Case Background
Lake Idlewild
Utility Company (Lake Idlewild or Utility) is a Class C utility serving
approximately 75 water customers in Lake County. Lake Idlewild’s last approved
rate increase was in 2016.
On November 26,
2018, Lake Idlewild filed an application for a limited alternative rate
increase (LARI) pursuant to Rule 25-30.457, Florida Administrative Code
(F.A.C.). On December 20, 2018, staff notified the Utility that it met the
initial requirements of Rule 25-30.457, F.A.C. Therefore, pursuant to Rule
25-30.457(4), F.A.C., the official date of filing was established as January
22, 2019, and the 90-day time frame for the Commission to render a decision
began on that date.
As stated above,
the Commission last set rates for Lake Idlewild in 2016. In that rate case the
Commission found the Utility’s overall quality of service to be satisfactory.
Staff has not identified any water quality complaints filed with the Commission,
the Utility, or the Florida Department of Environmental Protection (DEP) since
the last rate case.
Staff notes that
the most recent DEP compliance test results, dated January 23, 2018,
demonstrate that the Utility is currently in compliance with DEP secondary
standards. A customer meeting was held on February 26, 2019, in Lady Lake,
Florida. Three customers attended and each expressed concerns regarding the
requested rate increase. Additionally, one of these customers raised concerns
of low water pressure. The Utility provided a written response to those concerns
which is included in the docket file.[2]
Rule 25-30.457,
F.A.C., was adopted on March 15, 2005. The Rule was amended in 2008, 2014, and
2018. Under provisions of this Rule, the Commission previously approved
applications filed by only two other utilities in 2006.
The Commission
has jurisdiction pursuant to Sections 367.0814(9) and 367.121(1), Florida
Statutes.
Discussion
of Issues
Issue 1:
Should the Commission approve Lake Idlewild Utility
Company's application for a limited alternative rate increase?
Recommendation:
Yes. The Commission should approve Lake Idlewild's
application for a limited alternative rate increase in the amount of 20
percent. This equates to an increase of $8,023.
Pursuant to Rule 25-30.457(12), F.A.C., the Utility is
required to hold any revenue increase granted subject to refund with interest
for a period of 15 months after the filing of its annual report for the year
the adjustment in rates was implemented. If overearnings occur, such
overearnings, up to the amount held subject to refund, with interest, must be
disposed of for the benefit of the customers. After the increased rates are in
effect, pursuant to Rule 25-30.360(6), F.A.C., the Utility must file reports
with the Office of Commission Clerk no later than the 20th of every month
indicating the monthly and total amount of money subject to refund at the end
of the preceding month. The report filed must also indicate the status of the
security being used to guarantee repayment of any potential refund. (Wilson)
Staff Analysis:
Pursuant to Rule 25-30.457, F.A.C., any utility
eligible to file for a staff-assisted rate case may petition the Commission for
a rate increase of up to 20 percent applied to metered or flat recurring rates
as an alternative to a rate case. This Rule was designed to streamline the rate
increase process for qualifying small water or wastewater companies, by
establishing an abbreviated procedure for a limited rate increase that is less
time consuming and thus less costly for utilities, their customers, and the
Commission. This Rule is similar to the rules governing price index and
pass-through increases in that neither an engineering review nor a financial
audit of the utility's books and records is required.
On November 26, 2018, Lake Idlewild notified the
Commission of its intent to implement a limited alternative rate increase of 20
percent pursuant to Rule 25-30.457, F.A.C. The application met the initial requirements
of the rule, and January 22, 2019, was established as the official filing date.
Staff reviewed the Utility pursuant to the criteria listed
in Rule 25-30.457(5), F.A.C., and recommends that Lake Idlewild qualifies for
staff assistance pursuant to subsection (1) of this Rule and the Utility’s books
and records appear to be organized consistent with Rule 25-30.110, F.A.C. Staff
also verified that the Utility is current on the filing of regulatory
assessment fees and annual reports. The Utility has been in operation over a
year and filed additional relevant information in support of eligibility. The
Utility’s last rate case was granted more than two years, but less than seven
years, prior to the receipt of the petition currently under review. Lake
Idlewild was under earning based on information provided in the Utility’s 2017
Annual Report. However, based on information from the Utility’s 2018 Annual
Report, Lake Idlewild is now in a negative earnings posture. Based on the
information described above, staff recommends approval of the Utility’s
petition.
The data presented in the application was based upon
annualized revenues by customer class and meter size for the period ended
September 30, 2018, the most recent 12-month period. Based on annualized
revenues of $40,343, a 20 percent increase would result in an annual increase
in revenues of $8,023. This produces total annual service revenues of $48,366.
Pursuant to Rule 25-30.457(12), F.A.C., the Utility is
required to hold any revenue increase granted subject to refund with interest
in accordance with Rule 25-30.360, F.A.C., for a period of 15 months after the
filing of its annual report for the year the adjustment in rates was
implemented.
After the increased rates are in effect, pursuant to Rule
25-30.360(6), F.A.C., the Utility must file reports with the Office of
Commission Clerk no later than the 20th of every month indicating the monthly
and total amount of money subject to refund at the end of the preceding month.
The report filed must also indicate the status of the security being used to
guarantee repayment of any potential refund.
Staff reviewed the personal financial statements of the
primary shareholder, which is the company’s president. The
president has provided a personal guarantee of any rate increase approved in
this docket. Based on
the above, staff believes that in this circumstance the company’s president has
demonstrated the financial ability to guarantee the refund, if necessary.
To ensure overearnings will not occur due to the
implementation of this rate increase, the Commission will conduct an earnings review
of the Lake Idlewild's annual report for the year the adjustment in rates was
implemented. If overearnings occur, such overearnings, up to the amount held
subject to refund, with interest, will be disposed of for the benefit of the
customers.
Issue 2:
What are the appropriate monthly service rates for
Lake Idlewild?
Recommendation:
The existing service rates for Lake Idlewild should
be increased by 20 percent in accordance with Rule 25-30.457, F.A.C. The recommended
service rates are shown on Schedule No. 1. The Utility should file 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 rates should not be implemented until staff has
approved the proposed customer notice. The Utility should provide proof of the
date notice was given no less than 10 days after the date of the notice.
(Bruce)
Staff Analysis:
Based on staff’s recommended approval of the
Utility’s limited alternative rate increase in Issue 1, the existing service
rates for Lake Idlewild should be increased by 20 percent in accordance with
Rule 25-30.457, F.A.C. Therefore, staff calculated rates by applying the 20
percent increase across-the-board to the existing base facility and gallonage
charges. The Utility’s existing water rates and the staff recommended rates are
shown on Schedule No. 1. The Utility should file 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
rates should not be implemented until staff has approved the proposed customer
notice. The Utility should provide proof of the date notice was given no less
than 10 days after the date of the notice.
Issue 3:
Should the recommended rates be approved for Lake
Idlewild on a temporary basis, subject to refund, in the event of a protest
filed by a party other than the Utility?
Recommendation:
Yes. Pursuant to Rule 25-30.457(15), F.A.C., in the
event of a protest of the Proposed Agency Action (PAA) Order by a substantially
affected person other than the Utility, Lake Idlewild should be authorized to
implement the rates established in the LARI PAA Order on a temporary basis
subject to refund upon the Utility filing a staff-assisted rate case
application within 21 days of the date the protest is filed.
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 temporary rates should not be implemented until staff has approved the
proposed notice, and the notice has been received by the customers. If the
recommended rates are approved on a temporary basis, the incremental increase
collected by the Utility will be subject to the refund provisions outlined in
Rule 25-30.360, F.A.C. Pursuant to Rule 25-30.457(17), F.A.C., if the Utility
fails to file a staff-assisted rate case application within 21 days in the
event there is a protest, the application for a limited alternative rate
increase will be deemed withdrawn. (Wilson) (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 Rule 25-30.457(15), F.A.C., in the event of a protest of the PAA Order
by a substantially affected person other than the Utility, Lake Idlewild should
be authorized to implement the rates established in the LARI PAA Order on a
temporary basis subject to refund upon the Utility filing a staff-assisted rate
case application within 21 days of the date the protest is filed.
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 temporary rates should
not be implemented until staff has approved the proposed notice, and the notice
has been received by the customers. If the recommended rates are approved on a
temporary basis, the incremental increase collected by the Utility will be
subject to the refund provisions outlined in Rule 25-30.360, F.A.C. Pursuant to
Rule 25-30.457(17), F.A.C., if the Utility fails to file a staff-assisted rate
case application within 21 days in the event there is a protest, the
application for a limited alternative rate increase will be deemed withdrawn.
Issue 4:
Should this docket be closed?
Recommendation:
No. In the event of a
protest, Lake Idlewild may
implement the rates established in the PAA Order on a temporary basis, subject
to refund with interest, upon the
Utility’s filing of a staff-assisted rate case application within 21
days of the date of the protest. If Lake Idlewild fails to file a staff-assisted rate case within
21 days, the Utility’s
petition for a limited alternative rate increase will be deemed withdrawn
pursuant to Rule 25-30.457(17), F.A.C. If no person whose substantial interests
are affected by the proposed agency action files a protest within 21 days of
the issuance of the order, a consummating order should be issued. The docket
should remain open for staff’s verification that the revised tariff sheets,
which reflect the Commission-approved rates, and customer notice have been
filed by Lake Idlewild and
approved by staff, and so that staff may conduct an earnings review of the Utility pursuant to Rule
25-30.457(12), F.A.C. Upon staff’s approval of the tariff and completion of the
earnings review process as set forth in Rule 25-30.457(12)-(14), F.A.C., this
docket should be closed administratively. (Murphy, Weisenfeld)
Staff Analysis:
In the event of a protest, Lake Idlewild may implement the
rates established in the PAA Order on a temporary basis, subject to refund with
interest, upon the Utility’s
filing of a staff-assisted rate case application within 21 days of the date of
the protest. If Lake Idlewild fails
to file a staff-assisted rate case within 21 days, the Utility’s petition for a limited alternative rate increase
will be deemed withdrawn pursuant to Rule 25-30.457(17), F.A.C. If no person
whose substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the order, a consummating order
should be issued. The docket should remain open for staff’s verification that
the revised tariff sheets, which reflect the Commission-approved rates, and
customer notice have been filed by Lake
Idlewild and approved by staff, and so that staff may conduct an
earnings review of the
Utility pursuant to Rule 25-30.457(12), F.A.C. Upon staff’s
approval of the tariff and completion of the earnings review process as set
forth in Rule 25-30.457(12)-(14), F.A.C., this docket should be closed
administratively.
Lake Idlewild Utility
Company
Monthly Water Rates
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Staff
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Existing
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Recommended
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Rates
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Rates
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Residential and General Service
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Base Facility Charge
by Meter Size
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5/8” x 3/4"
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$16.09
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$19.30
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3/4"
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$24.14
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$28.95
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1”
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$40.23
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$48.25
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1 1/2"
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$80.45
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$96.50
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2”
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$128.72
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$154.40
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3”
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$257.44
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$308.80
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4”
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$402.25
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$482.50
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6”
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$804.50
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$965.00
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Gallonage Charge - Residential Service
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Charge Per 1,000
gallons
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0-3,000 gallons
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$2.11
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$2.53
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Over 3,000 gallons
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$2.47
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$2.96
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Gallonage Charge - General Service
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Charge Per 1,000
gallons
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$2.41
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$2.89
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Private Fire Protection
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Base Facility Charge by Meter Size
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2"
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$10.73
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$12.86
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3"
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$21.45
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$25.73
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4”
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$33.52
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$40.20
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6"
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$67.04
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$80.41
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8”
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$107.27
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$128.66
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10”
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$154.20
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$184.95
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Typical Residential 5/8” x 3/4” Meter Bill Comparison
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2,000 Gallons
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$20.31
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$24.36
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6,000 Gallons
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$29.83
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$35.77
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10,000 Gallons
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$39.71
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$47.61
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Order No. PSC-16-0305-PAA-WU, issued July 28, 2016, in
Docket No. 20150236-WU, In re:
Application for staff-assisted rate case in Lake County, by Lake Idlewild
Utility Company.
