Case Background
North
Peninsula Utilities Corporation (NPUC or Utility) is a Class B utility, which
provides wastewater service to 569 customers in Volusia County. The City of
Ormond Beach provides water to the area. NPUC’s 2015 Annual Report lists
operating revenues of $221,963 and a net operating income of $3,600. NPUC
bought the assets of Shore Utility Corp. in 1989[1] and filed five subsequent territory
amendments, which were all approved by the Commission. On August 2, 2013, the
Utility filed an application to amend its wastewater certificate, pursuant to
Section 367.045, Florida Statutes (F.S.), and Rule 25-30.036, Florida
Administrative Code (F.A.C.). In addition, the Utility requested implementation
of a main extension charge and a flat rate adjustment of three percent per year
to monthly rates for five years. On November 4, 2013, NPUC withdrew its request
for the flat rate adjustment. Staff identified several deficiencies in the
certificate amendment filing and met with the Utility’s representatives. At
that meeting, it was disclosed that there were potential objections to the
territory amendment by Volusia County and the City of Ormond Beach. As such,
the processing of the application was put on hold.
On
March 10, 2014, the Utility filed a revised application to amend its service
territory based upon negotiations with the City of Ormond Beach and Volusia
County. The revised application included less territory than its original
filing and a proposed tariff for a $795 main extension charge. Pursuant to
Order No. PSC-14-0273-PCO-SU, issued May 29, 2014, the Commission suspended the
proposed tariff to allow staff sufficient time to review all pertinent
information.[2] On July 21, 2014, NPUC filed additional
information to address the deficiencies previously identified by staff. On
October 20, 2014, NPUC representatives met with staff to discuss the amended
application and on January 13, 2015, NPUC filed supplemental information to
address staff’s concerns.
On
April 2, 2015, staff filed a written recommendation that:
·
NPUC’s revised application be denied because the
application failed to demonstrate a need for service in the territory requested.
·
Denial of the application obviated the need for
a main extension charge.
·
The service availability policy should be
revised to reflect that there are no service availability charges because the
plant is fully depreciated.
On April 3, 2015,
NPUC requested that the item be deferred from the April 16, 2015 Commission
Conference so that representatives of the Utility could again meet with staff. The
deferral was granted and a noticed informal meeting was convened on April 20,
2015. At that meeting, NPUC informed staff that it was removing certain areas
from the previously filed request for territory expansion, abandoning its
three-phased approach to expanding the territory, and withdrawing its request
for a main extension charge. A map outlining the changes in territory was
provided at the meeting, and on May 26, July 24, and August 27, 2015,
additional data was filed by the Utility.
On
October 22, 2015, staff filed a written recommendation that recommended denial
of NPUC’s application for the same reasons described in the April 2, 2015
recommendation. On November 5, 2015, the Commission deferred staff’s
recommendation to allow the Utility to reevaluate its plan to provide service
to the requested areas. On February 10, 2016, NPUC again revised its plan. The
February 10, 2016, revision removed certain areas from its original request.
The filing also contained cost estimates to serve the remaining areas for which
the Utility seeks to serve. Accurate legal descriptions for the proposed
annexed areas were provided to staff on June 28, 2016. This recommendation
addresses NPUC’s application as modified on February 10, 2016. The Commission has
jurisdiction pursuant to Section 367.045, F.S.
Discussion
of Issues
Issue 1:
Should North Peninsula Utilities Corporation’s
proposed territory amendment be approved?
Recommendation:
Yes in part and no in part. It is in the public
interest to amend wastewater certificate number 249-S to include the territory
as described in Attachment A, with the exception of the addition identified as
Area 4 (i.e., Capri Drive), effective the date of the Commission’s vote. The
resultant order should serve as NPUC’s amended certificate and should be
retained by the Utility. If the Commission agrees with staff’s recommendation,
the Utility should revise its territorial description to exclude Area 4 and
file the revision within ten (10) days of the Commission’s vote. (Bruce, Janjic, Lewis)
Staff Analysis:
Based on NPUC’s
application to amend its authorized service territory as well as additional
information provided by the Utility staff believes that NPUC is in compliance
with the governing statute, Section 367.045, F.S., and Rule 25-30.036, Florida
Administrative Code (F.A.C.), Application for Amendment to Certificate of
Authorization to Extend or Delete Service Area. The application contains proof
of compliance with the noticing provisions set forth in Rule 25-30.030, F.A.C,
Notice of Application and of Customer Meeting. No objections to the application
have been received and the time for filing such has expired. Adequate service
territory maps and territory descriptions have also been provided.
NPUC currently provides
wastewater service in the north peninsula area of Volusia County pursuant to
wastewater certificate number 249-S. NPUC’s 2016 Application identifies seven
(7) distinct areas to be annexed. Service availability charges for each of the
seven areas are discussed in Issue 2. Attachment A to this recommendation
provides an illustration of NPUC’s proposed territory expansion.
Rule 25-30.036, F.A.C., requires
a utility to provide a statement showing the need for service in the area
requested. All residences in the territory NPUC seeks to serve currently have
wastewater treatment in place, either by privately owned and maintained septic
tanks or existing wastewater treatment (package) plants.
Staff’s previously filed
recommendations, addressing NPUC’s application, recommended that the Commission
deny the Utility’s application because the Utility failed to demonstrate a need
for service in the territory requested. Specifically, staff was concerned that
the existing residents, in the territory NPUC seeks to add, likely would not
connect to NPUC’s system unless required by the county. Staff’s October 22,
2015, recommendation states:
Staff believes that as long as the county continues to
issue permits for replacement and repair of existing wastewater treatment
systems and mandatory interconnection is not required, customers are highly
unlikely to voluntarily connect to NPUC’s system....Without an enforced
mandatory interconnection, a customer is unlikely to abandon a functioning
septic system to connect to NPUC.
On December 22, 2015, the
Volusia County Commission revised its ordinances to mandate connection to a
municipal or privately owned wastewater provider when the facilities become
available.
The ordinance further requires residents to connect within five years of
installation of wastewater facilities. Giving consideration to the revised
ordinance, staff believes NPUC has reasonably demonstrated a need for service
in the areas requested.
In the
previous recommendation, staff had concerns regarding the vague conditions for
obtaining service in certain areas that NPUC was seeking to serve. The Utility
was advocating that individual customer service requests would be evaluated and
the customer may or may not have to pay for the collection lines depending on
the situation or facilities required. Another of staff’s concerns was that NPUC’s
plan appeared to expect customers living along the interior streets between
John Anderson Drive and Ocean Shores Blvd (A1A), wishing to connect, to pay for
the construction of collection lines. NPUC’s request, as amended on February
10, 2016, no longer contains the areas discussed above. Therefore, the
Utility’s amendment appears to mitigate staff’s prior concerns.
As previously discussed, NPUC is
proposing service expansion in seven distinct areas. One of the areas that NPUC
is proposing to serve consists of 55 homes/lots and is located on Capri Drive. This
area is identified as Area 4 in Attachment A. Volusia County constructed a wastewater
main along Capri Drive that is currently not in use. Upon confirmation of a
service request within the specified area, NPUC proposed to install a new lift
station with a grinder pump and connect it to the existing wastewater main.
Staff recommends denial of the
addition of Area 4 because NPUC has not provided documentation showing that Volusia
County would permit NPUC access to the existing wastewater main on Capri Drive.
NPUC states that an agreement concerning the Capri Drive facilities cannot be
finalized until Capri Drive lies within the territory of NPUC. Approving
extension to Area 4 could lead to a situation in which the Utility would be
required to serve customers with infrastructure that it may not be permitted to
access. Under such a scenario NPUC may not be able to adequately address
customer concerns or quality of service issues that are associated with the
wastewater main. Therefore, staff recommends that the Commission deny the
addition of Area 4.
The Utility provided analysis as well as an engineer’s statement to demonstrate
that the Utility has adequate capacity to serve the additional territory. Based
on the analysis provided, more than 60 percent of NPUC’s wastewater treatment
plant is available to serve future customers. Staff believes that the
documentation provided by the Utility adequately
demonstrates that NPUC has sufficient plant capacity to serve the additional
territory. Additionally, at this time there does not appear to be any
outstanding Consent Orders or Notices of Violation from DEP associated with
NPUC’s wastewater treatment plant.
Conclusion
Based on the information above, staff recommends it is in
the public interest to amend wastewater certificate number 249-S to include the
territory as described in Attachment A, with the exception of the addition
identified as Area 4 (i.e., Capri Drive), effective the date of the
Commission’s vote. The resultant order
should serve as NPUC’s amended certificate and should be retained by the
Utility. If the Commission agrees with staff’s recommendation, the Utility
should revise its territorial description to exclude Area 4 and file the
revision within ten (10) days of the Commission’s vote.
Issue 2:
What are the appropriate service availability
charges for NPUC?
Recommendation:
New customers requesting service should be required
to either install the mains necessary to connect to the Utility and donate
those lines to the Utility, or the Utility may extend the required lines and
collect a main extension charge based on whether a road crossing and force main
are required. A main extension charge associated with a road crossing of $762
per equivalent residential connection (ERC) and a main extension charge with no
road crossing of $444 per ERC should be approved. The recommended main
extension charges should be based on an estimated 250 gallons per day per ERC
of treated wastewater demand. Also, staff recommends a force main extension
charge of $1.25 per linear foot where the Utility will need to extend its force
main to provide service. The Utility should be required to file tariffs
reflecting the revised service availability policy and charges. The approved
service availability policy and charges should be effective for connections
made on or after the stamped approval date of the tariff pursuant to Rule
25-30.475, F.A.C. (Bruce)
Staff Analysis:
As mentioned earlier, NPUC
is requesting authority to add seven service areas to its existing territory,
which are referred to as proposed service areas 1, 2, 3A, 3B, 3C, 4, and 5.
However, as discussed in Issue 1, staff recommended proposed service Area 4 not
be approved. The proposed service areas include properties with small package
plants, septic tanks, and vacant lots. In addition, the Utility’s existing
service territory includes an undeveloped eight-acre parcel of land.
Currently, the Utility does not
have an approved plant capacity or main extension charge. The Utility’s plant
capacity charge was eliminated in a prior docket, because continued collection
would have resulted in a contribution level at build out in excess of the 75
percent maximum guideline, pursuant to Rule 25-30.580, F.A.C.
All collection lines needed to serve the existing service territory are
installed with the exception of the eight-acre parcel. In addition, all of the
collection system is contributed property and is fully depreciated. The
Utility’s existing service availability policy provides that in instances where
the Utility undertakes the installation of collection lines, in lieu of the
developer’s installation of such facilities, such installation will be at the
cost and expense of the developer. The Utility will provide laterals for
wastewater service to the developer’s lot line ready for a plumber’s “hook-up.”
The Utility’s practice has been to connect new customers without charge for the
installation of the service line to the Utility’s collection system when a
vacant lot is developed.
Rule 25-30.580, F.A.C.,
establishes guidelines for designing service availability charges. Pursuant to
the rule, the maximum amount of contributions-in-aid-of construction (CIAC),
net of amortization, should not exceed 75 percent of the total original cost,
net of accumulated depreciation, of the Utility’s facilities and plant when the
facilities and plant are at their designed capacity. The minimum amount of CIAC
should not be less than the percentage of such facilities and plant that is
represented by the water transmission and distribution system or wastewater
collection system.
The Utility originally proposed a
main extension charge of $795, but the request was withdrawn as a result of a
revised filing. In the Utility’s recent filing, the Utility provided the
incremental cost that would be incurred in order to provide service to each of
the respective proposed service areas as shown below in Table 2-1. However, the
Utility did not propose any service availability charges that correspond to the
incremental cost.
Table 2-1
Estimated Main Extension Costs
|
|
Service Area
|
Estimated Cost
|
Number Connections
|
|
1
|
Kingston Shores Condominiums
|
$150,000
|
106
|
|
2
|
John Anderson Drive (Ormond
Beach Plaza)
|
$13,100
|
10
|
|
3A
|
John Anderson Drive (Seabridge)
|
$8,200
|
6
|
|
3B
|
Mid John Anderson Drive
|
$13,500
|
26
|
|
3C
|
Southerly John Anderson Drive
|
$13,800
|
18
|
|
5
|
Fairwinds Shores Condominiums
|
$72,000
|
102
|
Source: Document No. 008676-16
Service to customers in the
proposed service areas will require installation of force mains and laterals.
In some areas, a single main extension is needed to connect a particular
property; however, in areas where there are single family homes or duplexes, a
main extension may serve multiple properties. In December of 2015, Volusia
County enacted an ordinance that requires mandatory connection to municipal or
investor owned wastewater facilities within five years when such facilities
become available. At this time, the Utility is not investing in the proposed
infrastructure until there is request for service. Requests for service may
either not materialize in any particular proposed service area or come at
varying times.
Staff believes it is appropriate
to recommend a main extension charge for future connections in areas where a
single main extension may serve multiple properties. This will allow those
customers to pay their pro rata share of the average cost of the infrastructure
needed to provide service to their property. In order to determine the
appropriate main extension charge, staff evaluated the Utility’s estimated
costs to extend service. Staff determined that there are several scenarios
under which service may be provided to the respective service areas. Service
may be provided either with or without a road crossing to a force main. In some
instances, the Utility may need to install an additional force main to provide
service. As result, staff determined the average cost of the main extension
charge with a road crossing and one without a road crossing. In addition, staff
calculated a per linear foot force main charge. Typically, staff would develop a single main
extension charge per connection that would reflect the pro rata share of the
cost of the lines. However, the
circumstances of the amendment are unique because of the uncertainty of the
need for the service and the disparity in the cost to provide service to each
distinct area. As a result, staff believes that a more reasonable approach is
to design a main extension charge that would allow those customers to pay their
pro rata share of the average cost of the infrastructure needed to provide
service to their property.
Based on the above, staff
recommends that, consistent with the guidelines in Rule 25-30.580, F.A.C., new
customers requesting service should either install the mains necessary to
connect to the Utility and donate those lines to the Utility or, the Utility
may extend the required lines and collect a main extension charge based on whether
a road crossing is required. A main extension charge associated with a road
crossing of $762 per ERC and a main extension charge with no road crossing of
$444 per ERC should be approved. The recommended main extension charges should
be based on an estimated 250 gallons per day of treated wastewater demand.
Also, staff recommends a force main extension charge of $1.25 per linear foot,
based on the average cost per connection, where the Utility will need to extend
its force main to provide service.
Summary
New customers requesting service
should be required to either install the mains necessary to connect to the Utility
and donate those lines to the Utility or, the Utility may extend the required
lines and collect a main extension charge based on whether a road crossing and
force main are required. A main extension charge associated with a road
crossing of $762 per ERC and a main extension charge with no road crossing of
$444 per ERC should be approved. The recommended main extension charges should be
based on an estimated 250 gallons per day per ERC of treated wastewater demand.
Also, staff recommends a force main extension charge of $1.25 per linear foot,
based on the average cost per connection, where the Utility will need to extend
its force main to provide service. The Utility should be required to file
tariffs reflecting the revised service availability policy and charges. The
approved service availability policy and charges should be effective for
connections made on or after the stamped approval date of the tariff pursuant
to Rule 25-30.475, F.A.C .
Issue 3:
Should this docket be closed?
Recommendation:
No. If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, a consummating order should be issued, and the docket
should remain open for staff’s verification that the revised tariff sheets have
been filed by the Utility and approved by staff. If a protest is filed within
21 days of the issuance of the Order, the tariff should remain in effect
subject to refund pending the resolution of the protest, and the docket should
remain open. (Janjic)
Staff Analysis:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, a consummating order should be issued, and the docket
should remain open for staff’s verification that the revised tariff sheets have
been filed by the Utility and approved by staff. If a protest is filed within
21 days of the issuance of the Order, the tariff should remain in effect
subject to refund pending the resolution of the protest, and the docket should
remain open.
