DATE:	May 23, 2007
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Economic Regulation (Fletcher, Bulecza-Banks, Rendell) Office of the General Counsel (Jaeger)
RE:	Docket No. 060256-SU – Application for increase in wastewater rates in Seminole County by Alafaya Utilities, Inc.
AGENDA:	06/05/07 – Regular Agenda – Parties May Participate
COMMISSIONERS ASSIGNED:		All Commissioners
PREHEARING OFFICER:		Administrative
CRITICAL DATES:		11/8/07 (8-Month Effective Date)
SPECIAL INSTRUCTIONS:		Place next to Dockets Nos. 060258-WS, 060260-WS, and 060261-WS.
FILE NAME AND LOCATION:		S:\PSC\ECR\WP\060256.RCM.DOC

 

 Case Background

Alafaya Utilities, Inc. (Alafaya or utility) is a Class A utility providing wastewater service to approximately 7,100 wastewater customers and 1,200 reuse customers in Seminole County.  The utility is a wholly-owned subsidiary of Utilities, Inc. (UI).  Water service is provided in the area by the City of Oviedo.  Wastewater rates were last established for this utility in its 2002 rate proceeding.[1]   

 On May 15, 2006, Alafaya filed the Application for Rate Increase at issue in the instant docket.  By Order No. PSC-06-0664-FOF-SU, issued August 7, 2006, the Commission approved an interim annual revenue increase of $539,070 or 18.86%.  This interim amount is being secured through a corporate undertaking by UI.  By Proposed Agency Action Order No. PSC-07-0130-SC-SU (PAA Order), issued February 15, 2007, the Commission approved rates that were designed to generate a wastewater revenue requirement of $3,508,843.

On March 8, 2007, the Office of Public Counsel (OPC) timely filed a protest of the PAA Order.  On March 16, 2007, Alafaya timely filed a cross-petition to protest the PAA Order pursuant to Rule 25-22.029(3), Florida Administrative Code (F.A.C.).  By letter dated March 14, 2007, Alafaya stated that it intended to put the PAA Order rates in effect during the pendency of the administrative hearing. 

By Order No. PSC-07-0381-PCO-SU, issued April 30, 2007, the Commission acknowledged Alafaya’s implementation of the PAA rates which are being held subject to refund and secured through a corporate undertaking by UI (Alafaya’s parent company).  On May 4, 2007, Alafaya and OPC (collectively, “Parties”) filed a Joint Motion Requesting Commission Approval of Settlement Agreement (Joint Motion).  That motion and Settlement Agreement are incorporated in this recommendation as Attachment A.

This recommendation addresses the Parties’ Settlement Agreement. The Commission has jurisdiction pursuant to Sections 367.081 and 367.121, Florida Statutes.

Discussion of Issues

Issue 1: 

 Should the Commission approve the Joint Motion Requesting Commission Approval of Settlement Agreement?

Recommendation:  Yes.  The Joint Motion and Settlement Agreement should be approved.  The final rates produced by the Settlement Agreement are shown in Attachment B.  Attachment B also shows the four-year rate reduction to the settlement rates.  The utility should file a proposed customer notice and revised tariff sheets within 15 days of the Commission vote, which is consistent with the Commission’s decision.  The approved rates should be effective for service rendered on or after the stamped approval date of the tariff pursuant to Rule 25-30.475(1), F.A.C., after staff has verified that the proposed customer notice is adequate and the notice has been provided to the customers.  The utility should provide proof that the customers have received notice within 10 days after the date of the notice.  Pursuant to the Settlement Agreement, the refund amount to be credited to CIAC should be 0.427% of revenues collected from April 12, 2007, through the day before the settlement rates become effective. The refund amount should include interest in accordance with Rule 25-30.360(4), F.A.C. (Fletcher)

Staff Analysis: 

 In the Settlement Agreement, the Parties have agreed that the PAA Order should be amended to eliminate the language relating to the determination of the used and usefulness of Alafaya’s wastewater treatment plant, in order for the PAA Order to have no precedential value as to determining the used and usefulness of the wastewater treatment plant.  The Commission has previously approved a proposed settlement where the language regarding a used and useful calculation was stricken from a proposed agency action order.[2]  Staff agrees that the language of the PAA Order which the Parties seek to strike can be stricken because each rate case is decided on its own merits.

The Parties also stipulated to a reduction in Alafaya’s revenue requirement in the amount of $15,000. The Settlement Agreement states that any refund caused by the utility’s implementation of PAA rates shall be accounted for on the books of Alafaya as contributions-in-aid-of-construction (CIAC).  Further, the Parties agree that the stipulated revenue requirement shall in no way limit or estop either party from espousing whatever positions either deems appropriate for each and every issue in any subsequent proceeding.

 Staff believes that the Parties’ Settlement Agreement is a reasonable resolution because it addresses all protested issues.  Further, staff believes that it is in the public interest for the Commission to approve the Settlement Agreement because it promotes administrative efficiency and avoids the time and expense of a hearing.  In keeping with the Commission’s long-standing practice of encouraging parties to settle contested proceedings whenever possible,[3] staff recommends that the Commission approve the Parties’ Settlement Agreement.  The final rates produced by the Settlement Agreement are shown in Attachment B.  Attachment B also shows the four-year rate reduction to the settlement rates.

If the Commission approves the Settlement Agreement, staff recommends that the utility file a proposed customer notice within 15 days of the Commission vote, which is consistent with its decision.  The approved rates should be effective for service rendered on or after the stamped approval date of the tariff pursuant to Rule 25-30.475(1), F.A.C., after staff has verified that the proposed customer notice is adequate and the notice has been provided to the customers.  The utility should provide proof that the customers have received notice within 10 days after the date of the notice.

As stated in the Case Background, the Commission acknowledged Alafaya’s implementation of the PAA rates which became effective April 12, 2007.  The $15,000 stipulated revenue reduction represents 0.427% of the PAA Order revenue requirement of $3,508,843.  Pursuant to the Settlement Agreement, the refund amount to be credited to CIAC should be 0.427% of revenues collected from April 12, 2007, through the day before the settlement rates become effective. The refund amount should include interest in accordance with Rule 25-30.360(4), F.A.C.

 

Issue 2: 

 Should this docket be closed?

Recommendation: 

   Yes.  If the Commission approves staff’s recommendation in Issue 1, this docket should be closed upon the issuance of the final order approving the Parties’ Settlement Agreement.  Further, upon the issuance of the final order approving the Parties’ Settlement Agreement, staff recommends the corporate undertaking amounts approved by the Commission for interim and PAA rates should be released.  (Fletcher, Jaeger)

Staff Analysis: 

 If the Commission approves staff’s recommendation in Issue 1, staff recommends this docket should be closed upon the issuance of the final order approving the Parties’ Settlement Agreement.  Further, upon the issuance of the final order approving the Parties’ Settlement Agreement, staff recommends the corporate undertaking amounts approved by the Commission for interim and PAA rates[4] should be released.

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