Case Background
Rule 25-30.433,
Florida Administrative Code (F.A.C.), addresses the procedures that apply in
water and wastewater rate case proceedings. The rule includes the subsection
(1) requirement that the Commission make a determination on the quality of
service provided by the utility in every rate case. The rule states that this
determination will be based on an evaluation of three separate components of
water and wastewater utility operations: (1) quality of the utility’s product
(water and wastewater); (2) operational conditions of the utility’s plant and
facilities; and (3) the utility’s attempt to address customer satisfaction.
Rulemaking to amend Rule 25-30.433, F.A.C., was initiated by staff in order to
remove consideration of the operational conditions of the utility’s plant and
facilities as one of the factors the Commission considers in evaluating a
utility’s quality of service under subsection (1). The rule was amended so that
the Commission considers operational conditions of the utility’s plant and
facilities separately from quality of service in a new subsection (2). In
addition, the factors considered by the Commission in making these
determinations were updated to clarify and codify existing agency practice.
The Office of Public Counsel (OPC)
participated in the December 14, 2017, staff rule development workshop on Rule
25-30.433, F.A.C. OPC filed post-workshop comments that included its suggestion
that paragraph (1)(d) concerning the Commission’s determination of quality of
service should be amended to require the Commission to consider all customer
communications, verbal and written, to the greatest extent possible, in
recognition of the customers’ interest in the quality of service determination.
In addition, OPC commented that paragraph (2), concerning the Commission’s
determination of operational conditions of the utility plant, should allow for
customers, utility employees, or other knowledgeable persons to provide
information related to the utility’s infrastructure or operational conditions
of the plant and facilities. OPC did not provide any specific language for
amending the rule.
In response to OPC’s comments, staff
broadened the language of Rule 25-30.433, F.A.C., and recommended that rule paragraph (1)(d) be
amended to require the Commission, as part of determining quality of service in
rate cases, to consider: “Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the utility’s quality of
service.” Staff further recommended that
paragraph (2)(c) be added to the rule to require the Commission, as part of
determining whether the infrastructure and operational conditions of the plant
and facilities are in compliance with Rule 25-30.225, F.A.C., to consider: “Any
testimony, complaints and comments of the utility’s customers and others with
knowledge of the infrastructure and operational conditions of the utility’s
plant and facilities.” In its recommendation to the Commission, staff stated
that it believed that:
[T]he
recommended rule language is broad enough to sufficiently cover the many ways
that customer complaints and comments are provided to the Commission (e.g.,
both oral and written statements directly from customers, OPC testimony in its
representation of customers, Commission staff testimony regarding customer
complaints).
The Commission
considered staff’s recommended amendments to Rule 25-30.433, F.A.C., at its
March 1, 2018, Agenda Conference. The Office of Public Counsel (OPC) spoke at
the March 1, 2018, Agenda Conference, and suggested that additional language
taken from the staff recommendation should be added to recommended paragraphs
(1)(d) and (2)(c), as follows:
(1)(d) Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the utility’s quality of
service (e.g., both oral and written statements directly from customers, OPC
testimony in its representation of customers, Commission staff testimony
regarding customer complaints); and
(2)(c) Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the infrastructure and
operational conditions of the utility’s plant and facilities (e.g., both
oral and written statements directly from customers, OPC testimony in its
representation of customers, Commission staff testimony regarding customer
complaints); and
The Commission
approved staff’s recommended amendments to Rule 25-30.433, F.A.C., without the
changes suggested by OPC. The Commission certified proposed Rule 25-30.433,
F.A.C., as a minor violation rule, and approved the Statement of Estimated
Regulatory Costs’ findings. Proposed Rule
25-30.433, F.A.C., was published in the March 5, 2018, edition of the F.A.R., Volume
44, Number 44. A copy of proposed Rule 25-30.433, F.A.C., is attached as
Attachment A.
On March 22,
2018, pursuant to Section 120.54(3)(c), Florida Statutes (F.S.), OPC filed a Petition
for a Hearing on paragraphs (1)(d) and (2)(c) of proposed Rule 25-30.433,
F.A.C. (Petition). A rule hearing was held before the full Commission on May 8,
2018, pursuant to notice appearing in the March 13, 2018, edition of the F.A.R.,
Volume 44, Number 73. At the rule
hearing, OPC suggested different language for changing the proposed rule than
it had requested in its Petition. Following OPC’s argument, the Commission directed
staff to bring a recommendation to the June 5, 2018, Agenda Conference, on the
changes to the proposed rule suggested by OPC.
This
recommendation addresses whether the Commission should make changes to paragraphs
(1)(d) and (2)(c) of proposed Rule 25-30.433, F.A.C., as suggested by OPC. The
Commission has jurisdiction pursuant to Sections 120.54, 350.127(2), 367.0812(5),
367.0814, 367.121, and 367.1213, F.S.
Discussion
of Issues
Issue 1:
Should the Commission make the Office of Public
Counsel’s suggested changes to paragraphs (1)(d) and (2)(c) of proposed Rule
25-30.433, F.A.C.?
Recommendation:
No. Staff recommends that the Commission should not
make changes to paragraphs (1)(d) and (2)(c) of proposed Rule 25-30.433, F.A.C.
Proposed Rule 25-30.433, F.A.C., as set forth in Attachment A, should be filed
with the Department of State pursuant to the provisions of Section 120.54, F.S.
(Cowdery, King, Graves, Fletcher, Draper, Guffey)
Staff Analysis:
A rule hearing was held by the Commission on May 8,
2018, on OPC’s Petition to make changes to paragraphs (1)(d) and (2)(c) of
proposed Rule 25-30.433, F.A.C. (Petition). Pursuant to subparagraph
120.54(3)(c)1., F.S., the Commission is required, in making its decision, to
consider OPC’s Petition and documents introduced by OPC at the May 8, 2018,
rule hearing.
OPCs Arguments at the Rule Hearing
OPC’s Petition requested that the Commission change
proposed Rule 25-30.433, F.A.C., by adding the following underlined language when
making its quality of service determinations in rate case proceedings:
(1)(d) Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the utility’s quality of
service (e.g., both oral and written statements directly from customers, OPC
testimony in its representation of customers, Commission staff testimony
regarding customer complaints); and
OPC also requested that the Commission change proposed
Rule 25-30.433, F.A.C., by adding the following underlined language when making
its determination in rate case proceedings on whether infrastructure and
operational conditions of utility plant and facilities are in compliance with
Rule 25-30.225, F.A.C.:
(2)(c) Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the infrastructure and
operational conditions of the utility’s plant and facilities (e.g., both
oral and written statements directly from customers, OPC testimony in its
representation of customers, Commission staff testimony regarding customer
complaints); and
At the May 8, 2018 rule hearing, OPC submitted language
for changing Rule 25-30.433, that was different from the changes it had
requested in its Petition, as follows:
(1)(d) Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the utility’s quality of
service (including both oral and written statements provided by customers,
informal and formal testimony by any party, and Commission staff testimony
regarding customer complaints); and
(2)(c) Any
testimony, complaints and comments of the utility’s customers and others with
knowledge of the infrastructure and operational conditions of the utility’s
plant and facilities (including both oral and written statements provided by
customers, formal and informal testimony by any party, and Commission staff
testimony regarding customer complaints); and
OPC characterized its suggested examples as stating a
minimum of what the Commission shall consider when determining quality of
service and the infrastructure and operational conditions of the utility plant without
excluding anything else from consideration. OPC stated that it does not believe
proposed Rule 25-30.433, F.A.C., is deficient, but that it could be improved by
including the suggested examples.
OPC argued that the Commission’s intent should be
expressed in the rule, especially in an arena where ambiguity has been found in
the qualitative nature of customer testimony and other forms of customer input.
OPC cited to Order No. 15490, issued December 23, 1985, Docket No. 850116-TL, In
re: Show cause to Southern Bell
regarding customer calling features, as an example where the plain language
of the rule was inconsistent with the Commission’s intent. The Commission in that case withdrew its
order to show cause after determining that even though the Commission’s intent
was that the rule apply to each person seeking information on basic telephone
service, the rule language itself referred to “applicants.”
OPC explained that the reason why OPC suggested changing
proposed Rule 25-30.433, F.A.C., to include examples of the types of comments,
complaints, and statements the Commission must consider was OPC’s concern that the
rule as proposed could be subject to different interpretations in the future.
OPC stated that in past rate cases there has been uneven or limited
consideration of customer comments by the Commission. OPC pointed to a 1997
water and wastewater overearnings rate case, In re: Investigation of Rates
of Gulf Utility, Order No. 97-0847-FOF-WS, issued July 15, 1997, Docket No.
960329-WS, citing to the order’s statement that the Commission in evaluating
customer service “also evaluated by a review of recent complaints and with
direct customer testimony at hearing.”
OPC stated that the word “direct” suggests that the testimony was given
“live” only at a formal hearing, indicating that the Commission could have
discretion to define in a limiting manner what “any” means and what “testimony”
means. OPC also noted that in recent Docket No. 20170222-WS, In re: Proposed amendment of Rules 25-30.130, Record
of Complaints, and 25-30.355, Complaints, F.A.C., the Commission proposed
amending Rule 25-30.130, F.A.C., to more specifically define “complaints,” and
didn’t just say “any complaints.”
OPC further argued that the Commission created ambiguity in
interpreting proposed rule paragraphs (1)(d) and (2)(c) because the Commission
considered and then rejected OPC’s suggested language that gave examples of
types of testimony and comments for consideration in future cases. OPC also
raised a concern that paragraphs (1)(d) and (2)(c) might be read too narrowly
because it read proposed paragraph (1)(b) as having narrowed the scope of
information to be considered by the Commission in determining quality of
service. OPC did not object to proposed
paragraph (1)(b), but interprets it as constricting the scope of documentation
to be considered because the rule language was amended from requiring
consideration of “consent orders” to requiring
consideration of “provisions of consent orders that relate to quality of
service.”
OPC stated that the reason it submitted the modified
changes at hearing was to meet the concerns it perceived from the March 1,
2018, Agenda Conference. However, based on questioning by the Commissioners at
the rule hearing, OPC concluded that of its two rule change options, it recommended
that the Commission change the proposed rule as suggested originally at the
March 1, 2018, Agenda Conference and in its Petition, except that the Latin
phrase “e.g.” should be replaced with the phrase “for example.”
Staff Analysis
Existing Rule 25-30.433, F.A.C., requires that in
determining quality of service, the Commission must consider the testimony of
utility’s customers. In order to clarify and codify existing agency practice,
and in response to post-workshop comments by OPC, the Commission proposed paragraph
(1)(d) that requires the Commission in determining quality of service to
consider any testimony, complaints, and comments of the utility’s customers and
others with knowledge of the utility’s quality of service. In addition, the Commission proposed
paragraph (2)(c) that requires the Commission in determining infrastructure and
operational conditions of the utility plant to consider any testimony,
complaints, and comments of the utility’s customers and others with knowledge
of the infrastructure and operational conditions of the utility’s plant and
facilities. Staff believes that the plain meaning of this proposed language
encompasses the specific examples suggested by OPC.
There is no ambiguity in the proposed language. The
adjective “any” modifies the nouns testimony, complaints, and comments in each
proposed paragraph, meaning that the Commission shall consider any testimony,
any complaints, and any comments of utility customers and others with knowledge
of the utility’s quality of service or infrastructure and operational
conditions of the utility’s plant and facilities. See, e.g. State
v. Huggins, 802 So. 2d 276 (Fla. 2001)(in interpreting a statutory
provision where an adjective was followed by two nouns, the court stated that
such phrases are commonly construed to mean that the adjective modifies
subsequent nouns). OPC ultimately agreed with this interpretation of “any” at
hearing. Further, as is generally the case, “any” in this context means
“all.” E.g. Baker v. Economic
Research Services, Inc., 44 Fla. L. Weekly D643 (Fla. 1st DCA 2018)). Staff believes that the plain language of the
proposed rule should result in consistency in the Commission’s consideration of
all listed input into its determinations of quality of service and the infrastructure
and operational conditions of utility plant and facilities in rate cases.
Staff does not believe that In re: Show cause to Southern Bell, Order No.
15490, is applicable to the proposed rule language. In that case, the Commission ordered Southern
Bell to show cause why it should not be fined for violation of Rule
25-4.107(1), F.A.C., that required a telephone company, upon initial contact,
to inform an applicant for service of the least expensive service
available. Staff had conducted an investigation
by telephoning various Southern Bell business offices and inquiring as to the
cost for basic telephone service, with responses not in compliance with Rule
25-4.107(1), F.A.C. The Commission withdrew the order to show cause because
although it was the Commission’s intent that Rule 25-4.107(1), F.A.C., apply to
each person seeking information about basic telephone service, the plain
language of the rule addressed only “applicant.” Staff agrees with OPC that if
the plain language of a rule does not reflect the Commission’s intent, the
plain language must control. However, in
this case, the plain language in the proposed rule is not restrictive, but
broadly covers any testimony, complaints, and comments of utility customers and
others with knowledge of the utility’s quality of service or infrastructure and
operational conditions of the utility’s plant and facilities.
OPC gave an example of what it believed showed the
Commission’s “uneven application” of the type of information considered in
determining quality of service. OPC stated that Order No. 97-0847-FOF-WS,
issued July 15, 1997, Docket No. 960329-WS, In re: Investigation of Rates of
Gulf Utility, suggested that the Commission considered only direct customer
testimony given at formal hearing in determining quality of service. Staff
disagrees with OPC’s position because the order indicates that in determining
quality of service, in addition to reviewing recent complaints and hearing
direct testimony at hearing, the Commission also heard testimony of customers
attending the service hearing. Further, there is nothing in Order No. 97-0847
that would limit the plain language interpretation of proposed rule paragraphs
(1)(d) and (2)(c) requiring the Commission to consider “any testimony,
complaints and comments of the utility’s customers and others with knowledge”
of the quality of service or of the infrastructure and operational conditions
of the utility’s plant and facilities.
Including examples of types of comments, testimony, and
complaints in the proposed rule may lead to confusion and ambiguity, raising
the question of whether listing certain specific types of input excludes other
specific types of input. Staff believes that the better practice is to not
include unnecessary, superfluous, and duplicative language in rules. Staff likewise
is of the opinion that the proposed language is clear and unambiguous, plainly
includes all the examples identified by OPC, and that the proposed language
should not be changed as suggested by OPC.
Staff notes that if the Commission does not change the
proposed rule, it may choose to state in the Notice of Adoption of Rule that
the language of paragraphs (1)(d) and (2)(c) is broad and includes by its plain
language both oral and written statements provided directly by customers,
testimony of any party, and Commission staff testimony regarding customer
complaints.
If the Commission decides to change the proposed rule to
include additional language in paragraphs (1)(d) and (2)(c), as suggested by
OPC, staff would recommend that the Commission use the language suggested in
OPC’s Petition, except that the Latin abbreviation “e.g.” should be
replaced with the phrase “for example” because plain language is clear and as
such preferable to the use of jargon and Latin abbreviations common to legal
writing. (See Attachment B hereto) If
the Commission makes these changes, it would not affect the conclusion in the
SERC and would not change the rule’s status as a minor violation rule.
Conclusion
As
discussed above, staff recommends that the Commission should not make changes
to paragraphs (1)(d) and (2)(c) of proposed Rule 25-30.433, F.A.C. Proposed
Rule 25-30.433, F.A.C., as set forth in Attachment A, should be filed with the
Department of State pursuant to the provisions of Section 120.54, F.S.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If the Commission approves staff’s
recommendation in Issue 1, the rule may be then filed for adoption with the
Department of State no sooner than 14 days after the June 5, 2018, Agenda
Conference, and this docket should be closed. (Cowdery)
Staff Analysis: If the Commission approves
staff’s recommendation in Issue 1, the rule may be then filed for adoption with
the Department of State no sooner than 14 days after the June 5, 2018, Agenda
Conference, and this docket should be closed.
If the Commission votes to make changes to proposed Rule 25-30.433,
F.A.C., a Notice of Change will be published in the Florida Administrative
Register. The rule may be then filed for adoption with the Department of State
21 days after the Notice of Change is published in Florida Administrative
Register, and this docket should be closed
25-30.433 Rate Case Proceedings.
In
a rate case proceeding, the following provisions shall apply., unless
the applicant or any intervenor demonstrates that these rules result in an
unreasonable burden. In these instances, fully supported alternatives will be
considered by the Commission. Any alternatives proposed by the utility must be
filed with the minimum filing requirements.
(1)
The Commission in every rate case shall make a determination of the quality of
service provided by the utility by evaluating the . This shall be
derived from an evaluation of three separate components of water and wastewater
utility operations: quality of utility’s product (water and wastewater);
operational conditions of utility’s plant and facilities; and the utility’s
attempt to address customer satisfaction (water and wastewater). In making this determination, the
Commission shall consider: Sanitary surveys, outstanding citations,
violations and consent orders on file with the Department of Environmental
Protection (DEP) and county health departments or lack thereof over the
preceding 3-year period shall also be considered. DEP and county health department officials’
testimony concerning quality of service as well as the testimony of utility’s
customers shall be considered.
(a)
The most recent chemical analyses for each water system as described in Rule
25-30.440(3), F.A.C.;
(b)
Any Department of Environmental Protection (DEP) and county health department
citations, violations and provisions of consent orders that relate to quality
of service;
(c)
Any DEP and county health department officials’ testimony concerning quality of
service;
(d)
Any testimony, complaints and comments of the utility’s customers and others
with knowledge of the utility’s quality of service; and
(e)
Any utility testimony and responses to the information provided in paragraphs
(1)(a) – (d) above.
(2)
In order to ensure safe, efficient, and
sufficient service to utility customers, the Commission shall consider whether
the infrastructure and operational conditions of the plant and facilities are
in compliance with Rule 25-30.225, F.A.C.
In making this determination, the Commission shall consider:
(a)
Any testimony of DEP and county health
department officials;
(b) Inspections, including sanitary surveys
for water systems and compliance evaluation inspections for wastewater systems;
citations, violations and consent orders issued to the utility;
(c) Any testimony, complaints and comments of the
utility’s customers and others with knowledge of the infrastructure and
operational conditions of the utility’s plant and facilities; and
(d) Any utility testimony and responses to the
information provided in paragraphs (2)(a) – (c) above.
(3)(2)
Working capital for Class A utilities shall be calculated using the balance
sheet approach. Working capital for Class B and C utilities shall be calculated
using the formula method (one-eighth of operation and maintenance expenses).
(4)(3)
Used and useful debit deferred taxes shall be offset against used and useful
credit deferred taxes in the capital structure. Any resulting net debit
deferred taxes shall be included as a separate line item in the rate base
calculation. Any resulting net credit deferred taxes shall be included in the
capital structure calculation. No other deferred debits shall be considered in
rate base when the formula method of working capital is used.
(5)(4)
The averaging method used by the Commission to calculate rate base and cost of
capital shall be a 13-month average for Class A utilities and the simple
beginning and end-of-year average for Class B and C utilities.
(6)(5)
Non-used and useful adjustments shall be applied to the applicable depreciation
expense. Property tax expense on non-used and useful plant shall not be
allowed.
(7)(6)
Charitable contributions shall not be recovered through rates.
(8)(7)
Income tax expense shall not be allowed for subchapter S corporations,
partnerships or sole proprietorships.
(9)(8)
Non-recurring expenses shall be amortized over a 5-year period unless a shorter
or longer period of time can be justified.
(10)(9)
The amortization period for forced abandonment or the prudent retirement, in
accordance with the National Association of Regulatory Utility Commissioners
Uniform System of Accounts, of plant assets prior to the end of their
depreciable life shall be calculated by taking the ratio of the net loss
(original cost less accumulated depreciation and
contributions-in-aid-of-construction (CIAC) plus accumulated amortization of
CIAC plus any costs incurred to remove the asset less any salvage value) to the
sum of the annual depreciation expense, net of amortization of CIAC, plus an
amount equal to the rate of return that would have been allowed on the net
invested plant that would have been included in rate base before the
abandonment or retirement. This formula shall be used unless the specific
circumstances surrounding the abandonment or retirement demonstrate a more
appropriate amortization period.
(11)(10)
A utility is required to have the right of access and continued use of own
the land upon which the utility treatment facilities are located, or possess
the right to the continued use of the land, such as a 99-year lease. Documentation
of continued use shall be in the form of a recorded warranty deed, recorded
quit claim deed accompanied by title insurance, recorded lease such as a
99-year lease, or recorded easement.
The Commission may consider a written easement or other
cost-effective alternative.
(12)(11)
In establishing an authorized rate of return on common equity, a utility, in
lieu of presenting evidence, may use the current leverage formula adopted by
Commission order. The equity return established shall be based on the equity
leverage order in effect at the time the Commission decides the case.
(13)(12)
Nonutility investment should be removed directly from equity when reconciling
the capital structure to rate base unless the utility can show, through
competent evidence, that to do otherwise would result in a more equitable
determination of the cost of capital for regulatory purposes.
(14)(13)
Interest expense to be included in the calculation of income tax expense shall
be the amount derived by multiplying the amount of the debt components of the
reconciled capital structure times the average weighted cost of the respective
debt components. Interest expense shall include an amount for the parent debt
adjustment in those cases covered by Rule 25-14.004, F.A.C. Interest shall also
be imputed on deferred investment tax credits in those cases covered by 26 CFR
Part 1, s. 1.46-6(b)(2)(i), (3) and (4)(ii) issued May 22, 1986 and effective
for property constructed or acquired on or after August 15, 1971.
Rulemaking
Authority 350.127(2), 367.0812(5), 367.0814, 367.121, 367.1213
FS. Law Implemented 367.081, 367.0812(1), 367.0814, 367.0822, 367.1213,
376.1213 FS. History–New 11-30-93,
Amended 12-14-93, ____________.
