Case Background
Cedar Acres, Inc. (Cedar Acres or Utility)
is a Class C water utility serving approximately 319 customers in the Oakland
Hills subdivision located in Sumter County. The area is in the Southwest
Florida Water Management District (SWFWMD). Wastewater treatment is provided by
septic tanks. The Utility was subject to Sumter County jurisdiction when the
development was designed and the Utility was established. Sumter County turned
over jurisdiction to the Florida Public Service Commission (Commission) in
1987. Unaware of the change in jurisdiction, Cedar Acres did not apply for an
original certificate with the Commission until 2008. The Commission granted Cedar
Acres an original certificate and approved the rates and charges in existence
at the time it was certificated.
On November 17, 2014, the Commission
received Cedar Acres’ application for a staff-assisted rate case (SARC), and the
instant docket was the Utility’s first rate case. Prior to this docket, rate
base had never been established for Cedar Acres. Likewise, prior to this
docket, the Utility’s rates had not been changed since its inception, almost 30
years ago. On May 14, 2015, staff conducted a customer meeting in Lady Lake,
Florida. Approximately 38 customers attended the meeting and expressed concerns,
primarily with the amount of the rate increase.
At the October 13, 2015, Commission Agenda
Conference (Agenda Conference), staff presented its recommendation regarding
the Utility’s SARC. Several customers attended the Agenda Conference and
addressed the Commission. These customers restated concerns that were expressed
at the customer meeting. In addition to the amount of the rate increase, the
customers conveyed frustration with billing issues, including meter and billing
accuracy, and overall management practices of the Utility. The customers also
conveyed concerns regarding a power outage incident that occurred in July 2015
which resulted in a water outage. The outage incident brought to light a major
Department of Environmental Protection (DEP)/Department of Health (DOH)
compliance issue with regard to boil water notices.
In its recommendation, staff recommended
that the Commission find the Utility’s overall quality of service
unsatisfactory. Circumstances surrounding the July 2015 outage incident and
improper issuance of boil water notices, along with the same violations cited
in both the 2012 and 2015 DEP sanitary surveys, weighed heavily in staff making
this recommendation.
Based on information contained in staff’s
recommendation, comments presented by customers and the Office of Public
Counsel (OPC), and discussions at the Agenda Conference, the Commission approved
a rate increase for Cedar Acres, but found the Utility’s quality of service to
be unsatisfactory.
As a result, the Commission ordered several measures be taken to improve the
Utility’s service to its customers. These measures included staff conducting a
management audit of the Utility’s billing and management practices. Additionally,
the Utility was ordered to file a compliance report with the Commission at 6
and 12 month intervals from the date of the consummating order. In the
compliance report, Cedar Acres was to include a billing analysis as well as
state all corrective measures taken: to resolve its billing issues; to
address customer concerns and complaints; and to comply with Commission, DEP,
and DOH regulations, including boil water notices.
Commission staff
initiated the management audit of Cedar Acres on October 26, 2015. The findings
of the “Management Audit of Cedar Acres, Inc.” (Management Audit) were
published in March 2016. The Management
Audit focused on key management issues including owner involvement and
accountability, adequacy of contractor performance, and effective relations
with customers and regulators. Commission audit staff also reviewed in general,
with the Utility, Commission rules in the Florida Administrative Code (F.A.C.)
that govern water and wastewater utilities, and in particular the following
rules:
·
25-30.130, F.A.C. Record
of Complaints
·
25-22.032, F.A.C. Customer
Complaints
·
25-30.311, F.A.C. Customer
Deposits
·
25-30.26, F.A.C. Meter
Readings
·
25-30.125, F.A.C. System
Maps and Records
·
25-30.335, F.A.C. Customer
Billing
·
25-30.320, F.A.C. Refusal
or Discontinuance of Service
·
25-30.460, F.A.C. Application
for Miscellaneous Service Charge
·
25-30.433, F.A.C. Determination
of Quality of Service.
On June 14,
2016, Cedar Acres filed its 6-month Compliance Report (Compliance Report)
pursuant to Order No. PSC-15-0535-PAA-WU. This recommendation addresses the
Utility’s progress and compliance with the Commission’s Order. This Commission
has jurisdiction pursuant to Chapter 367, Florida Statutes, (F.S.).
Discussion
of Issues
Issue 1:
Is Cedar Acres in substantial compliance with Order
No. PSC-15-0535-PAA-WU; and, if not, should Cedar Acres be ordered to show
cause why it is not in substantial compliance with Order No. PSC-15-0535-PAA-WU?
Recommendation:
Yes, Cedar Acres is in substantial compliance with
Order No. PSC-15-0535-PAA-WU, and should not be ordered to show cause. (Corbari,
Galloway, Mtenga, Johnson)
Staff Analysis:
By Order No. PSC-15-0535-PAA-WU,
Cedar Acres was ordered to allow Commission staff to conduct a management audit
of the Utility to ensure appropriate management controls and practices were
being implemented and corrective actions were being performed to comply with
Commission rules and regulations. Cedar Acres was also ordered to file a
Compliance Report at 6 and 12-month intervals from the date of the Consummating
Order, issued on December 14, 2015, outlining corrective measures it had taken
to address regulatory compliance issues with DEP and DOH, customer concerns and
complaints, and billing issues.
Commission staff initiated the
management audit of Cedar Acres on October 26, 2015, and the findings were
published in March 2016. Pursuant to Order No. PSC-15-05350PAA-WU, Cedar Acres
timely submitted its 6-month Compliance Report but neglected to file its
billing analysis with the Compliance Report. By letter dated June 27, 2016,
staff informed Cedar Acres of the omission of the billing analysis, and
instructed the Utility to file the billing analysis by July 8, 2016. Cedar
Acres filed its billing analysis on July 8, 2016.
In its Compliance Report, Cedar
Acres included a variety of corrective measures that have been taken, as
directed by this Commission and suggested by Managerial Audit Staff. Presented
below are the broad categories of concern cited by the Commission in its Order along
with an update from the Utility as to how these concerns have been addressed.
Regulatory Compliance with DEP and DOH
The Commission found that the Utility’s overall quality of service was
unsatisfactory due to factors surrounding the July 2015 water outage incident
and improper issuance of boil water notices, as well as repeat violations cited
on both the 2012 and 2015 DEP sanitary surveys. Pursuant to Order No.
PSC-15-0535-PAA-WU, Cedar Acres was required to report to the Commission what
corrective actions it has taken to comply with DEP and DOH regulation,
including boil water notices.
In its Compliance Report, Cedar
Acres reported that it corrected all of the deficiencies noted in the July 2015
DEP Sanitary Survey Report. Staff verified with the DEP that all outstanding
deficiencies including a signed and sealed tank inspection, an emergency
preparedness plan, a cross connection control panel on file, the calibration of
the finished drinking water flow meter, and the repair of a damaged well
pedestal have been corrected as of March 2016.
Prior to the Commission’s Order, the
Utility had been issuing boil notices incorrectly. In its Compliance Report, the
Utility reported that it has installed a “blast” messaging system which notifies
each customer directly via telephone of the implementation and rescission of
boil water notices.
As of March 2016, in addition to
the “blast” messaging system, the Utility installed, and ensured the proper
operation of, a Sensaphone (auto-dialer) system. The Sensaphone system alerts
the plant operator, Universal Waters, and the Utility of any operational
problems. The Utility also reported that it conducted generator maintenance
checks to ensure back-up power for power outages.
In June 2016, the “blast”
messaging system and auto-dialer were put to the test when, during the course
of Tropical Storm Colin, a transformer surged, causing the primary and
secondary pumps to shut off. The generator turned on properly but a drop in
water pressure still occurred, which resulted in a need for a boil water notice
to the community. The “blast” messaging system functioned properly during this
incident, and, in accordance with DEP regulations, notified the customers of
the boil water notice. DEP has noted that Cedar Acres is in compliance with its
polices with regard to both the Utility’s overall response to the outage,
including issuing and rescinding the boil water notices, as well as the
operation of the Utility after the incident.
Customer Concerns and Complaints
At the October 13, 2015 Agenda Conference, several customers conveyed
their frustration with regard to overall management practices of the Utility. Specifically,
some of these customers noted their repeated inability to reach Cedar Acres
personnel when needed to resolve problems.
One of the
first suggestions outlined in the Commission’s Management Audit was the need for
Cedar Acres to develop and implement written procedures that would
provide a record of customer complaints and inquiries in compliance with Rule
25-30.130, F.A.C. According to the Management Audit, in the past, Cedar Acres failed
to promptly address customers’ concerns and to provide an adequate two-way
channel for customers to funnel inquiries and complaints.
However, according to the
Utility, Cedar Acres made it a practice to return all calls that are made to
the Utility’s office. From the Management Audit, staff concluded that, on occasion, customers called the billing
contractor if they were unable to reach someone at the Utility office. As a
result, customer complaints were not logged in accurately, and thus, not returned. Cedar Acres agrees
nonetheless that, in the past, it had not been keeping records of all incoming
calls and its response to customer concerns.
In January 2016, the Utility
began the practice of logging customer inquiries and complaints received by
customers. The log currently contains records denoting customer names, contact
date, the form of contact (i.e., email, telephone, written notice), nature of
inquiry, and the status of the Utility’s response.
The Management Audit suggested
that since Cedar Acres is ultimately responsible for maintaining a record of
complaints, and monitoring and tracking complaints, customers should be
provided with and informed to call the Hollywood office number for all customer
billing and service inquiries. This measure should provide the Utility greater
awareness of all customer issues and the performance of its contractors. For
this reason, and due to a telephone company routing issue, the Utility’s
officers arranged for a new telephone line to be installed. According to Cedar
Acres’ Compliance Report, landlines from the Oakland Hills subdivision were
being routed in error to a hospital when customers were trying to call the Utility’s
Hollywood office. Staff believes with this new line change, customers should have
a clear line of communication with the Utility. The Utility’s new telephone
number and new email address were included on the March 1, 2016 customer bills
and subsequent bills. In its Compliance Report, the Utility wanted to note that
many customers do not have answering machines; however, every attempt is made by
the Utility to contact them, up to five attempted returned calls.
In an additional effort to
improve communications with the customers, on January 16, 2016, the Utility’s
president held an informal meeting with customers and officers of the
homeowners association. The owners of Artesian, the company providing billing
and meter reading services for Cedar Acres, also attended this meeting. Besides
making sure the customers have a clear understanding of how to reach the
Utility, the Utility president wanted to hear and address customer’s concerns
and frustrations expressed at the October 13, 2015, Agenda Conference.
Prior to the January 16, 2016,
informal meeting, customers expressed concerns that there was no vehicle
signage or uniforms on meter readers. They were concerned with unidentified
people on their property. Thus, the customers wanted the meter readers to be
clearly identifiable. Understanding this concern, both the Utility and Artesian
note that Artesian has had signage on their truck since 2010, and that Artesian
personnel wear coral colored shirts that say “Meter Reading.” Utility
representatives shared this information with the customers at the informal
meeting. According to the Utility, many customers told Artesian personnel
attending the meeting that they have known the Artesian personnel for years.
Based on this information, staff believes the meter reader identification matter
has been resolved.
Since the Commission’s Order and
the January 16, 2016 informal customer meeting, the Commission received two customer
complaints from two separate customers. One complaint regarded a billing
address issue that will be discussed below. The other complaint regarded the
June 2016 water outage incident that occurred due to the transformer surge,
discussed above. In both instances, staff believes the Utility was
appropriately responsive. In the latter instance, both the Utility and staff
have had numerous telephone conversations and exchanged several emails with the
customer explaining the cause of the outage. Staff believes the June 2016
outage complaint has been adequately addressed and resolved.
Billing Issues
In addition to frustration with
management practices, customers expressed concern with the Utility’s billing
practices. Customers reported faulty meters, unusual bills, and an issue with
mailing.
A primary source of the Utility’s
billing issues was directly related to the need to replace customer meters. Some
of the billing abnormalities were due to inaccurate or inoperable meters which
often led to estimated bills. Additionally, OPC expressed concern that the
billing determinants relating to usage were not reliable for rate-setting
purposes. To address this problem, the Commission ordered Cedar Acres to
implement a meter replacement program. Further, the Utility was ordered to
escrow $2,350 every two months, $14,110 annually, to be used for this program.
This amount equates to approximately 78 meters each year for a total of 320
meters.
In an effort to help
the Utility efficiently achieve the goal of replacing meters, the Management Audit
suggested that the Utility perform an audit of every residential meter to
identify its condition in order to prioritize meter replacements. In its
Compliance Report, the Utility
indicated that meters are audited with each reading and prioritized for meter
replacement. According to the Compliance Report and discussions with the
Utility, 14 meters have been replaced. The Utility has ordered 12 additional
meters that are scheduled to be installed by the end of July. Taking into
consideration that the bills reflecting the new rates were not sent until March
2016, for the January/February billing cycle, staff believes that Cedar Acres
is making good progress with the meter replacement program. Staff will continue
to monitor the progress of the meter replacement program.
In line with the meter
replacement program and pursuant to Order No. PSC-15-0535-PAA-WU, Cedar Acres
established an escrow account and filed the escrow agreement with the
Commission on April 14, 2016. According to the Utility, the ordered amount of
funds have not yet been escrowed even though meters have been replaced. The Utility explained that unexpected costs
to replace a pump motor and starter were paid in March 2016. These costs were
necessary for the proper operation of the utility plant and were in the amount
of $4,587. The Utility advised staff that, due to the motor replacement
expenditure, the ordered funds were not available to be placed into escrow.
Staff believes this is an extraordinary situation. While the Utility is not in
full compliance with the Commission’s Order, staff believes the Utility is
following the spirit of the Order by going forward with the actual replacement
of meters. Staff also believes that the Utility will be in a position to follow
the escrow procedure, as ordered, by September 2016, once receiving the
July/August billing cycle revenues.
In order to address some of the
concerns regarding incorrectly estimated bills, the Management Audit suggested
that Cedar Acres modify its bill calculation process and institute a review of
each bill for inaccuracies prior to being mailed to customers. According to the
Management Audit, the Utility’s review process should include cross-checking
the meter readings log input to customer bills. In its Compliance Report, Cedar
Acres states that bills are reviewed by the Finance Manager for anomalies. The Utility
also stated that a spreadsheet is maintained to compare the recent billing with
the prior billing period. While a number of meters remain inoperable or
unreadable, Cedar Acres indicated in its Compliance Report that those customers
are only billed the base facility charge.
Since the Cedar Acres is unable
to determine usage for these customers, staff believes the billing analysis
provided by Cedar Acres is not reliable for determining customer usage for the
six month billing period included in the report. As the Utility continues to
replace meters, it will be able to gather more accurate billing data. The
billing analysis Cedar Acres must file at the end of 12 months should provide a
better representation of customer usage.
The final billing concern staff
evaluated had to do with mailing and address issues. Staff is aware of two
separate billing address issues. One billing address issue was discussed at the
Agenda Conference. It involved a customer’s bill being mailed to an incorrect
address, and his unsuccessful repeated attempts at getting the issue resolved. After
the Agenda Conference, the matter was resolved.
Additionally, as mentioned
earlier, there was a complaint filed with the Commission on May 11, 2016 involving
a homeowner receiving a copy of the tenant’s bill. According to the homeowner, she had expressed
on several occasions that she did not wish to receive a copy of her tenant’s
bill. While the tenant was receiving the
bill through email, the Utility was under the impression the homeowner also wanted
a copy of the bill. The issue is now resolved. Staff believes this complaint
took place during a time when Cedar Acres was in the process of implementing
its new policies and procedures pertaining to customer complaints and/or
inquires. It appears that improvements have been made. However, staff believes any
improvement in this regard should be evaluated at the end of the 12-month
compliance period.
Based on the above, staff
believes that Cedar Acres is making a substantial effort to comply with Order
No. PSC-15-0535-PAA-WU by implementing corrective actions and improvements
regarding the Utility’s service to
its customers. Staff also believes that Cedar Acres has incorporated many of
the suggestions made in the Management Audit. Further, staff believes that Cedar
Acres has taken positive steps toward improving its billing issues, and
complying with regulatory matters. Because staff believes Cedar Acres to be
making a substantial effort to comply with the Commission’s Order, staff does
not believe the Utility should be ordered to show cause for non-compliance.
The Utility’s next Compliance
Report is due on December 14, 2016. Staff will continue to monitor the
Utility’s progress and the status of the escrow account, along with the meter
replacement program. Staff is scheduled to report back to the Commission after Cedar
Acres files its next Compliance Report.
Issue 2:
Should this docket be closed?
Recommendation:
No. This docket should
remain open to allow staff to continue to monitor Cedar Acres’ compliance with
Commission Order No. PSC-15-0535-PAA-WU, the meter replacement program, and
escrow account. (Corbari)
Staff Analysis:
This docket should remain open to allow staff to continue
to monitor Cedar Acres’ compliance with Commission Order No.
PSC-15-0535-PAA-WU, the meter replacement program and the escrow account.
Additionally, pursuant to Order No. PSC-15-0535-PAA-WU, Cedar Acres is required
to file a 12-month Compliance Report on December 14, 2016. Staff will report
back to the Commissioners regarding Cedar Acres’ compliance status after reviewing
the Utility’s next Compliance Report. Therefore, this docket should remain
open.
