Case Background
Utilities, Inc.
of Florida (UIF or utility) is a Class A utility providing water and wastewater
services to 27 systems in the following counties: Charlotte, Highlands, Lake,
Lee, Marion, Orange, Pasco, Pinellas, Polk, and Seminole. In its 2018 annual
report, the utility reported operating revenues of $15,633,470 for water and $19,795,636
for wastewater.
On October 7,
2019, the utility filed an application to revise its existing allowance for
funds prudently invested (AFPI) charges for its wastewater system formerly
known as Lake Utility Services, Inc. (LUSI), along with tariff sheets
reflecting the proposed charges. The utility’s existing AFPI charges for the
LUSI wastewater system were approved April 4, 2018. The utility is requesting to revise its
existing AFPI charges for LUSI’s wastewater system based on the Commission’s
remand decision in Order No. PSC-2019-0363-PAA-WS, issued August 27, 2019,
which reduced the used and useful (U&U) value of LUSI’s wastewater
treatment plant (WWTP) from 58.78 to 53.54 percent. The U&U value was reduced to reflect
the removal of prepaid connections from the U&U calculation because
capacity devoted to prepaid connections does not qualify under Section
367.081(2)(a)2.b., Florida Statutes (F.S.), as property used and useful in the
public service. The utility’s proposed AFPI tariffs were suspended by Order No.
PSC-2019-0546-PCO-WS, issued December 23, 2019, in the instant docket, pending
further investigation. Staff sent out its first data request on
November 26, 2019 and the utility provided its response on December 5, 2019. On
January 30, 2019, the utility filed revised schedules to correct an error in
the calculation of net depreciation expense. In addition, the utility filed a
schedule detailing the amount of AFPI collected and the number of equivalent
residential connections (ERCs) reserved or connected to the system from April
17, 2017 through October 1, 2019.
This
recommendation addresses UIF’s request to establish revised AFPI charges for
its LUSI wastewater system. The Commission has jurisdiction pursuant to
Sections 367.081 and 367.091, F.S.
Discussion
of Issues
Issue 1:
Should UIF’s request to revise its existing AFPI
charges for LUSI’s wastewater system be approved, and if so, what are the
appropriate AFPI charges?
Recommendation:
Yes, UIF’s request to revise its existing AFPI
charges for LUSI’s wastewater system should be approved and the appropriate
AFPI charges are shown on Table 1-1. The AFPI charges should apply until all
1,658 ERCs included in the calculation have connected to LUSI’s wastewater
system. After December 31, 2020, the AFPI charge should cease accruing and the
utility should be allowed to collect the constant charge of $1,171.57 until the
ERCs included in the calculation of the charge (1,658) have been added, upon which
the charges should be discontinued. UIF should provide notice to property
owners who have requested service during the 12 months prior to the month this
application was filed. 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 noticing within 10 days of providing its approved
notice. (Ramos, Hudson)
Staff Analysis:
Pursuant to Rule 25-30.434, Florida Administrative
Code (F.A.C.), an AFPI charge is a mechanism which allows a utility the
opportunity to earn a fair rate of return on prudently constructed plant held
for future use from the future customers to be served by that plant in the form
of a charge paid by those customers. The AFPI charge is calculated for one ERC
on a monthly basis up to the time the utility reaches the designed capacity of
the plant for which the charge applies. The charges cease when the plant has
reached its designed capacity.
UIF’s existing AFPI charges for LUSI’s wastewater system became
effective on March 15, 2018, and were calculated based on a U&U value of
58.78 percent for LUSI’s WWTP pursuant to Order No. PSC-2017-0361-FOF-WS. The
utility’s existing charges apply to the connection of 1,471 ERCs as of December
31, 2015. Portions of Order No. PSC-2017-0361-FOF-WS were appealed by
participating intervenors in the docket and as a result, the Commission ordered
adjustments to the U&U calculations to eliminate the prepaid connections. Thus,
Order No. PSC-2019-0363-PAA-WS reduced the U&U value of LUSI’s WWTP to
53.54 percent.
On October 7, 2019, UIF filed a request to revise its
existing AFPI charges for LUSI’s wastewater system in order to reflect the reduction
in the U&U value of LUSI’s WWTP. Since the U&U value of LUSI’s WWTP
decreased, the non-U&U value of the WWTP or available system capacity for future
customers increased. Pursuant to Rule 25-30.434, F.A.C., the calculation of AFPI
charges is based in part on the dollar amount of the non U&U plant and
accumulated depreciation and the related capacity in terms of ERCs. The utility requested the AFPI charges apply
to future connections of 1,658 ERCs, based on the non-U&U capacity of
LUSI’s WWTP. Staff believes the utility’s request to revise its AFPI charges to
reflect the reduced U&U percentage is appropriate. Furthermore, the requested
charges reflect the costs associated with one ERC based on 280 gallons per day
(gpd) per ERC. If a future customer is expected to place more demand on the
system than one ERC, the charge should be multiplied by the number of ERCs of
demand which are needed to provide service to the customer.
Pursuant to Rule 25-30.434(4), F.A.C., the beginning date
for accruing the AFPI charges should agree with the month following the end of
the test year that was used to establish the amount of non-U&U plant. The test
year ended December 31, 2015, was used to initially establish the utility’s
existing AFPI charges and remains unchanged.
For this reason, the beginning date of the five-year accrual period
should remain January 1, 2016 through December 31, 2020. After December 31,
2020, the utility should be allowed to collect the constant charge of $1,171.57
until the projected ERCs (1,658) included in the calculation of the charge have
been added, upon which the charges should be discontinued.
In response to staff’s data request, the utility indicated
that it has reserved capacity for 1,542 ERCs since the beginning of the accrual
period. Therefore, the utility is eligible to collect AFPI charges for 116
remaining ERCs (1,658 – 1,542). Staff’s recommended AFPI charges for UIF’s LUSI
wastewater system are shown on Table 1-1. The amount of AFPI charges collected
from an ERC is based on the month of the connection to the system.
Table 1-1
Allowance for Funds
Prudently Invested Charges
|
|
2016
|
2017
|
2018
|
2019
|
2020
|
|
January
|
$18.00
|
$234.69
|
$459.98
|
$694.47
|
$938.79
|
|
February
|
$36.00
|
$253.40
|
$479.45
|
$714.75
|
$959.95
|
|
March
|
$53.99
|
$272.11
|
$498.92
|
$735.04
|
$981.12
|
|
April
|
$71.99
|
$290.82
|
$518.40
|
$755.33
|
$1,002.28
|
|
May
|
$89.99
|
$309.53
|
$537.87
|
$775.62
|
$1,023.44
|
|
June
|
$107.99
|
$328.24
|
$557.34
|
$795.90
|
$1,044.60
|
|
July
|
$125.99
|
$346.95
|
$576.81
|
$816.19
|
$1,065.76
|
|
August
|
$143.98
|
$365.66
|
$596.29
|
$836.48
|
$1,086.92
|
|
September
|
$161.98
|
$384.37
|
$615.76
|
$856.77
|
$1,108.92
|
|
October
|
$179.98
|
$403.08
|
$635.23
|
$877.05
|
$1,129.25
|
|
November
|
$197.98
|
$421.79
|
$654.71
|
$897.34
|
$1,150.41
|
|
December
|
$215.98
|
$440.50
|
$674.18
|
$917.63
|
$1,171.57
|
Source: Staff’s calculations and revised utility
application
Based on the above, UIF’s request to revise its existing
AFPI charges for LUSI’s wastewater system should be approved and the
appropriate AFPI charges are shown on Table 1-1. The AFPI charges should apply
until all 1,658 ERCs included in the calculation have connected to LUSI’s
wastewater system. After December 31, 2020, the AFPI charge should cease
accruing and the utility should be allowed to collect the constant charge of
$1,171.57 until the ERCs included in the calculation of the charge (1,658) have
been added, upon which the charges should be discontinued. UIF should provide
notice to property owners who have requested service during the 12 months prior
to the month this application was filed. 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 noticing within 10 days of
providing its approved notice.
Issue 2:
Should this docket be closed?
Recommendation:
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 sheet and customer
notice have been filed by the utility and approved by staff. Once these actions
are complete, this docket should be closed administratively. (Trierweiler)
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 sheet and customer
notice have been filed by the utility and approved by staff. Once these actions
are complete, this docket should be closed administratively.
