DATE:	April 26, 2012
TO:	Office of Commission Clerk (Cole)
FROM:	Office of the General Counsel (Jaeger) Division of Economic Regulation (Fletcher, Lingo, Maurey)
RE:	Docket No. 100330-WS – Application for increase in water/wastewater rates in Alachua, Brevard, DeSoto, Hardee, Highlands, Lake, Lee, Marion, Orange, Palm Beach, Pasco, Polk, Putnam, Seminole, Sumter, Volusia, and Washington Counties by Aqua Utilities Florida, Inc.
AGENDA:	05/08/12 – Regular Agenda – Motion for Reconsideration - Participation is at discretion of the Commission
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Brisé
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\GCL\WP\100330.RCM.DOC

 

Case Background

On September 1, 2010, Aqua Utilities Florida, Inc. (AUF or Utility) filed an application for approval of an increase in rates for both its water and wastewater operations.  The Utility requested that this rate application be processed using the Proposed Agency Action (PAA) procedures.

Pending the Commission’s decision on final rates, AUF requested interim rates.  By Order No. PSC-10-0707-FOF-WS (Interim Rate Order), issued November 29, 2010, in this docket, the Commission approved an interim revenue requirement designed to generate annual water revenue of $9,062,892, an increase of $1,125,588[1] or 13.19 percent, and wastewater revenue of $5,391,338, an increase of $600,215[2] or 11.81 percent.

During the processing of AUF’s requested rate increase, the Office of the Public Counsel (OPC), the Office of the Attorney General (AG), YES Companies, LLC d/b/a Arredondo Farms (YES), Mr. David L. Bussey (Mr. Bussey), Ms. Lucy Wambsgan (Ms. Wambsgan), and Pasco County intervened in this docket.  However, Mr. Bussey and Ms. Wambsgan subsequently withdrew their intervention.

The original five-month statutory deadline for the Commission to vote on its PAA action was March 14, 2011.  By letter dated November 18, 2010, AUF waived the time to vote through May 24, 2011, and the Commission voted on the Utility’s requested rate increase on that date.  The Commission issued Order No. PSC-11-0256-PAA-WS (PAA Order)[3] on June 13, 2011.  Timely protests and cross-petitions of portions of the PAA Order were filed.

Pending the resolution of these protests, AUF provided notice of implementation of PAA rates subject to refund with interest on July 1, 2011.  By Order No. PSC-11-0336-PCO-WS, issued August 10, 2011, the Commission acknowledged the implementation of the PAA rates.

 

            Pursuant to Order No. PSC-11-0309-PCO-WS (Order Establishing Procedure), issued July 25, 2011, the protests and cross-petitions of the PAA Order were scheduled for formal hearing.[4]  Ten service hearings were held throughout the state,[5] and the technical hearing was held on November 29 and 30, and December 1 and 7, 2011.

 

            Subsequent to the close of the technical hearing, all parties filed briefs.  Thereafter, on February 14, 2012, upon consideration of the evidentiary record, the post-hearing briefs of the parties, and staff’s recommendation, the Commission issued Order No. PSC-12-0102-FOF-WS (Final Order), granting AUF an increase in its rates and charges to generate $3.8 million in additional gross annual revenues.

 

            On March 20, 2012, AUF timely filed a Motion for Reconsideration (Motion), pointing out several perceived scrivener’s errors and mistakes of fact or law in the Final Order.  AUF did not request oral argument on its motion.  Also, the Intervenors did not file a response to AUF’s Motion.  Staff notes that pursuant to Rule 25-22.0022(2), Florida Administrative Code, the Commission has the discretion to hear oral argument on all matters over which it presides.

           

            Also, on April 17, 2012, in addressing a customer complaint, staff discovered an apparent allocation error of the revenue requirement within Wastewater Rate Band 2 in the Final Order.  This apparent allocation error caused the rates in Wastewater Rate Band 2 to be improperly calculated with some wastewater customers being charged more than was appropriate and others being charged less.

 

This recommendation addresses AUF’s Motion for Reconsideration and the improper allocation of the revenue requirement within Wastewater Rate Band 2, with the resulting incorrect rates.  The Commission has jurisdiction over the matter pursuant to Sections 367.081 and 367.082, Florida Statutes (F.S.).

 

Discussion of Issues

Issue 1: 

  Should the Commission grant Aqua Utilities Florida, Inc.’s (AUF's) Motion for Reconsideration of Order No. PSC-12-0102-FOF-WS (Final Order)?

Recommendation: 

 The Motion should be granted in its entirety as set forth in the body of this recommendation.  Further, on its own motion, the Commission should correct the additional noted scrivener’s errors and approve the recalculation of the four-year rate reduction for amortization of rate case expense as indicated in the staff analysis.  Except for the additional correction of an allocation error recommended by staff in Issue 2, all other aspects of the Final Order should be reaffirmed.  (Jaeger, Fletcher, Lingo)

Staff Analysis:

Standard of Review

 

The standard of review in a motion for reconsideration is whether the motion identifies a mistake of fact or law, or a point of fact or law which was overlooked or which the Commission failed to consider in rendering its Final Order.  Stewart Bonded Warehouse, Inc. v. Bevis, 294 So. 2d 315 (Fla. 1974); Diamond Cab Co. v. King, 146 So. 2d 889 (Fla. 1962); and Pingree v. Quaintance, 394 So. 2d 161 (Fla. 1st DCA 1981).  In a motion for reconsideration, it is not appropriate to reargue matters that have already been considered.  Sherwood v. State, 111 So. 2d 96 (Fla. 3d DCA 1959), citing State ex. rel. Jaytex Realty Co. v. Green, 105 So. 2d 817 (Fla. 1st DCA 1958).  For the convenience of the Commission, this recommendation follows the sequence of perceived errors raised by AUF in its Motion for Reconsideration.

 

Discussion

 

            As noted, AUF timely filed its Motion for Reconsideration of portions of Order No. PSC-12-0102-FOF-WS (Final Order).  In its Motion, it listed the following perceived errors, miscalculations, mistakes of fact or law, and scrivener’s errors:

 

I.          Rate Reduction for Expiration of Amortization of Prior Rate Case Expense

            A. Corrections Needed Relating to the “Across-the Board Decrease” for          New Water Band 2; and

            B. Additional Corrections Needed for the “Across-the-Board Decrease”          for New Water Bands 1 & 2, and New Wastewater Rate Band 2

II.         Regulatory Asset for the Interim Deferral

            A. New Water Rate Band 2;

                  B. New Wastewater Rate Band 2

III.       Scrivener’s Error in Interim Refund Calculation

IV.       PAA Refund Calculation Error

V.        Repression Adjustment to New Water Rate Band 2

VI.       Post-Repression Revenue Requirement

VII.      Miscellaneous Typographical Errors

 

            The Intervenors did not file any responses to AUF’s Motion.  Each of the above-listed categories will be set out below with a brief summary of the Utility’s Argument and Staff’s Analysis and Conclusion following.

 

I. Rate Reduction for Expiration of Amortization of Prior Rate Case Expense

 

A. Corrections Needed Relating to the “Across-the Board Decrease” for New Water Band 2

 

            1. AUF’s Argument

 

            AUF notes that the table appearing on page 164 of the Final Order sets forth the “Across-the Board Decrease” percentages that would apply to the new rate bands starting on April 1, 2013, when the four-year amortization period expires.  In making those calculations, AUF notes that the Commission used the annual revenue requirement for each of the “Old” water and wastewater (WW) rate bands.  However, for the “New” Water Rate Band 2, AUF states that the Commission inadvertently used the revenue requirement for “Old” Wastewater Rate Band 1 as the entry for “Old” Water Band 4.  AUF states that the correct revenue requirement for “Old Water Rate Band 4” is $4,807,804 and not $462,187 (see Water Rate Band 4, Schedule 4-A, on page 224 of Final Order).  With this correction, AUF states that the “Across-the Board Decrease” percentage for New Water Rate Band 2 would be 2.33 percent and not 5.89 percent.

 

            2. Staff Analysis and Conclusion

            Staff agrees with the Utility.  The table on page 164 should be corrected to show an approved revenue requirement of $4,807,804 for Old Water Rate Band 4.  The figure of $462,187 is the revenue requirement for the Old Wastewater Rate Band 1 (and now New Wastewater Rate Band 1), which was inadvertently left blank.  Further, the revenue requirements for Old Wastewater Rate Bands 2 and 3 were inadvertently left blank and should have reflected revenue requirements of $3,572,176 and $894,944, respectively.  The above-noted errors were the result of cell formula reference errors in staff’s Excel spreadsheets, and as such, these scrivener errors should be corrected.  With this first correction, the across-the-board decrease percentage for New Water Rate Band 2 would be 2.33 percent and not 5.89 percent.  Further, in Section B, immediately below, AUF argues that a second correction is required which would further reduce the 2.33 percent figure.  AUF notes that in calculating the appropriate rate case expense reductions, the Commission improperly excluded the revenue requirements from the Breeze Hill, Fairways, and Peace River systems.  This argument is discussed immediately below.

 

B. Additional Corrections Needed for the “Across-the-Board Decrease” for New Water Bands 1 & 2, and New Wastewater Rate Band 2

 

            1. AUF’s Argument

 

            AUF notes that the approved capband rate structure contemplates a uniform rate structure within each band.  AUF argues that to calculate the appropriate rates, the revenue requirements for all individual systems within a band are totaled to create an aggregate revenue requirement for the band.  Further, AUF states that the annual rate case expense amortization amounts for all systems within each rate band must be included in the calculation of each band’s “Across-the Board Decrease” percentage, and then included in Tables 25 and 26.  AUF argues that in the table on page 164:

 

1.      The revenue requirement for the Fairways System was not included in New Water Rate Band 1;

2.      The revenue requirements for the Breeze Hill and Peace River Systems were not included in New Water Rate Band 2; and

3.      The revenue requirements for the Breeze Hill, Fairways, and Peace River Systems were not included in New Wastewater Rate Band 2.

 

            To properly calculate the “Across-the-Board Decrease” percentage, AUF argues that the revenue requirements for these three systems must be included.  AUF created its own schedule to show the proper calculation of the “Across-the-Board Decrease” percentage as shown in Attachment A.

 

            2. Staff’s Analysis and Conclusion

 

            In calculating the appropriate across-the-board decrease for amortization of rate case expense, the Final Order only included the Commission-approved revenue requirements for the old water and wastewater rate bands.  Because the stand-alone systems were consolidated with the old water and wastewater rate bands to form new bands, staff agrees with AUF that the Commission-approved revenue requirements for the three new systems that had stand-alone rates when this rate case was filed should be included when calculating the across-the-board decrease percentages as reflected in Table 1-1 below.  Table 1-1 should replace the table found on page 164 of the Final Order.

 

Table 1-1

 

           

            Based on the above across-the-board decreases, the rate reductions effective as of March 31, 2013, for the rate case expense approved in Docket No. 080121-WS for water and wastewater that were shown on Final Order Tables 25 and 26, respectively, should be replaced by Tables 1-2 and 1-3 below.

Table 1-2

 

Table 1-3

 

 

 

II. Regulatory Asset for the Interim Deferral

 

            Pursuant to Order No. PSC-10-0707-FOF-WS, AUF was allowed to defer recovery of a portion of the interim rate increase to which AUF was entitled for certain systems.  These deferred interim water and wastewater revenues resulted in “regulatory assets” to be recovered by AUF over a two-year period once final rates were determined.  At the expiration of the two-year period, rates were to “be reduced across-the-board to remove the respective grossed-up annual amortization of the regulatory assets.”

 

A. New Water Rate Band 2

 

            1 AUF’s Argument

 

            AUF notes that “Old” Water Rate Bands 2, 3, and 4, along with the Breeze Hill and Peace River water systems were all placed in the “New” Water Rate Band 2.  Therefore, pursuant to the capband methodology, these systems were supposed to have uniform rates both now and in the future.  However, AUF notes that Schedules 5-A, on pages 211 and 219, show that there would be no 2-year rate reduction for “Old” Water Rate Bands 2 and 3.  Further, Schedules 5-A on pages 227, 235, and 251 of the Final Order have three different amounts for the two-year rate reductions for “Old” Water Rate Band 4, Breeze Hill, and Peace River.  AUF argues that this is not what is intended by the capband rate structure, and that all the systems in New Water Rate Band 2 should have the same aggregate two-year rate reduction.

 

            2. Staff’s Analysis and Conclusion

            Staff agrees with AUF.  In the initial calculations, staff had individual percentage reductions for those bands and stand-alone systems that were due recovery of a regulatory asset.  The effect of applying individual reductions would be inconsistent with the Commission’s decision to consolidate certain bands and stand-alone systems.  Dividing the aggregate regulatory assets of $228,294 for the New Water Rate Band 2 by its aggregate revenue requirement, yields a composite across-the-board percentage reduction of 3.20 percent that should be applied to the Commission-approved New Water Rate Band 2 Rates to reflect the uniform 2-year rate reduction.  Staff recommends that the correct 2-year rate reductions for New Water Rate Band 2 are reflected on Schedules 5-A (attached to this recommendation), respectively, for the Old Water Rate Bands 2, 3, 4, as well as the stand-alone Breeze Hill and Peace River water systems. 

            Although not included in its Motion for Reconsideration, staff recommends that a similar correction should be made for the 4-year rate reduction associated with the amortization of rate case expense approved for this docket.  Accordingly, staff recommends that the correct 4-year rate reductions for New Water Rate Bands 1 (Old Water Rate Band 1 and Fairways) and 2 (Old Water Rate Bands 2 and 3, as well as the Breeze Hill and Peace River systems) are reflected on Schedules 5-A.

 

 

 

B. New Wastewater Rate Band 2

 

            1. AUF’s Argument

 

            AUF notes that “Old” Wastewater Rate Bands 2, 3, and 4, along with the Breeze Hill, Fairways, and Peace River wastewater systems were all placed in the “New” Wastewater Rate Band 2.  Therefore, pursuant to the capband methodology, these systems were supposed to have uniform rates both now and in the future.  However, AUF notes that Schedules 5-B on pages 212, 220, 236, 244, and 252 of the Final Order show that there would be no 2-year rate reduction for the “Old” Wastewater Rate Band 2, Breeze Hill, Fairways, and Peace River systems.  However, Schedule 5-B on page 220 of the Final Order shows a two-year rate reduction for “Old” Wastewater Rate Band 3.  AUF argues that this is not what is intended by the capband rate structure, and that all the systems in New Wastewater Rate Band 2 should have the same aggregate two-year rate reduction.

 

            2. Staff’s Analysis and Conclusion

            Staff agrees with AUF.  In the initial calculations, staff had individual percentage reductions for those bands and stand-alone systems that were due recovery of a regulatory asset.  The effect of applying individual reductions would be inconsistent with the Commission’s decision to consolidate certain bands and stand-alone systems.  Dividing the aggregate regulatory assets of $124,289 for the New Wastewater Rate Band 2 by its aggregate revenue requirement yields a composite across-the-board percentage of 2.66 percent that should be applied to the Commission-approved New Wastewater Rate Band 2 Rates to reflect the uniform 2-year rate reduction.  Staff recommends that the correct 2-year rate reductions for the New Wastewater Band 2 are reflected on Schedules 5-B (attached to this recommendation), respectively, for the Old Water Rate Bands 2 and 3, as well as the stand-alone Breeze Hill, Fairways, and Peace River wastewater systems.

            Although not included in its Motion for Reconsideration, staff recommends that a similar correction should be made for the 4-year rate reduction associated with the amortization of rate case expense approved for this docket.  Accordingly, staff recommends that the correct 4-year rate reductions for the New Wastewater Rate Band 2 are reflected on Schedules 5-B, respectively, for the Old Water Rate Bands 2 and 3, as well as the Breeze Hill, Fairways, and Peace River wastewater systems.

III. Scrivener’s Error in Interim Refund Calculation

 

            1. AUF’s Argument

 

            AUF notes that in calculating whether a refund of interim rates is required, the Commission calculates the interim revenue requirement excluding the rate case expense that may be incurred for the current rate proceeding.  However, AUF notes that the Final Order reflects a reduction of $727,528 for the interim revenue requirement on Table 27 in the “RAF Grossed RCE” column, when the amount of annual rate case expense allowed in this docket was only $352,261 ($1,409,043 divided by 4).  Grossing up for regulatory assessment fees (RAFs), AUF calculates that the total RAF Grossed RCE amount on Table 27 should be $368,860, and not the $727,528 shown.  Therefore, AUF argues that this inadvertent error overstates the Commission’s refund calculation by approximately $358,668.

 

            AUF further notes that the amount of prior rate case expense amortization approved by the Commission in Docket No. 080121-WS was $342,528, and when grossed up for RAFs would approximate the $358,668 erroneous figure (excludes rate case expense attributable to Chuluota).  AUF argues that the rate case expense from the prior rate case were “actual expenses” incurred during the interim collection period, and that this amount should not have been removed from the calculation of the appropriate interim rates.  AUF concludes that this error must be corrected or the Final Order would be confiscatory and prevent AUF from recovering rate case expense approved by the Commission in the last rate case.

 

            2. Staff’s Analysis and Conclusion

            Staff agrees with AUF.  In staff’s initial calculations, staff had excluded the Commission-approved rate case expense in Docket No. 080121-WS.  Staff agrees with AUF that the rate case expense from the last case is an actual expense incurred during the interim collection period and should not have been excluded.  Based on the revised calculations, the total grossed-up rate case expense that should be excluded is $363,695.  Based on the above, the following table reflects staff’s recommended interim refunds.

Table 1-4

 

IV. PAA Refund Calculation Error

 

            1. AUF’s Argument

 

            AUF notes that on pages 168-169 of the Final Order, the Commission described the PAA Refund calculation as follows: “To establish the proper refund amount, our staff calculated a revised revenue requirement for this period using the same data to establish final rates. . . . The incremental rate case expense above that which was embedded in the PAA rates was excluded because it was not an actual expense during the collection period.”  AUF argues that in actuality, the entire amount of rate case expense for this docket was removed, and not just the incremental portion.  Therefore, AUF argues that the language is inconsistent with the actual PAA refund calculation performed, and the language should be corrected to accurately describe the actual calculations performed.

 

            2. Staff’s Analysis and Conclusion

            Staff agrees with AUF.  To determine the appropriate PAA refund, all rate case expense from the current case was excluded, and the order language should be revised to reflect such.  This correction is to provide clarity to the Final Order, and does not affect any dollar amounts.

V. Repression Adjustment to New Water Rate Band 2

 

            1. AUF’s Argument

 

            AUF notes that on page 137 of the Final Order, the Commission states that “no repression is expected to occur in water Rate Band 2, and, as a result, no repression will be applied to that rate band in Table 24.”  However, AUF notes that Table 24 on page 148 shows consumption will be repressed by 7,900 kgals for an expense adjustment of $15,622.  AUF requests that this inconsistency be reconciled.

 

            2. Staff’s Analysis and Conclusion

 

            Staff agrees with AUF.  Staff notes that in the original recommendation, staff was recommending three water rate bands, with a repression adjustment for proposed Water Rate Band 3.  This proposed Water Rate Band 3 was required, because with staff’s recommended revenue requirement, the systems in that band would have surpassed the $12.50 subsidy limit if they had been combined with the proposed Water Rate Band 2 systems.  However, with the Commission’s reductions to staff’s proposed revenue requirement, it was determined that the systems in the proposed Water Rate Band 3 could be combined with the systems in the proposed Water Rate Band 2 without violating the subsidy limits.  Therefore the language on page 137 should have been modified or deleted to reflect that there were now systems in Water Rate Band 2 that would have repression.  Table 24 in the Final Order is correct, and the aggregate repression adjustment in that table is as shown.

 

 

VI. Post-Repression Revenue Requirement

 

            1. AUF’s Argument

 

            On page 149 of the Final Order, AUF notes that the post-repression revenue requirement, excluding miscellaneous service charges, was listed as $10,063,856 for water and $5,764,808 for wastewater.  However, AUF states that the workpapers suggest that the number $10,063,856 was a total water revenue requirement, from which $271,177 was subtracted to arrive at a post-repression water revenue requirement of $9,835,161, excluding miscellaneous charges.  Similarly, AUF states that the workpapers suggest the wastewater figure of $5,764,808 was a total wastewater requirement from which $89,040 was subtracted in order to arrive at a post-repression wastewater revenue requirement of $5,675,768, excluding miscellaneous charges.  AUF requests that these figures be reconciled.

 

            2. Staff’s Analysis and Conclusion

 

            Staff agrees with AUF’s argument that there is an inconsistency between the figures in the workpapers and the language found in the Order.  Therefore, to ensure clarity, staff recommends making the following changes to page 149 of the Final Order so that the Order would read in part:

 

            The appropriate post- pre-repression revenue requirement, excluding including miscellaneous service charges, is $10,063,856 $10,106,338 for the water system and $5,764,808 for the wastewater system.  The appropriate adjustments to the water system for metered ratesetting purposes are: 1) the removal of miscellaneous service charges of $271,177; and 2) a water system reduction of $42,482 to reflect expense reductions associated with the Commission-approved repression adjustments. . . . These resulting rates are designed to recover a post-repression revenues from metered rates requirement of $10,063,856 $9,792,679 for the water system.

 

            The appropriate pre-repression revenue requirement, including miscellaneous service charges, is $5,764,808 for the wastewater system.  The appropriate adjustment to the wastewater system for metered ratesetting purposes is the removal of $50,507 associated with miscellaneous service charges and revenues associated with residential wastewater-only flat rate charges of $89,040. . . . These resulting rates are designed to recover revenues from metered rates a revenue requirement of $5,764,808 of $5,714,301 for the wastewater system.

 

Staff notes that the above clarifying language does not affect the ultimate revenue requirement and the calculation of rates.

 

VII. Miscellaneous Typographical Errors

 

            1. AUF’s Argument

 

            In addition to the foregoing, AUF brings to the Commission’s attention the following miscellaneous typographical errors appearing in the Final Order:

 

a.        Page 93.  The last sentence at the top of page 93 of the Final Order states: “As a result, water revenues shall be reduced by $110,012 and wastewater revenue shall be reduced by $58,306.”  AUF avers that the sentence should read:  “As a result, water revenues shall be reduced by $26,527 and wastewater revenue shall be reduced by $141,791.”  AUF further notes that the total overall reduction is correct, and thus this error has no impact on the ultimate revenue requirements or rates.

 

b.       Table 26.  On page 166 of the Final Order (Table 26), for New Wastewater Rate Band 2 the BFC and rate reduction for the 8” meter size appears to have been inadvertently copied and inserted for the 10” meter size.  AUF states that for the 10” meter size, the BFC should be $3,953.70, and the rate reduction should be $69.76.

 

c.        Schedule 5-A.  On page 203 of the Final Order, with respect to Schedule 5-A for the columns pertaining to “Commission Approved Final” and “4-year Rate Reduction” in Old Water Rate Band 1, the BFC amounts in the Irrigation Section differ from those in the Residential, General Service and Multi-Family Section.  AUF avers that these amounts should be the same, and that the correct BFC amounts for Residential, General Service, Multi-Family, and Irrigation should be as set forth on Table 25 on page 165 of the Final Order.

 

d.        Schedule 5-B for Wastewater Rate Band 1.  On page 204, with respect to Schedule 5-B for the column “Commission Approved Final” for WW Rate Band 1, the BFC amounts for the General Service class and the Flat Rate for Valencia Terrace are actually the “4-year Rate Reduction” amounts.  The correct “Commission Approved Final” General Service BFC and Flat Rate amounts are therefore missing from the Final Order.  Also, for those same lines, the amounts in the column “4-year Rate Reduction” are incorrect.  The correct numbers for this table appear to be in the Commission workpaper file named “Wastewater Band 1.XLS” which was provided to all parties.

 

            2. Staff’s Analysis and Conclusion

 

            Staff agrees that the corrections noted above appear to be scrivener errors and should be made.  In addition, staff notes that on page 220, Schedule No. 5-B, the approved final gallonage charge for residential customers showed a charge of $8.869, and on page 228, Schedule No. 5-B, the approved final gallonage charge for GS showed a charge of $9.415.  These were also scrivener errors and have been corrected in the attached Schedules 5-B.

VIII. Summary Conclusion

            For the reasons stated above, staff recommends that AUF’s Motion for Reconsideration be granted in its entirety as set forth in the body of the recommendation.  As discussed above, AUF has identified scrivener’s errors, calculation errors, and points of fact that the Commission overlooked or failed to consider when it issued its Final Order.  The scrivener errors, calculation errors, and mistakes of fact should be corrected as set out in the staff analysis above.  Further, on its own motion, the Commission should correct the additional noted scrivener’s errors and approve the recalculation of the four-year rate reduction for amortization of rate case expense as indicated in the staff analysis.  Except for the additional correction of an allocation error recommended by staff in Issue 2, all other aspects of the Final Order should be reaffirmed.

Issue 2: 

 In calculating the appropriate wastewater rates, was there an error made in allocating the revenue requirement, and, if so, should the Commission on its own motion reconsider the appropriate wastewater rates and correct the allocation error?

Recommendation: 

 Yes, an arithmetic allocation error was made in calculating the appropriate rates for the customers in Wastewater Rate Band 2.  Therefore, the Commission on its own motion should reconsider the appropriate wastewater rates for Wastewater Rate Band 2 and correct the allocation error.

 

Correction of this error in the Final Order causes the annual revenue requirement for all but two of the residential unmetered wastewater-only (flat-rate) customers in Wastewater Rate Band 2 to be reduced by $38,533, with this amount being recovered from all remaining residential customers in that band.  Correcting this error results in the following changes to the residential rates in Wastewater Rate Band 2: a) a reduced flat rate for all but two residential flat-rate customers, b) increased rates for all remaining residential customers, and c) a resulting increase in the rate cap threshold for residential customers.  The results of staff’s recommended changes to the residential rates in Wastewater Rate Band 2, as well as the recommended change in the rate cap threshold for that band, are shown below:

 

Summary of Recommended Changes to Monthly Rates: Residential Wastewater Rate Band 2
	Per Final Order	Staff Recommended	Increase (Decrease)
Flat Rates:
Sunny Hills	$60.01	$61.84	$1.83
Zephyr Shores	$50.00	$61.84	$11.84
Jungle Den	$86.07	$61.84	($24.23)
Lake Gibson Estates	$180.52	$61.84	($118.68)
Base Facility Charge (5/8” x 3/4”)	$34.38	$34.66	$0.28
RS Kgal Charge	$8.86	$8.93	$0.07
Rate Cap Threshold (@ 6 Kgal)	$87.53	$88.24	$0.71

 

Because the rates set in the Final Order for Wastewater Rate Band 2 were in error, all unmetered flat-rate customers, except for the one flat-rate customer in Sunny Hills and the one flat-rate customer in Zephyr Shores, should be refunded the difference between the erroneous rates and the appropriate rates as set forth in the table above.  For all other wastewater customers in Wastewater Rate Band 2, AUF should be allowed to charge a surcharge to collect the difference between the erroneous rates and the appropriate rates as set forth in the table above.  (Jaeger, Lingo)

 

 

 

 

 

Staff Analysis: 

 

Standard of Review

 

            The standard of review in a motion for reconsideration is whether the motion identifies a mistake of fact or law, or a point of fact or law which was overlooked, or which the Commission failed to consider in rendering its Final Order.  Stewart Bonded Warehouse, Inc. v. Bevis, 294 So. 2d 315 (Fla. 1974); Diamond Cab Co. v. King, 146 So. 2d 889 (Fla. 1962); and Pingree v. Quaintance, 394 So. 2d 161 (Fla. 1st DCA 1981).  In a motion for reconsideration, it is not appropriate to reargue matters that have already been considered.  Sherwood v. State, 111 So. 2d 96 (Fla. 3d DCA 1959), citing State ex. rel. Jaytex Realty Co. v. Green, 105 So. 2d 817 (Fla. 1st DCA 1958).  Staff believes that in the Final Order, an arithmetical error occurred in calculating the rates for Wastewater Rate Band 2.

           

Discussion

 

            In the Final Order, the Commission determined that the total wastewater revenue requirement was $5,764,808.  This revenue requirement was allocated among three wastewater bands.  The revenues to be recovered were further allocated between the flat rate systems and metered systems in each of those bands, and rates were set accordingly.

 

            However, upon receiving complaints from residential customers regarding extremely high wastewater rates, staff discovered that the Final Order set wastewater residential flat rates for the Jungle Den and Lake Gibson Estates systems[6] in Rate Band 2 such that those residential customers would inappropriately pay, on an annual basis, an additional $38,533 that should have been allocated to the remaining residential customers in that rate band.  This allocation error would also result in the remaining residential customers in Wastewater Rate Band 2 paying too little by that same amount.  Staff recommends that the Commission, on its own motion, reconsider the appropriate rates for Wastewater Rate Band 2 as set forth in the analysis below.

 

Correction of the error in the Final Order causes the annual revenue requirement for all but two of the residential unmetered wastewater-only (flat rate) customers in Wastewater Rate Band 2 to be reduced by $38,533, with this amount being recovered from all remaining residential customers in that band.  Correcting this error results in the following changes to the residential rates in Wastewater Rate Band 2: a) a reduced flat rate for all but two residential flat rate customers, b) increased rates for all remaining residential customers, and c) a resulting increase in the rate cap threshold for residential customers.  Staff recommends that the changes to the residential rates in Wastewater Rate Band 2, as well as the recommended change in the rate cap threshold for that band, be as shown below:

 

 

 

 

 

Table 2-1 Summary of Recommended Changes to Monthly Rates: Residential Wastewater Rate Band 2
	Per Final Order	Staff Recommended	Increase (Decrease)
Flat Rates:
Sunny Hills	$60.01	$61.84	$1.83
Zephyr Shores	$50.00	$61.84	$11.84
Jungle Den	$86.07	$61.84	($24.23)
Lake Gibson Estates	$180.52	$61.84	($118.68)
Base Facility Charge (5/8” x 3/4”)	$34.38	$34.66	$0.28
RS Kgal Charge	$8.86	$8.93	$0.07
Rate Cap Threshold (@ 6 Kgal)	$87.53	$88.24	$0.71

 

            Because the rates set in the Final Order for Wastewater Rate Band 2 were in error, all unmetered flat rate customers, except for the one flat-rate customer in Sunny Hills and the one flat-rate customer in Zephyr Shores, should be refunded the difference between the erroneous rates and the appropriate rates as set forth in Table 2-1 above.  For all other wastewater customers in Wastewater Rate Band 2, AUF should be allowed to charge a surcharge to collect the difference between the erroneous rates and the appropriate rates as set forth in Table 2-1.

 

            Staff believes that its recommended requirement for refunds and surcharges is consistent with the holding in GTE Florida, Inc. v. Clark, 668 So. 2d 971, 972 (Fla. 1996)(GTE Florida, Inc. v. Clark).  In that case, the Florida Supreme Court, set out a “fairness and equity” exception to the prohibition against retroactive ratemaking, and specifically stated: “[W]e view utility ratemaking as a matter of fairness.  Equity requires that both ratepayers and utilities be treated in a similar manner.”

 

            In GTE Florida, Inc. v. Clark, the Court was addressing a Commission order implementing a remand imposed by GTE Florida, Inc. v. Deason, 642 So. 2d 545 (Fla. 1994), which resulted from the Commission’s disallowance of certain costs which had been included by GTE Florida, Inc. in a prospective test year in rate case proceedings.  In GTE Florida, Inc. v. Deason, the Florida Supreme Court ruled that the Commission erred in disallowing the costs.  GTE sought to impose a surcharge to recover the erroneously disallowed costs from the effective date of the original Commission order.  The Commission denied the surcharge, characterizing it as retroactive ratemaking, but was reversed by the Florida Supreme Court in GTE Florida, Inc. v. Clark, in which the Court held:

 

We . . . reject the contention that GTE’s requested surcharge constitutes retroactive ratemaking.  This is not a case where a new rate is requested and then applied retroactively.  The surcharge we sanction is implemented to allow GTE to recover costs already expended that should have been lawfully recoverable in the PSC’s first order.

 

Id. at 973.

 

            In the case at hand, the Commission has determined what the appropriate wastewater revenue requirement was.  However, in Wastewater Rate Band 2, the revenue requirement was erroneously allocated.  This erroneous allocation resulted in some customers paying too little, and other customers paying too much.  If the Commission were to only require a refund to those customers who paid too much, AUF would not be allowed to collect the revenue requirement to which the Commission determined it was entitled.  Therefore, staff believes that to correct the “error,” AUF should be required to refund the “overcharges,” and be allowed to collect a surcharge from those customers whose rates were set too low based on the erroneous allocation of the revenue requirement.  AUF was entitled to the revenue requirement set forth in the Final Order when it was issued and the final rates approved.  Therefore, as set out above, staff recommends that refunds be required, and surcharges be authorized.

 

Issue 3: 

 Should this docket be closed?

Recommendation: 

 If the Commission’s Final Order as modified by the resulting Order on Reconsideration is not appealed, this docket should be closed upon staff’s approval of the tariffs, verification of the required refunds, and the expiration of the time for filing an appeal.  (Jaeger)

Staff Analysis: 

 If the Commission agrees with staff’s recommendations and the Commission’s Final Order as modified by the resulting Order on Reconsideration is not appealed, this docket should be closed upon staff’s approval of the tariffs, verification of the required refunds, and the expiration of the time for filing an appeal.