DATE:	March 25, 2010
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Economic Regulation (Deason, Bulecza-Banks, Fletcher) Office of the General Counsel (Klancke)
RE:	Docket No. 090429-WU – Request for approval of imposition of miscellaneous service charges, delinquent payment charge and meter tampering charge in Lake County, by Pine Harbour Water Utilities, LLC.
AGENDA:	04/6/10 – Regular Agenda – Tariff Filing – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Administrative
CRITICAL DATES:			04/07/10 (8-Month Effective Date)
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\ECR\WP\090429.RCM.DOC

 

 Case Background

            Pine Harbour Water Utilities, LLC (Pine Harbour or Utility) is a Class C utility which provides service in Lake County to approximately 60 water customers.  The Utility's 2008 annual report shows water annual operating revenue of $15,678, and a total operating loss of $4,930.

           

            On August 7, 2009, Pine Harbour filed an application to modify Tariff Sheet No. 16.0.  The Utility proposes to establish miscellaneous service charges which include an initial connection fee, a normal reconnection fee, a violation reconnection fee, and a premises visit charge.  Pine Harbour has also requested adding a delinquent payment charge and a meter tampering charge.  By Order No. PSC-09-0709-PCO-WU, issued October 26, 2009, the Commission suspended the Utility’s tariff filing pending further clarification.

            On October 13, 2009, staff sent a data request to Pine Harbour to obtain further clarification and cost justification regarding its miscellaneous service charges.  The Utility responded to staff’s data request on October 25, 2009.

 

            This recommendation addresses Pine Harbour’s requested tariff changes.  The Commission has jurisdiction over this matter pursuant to Section 367.091, Florida Statutes (F.S.).

 

Discussion of Issues

Issue 1: 

 Should Pine Harbour’s proposed tariff sheet to establish miscellaneous service charges, a delinquent payment charge, and a meter tampering fee be approved as filed?

Recommendation: 

 No.  The Utility’s requested miscellaneous service charges, delinquent payment charge, and meter tampering fee should not be approved as filed.  However, in the interest of administrative efficiency, if the Utility were to file a revised tariff sheet consistent with staff’s analysis within 30 days of the consummating order being issued, staff requests administrative authority to approve that tariff sheet.  The revised tariff sheet should be implemented on or after the stamped approval date of the tariff, pursuant to Rule 25-30.475(2), Florida Administrative Code (F.A.C.), provided the notice has been approved by staff.  Within 10 days of the date the order is final, Pine Harbour should be required to provide notice of the tariff changes to all customers.  The Utility should provide staff with proof that the customers have received notice within 10 days after the date the notice is sent.  (Deason)

Staff Analysis: 

 As stated in the background, on August 7, 2009, Pine Harbour filed an application to modify Tariff Sheet No. 16.0.  The Utility proposes to establish miscellaneous service charges, which include, an initial connection fee, normal reconnection fee, violation reconnection fee, and a premises visit charge.  Pine Harbour has also requested adding a delinquent payment charge and a meter tampering charge.

Miscellaneous Service Charges

Rule 25-30.460, F.A.C., addresses applications for miscellaneous service charges.  Pursuant to this rule, all water and wastewater utilities may apply for these charges, and the charges shall be included in each company’s tariffs and shall include rates for initial connections, normal reconnections, violation reconnections, and premise visit charges.  Pursuant to this rule the following charges are allowed to be levied by utilities:

1)                  Initial Connection:  This charge is to be levied for service initiation at a location where service did not exist previously.

 

2)                  Normal Reconnection:  This charge is to be levied for transfer of service to a new customer account at a previously served location, or reconnection of service subsequent to a customer requested disconnection.

 

3)                  Violation Reconnection:  This charge is to be levied prior to reconnection of an existing customer after disconnection of service for cause according to Rule 25-30.320(2), F.A.C., including a delinquency in bill payment.

 

4)                  Premises Visit:  This charge is to be levied when a service representative visits a premises at a customer’s request for complaint resolution and the problem is found to be the customer’s responsibility.

 

5)                  Premises Visit (in lieu of disconnection):  This charge is to be levied when a service representative visits a premises for the purpose of discontinuing service for nonpayment of a due and collectible bill, but does not discontinue service because the customer pays the service representative or otherwise makes satisfactory arrangements to pay the bill.

 

This rule also allows a utility to request an additional charge (“after hours charge”) for overtime when the customer requests that service be performed after normal hours.  The after hours charge may be the same rate as the charge during normal working hours; however, if the utility seeks a charge other than the normal working hours charge, the utility must file cost support.  Section 367.091(6), F.S., authorizes the utility to file an application to establish, increase, or change a rate or charge other than monthly rates or service availability charges, which must be accompanied by a cost justification.

 

Prior to the adoption of Rule 25-30.460, F.A.C., which became effective November 30, 1993, companies relied on guidance provided from Staff Advisory Bulletins (SAB).  Previously, tariff provisions for miscellaneous service charges were outlined in SAB 2^nd Revised No. 13 (SAB 13), dated January 1, 1988.  According to SAB 13, charges should be contained in each utility’s tariff for initial connections, normal reconnections, violation reconnections, and premises visit charges.  SAB 13 delineated the costs typically recovered in each miscellaneous service charge category, contained an example of an approved level of charges, and provided guidance to utilities as the timing and procedures for including or revising tariff provision for each miscellaneous service charge category.

SAB 13 delineated several costs that should be recovered through miscellaneous service charges.  These costs include the following:

1.                           Office costs associated with recording and processing a customer request for service, including labor, computer service and postage.

2.                           Office costs associated with receiving, recording and processing the subsequent customer request for termination of service and final bill, including labor, computer services and postage.

3.                           Field costs associated with the inspection of a facility and connection of service including transportation, labor and meter reading expense.

4.                           Field costs associated with disconnection of service including transportation, labor and meter reading expense.

5.                           Overhead costs directly related to a specific job including a portion of general office facilities and equipment, supervision, insurance and small miscellaneous expenses required to support service activities.

SAB 13 included a list of Commission approved miscellaneous service charges (prior to January 11, 1988) as shown in the following table:

 

Type of Service	Water	Sewer
Initial Connection	$15	$15
Normal Reconnection	$15	$15
Violation Reconnection	$15	Actual Cost
Premises Visit	$10	$10

SAB 13 also stated that a notice of discontinuance of service, which must be sent to the customer prior to disconnection as required by Rule 25-30.320, F.A.C., should contain an estimate of the costs involved in this activity.  SAB 13 was subsequently rescinded in March, 1997, when the Commission repealed all of the Staff Advisory Bulletins.

The Commission addressed the level of miscellaneous service charges in 1996, in a rate case by Southern States Utilities.  By Order No. PSC-96-1320-FOF-WS,[1] the Commission expressed concern that the miscellaneous service charges were eight years old at the time and could not possibly cover current costs.  The Commission directed staff to examine whether miscellaneous service charges should be indexed in the future and included in index applications.  Order No. PSC-96-1320-FOF-WS states that, in the past, utilities based service availability charges on SAB 13 2^nd Revised 13, dated January 1, 1988.  This order acknowledges that staff advisory bulletins were issued by the Commission staff to provide informal, non-binding interpretations or classifications.  The Order further states that although there were increases in costs since 1988, when SAB No. 13 was issued, the bulletin had not been updated for inflation and these charges should be indexed in the same manner that utilities are allowed to index their monthly service rates.

Miscellaneous service charges may be indexed if requested in price index applications pursuant to Rule 25-30.420, F.A.C.  However, few utilities request that their miscellaneous service charges be indexed.  In order to adjust miscellaneous service charges for inflation, the Commission has applied the price index to reevaluate miscellaneous service charges.

By Order No. PSC-05-0776-TRF-WS,[2] the Commission approved miscellaneous service charges of $20 during normal hours and $40 for after hours for Mad Hatter Utility, Inc.  The Commission approved this charge by applying the approved price indices from 1990 through 2005 to Mad Hatter’s $15 miscellaneous service charge.  The Commission stated that as claimed by the utility, the costs for fuel and labor had increased substantially.  Therefore, the Commission found that Mad Hatter’s request for a $20 charge was reasonable and accepted indexing of historic charges as a method to arrive at a cost-based change.  Subsequently, by Order No. PSC-05-0397-TRF-WS,[3] the Commission approved a $20 charge for connection and reconnection during normal hours and a $40 after hours charge for Marion Utilities, Inc.  In doing so, the Commission stated the increases should be approved to allow the utility to recover the costs of its increased expenses for connection, reconnection, and after hours calls.  These charges were also established in the same manner as Mad Hatter’s by applying the price indices from 1990 through 2005 to the utility’s previously-approved miscellaneous service charge.

In several recent rate cases,[4] the Commission has approved miscellaneous service charges of $20-$21 for normal hours and $40-$42 for after hours based on applying price indices.  Pine Harbour has requested changes to increase all of its miscellaneous service charges for normal hours and after hours.  Changes and additions requested by

Pine Harbour to its Tariff Sheet No. 16.0 for miscellaneous service charges is discussed below.

 

Initial Connections and Normal Reconnections

 

            Pine Harbour requested to establish a charge for initial connection and normal reconnections during normal hours of $25.00.  The Utility also requested to establish an initial connection and a normal reconnection service charge for after hours of $50.00.  Pine Harbour states that its proposed charges have never been incorporated into its tariffs since the Utility began and that the cost of fuel, labor and repairs has skyrocketed.  According to Pine Harbour, during the past year the Utility had six connections and reconnections during normal hours and one connection and reconnection during after hours.

 

Premise Visit Charge and Premises Visit Charge In Lieu of Disconnection

           

            Pine Harbour requested to establish a charge for premises visits during normal hours of $25.00.  The Utility also requested to establish a premises visits for after hours of $50.00.  A Premise Visit Charge is consistent with Rule 25-30.460(1)(d), F.A.C.  By Order No. PSC-05-0397-TRF-WS,[5] the Commission approved a Premises Visit Charge to be levied when a service representative visits a premises at the customer’s request for a complaint and the problem is found to be the customer’s responsibility. 

 

            In addition, a Premises Visit Charge In Lieu of Disconnection charge may be levied when a service representative visits a premises for the purpose of discontinuing service for non-payment of a due and collectible bill and does not discontinue service because the customer pays the service representative or otherwise makes satisfactory arrangements to pay the bill.  According to Pine Harbour, during the past year the Utility had twelve premises visits.  Of the twelve premises visits, four premises visits were during after hours. 

 

Cost Justification for Miscellaneous Service Charges

 

            As cost justification for initial connections, normal reconnections, premise visit charge, and premises visit charge in lieu of disconnection, Pine Harbour provided the following breakdown for these charges listed below:

 

Normal Hours	After Hours
Clerical & Administrative Labor	Clerical & Administrative Labor
Office Clerk - $14.75 per hour	Office Clerk - $7.40 per hour
Total - $3.75 - $14.75 per hour/0.25 hour	Total - $7.40 - $22.13 per hour/0.33 hour
Labor to Inspect Facilities and Connect	Labor to Inspect Facilities and Connect
Field Labor - $18.75 per hour	Field Labor - $21.11 per hour
Total - $9.38 - $18.75 per hour/0.50 hour	Total - $21.11 - $28.13 per hour/0.75 hour
Transportation Costs	Transportation Costs
$9.00 – $1.50 x 6, One way miles to facility	$18.00 – $1.50 x 12, Round trip to facility
Overhead	Overhead
Ink, paper, postage, etc. - $2.87	Ink, paper, postage, etc. - $3.49
Total Costs	Total Costs
Clerical & Administrative Labor – $3.75	Clerical & Administrative Labor – $7.40
Labor to Inspect Facilities and Connect – $9.38	Labor to Inspect Facilities and Connect – $21.11
Transportation Costs – $9.00	Transportation Costs – $18.00
Overhead - $2.87	Overhead - $3.49
Total - $25.00	Total - $50.00

 

            After reviewing the numbers provided by the Utility, staff believes the following modifications to the cost justification for the initial connection and normal reconnections service charges:

 

(1)    Staff believes it is not necessary to mail a bill for a premises visit because the charge can be reflected on the customer’s next monthly billing statement.  Therefore, the overhead cost associated with postage is unnecessary and the cost for overhead should be eliminated from both normal and after hours costs.

 

(2)    Staff believes all clerical & administrative labor can be performed during normal hours.  Therefore, the office clerk salary under clerical & administrative labor should not be multiplied by 1.5 for after hours.

 

            Below is a revised chart that reflects staff’s adjustments to the miscellaneous service charge cost justification provided by Pine Harbour:

 

Normal Hours	After Hours
Clerical & Administrative Labor	Clerical & Administrative Labor
Office Clerk - $14.75 per hour	Office Clerk - $14.75 per hour
Total - $3.69 - $14.75 per hour/0.25 hour	Total - $3.69 - $14.75 per hour/0.25 hour
Labor to Inspect Facilities and Connect	Labor to Inspect Facilities and Connect
Field Labor - $18.75 per hour	Field Labor - $21.11 per hour
Total - $9.38 - $18.75 per hour/0.50 hour	Total - $21.08 - $28.13 per hour/0.75 hour
Transportation Costs	Transportation Costs
$9.00 – $1.50 x 6, One way miles to facility	$18.00 – $1.50 x 12, Round trip to facility
Total Costs	Total Costs
Clerical & Administrative Labor – $3.69	Clerical & Administrative Labor – $3.69
Labor to Inspect Facilities and Connect – $9.38	Labor to Inspect Facilities and Connect – $21.08
Transportation Costs – $9.00	Transportation Costs – $18.00
Total - $22.07	Total - $42.77

 

Delinquent Payment Charge

 

            The Utility has also requested to add a delinquent payment charge for any customer that pays a bill after the 20^th of the month.  Pursuant to Rule 25-30.335(4), F.A.C., “A utility may not consider a customer delinquent in paying his or her bill until the 21st day after the utility has mailed or presented the bill for payment.”  Therefore, the Utility cannot charge for a delinquent payment until the 21^st day after the utility has mailed the bill.

 

            The delinquent payment charge is designed to recover the cost of paper, printing and preparation, and mailing the late notice.  Pine Harbour feels that customers who pay on a timely basis should not bear the cost of those who rarely pay on time.  Staff agrees that it is appropriate to establish a delinquent payment charge.  As cost justification, the Utility provided the following breakdown of its requested charge as listed below:

 

Clerical & Administrative Labor Clerical time used to determine that account has not been paid - $3.00 Clerical time used to prepare, print and sort notices for mailing - $4.25 Total - $7.25   Materials - $0.31   Postage - $0.44   Total Costs Clerical & Administrative Labor – $7.25 Materials- $0.31 Postage - $0.44 Total - $8.00

           

            In the past, late payment charge requests have been handled on a case-by-case basis.  The Commission has approved late fees in several cases finding that the cost causer should pay the additional cost incurred by the utility for late payments, rather than the general body of the utility’s rate payers.[6]  Presently, Commission rules provide that late payers may be required by a utility to provide an additional deposit.

           

            In Order No. PSC-01-0998-TRF-WU,[7] the Commission found that the goal of allowing late fees to be charged by a utility is twofold: first, it encourages current and future customers to pay their bills on time; and second, if payment is not made on time, it ensures that the cost associated with the late payments is not passed on to the customers who do pay on time.  Allowing a late fee encourages prompt payment by current and future customers.  Therefore, staff recommends that a late payment fee should be approved.

 

            However, staff believes that $8 is not a reasonable late payment charge for this Utility.  After reviewing the information, staff believes that the time involved to determine that an account has not been paid should be part of the normal duties of the Utility and the associated costs should not be charged to every person who is charged a delinquent payment charge.  Therefore, staff believes the following breakdown is more appropriate:

 

Clerical & Administrative Labor

Clerical time used to prepare, print and sort notices for mailing - $4.25

 

Materials - $0.31

 

Postage - $0.44

 

Total Costs

Clerical & Administrative Labor – $4.25

Materials- $0.31

Postage - $0.44

Total - $5.00

 

            Staff believes that a late payment charge of $5 is a reasonable fee for a delinquent payment charge.  A late payment charge of $5 is consistent with prior Commission practice and orders.[8]  A late payment charge of less than $5 would not allow the Pine Harbour to recover its costs of processing delinquent accounts, nor would it send the appropriate signal to delinquent payers.

 

Meter Tampering Fee

 

            The Utility has requested the establishment of a meter tampering fee.  Pine Harbour stated that the meter tampering fee would cover the cost of a service representative to make a special premises visit to determine if a meter has been tampered with.  The Utility believes that any costs incurred to repair the meter, piping, or meter box should be passed on to the premises owner and that the general body of customers should not have to bear the directly-related costs of repairs.

 

            According to Pine Harbour, during the past year the Utility had two meter tampering events.  The meter tampering occurred after the technician shut off the water for non payment of services rendered.  Pine Harbour meters were encased in boxes without locks.  The customer took it upon themselves to turn the valves back on.  This has been verified by the Utility by spot checking the meter readings.  Pine Harbour has since obtained valve locks to place on its meters.  The Utility also stated that one customer has performed this practice more than once, causing the pipe to crack and leak.  As a result, the Utility incurred repair costs of $246.

 

            As cost justification, Pine Harbour provided the following breakdown of its requested charge as listed below:

 

Clerical & Administrative Labor

Labor to document complaint and prepare work order - $7.40

 

Labor to Inspect Facilities

Labor to inspect meter and determine if repairs are necessary - $21.11

 

Transportation Costs - $18.00

 

Total Costs Clerical & Administrative Labor – $7.40

Labor to Inspect Facilities and – $21.11

Transportation Costs – $18.00

Total - $50.00

Staff believes that the approval of the requested meter tampering fee is appropriate.  In its petition, the Utility has requested a meter tampering investigation fee in the amount of $50.  The Utility asserted that the typical cost of investigations arising from meter tampering events is $50.  Staff agrees with Pine Harbour that $50 adequately reflects the typical costs to be incurred in investigating and resolving situations of meter tampering.  Staff cautions, however, that the Utility should collect the investigation fee only where the investigation reveals evidence of meter tampering. 

 

Additionally, based on the information provided by the Utility, staff believes that the potential costs associated with repairs to Utility property arising from meter tampering events could be substantially higher than the $50 meter tampering investigation fee requested by Pine Harbour.  Therefore, staff believes that in addition to the meter tampering investigation charge of $50, the Utility should also be authorized to collect repair costs to Utility property encompassing the actual costs of repairing the damage to utility property arising from meter tampering events.  Staff believes that by authorizing the Utility to collect a repair to utility property fee, the cost causer will pay the additional cost incurred by the Utility for meter tampering, rather than the general body of the Utility’s rate payers.

 

A meter tampering investigation charge is very similar to a late payment charge.  In both instances, the Utility incurs additional costs as a result of an individual customer's failure to follow the utility's approved tariff.  Just as rates are set assuming customers pay their bills on time, rates are set assuming that the product delivered to the customer will be metered and billed at the appropriate rates.  Costs to send additional bills, or to detect and remedy meter tampering, are not normal costs of providing the regulated service but are directly related to actions by individual customers.  If those costs are not recovered from the customer causing the costs, the general body of ratepayers will be subsidizing inappropriate behavior of those who choose not to abide by the Utility's tariffs.

 

Finally, staff recommends that with respect to both the meter tampering investigation fee and the repair to utility property fee, the Utility’s tariff should be amended to inform customers that they have the right to contest imposition of the fees to the Commission without interruption of service (assuming there are no other grounds for disconnection) while the issue is undecided.

 

Summary

 

            In summary, Pine Harbour’s requested miscellaneous service charges, delinquent payment charge, and meter tampering charge should not be approved as filed.  Traditionally, the Commission has either approved or denied revised tariff sheets.  However, in the interest of administrative efficiency, if the Utility were to file a revised tariff sheet consistent with staff’s analysis within 30 days of the consummating order being issued, staff requests administrative authority to approve that tariff sheet.  The revised tariff sheet should be implemented on or after the stamped approval date of the tariff, pursuant to Rule 25-30.475(2), Florida Administrative Code (F.A.C.), provided the notice has been approved by staff.  Within 10 days of the date the order is final, Pine Harbour should be required to provide notice of the tariff changes to all customers.  The Utility should provide staff with proof that the customers have received notice within 10 days after the date the notice is sent.  A breakdown of the Utility’s requested charges and staff’s recommended charges is as follows:

 

 

 

 

 

 

 

	Currently Approved		Utility Revised Request		Staff  Recommended
Meter Tampering Fee	$0.00		$50.00		$50.00 plus the actual cost associated with any repairs
Delinquent Payment Charge	$0.00		$8.00		$5.00
Misc. Service Charges	Normal Hours	After Hours	Normal Hours	After Hours	Normal Hours	After Hours
Initial Connection Fee	$0.00	$0.00	$25.00	$50.00	$22.00	$43.00
Normal Reconnection Fee	$0.00	$0.00	$25.00	$50.00	$22.00	$43.00
Violation Reconnection Fee	$0.00	$0.00	$0.00	$0.00	$22.00	$43.00
Premises visit Fee	$0.00	$0.00	$25.00	$50.00	$22.00	$43.00
Premises visit Fee (In Lieu of Disconnection)	$0.00	$0.00	$25.00	$50.00	$22.00	$43.00

Issue 2: 

 Should this docket be closed?

Recommendation: 

 Yes.  If Issue 1 is denied and the Utility files a revised tariff sheet consistent with staff’s analysis within 30 days of the consummating order being issued, staff should administratively approve that tariff sheet and customer notice.  If a protest is filed within 21 days of the issuance date of the Order, the revised tariff should remain in effect with all increased charges held subject to refund pending resolution of the protest, and the docket should remain open.  If no timely protest is filed, the docket should be closed upon the issuance of a Consummating Order.  (Klancke, Deason)

Staff Analysis: 

 If Issue 1 is denied and the Utility files a revised tariff sheet consistent with staff’s analysis within 30 days of the consummating order being issued, staff should administratively approve that tariff sheet and customer notice.  If a protest is filed within 21 days of the issuance date of the Order, the revised tariff should remain in effect with all increased charges held subject to refund pending resolution of the protest, and the docket should remain open.  If no timely protest is filed, the docket should be closed upon the issuance of a Consummating Order.