REVISED
07/26/19
Case Background
This docket was opened to investigate the billing
practices of K W Resort Utilities Corporation (KWRU) to determine if KWRU had
violated any Commission order, rule or statute. An audit was conducted by Commission staff
for the period of April 2013 through March 2017, in which KWRU was found to
have charged rates inconsistent with its tariffs. Based on this audit, Order No. PSC-2018-0444-PAA-SU
(Order No. PSC-2018-0444) was issued on August 31, 2018.
The proposed agency action portion of Order No.
PSC-2018-0444 found that:
·
The April 2013 through March 2017 audit period utilized by Commission
staff was reasonable.
·
The appropriate time period for the refunds was April 2013 through March
2016.
·
KWRU was required to refund Safe Harbor (Safe Harbor) $26,408 with
interest in accordance with Rule 25-30.360, Florida Administrative Code
(F.A.C.).
·
KWRU was required to refund Sunset (Sunset) $41,034 with interest in accordance
with Rule 25-30.360, F.A.C.
·
KWRU was not required to refund rates charged for pools due to KWRU’s reasonable
belief that the approved tariff for pools it had for Key West Golf Club–HOA
“was applicable to any additional customers with pools.”
·
KWRU did not have to refund general service customers that were billed base
facility charges (BFC) based on units instead of Florida Keys Aqueduct Authority
(FKAA) metered rates for several reasons: 1) the error occurred during the
transition from flat to volumetric for residential customers in which a billing
software error incorrectly identified these customers as residential units; 2)
the billing determinants in KWRU’s 2009 rate case may have been based on units
rather than meter sizes; and 3) KWRU corrected its billing practices following
the implementation of Order No. PSC-16-0123-PAA-SU.
·
KWRU’s settlement with Roy’s Trailer Park was a reasonable solution to
address that customer’s corrected outstanding balance from being billed by KWRU
based on units instead of FKAA meters.
The show cause portion of Order No. PSC-2018-0444
directed KWRU to show cause why it should not be fined a $10,000 penalty for
violations of Sections 367.081(1) and 367.091(3), Florida Statutes (F.S.).
The Office of Public Counsel (OPC) filed a protest of
the PAA Order on September 21, 2018. In
its protest, OPC raised the issues of whether Rule 25-30.350, F.A.C., requires
that refunds be granted for the entire period that overbilling took place, 2009
through April 2016, and the calculation of customer refunds. KWRU filed a Cross Petition for Formal
Evidentiary Hearing (Cross Petition) on October 1, 2018. In its Cross Petition, KWRU protested the $10,000
penalty (Show Cause Order) and the refunds ordered for Safe Harbor and other
customers. On March 14, 2019, Order No. PSC-2019-0101-PCO-SU (OEP) was issued
setting a final hearing on the PAA order issues raised by OPC and KWRU for
September 17-18, 2019.
On May 17, 2019, KWRU and OPC filed a Joint Motion for
Approval of Stipulation and Settlement (Stipulation and Settlement). The Stipulation and Settlement is contained
in Attachment A. The Stipulation and
Settlement has the following provisions:
·
Fourth Avenue, LLC shall be refunded $1,004.34
and ITNOR Waters Edge shall be refunded $1,025.49 within 30 days of Commission
approval of the Stipulation and Settlement.
·
OPC will withdraw its protest of the PAA Order
filed on September 21, 2019.
·
OPC takes no position on refunds to Safe Harbor
or Sunset.
·
The Stipulation and Settlement does not address
the Show Cause portion of Order No. PSC-2018-0444.
·
KWRU will limit its contested issues to refunds
to Safe Harbor and Sunset (PAA Order) and the penalty (Show Cause Order).
·
The Stipulation and Settlement must be approved
by the Commission without modification.
On May 28, 2019, KWRU filed a Motion to Abate
Proceedings. In its Motion to Abate,
KWRU argued that the Stipulation and Settlement allowed both the PAA and Show
Cause portions of Order No. PSC-2018-0444 to be resolved at an Agenda Conference,
thereby negating the necessity for a formal evidentiary hearing. On June 4, 2019, KWRU filed the direct
testimony of Christopher A. Johnson. The
Motion to Abate was granted on June 14, 2019, by Order No. PSC-2019-0235-PCO-SU,
suspending the hearing schedule in this docket until further notice.
On June 14, 2019, KWRU also filed an Offer of Settlement
(KWRU Offer) to resolve the remaining issues in this docket not addressed in
the Stipulation and Settlement. The KWRU
Offer is contained in Attachment B. The
KWRU Offer contains the following provisions:
·
The Settlement Agreement and Release between
Safe Harbor and KWRU dated May 12, 2016, Exhibit CAJ-9 to witness Johnson’s
direct testimony, releases KWRU from any refund which may be due to Safe Harbor
in this docket for overbilling and no additional refunds are necessary.
·
The Settlement Agreement and Release between
Sunset and KWRU dated October 23, 2019, Exhibit CAJ-8 to witness Johnson’s
direct testimony, states that the payment of $41,034.00 by KWRU to Sunset is a
complete satisfaction of any claim that Sunset is owed any additional refunds
for overbilling by KWRU and no additional refunds are necessary.
·
KWRU is willing to pay a penalty of $2,500.00
for improper billing.
Unlike most cases when a
settlement is reached by the parties where an evidentiary hearing is scheduled,
staff is making a substantive recommendation to the Commission on Issues 1 and
2, the Stipulation and Settlement and KWRU’s Offer, both of which were filed to
resolve the unique facts and posture of this case. The order protested here involved refunds to
customers for which staff is not a party, and a fine for which staff is a party
and acts in a prosecutorial role.
Because all issues have become so intertwined, staff believes the most
expedient process is to make substantive recommendations on all settlement and
stipulation issues before the Commission.
This recommendation addresses
both the Stipulation and Settlement and KWRU Offer. A complete resolution of both the PAA Order
issues and Show Cause issue can only be achieved if both the Settlement and
Stipulation addressed in Issue 1 and Settlement Offer addressed in Issue 2 are
approved. The Commission has
jurisdiction pursuant to Section 367.081, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve the Stipulation and
Settlement jointly filed by KW Resort Utilities Corporation and the Office of
Public Counsel?
Recommendation:
Yes.
(Brownless, Schrader)
Staff Analysis:
The Stipulation and Settlement filed by the parties
on May 17, 2019, proposes to settle several legal and billing issues addressed
in Order No. PSC-2018-0444 that were protested by OPC and cross-protested by
KWRU. Specifically, the Stipulation and
Settlement requires KWRU to issue refunds to two additional KWRU customers:
$1,004.34 to Fourth Ave., LLC, and $1,025.49 to ITNOR Waters Edge, within 30
days of the Commission’s approval of the Stipulation and Settlement. These refunds would be paid in addition to
any refunds issued up until the time of the filing of the Stipulation and
Settlement,
OPC also agrees to withdraw its protest of the PAA Order and
take no position regarding further refunds to Safe Harbor or Sunset and to
take no position on the imposition of a penalty. The parties also state that the Stipulation
and Settlement “is in the best interests of both the Utility and its
customers.” In sum, OPC has agreed to
waive its right to a hearing on the factual and legal PAA Order issues it
protested in exchange for the payment of refunds to two additional customers
incorrectly billed by the use of BFCs based on the number of units or
individual dwellings present behind a master meter, rather than based on the
customer’s meter size.
Under the terms of the Stipulation and Settlement, KWRU is
able to contest the refunds for Safe Harbor and Sunset (PAA Order issues) and
the penalty issue (Show Cause Order issue).
In its Motion to Abate, KWRU made the representation that approval of
the Stipulation and Settlement would enable KWRU to resolve both the PAA and
Show Cause Order issues “at the Commission Conference, negating the necessity
for a formal administrative hearing.”
From this statement, Commission staff concludes that if given an
opportunity to present oral argument on the PAA and Show Cause Order issues at
an Agenda Conference, KWRU envisions waiving its right to an evidentiary
hearing on these issues.
Both OPC and KWRU have entered into the Stipulation and
Settlement in good faith and represent that it is in the public interest. The Stipulation and Settlement resolves some
protested billing issues and provides an administratively efficient means of
resolving the issues that remain: Safe Harbor and Sunset refunds and the $10,000
penalty. Given these unique facts, the
Stipulation and Settlement appears to be in the public interest and to fairly
and reasonably settle the issues between KWRU and OPC in this docket.
Issue 2:
Should KWRU's Offer of Settlement be approved?
Recommendation:
Yes, if the Commission votes to approve Issue 1. If
the Commission does not vote to approve Issue 1, this case should be set for
hearing with appropriate modifications to the filing dates made in Order No.
PSC-2019-0101-PCO-SU, Order Establishing Procedure. (Brownless, Schrader)
Staff Analysis:
The KWRU Offer of Settlement (KWRU Offer) proposes
to settle the remaining issues in this docket that were not addressed by the
Stipulation and Settlement. The KWRU Offer asks that the Commission approve
resolutions to the refund amounts due to Safe Harbor and Sunset and approve a
lower amount for the Show Cause penalty.
Regarding the remaining refunds due to Safe Harbor and
Sunset, KWRU filed the Settlement Agreement and Release it has reached with
each party as Exhibits to witness Christopher Johnson’s Prefiled Direct
Testimony filed on June 4, 2019. The
KWRU Offer asserts that the Settlement Agreement and Release reached with Safe
Harbor on May 12, 2016, resolved a number of issues between KWRU and Safe
Harbor “including, but not limited to, mutual obligations for refunds between
the parties.” Further, the KWRU Offer
states that, pursuant to this agreement and release, “any refund which may be
due to Safe Harbor in this docket is deemed satisfied and no additional refunds
are necessary.” For Sunset, the KWRU Offer states that the Settlement Agreement
and Release, dated October 23, 2018, reached between KWRU and Sunset, provides
that in consideration of a payment made by KWRU to Sunset of $41,034.00, Sunset
released KWRU from all claims related to any further refunds due that are
addressed in Order No. PSC-2018-0444.
Regarding the Show Cause penalty, KWRU states that
Commission staff, during the August 6, 2018 Agenda Conference recommended a
penalty of $1,000; however the Commission increased this penalty to
$10,000. KWRU argues that this penalty “greatly
exceeds a reasonable amount based upon the particular circumstances of the KWRU
tariff at that time.” In support of this
argument, KWRU points to the arguments it previously made at the August 6, 2018
Agenda Conference, pointing in particular to the following discussion from the
Conference:
Ms. [Patti] Daniels: ….I do want to reiterate and
emphasize to you is that Mr. Friedman is absolutely correct that the –the
tariff lacked clarity for many, many years…
Commissioner Brown: Are you – Patti, are you saying,
though, that staff had a role in some of the confusion that occurred?
Ms. Daniels: Absolutely Commissioner.
Commissioner Brown: Is that why staff is recommending a nominal
fee of a thousand dollar fine?
Ms. Daniel: Absolutely.
In consideration of its arguments, KWRU’s Settlement
requests that the Commission approve a penalty of $2,500 to resolve the Show
Cause portion of Order No. PSC-2018-0444.
Regarding the refunds to Safe Harbor and Sunset, it
appears that KWRU and those customers have reached a mutually agreeable
resolution of the amounts due to those customers. Regarding the Show Cause penalty, it appears
that while KWRU did violate its approved tariff, KWRU has reasonably shown that
Commission staff had at least some role in the confusion that KWRU asserts it
had regarding the interpretation and application of the tariff. Finally, KWRU has corrected its billing
practices and is currently billing in accord with its tariff. Given these unique facts, acknowledging the
agreements between KWRU and both Marinas and accepting a lower penalty of
$2,500 appears to be reasonable and in the public interest.
Due to the unique facts in this case, a complete
resolution of both the PAA Order issues and Show Cause issue can only be
achieved if both the Settlement and Stipulation addressed in Issue 1 and the
Settlement Offer addressed in Issue 2 are approved. Therefore, if the Commission approves the
Stipulation and Settlement in Issue 1, staff would also recommend approval of
the KWRU Offer. If the Commission does
not vote to approve the Stipulation and Settlement in Issue 1, then staff
recommends that the KWRU Offer not be accepted and that this matter be set for
hearing with appropriate modifications to the filing dates established in Order
No. PSC-2019-0101-PCO-SU.
Issue 3:
Should this docket be closed?
Recommendation:
Staff recommends that if the Commission approves
both the Stipulation and Settlement and the KWRU Offer, and if no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of issuance of the order, this docket should be administratively
closed upon the issuance of a consummating order. If the Commission does not
approve both the Stipulation and Settlement and the KWRU Offer, this docket
should remain open pending resolution at hearing. (Brownless, Schrader)
Staff Analysis:
Staff recommends that if the Commission approves
both the Stipulation and Settlement and the KWRU Offer, and if no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of issuance of the order, this docket should be administratively
closed upon the issuance of a consummating order. If the Commission does not
approve both the Stipulation and Settlement and the KWRU Offer, this docket
should remain open pending resolution at hearing.
