Discussion
of Issues
Issue 1:
Should KWRU be ordered to show cause, in writing,
within 21 days, why it should not be fined for apparent violations of Sections
367.081(1) and 367.091(3), F.S., regarding approved rates?
Recommendation:
Yes. KWRU should be ordered to show cause, in
writing within 21 days, as to why it should not be fined a flat fee in the
amount of $1,000 for failing to charge its approved rates, as required by
Sections 367.081(1) and 367.091(3), F.S. (Mapp, Friedrich)
Staff Analysis:
Sections 367.081(1) and 367.091, F.S., permit a
utility to only charge its approved rates. The Commission has previously
investigated KWRU’s billing practices on several occasions. In 2001, Safe
Harbor Marina (Safe Harbor), a customer of KWRU, filed a letter with the
Division of Consumer Affairs concerning the billing practices of KWRU. In Order
No. PSC-02-1165-PAA-SU, issued
August 26, 2002, the Commission determined that KWRU billed Safe Harbor a flat
rate that was not in the utility’s tariff and that KWRU was billing
discriminatory rates to Safe Harbor. As a result, the Commission approved a
unique bulk wastewater rate for Safe Harbor.
Also in 2002, KWRU filed an application for a price index
rate adjustment pursuant to Section 367.081(4)(a), F.S. During staff’s review
of that application, staff became aware of two wastewater charges used in
revenue calculations for which there were no Commission-approved tariffs. During
a conference call between staff and the utility, the utility was informed of
staff’s findings and asked to provide additional information about the new
classes of service. KWRU provided an explanation of the origin and duration of
the charges and filed for new classes of service. As a result, Order No.
PSC-02-1711-TRF-SU was
issued December 9, 2002, which established a small pool charge and a large pool
charge based on demand the Key West Golf Club - HOA (KWGC-HOA) pool facilities placed
on the system. In addition, rates for temporary service for a septic tank
pumping company were also approved. While the Commission did not order KWRU to
issue any refunds or to show cause for charging a rate that was not in its
tariff and failing to apply for a new class of service, the Commission put KWRU
on notice that it was in violation of Sections 367.091(4) and 367.091(5), F.S.
The Commission stated, as part of its reasoning in declining to show cause KWRU
in Docket No. 021008-SU, that “[KWRU] now thoroughly understands the
requirements of Sections 367.091(4) and 367.091(5), Florida Statutes, and will
not initiate new classes of service without notifying this Commission in a
timely manner.”
On February 18, 2016, during the PAA portion of KWRU’s 2015
rate case,
staff sent a letter to KWRU which stated that the utility’s billing practices
for several general service customers appeared to be inconsistent with its
approved tariff. The utility responded to staff’s letter on March 21, 2016. In Order
No. PSC-2017-0091-FOF-SU, issued March 13, 2017, the Commission ordered that a
separate docket be established to conduct a full audit and investigation into the
utility’s billing practices, and thus, this docket was established. The purpose
of the audit and investigation was to determine if any orders, rules, or
statutes were violated by the utility.
KWRU responded to staff’s audit on January 30, 2018.
As mentioned in the case background, staff held an
informal meeting on March 22 2018, with representatives from KWRU, OPC and the
County. Following this informal meeting, staff issued a NOAV to KWRU on May 17,
2018, by certified letter. Within staff’s NOAV, staff identified the following
as the utility’s apparent noncompliance with Commission statutes, rules, and
orders:
·
Negotiated Flat Rate: Order No.
PSC-02-1165-PAA-SU, issued August 26, 2002, recognized that KWRU had billed
discriminatory rates to Safe Harbor Marina (Safe Harbor) because the monthly
flat rate that was billed to this customer was not approved by the Commission,
in apparent violation on Section 367.081(2)(a)1., F.S. Following this order,
KWRU corrected its billing practices. However, during the billing period of April
2013 though March 2016, KWRU billed Safe Harbor a negotiated rate of $1,650.67
per month instead of its approved bulk flat rate of $917.11 per month. The
utility sent a letter, dated April 20, 2009, to the Commission advising it of
the utility’s decision to charge a different unauthorized rate for this
wastewater customer. However, the Commission never approved the negotiated rate
KWRU billed Safe Harbor.
·
Pool
Charges: While processing
KWRU’s 2002 price index request, Commission staff became aware of two charges
used in revenue calculations for which there were no Commission-approved
tariffs on file. As a result, the utility formally requested a new class of
service for small and large pools. The pool charges for KWGC-HOA were approved
in Order No. PSC-02-1711-TRF-SU. Staff’s audit indicated that KWRU administered
the pool charges from tariff Sheet No. 15.7, which was applicable to the KWGC-HOA,
to two additional customers, Sunset Marina and Carefree Property between April
2013 and March 2016.
·
Base Facility Charge (BFC): Staff’s audit
into the billing practices of KWRU (April 2013 through March 2016) indicated
that the utility billed the following customers BFCs based on the number of
units or individual dwellings present behind a master meter rather than the
appropriate BFC based on the customer’s meter size, as provided in Tariff Sheet
No. 12.0:
o Sunset
Marina
o General
Service Customers: James Beaver, Eadeh Bush Co., and Armando Sosa
o Ocean
Spray Trailer Park
o Tropic
Palm Mobile Home Park
o Meridian
West Apartments
o Fourth
Ave. LLC
o Banyan
Grove
o ITNOR
Waters Edge
o Roy’s
Trailer Park
o Flagler
Village
KWRU responded to staff’s NOAV on July 16, 2018, and
addressed the negotiated flat rate, pool charges, and BFC billing practices
identified by staff. In its response, the utility stated that it mistakenly
believed that its revision to Safe Harbor’s bulk wastewater rate had been
accepted by the Commission, similar to a developer’s agreement for service.
Additionally, in its response, KWRU pointed out that at the end of 2009,
management was moved in-house and has since routinely brought all matters
before the Commission. Further, KWRU indicated it believed the pool charges
were implemented reasonably under the tariff and were only implemented after
consulting with staff. KWRU responded to staff’s NOAV in regards to BFC billing
practices by admitting it had billed several general service customers
incorrect BFCs and stated it was an error that occurred in switching KWRU’s
billing system after the 2009 rate case. The utility also addressed Roy’s
Trailer Park in its response, and explained that it had engaged in numerous
discussions with the owner to mitigate the customer’s outstanding balance owed
to the utility consistent with KWRU’s approved tariffs. In addition, KWRU has
made refunds to three of its general service customers to correct incorrect billing
practices that occurred prior to the implementation of Order No.
PSC-16-0123-PAA-SU (PAA Order) in April 2016. Staff believes it is also
important to note that the utility’s billing practices appear to be consistent
with its approved tariff following the implementation of the PAA Order.
Utilities are charged with the knowledge of the Commission=s rules and statutes. Additionally, A[i]t
is a common maxim, familiar to all minds that >ignorance
of the law= will not
excuse any person, either civilly or criminally.@ Barlow v. United States, 32 U.S. 404,
411 (1833). In Commission Order No.
24306, issued April 1, 1991, in Docket No. 890216-TL, titled, In re:
Investigation into the Proper Application of Rule 25-14.003, Florida
Administrative Code, Relating to Tax Savings Refund for 1988 and 1989 for GTE
Florida, Inc., the Commission, having found that the company had not
intended to violate the rule, nevertheless found it appropriate to order it to
show cause why it should not be fined, stating that A[i]n
our view, >willful= implies an intent to do an act, and
that this is distinct from an intent to violate a statute or rule.@
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 day a
violation continues, if such entity is found to have refused to comply with or
to have a 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. In making similar decisions,
the Commission has repeatedly held that utilities are charged with the
knowledge of the Commission’s Rules and Statutes.
In other words, a utility cannot excuse its violation because it “did not
know.”
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 agrees with staff’s recommendation, the Commission should
issue 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 pursuant to Rule 28-106.2015, F.A.C. 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.
If the utility pays the fine, 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.
By billing rates that are not in the utility’s approved
tariff, KWRU appears to be in violation of the statutes. While staff believes
occasional mistakes may be made by any utility, staff believes that making
excessive and repeated mistakes demonstrates a disregard for the utility’s obligation
to charge its approved rates. As discussed in subsequent issues, although the
utility corrected these billing problems following the issuance of the PAA Order,
Order No. PSC-16-0123-PAA-SU, in 2016, given the utility’s pattern of failure
to bill customers in accordance with its Commission-approved tariffs and the
number of violations discovered within the three-year audited period, KWRU’s
mistakes are excessive and, therefore, appear to violate Sections 367.081(1)
and 367.091(3), F.S. Staff believes that this situation warrants more than just
a warning and recommends that KWRU should be ordered to show cause, in writing
within 21 days, as to why it should not be fined a flat fee in the amount of
$1,000 for its apparent violation of Section 367.081(1) and 367.091(3), F.S.,
for charging unauthorized rates.
Issue 2:
What is the appropriate time period to be considered
for potential refunds?
Recommendation:
The appropriate time period to be considered for
potential refunds is from April 2013 through March 2016. (Friedrich)
Staff Analysis:
As previously discussed, in Order No.
PSC-17-0091-FOF-SU
the Commission ordered that staff conduct a full audit and investigation of
KWRU’s billing practices. Audit staff reviewed the utility’s billing records
from April 2013 through March 2017. In a letter dated June 12, 2018, OPC noted
that staff’s audit does not go back to the final order issued in the 2009 rate
case when KWRU started incorrectly billing these customers.
Staff believes this time period is a reasonable remedy to
mitigate the utility’s incorrect billing practices prior to the implementation
of the PAA Order while considering that KWRU has corrected these billing
practices following the implementation of the PAA Order. Therefore, staff
recommends that the appropriate time period to be considered for potential
refunds in this docket is April 2013 through March 2016.
Issue 3:
Should KWRU be required to refund monies to Safe
Harbor Marina? If so, what is the appropriate amount that should be refunded?
Recommendation:
Yes. KWRU should be required to refund $26,408 with
interest in accordance with Rule 25-30.360, F.A.C to Safe Harbor Marina. The
refund should be completed within 90 days of the consummating order and
documentation supporting the final refund should be provided within 10 days of
the completed refund. (Friedrich)
Staff Analysis:
Safe Harbor is a unique customer not only because
this customer owns, operates, and maintains its own lift station, but it is
also a multi-use customer consisting of residential and commercial units, boat
slips, and bathhouses. Docket No. 020520-SU was initiated due to a complaint
from Safe Harbor concerning the billing practices of KWRU.
The Commission determined that KWRU had billed Safe Harbor a discriminatory
flat rate for Safe Harbor’s unmetered bar/restaurant, which was not in KWRU’s
tariff, and approved a bulk wastewater rate for Safe Harbor.
During KWRU’s 2015 rate case, staff determined that KWRU
was not billing this customer the approved tariff rate. In response to staff’s
audit, KWRU indicated that it sent the Commission a letter, dated February 27,
2009, stating it would charge a negotiated flat rate to Safe Harbor of
$1,650.67. While staff acknowledges that KWRU sent in a letter notifying the
Commission of its intent, the utility failed to appropriately apply for approval
of the new rate and have its request brought forth and approved by the
Commission. Based on the utility’s history with the Commission, where the Commission
has addressed the utility billing unauthorized rates in Order Nos.
PSC-02-1165-PAA-SU and PSC-02-0711-TRF-SU, staff believes the utility is aware
of the procedures required for approval of a new rate pursuant to Sections
367.081 and 367.091, F.S., and should not have begun to charge a negotiated
bulk rate without Commission approval.
During the 36 month period from April 2013 through March
2016, KWRU’s tariff rate for Safe Harbor Marina was $917.11 per month (Attachment
A). However, during this time period, the utility billed Safe Harbor a
negotiated bulk rate of $1,650.67. Based on these rates, staff determined that
KWRU overbilled Safe Harbor by $733.56 during each billing period. As a result
of charging a negotiated rate that was not approved by the Commission, staff
recommends that KWRU refund $26,408 ($733.56 x 36) with interest in accordance
with Rule 25-30.360, F.A.C to Safe Harbor Marina. The refund should be
completed within 90 days of the consummating order and documentation supporting
the final refund should be provided within 10 days of the completed refund.
Issue 4:
Should KWRU be required to refund monies regarding
its billing practices to Sunset Marina? If so, what is the appropriate amount
that should be refunded?
Recommendation:
Yes. KWRU should be required to refund $41,034 with
interest in accordance with Rule 25-30.360, F.A.C to Sunset Marina. The refund
should be completed within 90 days of the consummating order and documentation
supporting the final refund should be provided within 10 days of the completed
refund. (Friedrich)
Staff Analysis:
Sunset Marina is a general service customer with one
two-inch and one eight-inch turbo FKAA meter serving a marina, convenience
store, dry boat slips, and apartments. Staff determined that during the 36
month period (April 2013 - March 2016) KWRU billed Sunset Marina BFCs for 64
residential units in addition to BFCs for the customer’s two-inch and
eight-inch turbo meters, as well as charges for two small pools
and a gallonage charge based on usage.
Based on KWRU’s approved tariffs, Sunset Marina should
have been billed based on the FKAA meters only. KWRU should not have also
billed a residential BFC of $17.81 per month for each of the 64 apartment units
behind the master meters. KWRU overbilled Sunset Marina $1,139.84 per billing
period ($17.81 x 64 apartment units). Based on the above, staff recommends that
KWRU should refund $41,034 ($1,139.84 x 36) with interest in accordance with
Rule 25-30.360, F.A.C to Sunset Marina. The refund should be completed within
90 days of the consummating order and documentation supporting the final refund
should be provided within 10 days of the completed refund.
Issue 5:
Should KWRU be required to refund monies regarding
its billing practices for pools? If so, what is the appropriate amount that
should be refunded?
Recommendation:
No. KWRU should not be required to refund monies
regarding its billing practices for pools. (Friedrich)
Staff Analysis:
As discussed in Issue 1, Order No.
PSC-02-1711-TRF-SU, issued December 9, 2002,
established a small pool rate of $41.62 per month and a large pool rate of
$141.08 per month which considered the demand the KWGC-HOA pool facilities
placed on the system. Within this order, the Commission determined that the
utility should not be required to refund any amounts collected from KWGC-HOA,
which were billed using unauthorized rates, because the Commission-approved
rate was higher than the rate the utility had been collecting from KWGC-HOA.
Additionally, as discussed in Issue 1, the Commission did not order KWRU to
issue any refunds or to show cause for charging a rate that was not in its
tariff and failing to apply for a new class of service. However, the order noticed
KWRU that it should now thoroughly understand the requirements of Sections 367.091(4)
and (5), F.S., and not initiate new classes of service without notifying this
Commission in a timely manner.
Staff’s investigation and audit determined that KWRU had
applied its approved pool rates for KWGC-HOA to other additional customers with
pools of similar demands (Sunset Marina and Carefree Property). In the
utility’s response dated July 16, 2018, KWRU indicated that it applied its
approved pool charges reasonably under its tariff and only implemented the
charges after consultation with staff and its assurance that it was
appropriate. KWRU’s tariff sheet for pool charges was canceled by the
Commission in the PAA Order. As mentioned previously, KWRU has corrected its
billing practices following the implementation of the PAA Order. Therefore, staff
believes the utility should not be required to refund rates charged for pools
other than the KWGC-HOA because the utility believed that the tariff was
applicable to any additional customers with pools.
Issue 6:
Should KWRU be required to refund general service
customers that were billed BFCs based on units instead of meters? If so, what
is the appropriate amount that should be refunded?
Recommendation:
No. KWRU should not be required to refund general
service customers that were billed BFCs based on units instead of meters. (Friedrich)
Staff Analysis:
In the utility’s 2009 rate case, the Commission
transitioned the utility from flat residential rates to a traditional BFC and
gallonage charge rate structure.
In response to staff’s investigation and audit, KWRU agreed that several of its
general service customers, as discussed on page five, were billed based on
units instead of meter sizes. According to the utility, this error occurred
during the transition from flat to volumetric rates for residential customers
and a billing software error which incorrectly identified the customers as
residential units. In addition, it
appears that the billing determinants in the 2009 rate case may have been based
on units rather than meter sizes for some general service customers. As
mentioned previously, KWRU has corrected its billing practices following the
implementation of the PAA Order in April 2016. Therefore, staff does not
recommend that KWRU refund general service customers that were billed BFCs
based on units and not FKAA meters.
Issue 7:
Should KWRU be required to refund monies regarding
its billing practices for Roy's Trailer Park? If so, what is the appropriate
amount that should be refunded?
Recommendation:
No. KWRU should not be required to refund monies
regarding its billing practices for Roy’s Trailer Park. (Friedrich)
Staff Analysis:
Roy’s Trailer Park is a general service customer of
KWRU consisting of approximately 100 mobile homes which have been converted to
multi-units (i.e. duplex, triplex, etc.) and are serviced by 100 FKAA meters.
In response to staff’s NOAV, KWRU admitted it billed this customer based on the
number of units instead of meters dating back to December 2015.
The utility indicated that the majority of the 100
accounts in Roy’s Trailer Park have carried outstanding balances dating back to
October 2015. The utility also indicated that although Roy’s Trailer Park made
a payment each month for sewer service, the park was not paying its monthly
sewer bill in full.
KWRU addressed the billing issues with respect to Roy’s
Trailer Park by letter dated August 28, 2017, and explained that the customer
had repeatedly failed to remit its full payment for numerous billing periods
resulting in an outstanding balance of $49,300.37, which included late payment
charges of $7,215 assessed to all of the Roy’s Trailer Park accounts that were
delinquent. Roy’s Trailer Park agreed to the utility’s settlement proposal of
$35,215.06, which waived the late payment charges and recalculated the
customer’s bill for October 2015 through March 2016 consistent with the rates
established in Order No. PSC-16-0123-PAA-SU. Billing Roy’s Trailer Park based
on FKAA meters and not units further reduced the outstanding balance by
$6,870.31.
Based on the above, staff recommends that the utility’s
settlement with this customer was a reasonable solution to address the
corrected outstanding balance for Roy’s Trailer Park for this time period.
Consistent with staff’s recommendation in Issue 6 that the utility should not
be required to refund general service customers that were billed BFCs based on
units instead of meters, staff does not recommend that the utility be required
to refund Roy’s Trailer Park for the time period of April 2013 through
September 2015 during which it billed based on units instead of meters.
Issue 8:
Should this docket be closed?
Recommendation:
If the Commission approves Issue 1 and KWRU 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 KWRU responds to
the show cause order by remitting the fine, this show cause matter will be
considered resolved. If the Commission approves Issue 1 and KWRU 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. If the Commission approves the recommended refunds in Issues 3 and
4, this docket should remain open until staff verifies that the utility has
made the ordered refunds. Once the show cause matter is resolved and all
ordered refunds have been made and verified by staff, this docket should be
closed administratively. (Mapp)
Staff Analysis:
If the Commission approves Issue 1 and KWRU 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 KWRU responds to
the show cause order by remitting the fine, this show cause matter will be
considered resolved. If the Commission approves Issue 1 and KWRU 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. If the Commission approves the recommended refunds in Issues 3 and
4, this docket should remain open until staff verifies that the utility has
made the ordered refunds. Once the show cause matter is resolved and all
ordered refunds have been made and verified by staff, this docket should be
closed administratively.
