DATE:	September 8, 2011
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Economic Regulation (Roberts, Bruce, Fletcher, Hudson, Maurey, Simpson) Office of the General Counsel (Robinson)
RE:	Docket No. 100471-SU – Application for staff-assisted rate case in Marion County by S&L Utilities, Inc.
AGENDA:	09/20/11 – Regular Agenda – Proposed Agency Action except for Issues 10, 14 and 15 – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			Graham, Edgar, Brisé
PREHEARING OFFICER:			Brisé
CRITICAL DATES:			05/23/12 (15-Month Effective Date (SARC))
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\ECR\WP\100471.RCM.DOC

 

Table of Contents

Issue       Description                                                                                                                     Page

               Case Background. 3

1             Quality of Service (Simpson) 3

2             Used and Useful (Simpson) 3

3             Rate Base (Roberts) 3

4             Rate of Return (Roberts) 3

5             Test Year Revenues (Bruce, Roberts) 3

6             Operating Expenses (Roberts) 3

7             Operating Ratio Method (Roberts) 3

8             Revenue Requirement (Roberts) 3

9             Rates and Rate Structure (Bruce, Roberts) 3

10           Four-Year Rate Reduction (Roberts) 3

11           NSF Fees (Roberts) 3

12           Late Payment Fees (Roberts) 3

13           Pro Forma (Simpson, Roberts) 3

14           Temporary Rates (Roberts) 3

15           Proof of Adjustments (Roberts) 3

16           Close Docket (Robinson) 3

               Schedule No. 1-A Wastewater Rate Base. 3

               Schedule No. 1-B Adjustments to Rate Base. 3

               Schedule No. 2 Capital Structure. 3

               Schedule No. 3-A Wastewater Operating Income. 3

               Schedule No. 3-B Adjustments to Operating Income. 3

               Schedule No. 3-C Wastewater Operating and Maintenance Expenses. 3

               Schedule No. 4 Wastewater Rates. 3

               Schedule No. 5-A Wastewater Rate Base – Pro Forma Phase II 3

               Schedule No. 5-B Adjustments to Rate Base – Pro Forma Phase II 3

               Schedule No. 6 Capital Structure – Pro Forma Phase II 3

               Schedule No. 7-A Operating Income Pro Forma Phase II 3

               Schedule No. 7-B Adjustments to Operating Income Pro Forma Phase II 3

               Schedule No. 8 Wastewater Rates Pro Forma Phase II 3

 

 Case Background

S&L Utilities, Inc. (S&L or Utility) is a Class C utility which is currently providing wastewater service to approximately 76 customers in Marion County.  The Utility is located in the Southwest Florida Water Management District (SWFWMD).  According to the Utility’s 2010 Annual Report, S&L reported operating revenues of $38,469 and operating expenses of $27,102.  The test period for setting rates is the historical twelve-month period ended December 31, 2010.

S&L was granted Certificate No. 334-S in 1983.  The Utility’s last staff-assisted rate case (SARC) was in 1987.  On December 22, 2010, S&L filed an application for a SARC and paid the appropriate filing fee on February 21, 2011.  The Commission has jurisdiction in this case pursuant to Sections 367.011, 367.0814, and 367.081, Florida Statutes (F.S.).

Discussion of Issues

Issue 1: 

 Is the quality of service provided by S&L satisfactory?

Recommendation: 

 The quality of service provided by S&L is marginal.  (Simpson)

Staff Analysis: 

 Pursuant to Rule 25-30.433(1), F.A.C., the Commission determines the overall quality of service provided by a utility by evaluating three separate components of wastewater operations.  These components are the quality of the utility’s product, the operating condition of the utility’s plant and facilities, and the utility’s attempt to address customer satisfaction.  Comments or complaints received by the Commission from customers are reviewed and the Utility’s compliance with the Florida Department of Environmental Protection (DEP) is also considered.

 

Quality of the Utility’s Product and Operational Condition of the Plant and Facilities

 

            In its last rate case, the quality of service provided by S&L was found to be unsatisfactory.[1]  It was noted that the plant capacity was critically overloaded and customers complained about odor and sewer backups.  The Utility subsequently doubled the plant capacity from 15,000 gallons per day (gpd) to 30,000 gpd in 1987.

 

DEP issued a domestic wastewater facility operating permit to the Utility on October 13, 2004, with a requirement that the percolation pond be routinely maintained to control vegetation growth and to maintain percolation capability by removal of solids.  The Utility has not complied with this requirement.  On February 15, 2010, DEP renewed the Utility’s wastewater facility operating permit with a condition that the percolation pond be cleaned within 90 days of the issuance of the permit.  However, to date the pond has not been cleaned. 

 

            As a result of a July 2010 DEP inspection, a Warning Letter was issued citing unauthorized discharge of effluent to a stormwater pond, unauthorized discharge of raw influent from the plant onto the ground, and failure to provide notification of unauthorized discharge of effluent to a stormwater pond.  In addition, following a December 2010 inspection, DEP issued a noncompliance letter on February 1, 2011, noting the Utility’s failure to clean the pond as previously required, as well as the Utility’s failure to submit Discharge Monitoring Reports (DMRs) and provide an annual calibration report for the effluent meter.  In addition, the letter noted that the Utility’s February 2010 DMR indicated an excessive nitrate level, the percolation pond contained excessive solids and vegetation, and the clarifier weir was not level.  The Utility made substantial repairs and improvements and, on March 18, 2011, DEP issued a short form consent order (SFCO) indicating that the corrective actions required to bring the facility into compliance with the Warning Letter had been performed.  The SFCO required the Utility to pay a fine.   The Utility requested a payment plan after the original SFCO was executed.  DEP agreed and an amended SFCO was executed on June 15, 2011 extending payments out to 12 months from execution.

 

            Staff conducted a field investigation of the service area on March 30, 2011.  The wastewater treatment plant appeared to be operating normally, but components of the system need further improvements.  According to DEP, the Utility is currently in compliance with DEP’s standards with respect to nitrate levels and the Utility is now submitting the required DMRs.  However, while the Utility has resolved some of DEP’s concerns addressed in the February 1, 2011 noncompliance letter, DEP’s concerns with respect to the pond have not been resolved.  According to DEP, the Utility will be required to clean the pond as soon as possible. The Utility indicated that it has not had sufficient funds to clean the pond.

 

            The Utility has requested that pro forma plant related to cleaning the pond, replacing pumps at the lift stations, replacing air blowers at the wastewater plant, and performing a videography of the collection system be considered.  These proposed improvements are addressed in Issues 3 and 13.

 

The Utility’s Attempt to Address Customer Satisfaction

 

A customer meeting was held on June 23, 2011, in Ocala, Florida.  Representatives of the Utility were present.  Seven customers attended and six spoke describing sewage backups, the condition of the percolation pond, wastewater treatment plant odor, and the customers’ inability to contact the Utility.  In addition, about 25 customers petitioned the Commission to deny the rate increase, stating that they cannot afford a rate increase because they live on a fixed income. 

 

Several customers complained, at the customer meeting and in writing, about chronic sewage backups.  One customer indicated that a 2007 sewage backup resulted in damage to her house.  She also noted that she had to personally pay for the remodeling because the Utility was unwilling to pay for the damage caused by the spill.  Another customer described a March 2011 sewage backup in his home.  Customers living in the vicinity of lift station #2 have had to install a sewer backflow valve, at the customer’s expense, to prevent sewage from entering their homes.  According to DEP, a 100-gallon spill occurred at lift station #1 in February 2011, due to a broken PVC fitting.

 

Two customers complained about not being able to contact the Utility.  The Utility indicated that S&L Utilities is listed in the local telephone directory and the Utility’s telephone number is on the monthly billing statements.  Further, there are signs posted at the treatment plant and lift stations that provide the telephone number of the company retained to operate the system.  The Utility also states that the operator is on call 24 hours.

 

Customers also commented about an offensive odor at the wastewater treatment plant and the Utility’s failure to clean the percolation pond.  Staff contacted DEP about odor complaints, but DEP was not aware of that problem.  Additionally, none of the complaints received by the Commission addressed the issue of odor at the wastewater plant.

 

Staff also reviewed the Commission’s Consumer Activity Tracking System (CATS) for the past three years.  While no complaints have been filed in the past three years, one complaint that was made in 2007 was recently closed after repairs were made to a lift station gravity line near a customer’s home.

Summary

 

Although the Utility’s WWTP is currently operating satisfactorily, the Utility has failed to comply with DEP requirements to clean and perform routine maintenance at the percolation pond on a timely basis and the lift stations have not been properly maintained resulting in chronic spills.  While the Utility has made some efforts to comply with DEP and has requested that pro forma plant be considered in this case to address outstanding DEP concerns, staff recommends that the quality of S&L’s product and the operational condition of the plant be considered marginal.  However, the Utility appears to address customer concerns satisfactorily.  Based on these criteria, staff recommends that the Utility’s overall quality of service should be considered marginal.

Issue 2: 

 What are the used and useful percentages of the wastewater treatment plant and the collection system?

Recommendation: 

 The wastewater treatment plant and the collection system should be considered 100 percent used and useful.  (Simpson)

Staff Analysis: 

 The Utility’s wastewater treatment system includes two lift stations, a collection system of vitrified clay pipe, and an extended aeration, activated sludge treatment plant.  The wastewater treatment plant (WWTP) is permitted by DEP at 30,000 gpd based on the three-month average daily flow.  Liquid chlorine disinfection is applied prior to the wastewater effluent flowing into the percolation pond.

 

            Pursuant to Rule 25-30.432, F.A.C., the used and useful (U&U) percentage for a WWTP is based on the plant flows, a growth allowance, less any excessive inflow and infiltration (I&I), divided by the permitted capacity of the plant.  Other factors, such as whether the service area is built out and whether the plant flows have decreased due to conservation, may also be considered.  In the last rate case, the S&L WWTP and collection system were found to be 100 percent U&U.

 

The S&L WWTP plant three-month average daily flow during the test year was 16,133 gpd.  There does not appear to be excessive infiltration and inflow in the collection system.  There are no vacant lots in the service area, therefore the system is built out.  Staff recommends that the WWTP and collection system are 100 percent U&U because the system is built out.

Issue 3: 

 What is the appropriate average test year rate base?

Recommendation: 

The appropriate average test year rate base for S&L is $27,394.  (Roberts, Simpson)

Staff Analysis: 

 S&L’s rate base was last established by Order No. 18394.[2] Staff selected a test year ended December 31, 2010, for this rate case.  A summary of each component and the adjustments follows:

Utility Plant In Service (UPIS): The Utility recorded a test year UPIS balance of $152,328. Staff’s recommended adjustments relate to recording plant additions based on invoices and to capitalize plant recorded as expenses.  Also, S&L completed certain pro forma plant additions in May and June 2011, which were outside of the test year.  The Utility replaced the pumps on its two lift stations to address customer concerns related to sewage backups.  The total cost for the pro forma plant additions is $4,426.  Staff believes the cost of the pro forma plant additions is reasonable and prudent.  Therefore, staff recommends that UPIS be increased to reflect the pro forma plant additions.  Staff has decreased UPIS by $3,321 to reflect the retirement of replaced plant associated with the pro forma additions.  Staff recommends the following adjustments to the UPIS amount.

Table 3-1

 

The net result of staff’s adjustments to UPIS represents an increase of $6,083. Staff recommends a UPIS balance of $158,411.

Land & Land Rights:  S&L recorded a test year land value of $12,955.  Staff has reduced the land value by $12,955.  In S&L’s last rate case, the land value was reduced to zero because the Utility did not hold title to the land.  Also, S&L was to obtain title or a long-term lease for the land.[3]  According to the Marion County Property Appraiser, S&L now has title to the land.  However, the land was contributed to the Utility by a quit claim deed.  Therefore, staff recommends a land value of $0.

 

Non-used and Useful Plant:  As discussed in Issue 2, S&L’s service territory is built out and staff recommends the wastewater treatment plant be considered 100 percent U&U.  Therefore, no adjustments are necessary.

 

Accumulated Depreciation:  The Utility recorded a test year accumulated depreciation balance of $134,728.  Staff has calculated accumulated depreciation using the prescribed rates set forth in Rule 25-30.140, F.A.C.  As a result, accumulated depreciation was increased by $6,700 to reflect depreciation calculated per staff.  In addition, staff increased this account by $957 to reflect an averaging adjustment and by $3,320 to reflect the removal of accumulated depreciation related to the plant retirement. Finally, staff has increased accumulated depreciation by $89 for accumulated depreciation related to pro forma plant. These adjustments result in an average accumulated depreciation balance of $137,239.

 

Working Capital Allowance:  Working capital is defined as the investor-supplied funds that are necessary to meet operating expenses.  Consistent with Rule 25-30.433(2), F.A.C., staff used the one-eighth of the operation and maintenance (O&M) expense formula approach for calculating the working capital allowance.  Applying this formula, staff recommends a working capital allowance of $6,222 (based on O&M expense of $49,773).  Working capital has been increased by $6,222 to reflect one-eighth of staff’s recommended O&M expenses.

 

Rate Base Summary:  Based on the forgoing, staff recommends that the appropriate test year average rate base is $27,394.  Rate base is shown on Schedule No. 1-A.  The related adjustments are shown on Schedule No. 1-B.

 

Issue 4: 

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

Recommendation: 

 The appropriate return on equity (ROE) is 9.93 percent with a range of 8.93 percent to 10.93 percent.  The appropriate overall rate of return is 7.83 percent.  (Roberts)

Staff Analysis: 

 The Utility’s capital structure consists of 57.5 percent common equity and 42.5 percent long-term debt.  The appropriate ROE is 9.93 percent using the Commission-approved leverage formula currently in effect.[4]  The Utility’s capital structure has been reconciled with staff’s recommended rate base.  Staff recommends an ROE of 9.93 percent, with a range of 8.93 percent to 10.93 percent, and an overall rate of return of 7.83 percent.  The ROE and overall rate of return are shown on Schedule No. 2.

Issue 5: 

 What is the appropriate amount of test year revenues?

Recommendation: 

 The appropriate test year revenues for S&L are $40,577.  (Roberts, Bruce)

Staff Analysis: 

 S&L recorded total revenues of $35,650.  This amount included $34,956 for service revenues, $294 for miscellaneous revenues, and $400 for uncategorized income.  Based on staff’s review of the test year billing units, staff has determined test year service revenues to be $40,283.  Staff has increased test year revenues by $5,327 ($40,283-$34,956) to reflect the appropriate service revenues.  In addition, staff has removed the recording of salvage value as income of $400 pursuant to Audit Finding 5.  Based on the above adjustments, staff recommends test year revenues of $40,577 ($40,283 + $294).  Test year revenues are shown on Schedule No. 3-A.

Issue 6: 

 What are the appropriate total operating expenses?

Recommendation: 

 The appropriate amount of total operating expenses for S&L is $54,955.  (Roberts)

Staff Analysis: 

 The Utility recorded operating expenses of $29,198 during the test year ended December 31, 2010.  The test year O&M expenses have been reviewed, and invoices, canceled checks, and other supporting documentation have been examined.  Staff made several adjustments to the Utility’s operating expenses, as summarized below:

Salaries and Wages Officers (610/710) – S&L did not record a salary for its president.  The Utility requested an annual salary for the Utility's president of $520 per month or $6,240 annually.  The Utility president works 35 hours a month attending to customer service and other administrative duties.  Staff believes $520 a month is a reasonable amount.  Therefore, staff recommends officer annual salary expense of $6,240.

Contractual Services - Professional (631/731) – The Utility recorded contractual services - professional expense of $4,748.  Staff decreased this expense by $708 to capitalize plant recorded as expense.  In addition, staff decreased this expense by $3,680 to reclassify the plant operator expense to contractual services - other.  Staff’s net adjustment represents a decrease of $4,388.  Therefore, staff recommends contractual services – professional expense of $360.

Contractual Services - Other (636/736) – S&L recorded contractual services - other expense of $4,248.  Staff has made several adjustments to contractual services – other expense that relate to capitalized plant additions, reclassified expenses, office manager fees and plant operator fees.  The Utility has requested an office manager fee of $1,170 per month or $14,040 annually for Mr. Clark Yandle.  Mr. Yandle works approximately 39 hours per month handling all of the primary duties of the Utility.  He is responsible for providing oversight of all contract labor, resolving customer complaints, performing all accounting functions, acting as the liaison between the Utility and all regulatory agencies, preparing and mailing customer bills, processing the customer payments, and making the deposits at the bank.  Staff believes the office manager fee is reasonable for his duties. 

During the test year, the Utility paid $5,520 for plant operator services and testing.  S&L’s test year amount for operator and testing services is not reflective of the actual cost of the services.  This amount was paid to a company which had been providing the services to S&L at a reduced cost.  On a going-forward basis, the company had indicated to the Utility that it was not going to be able to continue its services at the reduced cost.  However, S&L has changed its operator services to another company.

 The Utility has entered into a contract with U.S. Water Corporation (U.S. Water).  S&L believes U.S. Water is better suited at assisting the Utility with achieving and maintaining compliance with regulatory agencies.  The contract amount with U.S. Water is $720 per month, or $8,640 per year.  Staff believes this amount is reasonable for the duties performed by U.S. Water.  Therefore, staff has increased this account by $3,120 to reflect the appropriate plant operator fee.  Staff recommends the following adjustments:

Table 6-1

 

CONTRACTUAL SERVICES - OTHER (736)                                                             WASTEWATER
1. To capitalize plant recorded as expense to Acct. No. 360.		($1,559)
2. To capitalize plant recorded as expense to Acct. No. 365.		(1,093)
3.  To reclassify plant operator expense from miscellaneous expense.		1,840
4.  To reclassify repairs from miscellaneous expense.		2,961
5.  To reclassify lawn services from miscellaneous expense.		650
6.  To reclassify plant operator expense from contractual services – professional.		3,680
7.  To reflect management fee.		14,040
8.  To reflect pro forma adjustment for increase operator fee.		3,120
Total		$23,639

 

            Based on staff’s net adjustment of $23,639, staff recommends contractual services – other expense of $27,887.

 

Rent Expense (640/740) – The Utility recorded rent expense of $0 for the test year.  The Utility’s office is located in the personal residence of the Utility’s president.  The home is 2,100 square feet (sq. ft.)  The office space is 256 sq. ft.  Staff believes the Utility’s allocation should be based on the percentage of sq. ft. occupied by S&L, which is approximately 12 percent (256 sq. ft. /2,100 sq. ft.).  The monthly cost related to the mortgage and electricity is $872.  The Utility’s allocation of 12 percent of the monthly cost is approximately $105, monthly or $1,255 annually.  Staff recommends rent expense of $1,255.

 

Insurance Expense (655/755) – The Utility recorded insurance expense of $819.  Staff decreased this expense by $819 to remove a non-Utility insurance expense related to the personal residence of the Utility president.  During the test year, the Utility did not have general liability insurance.  S&L has obtained general liability insurance and paid the annual premium of $2,543.  Therefore, staff recommends a pro forma increase in insurance expense for the general liability policy.  Staff recommends insurance expense of $2,543.

 

Regulatory Commission Expense (665/765) – During the test year, S&L recorded $0 in this account.  Pursuant to Section 367.0816, F.S., rate case expense is amortized over a 4-year period.  The Utility is required by Rule 25-22.0407(b)(9), F.A.C., to mail notices of the customer meeting in this case to its customers.  Staff has estimated noticing expense of $67 for postage expense, $53 for printing expense, and $8 for envelopes.  S&L’s filing fee was $200.  Based on the above, total rate case expense for the filing and noticing is $328 ($67+$53+$8+$200) with a resulting 4-year amortization of $82.  Staff has increased this account by $82 ($328/4).  Staff recommends regulatory commission expense for the test year of $82.

 

Miscellaneous Expense (675/775) – S&L recorded miscellaneous expense of $7,642. Staff recommends the following adjustments.

 

 

 

Table 6-2

 

 

            Based on staff’s net adjustment of $6,279, staff recommends a miscellaneous expense balance of $1,363.

 

Operation and Maintenance Expense (O&M Summary) – Based on the above adjustments, O&M expense should be increased by $22,272.  Staff’s recommended adjustments to O&M expenses are shown on Schedule Nos. 3-A, 3-B and 3-C.

Depreciation Expense (Net of Amortization of CIAC) – The Utility did not record depreciation expense.  Staff has calculated depreciation expense using the prescribed rates set forth in Rule 25-30.140, F.A.C.  Staff’s calculated depreciation expense is $1,594.  S&L has no amortization of CIAC.  Therefore, staff recommends net depreciation expense of $1,594.

Taxes Other Than Income (TOTI) – S&L recorded a TOTI balance of $1,697. Staff has increased TOTI by $113 to reflect the appropriate property taxes.  In addition, staff has increased TOTI by $477 to reflect the appropriate payroll taxes associated with the president’s salary.  In addition, staff reclassified the license fee of $300 from miscellaneous expense to TOTI. Furthermore, staff has increased TOTI by $129 [($40,577x4.5%)-$1,826)] to reflect the appropriate RAFs for the test year revenues recommended in Issue 5.  As will be discussed in Issue 7, revenues have been increased by $19,356 to reflect the change in revenue required to cover expenses and allow an opportunity to earn the recommended return on investment.  As a result, TOTI should be increased by $871 to reflect RAFs of 4.5 percent on the change in revenues.  Therefore, staff recommends TOTI of $3,588.

Income Tax – The Utility recorded income tax of $0.  S&L is an 1120C corporation; however, the Utility has a large amount of tax-loss carry-forwards recorded on its books.  This tax-loss carry-forward is in excess of the income tax provision going-forward and is expected to continue to be so over the next few years.  In this instance, it is Commission practice to allow no provision for income tax.[5]  Therefore, staff recommends no provision for income taxes.

Operating Expenses Summary –  The application of staff’s recommended adjustments to S&L’s test year operating expenses result in operating expenses of $54,955.  Operating expenses and adjustments are shown on Schedule Nos. 3-A and 3-B, respectively.

Issue 7: 

 Should the Commission, on its own motion, utilize the operating ratio methodology as an alternative means to calculate the revenue requirement for S&L, and if so, what is the appropriate margin?

Recommendation: 

 Yes, the Commission, on its own motion, should utilize the operating ratio methodology for calculating the revenue requirement.  The margin should be 10.00 percent of O&M expenses.  (Roberts)

Staff Analysis: 

 Section 367.0814(9), F.S., provides that the Commission may, by rule, establish standards and procedures for setting rates and charges of small utilities using criteria other than those set forth in Sections 367.081(1), (2)(a) and (3), F.S.  Rule 25-30.456, F.A.C., provides, in part, an alternative to a SARC as described in Rule 25-30.455, F.A.C.  As an alternative, utilities with total gross annual operating revenues of less than $250,000 per system may petition the Commission for staff assistance in alternative rate setting.

Although S&L did not petition the Commission for alternative rate setting under the aforementioned rule, staff believes that the Commission should exercise its discretion to employ the operating ratio methodology to set rates in this case.  The operating ratio methodology is an alternative to the traditional calculation of revenue requirements.  Under this methodology, instead of applying a return on the utility’s rate base, the revenue requirement is based on the margin of S&L’s O&M expenses.  This methodology has been applied in cases where the traditional calculation of revenue requirements would not provide sufficient revenues to protect against potential variances in revenues and expenses.

By Order No. PSC-96-0357-FOF-WU, the Commission, for the first time, utilized the operating ratio methodology as an alternative means for setting rates.[6]  This order also discussed criteria related to the use of the operating ratio methodology and a guideline margin of 10 percent of O&M expense.  This criteria was applied again in Order No. PSC-97-0130-FOF-SU.[7] Most recently, the Commission approved the operating ratio methodology for setting rates in Order No. PSC-10-0167-PAA-WU.[8]  

 

 In Order No. PSC-96-0357-FOF-WU, the Commission described criteria to determine whether to utilize the operating ratio methodology for those utilities with low or non-existent rate base.  The qualifying criteria outlined in Order No. PSC-96-0357-FOF-WU, and how they apply to the Utility, is discussed below:

1)         Whether the Utility=s O&M expense exceeds rate base.  In the instant case, the rate base is substantially less than the level of O&M expense.  Based on staff’s recommendation, the adjusted rate base for the test year is $27,394, while adjusted O&M expenses are $49,773.

 

2)         Whether the Utility is expected to become a Class B utility in the foreseeable future.  According to Chapter 367.0814(9), F.S., the alternative form of regulation being considered in this case only applies to small utilities with gross annual revenues of $250,000 or less.  S&L is a Class C utility and the recommended revenue requirement of $59,932 is substantially below the threshold-level for Class B status ($200,000 per system).  The Utility=s service area has not had any growth in the last five years and is essentially built out.  Therefore, the Utility will not become a Class B utility in the foreseeable future.

 

3)         Quality of service and condition of plant.  As mentioned earlier, a condition of S&L’s permit is to have its percolation ponds cleaned.  DEP has required the Utility to complete the cleaning within have 90 days of the issuance of its permit dated, February 15, 2010.  To date, the pond cleaning has not been completed.  As discussed in Issue 1, staff is recommending the quality of service be found to be marginal.  The quality of service was found unsatisfactory in the Utility’s last rate case.[9]  S&L still has an outstanding compliance issue with DEP.  However, staff does not believe the Utility should be disqualified from the operating ratio method because it has not completed the percolation pond cleaning. 

 

4)         Whether the Utility is developer-owned.  The current Utility owner is not a developer.  The service territory is not in the early stages of growth, and there has not been any customer growth in the last five years. 

 

5)         Whether the Utility operates treatment facilities or is simply a distribution and/or collection system.  S&L operates a wastewater treatment plant and collection system.

 

            By Order Nos. PSC-96-0357-FOF-WS and PSC-97-0130-FOF-WU, the Commission determined that a margin of 10 percent shall be used unless unique circumstances justify the use of a greater or lesser margin.  The important question was not what the return percentage should be, but what level of operating margin will allow the utility to provide safe and reliable service and remain a viable entity.  The answer to this question requires a great deal of judgment based upon the particular circumstances of the utility.  In these cases, the Commission applied a 10 percent margin.

Several factors must be considered in determining the reasonableness of a margin.  First, the margin must provide sufficient revenues for the Utility to cover its interest expense.  In this case, the interest expense is approximately $1,012.  The Utility’s return on rate base results in $2,146 of operating income.

            Second, use of the operating ratio methodology rests on the contention that the principal risk to the utility resides in operating cost rather than in capital cost of the plant.  The fair return on a small rate base may not adequately compensate the utility owner for incurring the risk associated with covering the much larger operating cost.  Therefore, the margin should adequately compensate the utility owner for that risk.  Under the rate base method, the return to S&L amounts to only $2,146 which is enough to cover only a 4.3 percent variance in O&M expenses.  Staff believes $2,146 is an insufficient financial cushion.

           Third, if the return on rate base method were applied, a normal return would generate such a small level of revenues that in the event revenues or expenses vary from staff’s estimates, S&L could be left with insufficient funds to cover operating expenses.  Therefore, the margin should provide adequate revenues to protect against potential variability in revenues and expenses.  The return on rate base method would provide the Utility only $2,146.  After deducting interest expense, S&L would only have $1,134 of operating income to cover revenue and expense variances.  If the Utility’s operating expenses increase, S&L may not have the funds required for day-to-day operations.

In conclusion, staff believes the above factors show that the Utility needs a higher margin of revenues over operating expenses than the traditional return on rate base method would provide.  Therefore, in order to provide S&L with adequate cash flow to satisfy environmental requirements and to provide some assurance of safe and reliable service, staff recommends application of the operating ratio methodology at a margin of 10 percent of O&M expenses.

 

Issue 8: 

 What is the appropriate revenue requirement?

Recommendation: 

 The appropriate revenue requirement is $59,932.  (Roberts)

Staff Analysis: 

 S&L should be allowed an annual increase of $19,355 (47.70 percent).  This will allow the Utility the opportunity to recover its expenses and a 10.00 percent cushion over its O&M expenses.  The calculations are as follows:

 

Table 8-1

 

 

Issue 9: 

 What are the appropriate rates and rate structure?

Recommendation: 

  The recommended rates should be designed to produce revenue of $59,638, excluding miscellaneous service charges.  The Utility’s current wastewater rate structure which consists of a flat rate should remain unchanged.  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 within 10 days of the date of the notice.  (Bruce, Roberts)

Staff Analysis: 

 Staff’s recommended revenue requirement is $59,932.  However, after excluding miscellaneous service revenues of $294, the revenue to be recovered through rates is $56,638.  The Utility’s current rate structure consists of a flat rate structure.   The Utility’s flat rate is $44.17 per month for residential service.  The Commission’s preferred wastewater rate structure is a base facility charge (BFC)/uniform rate structure.  However, the customers purchase their water service from Marion County.   Commission policy has been to allow the use of flat rate for wastewater service in situations where metered water consumption is not possible.[10]   For this reason, staff recommends a continuation of the flat rate structure. 

 

            Since metered consumption is not available, staff recommends the revenue requirement increase be applied as an across-the-board increase to the wastewater system’s current flat rate.   To determine the appropriate percentage increase to apply to the service rates prior to filing, miscellaneous service revenues should be removed from the test year revenues.

 

Wastewater

 

1.         Total Test Year Revenues                                                 $40,577

 

2.         Less:  Miscellaneous Revenues                                   $294

 

3.         Test Year Revenues from Service Rates                            $40,283

 

4.         Revenue Increase                                                             $19,355

 

5.         % Service Rate Increase (Line 4/Line3)                              48.05%

           

Therefore, the across-the-board increase of 48.05% should be applied to the Utility’s current flat rate of $44.17.  This results in a flat rate charge of $65.39.   

 

            Furthermore, as discussed in Issue 13, staff recommends a Phase II revenue requirement associated with pro forma plant improvements.  Also, staff recommends that the Phase II revenue requirement increase of 5.03 percent be applied as an across-the-board increase to the wastewater system’s Phase I flat rate of $65.39.  This results in a flat rate charge of $68.68 after S&L has completed the pro forma additions and after Phase II rates have been implemented.

 

            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 within 10 days of the date of the notice.

 

A comparison of the Utility's rates prior to filing and staff's recommended rates is shown on Schedule No. 4.

Issue 10: 

 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 wastewater rates should be reduced as shown on Schedule No. 4, to remove rate case expense grossed-up for RAFs 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 S&L 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.  (Roberts)

Staff Analysis: 

 Section 367.0816, F.S., requires that the rates be reduced immediately following the expiration of the four-year period by the amount of the rate case expense previously included in the rates.  The reduction will reflect the removal of revenues associated with the amortization of rate case expense, the associated operating margin and the gross-up for RAFs which is $94.  Using the Utility's current revenues, expenses, capital structure and customer base, the reduction in revenues will result in the rate decrease shown on Schedule No. 4.

 

            S&L should be required to file revised tariff sheets no later than one month prior to the actual date of the required rate reduction.  The Utility also should be required to file a proposed customer notice setting forth the lower rates and the reason for the reduction.

 

If S&L 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 11: 

 Should S&L’s  request for approval of a Non-Sufficient Funds fee be granted?

Recommendation: 

 Yes.  The Utility's request for a Non-Sufficient Funds (NSF) fee should be approved.  The NSF fee should be effective on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475(1), F.A.C.  In addition, the rates should not be implemented until staff has approved the proposed customer notice.  The Utility should provide proof of the date the notice was given within 10 days of the date of the notice.  (Roberts)

Staff Analysis: 

 Section 367.091, F.S., requires that rates, charges, and customer service policies be approved by the Commission.  The Commission has authority to establish, increase, or change a rate or charge.  S&L has requested an NSF fee in accordance with Section 832.08(5), F.S. 

Staff believes that S&L should be authorized to collect an NSF fee.  Staff believes the NSF fee should be established consistent with Section 68.065, F.S., which allows for the assessment of charges for the collection of worthless checks, drafts, or orders of payment.  As currently set forth in Sections 68.065(2) and 832.08(5), F.S., the following fees may be assessed:

1)         $25, if the face value does not exceed $50, 

2)         $30, if the face value exceeds $50 but does not exceed $300,

3)         $40, if the face value exceeds $300, or

4)         five percent of the face amount of the check, whichever is greater.

Approval of an NSF fee properly assigns costs to the cost causer and is consistent with prior Commission decisions.[11]  As such, staff recommends that S&L’s proposed NSF fee be approved.  This fee should be effective on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475(1), F.A.C.

Issue 12: 

 Should S&L be authorized to collect late payment fees, and if so, what are the appropriate charges?

Recommendation: 

 Yes.  S&L should be authorized to collect a $5 late fee.  The late fee should be effective on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475(1), F.A.C.  The revised tariff sheets should be approved upon staff's verification that the tariffs are consistent with the Commission's decision.  If revised tariff sheets are filed and approved, the late payment fee should become effective for connections made on or after the stamped approval date of the revised tariff sheets, if no protest is filed and provided customers have been noticed.  (Roberts)

Staff Analysis: 

 S&L is not currently authorized to collect late payment charges.  The Utility requested to implement a late payment charge.  Staff believes that the purpose of a late payment charge is not only to provide an incentive for customers to make timely payment, thereby reducing the number of delinquent accounts, but also to place the cost burden of processing such delinquencies upon those who are the cost causers.

In the past, late payment fee requests have been handled on a case-by-case basis.  The Commission has approved late fees in the amount of $5.[12]  Presently, Commission rules provide that late payers may be required by the utility to provide an additional deposit.  However, the Commission found that there is no further incentive for either delinquent or late paying customers to pay their bills on time after the additional deposit.[13]  In that same Order, the Commission also found that the cost causer should pay the additional cost incurred by the utility due to late payments, rather than the general body of the utility's rate payers.  Staff believes that the goal of allowing late fees to be charged by a utility is two-fold: first, to encourage current and future customers to pay their bills on time; and second, if payment is not made on time, to insure that the cost associated with the late payments is not passed on to the customers who do pay on time.

Staff believes there is a need for this incentive.  As noted above, a late payment charge of $5 is consistent with prior Commission practice and orders.  A late payment charge of less than $5 would not allow S&L to recover its costs of processing delinquent accounts, nor would it send the appropriate signal to delinquent payers.  In the majority of cases, the Commission has approved a late fee charge of $5.  The utilities that have higher charges have provided adequate documentation in support of those higher fees.  Staff believes that $5 is a reasonable fee for S&L. 

Therefore, staff recommends that a $5 late payment should be approved.  The late fee should be effective on or after the stamped approval date on the tariff sheets pursuant to Rule 25-30.475(1), F.A.C.  The revised tariff sheets should be approved upon staff's verification that the tariffs are consistent with the Commission's decision.  If revised tariff sheets are filed and approved pursuant to Rule 25-30.475, F.A.C., the late payment charge should become effective on the stamped approval date of the tariff sheets, if no protest is filed and provided customers have been properly noticed.

 

Issue 13: 

 Should the Commission approve pro forma plant and expenses for the Utility, and if so, what is the appropriate return on equity, overall rate of return, revenue requirement and date for implementing the new rates?

Recommendation: 

 Yes. The Commission should approve a Phase II revenue requirement associated with pro forma items.  S&L’s appropriate ROE should be 11.16 percent with a range of 10.16 to 12.16 percent.  The appropriate overall rate of return is 7.17 percent.  The Utility’s Phase II revenue requirement is $62,929 which equates to an increase of 5.00 percent over the Phase I revenue requirement.  S&L should complete the pro forma items within 12 months of the issuance of the consummating order.  The Utility should be allowed to implement the resulting rates once the pro forma items have been completed and documentation provided showing that all improvements have been made to the system.  Once verified, the rates should be effective for service rendered on or after the stamped approval date on the tariff sheets, pursuant to Rule 25-30.475(1), F.A.C.  The rates should not be implemented until notice has been received by the customers.  S&L should provide proof of the date notice was given within 10 days of the date of the notice.  If the Utility encounters any unforeseen events that will impede the completion of the pro forma items, the Utility should immediately notify the Commission in writing.  (Simpson, Roberts)

Staff Analysis: 

 The Utility requested recognition of additional pro forma plant items that it intends to complete.  The following is a chart summarizing the pro forma plant items, the cost, and staff’s recommended treatment:

 

Table 13-1

 

As discussed in Issue 1, S&L was required by DEP to clean its percolation pond as a condition for renewal of its wastewater operating permit.  The Utility requested to recover the cost associated with cleaning the percolation pond, replacing air blowers at the wastewater plant, and having a videography of the collection system.  Staff believes S&L’s proposed pro forma plant items are reasonable and prudent because it would allow the Utility to improve its quality of service. The Utility should be required to submit a copy of the final invoices and cancelled checks for all pro forma plant items.

Staff is recommending a Phase II revenue requirement associated with the pro forma plant items for a number of reasons.  First, it assures that the pro forma items are completed prior to the Utility’s recovery of the investment in rates.  In the past, there have been instances when the Commission approved revenue requirements associated with pro forma items only to have the utility in question fail to complete the pro forma investments.  In addition, addressing the pro forma items in a single case saves additional rate case expense to the customers because the Utility would not need to file another rate case or limited proceeding to seek recovery for them.  The Commission has approved a Phase-In approach in Docket Nos. 080668-SU and 090072-WU.[14]

The Utility’s Phase II revenue requirement should be $62,929.  Phase II rate base and adjustments are shown on Schedule Nos. 5-A and 5-B, respectively.  The capital structure for Phase II is shown on Schedule No. 6.  The revenue requirement and adjustments are shown on Schedule Nos. 7-A and 7-B, respectively.  The resulting rates are shown on Schedule No. 8.

S&L should be required to complete the pro forma items within 12 months of the issuance of the consummating order.  The Utility should also be required to submit a copy of the final invoices and cancelled checks for all pro forma plant items within 15 days of the completion.  The Utility should be allowed to implement the above rates once all pro forma items have been completed and documentation provided showing that the improvements have been made.  Once verified, the 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.  The rates should not be implemented until notice has been received by the customers.  S&L should provide proof of the date notice was given within 10 days of the date of the notice.  If the Utility encounters any unforeseen events that will impede the completion of the pro forma items, the Utility should immediately notify the Commission in writing.

 

 

Issue 14: 

 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 the Utility?

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 the Utility.  S&L 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 temporary rates should not be implemented until staff has approved the proposed notice, and the notice has been received by the customers.  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 the Utility should be subject to the refund provisions discussed below in the staff analysis.  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.  (Roberts)

Staff Analysis: 

 This recommendation proposes an increase in rates.  A timely protest might delay what may be a justified rate increase resulting in an unrecoverable loss of revenue to the Utility.  Therefore, pursuant to Section 367.0814(7), F.S., in the event of a protest filed by a party other than the Utility, staff recommends that the recommended rates be approved as temporary rates.  S&L 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 temporary rates should not be implemented until staff has approved the proposed notice, and the notice has been received by the customers.  The recommended rates collected by the Utility should be subject to the refund provisions discussed below. 

 

The Utility should be authorized to collect the temporary rates upon staff’s approval of an appropriate security for the potential refund and the proposed customer notice.  Security should be in the form of a bond or letter of credit in the amount of $14,538.  Alternatively, the Utility could establish an escrow agreement with an independent financial institution.

 

If the Utility chooses a bond as security, the bond should contain wording to the effect that it will be terminated only under the following conditions:

 

1)                  The Commission approves the rate increase; or

 

2)                  If the Commission denies the increase, the Utility shall refund the amount collected that is attributable to the increase.

 

            If the Utility chooses a letter of credit as a security, it should contain the following conditions:

 

1)         The letter of credit is irrevocable for the period it is in effect, and,

 

3)                  The letter of credit will be in effect until a final Commission order is rendered, either approving or denying the rate increase.

 

            If security is provided through an escrow agreement, the following conditions should be part of the agreement:

 

1)         No monies in the escrow account may be withdrawn by the Utility without the express approval of the Commission

 

2)         The escrow account shall be an interest bearing account;

 

3)         If a refund to the customers is required, all interest earned by the escrow account shall be distributed to the customers;

 

4)         If a refund to the customers is not required, the interest earned by the escrow account shall revert to the Utility;

 

5)         All information on the escrow account shall be available from the holder of the escrow account to a Commission representative at all times;

 

6)         The amount of revenue subject to refund shall be deposited in the escrow account within seven days of receipt;

 

7)                  This escrow account is established by the direction of the Florida Public Service Commission for the purpose(s) set forth in its order requiring such account.  Pursuant to Cosentino v. Elson, 263 So. 2d 253 (Fla. 3d DCA 1972), escrow accounts are not subject to garnishments;

 

8)                  The Commission Clerk must be a signatory to the escrow agreement; and

 

9)                  The account must specify by whom and on whose behalf such monies were paid.

 

In no instance should the maintenance and administrative costs associated with the refund be borne by the customers.  These costs are the responsibility of, and should be borne by, the Utility.  Irrespective of the form of security chosen by the Utility, an account of all monies received as a result of the rate increase should be maintained by the Utility.  If a refund is ultimately required, it should be paid with interest calculated pursuant to Rule 25-30.360(4), F.A.C. 

 

The Utility should maintain a record of the amount of the bond, and the amount of revenues that are subject to refund.  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 15: 

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

Recommendation: 

 Yes. To ensure that the Utility adjusts its books in accordance with the Commission’s decision, S&L should provide proof, within 90 days of the final order in this docket, that the adjustments for all applicable NARUC USOA primary accounts have been made.  (Roberts)

Staff Analysis: 

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

Issue 16: 

 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 should 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.  Also, the docket should remain open to allow staff to verify that the pro forma items have been completed and the Phase II rates properly implemented.  Once these actions are complete, this docket should be closed administratively.  (Robinson)   

Staff Analysis: 

 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 should 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.  Also, the docket should remain open to allow staff to verify that the pro forma items have been completed and the Phase II rates properly implemented.  Once these actions are complete, this docket should be closed administratively.

 

S & L UTILITIES, INC.				SCHEDULE NO. 1-A
TEST YEAR ENDED 12/31/10			DOCKET NO. 100471-SU
SCHEDULE OF WASTEWATER RATE BASE
		BALANCE	STAFF		BALANCE
		PER	ADJUSTMENTS		PER
DESCRIPTION		UTILITY	TO UTIL. BAL.		STAFF
UTILITY PLANT IN SERVICE		$152,328	$6,083		$158,411
LAND & LAND RIGHTS		12,955	(12,955)		0
NON-USED AND USEFUL COMPONENTS		0	0		0
CIAC		(100,088)	0		(100,088)
ACCUMULATED DEPRECIATION		(134,728)	(2,511)		(137,239)
AMORTIZATION OF CIAC		100,088	0		100,088
WORKING CAPITAL ALLOWANCE		0	6,222		6,222
WASTEWATER RATE BASE		$30,555	($3,161)		$27,394

 

 

 

 

	S & L UTILITIES, INC.						SCHEDULE NO. 3-A
	TEST YEAR ENDED  12/31/10						DOCKET NO. 100471-SU
	SCHEDULE OF WASTEWATER OPERATING INCOME
						STAFF	ADJUST.
			TEST YEAR		STAFF	ADJUSTED	FOR	REVENUE
			PER UTILITY		ADJUSTMENTS	TEST YEAR	INCREASE	REQUIREMENT
1.	OPERATING REVENUES		$35,650		$4,927	$40,577	$19,355	$59,932
							47.70%
	OPERATING EXPENSES:
2.	OPERATION & MAINTENANCE		$27,501		$22,272	$49,773	0	$49,773
3.	DEPRECIATION (NET)		0		1,594	1,594	0	1,594
4.	AMORTIZATION		0		0	0	0	0
5.	TAXES OTHER THAN INCOME		1,697		1,020	2,717	871	3,588
6.	INCOME TAXES		0		0	0	0	0
7.	TOTAL OPERATING EXPENSES		$29,198		$24,886	$54,084	$871	$54,955
8.	OPERATING INCOME/(LOSS)		$6,452			($13,507)		$4,977
9.	WASTEWATER RATE BASE		$30,555			$27,394		$27,394
10.	OPERATING MARGIN*		21.12%			-49.31%		10.00%
	(*UTILITY AND STAFF TEST YEAR ARE BASED ON RATE OF RETURN METHOD)

 

 

 

 

S & L UTILITIES, INC.			SCHEDULE NO. 3-C
TEST YEAR ENDED  12/31/10			DOCKET NO. 100471-SU
ANALYSIS OF WASTEWATER OPERATION AND MAINTENANCE EXPENSE
		TOTAL	STAFF	TOTAL
		PER	ADJUST-	PER
		UTILITY	MENT	STAFF
(701) SALARIES AND WAGES - EMPLOYEES		$0	$0	$0
(703) SALARIES AND WAGES - OFFICERS		0	6,240	6,240
(704) EMPLOYEE PENSIONS AND BENEFITS		0	0	0
(710) PURCHASED SEWAGE TREATMENT		0	0	0
(711) SLUDGE REMOVAL EXPENSE		1,800	0	1,800
(715) PURCHASED POWER		6,758	0	6,758
(716) FUEL FOR POWER PRODUCTION		105	0	105
(718) CHEMICALS		1,381	0	1,381
(720) MATERIALS AND SUPPLIES		0	0	0
(730) CONTRACTUAL SERVICES - BILLING		0	0	0
(731) CONTRACTUAL SERVICES - PROFESSIONAL		4,748	(4,388)	360
(735) CONTRACTUAL SERVICES - TESTING		0	0	0
(736) CONTRACTUAL SERVICES - OTHER		4,248	23,639	27,887
(740) RENTS		0	1,255	1,255
(750) TRANSPORTATION EXPENSE		0	0	0
(755) INSURANCE EXPENSE		819	1,724	2,542
(765) REGULATORY COMMISSION EXPENSES		0	82	82
(770) BAD DEBT EXPENSE		0	0	0
(775) MISCELLANEOUS EXPENSES		7,642	(6,279)	1,363
		$27,501	$22,272	$49,773

 

 

S & L UTILITIES, INC.			SCHEDULE NO. 4
TEST YEAR ENDED 12/31/10		DOCKET NO. 100471-SU
MONTHLY WASTEWATER RATES
	UTILITY'S	STAFF	MONTHLY
	EXISTING	RECOMMENDED	RATE
	RATES	RATES	REDUCTION
Residential Service
Flat Rate	$44.17	$65.39	$0.09

 

 

S & L UTILITIES, INC.				SCHEDULE NO. 5-A
TEST YEAR ENDED  12/31/10			DOCKET NO. 100471-SU
SCHEDULE OF WASTEWATER RATE BASE (PHASE II)
		BALANCE	STAFF	BALANCE
		PER	ADJUSTMENTS	PER
DESCRIPTION		UTILITY	TO UTIL. BAL.	STAFF
UTILITY PLANT IN SERVICE		$158,411	$55,997	$214,408
LAND & LAND RIGHTS		0	0	0
NON-USED AND USEFUL COMPONENTS		0	0	0
CIAC		(100,088)	0	(100,088)
ACCUMULATED DEPRECIATION		(137,239)	(965)	(138,204)
AMORTIZATION OF CIAC		100,088	0	100,088
WORKING CAPITAL ALLOWANCE		6,222	0	6,222
WASTEWATER RATE BASE		$27,394	$55,032	$82,425

 

 

 

 

	S & L UTILITIES, INC.							SCHEDULE NO. 7-A
	TEST YEAR ENDED  12/31/10						DOCKET NO. 100471-SU
	SCHEDULE OF WASTEWATER OPERATING INCOME
						STAFF	ADJUST.
			TEST YEAR		STAFF	ADJUSTED	FOR	REVENUE
			PER UTILITY		ADJUSTMENTS	TEST YEAR	INCREASE	REQUIREMENT
1.	OPERATING REVENUES		$59,932		$0	$59,932	$2,997	$62,929
							5.00%
	OPERATING EXPENSES:
2.	OPERATION & MAINTENANCE		$49,773		$0	$49,773	0	$49,773
3.	DEPRECIATION (NET)		1,594		1,930	3,523	0	3,523
4.	AMORTIZATION		0		0	0	0	0
5.	TAXES OTHER THAN INCOME		3,588		0	3,588	135	3,723
6.	INCOME TAXES		0		0	0	0	0
7.	TOTAL OPERATING EXPENSES		$54,955		$1,930	$56,885	$135	$57,019
8.	OPERATING INCOME/(LOSS)		$4,977			$3,048		$5,910
9.	WASTEWATER RATE BASE		$27,394			$82,425		$82,425
10.	RATE OF RETURN		10.00%			3.70%		7.17%