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State of Florida
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Public Service Commission
Capital Circle Office Center ● 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE:
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October 26, 2017
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TO:
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Office of Commission Clerk (Stauffer)
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FROM:
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Office of the General Counsel (DuVal,
Cuello)
Division of Accounting
and Finance (Mouring, Smith)
Office of Consumer
Assistance and Outreach (Hicks)
Division of Economics
(McCoy, McNulty)
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RE:
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Docket No. 20170200-WU – Initiation of show
cause proceedings against Kincaid Hills Water Company, in Alachua County, for
noncompliance with Sections 350.113, 350.117, 367.121, and 367.145, Florida
Statutes, and Rules 25-30.110, 25-30.120, 25-30.355, and 25-22.032, Florida
Administrative Code.
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AGENDA:
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11/07/17 – Regular Agenda – Show Cause – Interested Persons May
Participate
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Graham
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CRITICAL DATES:
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None
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SPECIAL INSTRUCTIONS:
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None
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Case Background
Commission staff
opened the instant docket to initiate show cause proceedings against Kincaid
Hills Water Company (Kincaid or Utility) for apparent violations of Florida
Statutes (F.S.) and Commission rules for: (1) its failure to remit payment of
its annual Regulatory Assessment Fees (RAFs) for the years 2008, 2009, 2012,
2013, and 2016; (2) its failure to submit its Annual Reports for the years
2009, 2010, 2011, 2012, and 2013; and (3) its failure to respond to customer complaints
and to provide a written response to Commission staff regarding customer
complaints.
Kincaid is a
Class C water utility providing service in Alachua County. Kincaid became
subject to Commission jurisdiction and was granted a grandfather water certificate
in 1993. The following information provides a
historical overview of the Commission’s activities related to Kincaid.
After failing to
submit its Annual Reports for 1994 through 1996, an enforcement proceeding was
initiated against Kincaid for violations of Rule 30.110, Florida Administrative
Code (F.A.C.) (1997 Proceeding), and Kincaid was ordered to show cause why it
should not be penalized $2,628 for failing to submit its Annual Reports.[2]
Kincaid failed to respond to the Commission’s Order, resulting in the
Annual Report penalties being assessed by the Commission.[3] After several failed attempts by
Commission staff to contact Kincaid to collect the Annual Report penalty, the
Commission submitted the penalty to the Florida Department of Financial Services
(DFS) to be written-off as uncollectible.[4]
In 2004, after failing to submit RAFs for
the years 1995 through 2003 and failing to submit Annual Reports for the years
1998 through 2003, the Commission initiated an enforcement proceeding against Kincaid
for violations of Section 350.113, F.S., and Rules 25-30.110 and 25-30.120,
F.A.C. (2004 Proceeding).[5] In
an effort to work with Kincaid to resolve its non-compliance issues and because
Kincaid made an effort to cooperate with Commission staff and submitted all of
the delinquent Annual Reports for 1998-2003, the Commission declined to order
Kincaid to show cause or assess fines against Kincaid for failing to submit
RAFs and Annual Reports.[6] Instead, the Commission approved a payment
plan submitted by Kincaid to pay the RAFs, plus statutory penalty and interest,
that it owed for the years 1995 to 2003.[7] In
addition, Kincaid was put on notice that failure to timely submit RAFs and
Annual Reports in the future or comply with any Commission orders would result
in further enforcement action by the Commission.
Kincaid again
failed to submit RAFs and Annual Reports the year after the 2004 Proceeding, as
well as the following two years. Kincaid made several payments toward the RAF
amounts owed pursuant to the payment plan approved by Order No.
PSC-04-0615-FOF-WU between June 2004 and January 2006, then ceased submitting
payments.[8] After failing to submit RAFs and Annual
Reports for 2004, 2005, and 2006, failing to submit payments pursuant to the
approved payment plan, and failing to respond to staff’s attempts to collect
the amounts owed, the Commission initiated another enforcement proceeding
against Kincaid in 2007 for violations of Section 350.113, F.S., and Rules
25-30.110 and 25-30.120, F.A.C., and Order No. PSC-04-0615-FOF-WU (2007
Proceeding).[9]
At the time the
Commission initiated the 2007 Proceeding, Kincaid had serious compliance issues
with the Florida Department of Environmental Protection (DEP), as well as the
United States Environmental Protection Agency (EPA). Despite finding “a continued pattern of
disregard for the directions, orders, and rules of this Commission,” and “a
continued pattern of disregard for the timely payment of RAFs,” the Commission
again declined to order Kincaid to show cause, finding “exigent and mitigating
circumstances” existed.[10] At
that time, the Commission reasoned that assessing additional penalties and
requiring Kincaid to pay its delinquent RAFs and assessing Annual Report
penalties would only further impair Kincaid’s financial viability and its
ability to address the DEP and EPA compliance issues.[11] Therefore, the Commission ordered that the
outstanding RAFs amounts, including penalty and interest, owed by Kincaid for
the years 1995 through 2006, be submitted to DFS to be written-off as
uncollectible.[12] Kincaid
was put on notice that “failure to timely file future annual reports
will subject it to the penalties authorized by Rule 25-30.110(7), F.A.C., and
to show cause proceedings and fines of up to $5,000 per day per violation for each
day the violation continues, as set forth in Section 367.161, F.S., or
revocation proceedings pursuant to Section 367.161(2), F.S.”[13] In
addition, the Commission found Kincaid eligible for a Staff-Assisted Rate Case
(SARC). Finally, the Commission ordered
that the 2007 Proceeding remain open until Kincaid filed its SARC application,
and that staff was to bring a recommendation to the Commission should Kincaid
fail to timely submit RAFs during the pendency of its SARC.[14]
In April 2008,
Kincaid notified Commission staff that it would not pursue a SARC due to
customer dissatisfaction expressed after Kincaid implemented recent rate
increases.[15] Between June 2007 and April 2008, Kincaid
received two price-index increases, and a 4.5% pass-through increase, which
allowed Kincaid to recover RAFs in its rates going forward. With the recent increases, Kincaid stated it
could meet its obligations to pay RAFs and maintain Kincaid without a SARC.[16] By
Order No. PSC-08-0386-FOF-WU, the Commission ordered the 2007 Proceeding closed
based on Kincaid submitting its 2007 RAFs[17] and receiving the index and pass-through
increases.[18]
The year
following the closure of the 2007 Proceeding, Kincaid again failed to submit
its RAFs for 2008, as well as for the years 2009, 2010, 2011, 2012, and 2013. Kincaid
again failed to submit its Annual Reports for the years 2009, 2010, 2011, 2012,
and 2013.[19] Kincaid also failed to respond to staff’s
repeated attempts to contact Kincaid by telephone, mail, and email. In June 2014, Kincaid’s owner, Mr. Berdell
Knowles, Sr., finally responded to staff regarding Kincaid’s outstanding RAFs,
outstanding Annual Reports, and payment options. Mr. Knowles, Sr. agreed to
submit Kincaid’s outstanding Annual Reports and RAF returns, along with an
initial RAF payment by June 30, 2014.[21] In addition, Mr. Knowles, Sr. was advised
that the Commission may pursue further compliance action if Kincaid did not
comply with a RAF payment plan.[22] Mr. Knowles, Sr. failed to submit
Kincaid’s 2008-2013 RAF returns or an initial RAF payment, and failed to submit
Kincaid’s 2009-2013 Annual Reports, by June 30, 2014, as agreed and,
again, failed to respond to staff’s attempts to contact Kincaid.
In October 2014,
due to staff’s continued inability to contact Mr. Knowles, Sr., Commission staff
communicated with the DEP staff assigned to Kincaid’s compliance issues and
obtained the contact information for Mr. Berdell Knowles, Jr., a corporate
officer of Kincaid. On October 20, 2014, staff spoke with Mr.
Knowles, Jr. regarding Kincaid’s delinquent RAF and Annual Report status, the
lack of cooperation by Mr. Knowles, Sr. to engage in discussions with staff,
and Kincaid’s corporate and financial status. On October 23, 2014, staff held a
conference call with Mr. Knowles, Jr., wherein Mr. Knowles, Jr. agreed to an
initial compliance action plan to resolve Kincaid’s compliance issues. Mr. Knowles, Jr. agreed to submit all of
Kincaid’s delinquent Annual Reports for years 2009-2013, as well as the RAF
amounts owed for the years 2010 and 2011, plus penalty and interest, by
November 7, 2014.[25] As part of the initial compliance plan,
Kincaid also agreed to continue working with staff regarding payment of the
remaining RAF amounts owed, to consider pursing a SARC, and to submit future
RAFs and Annual Reports timely.[26]
On November 14,
2014, the Commission received Kincaid’s payment in the amount of $8,690.15,
which satisfied the outstanding RAF amounts owed by Kincaid for 2010 and 2011.[27] On November 14, 2014, the Commission
received Kincaid’s Annual Reports for 2009-2013. On February 16, 2015, staff held a
conference call with Kincaid (Mr. Knowles, Sr. and Mr. Knowles, Jr. both
participated), wherein Kincaid agreed to resolve its compliance issues,
including negotiation of payment options for its past due RAFs, to submit
future RAFs and Annual Reports timely, to pursue a SARC, and to update its
corporate status with the Florida Secretary of State, Division of Corporations[29] Since submitting the $8,690.15 payment,
however, Kincaid failed to meet the requirements of the initial compliance plan
as agreed. Although Kincaid submitted its 2014, 2015,
and 2016 Annual Reports timely, Kincaid failed to meet the other requirements
of the initial compliance plan.[30] Specifically, Kincaid has failed to: (1)
submit additional payments toward its remaining years of delinquent RAFs; (2)
continue to work with staff regarding repayment of its remaining years of
delinquent RAFs; (3) update its corporate status with the Florida Secretary of
State, Division of Corporations; (4) apply for a SARC; and (5) to submit its
2016 RAFs.[31]
Commission staff
received customer complaints regarding Kincaid on October 13, 2016, March 30,
2017, and May 8, 2017. To date, Kincaid has not responded to these customer
complaints, nor has Kincaid provided a written response to Commission staff on
each complaint.
By certified
letter, dated July 31, 2017, Commission staff notified Kincaid of apparent
violations of Sections 350.113, 350.117, 367.121, and 367.145, F.S., and Rules
25-30.110, 25-30.120, 25-30.355, and 25-22.032, F.A.C., and possible initiation
of a show cause proceeding against the Utility for: (1) failing to remit payment
of its annual RAFs for the years 2008, 2009, 2012, 2013, and 2016; (2) failing
to timely submit its Annual Reports for the years 2009, 2010, 2011, 2012, and
2013; and (3) failing to respond to customer complaints and to provide a
written response to Commission staff regarding customer complaints. Kincaid’s owner, Mr. Knowles, Sr., was
informed in that letter that Section 367.161, F.S., provides in pertinent part:
(1) If any utility, by any authorized
officer, agent, or employee, knowingly refuses to comply with, or willfully
violates, any provision of this chapter or any lawful rule or order of the
commission, such utility shall incur a penalty for each such offense of not
more than $5,000, to be fixed, imposed, and collected by the commission . . . .
Each day that such refusal or violation continues constitutes a separate
offense. Each penalty shall be a lien upon the real and personal property of
the utility, enforceable by the commission as statutory liens under chapter 85.
(2) The commission has the power to impose
upon any entity that is subject to its jurisdiction under this chapter and that
is found to have refused to comply with, or to have willfully violated, any
lawful rule or order of the commission or any provision of this chapter a
penalty for each offense of not more than $5,000, which penalty shall be fixed,
imposed, and collected by the commission; or the commission may, for any such
violation, amend, suspend, or revoke any certificate of authorization issued by
it. Each day that such refusal or violation continues constitutes a separate
offense. Each penalty shall be a lien upon the real and personal property of
the entity, enforceable by the commission as a statutory lien under chapter 85.
Staff’s letter
put Kincaid on notice that Commission staff would open a docket to initiate a
show cause proceeding if Kincaid did not correct the violations by remitting
payment of the delinquent RAFs, remitting payment for penalties for late-filed
Annual Reports, and submitting written responses to the customer complaints by
August 31, 2017. Commission staff further notified Kincaid that should the
Utility ultimately be found in violation of Commission statutes, rules, or
orders, the Commission may impose fines of up to $5,000 per violation, for each
day each violation continues, including levying a statutory lien upon the real
and personal property of the Utility, or the Commission may amend, suspend, or
revoke Kincaid’s certificate, pursuant to Section 367.161, F.S. Additionally,
Commission staff stated that, if necessary, the Commission may also seek
injunctive or other appropriate relief in circuit court to compel Kincaid’s
compliance, pursuant to Section 367.121, F.S. To date, Kincaid has not remitted
payment of the delinquent RAFs, remitted payment for penalties for late-filed
Annual Reports, or submitted written responses to the customer complaints, in
response to staff’s letter.
By certified
letter, dated September 28, 2017, the Commission’s Office of the General
Counsel notified Kincaid that Commission staff opened a docket initiating a
show cause proceeding for the Utility’s apparent statute and rule violations.
This
recommendation addresses whether or not the Commission should order Kincaid to
show cause why it is not obligated to submit the relevant payments and fines
and bring itself into compliance with the Commission’s statutes and rules. Issue
1 is staff’s recommendation regarding Kincaid’s apparent violation of Sections 350.113
and 367.145, F.S., and Rule 25-30.120, F.A.C., for failure to submit RAFs for
the years 2008, 2009, 2012, 2013, and 2016. Issue 2 is staff’s recommendation
regarding Kincaid’s apparent violation of Section 367.121, F.S., and Rule 25-30.110,
F.A.C., for failure to timely submit its Annual Reports for the years 2009,
2010, 2011, 2012, and 2013. Issue 3 is staff’s recommendation regarding
Kincaid’s apparent violation of Rules 25-30.355 and 25-22.032, F.A.C., for
failing to respond to customer complaints. Issue 4 discusses the closing of the
docket and options for pursuing collection of the past due RAFs, Annual Report
penalties, and penalties for failing to respond to customer complaints, along
with the procedure for the option of initiating revocation proceedings.
When evaluating
staff’s recommendation, a review of the Commission’s authority regarding a
utility’s alleged violations of Commission rules, statutes, or orders is
helpful.
Pursuant to
Section 367.161(1), F.S., the Commission is authorized to impose upon any
entity subject to its jurisdiction a penalty of not more than $5,000 for each
such day a violation continues, if such entity is found to have refused to comply with or to have willfully violated any lawful
rule or order of the Commission, or any provision of Chapter 367, F.S. Each day a violation continues is treated as
a separate offense. Each penalty is a
lien upon the real and personal property of the utility and is enforceable by
the Commission as a statutory lien. If a
penalty is also assessed by another state agency for the same violation, the
Commission’s penalty will be reduced by the amount of the other agency’s
penalty. As an alternative to the above
remedies, Section 367.161(2), F.S., permits the Commission to amend, suspend,
or revoke a utility’s certificate for any such violation. Part of the determination the Commission must
make in evaluating whether to penalize a utility is whether the utility
willfully violated the rule, statute, or order.
Section 367.161, F.S., does not define what it is to “willfully violate”
a rule or order.
Willfulness is a
question of fact.[34] The plain meaning of “willful” typically
applied by the Courts in the absence of a statutory definition, is
an act or omission that is done “voluntarily and intentionally” with specific
intent and “purpose to violate or disregard the requirements of the law.” Fugate at 76.
The procedure
followed by the Commission in dockets such as this is to consider the
Commission staff’s recommendation and determine whether or not the facts
warrant requiring the utility to respond.
If the Commission finds that the facts warrant requiring the utility to
respond, the Commission issues an Order to Show Cause (show cause order). A show cause order is considered an
administrative complaint by the Commission against the utility. If the Commission issues a show cause order,
the utility is required to file a written response, which response must contain
specific allegations of disputed fact.
If there are no disputed factual issues, the utility’s response should so
indicate. The response must be filed
within 21 days of service of the show cause order on the respondent.
In recommending
a penalty, staff reviews prior Commission orders. While Section 367.161, F.S.,
treats each day of each violation as a separate offense with penalties of up to
$5,000 per offense, staff believes that the general purpose of the show cause
penalties is to obtain compliance with the Commission’s rules, statutes, and
orders. If a utility has a pattern of
noncompliance with a particular rule or set of rules, staff believes that a
higher penalty is warranted. If the rule
violation adversely impacts the public health, safety, or welfare, staff
believes that the sanction should be the most severe.
The utility has
two options if a show cause order is issued.
The utility may respond and request a hearing pursuant to Sections
120.569 and 120.57, F.S. If the utility
requests a hearing, a further proceeding will be scheduled before the
Commission makes a final determination on the matter. The utility may respond to the show cause order
by remitting the fine and bringing itself into compliance with the Commission’s
statutes and rules. If the utility pays
the fine and brings itself into compliance with the Commission’s statutes and
rules, this show cause matter is considered resolved, and the docket closed.
In the event the
utility fails to timely respond to the show cause order, the utility is deemed
to have admitted the factual allegations contained in the show cause
order. The utility’s failure to timely
respond is also a waiver of its right to a hearing. If the utility does not timely respond, a
final order will be issued imposing the sanctions set out in the show cause
order. It should be noted that if the
Commission commences revocation or suspension proceedings, the Commission must
follow very specific noticing requirements set forth in Section 120.60, F.S.,
prior to revocation or suspension of a certificate.
The Commission
has jurisdiction pursuant to Sections 350.113, 367.121, 367.145, and 367.161,
F.S.
Discussion
of Issues
Issue 1:
Should Kincaid Hills Water Company be ordered to
show cause in writing, within 21 days, why it is not obligated to remit payment
in the amount of $22,403.19, for delinquent Regulatory Assessment Fees, plus
statutory penalties and interest, for the years 2008, 2009, 2012, 2013, and
2016?
Recommendation:
Alternative 1
Recommendation: Yes. Kincaid
Hills Water Company should be ordered to show cause in writing, within 21 days,
why it is not obligated to remit payment in the amount of $22,403.19, for
delinquent Regulatory Assessment Fees, plus statutory penalties and interest,
for the years 2008, 2009, 2012, 2013, and 2016. Specifically, staff recommends
that the Utility be directed to pay its past due RAFs in the amount of $2,279.75
for 2008, $2,712.33 for 2009, $2,634.08 for 2012, $2,239.02 for 2013, and $2,006.69
for 2016, including statutory interest and penalties in the amounts of $2,963.68
for 2008, $3,200.55 for 2009, $2,159.95 for 2012, $1,544.93 for 2013, and $662.21
for 2016. (DuVal, Cuello, Hicks, McCoy, Smith)
Alternative 2
Recommendation: No. The Commission should direct staff to initiate
certificate revocation proceedings against Kincaid Hills Water Company
consistent with Chapter 120 and Section 367.161, F.S. (DuVal, Cuello, Hicks,
McCoy, Smith)
Staff Analysis:
Applicable Law
Pursuant to Sections 350.113 and 367.145, F.S., and Rule
25-30.120, F.A.C., each regulated company under the jurisdiction of the
Commission shall pay to the Commission a RAF based upon the gross operating
revenues for the prior year operating period.
Rule 25-30.120, F.A.C., requires that utilities pay a regulatory
assessment fee of 4.5 percent of its gross revenues derived from intrastate
business, or a minimum of $25.00 if there are no revenues or if revenues are
insufficient to generate above the $25.00 minimum. Section 350.113(4), F.S.,
provides for a penalty of 5 percent for the first 30 days, and an additional
penalty of “5 percent for each additional 30 days or fraction thereof during
the time in which the failure continues, not to exceed a total penalty of 25
percent,” and states that “the commission shall collect the fee and penalty,
plus interest and all costs of collection, from the regulated company.” Section 367.145(1)(b), F.S., states that, in
addition to the penalties and interest otherwise provided, the Commission may
impose a penalty upon a utility for failure to pay regulatory assessment fees
in a timely manner in accordance with Section 367.161, F.S. Further, Rule
25-30.120(7)(b), F.A.C., provides that, in addition to statutory penalties and
interest, the Commission may impose an additional penalty upon a utility for
failing to pay RAFs timely, pursuant to Section 367.161, F.S.
Pursuant to Section 367.161, F.S., the commission has the power
to impose upon any entity that is subject to its jurisdiction under this
chapter and that is found to have refused to comply with, or to have willfully
violated, any lawful rule or order of the commission or any provision of this
chapter a penalty for each offense of not more than $5,000, for each such day a
violation continues, which penalty shall be fixed, imposed, and collected by
the commission; or the commission may, for any such violation, amend, suspend,
or revoke any certificate of authorization issued by it.
Willfulness
is a question of fact.[35] Therefore,
part of the determination the Commission must make in evaluating whether to
penalize a utility is whether the utility willfully violated the rule, statute,
or order. Section 367.161, F.S., does not define what it is to “willfully
violate” a rule or order. The plain
meaning of “willful” typically applied by the Courts in the absence of a statutory definition, is an act
or omission that is done “voluntarily and intentionally” with specific intent
and “purpose to violate or disregard the requirements of the law.” Fugate at 76.
Factual
Allegations
Commission records indicate that Kincaid failed to submit
RAFs for the years 2008, 2009, 2012, 2013, and 2016.[36] Kincaid has a long history of failing to
submit RAFs, and has had two enforcement proceedings brought by the Commission
in 2004 and 2007 for failing to submit RAFs.[37] In fact, since coming under the Commission’s
jurisdiction in 1993, Kincaid has only submitted RAFs timely two times (2014
and 2015).[38] Despite
the numerous attempts by the Commission and staff over the last 13 years to
work with Kincaid to resolve its RAF compliance issues, Kincaid has repeatedly
failed to comply with its statutory and regulatory obligations.
Because Kincaid failed to submit its 2008, 2009, 2012,
2013, and 2016 RAFs timely, statutory penalties and interest are also due.
The total amount owed by Kincaid for 2008, 2009, 2012,
2013, and 2016 RAFs, plus associated penalties and interest, calculated through
November 7, 2017, is $22,403.19. A
breakdown of the amount is shown in the table below.
|
Year[39]
|
Revenues
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RAFs
(4.5%)
|
Penalty
(5% up to 25%)
(As of 11/7/17)
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Interest
(1% through 08/31/17)
(As of 11/7/17)
|
Payments
|
Total
Due
|
|
2016
|
$44,593.00
|
$2,006.69
|
$501.67
|
$160.54
|
$0.00
|
$2,668.90
|
|
2013
|
$49,756.00
|
$2,239.02
|
$559.76
|
$985.17
|
$0.00
|
$3,739.17
|
|
2012
|
$58,535.00
|
$2,634.08
|
$658.52
|
$1,501.43
|
$0.00
|
$4,715.00
|
|
2009
|
$60,274.00
|
$2,712.33
|
$678.08
|
$2,522.47
|
$0.00
|
$5,858.63
|
|
2008
|
$50,661.00
|
$2,279.75
|
$569.94
|
$2,393.74
|
$0.00
|
$5,197.83
|
|
Totals
|
$263,819.00
|
$11,871.87
|
$2967.97
|
$9,629.21
|
$12,888.25
|
$22,403.19
|
Alternative 1 Recommendation
By knowingly failing to comply with the provisions of Sections
350.113 and 367.145, F.S., and Rule 25-30.120, F.A.C., staff believes Kincaid’s
acts were “willful” in the sense intended by Section 367.161, F.S., and contemplated
by Fugate. Therefore, staff
recommends that Kincaid Hills Water Company be ordered to show cause in
writing, within 21 days, why it is not obligated to remit payment in the amount
of $22,403.19, for delinquent Regulatory Assessment Fees, plus statutory
penalties and interest, for the years 2008, 2009, 2012, 2013, and 2016.
Specifically, staff recommends that the Utility be directed to pay its past due
RAFs in the amount of $2,279.75 for 2008, $2,712.33 for 2009, $2,634.08 for
2012, $2,239.02 for 2013, and $2,006.69 for 2016, including statutory interest
and penalties in the amounts of $2,963.68 for 2008, $3,200.55 for 2009, $2,159.95
for 2012, $1,544.93 for 2013, and $662.21 for 2016. Staff recommends that the
show cause order incorporate the following conditions:
1.
This show cause order is an administrative complaint by
the Florida Public Service Commission, as petitioner, against Kincaid Hills
Water Company, as respondent.
2.
Kincaid shall respond to the show cause order within 21
days of service on the Utility, and the response shall reference Docket No. 20170200-WU,
Initiation of show cause proceedings against Kincaid Hills Water Company, in
Alachua County, for noncompliance with Sections 350.113, 350.117, 367.121, and
367.145, Florida Statutes, and Rules 25-30.110, 25-30.120, 25-30.355, and
25-22.032, Florida Administrative Code.
3.
Kincaid has the right to request a hearing to be
conducted in accordance with Sections 120.569 and 120.57, F.S., and to be
represented by counsel or other qualified representative.
4.
Requests for hearing shall comply with Rule
28-106.2015, F.A.C.
5.
Kincaid’s response to the show cause order shall
identify those material facts that are in dispute. If there are none, the petition must so
indicate.
6.
If Kincaid files a timely written response and makes a
request for a hearing pursuant to Sections 120.569 and 120.57, F.S., a further
proceeding will be scheduled before a final determination of this matter is
made.
7.
A failure to file a timely written response to the show
cause order will constitute an admission of the facts herein alleged and a
waiver of the right to a hearing on this issue.
8.
In the event that Kincaid fails to file a timely
response to the show cause order, the fine will be deemed assessed and a final
order will be issued.
9.
If Kincaid responds to the show cause order by
remitting the fine, this show cause matter will be considered resolved, and the
docket closed.
Furthermore, the Utility should be warned and put on
notice that continued failure to comply with Commission orders, rules, or statutes
will again subject the Utility to show cause proceedings and fines of up to
$5,000 per day per violation for each day the violation continues, or the
Commission may amend, suspend, or revoke Kincaid’s certificate, as set forth in
Section 367.161, F.S.
Alternative 2 Recommendation
In the
alternative, Commission staff should be directed to send a letter to the
Utility, giving the Utility 30 days notice that it intends to commence
revocation proceedings. Revocation would be in lieu of the penalties set forth
above. In evaluating this option, it would be important for the Commission to
consider Kincaid’s management’s history, specifically, the fact that the
Utility has a long history of noncompliance. Staff believes that Kincaid has a
poor record of complying with applicable rules and statutes under Commission
jurisdiction. Notably, this is the fourth time staff has opened a docket to
initiate a show cause proceeding since Kincaid became subject to the
Commission’s jurisdiction in 1993. The Commission similarly initiated
revocation proceedings against St. George Island Utility Company, Ltd. in
Franklin County as a result of that utility’s history of noncompliance with
orders, rules, and statutory requirements.
Commission
staff is concerned that Kincaid’s management does not understand how to and is
not willing to commit the time to operate a utility within the meaning of
Chapter 367, F.S. The operation of a
utility under Chapter 367, F.S., if successful, allows a utility the opportunity
to earn a return on its investment. If
management is not willing to operate as a utility, the Utility’s certificate
should be revoked, removing any opportunity the owner has to earn a return on
its investment. If the certificate is
revoked, a receiver must be appointed pursuant to Section 367.165, F.S., until
a sale of the utility system has been approved pursuant to Section 367.071,
F.S.
Issue 2:
Should Kincaid Hills Water Company be ordered to
show cause in writing, within 21 days, why it is not obligated to remit payment
in the amount of $14,376, in
statutory penalties for failing to timely submit its Annual Reports for the
years 2009, 2010, 2011, 2012, and 2013?
Recommendation:
Alternative 1
Recommendation: Yes. Kincaid Hills Water Company should be ordered to
show cause in writing, within 21 days, why it is not obligated to remit payment
in the amount of $14,376, in
statutory penalties for failing to timely submit its Annual Reports for the
years 2009, 2010, 2011, 2012, and 2013. (DuVal, Cuello, Hicks, McCoy, Smith)
Alternative 2
Recommendation: No. The
Commission should direct staff to initiate certificate revocation proceedings
against Kincaid Hills Water Company consistent with Chapter 120 and Section
367.161, F.S. (DuVal, Cuello, Hicks, McCoy, Smith)
Staff Analysis:
Applicable Law
Section 367.121(1)(c) and (i),
F.S., authorizes the Commission to require utilities subject to its
jurisdiction to file such regular financial reports it deems necessary. Rule
25-30.110(3)(a), F.A.C., provides that each utility under the jurisdiction of
the Commission shall file an Annual Report on or before March 31st, for the
preceding year ending December 31. The standard penalty for delinquent Annual Reports
is $3 per day, pursuant to Rule 25-30.110(7), F.A.C.
Pursuant to Section 367.161, F.S., the
commission has the power to impose upon any entity that is subject to its
jurisdiction under this chapter and that is found to have refused to comply
with, or to have willfully violated, any lawful rule or order of the commission
or any provision of this chapter a penalty for each offense of not more than
$5,000, for each such day a violation continues, which penalty shall be fixed,
imposed, and collected by the commission; or the commission may, for any such
violation, amend, suspend, or revoke any certificate of authorization issued by
it.
Willfulness is a question of
fact.[41]
Therefore, part of the determination the Commission must make in evaluating
whether to penalize a utility is whether the utility willfully violated the
rule, statute, or order. Section 367.161, F.S., does not define what it is to
“willfully violate” a rule or order. The plain meaning of “willful” typically applied by the Courts in the absence of a statutory definition, is
an act or omission that is done “voluntarily and intentionally” with specific
intent and “purpose to violate or disregard the requirements of the law.” Fugate at 76.
Factual Allegations
A review of Commission records indicates that Kincaid
has repeatedly failed to submit its Annual Reports. Since coming under
Commission jurisdiction in 1993, Kincaid has only submitted five Annual Reports
on time (1997, 2007, 2014, 2015, 2016).[42]
Therefore,
the total penalty amount owed by Kincaid for failing to timely submit its
annual reports for the years 2009 to 2013 is $14,376.
A breakdown of the amount is shown in the table below.
|
Year
|
Date Due
|
Date
Submitted
|
Days Late
|
Penalty
($3 per
day)
|
|
2013
|
03/31/2014
|
11/14/2014
|
228
|
$684.00
|
|
2012
|
04/01/2013
|
11/14/2014
|
593
|
$1,779.00
|
|
2011
|
04/02/2012
|
11/14/2014
|
958
|
$2,874.00
|
|
2010
|
03/31/2011
|
11/14/2014
|
1,324
|
$3,972.00
|
|
2009
|
03/31/2010
|
11/14/2014
|
1,689
|
$5,067.00
|
|
Total
|
|
|
4,792
|
$14,376.00
|
Alternative 1 Recommendation
By knowingly failing to
comply with the provisions of Section 367.121, F.S., and Rule 25-30.110, F.A.C.,
staff believes Kincaid’s acts were “willful” in the sense intended by Section
367.161, F.S., and contemplated by Fugate.
Therefore, staff recommends that Kincaid
Hills Water Company should be ordered to show cause in writing, within 21 days,
why it is not obligated to remit payment in the amount of $14,376, in statutory penalties for failing to submit its Annual Reports for
the years 2009, 2010, 2011, 2012, and 2013. Staff recommends that the
show cause order incorporate the following conditions:
1.
This show cause order is an administrative complaint by
the Florida Public Service Commission, as petitioner, against Kincaid Hills
Water Company, as respondent.
2.
Kincaid shall respond to the show cause order within 21
days of service on the Utility, and the response shall reference Docket No. 20170200-WU,
Initiation of show cause proceedings against Kincaid Hills Water Company, in
Alachua County, for noncompliance with Sections 350.113, 350.117, 367.121, and
367.145, Florida Statutes, and Rules 25-30.110, 25-30.120, 25-30.355, and
25-22.032, Florida Administrative Code.
3.
Kincaid has the right to request a hearing to be
conducted in accordance with Sections 120.569 and 120.57, F.S., and to be
represented by counsel or other qualified representative.
4.
Requests for hearing shall comply with Rule
28-106.2015, F.A.C.
5.
Kincaid’s response to the show cause order shall
identify those material facts that are in dispute. If there are none, the petition must so
indicate.
6.
If Kincaid files a timely written response and makes a
request for a hearing pursuant to Sections 120.569 and 120.57, F.S., a further
proceeding will be scheduled before a final determination of this matter is
made.
7.
A failure to file a timely written response to the show
cause order will constitute an admission of the facts herein alleged and a
waiver of the right to a hearing on this issue.
8.
In the event that Kincaid fails to file a timely
response to the show cause order, the fine will be deemed assessed and a final
order will be issued.
9.
If Kincaid responds to the show cause order by
remitting the fine, this show cause matter will be considered resolved, and the
docket closed.
Furthermore, the Utility should be warned and put on
notice that continued failure to comply with Commission orders, rules, or
statutes will again subject the Utility to show cause proceedings and fines of
up to $5,000 per day per violation for each day the violation continues, or the
Commission may amend, suspend, or revoke Kincaid’s certificate, as set forth in
Section 367.161, F.S.
Alternative 2 Recommendation
In the
alternative, Commission staff should be directed to send a letter to the
Utility, giving the Utility 30 days notice that it intends to commence
revocation proceedings. Revocation would be in lieu of the penalties set forth
above. In evaluating this option, it would be important for the Commission to
consider Kincaid’s management’s history, specifically, the fact that the
Utility has a long history of noncompliance. Staff believes that Kincaid has a
poor record of complying with applicable rules and statutes under Commission
jurisdiction. Notably, this is the fourth time staff has opened a docket to initiate
a show cause proceeding since Kincaid became subject to the Commission’s
jurisdiction in 1993. The Commission similarly initiated revocation proceedings
against St. George Island Utility Company, Ltd. in Franklin County as a result
of that utility’s history of noncompliance with orders, rules, and statutory
requirements.
Commission
staff is concerned that Kincaid’s management does not understand how to and is
not willing to commit the time to operate a utility within the meaning of
Chapter 367, F.S. The operation of a
utility under Chapter 367, F.S., if successful, allows a utility the
opportunity to earn a return on its investment.
If management is not willing to operate as a utility, the Utility’s
certificate should be revoked, removing any opportunity the owner has to earn a
return on its investment. If the
certificate is revoked, a receiver must be appointed pursuant to Section
367.165, F.S., until a sale of the utility system has been approved pursuant to
Section 367.071, F.S.
Issue 3:
Should Kincaid Hills Water Company be ordered to
show cause in writing, within 21 days, why it is not obligated to remit payment
in the amount of $750 in statutory penalties, respond to the customer
complaints submitted on October 13, 2016, March 30, 2017, and May 8, 2017, and
to provide a written response to Commission staff on each complaint?
Recommendation:
Alternative 1
Recommendation: Yes. Kincaid Hills Water Company should be ordered to
show cause in writing, within 21 days, why it is not obligated to remit payment
in the amount of $750 in statutory penalties, respond to the customer
complaints submitted on October 13, 2016, March 30, 2017, and May 8, 2017, and
to provide a written response to Commission staff on each complaint. Specifically,
staff recommends that the Utility be directed to pay a statutory penalty in the
amount of $250 for failing to respond to a customer complaint dated October 13,
2016, a statutory penalty in the amount of $250 for failing to respond to a
customer complaint dated March 30, 2017, and a statutory penalty in the amount
of $250 for failing to respond to a customer complaint dated May 8, 2017. (DuVal,
Cuello, Hicks, McCoy, Smith)
Alternative 2
Recommendation: No. The Commission should direct staff to initiate
certificate revocation proceedings against Kincaid Hills Water Company
consistent with Chapter 120 and Section 367.161, F.S. (DuVal, Cuello, Hicks,
McCoy, Smith)
Staff
Analysis:
Applicable Law
Rule 25-30.355, F.A.C., requires that a utility make a full and
prompt acknowledgment and investigation of all customer complaints and respond
fully and promptly to all customer requests. Finally, Rule 25-22.032(6)(b),
F.A.C., requires that a utility respond to a customer complaint received by the
Commission by contacting the customer within 15 working days after receiving
the complaint from Commission staff and provide a written response to the
complaint to Commission staff within 15 working days after receiving the
complaint from Commission staff.
Pursuant to Section 367.161, F.S., the commission has the power
to impose upon any entity that is subject to its jurisdiction under this
chapter and that is found to have refused to comply with, or to have willfully
violated, any lawful rule or order of the commission or any provision of this
chapter a penalty for each offense of not more than $5,000, for each such day a
violation continues, which penalty shall be fixed, imposed, and collected by
the commission; or the commission may, for any such violation, amend, suspend,
or revoke any certificate of authorization issued by it.
Willfulness
is a question of fact.[44] Therefore,
part of the determination the Commission must make in evaluating whether to
penalize a utility is whether the utility willfully violated the rule, statute,
or order. Section 367.161, F.S., does not define what it is to “willfully
violate” a rule or order. The plain
meaning of “willful” typically applied by the Courts in the absence of a statutory definition, is an act
or omission that is done “voluntarily and intentionally” with specific intent
and “purpose to violate or disregard the requirements of the law.” Fugate at 76.
Factual Allegations
A review of Commission records shows that Kincaid is not timely
responding to customer complaints. The Commission’s Consumer Activity Tracking
System (CATS) shows three customer complaints in which Kincaid has failed to
respond to both the customer and the Commission staff. Staff has compiled a
list of customer complaints currently open with the Commission, along with a
copy of each of the CATS complaint records for review.
These complaints were submitted to the Commission on October 13, 2016,
March 30, 2017, and May 8, 2017. The
complaints show that customers reported regularly experiencing difficulty in
reaching a Utility representative and reported Kincaid’s telephone number being
out-of-service on occasions. Commission staff has experienced great difficulty
in reaching Kincaid regarding the customer complaints.[46] Furthermore, Kincaid has failed to adequately
respond to Commission staff’s repeated attempts to contact Kincaid by
telephone, mail, and e-mail in order to resolve the complaints.[47] To
date, Kincaid has not responded to these customer complaints and has not
provided a written response to Commission staff on these complaints.
Alternative 1 Recommendation
Where
available, staff looks to prior Commission Orders for guidance on the amount
and type of fines for each violation. Order No. PSC-06-0349-SC-WS involved
a similar rule violation. The Commission
penalized Lindrick Service Corporation (Lindrick) for failure to properly
handle customer complaints in violation of Rule 25-22.032, F.A.C. In the Lindrick docket, Commission staff
conducted a study of Lindrick’s practices.
Staff issued a report, referred to as the 2005 report. Based in part on the report, the Commission
found that Lindrick did not properly track its customer complaints and
inquiries. The Commission also found that Lindrick did not accurately monitor
and trend its customer complaints. Furthermore, Lindrick did not timely respond
to five complaints. In response, Lindrick argued that it did try to monitor and
track the complaints, but then Lindrick agreed with the Commission that a more
formal tracking system would be helpful.
By the time of the issuance of the show cause order, Lindrick had taken
several proactive steps to remedy the problems identified by staff in its 2005
report. Lindrick worked with staff to establish a tracking system to correct
its deficiencies, for which the Commission reduced the recommended penalty from
$250 to $125. Accordingly, the Commission fined Lindrick $125 for its
violations of Rule 25-22.032, F.A.C., which was a reduction of the original
staff recommendation of $250 for the violation.
Order No. PSC-11-0541-SC-WS
also involved a similar rule violation. In that docket, the Commission
penalized Four Points Utility Corporation (Four Points) for failure to fully
and promptly acknowledge and investigate all customer complaints and furnish
replies to inquiries by Commission staff within 15 days from the date of the
inquiry, as required by Rule 25-30.355, F.A.C. Four Points did not timely
respond to 38 complaints (over seven times the number of untimely responses as
Lindrick). Unlike Lindrick, Four Points did not attempt to work with staff to
correct its deficiencies. Accordingly, using prior Order No. PSC-06-0349-SC-WS,
as a guide, the Commission ordered Four Points to show cause, in writing within
21 days, why it should not have been fined in the amount of $1,750 ($250 x 7)
for failure to fully and promptly acknowledge and investigate all customer
complaints and furnish replies to inquiries by Commission staff within 15 days
from the date of the inquiry, as required by Rule 25-30.355, F.A.C.
Kincaid has
not timely responded to three complaints. However, similar to Four Points,
Kincaid has not attempted to work with staff to correct its deficiencies.
Accordingly, using prior Order Nos. PSC-06-0349-SC-WS and PSC-11-0541-SC-WS, as
a guide, Kincaid should be ordered to show cause, in writing within 21 days,
why it should not be fined in the amount of $750 ($250 x 3) for failure to
fully and promptly acknowledge and investigate all customer complaints and
furnish replies to inquiries by Commission staff within 15 days from the date
of the inquiry, as required by Rule 25-30.355, F.A.C.
By knowingly failing to comply with the provisions of Rules
25-22.032(6)(b) and 25-30.355, F.A.C., staff believes Kincaid’s acts were
“willful” in the sense intended by Section 367.161, F.S., and contemplated by Fugate. Therefore, staff recommends that Kincaid Hills Water Company should be
ordered to show cause in writing, within 21 days, why it is not obligated
to remit payment in the amount of $750 in statutory penalties, respond to the
three referenced customer complaints, and to provide a written response to
Commission staff on each complaint. Specifically,
staff recommends that the Utility be directed to pay a statutory penalty in the
amount of $250 for failing to respond to a customer complaint dated October 13,
2016, a statutory penalty in the amount of $250 for failing to respond to a
customer complaint dated March 30, 2017, and a statutory penalty in the amount
of $250 for failing to respond to a customer complaint dated May 8, 2017. Staff
recommends that the show cause order incorporate the following conditions:
1.
This show cause order is an administrative complaint by
the Florida Public Service Commission, as petitioner, against Kincaid Hills
Water Company, as respondent.
2.
Kincaid shall respond to the show cause order within 21
days of service on the Utility, and the response shall reference Docket No. 20170200-WU,
Initiation of show cause proceedings against Kincaid Hills Water Company, in
Alachua County, for noncompliance with Sections 350.113, 350.117, 367.121, and
367.145, Florida Statutes, and Rules 25-30.110, 25-30.120, 25-30.355, and
25-22.032, Florida Administrative Code.
3.
Kincaid has the right to request a hearing to be
conducted in accordance with Sections 120.569 and 120.57, F.S., and to be
represented by counsel or other qualified representative.
4.
Requests for hearing shall comply with Rule 28-106.2015,
F.A.C.
5.
Kincaid’s response to the show cause order shall
identify those material facts that are in dispute. If there are none, the petition must so
indicate.
6.
If Kincaid files a timely written response and makes a
request for a hearing pursuant to Sections 120.569 and 120.57, F.S., a further
proceeding will be scheduled before a final determination of this matter is
made.
7.
A failure to file a timely written response to the show
cause order will constitute an admission of the facts herein alleged and a
waiver of the right to a hearing on this issue.
8.
In the event that Kincaid fails to file a timely
response to the show cause order, the fine will be deemed assessed and a final
order will be issued.
9.
If Kincaid responds to the show cause order by remitting
the fine, responding to the customer complaints, and providing a written
response to Commission staff on each complaint, this show cause matter will be
considered resolved, and the docket closed.
Furthermore, the Utility should be warned and put on notice
that continued failure to comply with Commission orders, rules, or statutes
will again subject the Utility to show cause proceedings and fines of up to
$5,000 per day per violation for each day the violation continues, or the
Commission may amend, suspend, or revoke Kincaid’s certificate, as set forth in
Section 367.161, F.S.
Alternative 2 Recommendation
In the
alternative, Commission staff should be directed to send a letter to the
Utility, giving the Utility 30 days notice that it intends to commence
revocation proceedings. Revocation would be in lieu of the penalties and
required actions set forth above. In evaluating this option, it would be
important for the Commission to consider Kincaid’s management’s history,
specifically, the fact that the Utility has a long history of noncompliance. Staff
believes that Kincaid has a poor record of complying with applicable rules and
statutes under Commission jurisdiction. Notably, this is the fourth time staff
has opened a docket to initiate a show cause proceeding since Kincaid became
subject to the Commission’s jurisdiction in 1993. The Commission similarly
initiated revocation proceedings against St. George Island Utility Company,
Ltd. in Franklin County as a result of that utility’s history of noncompliance with
orders, rules, and statutory requirements.
Commission
staff is concerned that Kincaid’s management does not understand how to and is
not willing to commit the time to operate a utility within the meaning of
Chapter 367, F.S. The operation of a
utility under Chapter 367, F.S., if successful, allows a utility the
opportunity to earn a return on its investment.
If management is not willing to operate as a utility, the Utility’s
certificate should be revoked, removing any opportunity the owner has to earn a
return on its investment. If the
certificate is revoked, a receiver must be appointed pursuant to Section
367.165, F.S., until a sale of the utility system has been approved pursuant to
Section 367.071, F.S.
Issue 4:
Should this docket be closed?
Recommendation:
If the Commission orders Kincaid to show cause as to
Issues 1, 2, and 3, and Kincaid timely responds in writing to the Order to Show
Cause, this docket should remain open to allow for the appropriate processing
of the response. If the Commission orders Kincaid to show cause as to Issues 1,
2, and 3, and Kincaid responds to the show cause order by remitting the fines,
responding to the customer complaints, and providing a written response to
Commission staff on each complaint, this show cause matter will be considered
resolved, and the docket should be closed administratively. If the Commission
orders Kincaid to show cause as to Issues 1, 2, and 3, and Kincaid does not
remit payment, or does not respond to the Order to Show Cause, this docket
should remain open to allow the Commission to pursue collection of the amounts
owed by the Utility. Alternatively, if the Commission orders that a proceeding
to revoke Kincaid’s water certificate should be initiated, this docket should
remain open until such a proceeding can be initiated. (DuVal, Cuello)
Staff Analysis:
If the Commission orders Kincaid to show cause as to
Issues 1, 2, and 3, and Kincaid timely responds in writing to the Order to Show
Cause, this docket should remain open to allow for the appropriate processing
of the response. If the Commission orders Kincaid to show cause as to Issues 1,
2, and 3, and Kincaid responds to the show cause order by remitting the fines, responding
to the customer complaints, and providing a written response to Commission
staff on each complaint, this show cause matter will be considered resolved,
and the docket should be closed administratively. If the Commission orders
Kincaid to show cause as to Issues 1, 2, and 3, and Kincaid does not remit
payment, or does not respond to the Order to Show Cause, this docket should
remain open to allow the Commission to pursue collection of the amounts owed by
the Utility. Alternatively, if the Commission orders that a proceeding to
revoke Kincaid’s water certificate should be initiated, this docket should
remain open until such a proceeding can be initiated.
