Case Background
On November 14,
2017, Seminole Waterworks, Inc. (Seminole Waterworks or Utility) filed a
Petition for Variance or Waiver of Rule 25-30.120, Florida Administrative Code
(F.A.C.). Rule 25-30.120, F.A.C., states that a utility is obligated to remit
regulatory assessment fees for any year in which it is subject to the Florida
Public Service Commission’s (Commission) jurisdiction on or before December 31
of that year. The waiver is sought in connection with the Utility’s Application
for grandfather water certificate in Leon County and application for pass
through increase of regulatory assessment fess (Application) in the instant
docket.
On June 20,
2017, the Board of County Commissioners of Leon County (County) passed and
adopted Resolution No. R17-12 (Resolution), transferring regulation of the
privately-owned, for-profit water and wastewater utilities in the County to the
Commission.
The Utility
consists of six water systems under franchises within Leon County. Seminole
Waterworks provides water service to approximately 690 residential customers
consisting of single family residential homes, mobile homes, and duplexes. All
of the service areas are fully built out.
Pursuant to
Section 120.542(5), Florida Statutes (F.S.), notice of this Petition was
published in the Florida Administrative Register on January 9, 2018. In
accordance with Rule 28-104.003(1), F.A.C., interested persons are given 14
days after the publication of the notice to submit written comments. No written
comments were received, and the time for such comments expired on January 23,
2018.
This
recommendation addresses the Utility’s Petition; issues relating to the Utility’s
Application will be addressed in a subsequent recommendation. The Commission
has jurisdiction in this matter pursuant to Sections 367.071 and 120.542, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Seminole Waterworks,
Inc.’s request for waiver or variance of Rule 25-30.120, F.A.C.?
Recommendation:
Yes, the Utility has demonstrated that the
underlying purpose of the statute will be or has been achieved by other means,
and that strict application of the rule would place a substantial hardship on
the Utility. Therefore, staff recommends that the Commission approve Seminole
Waterworks Inc.’s request for a waiver or variance of Rule 25-30.120, F.A.C., until
such time as the Utility is authorized to increase its rates pursuant to
Section 367.081(4)(b), F.S., or within three months of the Commission’s vote,
whichever occurs first. (Janjic)
Staff Analysis:
On November 14, 2017, Seminole Waterworks filed a
Petition seeking a waiver or variance of a requirement of Rule 25-30.120,
F.A.C., which requires that Regulatory Assessment Fees (RAFs) be paid for any
year during which a utility is subject to the Commission’s jurisdiction as of
December 31 of that year. The Utility requests the waiver or variance of Rule
25-30.120, F.A.C., until such time as the Utility is authorized to increase its
rates pursuant to Section 367.081(4)(b), F.S. Rule 25-30.120(2), F.A.C.,
provides that “[t]he obligation to
remit the regulatory assessment fees for any year shall apply to any utility
that is subject to this Commission’s jurisdiction on or before December 31 of
that year or for any part of that year.” The effect of this request would be to
permanently waive any RAFs that would have been otherwise due for 2017 up until
the Application is considered by this Commission.
Section 120.542(2), F.S., authorizes the Commission to
grant waivers or variances from agency rules where the petitioner subject to
the rule has demonstrated that the purpose of the underlying statute will be or
has been achieved by other means, and that a strict application of the rule
would cause the applicant substantial hardship or would violate the principles
of fairness. “Substantial hardship,” as defined in this section, means
demonstrated economic, technological, legal, or other hardship. A violation of
the “principles of fairness” occurs when the literal application of a rule
affects a particular person in a manner significantly different from the way it
affects other similarly situated persons who are subject to the rule.
As acknowledged in Order No. PSC-2017-0357-FOF-WS,
issued September 20, 2017, the Board of County Commissioners of Leon County on
June 20, 2017 passed and adopted Resolution No. R17-12, transferring regulation
of the privately-owned, for profit water and wastewater utilities in the County
to the Florida Public Service Commission. Effective upon the adoption of the
resolution, all non-exempt water and wastewater systems in the Leon County
became subject to the provisions of Chapter 367, F.S.
On July 19, 2017, Seminole Waterworks Inc. filed its
application for a grandfather certificate pursuant to Section 367.171(2), F.S.
and Rule 25-30.035, F.A.C. Also, in the same filing the Utility filed its
request for approval of a pass through increase for regulatory assessment fees
pursuant to Section 367.081(4)(b), F.S. That portion of the request was in
relation to the regulatory assessment fees required under Section 367.145, F.S.
and Rule 25-30.120, F.A.C.
Section 367.081(4)(b), F.S. states that:
[t]he
approved rates of any utility shall be automatically increased or decreased
without hearing, upon verified notice to the commission 45 days prior to its
implementation of the increase or decrease that the utility’s costs for any
specified expense item have changed. . . . The new rates authorized shall
reflect, on an amortized or annual basis, as appropriate, the cost of or the
amount of change in the cost of the specified expense item. The new rates,
however, shall not reflect the costs of any specified expense item already
included in a utility’s rates. Specified expense items that are eligible for
automatic increase or decrease of a utility’s rates include, but are not
limited to: . . . [t]he regulatory assessment fees imposed upon the utility by
the commission.
The underlying
statutory provision pertaining to RAFs and Rule 25-30.120, F.A.C., are Sections
367.145(1) and (3), F.S., which state that:
(1) The commission shall set by rule a
regulatory assessment fee that each utility must pay in accordance with
s. 350.113(3);
. . . .
(3) Fees collected by the commission
pursuant to this section may only be used to cover the cost of regulating water
and wastewater systems. Fees collected by the commission pursuant to chapters
364 and 366 may not be used to pay the cost of regulating water and wastewater
systems.
The Commission’s RAFs are not included in the Utility’s
current rates. Pass through items authorized by Section 367.081(4)(b), F.S., cannot
be approved without “approved rates” by the Commission. Further, the Commission’s
regulatory assessment fees are not included in the current existing rates for
Seminole Waterworks since the Utility was not regulated by the Commission prior
to June 2017. The Utility notes that a pass through of the regulatory
assessment fees is not permissible until such time as the Utility receives its
Grandfather Certificate and its rates are approved (grandfathered) in. For that
reason, the Utility argues it is placed at an unfair financial disadvantage due
to its inability to collect those regulatory assessment fees in its rates.
The Utility contends that there have been minimal to no
costs of regulating Seminole Waterworks under Chapter 367, F.S., absent the
review of its grandfather application. The Utility also notes that it has paid
the applicable filing fee of $1,000 as required by Section 367.145(2), F.S., and
Rule 25-30.020, F.A.C., for the processing of its grandfather filing.
Based on the foregoing analysis and the information
provided within the Utility’s petition, staff believes that Seminole Waterworks
has met the requirements of Section 120.542, F.S., and has demonstrated that
the purpose of the of the underlying statute will be or has been achieved by
other means, because minimal regulation has been required at this point and the
Utility has been very cooperative with staff’s requests. Further, the strict
application of Rule 25-30.120, F.A.C., would place a substantial hardship on
the Utility by requiring the Utility to pay regulatory expenses for which it is
not compensated through rates. Therefore, staff recommends that the Commission
approve the Utility’s requested waiver or variance of Rule 25-30.120, F.A.C., until
such time as the Utility is authorized to increase its rates pursuant to
Section 367.081(4)(b), F.S., or within three months of the Commission’s vote,
whichever occurs first.
Issue
2: Should
this docket be closed?
Recommendation:
This docket should remain open pending the
Commission’s final decision regarding the Utility’s Application for grandfather
water certificate in Leon County and application for pass through increase of
regulatory assessment fees. If no person whose substantial interests are
affected by the proposed agency action for the rule waiver files a protest
within 21 days of the issuance of the order, a consummating order should be
issued. (Janjic)
Staff Analysis:
This docket should remain open pending the Commission’s
final decision regarding the Utility’s Application for grandfather water
certificate in Leon County and application for pass through increase of
regulatory assessment fees. If no person whose substantial interests are
affected by the proposed agency action for the rule waiver files a protest
within 21 days of the issuance of the order, a consummating order should be
issued.
