Discussion
of Issues
Issue 1:
Should the application for water and wastewater
certificates by River Grove be approved?
Recommendation:
Yes. Granting the application is in the public
interest and River Grove should be granted Certificate Nos. 674-W and 575-S to
serve the territory described in Attachment A, effective the date of the
Commission’s vote. The resultant order should serve as River Grove’s water and
wastewater certificates and it should be retained by the Utility. (M. Watts,
Knoblauch, Sewards)
Staff Analysis:
On July 25, 2019, River Grove filed its application
for original water and wastewater certificates in Brevard County, Florida. Upon
review, staff determined the original filing was deficient and sent a
deficiency letter on August 16, 2019. Staff also sent data requests to the
Utility seeking additional information. River Grove corrected the deficiencies
on November 15, 2019, which is considered the official filing date for the
application. The Utility’s application is in compliance with the governing
statutes, Sections 367.031 and 267.045, F.S.
Notice
On October 24 and November 15, 2019, River Grove filed
proof of compliance with the noticing provisions set forth in Rule 25-30.030,
Florida Administrative Code (F.A.C.). One customer filed a letter in opposition
to the rates on November 8, 2019. Staff reached out to the customer by
telephone, leaving a voicemail, and by letter, to ask whether he wished to
merely note his objection or to request an administrative hearing. The customer
did not respond to these inquiries. No other protest was filed during the
protest period and the time for filing objections has passed.
Land Ownership and Service Territory
River Grove provided adequate service territory and system
maps, and a territory description as required by Rule 25-30.033, F.A.C. The
legal description of the service territory is appended to this recommendation
as Attachment A. The application contained a copy of the warranty deed for the
wastewater treatment plant site that will be executed and recorded upon the Commission’s
approval of the application.
Financial and Technical Ability
Rule 25-30.033(1)(h) and (i), F.A.C., requires a statement
providing the financial and technical ability of the applicant to provide
service, a detailed financial statement, and a list of all entities upon which
the applicant is relying to provide funding along with those entities’
financial statements. As a new business entity, River Grove is relying upon the
financial backing of its parent, RGMHV. The existing water and wastewater
infrastructure has been owned and operated by RGMHV since the 1970s. The
Commission has traditionally allowed reliance on the parent’s
financial ability in similar situations.[1] The Commission’s
reasoning has been the logical vested interest of a parent in the financial
stability of its subsidiary. The application contains RGMHV’s most recent
financial statements. Additionally, the application includes the loan agreement
for the Florida Department of Environmental Protection State Revolving Fund
(SRF) loan, which financed the construction of the Utility’s interconnection
with Barefoot Bay to purchase bulk water. Staff believes that RGMHV’s financial
statements demonstrate adequate and stable funding reserves for the Utility.
Therefore, staff recommends that River Grove has demonstrated that it will have
access to adequate financial resources to operate the Utility.
Regarding technical ability, the Utility stated in its
application that it has owned and operated the subject water and wastewater
systems since the 1970s. River Grove also stated that its systems will be
operated consistent with an operations agreement with U.S. Water Services
Corporation. Following the interconnection with Barefoot Bay, River Grove
appears to have no outstanding compliance issues on file with the DEP, and is
current with its monitoring requirements.
Conclusion
Based on the foregoing, staff recommends that granting
River Grove’s application is in the public interest. River Grove should be
granted Certificate Nos. 674-W and 575-S to serve the territory described in
Attachment A, effective the date of the Commission’s vote. The resultant order
should serve as River Grove’s water and wastewater certificates and it should
be retained by the Utility.
Issue 2:
What are the appropriate water and wastewater rates and
return on investment for River Grove?
Recommendation:
The recommended monthly water and wastewater rates, as
shown on Schedule No. 4 attached to this recommendation, 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. A return on equity of 10.55 percent, with a range of plus or minus 100
basis points, should also be approved. (Ramos, Sewards, M. Watts, Knoblauch)
Staff Analysis:
Within its application, the Utility provided the
appropriate information pursuant to Rule 25-30.033(1)(p), F.A.C., to support
its proposed rates and charges. In the instant case, the Utility’s water and wastewater
facilities are currently in operation. Therefore, the requested rates and
charges in the application are based on actual operating costs of the existing
systems. This is consistent with the Commission’s policy for setting initial
rates and charges.
Rate Base
Consistent with Commission practice in applications for
original certificates, rate base is identified only as a tool to aid in setting
initial rates and is not intended to formally establish rate base. The
Utility’s proposed water and wastewater rate base calculations, as well as
staff adjustments, are described below.
The Utility proposed plant in service balances, inclusive
of land, of $1,141,146 for water and $41,676 for wastewater in its filing. The
filing indicated a land balance of $2,250 for the water system and $2,250 for
the wastewater system. However, the wastewater balance of Account No.
351—Organization also included the land balance. As such, staff has made an
adjustment to decrease wastewater plant in service by $2,250 to remove the
duplicative costs.
As part of its proposed plant in service, the Utility
proposed $1,045,994 for its Potable Water Main Extension Project for
interconnection with the Barefoot Bay water system. Based on updated
information provided by the Utility, staff has made an adjustment to decrease
water plant in service by $44,559 to remove duplicative costs.
Based on the adjustments above, staff recommends a
reduction to River Grove’s projected plant in service of $44,559 for water and
$2,250 for wastewater. As such, staff recommends an adjusted projected plant in
service, inclusive of land, of $1,096,587 for water and $39,426 for wastewater.
River Grove proposed an accumulated depreciation balance
of $37,492 for water and $17,873 for wastewater. The Utility’s projection is
based on the accumulated depreciation of existing plant, as well as the use of
a half-year convention for the requested pro forma projects. As the pro forma
projects were completed in March 2019, staff believes it is reasonable to
include a full year of accumulated depreciation in rate base.
Additionally, a corresponding adjustment should be made to
the water system to reflect adjustments to plant in service, as discussed
above. Based on the above, staff recommends increasing accumulated depreciation
by $18,737 for the water system and $216 for the wastewater system. As such,
staff recommends an accumulated depreciation balance of $56,229 for water and
$18,089 for wastewater.
In its filing, River Grove proposed Contributions In Aid
of Construction (CIAC) balances of $837,564 for water and $0 for wastewater.
The CIAC balance for water includes estimated potential principal forgiveness
in the amount of $776,848, as identified in the SRF loan agreement between the DEP
and RGMHV. According to the loan agreement, the DEP is authorized to allow
principal forgiveness on loans funded by the Federal Drinking Water Act for
projects that meet the requirements of the Act. Also, the CIAC for water
includes a balance of $60,716, based on a proposed service availability charge
of $353 per customer for meter installation. However, through correspondence
with staff, the Utility indicated that all meters were already installed and
that the proposed service availability charge would be collected prospectively
if there is development of the adjacent property. As such, staff made an
adjustment to decrease CIAC for water by $60,716. Based on the above, staff
recommends CIAC balances of $776,848 for water and $0 for wastewater.
River Grove proposed an accumulated amortization of CIAC
balance of $11,633 for water and $0 for wastewater. Staff recommends the
inclusion of a full year of accumulated amortization of CIAC collected related
to the pro forma projects, consistent with the recommended adjustment to accumulated
depreciation, discussed above. Additionally, staff recommends an adjustment to
recognize the removal of the meter installation charges. These adjustments
result in an increase of $9,946 to accumulated amortization of CIAC for the
water system. As such, staff recommends an accumulated amortization of CIAC
balance of $21,579 for water and $0 for wastewater.
The Utility calculated a working capital allowance of
$15,124 for water and $18,189 for wastewater based on one-eighth of the
estimated operation and maintenance (O&M) expense for each system. Staff
recommends an increase of $1,513 for water and a decrease of $6,206 for
wastewater, to reflect staff’s recommended adjustments to O&M expense
discussed below. Staff’s recommended adjustments result in a working capital
allowance of $16,637 for water and $11,983 for wastewater.
In total, River Grove proposed a rate base of $292,847 for
water and $41,992 for wastewater. Based on the adjustments discussed above,
staff recommends that the rate base be increased $8,879 for water and decreased
$8,672 for wastewater. As such, staff recommends an adjusted rate base of
$301,726 for water and $33,320 for wastewater should be approved. Rate base
calculations for the water and wastewater systems are shown on Schedule Nos.
1-A and 1-B, respectively. Staff’s adjustments are shown on Schedule No. 1-C.
Cost of Capital
The Utility’s application contained a schedule of the
Utility’s capital structure. River Grove projected long-term debt of $229,209,
which consisted of the SRF loan balance that was not included in the principal
forgiveness. The Utility also projected common equity of $54,964 consisting of
paid in capital from RGMHV. River Grove also made an adjustment to reduce
common equity by $2,100 to reconcile proposed total capital with the Utility’s
requested rate base. However, it is Commission practice to reconcile all
investor sources of capital, which includes long-term debt, to the approved
rate base.[2] This
methodology results in pro rata adjustments to decrease long-term debt by
$1,513 and common equity by $363.
River Grove proposed a return of equity (ROE) of 10.93
percent, based on the leverage formula in effect at the time of filing.
However, staff recommends the Utility’s ROE be based on the current leverage formula
in effect. Using the current leverage formula, the ROE should be 10.55 percent. As
such, staff recommends an overall cost of capital of 2.52 percent. The
appropriate ROE for River Grove is 10.55 percent, with a range of plus or minus
100 basis points, as shown on Schedule No. 2.
Net Operating Income
River Grove calculated net operating income (NOI) of
$7,416 for water and $1,063 for wastewater. Based on staff’s adjustments above,
staff calculated an NOI of $7,614 for water and an NOI of $841 for wastewater.
The calculated NOI for the water and wastewater systems are shown on Schedule
Nos. 3-A and 3-B, respectively.
Operation and Maintenance Expense
The Utility proposed total O&M expenses of $120,994
for water and $145,513 for wastewater. Staff believes adjustments are
necessary, as addressed below.
Salaries and Wages Expense – Employees
River Grove projected salaries and wages – employees
expense of $0 for water and $68,533 for wastewater. In response to staff’s
first data request, the Utility updated its request to a total of $176,800, or
$88,400 for each system. River Grove stated that the updated request includes
two positions. The first position would be a superintendent/mechanic employee,
with a salary of $83,200, responsible for meter reading, general operations
monitoring, oversight of the contract operator, and day-to-day maintenance. The
second position would be a part-time director, with a salary of $93,600,
responsible for oversight of operations, maintenance, and administration. Staff
notes that the Utility has also requested contractual services expense for
billing, meter reading, reporting to the Commission, and handling phone calls
for the Utility.
Staff agrees that the requested superintendent/mechanic
position is reasonable for day-to-day operations of the Utility. Staff
requested an explanation of how the Utility developed the salary estimate for
this position, and the Utility only provided an hourly rate with no further
explanation. In order to gauge the reasonableness of the requested salary, staff
reviewed the American Water Works Association 2018 Utility Salary Compensation
Survey for Small Water and Wastewater Utilities and identified a position,
Small System Manager, which is representative of the requested
superintendent/mechanic position’s duties. The mid-point of the range for this
salary is $68,521. As such, staff believes the Utility’s original salary
request of $68,533 is an appropriate projection for this position. However,
staff recommends allocating the salary to both systems, per the Utility’s
updated request. As such, staff recommends that the requested superintendent
position, with a salary of $68,533, allocated equally between the water and
wastewater systems ($34,267 per system), should be approved.
Staff believes the responsibilities of the requested
director position would be duplicative of those assigned to the superintendent,
as well as the functions attributed to contractual services. As a result, staff
recommends that the requested director position should not be approved.
Based on the above, staff has calculated an adjustment
from the Utility’s original request to increase salaries and wages – employees
expenses by $34,267 for the water system, and to decrease the expense by
$34,267 for the wastewater system. This results in a recommended salaries and
wages – employees expense of $34,267 for the water system and $34,267 for the
wastewater system.
Purchased Power Expense
River Grove projected 2019 wastewater purchased power
expense of $17,954, based on the average of this expense for 2015, 2016 and
2017. In response to staff’s data request, River Grove provided documentation
showing purchased power expenses incurred in 2018. Given the variance of
purchased power expenses from year-to-year, staff believes the use of a
four-year average based on 2015 to 2018 is appropriate. Additionally, the
Utility included a 2.48 percent increase to account for inflation of expenses.
As the four-year averages are based on costs incurred from 2015 to 2018, staff
believes this is a reasonable adjustment given that it is comparable to the
2019 Price Index percentage of 2.36 percent authorized by the Commission. Based on the above, staff has calculated an
adjustment to decrease purchased power expenses by $925 for the wastewater
system. This results in recommended purchased power expenses of $17,029 for the
wastewater system.
Materials and Supplies, Transportation, and
Insurance Expense
River Grove projected materials and supplies,
transportation, and insurance expenses based on an average of allocated costs
incurred in 2015, 2016, and 2017. The Utility only projected materials and
supplies expense for the wastewater system. In response to a staff data
request, the Utility provided documentation showing costs incurred in 2018. As
discussed above, staff believes the use of a four-year average based on 2015 to
2018, including a 2.48 percent increase for inflation of expenses, is
appropriate. Based on the above, staff has calculated an adjustment to decrease
these expenses by a total of $672 for the water system and $1,494 for the
wastewater system.
Contractual Services Expense
The Utility proposed contractual services expenses of
$42,619 for the water system and $43,718 for the wastewater system. River
Grove’s contractual services expense is comprised of administrative fees,
customer billing and collections fees, lab fees, and meter reading software
maintenance fees.
River Grove estimated administrative fees of $21,738,
split evenly between the water and wastewater systems at $10,869 each.
Additionally, the Utility estimated meter reading software maintenance fees of
$950 for the water system only. Staff believes these proposed fees are
reasonable. Based on the above, staff recommends total administrative fees of
$21,738, split evenly between the water and wastewater systems at $10,869 each.
Further, staff recommends total maintenance fees of $950 for the water system
only.
The Utility projected total customer billing and
collection fees of $61,600, split evenly between the water and wastewater
systems at $30,800 each. The total fees are comprised of meter reading costs of
$20,640, billing and collection costs of $30,960, and a cost of $10,000 for
annual reporting to the Commission. In its initial response to staff’s first
data request, the Utility stated these administrative services would be
provided by RGMHV. In a subsequent response, River Grove stated its proposed
customer billing and collection fees were based on an agreement with the
company Rents. However, the Utility was unable to provide a written contract or
agreement between the Utility and Rents. Given the relatively large amount of
the fees for a utility of River Grove’s size, staff reviewed the reasonableness
of the requested expenses as discussed below.
River Grove estimated monthly meter reading costs at $10
per customer for a total of $20,640 annually (172 x $10 x 12). In Order No.
PSC-2016-0537-PAA-WU, the Commission determined a meter reading charge of $3.06
per customer to be reasonable.
Staff believes this is an appropriate proxy to use as it was based on a quote
for meter reading services from an independent third party. Additionally, to
account for inflation of expenses since the issuance of the abovementioned
Order, staff increased the charge to $3.20 using the Commission-approved price
index percentages for water and wastewater utilities. Based on the above, staff
has calculated meter reading costs of $6,608 (172 x $3.20 x 12).
The Utility estimated monthly billing and collection costs
at $15 per customer for a total of $30,960 annually (172 x $15 x 12). To
determine a reasonable monthly billing and collection charge, staff reviewed
the cost justification River Grove provided for late fees included in Exhibit
23B of its application. The Utility listed clerical labor, supervisor labor,
printing supplies, and postage at a total of $7.60 per late fee. Staff believes
this is a reasonable starting point to use for general billing and collection
activities. Staff used the clerical labor, printing supplies, and postage components
to formulate a recurring monthly per customer charge. Clerical labor per
customer would include the time to create and send bills, to collect and
process payments, as well as provide for possible communication with customers
for billing questions or issues. This results in monthly billing and collection
costs of $5.60 per customer. Based on the above, staff has calculated billing
and collection costs at $11,558 (172 x $5.60 x 12).
River Grove included an annual cost of $10,000 for
reporting to the Commission. Staff reviewed recent cases that have come before
the Commission involving Class C utilities of similar size to review the
reasonableness of this request. Staff located 2019 invoices from an independent
third party, which included the preparation and review of annual reports. The
invoices reflected the expense for several Class C utilities, with a range of
approximately $143 to $285. As such, staff believes it is appropriate to limit
River Grove’s request to the top of the range. Staff recommends $285 as an
appropriate annual cost for reporting to the Commission.
Based on the above, staff recommends total customer
billing and collection fees of $18,452 ($6,608 + $11,558 + $285), split evenly
between the water and wastewater systems at $9,226 each.
River Grove projected lab fees of $2,049 for the
wastewater system. The Utility based its proposed lab fees on an average of
costs incurred in 2015, 2016, and 2017. In response to a staff data request,
the Utility provided documentation showing costs incurred in 2018. As discussed
above, staff believes the use of a four-year average based on 2015 to 2018,
including a 2.48 percent increase for inflation of expenses, is appropriate.
Based on the above, staff recommends total lab fees of $2,129.
The Utility also provided a signed updated contract with
U.S. Water Services Corporation for operations of the wastewater treatment
plant. Although the cost of this contract was not included in the Utility’s
calculation, staff believes it should be included in contractual services as
the company is performing necessary functions to operate the wastewater
treatment plant. As such, staff recommends that $8,937 should be included in
contractual services for the wastewater system.
Based on the above, staff recommends total contractual
services expense of $21,045 for the water system and $31,161 for the wastewater
system. This results in an adjustment to decrease contractual services expense
by $21,574 for the water system, and $12,557 for the wastewater system.
Miscellaneous Expense
River Grove projected miscellaneous expense of $2,296 for
both the water and wastewater system. The Utility used a three-year average to
base its projected miscellaneous expense, using the average of costs incurred
in 2015, 2016, and 2017. As with the other expenses, staff received
documentation reflecting the costs incurred in 2018. As discussed above, staff
believes the use of a four-year average based on 2015 to 2018, including a 2.48
percent increase for inflation of expenses, is appropriate. This results in a
decrease of $406 to the miscellaneous expense for both the water and wastewater
systems. Additionally, an expense of $2,440 for Full System and Software
Training for the meters installed as part of the Potable Water Main Extension
Project was included in Account 334 – Meters. This amount was removed from
Account 334 and moved to Account 675 – Miscellaneous Expenses to be amortized
over five years. This results in an increase of $488 for the water system. As
such, staff recommends that the Utility’s projected miscellaneous expense be
increased by $82 (-$406 + $488) for water and decreased by $406 for wastewater.
O&M Expense Summary
Based on the above adjustments, staff recommends that projected
O&M expense be increased by $12,102 for water and decreased by $49,648 for
wastewater, resulting in total O&M expense of $133,096 for water and
$95,865 for wastewater.
Depreciation and CIAC Amortization Expense
River Grove reflected depreciation expense, net of CIAC
amortization, of $8,964 for water and $546 for wastewater. Based on staff’s
adjustments to rate base, corresponding adjustments should be made to increase
net depreciation by $4,084 for water and decrease by $56 for wastewater. These
adjustments result in net depreciation expense of $13,048 for water and $490
for wastewater.
Taxes Other Than Income
In its filing, River Grove included taxes other than
income (TOTI) expense of $22,769 and $7,294 for water and wastewater,
respectively. These total amounts included property tax expense of $15,485 and
$334 for water and wastewater, respectively. River Grove’s calculation of
proposed property tax expense for each system was based on net plant that
included the balance of Account Nos. 301 and 351—Organization. As this account
is considered intangible plant, staff removed these balances from the
calculations. Based on this adjustment, as well as a corresponding adjustment to
reflect staff’s adjustments to rate base, staff recommends decreasing property
tax expense by $1,460 for water and $334 for wastewater.
In addition, as discussed below, staff is recommending an
adjustment to the Utility’s projected revenues. As a result, TOTI should be
increased by $825 for water and decreased by $2,378 for wastewater to reflect regulatory
assessment fees of 4.5 percent on the change in revenues. Therefore, staff
recommends TOTI of $22,134 ($22,769 - $1,460 + $825) for water and $4,582 ($7,294
- $334 - $2,378) for wastewater.
Income Taxes
River Grove proposed income taxes of $1,715 for water and
$246 for wastewater. Based on staff’s adjustments to NOI, staff recommends
increasing income taxes by $2,576 for water and decreasing income taxes by $212
for wastewater. Therefore, staff recommends income taxes of $4,291 for water
and $34 for wastewater.
Revenue Requirement
The Utility proposed revenue requirements for water and
wastewater of $161,858 and $154,662, respectively. Staff recommends adjusted
revenue requirements of $180,183 for water and $101,811 for wastewater to be
used to set initial rates for service. The Utility’s projected revenue
requirements include O&M expenses, depreciation and amortization expense,
taxes other than income, income taxes, as well as a return on investment. The
recommended revenue requirements will allow the Utility the opportunity to
recover its expenses and earn a 2.52 percent return on its investment in rate
base, as shown on Schedule Nos. 3-A and 3-B, respectively. Staff’s adjustments
are shown on Schedule No. 3-C.
Rates and Rate Structure
The Utility
provides water and wastewater service to 168 residential customers, two
offices, and two clubhouses within the River Grove Mobile Home Village. The Utility
indicated that all customers have 5/8 inch x 3/4 inch meters. Furthermore, the
Utility indicated that there are currently four vacant mobile home lots which
when occupied, will have 5/8 inch x 3/4 inch meters. The Utility currently does
not have established rate structures and rates for its water and wastewater
services; however, utility services are a component of the total monthly lot
rent.
The Utility’s proposed rate structures and rates,
consisting of base facility and gallonage charges, for its water and wastewater
system, are shown below in Table 2-1. The Utility allocated service revenues to
the base facility charge (BFC) of approximately 44 percent for water and 75
percent for wastewater. The Utility additionally proposed a residential
wastewater cap of 10,000 gallons. Staff believes the Utility’s rate structure,
consisting of base facility and gallonage charges, is reasonable. However, in a
data request, the Utility indicated that the customers are not seasonal, and
therefore, staff believes the Utility’s proposed BFC allocations should be
reduced to 40 percent for water and 50 percent for wastewater based on
Commission practice. Furthermore, staff does not recommend a residential
wastewater cap in this instant proceeding because the necessary consumption
data in order to determine the appropriate cap is not readily available. The
appropriate residential wastewater cap should be evaluated by staff in a
subsequent rate proceeding in which a detailed billing analysis is audited and
can be analyzed. As a result, staff’s recommended rate structure and rates for
River Grove’s water and wastewater systems are shown in Table 2-1.
Table 2-1
River Grove’s Water and
Wastewater Rates
|
|
Utility Proposed
|
Staff Recommended
|
|
|
Water
|
Wastewater
|
Water
|
Wastewater
|
|
Base Facility Charge
|
$34.20
|
$56.07
|
$34.92
|
$24.66
|
|
|
|
|
|
|
|
Gallonage Charge
|
|
|
|
|
|
Charge per 1,000 gallons
|
$6.03
|
$2.57
|
$7.15
|
$3.36
|
|
|
|
|
|
|
|
Typical Residential 3/4” Meter Bill Comparison
|
|
3,000 gallons
|
$52.29
|
$63.78
|
$56.37
|
$34.74
|
|
5,000 gallons
|
$64.35
|
$68.92
|
$70.67
|
$41.46
|
|
7,000 gallons
|
$76.41
|
$74.06
|
$84.97
|
$48.18
|
Conclusion
Based on the above, the recommended monthly water and
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. A return on
equity of 10.55 percent, with a range of plus or minus 100 basis points, should
also be approved.
Issue 3:
Should the miscellaneous service charges requested
by River Grove be approved?
Recommendation:
Yes. The Utility’s requested miscellaneous service
charges of $30 and wastewater violation reconnection charge of actual cost
should be approved. The Utility should file revised tariff sheets and a
proposed customer notice to reflect the Commission-approved charges. The
approved charges should be effective for services rendered on or after the
stamped approval date on the tariff sheet provided customers have received
notice pursuant to Rule 25-30.475(1), F.A.C. The Utility should provide proof
of noticing within 10 days of rendering the approved notice. (Ramos)
Staff Analysis:
Section
367.091, F.S., authorizes the Commission to establish miscellaneous service
charges. River Grove’s request was accompanied by its reason for requesting the
charges as well as the cost justification required by Section 367.091(6), F.S.
The Utility requested initial connection, normal reconnection, violation
reconnection and premise visit charges of $30 during normal business hours.
Additionally, the Utility requested that its violation reconnection charge for
its wastewater system be actual cost, pursuant to Rule 25-30.460(1)(c), F.A.C.
The
purpose of these charges is to place the burden for requesting or causing these
services on the cost-causer rather than the general body of ratepayers. The Utility
requested the recovery of $26.60 of field and supervisorial labor associated
with processing miscellaneous services based on an hourly salary of $20 and the
time it takes to perform all job functions, which is estimated to be 1.33 hours.
Additionally, the Utility requested recovery of vehicle mileage of $3.48 based
on a mileage rate of $0.58 per mile for 6 miles. The Utility’s cost
justification for its requested miscellaneous service charges is shown in Table
3-1.
Table 3-1
Miscellaneous Service Charges Cost Justification
|
Labor ($20 x 1.33)
|
$26.60
|
|
Vehicle ($0.58 x 6)
|
$3.48
|
|
Total
|
$30.08
|
Source:
Utility’s Cost Justification
Staff believes the Utility’s
requested charges are reasonable and should be approved. A summary of the Utility’s
requested miscellaneous service charges is shown in Table 3-2.
Table
3-2
Miscellaneous Service Charges
|
Initial Connection Charge
|
$30.00
|
|
Normal Reconnection Charge
|
$30.00
|
|
Violation Reconnection Charge (Water)
|
$30.00
|
|
Violation Reconnection Charge (Wastewater)
|
Actual Cost
|
|
Premise Visit Charge
|
$30.00
|
Source:
Utility’s Cost Justification
Based on the above, the Utility’s requested miscellaneous
service charges of $30, and wastewater violation reconnection charge of actual
cost, should be approved. The Utility should file revised tariff sheets and a
proposed customer notice to reflect the Commission-approved charges. The
approved charges should be effective for services rendered on or after the
stamped approval date on the tariff sheet provided customers have received
notice pursuant to Rule 25-30.475(1), F.A.C. The Utility should provide proof
of noticing within 10 days of rendering the approved notice.
Issue 4:
What is the appropriate late payment charge for
River Grove?
Recommendation:
The appropriate late payment charge for River
Grove is $7.50. The Utility should file revised tariff sheets and a proposed
customer notice to reflect the Commission-approved charge. The approved charge
should be effective for services rendered on or after the stamped approval date
on the tariff sheet provided customers have received notice pursuant to Rule
25-30.475(1), F.A.C. The Utility should provide proof of noticing within 10
days of rendering the approved notice. (Ramos)
Staff Analysis:
River Grove requested a late payment charge of $7.50 to recover the
cost of supplies and labor associated with processing late payment notices.
River Grove’s request for a late payment charge was accompanied by its reason
for requesting the charge as well as the cost justification, as required by
Section 367.091, F.S. The goal of allowing late payment charges is two fold:
first, it encourages customers to pay their bills on time, and second, if
payments are not made on time, it ensures that the cost associated with
collecting late payments are not passed on to the customers who do pay on time.[5]
Within its cost justification, the
Utility included $5.00 for clerical labor associated with processing late
payment based on the clerical employee who is paid $20 per hour and the amount
of time it takes the employee to process a single late payment charge of 15
minutes. This is consistent with Commission practice, in which the Commission
has found that 10 to 15 minutes is an appropriate amount of time for a billing
employee to process a single late payment.[6]
Furthermore, the Utility requested to recover supervisorial labor of $2.00
based on the supervisor’s hourly salary of $25 per hour and the time it takes
the supervisor to review a late payment charge of five minutes, which is
consistent with Utilities, Inc. of Florida’s approved late payment charge. The
Utility is also requesting recovery of $0.10 for supplies and $0.50 for
postage. While the Utility’s cost justification totals to $7.60, the Utility
rounded down its requested late payment charge to $7.50.
The
Commission has recently approved late payment charges ranging from $4.50 to
$7.15.[8] Staff
understands that this late payment charge is slightly higher than what the
Commission has approved in the past. However, after reviewing the Utility’s
cost justification and comparing the cost break-down to other regulated water
and wastewater utilities, staff believes the Utility’s requested charge is
appropriate and should be approved. The cost justification for the Utility’s requested
late payment charge is shown on Table 4-1.
Table 4-1
Late Payment Charge Cost Justification
|
Activity
|
Cost
|
|
Clerical Labor
|
$5.00
|
|
Supervisor Labor
|
$2.00
|
|
Supplies
|
$0.10
|
|
Postage
|
$0.50
|
|
Total Cost
|
$7.60
|
Source:
Utility’s cost justification documentation.
Based on the above, the
appropriate late payment charge for River Grove is $7.50. The Utility should
file the revised tariff sheet and a proposed customer notice to reflect the
Commission-approved charge. The approved charge should be effective for
services rendered on or after the stamped approval date on the tariff sheet
provided customers have received notice pursuant to Rule 25-30.475(1), F.A.C.
The Utility should provide proof of noticing within 10 days of rendering the
approved notice.
Issue 5:
Should River Grove be authorized to collect
Non-Sufficient Funds Charge (NSF)?
Recommendation:
Yes. River Grove should be authorized to collect NSF
charges. The Utility should file revised tariff sheets and a proposed customer
notice to reflect the Commission-approved NSF charges. The approved charges
should be effective for service rendered on or after the stamped approval date
on the tariff sheets provided customers have received notice pursuant to Rule
25-30.475, F.A.C. The Utility should provide proof of noticing within 10 days
of rendering its approved notice. (Ramos)
Staff Analysis:
Section 367.091, F.S., authorizes the Commission to
establish miscellaneous service charges. Staff believes that River Grove should
be authorized to collect NSF charges consistent with Section 68.065, F.S.,
which allows for the assessment of charges for the collection of worthless
checks, drafts, or orders of payment. As currently set forth in Section
68.065(2), F.S., the following NSF charges may be assessed:
(1) $25, if the face value does not exceed
$50,
(2) $30, if the face value exceeds $50 but does
not exceed $300,
(3) $40, if the face value exceeds $300,
(4) or 5 percent of the face amount of the check,
whichever is greater.
Approval of NSF charges is
consistent with prior Commission decisions.[9]
Furthermore, NSF charges place the cost on the cost-causer, rather than
requiring that the costs associated with the return of the NSF checks to be
spread across the general body of ratepayers. As such, River Grove should be
authorized to collect NSF charges. The Utility should file revised tariff
sheets and a proposed customer notice to reflect the Commission-approved NSF
charges. The approved charges should be effective for service rendered on or
after the stamped approval date on the tariff sheets provided customers have
received notice pursuant to Rule 25-30.475, F.A.C. The Utility should provide
proof of noticing within 10 days of rendering its approved notice.
Issue 6:
What are the appropriate initial customer deposits
for River Grove?
Recommendation:
The appropriate initial customer deposits are $175
for water and $99 wastewater for the residential 5/8 inch x 3/4 inch meter
size. The initial customer deposit for all other residential meter sizes and
all general service meter sizes should be two times the average estimated bill.
The approved 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
initial customer deposits until authorized to change them by the Commission in
a subsequent proceeding. (Ramos)
Staff Analysis:
Rule 25-30.311, F.A.C.,
contains criteria for collecting, administering, and refunding customer
deposits. Rule 25-30.311(1), F.A.C., requires that each company’s tariff
contain its specific criteria for determining the amount of initial deposits. The
Utility requested customer deposits of $156.84 for water and $149.82 for
wastewater which was based on two months of average residential monthly bills
and the Utility’s proposed rates. Customer deposits are designed to minimize
the exposure of bad debt expense for the Utility and, ultimately, the general
body of ratepayers. In addition, collection of customer deposits is consistent
with one of the fundamental principles of rate making—ensuring that the cost of
providing service is recovered from the cost-causer.
Rule 25-30.311(7), F.A.C.,
authorizes utilities to collect new or additional deposits from existing
customers not to exceed an amount equal to the average actual charge for water
and/or wastewater service for two billing periods for the 12-month period
immediately prior to the date of notice. The two billing periods reflect the
lag time between the customer’s usage and the utility’s collection of the
revenues associated with that usage. Commission practice has been to set
initial customer deposits equal to two months bills based on the average
consumption for a 12-month period for each class of customers.[10] The Utility
indicated that the average monthly residential usage is 7,330 gallons per
customer. Therefore, the average residential monthly bill is approximately $87.33
for water and $49.29 wastewater service, based on staff’s recommended monthly
rates in Issue 2.
Based on the above, the appropriate initial customer
deposits are $175 for water and $99 wastewater for the residential 5/8 inch x 3/4
inch meter size. The initial customer deposit for all other residential meter
sizes and all general service meter sizes should be two times the average
estimated bill. The approved 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 initial customer deposits until authorized to change them by the
Commission in a subsequent proceeding.
Issue 7:
Should River Grove’s requested meter installation
charges be approved?
Recommendation:
Yes. The Utility’s requested meter
installation charge of $353 for the 5/8 inch x 3/4 inch meter size and actual
cost for all other meter sizes should be approved. The Utility should file
revised tariff sheets and a proposed customer notice. River Grove should provide
notice to potential customers who have requested service within 12 calendar
months prior to the month the application was filed and up until this Order
becomes final. The
approved charges should be effective for connections made on or after the
stamped approval date on the tariff sheets. The Utility should provide proof of
the date notice was given within 10 days of the date of notice. (Ramos)
Staff Analysis:
River Grove requested a
meter installation charge of $353 for 5/8 inch x 3/4 inch meters and actual
cost for all other meter sizes. The Utility’s requested charge of $353 is based
on the estimated costs of the water meter and meter box ($203) and installation
for the 5/8 inch x 3/4 inch meter size ($150). Pursuant to Section 367.101,
F.S., the Commission shall set just and reasonable charges and conditions for
service availability. The Utility’s requested meter installation charge is
consistent with Commission practice and therefore, staff believes the Utility’s
requested meter installation charges are appropriate.
Based on the above, the Utility’s requested meter
installation charge of $353 for the 5/8 inch x 3/4 inch meter size and actual
cost for all other meter sizes should be approved. The Utility should file
revised tariff sheets and a proposed customer notice. River Grove should
provide notice to potential customers who have requested service within 12
calendar months prior to the month the application was filed and up until this
Order becomes final. The approved charges should be effective for connections
made on or after the stamped approval date on the tariff sheets. The Utility
should provide proof of the date notice was given within 10 days of the date of
notice.
Issue 8:
Should this docket be closed?
Recommendation:
If no person whose substantial interest 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 and customer notice
have been filed by the Utility and approved by staff. Once these actions are
complete, this docket should be closed administratively. (Schrader)
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 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.
