Commission Conference Agenda

9**PAA Docket No. 070680-WS – Application for staff-assisted rate case in Pasco County by Orangewood Lakes Services, Inc.

Critical Date(s):		04/07/09 (15-Month Effective Date (SARC))
Commissioners Assigned:			All Commissioners
Prehearing Officer:			McMurrian
Staff:	ECR: Hudson, Bruce, Bulecza-Banks, Fletcher, Daniel, Lingo, Stallcup, Redemann GCL: Klancke

(Proposed Agency Action Except for Issues 12, 14, 15, 16, and 17.)

Issue 1:

Should the quality of service provided by Orangewood be considered satisfactory?

Recommendation:

Yes. The Utility’s quality of product, operational condition, and attempts to address customer complaints are satisfactory; therefore, the overall quality of service provided by Orangewood should be considered satisfactory.

Issue 2:

What are the used and useful percentages for Orangewood’s water and wastewater systems?

Recommendation:

The Utility’s water and wastewater treatment, distribution, and collection facilities are 100 percent used and useful.

Issue 3:

What is the appropriate average test year rate base for the Utility?

Recommendation:

The appropriate average test year rate base for Orangewood is $32,751 for water and $46,546 for wastewater.

Issue 4:

What is the appropriate rate of return on equity and overall rate of return for this Utility?

Recommendation:

The appropriate return on equity is 12.01 percent with a range of 11.01 percent - 13.01 percent. The appropriate overall rate of return is 7.67 percent.

Issue 5:

What are the appropriate pre-repression billing determinants for ratesetting purposes for the respective water and wastewater systems?

Recommendation:

The appropriate pre-repression billing determinants for ratesetting are 4,507 equivalent residential connections (ERCs) and 27,816.3 kgals for the water system and 3,991 ERCs and 21,483 kgals for the wastewater system.

Issue 6:

What are the appropriate amounts of test year revenues in this case?

Recommendation:

The appropriate amount of test year revenues for the Utility is $110,623 for water and $89,676 for wastewater.

Issue 7:

What is the appropriate amount of test year operating expenses?

Recommendation:

The appropriate amount of operating expense for the Utility is $77,815 for water and $181,865 for wastewater.

Issue 8:

What are the appropriate revenue requirements?

Recommendation:

The appropriate revenue requirements are $78,900 for the water system and $189,947 for the wastewater system.

Issue 9:

What are the appropriate rate structures for the Utility’s various customer classes?

Recommendation:

The appropriate rate structure for the water and wastewater systems’ residential and non-residential class is a base facility charge (BFC)/uniform gallonage charge rate structure. The unmetered residential customers of the mobile home park should be charged a bulk water rate wherein the BFC should be based on 80 percent of the ERCs. The water system’s 2 kgals allotment should be removed from the BFC, and the BFC cost recovery should be set at 50 percent. The appropriate rate structure for Orangewood’s wastewater system should be changed to a BFC/gallonage charge rate structure. The unmetered residential customers of the mobile home park should be charged a bulk wastewater rate wherein the BFC should be based on 80 percent of the ERCs. The residential monthly wastewater cap should be set at 6,000 gallons (6 kgal). The non-residential gallonage charge should be 1.2 times greater than the corresponding residential charge, and the BFC cost recovery percentage for the wastewater system should be set at 50 percent.

Issue 10:

Is a repression adjustment appropriate in this case?

Recommendation:

No. However, in order to monitor the effects of the changes in revenues, the Utility should prepare monthly reports for the water and wastewater systems, detailing the number of bills rendered, the consumption billed, and the revenues billed. These reports should be provided to staff. In addition, these reports should be prepared, by customer class and meter size, on a quarterly basis for a period of two years, beginning the first billing period after the approved rates go into effect.

Issue 11:

What are the appropriate rates for the Utility?

Recommendation:

The appropriate water and wastewater monthly rates are shown on Schedule Nos. 4-A and 4-B of staff’s memorandum dated November 18, 2008, respectively. The recommended rates should be designed to produce revenue of $76,781 for water and $187,549 for wastewater, excluding miscellaneous service charges. 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), F.A.C. In addition, the approved rates should not be implemented until staff has approved the proposed customer notice and the notice has been received by the customers. Orangewood should provide proof of the date notice was given no less than 10 days after the date of the notice.

Issue 12:

In determining whether any portion of the interim increase granted should be refunded, how should the refund be calculated, and what is the amount of the refund, if any?

Recommendation:

The Utility did not implement the Commission-approved interim rates. Therefore, no refund is necessary.

Issue 13:

Should the Utility be authorized to collect miscellaneous service charges, and, if so, what are the appropriate charges?

Recommendation:

Yes. Orangewood should be authorized to collect miscellaneous service charges. The appropriate charges are reflected in staff’s memorandum dated November 18, 2008. The Utility should file a proposed customer notice to reflect the Commission-approved charges. The approved charges 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., provided the notice has been approved by staff. Within 10 days of the date the order is final, Orangewood should be required to provide notice of the tariff changes to all customers. The Utility should provide proof the customers have received notice within 10 days after the date that the notice was sent.

Issue 14:

What is the appropriate amount by which rates should be reduced four years after the established effective date to reflect the removal of the amortized rate case expense as required by Section 367.0816, F.S.?

Recommendation:

The water and wastewater rates should be reduced as shown on Schedule No. 4 of staff’s memorandum dated November 18, 2008, to remove rate case expense grossed up for regulatory assessment fees and amortized over a four-year period. The decrease in rates should become effective immediately following the expiration of the four-year rate case expense recovery period, pursuant to Section 367.0816, F.S. The Utility should be required to file revised tariffs and a proposed customer notice setting forth the lower rates and the reason for the reduction no later than one month prior to the actual date of the required rate reduction. If Orangewood files this reduction in conjunction with a price index or pass-through rate adjustment, separate data should be filed for the price index and/or pass-through increase or decrease and the reduction in the rates due to the amortized rate case expense.

Issue 15:

Should the recommended rates be approved for the Utility on a temporary basis, subject to refund, in the event of a protest filed by a party other than Orangewood?

Recommendation:

Yes. Pursuant to Section 367.0814(7), F.S., the recommended rates should be approved for the Utility on a temporary basis, subject to refund, in the event of a protest filed by a party other than Orangewood. Prior to implementation of any temporary rates, the Utility should provide appropriate security. If the recommended rates are approved on a temporary basis, the rates collected by Orangewood should be subject to the refund provisions discussed in the analysis portion of staff’s memorandum dated November 18, 2008. In addition, after the increased rates are in effect, pursuant to Rule 25-30.360(6), F.A.C., the Utility should file reports with the Commission’s Division of Economic Regulation no later than the 20th of each month, indicating the monthly and total amount of money subject to refund at the end of the preceding month. The report filed should also indicate the status of the security being used to guarantee repayment of any potential refund.

Issue 16:

Should the Utility be required to show cause, in writing within 21 days, why it should not be fined for assessing additional meter installation charges without an authorized tariff?

Recommendation:

No. Show cause proceedings should not be initiated at this time. Orangewood should be put on notice that, pursuant to Sections 367.081(1) and 367.091(3), F.S., it may only charge rates and charges approved by the Commission.

Issue 17:

Should the Commission order Orangewood to show cause, in writing within 21 days, why it should not be fined for apparent violation of Section 367.045(2), Florida Statutes?

Recommendation:

No. Show cause proceedings should not be initiated; however, the Utility should be given until January 5, 2009, to file an amendment application to include the mobile home community in Orangewood’s authorized territory.

Issue 18:

Should this docket be closed?

Recommendation:

No. If no person whose substantial interests are affected by the proposed agency action issues files a protest within 21 days of the issuance of the order, a Consummating Order will 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. When the PAA issues are final and the tariff and notice actions are complete, this docket may be closed administratively.

10 **PAA Docket No. 070694-WS – Application for increase in water and wastewater rates in Orange County by Wedgefield Utilities, Inc.

Critical Date(s):		5-Month Effective Date Waived Through 12/2/08
Commissioners Assigned:			All Commissioners
Prehearing Officer:			Edgar
Staff:	ECR: Kyle, Bruce, Bulecza-Banks, Fletcher, Redemann, Stallcup GCL: Klancke

(Proposed Agency Action Except Issues Nos. 18 and 19.)

Issue 1:

Is the quality of service provided by Wedgefield satisfactory?

Recommendation:

Yes. The overall quality of the water service provided by Wedgefield is satisfactory.

Issue 2:

Should any adjustment be made to rate base allocations for Wedgefield?

Recommendation:

Yes. Rate Base should be increased by $34,297 for water. The appropriate net rate base allocation for Wedgefield is $133,514 for water.

Issue 3:

Should any additional adjustments be made to the Utility’s test year Plant in Service balance and test year expenses?

Recommendation:

Yes. Based on Staff’s recalculation of the Utility’s plant in service, plant in service should be reduced by $128,021 for water. Corresponding adjustments should be made to decrease accumulated depreciation by $33,327 for water. Depreciation expense should be decreased by $5,825 for water.

Issue 4:

What are the used and useful percentages of the Utility's water system?

Recommendation:

Wedgefield’s water treatment plant and storage tank should be considered 100 percent used and useful. The transmission and distribution mains should be considered 87.4 percent used and useful.

Issue 5:

What is the appropriate working capital allowance.

Recommendation:

The appropriate amount of working capital is $128,081 for water.

Issue 6:

Should any additional adjustments be made to the Utility’s rate base?

Recommendation:

Yes. An adjustment should be made to include accumulated net debit deferred income taxes in the amount of $314,739 in rate base.

Issue 7:

What is the appropriate rate base for the June 30, 2007, test year?

Recommendation:

Consistent with other recommended adjustments, the appropriate 13-month average rate base for the test year ending December 30, 2007, is $4,779,794 for water.

Issue 8:

What is the appropriate return on common equity?

Recommendation:

The appropriate return on common equity is 11.86 percent, based on the Commission’s leverage formula currently in effect. Staff recommends an allowed range of plus or minus 100 basis points be recognized for ratemaking purposes.

Issue 9:

What is the appropriate weighted average cost of capital including the proper components, amounts, and cost rates associated with the capital structure for the test year ended June 30, 2007?

Recommendation:

The appropriate weighted average cost of capital for the test year ended June 30, 2007, is 8.68 percent.

Issue 10:

Should any changes be made to pro forma expenses?

Recommendation:

Yes. Pro forma expenses should be decreased by a total of $24,457.

Issue 11:

What is the appropriate amount of rate case expense?

Recommendation:

The appropriate rate case expense is $151,575. This expense should be recovered over four years for an annual expense of $37,894. Thus, rate case expense should be reduced by $15,686 for water.

Issue 12:

What is the test year water operating income before any revenue increase?

Recommendation:

Based on the adjustments discussed in previous issues, the test year operating income is $185,017 for water.

Issue 13:

What is the appropriate pre-repression revenue requirement for the June 30, 2007 test year?

Recommendation:

The following pre-repression revenue requirement should be approved.

Test Year Revenues

$ Increase

Revenue Requirement

% Increase

Water

$761,328

$385,914

$1,147,242

50.69%

Issue 14:

What is the appropriate rate structure for the Utility’s water system?

Recommendation:

The appropriate rate structure for the water system’s residential class is a three-tier inclining block rate structure. The usage blocks should be set for consumption at: 1) 0-5 kgal; 2) 5-10 kgal; 3) usage in excess of 10 kgal, with appropriate usage block rate factors of 1.0, 1.25, and 2.0, respectively. The appropriate rate structure for the water system’s non-residential class is a traditional base facility charge (BFC)/uniform gallonage charge rate structure. The water system’s BFC cost recovery percentage should be set at 40 percent.

Issue 15:

Are repression adjustments appropriate in this case, and, if so, what are the appropriate adjustments to make for this Utility, what are the corresponding expense adjustments, and what is the final revenue requirement for the water system?

Recommendation:

Yes, a repression adjustment is appropriate for this Utility. Test year consumption should be reduced by 24,729 kgals or 16 percent. Purchased power expense should be reduced by $6,223, chemical expense should be reduced by $18,331, and regulatory assessment fees (RAFs) should be reduced by $1,157. The final post-repression revenues from monthly service, which excludes miscellaneous revenues of $3,847, should be $1,117,684.

In order to monitor the effect of the changes to rate structure and revenue, the Utility should be ordered to file reports detailing the number of bills rendered, the consumption billed and the revenues billed on a monthly basis. In addition, the reports should be prepared, by customer class and meter size. The reports should be filed with staff, on a quarterly basis, for a period of two years beginning the first billing period after the approved rates go into effect. To the extent the Utility makes adjustments to consumption in any month during the reporting period, the Utility should be ordered to file a revised monthly report for that month within 30 days of any revision.

Issue 16:

What are the appropriate monthly rates for the water system for the Utility?

Recommendation:

The appropriate monthly water rates are shown on Schedule No. 4 of staff’s memorandum dated November 18, 2008. Excluding miscellaneous service charges, the recommended water rates produce revenues of $1,117,684. 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), F.A.C. In addition, the approved rates should not be implemented until staff has approved the proposed customer notice and the notice has been received by the customers. The Utility should provide proof of the date notice was given no less than 10 days after the date of the notice.

Issue 17:

Should the Utility be authorized to revise its miscellaneous service charges, and, if so, what are the appropriate charges?

Recommendation:

Yes. Wedgefield should be authorized to revise its miscellaneous service charges. The Utility should file a proposed customer notice to reflect the Commission-approved charges. The approved charges 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., provided the notice has been approved by staff. Within 10 days of the date the order is final, Wedgefield should be required to provide notice of the tariff changes to all customers. The Utility should provide proof the customers have received notice within 10 days after the date that the notice was sent. The appropriate charges are reflected below.

Water and Wastewater Miscellaneous Service Charges

	Water		Wastewater

	Normal Hrs	After Hrs	Normal Hrs	After Hrs
Initial Connection	$21	N/A	$21	N/A
Normal Reconnection	$21	$42	$21	$42
Violation Reconnection	$21	$42	Actual Cost	Actual Cost
Premises Visit (in lieu of disconnection)	N/A	N/A	N/A	N/A
Premises Visit	$21	$42	$21	$42

Issue 18:

Recommendation:

The water rates should be reduced as shown on Schedule No. 4 of staff’s memorandum dated November 18, 2008, to remove $39,678 of water rate case expense, grossed up for RAFs, which is being amortized over a four-year period. The decrease in rates should become effective immediately following the expiration of the four-year rate case expense recovery period, pursuant to Section 367.0816, F.S. The Utility should be required to file revised tariffs and a proposed customer notice setting forth the lower rates and the reason for the reduction no later than 30 days prior to the actual date of the required rate reduction. The approved rates should be effective for service rendered on or after the stamped approval date of the revised tariff sheets, pursuant to Rule 25-30.475(1), F.A.C. The rates should not be implemented until staff has approved the proposed customer notice. Wedgefield should provide proof of the date notice was given no less than 10 days after the date of the notice.

Issue 19:

Should the Utility be required to provide proof, within 90 days of the final order issued in this docket, that it has adjusted its books for all applicable National Association of Regulatory Commissioners (NARUC) Uniform System of Accounts (USOA) primary accounts associated with Commission-approved adjustments?

Recommendation:

Yes. To ensure that the Utility adjusts its books in accordance with the Commission decision, Wedgefield should provide proof, within 90 days of the final order issued in this docket, that the adjustments for all the applicable NARUC USOA primary accounts have been made.

Issue 20:

Should this docket be closed?

Recommendation:

No. If no person whose substantial interests are affected by the proposed agency action files a protest within twenty-one days of the issuance of the order, a consummating order will be issued. 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. Once these actions are complete, this docket should be closed administratively.

DOCKET NO.	COMPANY NAME
080659‑ TX	Solarity Communications LLC

Critical Date(s):		None
Commissioners Assigned:			All Commissioners
Prehearing Officer:			Skop
Staff:	GCL: Sayler ECR: Clapp