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State of Florida
Public Service
Commission
Capital Circle Office Center 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE: |
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TO: |
Director, Division of the Commission Clerk & Administrative Services (Bayó) |
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FROM: |
Division of Economic Regulation (Joyce, Merchant, Willis) Office of the General Counsel (Fleming) Division of Regulatory Compliance & Consumer Assistance (Vandiver) |
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RE: |
Docket No. 040316-WS – Analysis of Utilities, Inc.'s plan to bring all of its Florida subsidiaries into compliance with Rule 25-30.115, Florida Administrative Code. |
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AGENDA: |
12/07/04 – Regular Agenda – Interested Persons May Participate |
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SPECIAL INSTRUCTIONS: |
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FILE NAME AND LOCATION: |
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Utilities, Inc. (UI) is the parent corporation of the following 16 utilities that provide water and wastewater services in the State of Florida and are subject to the Commission’s jurisdiction: Alafaya Utilities, Inc., Bayside Utility Services, Inc., Cypress Lakes Utilities, Inc., Labrador Utilities, Inc., Lake Utility Services, Inc., Mid-County Services, Inc., Miles Grant Water and Sewer Company, Sandy Creek Utility Services, Inc., Sanlando Utilities Corporation, Tierre Verde Utilities, Inc., Utilities, Inc. of Eagle Ridge, Utilities, Inc. of Florida, Utilities, Inc. of Longwood, Utilities, Inc. of Pennbrooke, Utilities, Inc. of Sandalhaven, and Wedgefield Utilities, Inc. Water Service Corporation (WSC) is also a wholly-owned subsidiary of UI. WSC provides the necessary administrative and financial services to all UI’s subsidiaries. Sandy Creek Utility Services, Inc. and Bayside Utility Services, Inc. were originally included in this docket, but on September 9, 2004, Bay County rescinded jurisdiction.
Pursuant to Order No. PSC-04-0358-FOF-WS, issued April 5, 2004, in Docket No. 020407-WS, In re: Application for Rate Increase in Polk County by Cypress Lakes Utilities, Inc., the Commission opened a docket to analyze UI’s plan to bring all Florida subsidiaries into compliance with Rule 25-30.115, Florida Administrative Code (F.A.C.). In this docket, staff addresses the specific areas of concern that were identified in Docket No. 020407-WS. Staff suggested that a possible way to resolve the identified issues was for the company to make an offer of settlement in this docket to address each of the 11 issues.
On November 8, 2004, after discussions with staff, UI filed a proposed settlement agreement to bring all Florida subsidiaries into compliance. The purpose of this recommendation is to seek the Commission’s approval of the settlement agreement. The Commission has jurisdiction pursuant to Sections 367.081 and 367.121, Florida Statutes.
Discussion of Issues
In the settlement agreement, UI agrees to the following:
1) Annual Report and Minimum Filing Requirements (MFRs) shall begin with balance per books. Beginning with all years ending after December 31, 2004, each UI subsidiary’s annual report balances shall agree with the general ledger balances. All MFR pages that require a balance per books column shall either be the actual balance per the general ledger or an average test year balance, with supporting calculations provided that show that the components of the calculation came from the general ledger.
2) Adjustments to Rate Base should be timely made. Beginning with the year ended December 31, 2003, and continuing through December 31, 2004, UI shall have reviewed all Commission transfer and rate case orders to determine if proper adjustments have been made to correctly state rate base balances. UI shall complete the adjustments to the books of Labrador Utilities, Inc., Bayside Utility Services, Inc., Mid-County Services, Inc., and Utilities, Inc. of Eagle Ridge when the Commission orders in their respective pending rate cases have become final. UI will complete the adjustments to the remaining Utilities’ books on or before December 31, 2004. If UI has questions regarding adjustments for a specific Utility, it shall notify Commission staff prior to December 31, 2004. UI shall maintain sufficient workpapers so that Commission staff can easily review adjustments made and whether appropriate adjustments to reserve accounts have been made, since the date of transfer or the end of the test year in a rate case or other proceeding where rate base was established.
3) Improvements to accounts cross reference and allocation methodology. Beginning with the year ended December 31, 2004, and annually thereafter, UI shall maintain a schedule reconciling each general ledger account and sub-account to the Uniform System of Accounts (USOA) primary accounts. For any system that is utilizing a December 31, 2003 test year, UI shall complete this analysis before filing its MFRs. For all future rate cases, UI will prepare a detailed schedule for reconciliation of the general ledger account and sub-account to the USOA primary accounts.
4) Correction of pumping equipment account number. UI will continue to review account 310 and 311 to correct any mismatches between accounts 310 and 311. UI shall maintain supporting documentation to allow Commission staff to confirm that the adjustments have been made for any future Commission staff audits, and any adjustment will be reflected in future rate cases.
5) Retirements to be made consistently. UI shall complete, by the end of 2004, a review of all systems to ensure that all appropriate retirement entries have been made. Beginning with the year ended December 31, 2003, UI shall ensure that its operation and accounting personnel consistently utilize UI’s existing retirement policy. Beginning September 30, 2004, UI’s regulatory accounting and operations personnel shall make quarterly analysis of all plant additions to ensure that all required retirements have been made. Adjustments to the books of the UI subsidiaries will be completed either before December 31, 2004, or prior to the filing of a rate case by the relevant subsidiary. UI has implemented a fully automated work order system to facilitate its work order process. UI has already added the following fields to its work order form and input screen to track retirements when items are moved from the CP ledger to the general ledger: (1) New, (2) Upgrade, (3) Repair, and (4) Replace. These additional data entry fields will allow UI to sort all projects and better evaluate which projects require retirements. In addition, UI will require operations employees to provide accounting staff with the original date the asset was placed in service or the original cost, if available.
6) Corrections to Contributions-In-Aid of Construction Amortization (CIAC) Rate. The utility shall comply with Rule 25-30.140(9)(a), F.A.C., which states the following:
Beginning with the year ending December 31, 2003, all Class A and B utilities shall maintain separate sub-accounts for: (1) each type of CIAC charge collected including, but not limited to, plant capacity, meter installation, main extension or system capacity; (2) contributed plant; (3) contributed lines; and (4) other contributed plant not mentioned previously. Establishing balances for each new sub-account may require an allocation based upon historical balances. Each CIAC sub-account shall be amortized in the same manner that the related contributed plant is depreciated. Separate sub-accounts for accumulated amortization of CIAC shall be maintained to correspond to each sub-account for CIAC.
7) Lack of support for WSC Allocations. Pursuant to Order No. PSC-03-1440-FOF-WS, issued December 22, 2003, in Docket No. 020071-WS, the Commission ordered that Utilities, Inc. shall use equivalent residential connections (ERCs) as its primary allocation factor for affiliate costs in future cases in Florida as of January 1, 2004, and shall use the end of the applicable year as the measurement date. UI is reviewing the appropriateness of an ERC allocation methodology in other jurisdictions in which it operates. Until the appropriateness of this type of allocation can be determined, UI will prepare a second WSC allocation book specifically for its Florida subsidiaries using the ERC as its primary allocation factor as delineated in Rule 25-30.055, F.A.C., beginning January 1, 2004. UI shall also maintain workpaper for each utility to show how the ERCs are determined on an annual basis.
8) Allocation to non-owned systems. UI agrees to implement its allocation methodology to systems that it does not own but operates, and has included these systems in the 2003 allocation book.
9) Documentation of “other water uses.” UI has implemented and is using the following standard operating protocol to track other water usage. UI believes that this protocol satisfies staff’s concerns.
For each water system in Florida, the operator or field supervisor for each system will submit a report form each month entitled water loss record to the Florida regional office. This document shall identify the estimated volume of unmetered water used in the system on a given day and the reason why it was lost. For example, water lost due to a water main break would be calculated from the duration of the event, the size of the pipe, and the estimated flow rate.
Other types of unmetered water use include, but are not limited to:
-water main flushing activities;
-hydrant flow testing;
-filling and chlorinating new water main extensions, storage tanks or treatment units;
-filling new force main and reuse main extensions;
-water used internally in the treatment or disinfection process
Each month, the total sum of water noted on the water loss record is entered into the utility’s spreadsheet that tracks and compares water pumped and water purchased, against water sold for each system. In this way, UI has the means to review the data on a routine basis. The monthly form is attached to and filed with the file copy of each utility’s Monthly Operating Report and retained for future use.
10) Maintenance of adjusting an entry log book. For all years beginning with January 1, 2003, UI shall maintain an adjusting entry log book and supporting documentation (purpose of the entry, person making the entry, worksheets showing any calculations and any supporting documents, reconciliations, invoices, etc.) for each adjustment to the journal.
11) Detailed supporting cash book and general ledger. UI shall maintain supporting documentation (purpose of the entry, person making the entry, worksheets showing any calculations and any supporting documents, reconciliations, invoices, etc.), or a reference where the supporting documentation can be found.
Staff has reviewed the settlement agreement filed by UI and believes that it is a reasonable resolution to this compliance issue. Further, staff believes that it is in the best interest for the Commission to approve the settlement agreement because UI has addressed all of staff’s concerns identified in Docket No. 020407-WS. Based on the foregoing, staff recommends that the Commission approve the settlement agreement in its entirety.
