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 Conference
(Conference), staff presented its recommendation regarding the Utility’s SARC.
Several customers attended the 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 Department of Environmental
Protection (DEP)/Department of Health (DOH) compliance issue with regard to
boil water notices.
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 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 a 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 the Utility’s
compliance with 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. By
Order No. PSC-16-0351-FOF-WU, issued on August 23, 2016, the Commission acknowledged
the Utility’s management controls and practices were being implemented and
corrective actions were being performed to comply with Commission rules and
regulations. This Order also found the Utility to be in substantial compliance
with Order No. PSC-15-0535-PAA-WU. On December 14, 2016, the Utility filed its
12-month Compliance Report. This recommendation addresses the Utility’s 12-month
Compliance Report. 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:
On December 14, 2016, Cedar
Acres timely submitted its 12-month Compliance Report along with the required
billing analysis. In the Compliance Report, Cedar Acres included a variety of
corrective measures that are continuing to be taken, as directed by this
Commission and suggested by staff in its Managerial Audit. Presented below are
the broad categories of concern cited by the Commission in Order No.
PSC-15-0535-PAA-WU, along with an update from the Utility as to how these
concerns have been addressed.
Quality of Service Concerns
Cedar Acres has continued to
implement the corrective measures that were recommended by staff in its Management
Audit. The Utility implemented a system to record customer complaints, but has
received no complaints since its six-month compliance report. In addition, the
Commission’s Consumer Activity Tracking System (CATS) has registered zero
complaints in the last six months. DEP has not recorded any violations or
complaints for the Utility in the last six months. Staff believes the Utility
has taken adequate measures to address customer concerns and complaints and to
comply with DEP requirements and Commission rules.
Billing Issues
During the October 13, 2015, Commission
Conference, customers expressed concern with the Utility’s billing practices.
Customers reported faulty meters, unusual bills, and a mailing issue dispute
between an owner of the property receiving water and the tenant of the property.
Staff addressed these issues in its October 1, 2015 recommendation, recognizing
that 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 over the course of a four year
period.
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 12-month
Compliance Report, the Utility
indicated that meters are audited with each reading and prioritized for meter
replacement. According to the Utility’s 12-month Compliance Report and staff’s discussions
with the Utility, 50 meters have been replaced. The Utility has ordered 12
additional meters that are scheduled to be installed when they arrive based on
the installer’s schedule. 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. Due to unanticipated expenses, the Utility hasn’t
always been able to make regular escrow deposits. However, the Utility has been replacing an
acceptable number of meters on a consistent basis. While the Utility is not in
full compliance with the Commission’s Order regarding the escrow deposits, the
Utility is diligently working with staff to keep the Commission updated with
actual replacement of meters. Thus, Staff believes the Utility is following the
spirit of the Commission’s Order by going forward with the actual replacement
of meters even when funds have not been timely deposited into the established
escrow account.
Based on the reasons outlined above,
staff believes that Cedar Acres is making a substantial effort to comply with
Order No. PSC-15-0535-PAA-WU by implementing corrective measures and
improvements regarding the Utility’s
service to its customers. Staff also believes that Cedar Acres continues to
incorporate 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 Cedar Acres is 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. Staff will
continue to monitor the Utility’s progress and the status of the escrow account,
along with the meter replacement program.
Issue 2:
Should the Utility be required to file an additional
billing analysis?
Recommendation:
Yes. Cedar Acres should be required to file an additional billing analysis,
which reflects the period of November 1, 2016 to June 30, 2017, by July 31,
2017. (Hudson)
Staff
Analysis: In
accordance with Order No. PSC-15-0535-PAA-WU, Cedar
Acres filed a billing analysis for the 12-month compliance review period. The
billing analysis data represented the 10-month period from January 2016 to
October 2016. Based on the billing analysis data, staff annualized revenues and
water demand for the 10-month period and compared those amounts with the
revenue requirement approved in Order No. PSC-15-0535-PAA-WU.
Table 2-1
Revenue and Demand
|
|
Revenue
|
Demand
|
|
Commission Approved
|
$115,111
|
15,716,600 gallons*
|
|
Billing Analysis - Actual
|
$60,635
|
5,303,461 gallons
|
|
Billing Analysis - Annualized
|
$72,763
|
6,364,134 gallons
|
|
*Approximate post-repression gallons
|
Source: Order No. PSC-15-0535-PAA-WU, Utility data, and staff’s
calculations
In its 12-month Compliance
Report, the Utility indicated 50 meters have been replaced, with 12 more on
order. The Utility further indicated that the last 24 meters were replaced
subsequent to its October 2016 billing. Staff determined that the monthly
operating reports for the corresponding period of January 2016 to October 2016,
reflect approximately 18 million gallons pumped versus the 5.3 million gallons
sold. Although Cedar Acres is replacing all of the meters, there were 44 meters
(or 16 percent) identified as partially readable or unreadable in the
Commission’s Management Audit. Therefore, staff has concern with the disparity
between the gallons pumped and gallons sold. Since the billing analysis does
not reflect any actual readings from the most recent meter replacements and
there is a large disparity between water gallons pumped and sold, staff
believes an additional billing analysis should be provided by the Utility in
order to more fully evaluate the customer demand. In addition, staff encourages
the Utility to reach out to the Florida Rural Water Association to help
determine the discrepancies between gallons pumped and gallons sold.
Based on the above, staff recommends that the Utility be
required to file an additional billing analysis, which reflects the period of
November 1, 2016 to June 30, 2017, by July 31, 2017.
Issue 3:
Should this docket be closed?
Recommendation:
No. This docket should remain open to allow staff to
continue to monitor Cedar Acres’ meter replacement program, and administration
of escrow account funds. Additionally, this docket should remain open to allow
staff to analyze the Utility’s billing analysis due on or before July 31, 2017.
(Corbari)
Staff Analysis:
This docket should remain open to allow staff to
continue to monitor Cedar Acres’ meter replacement program, and administration
of escrow account funds. Additionally, this docket should remain open to allow
staff to analyze the Utility’s billing analysis due on or before July 31, 2017.
Therefore, this docket should remain open.
