DATE:	April 23, 2010
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Economic Regulation (Smith, Fletcher, Hudson, Maurey) Office of the General Counsel (Jaeger)
RE:	Docket No. 090170-WU – Application for staff-assisted rate case in Lee County by Mobile Manor Water Company, Inc.
AGENDA:	05/04/10 – Regular Agenda – Proposed Settlement Agreement – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			Edgar, Skop, Stevens
PREHEARING OFFICER:			Edgar
CRITICAL DATES:			09/07/10 (15-Month Effective Date (SARC))-Waived
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\ECR\WP\090170.RCM.DOC

 

 

Case Background

Mobile Manor Water Company, Inc. (Mobile Manor or Utility) is a Class C utility serving 313 water customers in Lee County.  According to Mobile Manor’s 2008 Annual Report, its total gross revenue was $50,531 and its operating expenses were $70,979.

Prior to this rate case, the Commission last established rate base for the Utility pursuant to Order No. 13067.[1]  The Utility changed its name from Mobile Manor, Inc. to Mobile Manor Water Company, Inc. on November 29, 2004.[2]

On April 6, 2009, the Commission received Mobile Manor’s application for a staff-assisted rate case.  In this application, the Utility requested interim rates.  By Order No. PSC-09-0421-PCO-WU, the Commission approved a 47.09 percent interim increase, subject to refund with interest.[3]  Due to problems obtaining security, the Utility did not implement the interim rates until October 1, 2009.

A customer meeting was held on September 30, 2009.  Staff received letters before the meeting that the timing of the meeting precluded many customers from participating because they were still up north.  Approximately 47 customers attended this meeting with a majority of them opposed to any rate increase.

Upon consideration of the staff recommendation and the presentation of several Utility representatives at the November 10, 2009, Agenda Conference, the Commission proposed to approve a 4.61 percent across-the-board increase over the rates in effect prior to filing.[4]

However, before the Commission order approving the increase could become final, the Commission received a timely protest and request for evidentiary proceedings (Protest) on December 21, 2009.  That Protest had approximately 156 separate signatures representing approximately 109 residential connections.  The customers raised four issues and actually requested that a larger rate increase be allowed above the approved PAA rates.  In response to this Protest, on December 23, 2009, the Commission received a petition (Responsive Petition) signed by 56 customers (non-protesting customers) which opposed any additional increase above and beyond that which was proposed in the PAA Order.  This Responsive Petition addressed three of the four issues raised by the protestors.

Based on the timely Protest, the PAA Order never became final and an Issue Identification/Settlement Meeting was noticed and scheduled for January 29, 2010.  Approximately 130 customers attended this meeting.[5] After discussing the issues raised by the protesting customers, a discussion concerning settlement of the case ensued.  After much discussion and after approximately 30 customers had already left, a settlement was proposed with approximately 91 customers being in favor of it and 9 customers still apparently opposed to any additional increase.  The customers requested time to have the proposed settlement reduced to writing and the necessary signatures obtained.

On March 9, 2010,[6] staff counsel sent letters to all customers who had signed the original Protest as well as all customers who had signed the Responsive Petition to determine if any customers wanted to participate as a party and pursue a formal hearing.  Only one customer, Mr. Tom Hawkins,[7] responded that he would like to participate as a party.

  On March 11, 2010, the Commission received a proposed Settlement Agreement.  The Settlement Agreement on behalf of the protesting customers and some of the non-protesting customers is incorporated in this recommendation as Attachment A.  However, prior to receiving the Settlement Agreement, the Commission received a petition in opposition to the proposed Settlement Agreement.[8]  The following table illustrates how many customers were represented in the Protest, the Responsive Petition, the Settlement Agreement, and the opposition to the Settlement Agreement.

This recommendation addresses the proposed Settlement Agreement and whether the Commission should accept it.  The Commission has the authority to consider this Settlement Agreement pursuant to Sections 367.011(2) and 367.0814, Florida Statutes (F.S.).

 

Discussion of Issues

Issue 1: 

 Should the Commission approve the proposed Settlement Agreement?

Recommendation: 

 Yes.  The proposed Settlement Agreement should be approved.  Within 15 days of the Commission vote, Mobile Manor should file a proposed customer notice and revised tariff sheets which are 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.  With the approval of the Settlement Agreement, the escrowed funds should be released to the Utility.  (Smith, Hudson, Fletcher, Jaeger)

Staff Analysis: 

 As noted in the Case Background, the Commission proposed a 4.61 percent across-the-board increase over the rates in effect prior to filing.  However, before that PAA Order could become final, the Commission received a timely Protest on December 21, 2009.  In that Protest, the customers raised four issues and actually requested that a larger increase be allowed above the approved PAA rates.  The protesting customers objected to the following four issues in staff’s PAA Order: 1) Chemicals; 2) Contractual Services – Professional; 3) Contractual Services – Other; and 4) Rents.  In response to this Protest, on December 23, 2009, the Commission received a Responsive Petition signed by the non-protesting customers that opposed any additional increase, and addressed three of the four issues raised by the protestors.  The customers who signed the Settlement Agreement, including Mr. Tom Hawkins who is currently the only party other than the Utility, proposed to settle the case which would resolve the four separate issues raised by the protestors.  Further, pursuant to the Settlement Agreement, the customers agree that the Utility should be allowed to keep the escrowed funds.

The customers who signed the Settlement Agreement believe the appropriate revenue requirement for Mobile Manor is $74,822.  However, based on the Utility’s billing determinants, the settlement rates only generate a revenue requirement of $71,603.[10]  Staff contacted the customers and informed them of the discrepancy of $3,219 in revenues.  The customers have agreed to forgo the $3,219 in order to finalize this proceeding.  The Settlement Agreement proposed a 70 percent allocation of the fee assessed by the Utility’s management company, Associa Benson’s Inc., to the Utility and 30 percent to Mobile Manor, Inc. (community association).  Because the customers have agreed to forgo the additional revenues, this results in a management company fee allocation of 56 percent to the Utility and 44 percent to the community association.

Although some of the non-protesting customers now agree with the Settlement Agreement, the majority of non-protesting customers are opposed to the Settlement Agreement.  However, as of the filing of this recommendation, no customer other than Mr. Hawkins has filed either a petition requesting a formal hearing or a request that he or she be made a formal party.  The customers opposing any additional increase dispute the prudency to hire the management company, Associa Benson’s Inc.  Further, the opposing customers believe that if all maintenance cannot be completed internally, then the Utility should be turned over to Lee County Utilities.

Based on the expenses being requested for approval by this settlement, staff did an analysis to determine the reasonableness of the expenses in comparison to other similarly situated Class C water utilities.  Staff compared the following expenses:  Account 601 – Salaries and Wages-Employees; Account 603 – Salaries and Wages – Officers; Account 630 – Contractual Services – Billing; Account 631 – Contractual Services – Professional; and Account 636 – Contractual Services – Other.  For those expenses, the range on a per ERC basis is $72 to $196, with an average of $118 (See Attachment B).  Mobile Manor’s per ERC expense is $91.  Therefore, staff believes the expenses requested in the Settlement Agreement are reasonable.

Based on the above, staff believes that the Settlement Agreement is a reasonable resolution to address 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,[11] staff recommends that the Commission approve the Settlement Agreement.

            Staff notes that the customer base for Mobile Manor is highly seasonal and the average usage is approximately 3,000 gallons per month.[12]  Based on the average usage, when all customers are present and utilizing the water system, typical residential customer’s bill would be as shown below:

 

                                                            Rates Prior       Interim              PAA                Settlement

            Typical Residential Bill  To Filing           Rates                Rates                Rates

            3,000 Gallons                           $25.66             $37.75             $26.85             $29.06

           

Analyzing the average usage, the difference between the PAA rates and the settlement rates is $2.21 per month.[13]

Within 15 days of the Commission vote, the Utility should file a proposed customer notice and revised tariff sheets which are 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.  Mobile Manor should provide proof that the customers have received notice within 10 days after the date of the notice.  With the approval of the Settlement Agreement, the escrowed funds should be released to the Utility.

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 Settlement Agreement.  (Jaeger, Smith)

Staff Analysis: 

 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 Settlement Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

* Utilities with asterisks denote audited expenses indexed to current level.  The information for the utilities without asterisks was obtained from 2008 Annual Report.