Discussion
of Issues
Issue 1:
Is the quality of service provided by Deer Creek
satisfactory?
Recommendation:
Yes. Staff recommends that the overall quality of
service provided by Deer Creek be considered satisfactory. (Knoblauch)
Staff Analysis:
Pursuant to Rule 25-30.433(1), F.A.C., the Commission, in
every rate case, shall make a determination of the quality of service provided
by the utility by evaluating the quality of utility’s product (water) and the
utility’s attempt to address customer satisfaction (water and wastewater). The Rule
states that the most recent chemical analyses, and outstanding citations,
violations, and consent orders on file with the Department of Environmental
Protection (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 shall also be considered.
Quality of the Utility’s Product (Water)
Deer Creek does not have its own wells or water treatment
facilities. It provides water to its customers by purchasing bulk water from
Polk County; therefore, the Utility only maintains its distribution system. As
a reseller of water, Deer Creek is not subject to the DEP’s secondary water
standards which regulate contaminants that may impact the taste, odor, and
color of drinking water. The chemical analyses required within Deer Creek’s
distribution system include microbiological, disinfection byproducts, as well
as lead and copper. Staff reviewed the Utility’s most recent results for the
distribution system, and all results were in compliance with the DEP’s rules
and regulations which protect public health.
Staff held a customer meeting on December 17, 2019, to
receive customer comments regarding the quality of service. At the meeting, ten
customers spoke, two of whom provided comments on the water quality. One
customer remarked positively about the water. The second customer stated that
they recently had to replace their water filter after three months, and that
the filter was rust colored. The other customer comments that were made at the
customer meeting are discussed below.
Deer Creek has no outstanding citations, violations, or
consent orders on file with the DEP. Additionally, there have been no
complaints regarding the quality of the Utility’s product filed with the
Utility, the Commission, or the DEP, over the last five years.
The Utility’s Attempt to Address Customer
Satisfaction (Water & Wastewater)
Table 1-1 shows a summary of the complaints received at
the customer meeting, as well as complaints received by the Commission’s
complaint tracking system, the DEP, and Deer Creek over the past five years.
Table 1-1
Number of Complaints by Type
and Source
|
Complaint Type
|
Customer Meeting
|
Commission Records
|
DEP Records
|
Utility Records
|
|
Water Quality
|
2
|
0
|
0
|
0
|
|
Leaks
|
2
|
0
|
0
|
0
|
|
Infrastructure
|
4
|
0
|
0
|
0
|
|
Non-Utility Customers
|
3
|
0
|
0
|
0
|
|
Rate Increase
|
7
|
0
|
0
|
0
|
|
Wastewater
|
0
|
0
|
0
|
0
|
|
Billing
|
4
|
1
|
0
|
3
|
|
Total
|
22
|
1
|
0
|
3
|
*A single customer complaint may be counted more
than once if it fits into multiple categories.
Customer Meeting
At the customer meeting, the majority of the customers
spoke about the magnitude of the rate increase, the proposed rate structure,
and the uncompensated use of Deer Creek’s distribution and collection lines by
non-Utility customers. Two customers also voiced concerns about the number of
water line breaks and outages that they had experienced. In response, the
Utility provided staff with details for all leaks and repairs that had occurred
since 2018, the year it began retaining such records. The data showed that
these occurrences were largely related to small service line leaks.
Additionally, the Utility provided staff with all precautionary boil water
alerts that were issued since receiving its certificates in 2017. Two alerts
were issued in 2018 due to water main breaks, and one alert was issued in 2019
when water was shut off from Polk County, the Utility’s water provider.
Deer Creek shares its customers’ concerns regarding the
uncompensated use of its distribution and collection lines by non-Utility customers,
which includes a community of approximately 180 residential customers and a
commercial strip of businesses. These non-Utility customers receive water and
wastewater service from Polk County, but utilize a portion of Deer Creek’s
distribution and collection systems. Deer Creek met with staff on June 12,
2019, to discuss whether the Commission could suggest a mechanism to obtain
payment for the use of its distribution and collection mains. Staff advised
during the meeting that because the entities in question are not customers of
record, staff could not recommend a means of compensation.
Complaints
As noted above, there were no complaints on the quality of
the Utility’s product over the last five years; however, four non-water quality
complaints were found. A review of the Commission’s complaint tracking system
revealed one billing complaint in the previous five-year period. The complaint
was forwarded to the Utility for resolution and was subsequently closed. In
response to staff’s first data request asking for complaints received during
the test year and four years prior, Deer Creek provided three. All of the
complaints were concerning billing, with one of the complaints relating to the
previously discussed Commission-received complaint. Of the two remaining
complaints, one was resolved with a meter test performed by the Utility, and
the other was resolved after the customer’s meter was replaced. In addition,
staff contacted the DEP requesting complaints regarding Deer Creek for the prior
five years, and there were no complaints on file with the DEP.
Conclusion
The Utility’s water quality is in compliance with DEP
rules and regulations. Additionally, the majority of the concerns raised by
customers were related to the rate increase, and not Deer Creek’s quality of
service. Therefore, staff recommends that the overall quality of service
provided by Deer Creek be considered satisfactory.
Issue 2:
Are the infrastructure and operating conditions of Deer
Creek’s water and wastewater systems in compliance with DEP regulations?
Recommendation:
Yes. Deer Creek’s water and wastewater systems are
currently in compliance with DEP regulations. (Knoblauch, M. Watts)
Staff Analysis:
Rule 25-30.225(2), F.A.C., requires each water and wastewater
utility to maintain and operate its plant and facilities by employing qualified
operators in accordance with the rules of the DEP. Rule 25-30.433(2), F.A.C.,
requires consideration of whether the infrastructure and operating conditions
of the plant and facilities are in compliance with Rule 25-30.225, F.A.C. ln
making this determination, the Commission must consider testimony of the DEP
and county health department officials, compliance evaluation inspections,
citations, violations, and consent orders issued to the utility, customer
testimony, comments, and complaints, and utility testimony and responses to the
aforementioned items.
Deer Creek
does not have its own wells, water treatment facilities, or wastewater
treatment facilities. It provides water and wastewater service to its customers
by purchasing bulk water and wastewater treatment service from Polk County;
therefore, the Utility maintains its distribution and collection systems.
Systems that purchase bulk water and/or wastewater treatment are referred to as
“consecutive” systems. The most
recent inspection report from the DEP, dated May 15, 2019, indicated that the Utility was in compliance with its regulations
and requirements except that the Utility had no testing records of the
distribution system’s backflow prevention devices. The Utility stated that the
deficiency was corrected on May 31, 2019, and provided documentation of the
test results for its backflow devices. Additionally, Deer Creek has no
outstanding citations, violations, or consent orders on file with the DEP.
Conclusion
Deer Creek’s water and wastewater systems are currently in
compliance with DEP regulations.
Issue 3:
What are the used and useful (U&U) percentages for
Deer Creek’s water distribution system and wastewater collection system?
Recommendation:
Staff recommends that the water distribution system
and the wastewater collection system be considered 100 percent U&U. A 20.6
percent excessive unaccounted for water (EUW) adjustment should be made to purchased
water expense and purchased wastewater expense to reflect excessive water loss.
Staff is unable to calculate inflow and infiltration (I&I) due to the
nature of the Utility’s provision of wastewater service. Therefore, no
adjustment to operating expenses is recommended for I&I. (M. Watts)
Staff
Analysis: As discussed in Issue 2, Deer Creek does not have its
own wells or water and wastewater treatment plants. The Utility’s water
distribution system consists of polyvinyl chloride (PVC) pipe and 21 fire
hydrants. The wastewater collection system is composed of PVC pipe, 110
manholes, and a lift station. A summary of Deer Creek’s distribution and
collection system is provided in Table 2-1.
Table
2-1
Water Distribution
System and Wastewater Collection System Mains
|
|
No. of Feet of Pipe
|
|
Diameter of Pipe
|
Water Mains
|
Wastewater Collecting Mains
|
|
4-inch
|
5,430
|
|
|
6-inch
|
10,810
|
|
|
8-inch
|
10,247
|
15,841
|
|
10-inch
|
580
|
6,011
|
Source: Deer Creek RV Golf & Country Club, Inc.
2018 Annual Report.
Water
Distribution and Wastewater Collection System Used & Useful
Deer Creek serves several contiguous mobile home
communities and commercial properties that were developed in the 1980s. The
service territory is built out, with no growth occurring over the past five
years and no prospect for further growth. Therefore, the U&U for the water
distribution system and the wastewater collection system should be considered
100 percent.
Excessive
Unaccounted for Water
Rule 25-30.4325(1)(e), F.A.C., describes EUW as
unaccounted for water in excess of 10 percent of the amount produced. The
Commission recognizes that some uses of the water are readily measurable and
others are not. Unaccounted for water is all water that is produced that is not
sold, metered, or accounted for in the records of the utility. The Rule
provides that to determine whether adjustments to operating expenses (such as
purchased water in the case of a consecutive system) are necessary, the
Commission will consider all relevant factors as to the reason for EUW,
solutions implemented to correct the problem, or whether a proposed solution is
economically feasible. The unaccounted for water is calculated by subtracting
both the gallons used for other purposes (such as flushing) and the gallons
sold to customers from the total gallons purchased for the test year.
Prior to filing its application for a SARC, the Utility
was aware that it had a high level of unaccounted for water, and hired a firm
to do a leak detection survey on its distribution system. The firm did not find
any leaks within the system. However, it did identify two gate valves that are
inoperable and in an unknown position. If they are open, they could allow for
uncompensated water flow that could bypass the master meters for two
residential communities. The Utility is seeking bids to repair or replace the
gate valves.
Additionally, during on-site discussions between Polk
County Utilities and Deer Creek over the water loss issue, it was discovered
that a business entity within its certificated territory had been receiving
potable water from Deer Creek without paying for it for an unknown period of
time. Deer Creek serves the tenants of a commercial business center called Deer
Creek Crossing (DCC). The tenants are metered and billed separately, but DCC
provides for irrigation of the common areas around the building. The irrigation
system is designed to use a surface water well for irrigation, with a metered
connection to Deer Creek’s distribution system as a backup when the surface
water well does not provide a sufficient quantity of water. The current owners
of Deer Creek were unaware of this connection and had not billed DCC for
service. Upon investigation,
Deer Creek determined that the last time the meter was read was in December
2017. In the 21-month period from December 2017 to September 2019 (when Deer
Creek found and read the meter), DCC consumed 2,954,500 gallons of
uncompensated potable water, or an average of 140,690 gallons per month. Thus,
during the test year, DCC used an estimated 1,692,880 gallons of water. Deer
Creek is seeking compensation from DCC, and offered to have DCC become a
customer of record. DCC refused to become a customer of record, and Deer Creek
subsequently removed the meter and connection to its distribution system.
The Utility’s bills from Polk County show that it
purchased 25,929,000 gallons. According to its billing records, the Utility
sold 16,304,762 gallons of water during the test year. The Utility reported
that it flushes the system once per year, using a minimal volume of water, and
so it did not record any water for other uses. As stated above, the Utility was
able to account for approximately 1,692,880 gallons of water provided to DCC. Adding
the water sold to the water provided to DCC, and subtracting the sum from the
amount produced yields an unaccounted for water total of 7,931,358 gallons, or 30.6
percent, yielding an EUW of 20.6 percent. Since Polk County bills the Utility
for wastewater based on the number of gallons of water sold to the Utility,
unaccounted for water affects the amount it is charged for wastewater. Therefore,
staff recommends that a 20.6 percent adjustment be made to purchased water expense
and purchased wastewater expense due to EUW.
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. Because
the amount of wastewater treated by Polk County on behalf of Deer Creek is not
measured separately, staff is unable to calculate whether there is excessive
I&I and thus no adjustment is recommended.
Conclusion
Staff recommends that the water distribution system and the
wastewater collection system be considered 100 percent U&U. A 20.6 percent
EUW adjustment should be made to purchased water expense and purchased
wastewater expense to reflect excessive water loss. Staff is unable to
calculate I&I due to the nature of the Utility’s provision of wastewater
service. Therefore, no adjustment to operating expenses is recommended for
I&I.
Issue 4:
What is the appropriate average test year water rate
base and wastewater rate base for Deer Creek?
Recommendation:
The appropriate average test year rate base for Deer Creek is $58,509
for water and $110,351 for wastewater. (D. Brown, T. Brown)
Staff
Analysis: The appropriate components of a Utility’s
rate base include utility plant in service, land, contributions in aid of construction
(CIAC), accumulated depreciation, amortization of CIAC, and working capital.
Rate base has not previously been established for Deer Creek, but the
Commission approved the Utility’s existing rates in its original certificate
docket.
The test year ended December 31, 2018, was used for the instant case.
Deer Creek operated at an operating loss in 2017 and 2018 based on the
Utility’s Annual Reports. Commission audit staff determined that the Utility’s
books and records are in compliance with the National Association of Regulatory
Utility Commissioners’ Uniform System of Accounts (NARUC USOA). A summary of
each water rate base and wastewater rate base component, and recommended
adjustments, are discussed below.
Utility Plant in Service
(UPIS)
The Utility recorded UPIS of $44,553 for water and $95,948
for wastewater. The Utility does not operate a water treatment facility or a
wastewater facility. Deer Creek’s utility plant consists of a water
distribution system, water meters, and a wastewater collection system with a
master lift station. Water is purchased from Polk County via a single master
meter. Effluent from the lift station is transferred to Polk County for
treatment and disposal. Staff decreased UPIS by $11,034 for water and $6,900
for wastewater to reflect averaging adjustments. Therefore, staff recommends a
UPIS balance of $33,519 for water and $89,048 for wastewater.
Land and Land Rights
The Utility recorded no land for water and wastewater. Audit
staff verified that the Utility has no land deeds and determined that there
have been no changes to land since the Utility was acquired on December 5,
2013. The lift station is on common property owned by the Utility’s parent.
Audit staff did not determine the value of land, nor was a cost assigned to the
Utility. Accordingly, no adjustments are necessary. Staff recommends a
land and land rights balance of $0 for water and wastewater.
Non-Used and Useful Plant
As discussed in Issue 3, Deer Creek’s water distribution system
and wastewater collection system are considered 100 percent U&U. Therefore,
no U&U adjustments are necessary.
Contributions In Aid of
Construction
The Utility does not collect any CIAC and had none
recorded for water or wastewater; therefore, no adjustments are necessary. As
such, staff’s recommended CIAC balances are $0 for water and wastewater.
Accumulated Depreciation
According to the Utility’s general ledger, the accumulated
depreciation balances for water and wastewater were $1,651 and $7,171,
respectively, as of December 31, 2018. Staff recalculated accumulated
depreciation and depreciation expense using the audited UPIS balances and the
depreciation rates established by Rule 25-30.140(2), F.A.C. Staff
decreased this account by $7 for water and $37 for wastewater to reflect the
audited balances. In addition, staff decreased accumulated depreciation by $670
for water and $2,421 for wastewater, to reflect an averaging adjustment.
Staff’s adjustments to this account result in accumulated depreciation balances
of $974 ($1,651 - $7 - $670) for water and $4,714 ($7,171 - $37 - $2,421) for
wastewater.
Accumulated Amortization of CIAC
As mentioned previously, the Utility does not collect any
CIAC and there is no CIAC to amortize; therefore, no adjustments are necessary.
As such, staff’s recommended accumulated amortization of CIAC balances are $0
for water and wastewater.
Working Capital Allowance
Working capital is defined as the short-term
investor-supplied funds that are necessary to meet operating expenses of the
Utility. 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. Staff also removed the unamortized
balance of rate case expense of $947 for water and $947 for wastewater pursuant
to Section 367.081(9), F.S.
Applying this formula, staff recommends a working capital allowance of $25,964
($207,709 / 8) for water, based on the adjusted O&M expense of $207,709
($208,657 - $947). Further, staff recommends a working capital allowance of
$26,016 ($208,130 / 8) for wastewater, based on the adjusted O&M expense of
$208,130 ($209,077 - $947).
Rate Base Summary
Based on the foregoing, staff recommends that the
appropriate average test year rate base is $58,509 for water and $110,351 for
wastewater. Water and wastewater rate bases are shown on Schedule Nos. 1-A and
1-B, respectively. The related adjustments are shown on Schedule No. 1-C.
Issue 5:
What is the appropriate return on equity and overall
rate of return for Deer Creek?
Recommendation:
The appropriate return on equity (ROE) is 10.55 percent with a range of
9.55 percent to 11.55 percent. The appropriate overall rate of return is 4.86
percent. (D. Brown, T. Brown)
Staff
Analysis: Deer
Creek’s capital structure consists of long-term debt and customer deposits.
Audit staff determined that common equity for the Utility resulted in a
negative balance. As such, common equity was set to zero consistent with Commission
practice. The Utility’s capital structure has been reconciled with
staff’s recommended rate base. The appropriate ROE for the Utility is 10.55
percent based upon the Commission-approved leverage formula currently in
effect.[5] Staff
recommends an ROE of 10.55 percent, with a range of 9.55 percent to 11.55
percent, and an overall rate of return of 4.86 percent. The ROE and overall
rate of return are shown on Schedule No. 2.
Issue 6:
What are the appropriate test year revenues for Deer
Creek?
Recommendation:
The
appropriate test year revenues are $120,048 for the water system and $197,354
for the wastewater system. (Sibley)
Staff Analysis: The Utility recorded total
test year revenues of $132,542 for water and $194,307 for wastewater. The water
revenues included $128,765 of service revenues and $3,777 of miscellaneous
revenues. The wastewater revenues included $194,307 of service revenues and no
miscellaneous 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 $118,162 for water and $195,467 for wastewater. This results
in a decrease of $10,603 ($128,765 - $118,162) for water and an increase of
$1,160 ($195,467 - $194,307) for wastewater test year service revenues. The
decrease in water service revenues is attributable to revenues collected for a
Polk County tax which is non-jurisdictional. The increase in wastewater service
revenues is due to the Utility incorrectly billing its approved tariffed rates;
staff recalculated the revenues based on the appropriate billing determinants
from the billing register.
Staff also
made adjustments to miscellaneous revenues for water and wastewater. Staff
decreased the Utility’s water miscellaneous revenues by $4 to reflect the
appropriate miscellaneous revenues based on the number of test year occurrences
and the approved miscellaneous service charges. In addition, miscellaneous
revenues were reallocated equally between the water and wastewater systems.
Therefore, staff recommends miscellaneous revenues of $1,886 for the water
system and $1,887 for the wastewater system.
Based on the above, the appropriate test year revenues are $120,048
($118,162 + $1,886) for the water system and $197,354 ($195,467 + $1,887) for
the wastewater system.
Issue 7:
What is the appropriate amount of operating expenses for
Deer Creek?
Recommendation:
The appropriate amount of operating expenses for Deer
Creek are $222,823 for water and $225,982 for wastewater. (D. Brown, T. Brown)
Staff Analysis:
Deer Creek recorded operating expenses of $254,463 for
water and $276,106 for wastewater for the test year ended December 31, 2018.
The test year O&M expenses have been reviewed, including invoices, canceled
checks, and other supporting documentation. Staff made several adjustments to
the Utility’s operating expenses as summarized below.
Salaries and Wages - Employees (601/701)
The Utility recorded salaries and wages – employees
expense of $36,793 for water and $26,701 for wastewater during the test year. There
are two parent company employees assigned to the Utility. The parent company,
Deer Creek Corp., charges 100 percent of the employees’ time plus overhead to
Utility operations. There is no pension and benefit expense recorded by the
Utility. Deer Creek Corp. recovers these types of costs from the Utility by
means of a corporate overhead calculation applied to the bi-weekly salary
charged for the Utility’s employees. The overhead rates are set by Deer
Creek Corp.’s property management company, Artemis Lifestyle Services
(ALS). ALS is the property management company contracted to provide
administrative services. These administrative services consist of:
management, payroll, insurance, financial accounting, and human resource
services. The 41 percent and 37 percent overhead rates are the estimated
cost for ALS to provide these services to all properties that ALS services.
Staff believes the overhead rates are appropriate. Therefore, staff recommends
salaries and wages-employees expense for the test year of $36,793 for water and
$26,701 for wastewater.
Purchased Water (610)
Deer Creek recorded purchased water expense of $175,431 in
the test year. Supporting documentation confirming the purchased water expense
was provided. In December 2019, the Utility also requested consideration of a
pro forma increase to purchased water to reflect a Polk County rate increase
that went into effect on October 1, 2019. Staff recommends the increase be
included because it is known, measurable, and already in effect. As a
result, staff increased purchased water by $6,969 to reflect annualized
purchased water using the new rates, which results in purchased water expense
of $182,400 ($175,431 + $6,969). As discussed in Issue 3, staff is also
recommending an EUW adjustment of 20.6 percent. Therefore, staff reduced purchased
water by $37,574 ($182,400 x .206) to reflect the 20.6 percent EUW adjustment.
As such, staff recommends purchased water expense for the test year of $144,826
($175,431 + $6,969 - $37,574).
Purchased Sewage Treatment
(710)
The Utility recorded purchased wastewater expense of
$202,710 in the test year. Supporting documentation confirming the
purchased wastewater expense was provided. As discussed in Issue 3,
staff is also recommending an EUW adjustment of 20.6 percent. Therefore, staff
reduced purchased wastewater expense by $41,758 ($202,710 x .206) to reflect
the 20.6 percent EUW adjustment. Staff is making an EUW adjustment, instead of an
infiltration and inflow adjustment, in the instant docket as Polk County uses
the purchased water gallonage to determine the gallonage billed for treatment,
and excess unaccounted-for water results in higher wastewater charges for
customers. As such, staff recommends purchased wastewater expense for the test
year of $160,952 ($202,710 - $41,758).
Purchased Power (615/715)
Deer Creek recorded purchased power expense of $2,059 for
wastewater for the test year. No purchased power expense was recorded for
water. Supporting documentation confirming the purchased power expense was
provided by the Utility. Staff made no adjustments to this account. Therefore,
staff recommends purchased power expense of $2,059 for wastewater.
Materials and Supplies (620/720)
The Utility recorded materials and supplies expense of
$1,079 for water. No materials and supplies expense was recorded for wastewater
during the test year.
Staff made no adjustments to this account. Accordingly, staff recommends
materials and supplies expense for the test year of $1,079 for water.
Contractual Services - Billing (630/730)
Deer Creek recorded billing expense of $600 for water and
$600 for wastewater for the test year. Staff made no adjustments to this
account for either system. Accordingly, staff recommends contractual services –
billing expense for the test year of $600 for water and $600 for wastewater.
Contractual Services - Professional
(631/731)
Deer Creek
recorded contractual services – professional expense of $15,190 for water and
$15,190 for wastewater for the test year. Contractual services – professional
expense was comprised of the following:
Table 7-1
Test Year Contractual Services –
Professional
|
Description
|
Water
|
Wastewater
|
|
Saxon Gilmore (Legal)
|
$9,509
|
$9,509
|
|
OCBOA (Accounting)
|
3,491
|
3,491
|
|
Copley (Training)
|
278
|
278
|
|
Def. Asset
|
1,913
|
1,913
|
|
Total
|
$15,190
|
$15,190
|
Source:
Audit Report and audit work papers.
The bulk
of the expense, $13,000 for water and $13,000 for wastewater, was related to
legal and accounting consulting services. Staff noted that the amount for
consulting services appeared excessive, especially since the Utility is a
reseller. This could have been a result of the Utility being newly
certificated, so staff requested the Utility’s consulting expense for 2019. The
updated consulting expense was comprised of the following:
Table 7-2
2019 Consulting Expense
|
Description
|
Recurring
|
Rate Case
|
Irrigation Meter
(Non-recurring)
|
|
Saxon Gilmore (Legal)
|
$2,162
|
$1,032
|
$4,806
|
|
OCBOA (Accounting)
|
2,574
|
2,593
|
812
|
|
Total
|
$4,736
|
$3,625
|
$5,618
|
Source: Document No. 00534-2020, filed January 24,
2020.
The 2019
consulting expense totaled $13,979 ($4,736 + $3,625 + $5,618), or $6,989 for
water and $6,989 for wastewater.
Staff made no adjustments to the recurring expense
reflected in Table 7-2 as it was utility related. As such, legal recurring
expense should be allocated equally between the water and wastewater systems,
$1,081 ($2,162 / 2) per system and accounting recurring should be allocated
equally between the water and wastewater systems, $1,287 ($2,574 / 2) per
system.
As for the
rate case portion, staff removed $3,137 for professional consulting expenses
that were incurred by the Utility prior to the Staff Report filing date
of
November 18, 2019, as required by Section 367.0814(3), F.S. As such,
staff recommends the $488 recommended for consultant rate case expense for 2019
should be reassigned to regulatory commission expense (Account 665 / 765) and
split evenly between each system.
Table 7-3
Consultant Expense Related to Rate
Case
|
Description
|
Rate Case
|
Adjustment
|
Staff Recom.
|
|
Saxon Gilmore (Legal)
|
$1,032
|
($782)
|
$250
|
|
OCBOA (Accounting)
|
2,593
|
(2,355)
|
238
|
|
Total
|
$3,625
|
($3,137)
|
$488
|
Source: Document No. 00534-2020 and staff
calculations.
Regarding
the non-recurring consulting expense related to the irrigation meter, Deer
Creek has requested Commission approval to create a deferred regulatory asset
account that would be used to record attorney fees and other related cost
associated with the Utility’s effort to recover the uncompensated service
revenues from the alleged unauthorized use of water for irrigation. This is
more fully discussed in Issue 10. As referenced in Table 7-2, the
Utility has already incurred $5,618 of legal and consulting fees related to
this matter, as of December 31, 2019. Staff did not include the expense in its
rate case expense calculations in the instant docket. Staff recommends
that upon completion of the Utility’s legal matters, the Commission determine
the appropriate accounting and recovery methodology for these costs that may
result from the anticipated legal matter.
Staff also made an adjustment to training, related to
office training on a new system. In its test year, the Utility included $278
for water and $278 for wastewater to provide Quick Books training for the
Utility Supervisor at start-up. Staff believes that the training is a one-time
expense that should be amortized over five years, or $56 ($278 / 5 years) per
year for each system.
The annual amortization amount of $1,913, to water and
wastewater services is for non-recurring legal fees that were incurred by the
Utility. These fees were not related to the Utility’s certificate application.
These fees included legal matters with Polk County, development and passage of
the Utility’s backflow prevention plan, the cancelation and procurement of a
new billing system vendor, and other various legal matters that were deemed as
non-recurring by the Utility. Staff made no adjustments to the deferred asset
allocated to both the water and wastewater systems.
Staff’s
recommended contractual services – professional expense and adjustments for
water and wastewater appear in Table 7-4 and Table 7-5, respectively.
Table 7-4
Recommended Professional Expense for
Water
|
Description
|
As Filed
|
Staff Rec.
|
Adj.
|
|
Saxon Gilmore (Legal)
|
$9,509
|
$1,081
|
($8,428)
|
|
OCBOA (Accounting)
|
3,491
|
1,287
|
(2,204)
|
|
Copley (Training)
|
278
|
56
|
(222)
|
|
Def. Asset
|
1,913
|
1,913
|
0
|
|
Total
|
$15,190
|
$4,336
|
($10,854)
|
Source: Audit work papers, Utility responses
to data requests, staff calculations.
Table 7-5
Recommended Professional Expense for
Wastewater
|
Description
|
As Filed
|
Staff Rec.
|
Adj.
|
|
Saxon Gilmore (Legal)
|
$9,509
|
$1,081
|
($8,428)
|
|
OCBOA (Accounting)
|
3,491
|
1,287
|
(2,204)
|
|
Copley (Training)
|
278
|
56
|
(222)
|
|
Def. Asset
|
1,913
|
1,913
|
0
|
|
Total
|
$15,190
|
$4,336
|
($10,854)
|
Source: Audit work papers, Utility responses to data
requests, staff calculations.
Staff recommends contractual services – professional
expense for the test year of $4,336 ($15,190 - $10,854) for water and $4,336
($15,190 - $10,854) for wastewater.
Contractual Services -
Testing (635/735)
The Utility recorded testing expense of $6,110 for water
only. No testing expense was reflected for wastewater. Staff decreased water
testing by $3,030 to reflect the testing expense supported by actual invoices.
Staff recommends that the $3,030 should be reassigned to contractual services –
other, since it relates to monthly contract operations. Based on the above,
staff recommends contractual services – testing expense for the test year of
$3,080 ($6,110 - $3,030) for water.
Contractual Services - Other (636/736)
The Utility recorded contractual services – other expense
of $1,051 for water and $3,945 for wastewater. As discussed in Issue 3, Deer
Creek recorded a significant amount of unaccounted for water during the test
year. In order to determine the source of the unaccounted for water, the
Utility requested bids for a leak detection survey project. Three bids were
received, and Deer Creek stated that the lowest bid of $20,400 was selected.
The Utility requested recovery of expenses related to the leak
detection project, which was completed in August 2019.
The leak detection survey was unable to identify the source of the
unaccounted for water; however, as stated in Issue 3, the Utility recently
become aware of a customer that was receiving unbilled water from Deer Creek.
Based on the documentation provided, staff recommends an amount of $20,400 for
the leak detection survey project be included in contractual services – other. Staff
also recommends recovery of this project should be amortized over five years,
or $4,080 ($20,400 / 5 years) per year.
In addition, staff has increased water contractual services – other by $3,030
to reflect the monthly contractual service amount removed from contractual
services – testing. Staff made no adjustments to wastewater contractual
services – other expense. Based on the discussion above, staff recommends
contractual services – other expense for the test year of $8,161 ($1,051 +
$4,080 + $3,030) for water and $3,945 for wastewater.
Rent Expense (640/740)
Deer Creek recorded rent expense of $3,600 for water
and $3,600 for wastewater. According to the Utility, the lease amount was
determined based on the square footage occupied by the Utility Supervisor’s
office. The price per square foot was determined by using an existing lease
between Deer Creek’s parent and a non-related third-party lessee, Oaks Realty,
which is located in the same building. In addition to the lease amount of $600
per month, there is a $300 per month allocation for office supplies and the use
of office equipment such as facsimile, printers, scanners, copiers, telephones,
etcetera. This includes use of common areas such as the bathroom, kitchen, and
conference room. Utilities are also included in rent. The $300 per month for
office supplies is split between water and wastewater and is included in the
miscellaneous expense balances discussed below. Total rent for the test year is
$7,200 ($600 x 12 months), which is then split between water and wastewater.
The Utility provided staff with a copy of the lease in response to staff’s
third data request.
Staff made no adjustments to this account. Therefore, staff recommends
rent expense for the test year of $3,600 for water and $3,600 for wastewater.
Regulatory Commission
Expense (665/765)
The Utility did not record any regulatory commission expense in
this account. Staff recommends that the Utility’s original certificate application
filing fee should be included in the instant docket since it has not been
recovered to date.
Rule 25-30.433(9), F.A.C., requires that non-recurring expenses be amortized
over a five-year period unless a shorter or longer period of time can be
justified. As such, staff increased water by $300 ($1,500 / 5) and wastewater
by $300 ($1,500 / 5) to reflect the five-year amortization of the Utility’s
original certificate application filing fee.
Regarding the instant case, the Utility is required by Rule
25-22.0407, F.A.C., to provide notices of the customer meeting and notices of
final rates in this case to its customers. Staff is also recommending that the
Utility be required to provide notice of the four-year rate reduction to its
customers when the rates are reduced to remove the amortized rate case expense.
For noticing, staff estimated $1,305 for postage expense, $712 for printing
expense, and $119 for envelopes. This results in $2,136 ($1,305 + $712 + $119)
for the noticing requirement. The Utility paid a total of $2,000 in rate case
filing fees ($1,000 for water and $1,000 for wastewater) in this docket. Staff
has also reallocated $488 from contractual services - professional expense to regulatory
commission expense because it relates to the instant rate case. This amount was
limited to those professional consulting expenses that were incurred by the
Utility after the Staff Report was filed on November 18, 2019, as required by Section
367.0814(3), F.S.
On March 4, 2020, the Utility also provided additional
consultant expense incurred through February 2020, estimated expense to
complete the rate case, and travel expense to attend the Commission Conference.
The Utility requested $1,449 for accounting expense in January and February
2020 related to the current rate case. The amount was based on a total of 15.25
hours at $95 per hour. The majority of the hours were associated with
responding to staff requests for information. Staff made no adjustments to the
consultant expense incurred through February 2020. The Utility also estimated
seven additional hours of accounting consultant expense, or $665 (7 hours x $95
/ hour), would be necessary to complete the rate case. This amount includes
responding to additional formal and informal data requests, review of the staff
recommendation, discussing the recommendation with the Utility, and preparing
for and attending the Commission Conference. Staff believes that $665 for seven
hours is reasonable for the services outlined in the Utility’s request.
Finally, the Utility estimated $842 of travel expense for the
accounting consultant and a Utility representative to attend the Commission
Conference. The estimated travel expense was comprised a total of $40
for meals, $230 for hotel ($115 / room x 2 rooms), and $572 for mileage based
on one person traveling from Orlando and one traveling from Davenport round trip.
The mileage was based on Florida Department of Transportation official mileage
and the 2020 IRS mileage rate. As such, staff believes the estimated travel
expense of $842 is reasonable for two people to attend the Commission
Conference.
Based on
the above, staff recommends the following total rate case expense:
Table 7-6
Rate Case Expense
|
Item
|
Staff Recommended
|
|
Noticing (includes four-year rate reduction notice)
|
$2,136
|
|
Filing Fee
|
2,000
|
|
Expense from Contractual Services – Professional (631/731)
|
488
|
|
Actual accountant expense (January-February 2020)
|
1,449
|
|
Estimated expense to complete
|
665
|
|
Travel
|
842
|
|
Total
|
$7,580
|
|
|
|
|
Annual Rate Case Expense ($7,580 / 4 years)
|
$1,895
|
|
|
|
Source: Utility filings, responses to
staff data requests, staff calculations.
Staff
allocated the annual rate case expense to the water and wastewater systems
equally, resulting in annual rate case expense of $947 for water and $947 for
wastewater. Therefore, staff recommends regulatory commission expense for the
test year of $1,247 ($300 + $947) for water and $1,247 ($300 + $947) for
wastewater.
Bad Debt Expense (670/770)
Deer Creek recorded $57 in bad debt expense for water and
no bad debt expense for wastewater. Staff notes that no bad debt expense was
included in the Utility’s 2017 or 2018 Annual Reports. Staff recommends bad debt expense
for the test year of $57 for water and $0 for wastewater.
Miscellaneous Expense (675/775)
The Utility recorded test year miscellaneous expense of
$4,878 for water and $5,997 for wastewater. Staff decreased the wastewater
account by $360 to remove past due amounts from the test year balance. Staff
made no adjustments to water. As mentioned previously, there
is a $300 per month allocation for office supplies and the use of office equipment
such as facsimile, printers, scanners, copiers, telephones, etcetera included
as part of the Utility’s lease. The amount is split between each system,
$150 for water and $150 for wastewater on a monthly basis. The amounts are
included in the recorded amounts reflected above. As such, staff recommends
miscellaneous expense for the test year of $4,878 for water and $5,637 ($5,997
- $360) for wastewater.
Operation and Maintenance
Expense (O&M Summary)
Based on the above adjustments, O&M expense should be
decreased by $36,132 for water and by $51,725 for wastewater, resulting in
total O&M expense of $208,657 for water and $209,077 for wastewater.
Staff’s recommended adjustments to O&M expense are shown on Schedule Nos.
3-A through 3-C.
Depreciation Expense (Net
of Amortization of CIAC)
The Utility’s records reflect test year depreciation
expense of $1,340 for water and $4,841 for wastewater. Staff calculated
depreciation expense using the prescribed rates set forth in Rule 25-30.140,
F.A.C., and found that no
adjustments were necessary. As mentioned in Issue 4, Deer Creek does not
collect any CIAC and there is no CIAC to amortize; therefore, no adjustments
are necessary. As such, staff’s recommended CIAC amortization expense balances
should be $0 for water and wastewater. Therefore,
staff recommends net depreciation expense of $1,340 for water and $4,841 for
wastewater.
Taxes Other Than Income
(TOTI)
Deer Creek recorded TOTI of $8,334 for water and $10,463
for wastewater for the test year. Staff decreased water by $477 and increased wastewater by $53
to reflect the appropriate test year Regulatory Assessment Fees (RAFs).
As discussed in Issue 9, revenues have been increased by
$110,435 for water and $34,403 for wastewater to reflect the change in revenue
required to cover expenses and allow an opportunity to recover the operating
margin
on water and wastewater. As a result, TOTI should be increased by $4,970 for water and
$1,548 for wastewater to reflect RAFs of 4.5 percent of the change in revenues.
Therefore, staff recommends TOTI of $12,827 for water and $12,064 for
wastewater.
Operating Expenses Summary
The application of staff’s recommended adjustments to Deer
Creek’s test year operating expenses results in operating expenses of $222,823
for water and $225,982 for wastewater. Operating expenses are shown on
Schedules No. 3-A and 3-B. The adjustments are shown on Schedule No. 3-C.
Issue 8:
Does Deer Creek meet the criteria for the application of
the Operating Ratio Methodology?
Recommendation: Yes. The Utility meets the requirement for application of the operating
ratio methodology for calculating the revenue requirement for Deer Creek. The
margin should be 12 percent of O&M expenses. (D. Brown, T. Brown)
Staff Analysis: Rule 25-30.4575(2), F.A.C., provides that, in rate cases processed
under Rule 25-30.455 F.A.C., the Commission will use the operating ratio
methodology to establish the utility’s revenue requirement when the utility’s
rate base is no greater than 125 percent of O&M expenses and the use of the
operating ratio methodology does not change the utility’s qualification for a SARC.
Under the operating ratio methodology, instead of calculating the utility’s
revenue requirement based on a rate of return on the utility’s rate base, the
revenue requirement is calculated using a margin of 12 percent of O&M
expenses, not to exceed $15,000. Purchased water and wastewater must be removed
from O&M expenses prior to calculating the margin of 12 percent.
As discussed in Issues 4 and 7, staff has recommended a
rate base of $58,509 for water and $110,351 for wastewater and O&M expenses
of $208,657 for water and $209,077 for wastewater. Based on these recommended
amounts, Deer Creek’s water and wastewater rate bases are only 28 percent and
53 percent of its O&M expenses, respectively. Based on a margin of 12 percent, the operating
margin for Deer Creek is $7,660 for water and $5,775 for wastewater, which do
not exceed $15,000. Furthermore, the application of the operating ratio
methodology does not change the Utility’s qualification for a SARC. As such,
Deer Creek 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 revenue requirement for both the water and wastewater systems.
Issue 9:
What is the appropriate revenue requirement for Deer Creek?
Recommendation:
The appropriate revenue requirement is $230,483 for water
and $231,757 for wastewater, resulting in an annual increase of $110,435 for
water (91.99 percent) and $34,403 for wastewater (17.43 percent). (D. Brown, T.
Brown)
Staff
Analysis:
Deer
Creek should be allowed an annual increase of $110,435 for water (91.99
percent) and $34,403 for wastewater (17.43 percent). This will allow the
Utility the opportunity to recover its expenses and a 12 percent margin on
O&M expenses for its water and wastewater systems. The
calculations are shown below, in Tables 9-1 and 9-2 for water and wastewater,
respectively:
Table 9-1
Water Revenue Requirement
|
Adjusted O&M Expense (less Purchased Water)
|
|
$63,831
|
|
Operating Margin (%)
|
|
x 12.00%
|
|
Operating Margin ($15,000 Cap)
|
|
$7,660
|
|
Adjusted O&M Expense
|
|
208,657
|
|
Depreciation Expense (Net)
|
|
1,340
|
|
Taxes Other Than Income
|
|
7,857
|
|
Test Year RAFs
|
|
4,970
|
|
Revenue Requirement
|
|
$230,483
|
|
Less Adjusted Test Year Revenues
|
|
120,048
|
|
Annual Increase
|
|
$110,435
|
|
Percent Increase
|
|
91.99%
|
Table 9-2
Wastewater Revenue Requirement
|
Adjusted O&M Expense (less Purchased Wastewater)
|
|
$48,125
|
|
Operating Margin (%)
|
|
x 12.00%
|
|
Operating Margin ($15,000 Cap)
|
|
$5,775
|
|
Adjusted O&M Expense
|
|
209,077
|
|
Depreciation Expense (Net)
|
|
4,841
|
|
Taxes Other Than Income
|
|
10,516
|
|
Test Year RAFs
|
|
1,548
|
|
Revenue Requirement
|
|
$231,757
|
|
Less Adjusted Test Year Revenues
|
|
197,354
|
|
Annual Increase
|
|
$34,403
|
|
Percent Increase
|
|
17.43%
|
Issue 10:
Should the Commission approve Deer Creek’s request
to defer legal fees and other related costs associated with the recovery of
uncompensated service revenues from a business entity in its certificated
service area?
Recommendation:
Yes. The Commission should approve the request by Deer
Creek to defer the legal fees and other related costs associated with the
recovery of uncompensated service revenues from a business entity in its
certificated service area pending a final determination of whether any prudent
costs incurred should be capitalized, amortized, or expensed. (D. Brown, T.
Brown)
Staff
Analysis: On March 2, 2020, Deer
Creek filed a letter related to the Utility’s efforts to recover uncompensated
service revenues (as discussed in Issue 3) from a business entity in its
certificated service area. In the letter, Deer Creek requested Commission
approval to create a deferred regulatory asset account that would be used to
record legal fees and other related cost associated with the Utility’s effort
to recover the uncompensated service revenues. The Utility had previously
updated the Commission on its efforts to recover the uncompensated service
revenues in letters filed on October 22, 2019,
and January 13, 2020.
The Utility estimated a consolidated bill of $44,561 for the 12-month period
from October 2018 through September 2019. The Utility also requested a customer
deposit of $7,427, and indicated that it may pursue an additional payment of
$33,421 for potable water service for another 9-month period based on Rule
25.30-351, F.A.C.
In the January 13, 2020 update, the Utility noted that a
demand for payment was authorized by the Board of Directors for Deer Creek RV
Golf & Country Club, Inc. in a board meeting held in December 2019. The
demand letter was sent by the Utility’s attorney on January 7, 2020. As of
March 3, 2020, there has been no contact or response from the business entity
or their legal counsel on this matter. Given the lack of response, the Utility
is considering legal action to recover the uncompensated service revenues at
issue from the commercial property owner. As of December 31, 2019, the Utility
has incurred $5,618, of legal and consulting fees for this matter.
Staff notes that the Commission previously approved the creation of a similar
account for “legal expenses and other costs associated with the resolution of
land rights issues involving the utility’s ponds and spray fields” in a 2016
decision. In that
decision, West Lakeland had already incurred some legal expenses and additional
expenses were anticipated going forward.
The concept of deferral accounting allows companies to
defer costs due to events beyond their control and seek recovery through rates
at a later time. The alternative would be for the company
to seek a rate case each time it experiences an exogenous event. The
costs in the instant docket relate to legal fees incurred by the Utility in
trying to recover uncompensated service revenues from a business entity in its
certificated service area. Since this situation is still ongoing, allowing
recovery of a regulatory asset is not possible at this time. Upon completion of
the legal matters, the Commission can determine the appropriate accounting and
recovery methodology for these costs in a future proceeding. Therefore, staff
recommends the Commission approve the request by Deer Creek to defer the legal
fees associated with the uncompensated service revenues, pending a final
determination of whether any prudent costs incurred should be capitalized,
amortized, or expensed.
Issue 13:
What is the appropriate amount by which rates should be
reduced four years 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-A
and 4-B, 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. Deer Creek 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. (Procedural Agency Action) (Sibley,
D. Brown, T. Brown)
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 $992 for each system.
Staff recommends that the rates should be reduced as shown
on Schedule No. 4-A and 4-B, 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., Deer Creek 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 14:
Should the recommended rates be approved for Deer Creek 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. Deer Creek 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. (Procedural Agency Action) (D. Brown, T.
Brown)
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. Deer Creek 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.
Deer Creek
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
$97,589. 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 Clerk, or his or her designee;
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, Deer Creek 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 15:
Should Deer Creek be required to notify the Commission, in
writing, that it has adjusted its books in accordance with the Commission’s
decision?
Recommendation:
Yes. Deer Creek should be required to notify the
Commission, in writing, that it has adjusted its books in accordance with the
Commission’s decision. Deer Creek 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. Upon providing good cause, staff should be given
administrative authority to grant such an extension for up to 60 days. (Procedural
Agency Action) (D. Brown, T. Brown)
Staff
Analysis:
Deer Creek should be required to
notify the Commission, in writing, that it has adjusted its books in accordance
with the Commission’s decision. Deer Creek 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. Upon providing good cause, staff should be given
administrative authority to grant such an extension for up to 60 days.
Issue 16:
Should Deer Creek’s request for a cross connection control
and backflow prevention tariff sheet be approved?
Recommendation:
Yes. The
tariff outlining Deer Creek’s cross connection prevention policy tariff should
be approved. The approved tariff should be effective for service rendered on or
after the stamped approval date on the tariff pursuant to Rule 25-30.475,
F.A.C. (Sibley)
Staff Analysis: The
Utility requested a cross connection control and backflow prevention tariff to
provide a single source that clarifies the rights and obligations of Deer Creek
and its customers. The DEP requires customers with cross connections into the
water system to install a backflow prevention assembly on the potable water
line and for the Utility to furnish a Cross Connection Control and Backflow
Prevention (CCCBP) plan. A cross connection is any temporary or permanent
connection between a public water system or consumer’s potable water system and
any source or system containing non-potable water or other substances. An
example of a non-potable water system is an irrigation system. The backflow
preventer is responsible for preventing an undesirable reversal of flow of
non-potable water or other substances through a cross connection and into the
piping of a public water or consumer’s potable water system. It is the
customer’s responsibility to ensure a backflow prevention device is properly
installed, repaired, and annually field tested by a certified inspector.
Staff notes
that if the Utility has reason to believe a cross connection exists, the
customer shall allow the Utility onto the premises for an inspection pursuant
to Rule 25-30.320(2)(f), F.A.C. Failure by the customer to install, inspect,
repair or replace the backflow prevention device will result in disconnection
of service after reasonable notice is given. The requested tariff provision,
which is an abridged copy of the Utility’s CCCBP, explains what customers are
responsible for in regard to the CCCBP plan. Staff recommends that the tariff
is reasonable and consistent with Rule 25-30.320, F.A.C., which allows the
discontinuance of service if needed, when a customer fails to install or
maintain a backflow preventer to eliminate cross connections.
Staff
recommends that Deer Creek’s cross connection prevention policy tariff should
be approved. The approved tariff should be effective for service rendered on or
after the stamped approval date on the tariff pursuant to Rule 25-30.475, F.A.C.
Issue 17:
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. Also, the docket should remain open to allow the Utility
to provide the recommended reporting information. Once these actions are
complete, this docket should be closed administratively. (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. Also, the
docket should remain open to allow the Utility to provide the recommended
reporting information. Once these actions are complete, this docket should be
closed administratively.
