Discussion of Issues
Issue 1:
Is the quality of service provided by Country Walk
satisfactory?
Recommendation:
Country Walk is currently working to incorporate Department
of Environmental Protection (DEP) guidance into its operating methodology and
is expected to return to compliance with disinfection byproduct standards
following third quarter sampling results. Country Walk has worked, and
continues to work closely with its customers to address complaints in a timely
manner and to discuss potential operational solutions to its customers’ needs.
Finally, Country Walk’s water treatment plant was found to be in sound
operating condition during the recent site visit. However, because Country Walk
is not currently in compliance with DEP standards, staff recommends that the
overall quality of service should be considered marginal. (Wright)
Staff Analysis:
Pursuant to Section 367.081(2)(a)1, F.S., in water
and wastewater rate cases, the Commission considers the overall quality of
service provided by a utility. Rule 25-30.433(1), Florida Administrative Code
(F.A.C.), provides for the consideration of three separate components of the
utility’s operations.
The components are: (1) the quality of the utility’s product; (2) the utility’s
attempt to address customer satisfaction; and (3) the operating conditions of
the utility’s plant and facilities. The Rule further states that sanitary
surveys, outstanding citations, violations, and consent orders on file with DEP
and the county health department over the preceding three-year period shall be
considered. Additionally, Section 367.0812(1), F.S., requires the Commission to
consider the extent to which the utility provides water service that meets
secondary water quality standards as established by DEP.
Quality of Utility’s Product
In evaluating Country Walk’s product quality,
staff reviewed the Utility’s compliance with DEP’s primary and secondary
drinking water standards. Primary standards protect public health, while
secondary standards regulate contaminants that may impact the taste, odor, and
color of drinking water. Pursuant to Rule 25-30.433, F.A.C., staff reviewed DEP’s
compliance records from January 1, 2015, through December 31, 2017,
and has identified two related areas of concern: (1) disinfection byproduct
levels of Total Trihalomethanes (TTHM) and Haloacetic Acids (HAA5), both
primary contaminants had exceeded their maximum contaminant levels (MCL) on
multiple occasions; and (2) the water color standard, measuring a secondary
contaminant, was not met when last evaluated.
Country Walk draws its water from a source containing high
concentrations of hydrogen sulfides. Prior to recent plant modifications,
Country Walk’s system employed a pump-and-chlorinate methodology. High doses of
chlorine were required to maintain DEP mandated residual chlorine levels in the
water distribution system because chlorine was being readily consumed through
an oxidation reaction with the hydrogen sulfides. An August 16, 2014, sampling
of Country Walk’s system, however, found that this methodology was resulting in
TTHM and HAA5 MCL exceedances, per DEP standards. At the same time, due to the
residual hydrogen sulfides in the distribution system and the high levels of
treatment required, Country Walk was receiving customer complaints regarding
dark/foul smelling water and loss of pressure, the former being reflected in a
May 12, 2015, secondary standards sampling that revealed water color standards
were not being met.
DEP responded to Country Walk’s sampling results by
placing them on a quarterly TTHM and HAA5 sampling requirement. In a follow-up
letter to DEP, dated September 16, 2014, Country Walk explained that, through U.S.
Water Services Corporation, a treatment system to remove the sulfides in the
raw water was designed in line with recommendations from DEP rules. Country
Walk also explained that the treatment system’s estimated $100,000 cost would
be, pending Commission approval, passed on to Country Walk’s customers who, at
the time, were not willing to take on the financial burden.
On February 11, 2016, Country Walk held a meeting with the
Homeowners Association and DEP during which Country Walk’s customers were made
aware of the regulatory motivations for the proposed plant modifications and
were provided an opportunity to participate in the funding of the project as a
means to mitigate a rate increase. In a follow-up letter dated April 25, 2016,
Country Walk’s Homeowners Association declined the option to participate in
project funding but expressed their approval of the planned plant
modifications. With approval from its customers, Country Walk began to
implement its plans on May 2, 2016. In September 2017, Country Walk completed
the plant modifications and placed into service its new forced draft aeration
treatment system to begin removing the hydrogen sulfides from its raw water
prior to chlorination. Sulfide analysis performed on samples taken downstream
of the forced draft aeration treatment system on September 6, 2017, revealed
undetectable levels of sulfides, indicating the system is effectively
volatizing and removing the hydrogen sulfides present in the raw water. Cost
recovery for the forced draft aeration treatment system is discussed in Issue
3.
While the design and construction of the forced draft
aeration treatment system was underway, Country Walk was still operating on a
DEP-imposed quarterly TTHM and HAA5 sampling schedule, under which Country Walk
repeatedly reported disinfection byproduct MCL exceedances. By a February 6,
2018 letter, DEP issued Country Walk a draft consent order, finding Country
Walk in repeated violation of primary drinking water standards. In a responsive
letter to DEP dated February 16, 2018, Country Walk explained that the new
system had recently gone into service and that, according to the sampling
schedule, it would take some months for Country Walk to return to official
compliance. Staff has contacted DEP in regards to this consent order and has
been informed that Country Walk is on a monitoring plan to determine if the consent
order is required. Staff has reviewed recent TTHM and HAA5 sampling results
which show that Country Walk’s rolling annual average falls under MCL,
indicating the new system is operating as intended. However, DEP has not
released Country Walk from its quarterly sampling requirement, instead opting
to reevaluate after third quarter sampling results. Staff has reviewed a June
12, 2018 correspondence between Country Walk and DEP that exhibits Country
Walk’s continued efforts to incorporate DEP guidance into its treatment
methodology.
Staff has also reviewed two sets of lead and copper analyses
of Country Walk’s system performed, in part, to address customer complaints
regarding green/blue staining of surfaces in contact with finished water and a
dark coloration to the finished water. Both analyses, the first performed on
samples dating from April 27 to May 4, 2018, and the second performed on
samples dated July 19, 2018, reported lead and copper concentrations under
actionable levels. Country Walk was recently required by DEP to perform
quarterly lead and copper sampling due to the change in the water treatment
process discussed above. Sampling results for all other primary and secondary
quality standards, performed on samples taken August 6, 2018, were reviewed by
staff and indicated that the Utility was in compliance with the exception of the
pH of the finished water. Country Walk’s finished water, sampled at the entry
point to distribution, was found to be slightly more acidic, with a pH of 6.38,
than the normal finished water pH range of 6.5 – 8.5. Country Walk is still
working with DEP to make modifications to its treatment methodology to achieve
its finished water target pH of 7.3. Additionally, staff’s review did not
reveal any citations from the Highlands County Health Department.
Country Walk is currently working to incorporate DEP guidance
into its operating methodology, is cooperating with sampling requirements, and
is expected to return to compliance with disinfection byproduct standards
following third quarter sampling results.
The Utility’s Attempt to Address
Customer Satisfaction
Staff reviewed the complaint records filed with
this Commission, DEP, and Country Walk for the period starting October 23,
2013, and ending March 1, 2018. Staff has also performed a supplemental review
of the complaints filed with this Commission following the July 25, 2018,
customer meeting. Table 1-1 below shows a count of all complaints reviewed by
source and subject.
Table 1-1
Number
of Complaints by Source and Subject
|
Subject of Complaint
|
PSC Records
|
DEP Records
|
Utility Records
|
|
Dark/Foul Smelling Water
|
3
|
-
|
48
|
|
Decreased Water Pressure
|
1
|
-
|
21
|
|
High Water Pressure
|
3
|
-
|
3
|
|
Excessive Gallonage/
Billing Errors
|
5
|
1
|
25
|
|
No Generator at Plant
|
2
|
-
|
-
|
|
Suspended Solids
|
1
|
-
|
-
|
|
Rate Concerns
|
2
|
-
|
-
|
|
Other
|
1
|
-
|
-
|
|
Total*
|
18
|
1
|
97
|
*A single customer complaint may be counted multiple
times if it meets multiple categories.
Prior to
recent plant modifications, Country Walk’s customers had complained of
dark/foul smelling water. This water quality issue originated from Country
Walk’s prior treatment methodology, discussed above in detail, and was
exacerbated by the seasonality of Country Walk’s customers. Country Walk
addressed these complaints by flushing customer’s water pipes until the water
quality improved. Following installation of the new forced draft aeration
treatment system, customers have reported a notable improvement in water
quality. At the same time, staff was made aware of new water quality complaints
during the July 25, 2018 customer meeting. It appears that some customers have
experienced green/blue staining of surfaces in contact with finished water. As
discussed above, Country Walk has performed lead and copper analyses of its
finished water to determine if this staining was related to potential mineral
leaching from residents’ internal plumbing. These analyses resulted in lead and
copper concentrations under actionable levels. Country Walk explained that due
to the seasonality of many of its customers and the volume of water contained
in its distribution system, these issues will take some time to resolve and has
urged customers to cycle the water in their hot water heaters and, when faced
with acute water quality issues, to run faucets until the water quality
improves. Country Walk has indicated that if further changes to its treatment
methodology are required to address these complaints, it will consider adding a
sequestrant or may convert to using chloramines as a disinfectant.
Several
other customer complaints concerned a decrease or complete loss of pressure at
customers’ homes, the cause of which varied by instance. If the cause of the
pressure loss was known, such as a planned outage or a main break, Country Walk
would inform the customer of the issue and the estimated duration of the
service interruption. If the cause was not immediately known, Country Walk
would respond to these complaints by issuing a service order for a technician
to visit the property to inspect the water meter and perform a leak test. Leaks
found on the Utility’s side of the meter were repaired. If a leak was believed
to be on the customer’s side of the meter, Country Walk would advise the
customer to seek a plumber’s expertise. At a February 11, 2016 customer
meeting, Country Walk was made aware of multiple pressure loss complaints.
Following the meeting, Country Walk representatives investigated the complaints
and discovered that, due to both the age of the system and the high levels of
chlorine required to treat the source water, calcium buildup had clogged the
service lines where they tap into the water mains. A select few homes had their
service lines dug up, the calcium buildup removed, and their water pressure
tested, revealing satisfactory pressure levels. As discussed in Issue 3,
Country Walk is now undergoing a project to clear the calcium buildup from the
service lines of every property served.
A high
pressure event occurred in September 2017, due to an electrical failure
associated with the newly installed forced draft aeration treatment system that
caused Country Walk’s distribution lines to be over-pressurized. This led to
damages of some customers’ plumbing and may have contributed to a main line
break that occurred around this time. Country Walk has since repaired the
electrical components at the water treatment plant and has begun working with
affected customers to resolve their complaints. As of August 10, 2018, Country
Walk reports that it has not received any documentation detailing damage to
customer plumbing. Country Walk has installed a pressure relief valve, designed
to open at 80 psi, downstream of the high-service pumps which feed into the
hydropneumatic tank to prevent future high-pressure events.
Customer
complaints related to billing included excessive gallonage charges and other
errors in billing. Country Walk’s initial response was typically to review a
customer’s historical usage rates to determine if the usage in question differs
by a large margin. If it did, or if a customer was still not satisfied by the
usage review, Country Walk would schedule a visit by a technician to inspect
and reread customers’ meters and test for leaks. If the meter was found to have
been read incorrectly, the customer’s account would be credited for the
excessive gallonage charges. However, if the meter was found to have been read
accurately and no leaks were found, Country Walk would offer to perform a
bucket test on the customer’s meter to determine if it was registering water
flow appropriately. In those cases where the meter was found to be operating
correctly, Country Walk would notify the customer and, if the customer was
still not satisfied, would typically offer a credit to the customer’s account
as a courtesy. Those meters found to be incorrectly registering water flow
would be replaced and, in some cases, the old meter would be sent to an independent
testing facility to confirm its erroneous measurements. In those cases, Country
Walk’s customers would also be offered a credit to their accounts, calculated
according to Rule 25-30.340, F.A.C. Country Walk has recently analyzed
consumption in 2018 and reports that it found no anomalous values.
During the
July 25, 2018 customer meeting, Country Walk customers informed staff of their
troubles experienced during a five to seven day period in September 2017 after
Hurricane Irma during which Country Walk had lost power, and therefore its
capability to provide potable water to its customers. Customers questioned
whether Country Walk was required to have a standby generator at its water
treatment plant. Per DEP rules, a community water system serving, or designed
to serve, 350 or more persons or 150 or more service connections is required to
provide standby power for operation. Because Country Walk does not meet this
criteria, it is not required to provide standby power. However, in an effort to
address customer complaints, Country Walk communicated with the Homeowners
Association in regards to equipping Country Walk’s water treatment plant with a
generator. On August 31, 2018, the Homeowners Association responded that it
does not want Country Walk to install and maintain a generator at the plant at
this time.
Following
the July 25, 2018 customer meeting, this Commission received additional
customer complaints. One such complaint concerned clogging of a customer’s
filtration equipment. Country Walk has responded to the customer informing them
that filtration of its finished water is neither needed nor required. Country
Walk also explained that its water treatment plant is neither equipped nor
permitted to provide for filtration of its finished water. Staff has been
informed that DEP is currently investigating the complaint. Customers have also
expressed concerns over the proposed rate increase.
Operating Condition of the Utility’s
Plant and Facilities
Country Walk’s water treatment plant is served
by a single well, where raw water is pumped up from a well rated at 80 gallons
per minute (gpm). Prior to recent plant modifications, Country Walk treated the
water with high levels of chlorine and pumped the treated water into its
distribution system with a 5,000 gallon hydropneumatic tank. As discussed
above, Country Walk has recently installed a forced draft aeration treatment
system to remove the hydrogen sulfides from the raw water prior to
chlorination.
Staff has reviewed the most recent available DEP Sanitary
Survey for Country Walk’s water treatment plant dated April 17, 2013. Staff
notes that this Sanitary Survey predates Country Walk’s purchase of the water
treatment system on October 23, 2013. This report identifies two deficiencies:
(1) the previously used well had not been capped correctly following its
retirement; and (2) the new well’s air release valve had not been installed
correctly. In a letter dated May 28, 2013, former owner Holmes Utilities, Inc.
reported to DEP that all deficiencies had been corrected. On July 26, 2018,
staff confirmed, through a site visit to Country Walk’s water treatment plant,
that both deficiencies had been corrected. Staff also reviewed a subsequent DEP
Compliance Inspection Report dated June 27, 2014, that identified two areas of
concern: (1) the new well for the system had total sulfide levels that required
specialized treatment; and (2) Country Walk’s hydropneumatic tank was due for
its five-year inspection and cleaning. Country Walk responded to DEP in a
letter dated July 9, 2014, reporting that a preliminary conceptual design with
an associated cost estimate was being prepared for the system required to treat
the new well’s water (that system being the newly installed forced draft
aeration treatment system discussed above), and that the hydropneumatic tank
was scheduled to be inspected and cleaned within the next 60 days. Staff
received confirmation from Country Walk that the hydropneumatic tank was
inspected and cleaned on October 2, 2014. Per DEP, Country Walk is scheduled for
a Sanitary Survey to occur during the next federal fiscal year, October 2018
through September 2019.
Conclusion
Country Walk
is currently working to incorporate DEP guidance into its operating methodology
and is expected to return to compliance with disinfection byproduct standards
following third quarter sampling results. Country Walk has worked, and
continues to work closely with its customers to address complaints in a timely
manner and to discuss potential operational solutions to its customers’ needs.
Finally, Country Walk’s water treatment plant was found to be in sound
operating condition during the recent site visit. However, since Country Walk
is not currently in compliance with DEP standards, staff recommends that the
overall quality of service should be considered marginal.
Issue 2:
What is the used and useful percentage (U&U) of
Country Walk’s water treatment plant, storage, and distribution system?
Recommendation:
Country Walk’s water treatment plant, storage, and
distribution system should be considered 100 percent U&U. There appears to
be no excessive unaccounted for water; therefore, no adjustment should be made
to operating expenses for chemicals and purchased power. (Wright)
Staff Analysis:
Country
Walk’s water treatment plant is served by a single well rated at 80 gpm. The
Utility’s water system has two 5,000 gallon storage tanks, one underground tank
and one hydropneumatic tank. Country Walk’s distribution system is composed of
3,815 linear feet of 2 inch polyvinyl chloride (PVC) pipe and 1,802 linear feet
of 4 inch PVC pipe.
Rule
25-30.4325, F.A.C., addresses the method by which the U&U of a water system
is determined. The U&U for Country Walk’s water treatment plant and
distribution system were last determined in Order No. PSC-01-2385-PAA-WU. In
that Order, the Commission found Country Walk’s water treatment plant and
distribution system to be 100 percent and 90 percent U&U, respectively.
Country Walk’s water storage is a recent addition to its system and, thus, a
storage U&U determination has not previously been made.
Water Treatment Plant Used and Useful
As noted
above, the Commission found the water treatment plant to be 100 percent U&U
in the prior rate case. The Utility has not increased the capacity of its water
treatment facilities since the last rate case. Therefore, consistent with the
Commission’s previous decisions, staff recommends the Utility’s water treatment
plant to be considered 100 percent U&U.
Water Storage Used and Useful
Pursuant to
Rule 25-30.4325(8), F.A.C., for water systems with storage, if the storage
capacity is less than the peak demand, the storage system should be considered
100 percent U&U. Country Walk stores its water in a 5,000 gallon
underground concrete tank. Per Rule 25-30.4325(9)(b), F.A.C., Country Walk’s
water storage tank has a usable storage capacity of 4,500 gallons (90 percent
of 5,000 gallons). Country Walk’s peak day demand is estimated at approximately
118,191 gallons which exceeds the usable water storage amount. Staff recommends
that the water storage is 100 percent U&U.
Water Distribution System Used and Useful
There are no
large undeveloped parcels in Country Walk’s territory. While there are
undeveloped lots interspersed throughout the distribution system, all lines are
required to serve existing customers, and no portions of the distribution
system could be isolated as not U&U. Therefore, staff recommends that
Country Walk’s water distribution system be considered 100 percent U&U.
Excessive Unaccounted for Water (EUW)
Unaccounted
for water (UW) is all water produced that is not sold, metered, or accounted
for in the records of the Utility. Rule 25-30.4325(1)(e), F.A.C., defines EUW
as “unaccounted for water in excess of 10 percent of the amount produced.” EUW
is used in the U&U determinations pursuant to Rule 25-30.4325, F.A.C.
Additionally, Rule 25-30.4325(10), F.A.C., provides factors to be considered in
determining whether adjustments to plant operating expenses are necessary for
EUW.
UW is
calculated by subtracting test year totals of both the gallons sold to
customers and the gallons used for other services, such as flushing, from the
total gallons produced at the water treatment plant. Based on the monthly
operating reports Country Walk has submitted to DEP, Country Walk produced
3,771,300 gallons of water from January 1, 2017, to December 31, 2017. The
audit completed by staff indicated that the Utility sold 2,533,000 gallons of
water to customers. Country Walk reported that an estimated 1,410,025 gallons
of water were used for flushing and maintenance purposes during the test year,
including estimations of leakage from main line breaks. Staff notes that, based
on the data provided, several months were determined to exhibit negative UW,
indicating that a greater amount of water had been
accounted for than was actually produced. This likely resulted from either
Country Walk’s overestimation of water lost to main line breaks or its flushing
activities; the latter having been discussed in Issue 1 as it relates to
Country Walk’s water quality issues and its solutions thereof. For the purposes
of EUW determination, staff has adjusted any negative UW calculations to be
zero. After adjustment, Country Walk’s UW was calculated to be 1 percent,
indicating that Country Walk has no EUW. As such, staff recommends
no adjustment should be made to operating expenses for chemicals and purchased
power.
Conclusion
Staff
recommends that Country Walk’s water treatment plant, storage, and distribution
system be considered 100 percent U&U. There appears to be no EUW; therefore,
no adjustment should be made to operating expenses for chemicals and purchased
power.
Issue 3:
Should the Commission approve a year-end rate
base for Country Walk, and if so, what is the appropriate water rate base for
the year-end test year?
Recommendation:
Yes, the Commission should approve a year-end rate
base. The appropriate water rate base is $167,776 for the test year ended
December 31, 2017. (L. Smith, Wright)
Staff Analysis:
Country Walk’s net book value was established as of September 4, 2013,
in its 2013 transfer docket by Order No. PSC-14-0495-PAA-WU.
The test year end December 31, 2017, is being used for the instant case. A
summary of each rate base component and recommended adjustments are discussed
below.
Year-End Rate Base
In its application, the Utility requested a year-end rate
base for its water system in order to have an opportunity to recover its
allowed rate of return on the capital improvement that was made during the test
year. This improvement consisted of a forced draft aeration treatment system
which was installed to remove the majority of the hydrogen sulfides from
Country Walk’s well water, thereby addressing both the primary and secondary
standards compliance issues discussed in Issue 1. Based on staff’s review,
Country Walk’s water system improvement represents an increase of $136,344 or
147.07 percent over the Utility’s 2016 year-end Utility Plant in Service (UPIS)
balance. If an average rate base were used, the Utility would not be afforded
the opportunity to recover its allowed rate of return on the new investment and
would be put in the position of requesting a subsequent SARC at a later date.
The Commission has the authority
to apply a year-end rate base, but should only apply a year-end rate base in
extraordinary circumstances.
Staff believes extraordinary circumstances exist in the instant case. The
Utility has made a significant improvement to its water system to address water
quality concerns. The year-end rate base will provide Country Walk with an
opportunity to recover its investment to improve water quality and will ensure
compensatory rates for this Utility. The Commission has previously authorized
the use of a year-end rate base in other cases involving significant test year
improvements.
Therefore, staff recommends that the Commission approve a year-end water rate
base for Country Walk.
Utility Plant in Service (UPIS)
Country Walk has modified its water treatment plant by
installing a forced draft aeration treatment system. This system was recently
cleared by the DEP and was placed into operation in September 2017 in an effort
to resolve water quality complaints and to conform to the DEP’s maximum
disinfection by-product contamination levels as discussed in Issue 1. Per
Country Walk’s response to staff’s second data request, the cost of purchasing
and installing the treatment system through U.S. Water Services Corporation
(USWSC) was $114,485.
Country Walk explains that the actual cost of providing and installing the
system from USWSC was $122,369 but that USWSC lowered the labor rate and the
project margin below contracted amounts, and absorbed some of the travel
expenses of the workers, resulting in an invoiced amount that is $7,884 lower.
USWSC also provided design and permitting services for the forced draft
aeration treatment system at an additional cost of $21,859, for a total cost of
$136,344. Supporting documentation was provided in the staff audit. For
comparative purposes, Country Walk provided a bid by Marolf Environmental Inc.
for providing and installing a similar treatment system, not including design
and permitting costs, which totaled $161,283. Therefore, staff recommends that
Country Walk was acting prudently in its contracting with USWSC for the forced
draft aeration treatment system and recommends that UPIS be adjusted
accordingly.
Country Walk recorded UPIS of $230,541. Staff has reviewed
the audit workpapers and the Utility’s annual reports and found that a second
well was placed into service in 2012. In response to staff’s data request dated
August 8, 2018, the Utility stated that only one well has been in service since
2012.
Staff could not find the retirement associated with the original well.
Therefore, staff recommends reducing Account 307 Wells and Springs by $16,306
to retire the original well that is no longer in service.
Pro
Forma Plant
As discussed in Issue 1, Country
Walk’s customers have been experiencing low water pressure issues. Country Walk
representatives investigated the complaints and discovered that, due to both
the age of the system and the high levels of chlorine required to treat the
source water, calcium buildup had clogged the service lines where they tap into
the water mains. A select few homes had their service lines dug up by the
Utility and the calcium buildup removed, resulting in satisfactory pressure
levels. Country Walk believes it is necessary to conduct a system-wide project
to address the remaining service connections and has provided staff with two
bids for the project: one from USWSC for $16,085 and one from Oxford Pipeline
Inc. for $21,000. Country Walk requested additional bids from other contractors
but no other proposals have been received at this time. Country Walk has
selected the bid from USWSC who is currently executing the contract. Staff
believes this project is reasonable, prudent, and necessary to increase water
pressure to acceptable levels.
Country Walk also is requesting a
pro forma plant item to install a bypass around its hydropneumatic tank that
will allow Country Walk to continue to provide water to its customers during
times when its hydropneumatic tank is taken out of service, as will be the case
for its upcoming sandblasting and coating as discussed in Issue 6. Without this
bypass system, Country Walk would be forced to take its water system offline,
and subsequently issue boil water notices, any time its hydropneumatic tank was
serviced. Country Walk has provided one invoice from USWSC for $1,029. Staff
has requested additional bids from Country Walk but was informed that Country
Walk did not seek additional bids from other contractors due to the nature of
the work and the location of the Utility in a rural area of Florida. Due to the
cost and scope of the project, the competitiveness of the other USWSC bids
reviewed during this rate case, and the lasting benefits to customers, staff
believes that this project is reasonable and prudent.
Based on the above, staff
increased UPIS by $17,114 ($16,085 + $1,029) to reflect the service connection
refurbishment project and the hydropneumatic tank bypass installation. Staff’s
adjustments result in a net increase to UPIS of $808 (-$16,306 + $17,114) Therefore,
staff is recommending a year-end UPIS balance of $231,349 ($230,541 +$808).
Land & Land Rights
The Utility recorded a test year land value of $1,495.
Staff believes the amount is correct and did not make any adjustments to this
account.
Contributions In Aid of Construction
(CIAC)
Country Walk recorded a CIAC
balance of $23,950 as of December 31, 2017. This balance consists of $6,701 for
the Distribution Reservoirs & Standpipes, $2,896 for Transmission &
Distribution (T&D) Mains, and $14,353 for Cash. Staff did not make any
adjustments to this account.
Accumulated Depreciation
Country Walk recorded a test year
accumulated depreciation balance of $64,064. Staff recalculated accumulated
depreciation using the
prescribed rates set forth in Rule 25-30.140, F.A.C., to be $66,515 as
of December 31, 2017. This results in an increase of $2,451. Additionally,
staff reduced accumulated depreciation by $16,306 to reflect the retirement of
the original well discussed above. Further, staff increased accumulated
depreciation by $520 to reflect the two pro forma projects, resulting in a
total decrease of $13,335 ($2,451 - $16,306 + $520). Staff’s
adjustments result in an accumulated depreciation balance of $50,729 ($64,064
- $13,335).
Accumulated Amortization of CIAC
The Utility recorded accumulated
amortization of CIAC of $17,421 in its 2017 Annual Report. Based on staff’s
calculations, the appropriate components of accumulated amortization of CIAC
are $4,739 for the Distribution Reservoirs & Standpipes, $1,788 for T&D
Mains, and $11,402 for Cash. Therefore, staff recommends an accumulated
amortization of CIAC balance of $17,929 ($4,739 + $1,788 + $11,402). The result
is a net increase of $508 ($17,929 - $17,421).
Acquisition Adjustment
The Utility recorded a negative acquisition adjustment of
$20,064. Staff believes this amount is correct and did not make any adjustments
to this account.
Accumulated Amortization of
Acquisition Adjustment
The Utility recorded an
accumulated amortization of acquisition adjustment of $10,127. Staff
recalculated this amount based on the method set forth in Rule 25-30.0371,
F.A.C. Staff’s calculation results in a decrease of $2,337. Therefore, staff
recommends an accumulated amortization of acquisition adjustment balance of
$7,790 ($10,127 - $2,337).
Working Capital Allowance
Working capital is defined as the short-term
investor-supplied funds that are necessary to meet operating expenses.
Consistent with Rule 25-30.433(2), F.A.C., staff used the one-eighth of the
operation and maintenance expense formula approach for calculating the working
capital allowance. Applying this formula, staff recommends a working capital
allowance of $3,956.
Rate Base Summary
Based on the foregoing, staff
recommends that the appropriate year-end rate base is $167,776 as shown on
Schedule No. 1-A. The associated adjustments are shown on Schedule No. 1-B.
Issue 4:
What is the appropriate return on equity and overall
rate of return for Country Walk?
Recommendation:
The appropriate return on equity (ROE) is 8.11
percent with a range of 7.11 percent to 9.11 percent. The appropriate overall
rate of return is 8.08 percent. (L. Smith)
Staff Analysis:
Country
Walk’s test year capital structure reflected a total common equity balance of
$35,848 and customer deposits of $744. The common equity balance consists of
$250 in common stock, $21,704 of retained earnings, and $13,894 of paid-in
capital. Staff did not make any adjustments to these amounts.
Country Walk’s capital structure has been reconciled with
staff’s recommended rate base. The appropriate ROE for the Utility is 8.11
percent based upon the Commission-approved leverage formula currently in
effect.[12] Staff
recommends an ROE of 8.11 percent, with a range of 7.11 percent to 9.11
percent, and an overall rate of return of 8.08 percent. The ROE and overall
rate of return are shown on Schedule No. 2.
Issue 5:
What are the appropriate test year revenues for
Country Walk Utilities, Inc.?
Recommendation:
The appropriate test year revenues are $29,364.
(Sibley)
Staff Analysis:
Country Walk recorded $28,552 in test year revenues,
which consists of $28,263 in service revenues and $289 in miscellaneous
revenues. Based on the test year billing determinants and the service rates,
staff determined service revenues should be $29,070, which is an $807
($29,070-$28,263) increase to test year service revenues. This adjustment to
service revenues is due to a timing difference between the billing register and
the general ledger and annualizing prorated bills. For miscellaneous revenues,
staff applied the appropriate miscellaneous service charges to the test year
occurrences and determined miscellaneous revenues should be $294, which is an
increase of $5. Staff recommends that the appropriate test year revenues are
$29,364 ($29,070+$294).
Issue 6:
What are the appropriate test year operating
expenses for Country Walk?
Recommendation:
The appropriate amount of test year total operating
expenses for the Utility is $43,405. (Hightower, L. Smith)
Staff Analysis:
Country Walk recorded operating expense of $27,804.
Staff reviewed the Utility’s test year operating expenses, including invoices,
canceled checks, and other supporting documentation. Staff made several
adjustments to the Utility's operating expenses as summarized below.
Salaries and Wages - Officers (603)
Country Walk recorded salaries and wages - officers
expense of $3,000. In the Utility’s last rate case, the Commission approved an
expense of $3,000 for this account. Staff compared this amount with Country
Walk’s sister utilities and found it below the average. Staff believes this
amount is reasonable. Therefore, staff recommends salaries and wages - officers
expense of $3,000.
Purchased Power (615)
The Staff Audit Report recorded
$1,224 for purchased power expense in Account 615 for the test year. The
Utility subsequently provided invoices for the most recent twelve-month period,
August 2017 through July 2018, which averaged a monthly expense of $96 or
$1,152 annually for purchased power. Staff made an adjustment of $72 to
decrease purchased power expense to reflect the actual expense of $1,152.
Therefore, staff recommends purchased power expense of $1,152 ($1,224 - $72).
Chemicals (618)
Country Walk recorded chemical
expense of $2,969 in its General Ledger for the test year. Due to the
installation of a new forced draft aeration water treatment system, the Utility
was required to purchase two new chemicals to treat the water: sodium hydroxide
and sulfuric acid. Country Walk provided its calculation of the annualized
chemical expense of $3,749, and the actual chemical purchase expense of $3,673
in Document No. 04218-2018. The Utility determined the new water treatment
system used approximately 5.8 gallons of sodium hydroxide during a 50-day
period. However, the Utility purchased 280 gallons of sodium hydroxide at a
cost of $4 per gallon, or $1,120. At a use rate of 5.8 gallons per 50 days, the
utility would use only 42.3 gallons of sodium hydroxide per year at an annual
cost of $169. Therefore, staff believes the appropriate annual cost for sodium
hydroxide is $169. Country Walk calculated its expenses for sulfuric acid and
chlorine of $2,324 and $326, respectively, which appears to reflect the actual
use rates for those chemicals. Therefore, staff believes the appropriate annual
chemical expense is $2,819 ($2,324 + $326 + $169). Accordingly, staff
recommends a reduction to chemical expense of $150 ($2,969 - $2,819).
Contractual Services - Accounting
(632)
The Utility recorded contractual
services - accounting expense of $350. Supporting documentation confirming the
expense was used for tax preparation was provided. Staff made no adjustments to
contractual services – accounting expense and recommends contractual services -
accounting expense of $350.
Contractual Services - Legal (633)
Country Walk recorded contractual
services - legal expense of $530. Staff was able to trace the expenses without
exception and supporting documentation confirmed the expense was used for legal
fees related to annual corporate maintenance, including a Department of State
filing fee. Staff did not make any adjustments to contractual services – legal
as recorded. Staff recommends contractual services - legal expense of $530.
Contractual Services –
Other (636)
Country Walk recorded contractual
services - other expense of $15,432 related to the USWSC service contract,
which includes the expense for operating the new forced draft aeration water
treatment system, meter reading, testing, and various repairs. In its filing,
the Utility advised staff of changes to the USWSC contract effective October 1,
2017, that increased the costs charged to the Utility. The revised USWSC contract
takes into consideration similar USWSC agreements previously approved in prior
cases involving seven of Country Walk’s “sister” utilities during nine rate
case proceedings.[13] Staff
made adjustments to annualize the updated amount of the revised USWSC contract
and staff recommends an amount of $20,828, which equates to an increase of
$5,396 or 24 percent.
There are significant changes
between the current USWSC contract (2017 contract) and the contract which was
last revised on October 1, 2013 (2013 contract). The 2017 contract removes the
addition of 1,000 potential ERCs that were included in the 2013 contract for a
growth allowance that is no longer expected to occur. Actual costs for fuel and
maintenance utilized in 2016 are included in the management and administrative
portion of the 2017 contract. Also included in the 2017 contract are the
allocated costs for in-house customer service and billing as well as necessary
operator and maintenance technician positions previously excluded from the 2013
contract. According to USWSC, the 2013 contract did not reflect the full actual
cost for other services incurred such as inspections required by DEP or
calibrating the water well meter. The 2017 contract adjusted these costs to
reflect the actual costs incurred by the Utility.
In order to analyze the
reasonableness of the 2017 USWSC Service contract, staff compared the total
O&M costs recommended in the instant case with the Commission approved
amounts for the similarly sized utilities of Lake Idlewild and Charlie Creek.[14] Staff
indexed the amounts from those cases using the Commission approved index
factors.[15] This
analysis resulted in per ERC amounts of $418 for Lake Idlewild and $454 for
Charlie Creek. Staff’s recommended amount of $20,828, in the instant case
equates to $446 per ERC. Based on this analysis, staff believes the revised
USWSC service contract amount is reasonable.
Country Walk is also requesting
$5,000 for the sandblasting and recoating of a tank, which is a maintenance
project required by DEP to be completed every five years. The estimated cost is
based on a 2016 proposal from Crystal Coating, Inc. for $5,000. A second bid of
$14,150 was received from PCI, Inc. for the same project. Country Walk is
working with Crystal Coating, Inc. to schedule the project with other utilities
in Highlands County in order to minimize the costs. Pursuant to Rule 25-30.433(9),
F.A.C., non-recurring expenses shall be amortized over a 5-year period unless a
shorter or longer period of time can be justified. Staff recommends the $5,000
tank sandblasting and recoating expense be amortized over the required 5-year
period and recommends increasing this account by $1,000 ($5,000 ÷ 5).
Therefore, staff recommends contractual services - other expense of $21,828 ($15,432
+ $5,396 + $1,000).
Insurance Expense - General Liability
(657)
The Utility recorded insurance expense
of $1,300. The Utility provided invoices totaling $1,300 related insurance
expense. Staff recommends no adjustments to insurance expense.
Regulatory Commission Expense (665)
By Rule 25-22.0407, F.A.C., Country Walk is
required to mail notices of the customer meeting, notices of final rates, and
notices of the four-year rate reduction in this case to its customers. Staff
increased this account by $75 for printing and mailing notices for the customer
meeting, $53 for printing and mailing notices of the final hearing, and $53 for
the four-year rate reduction.
The Utility requested travel and
lodging expense of $250 to attend the customer meeting and $250 to attend the
Agenda conference. Staff adjusted those amounts based on actual mileage and
hotel receipts. Staff further adjusted these amounts in order to share them
with Pine Harbour Waterworks, Inc. Pine Harbour is a sister utility of Country
Walk that had its customer meeting the day after Country Walk’s, and is
scheduled to be on the same Agenda Conference. Based on these adjustments,
staff is decreasing this expense by $78 and recommends travel expense of $422.
Additionally, the Utility paid a $1,000 rate case filing
fee. Based on the above, staff recommends total rate case expense of $1,603
($75 + $53 + $53 + $422 + $1,000), which amortized over four years, results in
regulatory commission expense of $401 ($1,603 ÷ 4)
Bad Debt (670)
Country Walk recorded a bad debt
expense of $117 for the test year. It is Commission practice to calculate bad
debt expense using a three-year average. Staff did not use a three-year average
due to a negative balance recorded in 2016. The negative balance is not indicative
of the actual bad debt expense incurred and is due to an accounting entry
reflecting a write-off. Therefore, staff recommends using a percentage of the
revenue requirement. In a prior SARC for sister utility, LP Waterworks, Inc.,
the Commission determined 1 percent of the revenue requirement was a reasonable
percentage for bad debt.[16] Staff
believes 1 percent is also reasonable in the instant case as bad debt expense
is expected to increase due to the substantial increase in the Utility’s
revenue requirement. Staff believes the appropriate bad debt expense for the
test year is 1 percent of staff’s recommended revenue requirement, or $570.
This represents an increase of $453. Therefore, staff recommends a bad debt
expense of $570 ($117 + $453).
Miscellaneous Expense (675)
The Utility recorded
miscellaneous expenses of $100 for DEP fees. Staff believes this expense is
reasonable and recommends no adjustment.
Operation and Maintenance Expenses
Summary
Based on the above, staff
recommends that the O&M expenses are $32,050. Staff’s recommended
adjustments to O&M expenses are shown on Schedule No. 3-B.
Depreciation Expense (Net of
Amortization of CIAC)
The Utility recorded depreciation expense of $4,328 and CIAC
expense of $779, resulting in a net depreciation expense of $3,549 ($4,328 -
$779) for the test year. The Utility used a half-year convention when
calculating depreciation expense during the test year. Staff increased this
expense to reflect the going-forward depreciation expense that is needed for
the Utility to recover its investment in the forced draft aeration system
discussed previously. Staff recalculated depreciation expense using the
prescribed rates set forth in Rule 25-30.140, F.A.C., and found that
depreciation expense was understated by $7,084. Additionally, staff reduced
depreciation expense by $604 to reflect the well retirement discussed in Issue
3. Staff also increased depreciation expense by $520 to reflect the increase in
depreciation expense for the pro forma plant additions. Therefore, staff
recommends deprecation expense of $11,328 ($4,328 + $7,084 - $604 + $520).
Staff recalculated CIAC amortization expense using the
methodology prescribed in the Utility’s last SARC. Staff reduced this expense
by $78. Therefore, staff is recommending CIAC amortization expense of $701
($779 - $78). Based on the above, staff recommends a test year net depreciation
expense of $10,627 ($11,328 - $701).
Amortization Expense for Acquisition
Adjustment
Country Walk recorded amortization
expense for acquisition adjustment of ($2,337). Staff has reviewed this amount
and finds it to be appropriate. Staff is therefore recommending amortization
expense for acquisition adjustment of ($2,337).
Taxes Other Than Income (TOTI)
Country Walk recorded TOTI of
$1,570. Staff increased this amount by $253 to reflect the increase in property
taxes related to the pro forma plant project. Staff increased TOTI by $1,242 to
reflect RAFs associated with the revenue increase. Staff is therefore recommending
TOTI of $3,065 ($1,570 + $253 + $1,242).
Total Operating Expenses Summary
The
application of staff=s
recommended adjustments to Country Walk’s test year operating expenses results
in total operating expenses of $43,405. Operating expenses are shown on
Schedule No. 3-A. The related adjustments are shown on Schedule No. 3-B.
Issue 7:
What is the appropriate revenue requirement?
Recommendation:
The appropriate revenue requirement is $56,960,
resulting in an annual increase of $27,596 or 93.98 percent. (L. Smith)
Staff Analysis:
Country Walk should be
allowed an annual increase of $27,596 or 93.98 percent. This will allow the
Utility the opportunity to recover its expenses and earn an 8.08 percent return
on its water system. The calculations are shown in Table 7-1.
Table
7-1
Revenue
Requirement
|
Revenue Requirement
|
|
Adjusted Rate Base
|
|
$167,776
|
|
Rate of Return
|
|
8.08%
|
|
Return on Rate Base
|
|
$13,556
|
|
Adjusted O&M Expense
|
|
32,050
|
|
Depreciation Expense (Net)
|
|
10,627
|
|
Amortization Expense
|
|
(2,337)
|
|
Taxes Other Than Income
|
|
3,065
|
|
Revenue Requirement
|
|
$56,960
|
|
Less Adjusted Test Year Revenues
|
|
(29,364)
|
|
Annual Increase
|
|
$27,596
|
|
Percent Increase
|
|
93.98%
|
|
|
|
|
Source:
Staff’s Calculation
Issue 8:
What are the appropriate rate structure and rates
for Country Walk?
Recommendation:
The recommended rate structure and monthly water
rates are shown on Schedule No. 4. The Utility should file revised tariff
sheets and a proposed customer notice to reflect the Commission-approved rates.
The approved rates should be effective for service rendered on or after the
stamped approval date on the tariff sheets pursuant to Rule 25-30.475(1),
F.A.C. In addition, the approved rates should not be implemented until staff
has approved the proposed customer notice and the notice has been received by the
customers. The Utility should provide proof of the date notice was given within
10 days of the date of this notice. (Sibley)
Staff Analysis:
Country Walk is located in Highlands County within
the SWFWMD. The Utility provides water service to approximately 70 residential
customers and a single general service customer. Approximately 22.9 percent of
the residential customer bills during the test year had zero gallons,
indicating some seasonality in the customer base. The average residential water
demand is 2,794 gallons per customer. The average residential water demand
excluding zero gallons bills is 3,625 gallons per customer. The Utility’s
current water system rate structure for residential customers consists of a
base facility charge (BFC) and two-tier inclining block rate structure. The
rate blocks are: (1) 0-10,000 gallons and (2) all usage in excess of 10,000
gallons per month. The general service rate structure consists of a BFC and
uniform gallonage charge.
Staff performed an analysis of the Utility’s billing data
in order to evaluate the appropriate rate structure for the residential water
customers. The goal of the evaluation was to select the rate design parameters
that: (1) produce the recommended revenue requirement; (2) equitably distribute
cost recovery among the Utility’s customers; (3) establish the appropriate
non-discretionary usage threshold for restricting repression; and (4)
implement, where appropriate, water conserving rate structures consistent with
Commission practice.
Due to the customers’ low average monthly consumption and
somewhat seasonal customer base, staff recommends 45 percent of the revenue
requirement should be recovered through the BFC in an effort to provide revenue
stability. In addition, the average
number of people per
household served by the water
system is two; therefore, based on the
number of persons per household, 50 gallons per day
per person, and the number
of days per month, the
non-discretionary usage threshold should be 3,000 gallons per month. Staff
recommends a traditional BFC and gallonage charge rate structure with an
additional gallonage charge for non-discretionary usage for residential water
customers. General service customers should be billed a BFC based on meter size
and a uniform gallonage charge.
Based on the customer billing data provided by the
Utility, approximately 32 percent of total residential consumption is
discretionary and subject to the effects of repression. Customers will typically
reduce their discretionary consumption in response to price changes, while
non-discretionary consumption remains relatively unresponsive. Based on the recommended
revenue increase of 94 percent, the residential discretionary consumption (over
3,000 gallons per bill) can be expected to decline by 356,000 gallons resulting
in anticipated average residential demand of 2,374 gallons per month. Staff
recommends a 15 percent reduction in test year gallons for rate setting
purposes and corresponding reductions of $172 for purchased power, $420 for
chemicals, and $28 for RAFs to reflect the anticipated repression. This results
in a post repression revenue requirement of $56,046. As shown on Table 8-1, in
comparison to staff’s recommended rate structure and rates, although
Alternatives I and II, result in lower bills for non-discretionary usage, they
send less of a pricing signal for targeting discretionary usage. Staff’s
recommended rate structure and resulting water rates are shown on Schedule No.
4.
Conclusion
Based on the above, the
recommended rate structures and monthly water rates are shown on Schedule No. 4.
The Utility should file revised tariff sheets and a proposed customer notice to
reflect the Commission-approved rates. The approved rates should be effective
for service rendered on or after the stamped approval date on the tariff sheet
pursuant to Rule 25-30.475(1), F.A.C. In addition, the approved rates should
not be implemented until staff has approved the proposed customer notice and the
notice has been received by the customers. The Utility should provide proof of
the date notice was given within 10 days of the date of this notice.
Table 8-1
Staff’s Recommended and
Alternative Water Rate Structures and Rates
|
RATES AT
TIME OF
FILING
|
STAFF
RECOMMENDED
RATES
|
ALTERNATIVE
I
|
ALTERNATIVE
II
|
|
|
(45% BFC)
|
(50% BFC)
|
(55% BFC)
|
|
Residential and General Service
|
|
Base Facility Charge by
Meter Size
|
|
|
|
|
|
5/8"X3/4"
|
$16.45
|
$29.16
|
$32.42
|
$35.70
|
|
|
|
|
|
|
Charge per 1,000 gallons -
Residential
|
|
|
|
|
|
0-10,000 gallons
|
$6.17
|
|
|
|
|
Over 10,000 gallons
|
$7.72
|
|
|
|
|
|
|
|
|
|
0-3,000 gallons
|
|
$13.07
|
$11.88
|
$10.69
|
|
Over 3,000 gallons
|
|
$23.74
|
$20.22
|
$17.14
|
|
|
|
|
|
|
|
Charge per 1,000 gallons -
General Service
|
$6.17
|
$15.19
|
$13.63
|
$12.11
|
|
|
|
|
|
|
|
Typical
Residential 5/8" x 3/4" Meter Bill Comparison
|
|
3,000 Gallons
|
$34.96
|
$68.37
|
$68.06
|
$67.77
|
|
6,000 Gallons
|
$53.47
|
$139.59
|
$128.72
|
$119.19
|
|
10,000 Gallons
|
$78.15
|
$234.55
|
$209.60
|
$187.75
|
Source: Current tariff and staff’s calculations
Issue 9:
What are the appropriate initial customer deposits
for Country Walk?
Recommendation:
The appropriate initial customer deposits should be $120
for the residential 5/8 inch x 3/4 inch meter size. The initial customer
deposits for all other residential meter sizes and all general service meter
sizes should be two times the average estimated monthly bill. The approved
initial customer deposits should be effective for connections made on or after the
stamped approval date on the tariff sheets pursuant to Rule 25-30.475, F.A.C. The
Utility should be required to collect the approved deposits until authorized to
change them by the Commission in a subsequent proceeding. (Sibley)
Staff Analysis:
Rule 25-30.311, F.A.C.,
provides the criteria for collecting, administering, and refunding customer
deposits. Customer deposits are designed to minimize the exposure of bad debt
expense for the Utility and, ultimately, the general body of ratepayers. An initial
customer deposit ensures that the cost of providing service is recovered from
the cost causer. Historically, the Commission has set initial customer deposits
equal to two times the average estimated bill.[17] Currently, the Utility has an initial customer deposit
of $62. However, this amount does not cover two months’ average bills based on
staff’s recommended rates. The post-repression average monthly residential
usage is approximately 2,374 gallons per customer. Therefore, the average
residential monthly bill based on staff’s recommended rates is approximately
$120.
Staff recommends the appropriate initial customer deposits
should be $120 for the residential 5/8 inch x 3/4 inch meter size. The initial
customer deposits for all other residential meter sizes and all general service
meter sizes should be two times the average estimated monthly bill. The
approved initial customer deposits should be effective for services rendered or
connections made on or after the stamped approval date on the tariff sheets pursuant
to Rule 25-30.475, F.A.C. The Utility should be required to collect the
approved deposits until authorized to change them by the Commission in a
subsequent proceeding.
Issue 10:
Should Country Walk's request to implement
a $6.50 late payment charge be approved?
Recommendation:
Yes. The Utility's request to implement a
$6.50 late payment charge should be approved. Country Walk should be required
to file a proposed customer notice to reflect the Commission-approved charge.
The approved charge should be effective on or after the stamped approval date
on the tariff sheet pursuant to Rule 25-30.475(1), F.A.C. In addition, the
approved charge should not be implemented until staff has approved the proposed
customer notice and the notice has been received by customers. The Utility
should provide proof of the date notice was given no less than 10 days after
the date of the notice. (Sibley)
Staff Analysis:
The Utility is requesting a $6.50 late
payment charge to recover the cost of labor, supplies, and RAFs associated with
processing late payment notices. Country Walk’s current late payment charge is
$5.00. However, the Utility is requesting $6.50 for its late payment charge,
which is consistent with Commission practice and its sister utilities managed
by U.S. Water.
The purpose of this charge is not only to provide an incentive for customers to
make timely payment, thereby reducing the number of delinquent accounts, but
also to place the cost burden of processing delinquent accounts solely upon
those who are cost causers. Section 367.091, F.S., authorizes the Commission to
establish, increase, or change a rate or charge other than monthly rates or
service availability charges.
Country Walk calculated the actual costs for its late payment
charges to be $8.07. The Utility indicated that it will take approximately 15
minutes per account to research, compile, and produce late notices. The
delinquent customer accounts will be processed by the administrative contract
employee, which results in labor cost of $7.00 ($28.00 x 0.25hr). This is
consistent with prior Commission decisions where the Commission has allowed
10-15 minutes per account per month for the administrative labor associated
with processing delinquent customer accounts.
However, $8.07 would be the highest late payment charge amongst all other water
and wastewater utilities regulated by the Commission.
Therefore, the Utility is requesting a charge of $6.50, consistent with recent
Commission decisions. The Utility's calculation for its requested late payment
charge is shown in Table 10-1.
Table 10-1
Late Payment Charge Cost Justification
|
Activity
|
Cost
|
|
Labor
|
$7.00
|
|
Supplies
|
$0.22
|
|
Postage
|
$0.49
|
|
Markup for RAFs
|
$0.36
|
|
Total Cost
|
$8.07
|
Source: Utility’s
cost justification documentation
Based on the above, Country Walk's request to implement a $6.50
late payment charge should be approved. The Utility should be required to file
a proposed customer notice to reflect the Commission-approved charge. The
approved charge should be effective on or after the stamped approval date on
the tariff sheet pursuant to Rule 25-30.475(1), F.A.C. In addition, the
approved charge should not be implemented until after staff has approved the
proposed customer notice and the notice has been received by customers. The
Utility should provide proof of the date notice was given no less than 10 days
after the date of the notice.
Issue 11:
What are the appropriate miscellaneous service
charges for Country Walk?
Recommendation:
The miscellaneous service charges identified in
Table 11-5 are appropriate and should be approved. The charges should be
effective on or after the stamped approval date on the tariff pursuant to Rule
25-30.475, F.A.C. In addition, the approved charges should not be implemented
until staff has approved the proposed customer notice and the notice has been
received by the customers. The Utility should provide proof of the date notice
was given within 10 days of the date of the notice. (Sibley)
Staff Analysis:
Country Walk’s current miscellaneous service charges
were established in Docket Nos. 960244-WU,
150067-WU, and
150260-WS. Section
367.091, F.S., authorizes the Commission to change miscellaneous service
charges. The Utility’s request to revise its miscellaneous charges was
accompanied by its reason for requesting the charges, as well as the cost
justification required by Section 367.091(6), F.S. The requested charges are
consistent with those recently approved for its sister company, LP Waterworks,
which is located in the same county.
The calculation for staff’s recommended charges for miscellaneous services are
shown in Tables 11-1 through 11-4 and are rounded up to the nearest tenth. The
Utility’s current and staff’s recommended miscellaneous service charges are
shown in Table 11-5.
Initial Connection Charge
The
initial connection charge is levied for service initiation at a location where
service did not exist previously. A Utility representative makes one trip when
performing the service of an initial connection. Based on labor and
transportation to and from the service territory, staff recommends initial
connection charges for Country Walk’s water system of $31.10 for normal hours
and $36.20 for after hours. Staff’s calculations are shown in Table 11-1.
Table 11-1
Initial Connection
Charge Calculation
|
Activity
|
Normal Hours Cost
|
Activity
|
After Hours Cost
|
|
Administrative Labor
($28/hr x 1/4 hr)
|
$7.00
|
Administrative Labor
($28/hr x 1/4 hr)
|
$7.00
|
|
Field Labor
($30.42/hr x 1/3 hr)
|
$10.14
|
Field Labor
(45.63/hr x 1/3 hr)
|
$15.21
|
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
|
Total
|
$31.05
|
Total
|
$36.12
|
Source: Staff Analysis
Normal Reconnection Charge
A normal reconnection charge is levied for the
reconnection of service subsequent to a customer requested disconnection. A
normal reconnection requires two trips, which includes one to turn service off
and the other to turn service on. Based on labor and transportation to and from
the service territory, staff recommends normal reconnection charges for Country
Walk’s water system of $57.10 for normal hours and $64.70 for after hours.
Staff’s calculations are shown in Table 11-2.
Table 11-2
Normal Reconnection
Charge Calculation
|
Activity
|
Normal Hours Cost
|
Activity
|
After
Hours Cost
|
|
Administrative Labor
($28/hr x1/4hr x 2)
|
$14.00
|
Administrative Labor
($28/hr x1/4hr)
|
$14.00
|
|
Field Labor
($30.42/hr x 1/4 hr x 2)
|
$15.21
|
Field Labor
($45.63/hr x 1/4hr x 2)
|
$22.82
|
|
Transportation
($0.535/mile x 26 miles-to/from x 2)
|
$27.82
|
Transportation
($0.535/mile x 26 miles-to/from x 2)
|
$27.82
|
|
Total
|
$57.03
|
Total
|
$64.64
|
Source: Staff Analysis
Violation Reconnection Charge
The violation reconnection charge
is levied prior to reconnection of an existing customer after discontinuance of
service for cause. The service performed for violation reconnection requires
two trips, which includes one trip to turn off service and a subsequent trip to
turn on service once the violation has been remedied. Based on labor and
transportation to and from the service territory, staff recommends violation
reconnection charges for Country Walk’s water system of $57.10 for normal hours
and $64.70 for after hours. Staff’s calculations are shown in Table 11-3.
Table 11-3
Violation Reconnection
Charge Calculation
|
Activity
|
Normal
Hours Cost
|
Activity
|
After
Hours Cost
|
|
Administrative Labor
($28/hr x1/4hr x 2)
|
$14.00
|
Administrative Labor
($28/hr x1/4hr x 2)
|
$14.00
|
|
Field Labor
($30.42/hr x 1/4 hr x 2)
|
$15.21
|
Field Labor
($45.63hr x 1/4 hr x 2)
|
$22.82
|
|
Transportation
($0.535/mile x 26 miles-to/from) x 2
|
$27.82
|
Transportation
($0.535/mile x 26 miles-to/from) x 2
|
$27.82
|
|
Total
|
$57.03
|
Total
|
$64.64
|
Source: Staff Analysis
Premises Visit Charge
The premises visit charge is
levied when a service representative visits a premises at the customer’s
request for complaint resolution and the problem is found to be the customer’s
responsibility. In addition, the premises visit charge can be levied when a
service representative visits premises for the purpose of discontinuing service
for nonpayment of a due and collectible bill and does not discontinue service
because the customer pays the service representative or otherwise makes
satisfactory arrangements to pay the bill. A premises visit requires one trip.
Based on labor and transportation to and from the service territory, staff
recommends a premises visit charge of $31.10 for normal hours and $36.20 for
after hours. Staff’s calculations are shown in Table 11-4.
Table 11-4
Premises Visit Charge
Calculation
|
Activity
|
Normal
Hours Cost
|
Activity
|
After
Hours Cost
|
|
Administrative Labor
($28.00/hr x1/4hr)
|
$7.00
|
Administrative Labor
($28.00/hr x1/4hr)
|
$7.00
|
|
Field Labor
($30.42/hr x 1/3 hr)
|
$10.14
|
Field Labor
($45.63/hr x 1/3 hr)
|
$15.21
|
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
|
Total
|
$31.05
|
Total
|
$36.12
|
Source: Staff Analysis
Conclusion
Based on the aforementioned, the
miscellaneous service charges identified in Table 11-5 are appropriate and
should be approved. The charges should be effective on or after the stamped
approval date on the tariff pursuant to Rule 25-30.475, F.A.C. In addition, the
approved charges should not be implemented until staff has approved the
proposed customer notice and the notice has been received by the customers. The
Utility should provide proof of the date notice was given within 10 days of the
date of the notice.
Table 11-5
Miscellaneous Service
Charges
|
|
Current
|
Staff
Recommended
|
|
Normal
and After Hours
|
Normal
Hours
|
After
Hours
|
|
Initial Connection Charge
|
$15.00
|
$31.10
|
$36.20
|
|
Normal Reconnection Charge
|
$15.00
|
$57.10
|
$64.70
|
|
Violation Reconnection Charge
|
$15.00
|
$57.10
|
$64.70
|
|
Premises Visit
Charge
|
$10.00
|
$31.10
|
$36.20
|
Source: Staff Analysis
Issue 12: What is the appropriate amount by
which rates should be reduced in four years after the published effective date
to reflect the removal of the amortized rate case expense as required by
Section 367.0816, F.S.?
Recommendation:
The water rates should be reduced, as shown on
Schedule No. 4-A, to remove rate case expense grossed-up for RAFs and amortized
over a 4-year period. The decrease in rates should become effective immediately
following the expiration of the four-year rate case expense recovery period,
pursuant to Section 367.081, F.S. Country Walk should be required to file
revised tariffs and a proposed customer notice setting forth the lower rates
and the reason for the reduction no later than one month prior to the actual
date of the required rate reduction. If the Utility files this reduction in
conjunction with a price index or pass-through rate adjustment, separate data
should be filed for the price index and/or pass-through increase or decrease
and the reduction in the rates due to the amortized rate case expense. (Sibley,
L. Smith) (Final Agency Action)
Staff Analysis:
Section 367.081(8), F.S.,
requires that the rates be reduced immediately following the expiration of the
4-year period by the amount of the rate case expense previously included in
rates. The reduction will reflect the removal of revenue associated with the
amortization of rate case expense, the associated return in working capital,
and the gross-up for RAFs. This results in a reduction of $420.
The water
rates should be reduced, as shown on Schedule No. 4-A, to remove rate case
expense grossed-up for RAFs and amortized over a 4-year period. The decrease in
rates should become effective immediately following the expiration of the
4-year rate case expense recovery period, pursuant to Section 367.0816(8), F.S.
Country Walk should be required to file revised tariffs and a proposed customer
notice setting forth the lower rates and the reason for the reduction no later
than one month prior to the actual date of the required rate reduction. If the
Utility files this reduction in conjunction with a price index or pass-through
rate adjustment, separate data should be filed for the price index and/or
pass-through increase or decrease and the reduction in the rates due to the
amortized rate case expense.
Issue 13:
Should the recommended rates be approved for the
Utility on a temporary basis subject to refund with interest, in the event of a
protest filed by a party other than the Utility?
Recommendation:
Yes. Pursuant to Section 367.0814(7), F.S., the
recommended rates should be approved for the Utility on a temporary basis,
subject to refund with interest, in the event of a protest filed by a party
other than the Utility. Country Walk should file revised tariff sheets and a
proposed customer notice to reflect the Commission-approved rates. The approved
rates should be effective for service rendered on or after the stamped approval
date on the tariff sheet, pursuant to Rule 25-30.475(1), F.A.C. In addition,
the temporary rates should not be implemented until staff has approved the
proposed notice, and the notice has been received by the customers. Prior to
implementation of any temporary rates, the Utility should provide appropriate
security. If the recommended rates are approved on a temporary basis, the rates
collected by the Utility should be subject to the refund provisions discussed
below in the staff analysis. In addition, after the increased rates are in
effect, pursuant to Rule 25-30.360(6), F.A.C., the Utility should file reports
with the Commission’s Office of Commission Clerk no later than the 20th of each
month indicating the monthly and total amount of money subject to refund at the
end of the preceding month. The report filed should also indicate the status of
the security being used to guarantee repayment of any potential refund. (L.
Smith) (Final Agency Action)
Staff Analysis:
This recommendation
proposes an increase in water rates. A timely protest might delay what may be a
justified rate increase resulting in an unrecoverable loss of revenue to the
Utility. Therefore, pursuant to Section 367.0814(7), F.S., in the event of a
protest filed by a party other than the Utility, staff recommends that the
recommended rates be approved as temporary rates. Country Walk should file
revised tariff sheets and a proposed customer notice to reflect the
Commission-approved rates. The approved rates should be effective for service
rendered on or after the stamped approval date on the tariff sheet, pursuant to
Rule 25-30.475(1), F.A.C. In addition, the temporary rates should not be
implemented until staff has approved the proposed notice, and the notice has
been received by the customers. The recommended rates collected by the Utility
should be subject to the refund provisions discussed below.
The Utility should be authorized
to collect the temporary rates upon staff’s approval of an appropriate security
for the potential refund and the proposed customer notice. The security should
be in the form of a bond or letter of credit in the amount of $18,640. Alternatively, the Utility could establish an escrow
agreement with an independent financial institution.
If the Utility chooses a bond as
security, the bond should contain wording to the effect that it will be
terminated only under the following conditions:
1)
The Commission approves the rate increase; or,
2)
If the Commission denies the increase, the Utility
shall refund the amount collected that is attributable to the increase.
If the Utility chooses a letter
of credit as a security, it should contain the following conditions:
1) The
letter of credit is irrevocable for the period it is in effect, and,
2) The letter of credit will be
in effect until a final Commission order is rendered, either approving or
denying the rate increase.
If security is provided through
an escrow agreement, the following conditions should be part of the agreement:
1) The Commission Clerk, or his or her designee,
must be a signatory to the escrow agreement; and,
2) No monies in the escrow account may be
withdrawn by the Utility without the prior written authorization of the
Commission Clerk, or his or her designee;
3) The escrow account shall be an interest
bearing account;
4) If a refund to the customers is required, all
interest earned by the escrow account shall be distributed to the customers;
5) If a refund to the customers is not required,
the interest earned by the escrow account shall revert to the Utility;
6) All information on the escrow account shall
be available from the holder of the escrow account to a Commission representative
at all times;
7) The amount of revenue subject to refund shall
be deposited in the escrow account within seven days of receipt;
8) This escrow account is established by the
direction of the Florida Public Service Commission for the purpose(s) set forth
in its order requiring such account. Pursuant to Consenting v. Elson, 263 So.
2d 253 (Fla. 3d DCA 1972), escrow accounts are not subject to garnishments;
9) The account must specify by whom and on whose
behalf such monies were paid.
In no instance should the
maintenance and administrative costs associated with the refund be borne by the
customers. These costs are the responsibility of, and should be borne by, the
Utility. Irrespective of the form of security chosen by the Utility, an account
of all monies received as a result of the rate increase should be maintained by
the Utility. If a refund is ultimately required, it should be paid with
interest calculated pursuant to Rule 25-30.360(4), F.A.C.
The Utility should maintain a record of the amount of the
security, and the amount of revenues that are subject to refund. In addition,
after the increased rates are in effect, pursuant to Rule 25-30.360(6), F.A.C.,
the Utility should file reports with the Commission’s Office of Commission
Clerk no later than the 20th of each month indicating the monthly and total
amount of money subject to refund at the end of the preceding month. The report
filed should also indicate the status of the security being used to guarantee
repayment of any potential refund.
Issue 14:
Should the Utility be required to notify the
Commission within 90 days of an effective order finalizing this docket, that it
has adjusted its books consistent with the applicable National Association of
Regulatory Utility Commissioners (NARUC) Uniform System of Accounts (USOA) for
all Commission-approved adjustments?
Recommendation:
Yes. The Utility should be required to notify the
Commission, in writing, that it has adjusted its books in accordance with the
Commission's decision. Country Walk should submit a letter within 90 days of
the final order in this docket, confirming that the adjustments to all the
applicable NARUC USOA accounts have been made to the Utility’s books and
records. In the event the Utility needs additional time to complete the
adjustments, notice should be provided within seven days prior to deadline.
Upon providing good cause, staff should be given administrative authority to grant
an extension of up to 60 days. (L. Smith) (Final Agency Action)
Staff Analysis:
The Utility should be required to notify the
Commission, in writing, that it has adjusted its books in accordance with the
Commission's decision. Country Walk should submit a letter within 90 days of
the final order in this docket, confirming that the adjustments to all the
applicable NARUC USOA accounts have been made to the Utility’s books and
records. In the event the Utility needs additional time to complete the
adjustments, notice should be provided within seven days prior to deadline.
Upon providing good cause, staff should be given administrative authority to
grant an extension of up to 60 days.
