Discussion
of Issues
Issue 1:
Should the transfer of Oak Springs, LLC’s water
system and Certificate No. 623-W in Orange and Lake Counties to Oak Springs
MHC, LLC be approved?
Recommendation:
Yes. The transfer of the water system and
Certificate No. 623-W is in the public interest and should be approved
effective the date of the Commission vote. The resultant order should serve as
the Buyer’s certificate and should be retained by the Buyer. The existing rates and charges should
remain in effect until a change is authorized by the Commission in a subsequent
proceeding. The tariffs reflecting the transfer should be effective for
services rendered or connections made on or after the stamped approval date on
the tariffs pursuant to Rule 25-30.475, Florida Administrative Code (F.A.C.). The
Seller should be responsible for all Regulatory Assessment Fees (RAFs) payable
through the date of closing. The Buyer has filed the 2015 and 2016 Annual
Reports, and will be responsible for all future Annual Reports and RAFs
subsequent to the date of closing (May
31, 2015). (M. Watts, Andrews, Johnson)
Staff Analysis:
On
April
5, 2016, OSMHC filed an application for the transfer
of Certificate No. 623-W from Oak Springs, LLC in Orange and Lake Counties.
The application is in compliance with Section 367.071, F.S., and Commission
rules concerning applications for transfer of certificates. The sale occurred
on May 31, 2015.
Noticing,
Territory, and Land Ownership
The Utility
provided notice of the application pursuant to Section 367.071, F.S., and Rule
25-30.030, F.A.C. No objections to the transfer were filed with the Commission,
and the time for doing so has expired. The notices contained a description of
the territory for OSMHC, which is appended to this recommendation as Attachment
A. The applicant provided a copy of a special warranty deed that was executed
on May 27, 2015, to the staff auditor as evidence that OSMHC owns the land upon
which the water treatment facilities are located pursuant to Rule
25-30.037(2)(q), F.A.C.
Purchase Agreement and Financing
Pursuant to Rule 25-30.037(2)(i), and (j), F.A.C., the
application contains a statement regarding financing and a copy of the Purchase
Agreement, which includes the purchase price, terms of payment, and a list of
the assets purchased. There are no customer deposits, guaranteed revenue
contracts, developer agreements, customer advances, leases, or debt of Oak
Springs that must be disposed of with regard to the transfer. According to the Purchase
Agreement, the total purchase price for the assets, including a Mobile Home
Park, is $1,100,000, of which $110,000 is allocated to the purchase price of
the Utility assets. According to the Buyer, the sale took place on May 31, 2015,
subject to Commission approval, pursuant to Section 367.071(1), F.S.
Facility Description and
Compliance
The water treatment system consists of two wells, a steel
ground storage tank with a storage capacity of 28,000 gallons, a 10,000 gallon
steel hydropneumatic tank, and a sodium hypochlorite system used for
disinfection. The last Florida Department of Environmental Protection (DEP)
sanitary survey was conducted on June 11, 2015, and there were no deficiencies.
On July 20, 2015, the DEP deemed the Utility to be in compliance, therefore,
the system appears to be in compliance with the DEP rules.
Technical and Financial Ability
Pursuant to Rule
25-30.037(2)(l), F.A.C., the application contains statements describing the
technical and financial ability of the Applicant to provide service to the
proposed service area. As referenced in the transfer application, the Buyer has
enlisted the services of key personnel with knowledge, training, and expertise
to assist in the operation and maintenance of the utility system by employing
the same personnel as used by the Seller.
Additionally, the
application contains statements describing the financial ability of the Buyer
to provide service to the proposed service area. According to the application,
the Buyer has acquired the assets of the Utility and has retired all
outstanding long-term and short-term debt for the Utility. Staff also reviewed
the financial statements of the Buyer. Based on the above, staff believes the
Buyer has demonstrated the technical and financial ability to provide service
to the existing service territory.
Rates and Charges
The
Utility’s rates and charges were initially approved in an original
certificate application in 2004.[3] The rates
were subsequently increased through numerous price indexes. The Utility currently
has a pending index increase that will become effective July 8, 2017. The
Utility’s rates, effective July 8, 2017, are shown on Schedule No. 1. Rule
25-9.044(1), F.A.C., provides that, in the case of a change of ownership or
control of a utility, the rates, classifications, and regulations of the former
owner must continue unless authorized to change by this Commission. Therefore,
staff recommends that the Utility’s existing rates and charges remain in effect
until a change is authorized by this Commission in a subsequent proceeding.
Regulatory
Assessment Fees and Annual Reports
Staff has verified
that the Utility is current on the filing of Annual Reports and RAFs. The
Seller has submitted all RAFs payable through the date of closing, May 31,
2015. The Buyer has filed the 2015 and 2016 Annual Reports and paid subsequent RAFs.
The Buyer is responsible for filing all future annual reports and RAFs.
Conclusion
The transfer of the water system and Certificate No. 623-W
is in the public interest and should be approved effective the date of the
Commission vote. The resultant order should serve as the Buyer’s certificate
and should be retained by the Buyer. The existing rates and charges should remain in effect until a change
is authorized by the Commission in a subsequent proceeding. The tariffs
reflecting the transfer should be effective for services rendered or
connections made on or after the stamped approval date on the tariffs pursuant
to Rule 25-30.475, F.A.C. The Seller should be responsible for all RAFs
payable through the date of closing. The Buyer has filed the 2015 and 2016
Annual Reports, and will be responsible for all future Annual Reports and RAFs
subsequent to the date of closing (May 31, 2015).
Issue 2:
What is the appropriate net book value (NBV) for the
water system for transfer purposes and should an acquisition adjustment be
approved?
Recommendation:
The NBV of the water system for transfer
purposes is $106,950 as of May 31, 2015. An acquisition adjustment should not
be included in rate base. To ensure that the Buyer adjusts its books in
accordance with the Commission decision, it should notify the Commission,
within 90 days of the final order in this docket, confirming that the
adjustments to all the applicable National Association of Regulatory Utility
Commissioners (NARUC), Uniform System of Accounts (USOA) accounts have been
made to the Buyer’s books and records. In the event the Buyer needs additional
time to complete the adjustments, notice should be provided to staff within
seven days prior to the deadline. Upon provided good cause, staff should be
given administrative authority to grant an extension of up to 60 days. The
adjustments should be reflected in the Buyer’s 2017 Annual Report when filed. (Andrews)
Staff Analysis:
The purpose of establishing net
book value (NBV) for transfers is to determine whether
an acquisition adjustment should be approved. The NBV does not include
normal ratemaking adjustments for used and useful plant or working capital. The
Utility’s NBV has been updated to reflect balances as of May 31, 2015.
Staff’s recommended NBV, as described below, is shown on Schedule No. 2.
Utility
Plant in Service (UPIS)
In
Docket No. 040515-WU,
an original cost study of the Utility’s Plant in Service was performed to
establish initial rates but was not intended to formally establish rate base.
The revised original cost study,
performed on September 17, 2004, reflected a 2003 plant balance of $429,105.
For the test year ended May 31, 2015, the Utility’s application
reflected a UPIS balance of $444,857. Staff reviewed invoices to bring the
Utility’s 2003 UPIS balance (using the revised original cost study) forward to
May 31, 2015. Staff determined the appropriate balance for UPIS as of May 31,
2015, is $444,857. Staff’s balance reflects no adjustments to the Utility’s
UPIS balance in the application. Therefore, staff recommends that the Utility’s
UPIS balance as of May 31, 2015, should be $444,857.
Land
For the test year ended May 31,
2015, the Utility’s application reflected a land balance of $3,750, consistent
with the estimate from the original cost study. Staff auditors obtained from
the Utility a deed for the land and a written statement that there has been no
change in land ownership since the last proceeding. Based on the auditor’s
findings, the cost assigned to land was $2,733. Staff’s balance reflects a
reduction to land in the amount of $1,017. Therefore, staff recommends that the
Utility’s land balance as of May 31, 2015, should be $2,733.
Accumulated Depreciation
The Utility’s application reflected an accumulated
depreciation balance of $338,750. Based on staff’s
recommended UPIS balance discussed earlier, staff calculated the
appropriate accumulated depreciation balance to be $340,640. As a result,
accumulated depreciation should be increased by $1,890. Therefore, staff
recommends that the Utility’s accumulated depreciation balance as of May 31,
2015, should be $340,640.
Contributions-in-Aid-of-Construction
(CIAC) and Accumulated Amortization of CIAC
Order No. PSC-04-1120-PAA-WU
did not impute CIAC because Oak Springs, LLC did not sell lots; the lots are
leased to homeowners. Audit staff verified that no CIAC has been collected
since this order. Therefore, staff recommends that the Utility’s CIAC and
accumulated amortization of CIAC balances as of May 31, 2015, should be $0.
Net Book Value
The Utility’s application reflected a NBV of $113,607.
Based on the adjustments described above, staff recommends that the NBV is
$106,950. Staff’s recommended NBV and the NARUC USOA balance for UPIS and
accumulated depreciation, as of May 31, 2015, are shown on Schedule No. 2, Page
1 of 3.
Acquisition Adjustment
An acquisition adjustment results when the purchase price
differs from the NBV of the assets at the time of the acquisition. The Utility
and its assets were purchased for $110,000. As stated above, staff has
determined the appropriate NBV total to be $106,950. Pursuant to Rule
25-30.0371, F.A.C., a positive acquisition adjustment may be appropriate when
the purchase price is greater than the NBV, and a negative acquisition
adjustment may be appropriate when the purchase price is less than NBV.
However, pursuant to Rule 25-30.0371(2), F.A.C., a positive acquisition
adjustment shall not be included in rate base absent proof of extraordinary circumstances.
In addition, the Buyer did not request a positive acquisition adjustment. As such, staff recommends that no positive
acquisition adjustment be approved.
Conclusion
The NBV of Oak Springs’s water system for transfer
purposes is $106,950 as of May 31, 2015. No acquisition adjustment should be
included in rate base. To ensure that the Buyer adjusts its books in accordance
with the Commission decision, it should notify the Commission, within 90 days
of the final order in this docket, confirming that the adjustments to all the
applicable NARUC USOA accounts have been made to the Buyer’s books and records.
In an effort to assist the Buyer in its requirement, Schedule 2, Page 3 of 3,
provides a breakdown by primary account for plant and accumulated depreciation
that reflects the ending balances as of May 31, 2015. In the event the Buyer
needs additional time to complete the adjustments, notice should be given to
staff within seven days prior to the deadline. Upon providing good cause, staff
should be given administrative authority to grant an extension of up to 60
days. The adjustments should be reflected in the Buyer’s 2017 Annual Report
when filed.
Issue 3:
Should this docket be closed?
Recommendation:
If no protest to
the proposed agency action is filed by a substantially affected person within
21 days of the date of the order, a consummating order should be issued and the
docket should be closed administratively after OSMHC has provided proof that
its general ledgers have been updated to reflect the Commission-approved
balances as of May 31, 2015. (Mapp)
Staff Analysis:
If no protest to the proposed agency action is filed
by a substantially affected person within 21 days of the date of the order, a
consummating order should be issued and the docket should be closed
administratively after OSMHC has provided proof that its general ledgers have
been updated to reflect the Commission-approved balances as of May 31, 2015.
Oak Springs, MHC
Water Territory
Description
Orange & Lake
Counties
PARCEL I: ORANGE
COUNTY
That part of
the Northeast Ľ of Section 5, Township 20 South, Range 28 East, Orange County, Florida,
more particularly described as follows:
Commence at
the Northeast corner of the Northeast Ľ of Section 5, Township 20 South, Range
28 East, Orange County, Florida; thence North 89°42’51” West, along the North
boundary of said Northeast Ľ, a distance of 204.22 feet to the Point of
Beginning; thence South 0°17’09” West, 350.00 feet; thence North 89°42’51”
West, 350.00 feet from and parallel with said North boundary, a distance of
1082.18 feet to a point on the West boundary of Lot 2, and the East boundary of
Lot 3, J.B. Babcock’s Subdivision, as recorded in Plat Book “B”, Page 27,
Public Records of Orange County, Florida; thence North 6°33’51” West, along said
boundary, a distance of 135.97 feet; thence North 89°42’51” West, 215.00 feet
from and parallel with said North boundary a distance of 713.38 feet to a point
on the East right of way line of State Road No. 435; thence North 0°51’24”
East, along said right of way line, 33.00 feet from and parallel with the
centerline of said road, a distance of 215.01 feet to a point on the North
boundary of said Northeast Ľ; thence South 89°42’51” East, along said North
boundary, 1809.63 feet to the point of Beginning. All being in the Northeast Ľ of Section 5,
Township 20 South, Range 28 East, Orange County, Florida.
PARCEL II: LAKE COUNTY
That part of
the Southeast Ľ of Section 32, Township 19 South, Range 28 East, Lake County, Florida,
more particularly described as follows:
Begin at the Southeast corner of the Southeast Ľ of
Section 32, Township 19 South, Range 28 East, Lake County, Florida; thence
North 89°42’51” West, along the South boundary of said Southeast Ľ, a distance
of 2013.85 feet to a point on the East right of way line of State Road No. 435;
thence North 0°51’24” East, along said right of way line, 33.00 feet from and
parallel with the centerline of said road, a distance of 648.73 feet to the
point of curvature of a curve that is concave Westerly, having a radius of
851.51 feet; thence along the arc of said right of way line curve, 33.00 feet
from and parallel with said centerline, a chord bearing and distance of North
13°36’41” West, 425.49 feet to the point of tangency of said curve; thence
North 28°04’47” West, along said right of way line, 33.00 feet from and
parallel with said centerline, a distance of 213.52 feet to the point of
curvature of a curve that is concave Easterly, having a radius of 268.56 feet;
thence along the arc of said curve, 33.00 feet from and parallel with said
centerline, a chord bearing and distance of North 19°09’24” West, 83.31 feet to
a point on the North boundary of the South ˝ of said Southeast Ľ; thence South 89°46’22” East, along said
North boundary 298.70 feet to a point on the Southeasterly right of way line of
Tifton Street and the Northwesterly boundary of Block 131, Mt. Plymouth,
Section “A”, as recorded in Plat Book 8, Pages 85 through 85-D, Public Records
of Lake County, Florida; thence North 36°11’03” East, along said right of way
line and along said Westerly boundary, a distance of 113.68 feet to a point on
a curve that is concave Northwesterly, having a radius of 1059.00 feet; thence
along the arc of said curve along said right of way line, a chord bearing and
distance of North 30°03’55” East, 157.64 feet, to a point on the Northwesterly
boundary of Block 98, said Section “A”; thence North 26°28’40” East, along said
right of way line and along said Northwesterly boundary, a distance of 165.71
feet to a point on a curve that is concave Southerly, having a radius of 42.70
feet; thence along the arc of said curve, along the Northerly boundary of said
Block 98, a chord bearing and distance of North 72°53’40” East, 62.30 feet to a
point on a curve that is concave Northerly, having a radius of 1621.00 feet;
thence along the arc of said curve, along the Southerly right of way line of
Selma Avenue as shown on said Section “A”, and along the Northerly boundary of
said Block 98 and continuation thereof, a chord bearing and distance of South
71°18’13” East, 611.36 feet to a point on the West boundary of Block 129, said
Section “A”; thence North 0°20’54” West, along West boundary, and the East
right of way line of St. Andrews Boulevard, as shown on said Section “A”, a
distance of 70.56 feet, to the most Northerly corner of said Block 129; thence
South 38°15’27” East, along the Northeasterly boundary of said Block 129, and
Southwesterly right of way of Selma Avenue, a distance of 355.01 feet to a
point on the North boundary of said South ˝; thence South 89°46’22” East, along
said North boundary, 850.77 feet to the Northeast corner of said South ˝;
thence South 0°07’38” East, along the East boundary of said Southeast Ľ, a
distance of 3.43 feet to a point on the South boundary of Block 100, said
Section “A”; thence North 89°42’04” West, along the South boundary of said
Block 100, a distance of 265.20 feet to the Southwest corner of said Block;
thence South 44°54’51” East, 376.44 feet to a point on said East boundary;
thence South 0°07’38” East along said East boundary, 1061.85 feet to the Point
of Beginning. All being in the Southeast
Ľ of Section 32, Township 19 South, Range 28 East, Lake County, Florida.
FLORIDA PUBLIC SERVICE COMMISSION
Authorizes
Oak Springs MHC, LLC.
Pursuant to
Certificate Number 623-W
To provide water service in Orange
and Lake Counties in accordance with the provisions of Chapter 367, Florida
Statutes, and the Rule, regulations, and Orders of this Commission in the
territory described by the Orders of this Commission. This authorization shall
remain in force and effect until superseded, suspended, cancelled or revoked by
Order of this Commission.
Order Number Date Issued Docket Number Filing Type
PSC-04-1120-PAA-WU 11/09/2004 040515-WU Original
Certificate
* * 160075-WU Transfer of Certificate
* Order Numbers and
dates to be provided at time of issuance
