For example, during our travel to Europe earlier this month, at one well-starred hotel, the shower stall controls comprised three small, unmarked levers. Randomly moving one lever activated a roaring river of cold water out of the low faucet designed to fill the bathtub in which I was now standing, but not the shower head. The other levers appeared to do nothing, like placebos. Finally, after some 15 minutes of standing in the rushing cold water in the bath tub and frantically twisting all three levers, somehow water began to drip from the shower head. We have no idea how this happened, so we had to keep everything running as each person popped in and out of the stall. Of course, the whole process had to be repeated the next morning.

Another example on the same trip involved a shower stall that had no levers or any other visible controls. Instead, the only thing that was showing was a chrome tube with a rounded end coming out of the wall, and having the appearance of a large suppository suitable for an elephant. Again, only after at least 15 minutes of grasping and twisting at this tube did water magically begin to pour from the shower head.

Any one who has seen Dvorak's opera Rusalka can readily conclude that European showers are controlled not by levers and handles but by Vondik, the water goblin.

We have concluded that the pressing matter of shower stall controls is ripe for regulation by some EU or UN agency so as to provide uniformity of controls and public information on use of the controls. In the meantime, we will seek assistance from Vondik next time we travel to Europe.

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* (Section 3, p.2, April 13, 2014)