Discussion
of Issues
Issue 1:
Should UIF be required to refund overcollections of AFPI
charges and, if so, what is the appropriate amount to be refunded?
Recommendation:
Yes. UIF should be required to refund overcollected
AFPI charges of $165,739 with interest in accordance with Rule 25-30.360,
F.A.C. to the two developers that paid AFPI charges for a total of 292
connections. The refund should be completed within 90 days of the Commission’s vote
and documentation supporting the final refund should be provided within 10 days
of the completed refund. (Bruce)
Staff Analysis:
Background
Pursuant to
Rule 25-30.434, Florida Administrative Code (F.A.C.), an AFPI charge is a mechanism
designed to allow a utility the opportunity to earn a fair rate of return on
prudently constructed plant held for future use from the customers that will be
served by that plant. This one-time charge is assessed based on the date the
future customer connects to the utility’s system. The charge is calculated for
one equivalent residential connection (ERC) on a monthly basis up to the time
the utility reaches the designed capacity of the plant for which the charge
applies. The calculation includes the costs associated with the non-used and
useful facilities and the number of future ERCs from which the utility may
collect the AFPI charges.
Lake Groves
Lake Groves’s
initial rates and charges became effective in an original certificate case in
1991. The
water and wastewater AFPI charges that were approved in that docket were
designed to be collected from 545 ERCs. The projected capacity of the water
system at the time the charges were approved was 600,000 gallons per day (gpd)
and the projected capacity of the wastewater system was 160,000 gpd.
Over the years,
Lake Groves’s certificates were amended on several occasions to include
additional territory and the Commission approved the utility’s existing rates
and charges, including AFPI for each new territory. In 1999,
the Commission approved the transfer of majority organizational control of Lake
Groves to Utilities, Inc. and the rates and charges of Lake Groves were
continued. According
to the order approving the transfer, the utility was serving approximately 600
water and wastewater customers at that time, which exceeded the number of ERCs
upon which the AFPI charges were based.
In Docket No.
20070693-WS,
the Commission found that the Lake Groves wastewater system was 52.42 percent
used and useful based on 1,000,000 gpd of capacity; the utility was serving
approximately 2,860 ERCs during the test year. According to the utility’s
annual reports, no AFPI charges were collected from 1991 through 2016. However,
in response to a data request, the utility indicated that during early 2017 it
had collected $165,739 in AFPI charges for future Lake Groves wastewater
connections.
LUSI
The Commission approved AFPI charges for the LUSI water
system in the utility’s original certificate application in 1988.
The charges were designed to be recovered from 106 future ERCs based on
projected capacity of 37,100 gpd. Several amendments were approved for the LUSI
system and by 1992 the utility was serving over 300 customers.
Subsequently, in a rate case in 1997,
the Commission found that LUSI may have incorrectly collected the AFPI charges
approved in 1988 and opened an investigation. During the 1997 rate case, the
Commission also approved new AFPI charges for the LUSI water system as a result
of increases in the capacity of the water treatment plant (WTP) and the
distribution system. Separate charges were designed for the WTP and the
distribution system based on the increased capacity of those systems and the
used and useful adjustments that were made during the rate case. The new WTP
AFPI charge was designed to be collected from 1,080 future ERCs and the
distribution system AFPI charge was designed to be collected from 977 future
ERCs. At that time, the LUSI water system served 937 ERCs.
As a result of
the investigation into the potential overcollection of LUSI’s 1998 AFPI
charges, the Commission found that LUSI had overcollected those AFPI charges
and required LUSI to record the overcollection as
contributions-in-aid-of-construction (CIAC).
Following a protest and settlement agreement, two customers who protested were
given a refund in the amount of the AFPI charges they paid.
According to the utility’s annual reports, AFPI charges in the amount of
$421,472 were collected for LUSI from 1999 through 2001 based on the new
charges approved in the 1997 rate case.
Merger of Lake Groves and LUSI
In 2002, as a result of a corporate merger and name
change, Lake Groves was merged with LUSI.
At that time, the LUSI system had approximately 3,000 water customers and the
Lake Groves system had approximately 2,200 water and wastewater customers.
Following the merger, the utility had rate cases in 2008
and 2010;
however, the final orders in those dockets did not address AFPI charges and
collections. The utility was serving approximately 8,746 water and 2,827
wastewater customers in 2010. The Commission found that the Lake Groves
wastewater treatment plant (WWTP) was 53 percent used and useful (the capacity
had been expanded from 500,000 gpd to 1,000,000 gpd), and the WTP as well as
the water distribution and wastewater collection lines were 100 percent used
and useful.
Staff
Investigation
In Docket No. 20160101-WS, the Commission discontinued the
AFPI charges for UIF’s Lake Groves and LUSI systems and ordered an
investigation to determine the amount of over collection and the disposition of
the overcollection of AFPI charges. As
noted above, the Lake Groves AFPI charges were approved in 1991 based on 545
ERCs. Based on staff’s review of annual reports and prior rate case dockets,
the number of ERCs upon which the Lake Groves water and wastewater AFPI charges
were based was exceeded around 1999 when the utility was serving approximately
600 ERCs. After several expansions to the capacity of the WWTP, it was found to
be 52.42 percent used and useful in Docket No. 20070693-WS; the utility was
serving approximately 2,860 ERCs during the test year.
In response to
staff’s data request, the utility argued that the AFPI charges for its Lake
Groves wastewater system should not have been discontinued in the 2016 rate
case because it had been found to be less than 100 percent used and useful. As
a result, the utility believed it was entitled to collect AFPI charges pursuant
to its tariff. The utility indicated that its tariffs did not specify a cap on
the ERCs for which AFPI could have been collected. The utility stated that had
it known there was a cap on the number of ERCs, it would have filed the
appropriate tariff amendment at the time. Further, due to the fact that the
wastewater plant had undergone a substantial increase in capacity, the utility
stated that the AFPI tariff was actually obsolete and the Commission should
have updated the AFPI charges in prior rate proceedings to recognize the
substantial increase in the capacity of the WWTP plant. According to the
utility, the only AFPI charges collected for Lake Groves was $165,739, which was
collected during early 2017 for 292 connections.
Rule 25-30.434(6), F.A.C., provides that the utility can
collect AFPI charges until all projected ERCs included in the calculation of
the charge have been added. While staff agrees that the original tariff for the
Lake Groves AFPI charges did not reflect the 545 ERCs upon which the charges
were based, the requirement was included in the Order No. 24283 when the AFPI
charges were approved in 1991. Staff agrees with the utility that the AFPI
charges could have been revised to reflect that circumstances had changed in
regards to the capacity of system. However, pursuant to Section 367.091(4),
F.S., a utility may only charge the rates and charges in its approved tariff.
Rates and charges may only be changed as a result of a Commission decision and
it is incumbent upon the utility to request a revaluation of its rates and
charges. Therefore, the utility should have discontinued collection of AFPI
charges for the Lake Groves water and wastewater systems when the 545 ERCs were
connected. Therefore, UIF should be required to refund overcollected AFPI
charges for the Lake Groves system of $165,739 with interest in accordance with
Rule 25-30.360, F.A.C.
Further, as previously discussed, the Commission investigated
the overcollection of AFPI charges for LUSI, a sister cooperation, in 1998.
The Commission required LUSI to record the overcollection as CIAC and required
refunds to the two customers that had protested an earlier decision. Following
approval of new AFPI charges in 1997, that were based on increased capacity in
the water system, the LUSI customer growth exceeded the number of ERCs upon
which those charges were based around 2001. According to the utility’s annual
reports, the LUSI AFPI charges were only collected from 1999 through 2001; it
does not appear that the AFPI collection exceeded the number of ERCs upon which
the charges were based. Therefore, it appears there was no overcollection of
AFPI for the LUSI water system.
UIF currently has approved AFPI charges for seven of its
wastewater systems, including Longwood and
Sandalhaven as well as the five systems for which charges
were recently approved in Docket No. 20170223-SU. None of the UIF water systems
have approved AFPI charges.
CONCLUSION
Based on the above, it appears there was no overcollection
of AFPI for the LUSI water system. However, UIF should be required to refund overcollected
AFPI charges for the Lake Groves system of $165,739 with interest in accordance
with Rule 25-30.360, F.A.C. to the two developers that paid AFPI charges for a
total of 292 connections. The refund should be completed within 90 days of the
Commission’s vote and documentation supporting the final refund should be
provided within 10 days of the completed refund.
Issue 2:
Should this docket be closed?
Recommendation:
If no person whose
substantial interests are affected by this proposed agency action files a
protest within 21 days of the issuance of the order, a consummating order
should be issued. This docket should remain open for staff’s verification that
the utility has completed the refund pursuant to Rule 25-30.360, F.A.C.
Once staff has verified that refunds are complete, this docket should be closed
administratively. (Mapp)
Staff Analysis:
If no person whose substantial interests are
affected by this proposed agency action files a protest within 21 days of the
issuance of the order, a consummating order should be issued. This docket
should remain open for staff’s verification that the utility has completed the
refund pursuant to Rule 25-30.360, F.A.C. Once staff has verified that
refunds are complete, this docket should be closed administratively.
