Staff has identified three periods of time over which refunds should be calculated. First, is the period November 15, 2003, through August 4, 2004; second is the period August 5, 2004, through December 31, 2004; and third is the period January 1, 2005, through the date rates are changed. The pro forma impact on the revenue requirement for these periods is presented on Schedule A.

November 15, 2003 – August 4, 2004: During this period, little if any construction had taken place on the interconnection. Thus, staff believes that from November 15, 2003 through August 4, 2004, the utility collected revenues to which it was not entitled. Staff calculated the revenue requirement impact of the interconnection included in the rate case. However, adjustments to the rate case revenue requirement are necessary because the rate case contemplated the interconnection would be complete. Because it was not completed, the utility continued to operate its treatment facilities. Staff reversed certain operation and maintenance (O&M) adjustments that were made in the rate case to the projected 2003 test year. This included a new expense for purchased wastewater treatment, and excluded certain O&M expenses that would no longer be incurred by the utility after the interconnection was completed. The resulting revenue requirement impact is $107,112. In the rate case, the Commission-approved wastewater rates were designed to recover $230,802. Therefore, staff calculated a refund to customers of 46.41 percent ($107,112/$230,802) of revenues collected between November 15, 2003, and August 4, 2004. However, staff is not recommending a 46.41 percent refund.

To evaluate the effect the refunds would have on the utility’s 2004 and 2005 earnings, staff analyzed EPS’s annual reports. Staff made adjustments to the annual reports consistent with the utility’s rate case. Based on the analysis, the utility overearned by 35.64 percent in 2004 and by 26.64 percent in 2005. Therefore, staff recommends that the utility refund to customers 35.64 percent of revenues collected between November 15, 2003, and August 4, 2004.

August 5, 2004 – December 31, 2004: It appears from invoices that from August 5, 2004, the utility began spending substantial amounts for the interconnection project. However, the cost of the project was less than what was approved by the Commission. Further, during this time, the interconnection still was not completed, so the same O&M adjustments discussed above were made to this time period. Staff calculated the difference between the revenue requirement impacts projected in the rate case and the actual costs. Staff also made the reversing adjustments described above. The resulting revenue requirement impact is $20,714. In the rate case, the Commission-approved wastewater rates were designed to recover $230,802. Therefore, staff recommends that the utility refund to customers 8.97 percent ($20,714/$230,802) of revenues collected between August 5, 2004 – December 31, 2004.

By recommending December 31, 2004, as the ending date for the 8.97 percent refund, staff is allowing the full nine months for completion of the project as ordered by the Commission. The interconnection occurred on September 20, 2005, and December 31, 2004 would be nine months prior to the interconnection date.

January 1, 2005 – Date Rates are Changed: As stated above, the utility interconnected with PIRTS on September 20, 2005. Because the actual cost of the interconnection is less than the amount projected in the rate case, staff believes the utility is collecting more in rates than is fair and just. Since the interconnection has occurred, no reversal of the O&M adjustments was made. As a result, staff calculated the difference in the revenue requirement impact of the interconnection approved in the rate case of $97,401 and the actual costs incurred by the utilty of $86,398. The resulting $11,003 was divided by the total revenue requirement from the rate case of $230,802 to produce 4.77 percent. Therefore, staff recommends that the utility refund to customers 4.77 percent of revenues collected between January 1, 2005 and the date rates are changed. Refunds have been ordered by the Commission in prior cases.³

The refunds should be made within 90 days of the effective date of the Consummating Order finalizing the Order for refunds and a rate reduction and include interest as required by Rule 25-30.360(4), F.A.C. The utility should be required to submit the proper refund reports pursuant to Rule 25-30.260(7), F.A.C. The refund should be made to customers of record as of the date of the Consummating Order pursuant to Rule 25-30.360(3), F.A.C. The utility should treat any unclaimed refunds as CIAC pursuant to Rule 25-30.360(8), F.A.C. In no instance should the maintenance and administrative costs associated with a refund be borne by the customers. These costs are the responsibility of, and should be borne by the utility.

Issue 2:2 (Merta)" \l 1  

 Should EPS's rates be reduced to remove the rate impact of the difference in projected versus actual cost of the pro forma plant items?

Recommendation: 

 Yes. Wastewater rates should be reduced by 4.77 percent ($11,003) annually. The utility should file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates. The approved rates should be effective for service rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), Florida Administrative Code. The appropriate wastewater rates are reflected on Schedule B. (Merta)

Staff Analysis: 

 Based on staff’s calculation on Schedule A, the Commission-approved pro forma allowances accounted for $97,401 of the revenue requirement approved in the above referenced order. Applying the same methodology to the actual pro forma cost incurred results in a revenue requirement of $86,398 from pro forma additions. The difference in revenue requirement, ($11,003) represents the amount staff believes existing rates should be reduced.

The Commission-approved wastewater rates are designed to recover $230,802. Applying the reduction to the revenue requirement of $11,003 discussed above results in a 4.77 percent ($11,003/$230,802) reduction to existing wastewater rates.

Therefore, staff recommends that wastewater rates should be reduced across the board by 4.77 percent ($11,003) annually. The utility should file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates. The approved rates should be effective for service rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), Florida Administrative Code. The appropriate wastewater rates are reflected on Schedule B.

Issue 3:3 Show Cause for Apparent Violation of an Order (Brubaker, Merta)" \l 1  

 Should the utility be ordered to show cause, in writing within 21 days, why it should not be fined for its apparent failure to comply with the requirements of Order No. PSC-03-1119A-PAA-SU to complete the construction of facilities needed to interconnect with PIRTS within nine months of the issuance date of the Consummating Order?

Recommendation: 

 No. Show cause proceedings should not be initiated at this time. (Brubaker, Merta)

Staff Analysis: 

 Pursuant to Order No. PSC-03-1119A-PAA-SU, supra, the Commission required EPS to complete the construction of facilities needed to interconnect with PIRTS within nine months of the issuance date of the Consummating Order. That PAA Order was finalized by a Consummating Order, Order No. PSC-03-1266-CO-SU, issued November 10, 2003. Therefore, the construction and interconnection should have been accomplished no later than August 10, 2004.

According to the utility, it encountered many problems and delays and the interconnection did not occur until September 20, 2005. During 2004 through 2006, the utility kept staff advised of its progress and problems and agreed to hold revenues from the date of the Order subject to refund. Obstacles that impeded the completion of the project included obtaining funding, hiring reliable contractors, and weather-related incidents.

Utilities are charged with the knowledge of the Commission's orders, rules and statutes. Additionally, "[i]t is a common maxim, familiar to all minds that ‘ignorance of the law’ will not excuse any person, either civilly or criminally." Barlow v. United States, 32 U.S. 404, 411 (1833). Section 367.161(1), F.S., authorizes the Commission to assess a penalty of not more than $5,000 for each offense if a utility is found to have knowingly refused to comply with, or to have willfully violated, any provision of Chapter 367, F.S., or any lawful order of the Commission. By failing to comply with the Commission’s Order, by not completing the interconnection by September 10, 2004, the utility’s acts were “willful” in the sense intended by Section 367.161, Florida Statutes. In Commission Order No. 24306, issued April 1, 1991, in Docket No. 890216-TL titled In Re: Investigation Into The Proper Application of Rule 25-14.003, F.A.C., Relating To Tax Savings Refund for 1988 and 1989 For GTE Florida, Inc., the Commission, having found that the company had not intended to violate the rule, nevertheless found it appropriate to order it to show cause why it should not be fined, stating that “willful” implies an intent to do an act, and this is distinct from an intent to violate a statute or rule. Id. at 6.

Although regulated utilities are charged with knowledge of the Commission’s orders, rules, and statutes, staff does not believe that EPS’s actions rise to the level justifying the initiation of a show cause proceeding. Staff believes that mitigating circumstances exist. The utility kept staff apprised of its progress and agreed to hold revenues subject to refund. In addition, staff is recommending a refund and a prospective rate decrease. Thus, customers will be reimbursed for past charges and in the future, rates will include only the actual costs of the interconnection. Therefore, staff recommends that no show cause proceeding be initiated.

Issue 4:4 (Brubaker, Merta)" \l 1  

 Should the docket be closed?

Recommendation: 

 No. If no timely protest is filed by a substantially affected person within 21 days of the Proposed Agency Action Order, a Consummating Order should be issued. However, the docket should remain open for staff’s verification that the revised tariff sheets and customer notice have been filed by the utility and approved by staff and that the refund has been completed and verified by staff. Once these actions are complete, this docket should be closed administratively. (Brubaker, Merta)

Staff Analysis: 

 If no timely protest is filed by a substantially affected person within 21 days of the Proposed Agency Action Order, a Consummating Order should be issued. However, the docket should remain open for staff’s verification that the revised tariff sheets and customer notice have been filed by the utility and approved by staff and that the refund has been completed and verified by staff. Once these actions are complete, this docket should be closed administratively.

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