DATE:	July 1, 2009
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Economic Regulation (Johnson, Walden) Office of the General Counsel (Young)
RE:	Docket No. 080499-WU – Application for certificate to operate water utility in Lake County by TLP Water, Inc. County:  Lake
AGENDA:	07/14/09 – Regular Agenda – Proposed Agency Action for Issue 7 -Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Skop
CRITICAL DATES:			08/06/09 (Statutory Deadline for original certificate pursuant to Section 367.031, Florida Statutes)
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\ECR\WP\080499.RCM.DOC

 

 Case Background

On July 15, 2008, TLP Water, Inc (TLP, applicant, or utility) filed its application for an original water certificate in Lake County.  The utility is located in the St. Johns River Water Management District (SJRWMD) area where water use restrictions apply.  The utility provides water service to approximately 50 residential customers.  Wastewater treatment is provided by septic tanks.

Three Lakes Mobile Home Park is a privately owned property formerly known as Cari’s Camp.  In 1945, Cari’s Camp installed a small 4-inch well to provide water service to the area.  A 1948 agreement required Cari’s Camp to supply water to the residents on Lakeside Lane and Canal Street, which are located outside of the park.  The camp became known as the Three Lakes Mobile Home Park in the 1960s.  The Commission received jurisdiction over Lake County in 1972.[1]  In 1992, Three Lakes Mobile Home Park was incorporated as a nonprofit cooperative.  The mobile home park believed it was exempt from the Commission’s jurisdiction, pursuant to Section 367.022, Florida Statutes (F.S.); however, the utility continued to serve customers outside the cooperative, which actually rendered it subject to the Commission’s jurisdiction.

In 2008, a customer complaint was filed with the Commission against the utility indicating that it was providing water service to residents outside the coop membership.  Upon review of the complaint, the Commission staff contacted the utility and informed it that it appeared that the utility was not exempt from Commission regulation.  Also, Commission staff informed the utility that it needed to apply for and be granted a certificate to operate a water utility.  Subsequently, in 2008, TLP Water, Inc. was incorporated as the water utility. 

On July 15, 2008, the President of TLP filed an application for a certificate to operate a water utility.  In January 2009, several customers objected to TLP’s application.  The objections were based upon the Lakeside Lane and Canal Street customers’ belief that their 1948 contract agreement absolved them of the responsibility to pay the cost for repairs and renovations to the water system.  Moreover, the Lakeside Lane and Canal Street customers objected because they wanted clarification on how the cost would be apportioned between coop members and non-coop members.

On February 12, 2009, staff held an informal meeting with the interested parties of TLP.  At the meeting, staff addressed the Lakeside Lane and Canal Street customers’ concerns and their objections.  Also at the meeting, the parties agreed to the water service rate of $39.00 per month, a continuation of a 2008 negotiated agreement between TLP and its customers on Lakeside Lane and Canal Street to recover the operational costs.  On May 7, 2009, the representatives for TLP and the customers living on Lakeside Lane and Canal Street provided staff with a letter indicating the withdrawal of their objections.

Pursuant to Section 367.031, F.S., the Commission shall grant or deny an application for a certificate of authorization within 90 days after the official filing date of the completed application.  TLP’s application was complete on March 9, 2009; however, the objections filed in January 2009 were not withdrawn and resolved until May 8, 2009.  Thus, the official filing date is deemed to be May 8, 2009.  Therefore, this application must be ruled upon by August 6, 2009.

This recommendation addresses the application for an original water certificate.  The Commission has jurisdiction pursuant to Sections 367.031 and 367.045, F.S. 

Discussion of Issues

Issue 1: 

 Should the Commission order TLP Water, Inc. to show cause, in writing within 21 days, why it should not be fined for operating a water utility without a certificate of authorization in apparent violation of Chapter 367.031, F.S.?

Recommendation: 

 No, TLP Water, Inc. should not be ordered to show cause for operating a water utility without a certificate of authorization.  (Young)

Staff Analysis: 

 Section 367.031, F.S., provides that “each utility subject to the jurisdiction of the commission must obtain from the commission a certificate of authorization to provide water or wastewater service.”  Moreover, 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.  Utilities are charged with the knowledge of the Commission’s statutes and rules.  Thus, any intentional act, such as TLP providing water service to the public for compensation since 1948, without first obtaining a certificate of authorization from the Commission, would meet the standard for a “willful violation” of Section 367.161(1), F.S.  In Order No. 24306, issued April 1, 1991, in Docket No. 890216-TL, In Re: Investigation Into The Proper Application of Rule 25-14.003, Florida Administrative Code (F.A.C.), Relating to Tax Savings Refund For 1988 and 1989 For GTE Florida, Inc., having found that the company had not intended to violate the rule, the Commission nevertheless found it appropriate to order the utility to show cause why it should not be fined, stating that “in our view, ‘willful’ implies an intent to do an act, and this is distinct from an intent to violate a statute or rule.”  Additionally, “it 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).

Although TLP’s Water, Inc. failure to obtain certificates of authorization from the Commission prior to charging the public for service is an apparent violation of the statute, there are circumstances which appear to mitigate the apparent violation.  As stated, the utility has been providing water service to the public for compensation since 1948.  In 1972, the County turned over jurisdiction to the Commission; however, TLP believed that it was exempt from Commission rule and regulations.  It was not until a complaint was filed by one of TLP’s customers that the utility learned that its was not exempt from the rules and regulation of the Commission.  The utility promptly began the application process for certification in 2008.  In light of these circumstances, staff does not believe that the apparent violation of Section 367.031, F.S., rises to the level of warranting a show cause order.

Therefore, for the reason stated above, staff recommends that TLP should not be show caused for providing water service to the public for compensation without first obtaining certificates of authorization from the Commission in apparent violation of Section 367.031, F.S.

Issue 2:  Should TLP Water, Inc. be ordered to show cause, in writing within 21 days, as to why it should not be fined for charging unauthorized rates from 1972 to present, in apparent violation of Sections 367.081(1) and 367.091(3), Florida Statutes, and Rule 25-30.135, Florida Administrative Code (F.A.C)?

Recommendation: 

 No, TLP Water, Inc. should not be ordered to show cause for charging unauthorized rates from 1972 to present.  However, the utility should be placed on notice that it must charge its Commission-approved rates and charges until authorized to change by the Commission, and that such apparent violations will not be tolerated in the future. (Young)

Staff Analysis: 

 As stated in the case background, TLP has been charging unauthorized rates for water service to the public from 1972 to present.  According to the information provided in the application, TLP initially believed its systems were exempt from Commission regulation.  TLP was not aware that the Commission received jurisdiction in the County in 1972.  It was not until a complaint was filed by one of TLP’s customers that the utility learned that it was not exempt from the rules and regulation of the Commission and that it not authorized to charge the public rates for its water service.  At that point, TLP learned of the application process for certification and began its application.  

Section 367.081(1), F.S., provides that a utility may only charge rates and charges that have been approved by the Commission.  Section 367.091(3), Florida Statutes, requires that each utility’s rates, charges, and customer service policies be contained in a tariff approved by and on file with the Commission.  Rule 25-30.135(1) and (2), F.A.C., requires utilities to file tariffs and prohibits utilities from modifying or revising their rules, regulations, or schedules of rates and charges until they file and receive approval from the Commission for any such modification or revision.  By charging the public for water service without Commission approval while subject to the Commission’s jurisdiction, TLP is in apparent violation of the above-identified Commission Statutes and rule.

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.  By charging the public for water service since 1972 without Commission approval, the utility’s act was “willful” in the sense intended by Section 367.161, F.S.  In Order No. 24306, issued April 1, 1991, in Docket No. 890216-TL, In Re: Investigation Into The Proper Application of Rule 25-14.003, Florida Administrative Code, Relating to Tax Savings Refund For 1988 and 1989 For GTE Florida, Inc., having found that the company had not intended to violate the rule, the Commission nevertheless found it appropriate to order the utility to show cause why it should not be fined, stating that “[i]n our view, ‘willful’ implies an intent to do an act, and this is distinct from an intent to violate a statute or rule.”  Additionally, “it 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).

Although TLP’s failure to obtain Commission approval prior to charging its rates from 1972 to present is an apparent violation of Sections 367.081(1) and 367.091(3), F.S., and Rule 25-30.135, F.A.C., there are circumstances which appear to mitigate the utility’s apparent violation.  As stated, the utility mistakenly believed that it was exempt from Commission regulation.  For example, to resolve a dispute concerning rate increase, TLP and some of its customers negotiated an agreement of $39 per month.  When the utility became aware that it subject to Commission regulations TLP took the appropriate steps to correct its violation.  TLP has filed for an original certificate and its application was deemed complete on May 8, 2009.  Staff would note that prior to the 2008 agreement to increase the water service rate to $39 per month between TLP and its customers on Canal Street and Lakeside Lane, the utility has not increased it monthly rates since it was first implemented in 1948.  Also, upon review of the utility’s existing rates in Issue 6, staff notes that the revenues generated from the existing water service rates appear to be less than the cost of providing those services.  Staff does not believe that the customers have been harmed by the unauthorized rates and charges.  Therefore, staff does not believe that the apparent violation of Sections 367.081(1) and 367.091(3), F.S., and Rule 25-30.135, F.A.C, rises in these circumstances to the level which warrants the initiation of a show cause proceeding. 

For the foregoing reasons, staff recommends that TLP Water Inc. should not be ordered to show cause for charging unauthorized rates from 1972 to present.  However, staff recommends that the Commission place the utility on notice that it must charge the Commission-approved rates and charges until authorized to change by the Commission, and that such apparent statutory and rule violations will not be tolerated in the future.

Issue 3: 

 Should TLP Water, Inc. be ordered to show cause, in writing, within 21 days, why it should not be fined for failure to file annual reports from 1972 to 2007, in apparent violation of Rules 25-30.110(3), Florida Administrative Code (F.A.C.)?

Recommendation: 

 No, TLP Water, Inc. should not be ordered to show cause for failing to file annual reports from 1972 to present.  (Young)

Staff Analysis: 

 Rule 25-30.110(3), F.A.C., provides that “each utility shall file with the Commission annual reports…The obligation to file an annual report for any year shall apply to any utility which is subject to this Commission’s jurisdiction as of December 31 of that year, whether or not the utility has actually applied for or has been issued a certificate.”  During the time that the utility was subject to the Commission’s jurisdiction, it failed to file its annual reports; therefore, the utility is in apparent violation of Rule 25-30.110(3), F.A.C.  Rule 25-30-110(6), F.A.C., provides that “a penalty shall be assessed against any utility that fails to file annual reports…unless the utility demonstrates good cause for noncompliance.”  Further, the rule states that “the Commission may, in its discretion, impose penalties for noncompliance that are greater or lesser than provided by the rule.”

Utilities are charged with the knowledge of the Commission's rules and statutes. As stated, “it is a common maxim, familiar to all minds that ignorance of the law will not excuse any person, either civilly or criminally" Barlow, 32 U.S. at 411.  Thus, any intentional act, such as the utility's failure to file it annual report for any given year, would meet the standard for a “willful vio1ation.”  Also, as stated, 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.  Section 367.161, 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 Commission rule, order or provision of Chapter 367, F.S.

 

However, staff believes that there are mitigating circumstances in this case which lead staff to recommend that show cause proceedings are not warranted at this time, and the Commission should not assess penalties against the utility for failure to file annual reports from 1972 to 2007.  As discussed in Issue 1, TLP initially believed it was exempt from regulation because of its nonprofit cooperative status.  It was not until a complaint was filed by a customer that the utility learned that it was not exempt from regulation.  Staff would note that the utility has been very cooperative with Commission staff in its efforts to come into compliance with Commission rules and statutes, and has filed its 2008 annual report.  Under these circumstances, staff believes that the apparent violation of 25-30.110(3), F.A.C., does not rise in these circumstances to the level of warranting the initiation of a show cause proceeding.  Moreover, staff believes that TLP has demonstrated good cause for it apparent noncompliance, and should not be assessed a penalty.

            Therefore, staff recommends that the Commission should not order the utility to show cause why it should not be fined for its failure to file its annual reports from 1972 to 2007.  Moreover, staff recommends that no penalties be assessed against TLP.  As stated, the utility has filed its 2008 annual report.

Issue 4: 

 Should TLP Water, Inc. be ordered to show cause, in writing, within 21 days, why it should not be fined for failure to remit its regulatory assessment fees (RAFs) for 1972 through 2008, in apparent violation of Section 367.145, F.S., and Rule 25-30.120, F.A.C.?

Recommendation: 

 No, TLP Water, Inc. should not be ordered to show cause for failing to remit its RAFs for 1972 through 2008. (Young)  

Staff Analysis: 

 Pursuant to Sections 350.113(3)(e) and 367.145, F.S., and Rule 25-30.120(1), F.A.C., each water and wastewater utility shall remit to the Commission annually RAFs in the amount of 0.045 of its gross operating revenue.  Pursuant to Rule 25-30.120(2), F.A.C., A[t]he obligation to remit the [RAFs] for any year shall apply to any utility which is subject to [the] Commission=s jurisdiction on or before December 31 of that year or for any part of that year, whether or not the utility has actually applied for or has been issued a certificate.@  Accordingly, TLP is responsible for RAFs for the time period of 1972 through December 31, 2008.  In failing to remit the RAFs for this time period, TLP is in apparent violation of the above-referenced statutory and rule provisions. 

 

Utilities are charged with the knowledge of the Commission's rules and statutes. As previously stated, “it is a common maxim, familiar to all minds that ignorance of the law will not excuse any person, either civilly or criminally." Barlow, 32 U.S. at 411.  Thus, any intentional act, such as the utility's failure to remit its RAFs, would meet the standard for a “willful vio1ation.”  Also, as stated, 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.  Section 367.161, 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 Commission rule, order or provision of Chapter 367, F.S.

 

As discussed in Issues 1, 2, and 3, staff believes that there are mitigating circumstances in this case which lead staff to recommend that show cause proceedings are not warranted at this time.  As previously discussed, the utility was established in 1948.  The County turned over jurisdiction to the Commission in 1972.  TLP believed that as a non-profit co-op, it was exempt from the Commission jurisdiction.  However, the primary purpose of paying RAFs is to defray costs incurred by the Commission in regulating jurisdictional utilities.  Staff notes that the Commission has not expended any Commission resources or dollars regulating TLP until 2008, the year the utility filed for its certificate.  Section 350.113(3), F.S., states that RAFs shall to the extent practicable, be related to the cost of regulating such type of regulated company.  Staff therefore believes it is appropriate that the Commission assess TLP RAFs for 2008.  Finally, TLP has been very cooperative with Commission staff in its efforts to come into compliance with Commission rules.  TLP has paid its 2008 RAFs in the amount of $1,013.40.  This amount was calculated based upon annual revenues of approximately $22,520 for the 12 months ended December 30, 2008, as filed with the company’s annual report.

 

            For the foregoing reasons, staff does not believe that the apparent violation of Sections 350.113(3)(e) and 367.145, F.S., and Rule 25-30.120(1), F.A.C., rises in these circumstances to the level of warranting the initiation of a show cause proceeding.  Therefore, staff recommends that the Commission not order TLP  to show cause, in writing within 21 days, why it should not be fined for its failure to remit its RAFs from 1972 through 2007. 

Issue 5: 

 Should the application of TLP Water, Inc. for a water certificate be approved?

Recommendation: 

 TLP Water, Inc. should be granted Certificate No. 644‑W to serve the territory described in Attachment A, effective the date of the Commission’s vote.  The resultant order should serve as the utility’s water certificate and it should be retained by the utility. (Johnson, Walden, Young)

Staff Analysis: 

  TLP Water, Inc. filed its completed application for an original water certificate to provide service in Lake County on March 9, 2009.  The application is in compliance with the governing statute, Section 367.045, F.S., and other pertinent statutes and administrative rules concerning an application for original certificate.  In addition, the application contains proof of compliance with the noticing provisions set forth in Rule 25-30.030, F.A.C.  As previously mentioned, there were several objections to the notice of application, however, all objecting parties withdrew their objections on May 8, 2009.

The application includes a proprietary lease in the name of the TLP Water, Inc. which includes the water facilities that are located on lot 9 in the Three Lakes Park mobile home community.  Adequate service territory and system maps and a territory description have been provided as prescribed by Rule 25-30.033(1)(l),(m) and (n), F.A.C.  A description of the territory requested by the applicant is appended to this memorandum as Attachment A.

The applicant appears to have the financial and technical ability to provide water service to the proposed service area.  Regarding financial ability, the application indicates that the Three Lakes Park Co-op, Inc. has and continues to provide necessary funds to cover the operational shortfalls of TLP Water, Inc.  However, the operational expenses of the utility are depleting the park’s reserves, and adequate funding is needed; therefore, the utility has applied for a staff assisted rate case (SARC).[2]

Regarding the applicant's technical ability, the applicant has been operating and maintaining the utility over the years with the help of a licensed plant operator.  The utility contracts for testing.  There are no outstanding issues with St. Johns River Water Management District.  There are outstanding issues with the Department of Environmental Protection (DEP) that included distribution system replacements; however, DEP is working with the utility to resolve these issues.

The applicant is aware that it must maintain its books and records according to the National Association of Regulatory Utility Commissioners Uniform System of Accounts.  TLP has filed its 2008 annual report and has paid its 2008 RAFs.  In addition, the applicant is aware that it may not change rates, serve outside its certificated territory, or sell the utility without prior Commission approval.

Based on the above information, staff believes it is in the public interest to grant TLP Water, Inc. Certificate No. 644-W to serve the territory described in Attachment A, effective the date of the Commission’s vote.  The resultant order should serve as the utility’s water certificate and it should be retained by TLP Water, Inc.
Issue 6: 

 Should the utility’s existing rate and charges be continued?

Recommendation: 

 The existing water rate shown Schedule No. 1 should be approved for TLP’s customers.  TLP should be required to charge the approved rate until authorized to change by this Commission in a subsequent proceeding.  The rate should be effective for services rendered on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475, F.A.C.  (Johnson)

Staff Analysis: 

 According to the application, the existing flat $39 monthly rate was based on the utility’s 2007 operating and maintenance expenses and was agreed to by all customers in a 2008 mediation.  In the mediation, the utility reported revenue of $13,860 and operating and maintenance expenses of $25,273.  Therefore, staff recommends that the existing water rate charged by TLP, as shown on Schedule No. l, should be approved.  As previously noted, the utility has already applied for a SARC to address its revenue shortfall, as well as capital improvements being required by DEP.  TLP should be required to charge the approved rate until authorized to change by this Commission in a subsequent proceeding.  The rate should be effective for services rendered or connections made on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475, F.A.C.

Issue 7: 

 Should the utility’s requested miscellaneous service charges, and late fee be approved?

Recommendation: 

 Yes.  The utility’s requested miscellaneous service charges, and late fee should be approved.  The miscellaneous service charges, and late fee should be effective for services rendered on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475, F.A.C.  (Johnson)

Staff Analysis: 

 The utility’s request for miscellaneous service charges and a late payment fee were accompanied by its reason for requesting the charges, as well as the cost justification required by Section 367.091, F.S.  The utility’s proposed miscellaneous service charges and late payment charge are shown on Schedule No. 1.  Pursuant to Rule 25-30.460, F.A.C., all water and wastewater utilities may apply for miscellaneous service charges.  These charges include initial connections, normal reconnections, violation reconnections, and premises visit charges.

The utility’s requested miscellaneous service charges are based on the hourly rate of the plant operator and bookkeeper and overhead costs including transportation, supplies, and billing expenses.  The utility will only be charging miscellaneous service charges when a specific customer requests the service or is responsible for the service.  The utility’s justification for the miscellaneous service charges is to place the burden of these charges on the cost-causer rather than the general body of ratepayers.

Based on the utility’s expenses, the proposed miscellaneous service charges appear to be reasonable.  Therefore, staff recommends that the utility’s proposed miscellaneous service charges, as shown on Schedule No. 1, be approved.

In addition to the miscellaneous service charges, the utility proposed a $5.00 late payment fee.  The late payment fee is designed to encourage customers to pay their bills on time to ensure that the cost associated with late payment is not passed onto customers who do pay on time.  The estimated cost provided by the utility appears reasonable.  Therefore, the utility’s requested late fee of $5.00 should be approved.

Staff recommends that TLP’s proposed miscellaneous service charges, and late fee, shown on Schedule No. 1, are consistent with Commission rules and should be approved.  The deposits and charges should be effective for services rendered on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475, F.A.C.

 

Issue 8: 

 Should this docket be closed?

Recommendation: 

 Yes.  If no timely protest is filed by a substantially affected person to proposed agency action in Issue 7, a consummating order should be issued upon expiration of the protest period and the docket should be closed.  (Young)

Staff Analysis: 

 Yes.  If no timely protest is filed by a substantially affected person to proposed agency action in Issue 7, a consummating order should be issued upon expiration of the protest period and the docket should be closed.

TLP Water, Inc.

Description of Water Territory

Lake County

 

Three Lakes Mobile Home Park and Sunset View

 

In Sections 19 and 30, Township 19 South, Range 26 East:

 

 

The Southwest quarter of Section 19, less and except that finger of land lying north and west of the Dead River Canal outlet to Lake Eustis; and,

 

In Section 30, Township 19 South, Range 26 East, the Northwest quarter of Section 30 lying north of US Highway 441, less the east 330 feet thereof.

 

FLORIDA PUBLIC SERVICE COMMISSION

authorizes

TLP Water, Inc.

pursuant to

Certificate Number 644-W

 

to provide water service in Lake County in accordance with the provisions of Chapter 367, Florida Statutes, and the Rules, Regulations, and Orders of this Commission in the territory described by the Orders of this Commission.  This authorization shall remain in force and effect until superseded, suspended, cancelled or revoked by Order of this Commission.

 

Order Number                         Date Issued      Docket Number           Filing Type

 

*                                              *                      080499-WU                Original Certificate

 

 

*Order Number and date to be provided at time of issuance.

Schedule No. 1

 

TLP WATER, INC.

Residential and General

Monthly Service Rate

 

            Meter Size                                                                                            Flat Rate

 

            All Meter Sizes                                                                                     $ 39.00

           

           

                                                           

 

MISCELLANEOUS SERVICES CHARGES

 

                                                         Office Hours                                            After Hours

Initial Connection                               $30.00                                                       $       45.00

Normal Reconnection                        $30.00                                                       $       45.00

Violation Reconnection                      $30.00                                                       $       45.00

Premises Visit                                    $15.00                                                       $       30.00

 

Late Fee                                            $  5.00