DATE:	August 21, 2014
TO:	Office of Commission Clerk (Stauffer)
FROM:	Division of Accounting and Finance (Maurey, Springer) Division of Economics (Thompson) Division of Engineering (Lee) Office of the General Counsel (Mapp, Crawford)
RE:	Docket No. 130212-WS – Application for increase in water/wastewater rates in Polk County by Cypress Lakes Utilities, Inc.
AGENDA:	09/04/14 – Regular Agenda – Proposed Settlement Prior to Hearing – Parties May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Edgar
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None

 

 Case Background

Cypress Lakes Utilities, Inc. (CLU or Utility), a wholly-owned subsidiary of Utilities, Inc. (UI), is a Class B utility in Polk County.  Rates were last established for CLU in its limited proceeding in Docket No. 090349-WS.^[1]  CLU’s last full rate case proceeding was in Docket No. 060257-WS.^[2] 

On September 30, 2013, CLU filed its application for a rate increase.  The Utility’s application met the minimum filing requirements (MFRs) on September 30, 2013.  The test year established for interim and final rates is the simple average period ended December 31, 2012.  The Utility serves 1,447 residential water and wastewater customers and several general service water and wastewater customers.  CLU also serves approximately 40 general service water only customers.

On December 3, 2013, the Commission approved an interim rate increase designed to generate an interim revenue increase of $85,052 (26.80 percent) for the water system only.^[3]  The interim rates were subject to refund with interest, pending the conclusion of the rate case.  The Utility requested final revenue increases of $100,603 (31.71 percent) for water and $26,350 (3.95 percent) for wastewater. Subsequently, on May 30, 2014, the Commission issued Order No. PSC-14-0283-PAA-WS (PAA Order), granting in part the Utility’s application for water increase and decreasing wastewater rates in Polk County.  On June 17, 2014, CLU filed a Petition for Formal Administrative Hearing, protesting the PAA Order.  CLU contends that the adjustment to rate case expense was unsupported by the record. On June 26, 2014, Order No. PSC-14-0333-PCO-WS was issued acknowledging the Office of Public Counsel’s (OPC) Notice of Intervention. 

On July 10, 2014, CLU, OPC, and Commission staff held a noticed informal meeting to discuss potential issues and procedural matters in the docket.  On July 31, 2014, OPC and CLU filed a Joint Motion Requesting Commission Approval of Settlement Agreement (Settlement Agreement), which is attached to this recommendation as Attachment A.  If approved the Settlement Agreement resolves CLU’s protest of the Commission’s adjustment to rate case expense.  The parties contend that the Settlement Agreement avoids the time, expense, and uncertainty associated with adversarial litigation.

This recommendation addresses the parties’ proposed Settlement Agreement.  The Commission has jurisdiction pursuant to Sections 367.081 and 367.082, Florida Statutes (F.S.).

 

 

 

 

Discussion of Issues

Issue 1: 

 Should the Commission grant OPC and CLU’s Joint Motion to Approve Settlement Agreement?

Recommendation: 

 Yes.  Staff recommends that the Settlement Agreement should be approved.  Order No. PSC-14-0283-PAA-WS should be modified as set forth below, and made final. If the Commission approves the Settlement Agreement, staff recommends that CLU file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates within fifteen days of the Commission vote. The approved 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 approved rates should not be implemented until Commission staff has approved the proposed customer notice and the notice has been received by the customers. CLU should provide proof of the date the notice was given within ten days of issuance.   (Mapp, J.S. Crawford, Maurey)

Staff Analysis: 

 On July 31, 2014, CLU and OPC filed a Joint Motion Requesting Commission Approval of Settlement Agreement.  The Settlement Agreement maintains the water and wastewater rates approved by the Commission in Order No. PSC-14-0283-PAA-WS, but seeks to replace the first paragraph on page twenty-four of the PAA Order concerning rate case expense with the following:

Although the Utility believes that all of the rate case expense was prudent, in order to settle this disputed issue, the Utility accepts and OPC agrees to a further reduction to rate expense of $29,607, resulting in a total approved rate expense of $88,821. This acceptance shall not be construed as an agreement by the Utility of a methodology of reducing rate case expense based upon a percentage reduction.

            After review of the motion and Settlement Agreement, staff believes that the parties’  Settlement Agreement is a reasonable resolution of all protested issues. Staff recommends that it is in the public interest for the Commission to approve the Settlement Agreement because it promotes administrative efficiency and avoids the time, expense and uncertainty associated with adversarial litigation.  The Settlement Agreement is in keeping with the Commission’s long-standing practice of encouraging parties in contested proceedings to settle issues whenever possible.[4]  As such, staff recommends that the parties’ Settlement Agreement be approved, and Order No. PSC-14-0283-PAA-WS be modified as set forth above and made final.

            If the Commission approves the Settlement Agreement, staff recommends that CLU file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates within fifteen days of the Commission vote. The approved 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 approved rates should not be implemented until Commission staff has approved the proposed customer notice and the notice has been received by the customers. CLU should provide proof of the date the notice was given within ten days of issuance.
Issue 2: 

 Should this docket be closed?

Recommendation: 

 No.  The docket should remain open for staff’s verification that the revised tariff sheets and customer notice have been filed by CLU and approved by staff, and that the interim refund has been completed and verified by staff.  Once these actions are complete, this docket should be closed administratively.  (Mapp)

Staff Analysis: 

 The docket should remain open for staff’s verification that the revised tariff sheets and customer notice have been filed by CLU and approved by staff, and that the interim refund has been completed and verified by staff.  Once these actions are complete, this docket should be closed administratively.