Discussion
of Issues
Issue 1:
Is the quality of service provided by TKCB, Inc.
satisfactory?
Recommendation:
Yes. The Utility is in compliance with DEP’s rules
and regulations and there have been no customer comments or complaints against
the Utility in the previous five-year period. Therefore, staff recommends that
the overall quality of service provided by the Utility be considered
satisfactory. (Doehling)
Staff Analysis:
Pursuant to Rule 25-30.433(1), F.A.C., in water and
wastewater rate cases, the Commission shall determine the overall quality of
service provided by a utility. For a wastewater only utility, the determination
is made from an evaluation of the utility’s attempt to address customer
satisfaction. The Rule further states that outstanding citations, violations,
and consent orders on file with the DEP and the county health department, along
with any DEP and county health department officials’ testimony concerning
quality of service shall be considered. In addition, any customer testimony,
comments, or complaints received by the Commission are also reviewed.
The Utility’s Attempt to
Address Customer Satisfaction
On May 30, 2019, a customer meeting was held at the
Merritt Island Public Library to receive customer comments concerning quality
of service. No customers attended the meeting. Staff reviewed the Commission’s
complaint records related to TKCB from October 1, 2013, through July 23, 2019,
and found no complaints. In addition, no complaints were received by the DEP or
the Utility. The Utility is currently in compliance with DEP’s rules and
regulations.
Conclusion
The Utility is in compliance with DEP’s rules and
regulations and there have been no customer comments or complaints against the
Utility in the previous five-year period. Staff recommends that the overall
quality of service provided by the Utility should be considered satisfactory.
Issue 2:
What are the used and useful (U&U) percentages
for the Utility’s wastewater treatment plant (WWTP) and collection system?
Recommendation:
Staff recommends that the WWTP and collection system
be considered 100 percent U&U. There is no excessive infiltration and
inflow (I&I) and no adjustment to operating expenses is necessary.
(Salvador)
Staff Analysis:
Pursuant to Rule 25-30.432, F.A.C., the U&U
percentage of a WWTP is based on the plant flows, growth allowance, I&I and
the plant permitted capacity. Other factors, such as whether the service area
is built out and whether the plant flows have decreased due to conservation may
also be considered. The DEP permitted capacity is currently at 99,000 gallons
per day (gpd) based on the annual average daily flow. The collection system is
composed of polyvinyl chloride pipes and there is one lift station in the service
area.
WWTP and Collection System U&U
The Utility’s service area is plotted for 295 mobile home
connections. During the test year the Utility indicated 274 lots were being
served. During the analysis period of the previous SARC staff conducted a field
inspection and confirmed that the service area is built out. In that same rate
case the Commission found the WWTP and collection system to be 100 percent
U&U. Since that time there have been no changes to either the WWTP or the
collection system and there are no plans for expansion. Because the service
area is built out and there are no plans for expansion, staff recommends that
the WWTP and collection system should be considered 100 percent U&U.
Infiltration and Inflow
Typically infiltration results
from groundwater entering a wastewater collection system through broken or
defective pipes and joints; whereas, inflow results from water entering a
wastewater collection system through manholes or lift stations. By convention,
the allowance for infiltration is 500 gpd per inch diameter pipe per mile, and
an additional 10 percent of residential water billed is allowed for inflow.
Rule 25-30.432, F.A.C., provides that in determining the WWTP amount of
U&U, the Commission will consider I&I.
All wastewater collection systems experience I&I. The
conventions noted above provide guidance for determining whether the I&I
experienced at a WWTP is excessive. Staff calculates the allowable infiltration
based on system parameters and allowable inflow based on water sold to
customers. The sum of these amounts is the allowable I&I. Staff next
calculates the estimated amount of wastewater returned from customers. The
estimated return is determined by summing 80 percent of the water sold to residential
customers with 90 percent of the water sold to non-residential customers.
Adding the estimated return to the allowable I&I yields the maximum amount
of wastewater that should be treated by the wastewater system without incurring
adjustments to operating expenses. If this amount exceeds the actual amount
treated, no adjustment is made. If it is less than the gallons treated, then
the difference is the excessive amount of I&I.
The Utility has 3,570 feet of 4-inch, 2,300 feet of 6-inch
and 6,975 feet of 8-inch collecting mains. Given these parameters and
performing the necessary conversions to express the result in gallons per year
(gpy), the allowance for infiltration is 2,899,261 gpy.
The Utility reported the total number of water gallons
billed to all wastewater customers during the test year was 11,476,000. Thus,
the allowance for inflow is 10 percent of the residential flow, or 1,147,600
gpy. Therefore, the total allowance for infiltration and inflow is 4,046,861
gpy.
Estimating the residential return at 80 percent, the total
estimated return to the wastewater plant is 9,180,800 gallons. Thus, the
estimated maximum amount of wastewater that the system should treat, the
estimated return plus the allowable I&I, is 13,227,661 gpy. Any amount
treated in excess of this amount is considered excessive I&I.
According to the Utility’s daily flow reports, the Utility
treated 11,757,000 gallons of wastewater during the test year. This is less
than the estimated maximum amount allowable. Therefore, there is no excessive
I&I and no adjustment to operating expenses is necessary.
Conclusion
Staff recommends that TKCB’s WWTP and collection system should
be considered 100 percent U&U. There is no excessive I&I and no
adjustment to operating expenses is necessary.
Issue 3:
What is the appropriate average test year rate base
for TKCB, Inc.?
Recommendation:
The appropriate average test year rate base for TKCB
for ratemaking purposes is $58,454. (Bennett, Sewards, Knoblauch)
Staff Analysis:
The test year ended September 30, 2018, was used for
the instant case. A summary of each rate base component and recommended
adjustments are discussed below.
Utility Plant in Service (UPIS)
The Utility recorded a test year UPIS balance of $17,058.
Based on audit staff’s review of the Utility’s books and records, UPIS should
be decreased by $626 to reflect the appropriate UPIS test year balances. In
addition, staff decreased UPIS by $2,910 to include an averaging adjustment.
Staff’s adjustments to UPIS result in a decrease of $3,536 ($626 + $2,910).
Therefore, staff recommends that the appropriate UPIS balance is $13,522.
Land & Land Rights
The Utility recorded a test year land balance of $36,203.
The land balance was established in Order No. PSC-13-1026-PAA-SU. In that case,
staff auditors examined records from the Brevard County Property Appraiser and
determined the balance represented land dedicated to the wastewater plant,
percolation ponds, and utility easements as of the date the land was dedicated
to utility service. Based on staff’s review, no adjustment is necessary. Therefore,
staff recommends that the appropriate balance is $36,203.
Used & Useful
As discussed in Issue 2, TKCB’s WWTP and collection system
are considered 100 percent U&U. Therefore, no U&U adjustments are
necessary.
Accumulated Depreciation
TKCB recorded a test year accumulated depreciation balance
of $653. Staff increased accumulated depreciation by $326 to reflect
depreciation pursuant to Rule 25-30.140, F.A.C.
In addition, staff decreased accumulated depreciation by $252 to reflect
an averaging adjustment. Staff’s adjustments to accumulated depreciation result
in a net increase of $74 ($326 - $252).
Therefore, staff recommends an accumulated depreciation balance of $727.
Contributions in Aid of Construction (CIAC)
The Utility recorded a test year CIAC balance of $0. Based
on staff’s review, no adjustment is necessary. Therefore, staff recommends that
the appropriate balance is $0.
Accumulated Amortization of CIAC
The Utility recorded a test year accumulated amortization
of CIAC balance of $0. Based on staff’s review, no adjustment is necessary. Therefore,
staff recommends that the appropriate balance is $0.
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(3), F.A.C., staff used the one-eighth of the operation and
maintenance (O&M) expense formula approach for calculating the working
capital allowance. Section 367.081(9), F.S., prohibits a utility from earning a
return on the unamortized balance of rate case expense. As such, staff removed
the rate case expense balance of $384 for this calculation resulting in an
adjusted O&M expense balance of $75,645 ($76,030 - $384). Applying this formula
approach to the adjusted O&M expense balance, staff recommends a working
capital allowance of $9,456 ($75,645 / 8).
Rate Base Summary
Based on the forgoing, staff recommends that the
appropriate test year average rate base is $58,454. Rate base is shown on
Schedule No. 1-A. The related adjustments are shown on Schedule No. 1-B.
Issue 4:
What is the appropriate return on equity and overall
rate of return for TKCB, Inc.?
Recommendation:
The appropriate return on equity (ROE) is 7.85
percent with a range of 6.85 percent to 8.85 percent. (Bennett, Sewards)
Staff Analysis:
According to staff’s audit, TKCB’s test year capital
structure reflected common equity of $50,060. As discussed in Issue 7, staff is
recommending the operating ratio methodology be used in this case. Although the
traditional rate of return does not apply in this case due to rate base being
less than 125 percent of O&M expenses, staff recommends that an ROE still
be established for this Utility. The appropriate ROE for the Utility is 7.85
percent based on the Commission approved leverage formula currently in effect.,
As such, staff recommends a ROE of 7.85 percent, with a range of 6.85 percent
to 8.85 percent. The ROE and overall rate of return are shown on Schedule No.
2.
Issue 5:
What are the appropriate test year revenues for TKCB,
Inc.?
Recommendation:
The appropriate test year revenues for TKCB are $83,684.
(Ramos)
Staff Analysis:
TKCB recorded total test year revenues of $83,015. The
Utility’s test year revenues consisted entirely of service revenues. Based on
staff’s review of the Utility’s billing determinants and the service rates that
were in effect during the test year, staff determined test year service
revenues should be increased by $669 to reflect annualized test year revenues
of $83,684. The Utility
has no miscellaneous service charges and thus, there are no miscellaneous
revenues. Based on the above, the appropriate test year revenues for TKCB are $83,684
($83,015 + $669).
Issue 6:
What is the appropriate amount of operating expense
for TKCB, Inc.?
Recommendation:
The appropriate amount of operating expense for TKCB
is $85,605. (Bennett, Sewards, Knoblauch)
Staff Analysis:
TKCB recorded operating expense of $73,593 for the
test year ended September 30, 2018. The test year O&M expenses have been
reviewed, including invoices, canceled checks, and other supporting documentation.
Staff has made a few adjustments to the Utility's operating expenses as
summarized below.
Operation & Maintenance Expense
Salaries and Wages – Employees (701)
The Utility recorded salaries and wages – employees
expense of $3,400 in the test year. The Utility’s bookkeeper is also an
employee of Atlantis Investments, a related party. In the last rate case, the
Commission approved a salary for this position of $3,000 based on a yearly
salary of $30,000, and a time allocation of 10 percent for utility-related
matters.
By letter dated December 18, 2018, TKCB requested an
increase in salary for this position.
Using the American Water Works Association 2018 Utility Salary Compensation
Survey for Small Water and Wastewater Utilities (2018 AWWA Small Utility
Survey), the Utility determined the position of Small System Bookkeeper with a
salary of $42,596 was more representative of the bookkeeper’s duties. Staff
reviewed the 2018 AWWA Small Utility Survey and believes the description and
requested salary is reasonable for this position. As such, staff recommends a
salary of $42,596 should be used for the bookkeeper position.
Additionally, TKCB has requested that the allocation of
time for utility-related matters be increased to 15 percent for the bookkeeper
position. The Utility stated that, in the last rate case, the time required for
work performed was based on an estimate of 10 percent and not actual time spent
on utility matters. Staff believes that the calculation of time allocated to
TKCB should take into consideration actual time spent historically by the
bookkeeper on utility matters. As such, staff recommends that the time
allocation for the bookkeeper position should be increased to 15 percent.
These adjustments result in a salaries and wages –
employees expense of $6,389 ($42,596 x 15%), or an increase of $2,989 ($6,389 -
$3,400).
Salaries and Wages – Officers (702)
The Utility recorded salaries and wages – officers expense
of $8,140 in the test year. The Utility’s President is also the President and
owner of Atlantis Investments, a related party. In the last rate case, the
Commission approved a salary for this position of $6,311, based on a yearly
salary of $42,073 and a time allocation of 15 percent for utility-related
matters. The President’s salary was established using the 2008 American Water
and Wastewater Association Compensation Survey.
By letter dated December 18, 2018, TKCB also requested an
increase in salary for this position.
Using the 2018 AWWA Small Utility Survey, the Utility determined the position
of Small System General Manager with a salary of $78,709 was more
representative of the President’s duties. Staff reviewed the 2018 AWWA Small
Utility Survey and believes the description and requested salary is reasonable
for this position. As such, staff recommends a salary of $78,709 for the
President.
Additionally, TKCB has requested that the allocation of
time for utility-related matters be increased to 20 percent for the President.
The Utility stated that, in the last rate case, the time required for work
performed was based on an estimate of 15 percent and not actual time spent on
utility matters. Staff believes that the calculation of time allocated to TKCB
should take into consideration actual time spent historically by the President
on utility matters. As such, staff recommends that the time allocation for the
President should be increased to 20 percent.
These adjustments would result in a salaries and wages –
officers expense of $15,742 ($78,709 x 20%), or an increase of $7,602 ($15,742
- $8,140).
Sludge Removal Expense (711)
The Utility recorded sludge removal expense of $764 in the
test year. In response to staff’s data request, TKCB provided additional
information that increased the sludge removal expense for the test year to
$3,200. However,
a number of the invoices provided by the Utility were related to Hurricane
Irma, and do not represent normal operation. Therefore, staff requested sludge
removal invoices from the Utility over the last four years, and determined the
average amount of sludge removed per year to be 10,750 gallons. Using the
current sludge removal rate of $0.20 per gallon, the total expense was
calculated to be $2,150. Therefore, staff recommends sludge removal expense of
$2,150, or an increase of $1,386.
Purchased Power (715)
The Utility recorded purchased power expense of $9,570 in
the test year. Staff decreased this account by $78 to remove late fees and
reflect the appropriate amount of purchased power expense. As such, staff
recommends a purchased power expense of $9,492.
Chemicals Expense (718)
The Utility recorded chemicals expense of $502 in the test
year. Staff increased this account by $9 to reflect supporting documentation
provided. As such, staff recommends a chemicals expense of $511.
Materials and Supplies Expense (720)
TKCB recorded materials and supplies expense of $720 in
the test year. Staff increased materials and supplies expense by $122 to
reflect actual invoices for TKCB. Therefore, staff recommends materials and
supplies expense of $842.
Contractual Services – Billing Expense (730)
TKCB has a contract with the City of Cocoa Utilities Department
(COC) for customer billing services. The Utility’s wastewater bills are based
on customers’ monthly water consumption with COC. TKCB recorded contractual
services – billing expense of $3,643 in the test year. Audit staff decreased
this expense by $22 to reflect the appropriate amount of contractual services
for billing. Additionally, by letter dated June 20, 2019, the Utility provided
documentation from COC that stated that its billing fee will increase from the
test year charge of $1.09 to $1.14 per bill effective October 1, 2019. Staff
has reviewed the documentation provided and believes this adjustment is
appropriate. Staff calculated the increase in billing expense using the number
of customer bills in the test year and the $0.05 increase in fees. This results
in an increase of $166 (3,322 customer bills x $0.05). Staff’s adjustments to
contractual services – billing expense results in a net increase of $144 (-$22
+ $166). Therefore, staff recommends contractual services – billing expense of
$3,787.
Contractual Services – Testing Expense (735)
The Utility recorded contractual services – testing expense
of $3,647 in the test year. Staff decreased this account by $13 to reflect
supporting documentation provided. As such, staff recommends contractual
services – testing expense of $3,634.
Contractual Services – Other Expense (736)
The Utility recorded contractual services – other expense
of $20,381 in the test year. Staff removed $1,570 for expenses booked outside
of the test year or that were non-utility related expenses. Additionally, staff
annualized the monthly fees for the WWTP contractor and mowing services for the
test year, and removed an expense that was already booked in a separate account.
Staff’s adjustments to contractual services – other expense result in a net
decrease of $786 (-$1,570 + $100 - $66 + $750). Therefore, staff recommends
contractual services – other expense of $19,595.
Rent Expense (740)
TKCB recorded rent expense of $12,000 in the test year.
The Utility shares office space with a related party, Atlantis Investments. In
response to a data request, the Utility stated the office space was owned by
the related party. On April 5, 2019, TKCB provided a calculation for rent
expense detailing the allocation of rent, office utilities, and supplies
expense. Additionally, TKCB provided invoices for utility expenses as well as
office supplies expenses.
The Utility also provided calculations to support indexing the rent expense
approved in the last rate case from 2012 to 2019 to account for inflation. In
total, TKCB provided documentation supporting rent expense of $8,860. Staff has
reviewed the Utility’s indexing and allocation calculations, as well as
invoices provided supporting expenses and believes TKCB’s allocation of rent
from the related party is reasonable. Therefore, staff recommends rent expense
of $8,860, or a decrease of $3,140 ($12,000 - $8,860).
Regulatory Commission Expense (765)
TKCB recorded regulatory
commission expense of $162. This balance was associated with the previous rate
case and removed from the account by audit staff, as it is currently fully
amortized. Staff has calculated a total of $1,538 in regulatory commission
expense for the current docket. This amount includes a $1,000 filing fee and
$538 in noticing costs for the instant case. The recommended total rate case
expense of $1,538 should be amortized over four years pursuant to Section
367.081(8), F.S., as the Utility did not request a different amortization
period be used. This represents an annual expense of $384 ($1,538 / 4). As
such, staff recommends regulatory commission expense of $384.
Bad Debt Expense (770)
The Utility recorded bad debt expense of $1,818. Audit
staff discovered that TKCB records its bad debt every September and determined
the balance of $1,818 represented bad debt recorded for the year 2017. Staff
also determined that the current test year balance should be $844, as recorded
for the year 2018.
In its response to the audit, the Utility requested the
use of a three-year average for bad debt expense, consistent with its last rate
case. TKCB recorded bad debt expense of $1,665, $1,818, and $844 for the years
2016, 2017, and 2018, respectively. Given the variance of this account from
year-to-year, staff believes the use of a three-year average is appropriate.
Staff calculated a three-year average of $1,442, a decrease of $376 from the
test year balance. Therefore, staff recommends bad debt expense of $1,442
($1,818 - $376).
Miscellaneous Expense (775)
The Utility recorded miscellaneous expense of $2,015.
Staff decreased this account by $69 to properly reflect the amount from
provided invoices. As such, staff recommends miscellaneous expense of $1,946.
Operation & Maintenance Expense Summary
Based on the above adjustments, staff recommends that
O&M expense be increased by $8,014, resulting in total O&M expense of
$76,030. Staff’s recommended adjustments to O&M expense are shown on
Schedule No 3-C.
Depreciation Expense
TKCB
recorded depreciation expense of $577 during the test year. Staff recalculated
depreciation expense for the test year and decreased the expense by $73.
Therefore, staff recommends depreciation expense of $504 ($577 - $73).
Taxes Other Than Income (TOTI)
TKCB recorded a TOTI balance of $5,000 during the test
year. Staff increased the Regulatory
Assessment Fees (RAFs) by $30 to reflect the adjusted test year revenues. Staff
increased property tax expense by $2,633 to reflect the appropriate amount of
property tax. Staff increased TOTI by $101 to reflect the appropriate test year
payroll tax. Additionally, staff increased payroll tax by $810 to reflect the
recommended increase to salaries and wages expense discussed above. This
results in an increase of $3,574 ($30 + $2,633 + $101 + $810).
In addition, as discussed in Issue 8, revenues have been increased
by $11,044 to reflect the change in revenue required to cover expenses and
allow the recommended operating margin. As a result, TOTI should be increased
by $497 to reflect RAFs of 4.5 percent on the change in revenues. Staff’s
adjustments result in an increase of $4,071 ($3,574 + $497). Therefore, staff
recommends TOTI of $9,071.
Operating Expenses Summary
The application of staff=s
recommended adjustments to TKCB’s test year operating expenses results in
operating expenses of $85,605. Operating expenses are shown on Schedule No. 3-A.
The related adjustments are shown on Schedule Nos. 3-B and 3-C.
Issue 7:
Should the Commission utilize the operating ratio
methodology as an alternative method of calculating the wastewater revenue
requirement for TKCB, Inc. and, if so, what is the appropriate margin?
Recommendation:
Yes. The Commission should utilize the operating
ratio methodology for calculating the revenue requirement for TKCB. The margin
should be 12 percent of O&M expense. (Bennett, Sewards)
Staff Analysis:
Rule 25-30.4575, F.A.C., states that the Commission will apply a margin
of 12 percent when determining the revenue requirement, up to a cap of $15,000.
The operating ratio methodology will be applied when the Utility’s rate base is
no greater than 125 percent of O&M expenses. The use of the operating ratio
methodology does not change the Utility’s qualification for a staff assisted
rate case under Rule 25-30.455(1), F.A.C.
The operating ratio methodology is an alternative to the
traditional calculation of revenue requirements. Under this methodology, instead
of applying a return on the Utility's rate base, the revenue requirement is
based on the Utility’s O&M expenses plus a margin of 12 percent. This
methodology has been applied in cases in which the traditional calculation of
the revenue requirement would not provide sufficient revenue to protect against
potential variances in revenues and expenses. As discussed in Issues 3 and 6,
staff has recommended a rate base of $58,454 and O&M expenses of $76,030.
Based on staff’s recommendation, TKCB’s rate base is only 77 percent of its
O&M expenses. Furthermore, the application of the operating ratio
methodology does not change the Utility’s qualification for a staff assisted
rate case. As such, TKCB meets the criteria for the operating ratio methodology
established in Rule 25-30.4575(2), F.A.C. Therefore, staff recommends the application
of the operating ratio methodology at a margin of 12 percent of O&M expense
for determining the wastewater revenue requirement.
Issue 8:
What is the appropriate revenue requirement for
TKCB, Inc.?
Recommendation:
The appropriate revenue requirement is $94,728
resulting in an annual increase of $11,044 (13.20 percent). (Bennett, Sewards)
Staff Analysis:
TKCB should be allowed an annual increase of $11,044
(13.20 percent). The calculations are shown in Table 8-1:
Table 8-1
Revenue Requirement
|
Adjusted O&M
|
|
$76,030
|
|
Operating Margin (%)
|
|
x 12.00%
|
|
Operating Margin ($15,000 Cap)
|
|
$9,124
|
|
Adjusted O&M Expense
|
|
76,030
|
|
Depreciation Expense (Net)
|
|
504
|
|
Taxes Other Than Income
|
|
9,071
|
|
Revenue Requirement
|
|
$94,728
|
|
Less Adjusted Test Year Revenues
|
|
83,684
|
|
Annual Increase
|
|
$11,044
|
|
Percent Increase
|
|
13.20%
|
Issue 9:
What are the appropriate wastewater rates for TKCB,
Inc.?
Recommendation:
The recommended monthly wastewater rates, as shown on
Schedule No. 4, are reasonable and should be approved. 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. The approved rates 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 within 10 days of the date of the notice. (Ramos)
Staff Analysis:
The Utility provides wastewater to approximately 274
residential mobile homes, in Sun Lake Village Estates, in Brevard County. The
Utility does not have any general service customers. Additionally, the City of
Cocoa performs the billing for TKCB and is also the water provider. TKCB’s rate
structure consists of a uniform base facility charge (BFC) for all residential
meter sizes and a gallonage charge with a 6,000 gallon cap. General Service
rate structure is a BFC by meter size and a gallonage charge that is 1.2 times
higher than the residential gallonage charge.
Staff performed an analysis of the Utility’s billing data
to evaluate various BFC cost recovery percentages and gallonage caps for the
residential 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; and (3) implement a
gallonage cap that considers approximately the amount of water that may return
to the wastewater system.
Consistent with Commission practice, staff allocated 50
percent of the wastewater revenue to the BFC due to the capital intensive
nature of wastewater plants. In addition, it is also Commission practice to set
the wastewater cap at approximately 80 percent of residential water gallons
sold. The wastewater gallonage cap recognizes that not all water is returned to
the wastewater system. Based on staff’s review of the billing analysis, 83
percent of the gallons are captured at the 6,000 gallon consumption level. For
this reason, staff recommends that the gallonage cap for residential customers
remain at 6,000 gallons. Staff also recommends that the general service
gallonage charge be 1.2 times greater than the residential gallonage charge,
which is consistent with Commission practice.
Based on the above, the recommended monthly wastewater
rates, as shown on Schedule No. 4, are reasonable and should be approved. 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. The approved rates 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 within 10 days of the date of the notice.
Issue 10:
What is the appropriate amount by which rates should
be reduced after the published effective date to reflect the removal of the
amortized rate case expense as required by Section 367.081(8) F.S.?
Recommendation:
The rates should be reduced as shown on Schedule No.
4, to remove rate case expense grossed-up for RAFs and amortized over a
four-year period. The decrease in rates should become effective immediately
following the expiration of the rate case expense recovery period, pursuant to
Section 367.081(8), F.S. TKCB 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. (Ramos, Bennett, Sewards)
Staff Analysis:
Section 367.081(8), F.S., requires that the rates be
reduced immediately following the expiration of the recovery 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 and the gross-up for RAFs. The total reduction is $403.
Staff recommends that the rates should be reduced as shown
on Schedule No. 4, to remove rate case expense grossed-up for RAFs and amortized
over a four-year period. The decrease in rates should become effective
immediately following the expiration of the rate case expense recovery period,
pursuant to Section 367.081(8), F.S., TKCB 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 11:
Should the recommended rates be approved for TKCB,
Inc. 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. TKCB 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.
(Bennett, Sewards)
Staff Analysis:
This recommendation proposes an increase in 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. TKCB 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.
TKCB 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. Security should be in the form of a bond or
letter of credit in the amount of $7,478. 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;
2) No
monies in the escrow account may be withdrawn by the Utility without the
express approval of the Commission;
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 Cosentino 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.
Should the recommended
rates be approved by the Commission on a temporary basis, TKCB 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
12:
Should the Utility be
required to notify the Commission, in writing, that it has adjusted its books
in accordance with the Commission's decision?
Recommendation:
Yes. TKCB should be required to notify the
Commission, in writing, that it has adjusted its books in accordance with the
Commission’s decision. TKCB should submit a letter within 90 days of the final
order in this docket, confirming that the adjustments to all applicable National
Association of Regulatory Commissioners (NARUC) Uniform System of Accounts (USOA)
primary accounts have been made to the Utility’s books and records. In the
event the Utility needs additional time to complete the adjustments, notice
providing good cause should be filed within seven days prior to the deadline.
Staff should be given administrative authority to grant such an extension for
up to 60 days. (Bennett, Sewards)
Staff Analysis:
TKCB should be required to notify the Commission, in
writing, that it has adjusted its books in accordance with the Commission’s
decision. TKCB should submit a letter within 90 days of the final order in this
docket, confirming that the adjustments to all the applicable NARUC USOA
primary accounts have been made to the Utility’s books and records. In the
event the Utility needs additional time to complete the adjustments, notice
providing good cause should be filed within seven days prior to the deadline.
Staff should be given administrative authority to grant such an extension for
up to 60 days.
Issue 13:
Should this docket be closed?
Recommendation:
No. If
no person whose substantial interests are affected by the proposed agency
action files a protest within 21 days of the issuance of the proposed agency
action order, a consummating order should be issued. The docket should remain
open for staff’s verification that the revised tariff sheets and customer
notice have been filed by the Utility and approved by staff. Once these actions
are complete, this docket should be closed administratively. (DuVal,
Weisenfeld)
Staff Analysis:
If no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the proposed agency action order, a
consummating order should be issued. The docket should remain open for staff’s
verification that the revised tariff sheets and customer notice have been filed
by the Utility and approved by staff.
Once these actions are complete, this docket should be
closed administratively.
