Discussion
of Issues
Issue 1:
Should the Commission approve FUS1’s application for
a limited alternative rate increase for Alturas, East Marion, Pinecrest, and
Sunrise?
Recommendation:
Yes. The Commission should approve the aforementioned
utilities’ application for a limited alternative rate increase with staff’s
modifications. The increase for each utility is listed in the table below.
Pursuant to Rule 25-30.457(7), F.A.C., the utilities are required to hold any
revenue increase granted subject to refund with interest. To ensure
overearnings will not occur because of these rate increases, Commission staff
will conduct earning reviews of the twelve-month period following the
implementation of the revenue increase. If overearnings occur, such
overearnings, up to the amount held subject to refund, with interest, must be
disposed of for the benefit of the customers. If Commission staff determines
that a utility did not exceed the range of its last authorized return on
equity, the revenue increase will no longer be held subject to refund.
|
System Name
|
Percent Increase
|
Revenue Increase
|
|
Alturas Water
|
14.05%
|
$3,466
|
|
East Marion (water)
|
8.71%
|
$2,717
|
|
East Marion (wastewater)
|
5.88%
|
$2,586
|
|
Pinecrest
|
6.67%
|
$4,046
|
|
Sunrise Water
|
20.00%
|
$11,731
|
(Richards, D.
Brown, Knoblauch, Maloy)
Staff Analysis:
Pursuant to Rule 25-30.457, F.A.C., any utility
eligible to file for a SARC may petition the Commission for a rate increase of
up to 20 percent applied to metered or flat recurring rates as an alternative
to a rate case. This Rule was designed to stream-line the rate increase process
for qualifying water or wastewater companies, by establishing an abbreviated
procedure for a limited rate increase that is less time consuming and thus less
costly for utilities, their customers, and the Commission. This Rule is similar
to the rules governing price index and pass-through increases, in that neither
an engineering review nor a financial audit of the utility's books and records
is required.
As discussed in the case background, only Alturas, East
Marion, Pinecrest, and Sunrise remain in this proceeding. Staff reviewed the filing
regarding the remaining utilities pursuant to the criteria listed in Rule
25-30.457(5), F.A.C., and recommends that they qualify for staff assistance
pursuant to subsection (1) of this Rule. Staff also verified that the utilities
are current on their filing of regulatory assessment fees and annual reports. Each
of the four utilities have had rates established within the last seven years,
pursuant to Rule 25-30.457(2)(l), F.A.C., and are under earning based on
information provided in their 2019 Annual Reports. Additionally, the utilities’
books and records appear to be organized consistent with Rule 25-30.110, F.A.C.
The filing contained additional relevant information in support of their
application. This information is detailed below.
Secondary Water Standards
Pursuant to Section 367.0812(1), F.S., “in fixing rates
that are just, reasonable, compensatory, and not unfairly discriminatory, the
commission shall consider the extent to which the utility provides water
service that meets secondary water quality standards as established by the
Department of Environmental Protection (DEP).” As such, staff analyzed the
current compliance with secondary standards and other quality of service items
for the utilities.
In their last rate cases, the Commission determined the
overall quality of service to be satisfactory for both East Marion
(2015, water and wastewater) and Pinecrest
(2012, water). In the last rate cases of Alturas
(2014, water) and Sunrise
(2014, water), the Commission found the overall quality of service to be
unsatisfactory and ordered a 25 percent penalty be applied to the officers’
salaries. Subsequent to its last rate case, Sunrise and Alturas were
transferred to the current owner in June 2018, whereas, the East Marion and
Pinecrest systems were transferred to the current owner, prior to their last
rate cases, in 2015 and 2011, respectively.
Based on the DEP’s most recent
Sanitary Survey for the East Marion water treatment
plant (WTP), conducted on October 2, 2019, the DEP determined the system
was out of compliance with the DEP’s rules and regulations. This was due to
inadequate chlorine levels, a leaking valve, missing a monthly operating
report, no security for the tank system, and lack of a flushing plan on site.
In addition, the utility is required to submit annual and biannual testing of
certain contaminants. The DEP issued the utility a consent order for failure to
monitor contaminant levels in 2019.
Subsequently, the utility entered into a settlement agreement with the DEP
on July 31, 2020. Secondary standards
were last tested, on November 29, 2018. East Marion passed all 14 secondary
standards and will next be tested for secondary standards in 2021. On July 24,
2019, the DEP conducted a compliance inspection on the East Marion wastewater
treatment plant (WWTP) and determined it to be out of compliance with the DEP’s
rules and regulations due to permitting and monitoring violations. Since the
compliance inspection, the utility has worked to correct the issues for its
WWTP and on March 9, 2020, the DEP determined the facility resolved its issues
and is now in compliance.
Based on the DEP’s most recent
Sanitary Surveys for Sunrise, conducted on June 22, 2020, the DEP determined the
system was in compliance with the DEP’s rules and regulations. The last
secondary standards testing for Sunrise was performed on August 2, 2018, and
reported excess foaming agent levels. The next secondary standards testing will
occur in 2021. The DEP conducted a sanitary survey for the Pinecrest system on
September 19, 2017, and deemed the system out of compliance due to the utility’s
failure to obtain the proper permit before beginning a project. Additionally,
Pinecrest was tested for secondary standards on July 17, 2018, and passed all
secondary standards. The next test for this system will occur in 2021. The DEP
conducted a sanitary survey for the Alturas system on July 30, 2018. The DEP
determined the system to be out of compliance due to an expired tank
inspection. On August 29, 2018, the Alturas system had its secondary standards
tested, which indicated excess iron levels.
Staff analyzed the complaint records of the Commission,
the DEP, and the utility for each of the systems since 2015. The results are
shown in Table 1-1.
Table 1-1
|
Quality of Service Complaints by
System (2015-2020)
|
|
System
|
Commission
|
DEP
|
Utility
|
|
East Marion
|
32 (water)
0 (wastewater)
|
8 (water)
1 (wastewater)
|
5 (water)
0 (wastewater)
|
|
Pinecrest
|
0
|
0
|
6
|
|
Sunrise
|
10
|
7
|
1
|
|
Alturas
|
0
|
0
|
0
|
Source: Complaint records of the
Commission’s Consumer Activity Tracking System, the DEP, and the utility
Since the transfer of Sunrise and
East Marion to the current owner, the complaints filed with the DEP and the
Commission have decreased. Specifically, for the Sunrise system, post-transfer,
two complaints were filed with the DEP and zero complaints were filed with the Commission.
For the East Marion system, post-transfer, zero complaints were filed with the DEP and two complaints were filed with
the Commission.
Due to travel restrictions
implemented by the Department of Management Services, a customer meeting was
not held.
However, all customers received a Notice for the Solicitation of Comments
(Notice) that provided a summary of the rate case, the current and proposed
rates, detailed instructions on how comments may be filed with the Commission
prior to the Commission Conference, and instructions if a customer wished to
comment at the Commission Conference. Also, attached to the Notice was a
customer comment card that customers could complete and mail to the Commission.
As of September 21, 2020, 14 customers submitted comments. Two customers (one
from Sunrise and one from East Marion) expressed concern regarding the proposed
rate increase and 12 expressed concern regarding water quality issues (two
customers for Sunrise, seven customers for East Marion, and three customers for
Pinecrest).
East Marion and Pinecrest are currently in compliance with
secondary standards. Sunrise and Alturas are not currently meeting secondary
standards based upon tests taken within a few months of the systems being
transferred to the current owner. The rates of Sunrise and Alturas currently
include a financial penalty, which will remain in place until their next SARCs,
at which time quality of service will be evaluated. Additionally, as a part of this proceeding,
FUS1 requested a new Compliance Technician position, which is discussed in
greater detail below. This position will assist in permitting and regulatory
reporting for the utilities, which appears to be a contributing factor as to
why the utilities are not compliant with the DEP. Therefore, staff does not
believe any additional action is necessary at this time.
FUS1 Allocation
The utilities’ application requested recovery of FUS1’s
allocated common costs for each of the systems referenced above, based on the
allocated common costs approved in Docket No. 20180202-SU. The
operations and maintenance (O&M) common costs are allocated among all of
the utilities in the FUS1 system based on number of customers. Table 1-2 below
shows the allocation used for the four utilities in the present docket.
Table 1-2
FUS1 Utility Allocation
|
|
|
|
|
|
Non-LARI
|
|
|
|
Alturas
|
East Marion
|
Pinecrest
|
Sunrise
|
Utilities
|
FUS1 Total
|
|
Customers
|
55
|
106
|
142
|
257
|
2,826
|
3,386
|
|
Allocation
|
2%
|
3%
|
4%
|
8%
|
83%
|
100%
|
Source: Document No. 02809-2020, Exhibit E.
The
O&M common costs allocated to each FUS1 utility include:
·
Salaries and Wages – Employees (601/701)
·
Salaries and Wages – Officers (603/703)
·
Employee Benefits (604/704)
·
Materials and Supplies (620/720)
·
Contractual Services – Professional (631/731)
·
Contractual Services – Other (636/736)
·
Rents (640/740)
·
Transportation (650/750)
·
Insurance (655/755)
·
Miscellaneous Expenses (675/775)
Table 1-3
illustrates the adjustments made to the reported amounts for 2019 in order to
achieve the Commission-approved FUS1 O&M common costs.
Table 1-3
Allocated O&M Common
Costs
|
|
2019
|
Adjustment To
|
Approved
|
|
Utility
|
Amount
|
Meet Allocation
|
Allocation
|
|
Alturas
|
$10,274
|
$986
|
$11,260
|
|
East Marion
|
$15,412
|
$1,478
|
$16,890
|
|
Pinecrest
|
$23,090
|
($571)
|
$22,519
|
|
Sunrise
|
$41,097
|
$3,941
|
$45,038
|
|
Non-LARI Systems
|
$423,841
|
$43,427
|
$467,268
|
|
Total FUS1
|
$513,714
|
$49,261
|
$562,975
|
Source: Document 02809-2020, Exhibit
F.
Payroll Taxes
In
addition to O&M common costs, the Commission approved payroll taxes of
$23,910 for the FUS1 utilities in Docket No. 20180202-SU. Table 1-4 illustrates
the adjustments made to the reported payroll tax amounts for 2019 in order to
achieve the amount approved by the Commission.
Table 1-4
Allocated Payroll Taxes
|
|
2019
|
Adjustment To
|
Approved
|
|
Utility
|
Amount
|
Meet Allocation
|
Allocation
|
|
Alturas
|
$402
|
$76
|
$478
|
|
East Marion
|
$602
|
$114
|
$716
|
|
Pinecrest
|
$905
|
$51
|
$956
|
|
Sunrise
|
$1,608
|
$305
|
$1,913
|
|
Non-LARI Systems
|
$16,579
|
$3,268
|
$19,847
|
|
Total FUS1
|
$20,096
|
$3,814
|
$23,910
|
Source: Document No.
02809-2020, Exhibit F.
Pro Forma Expenses
As part of their application, the utilities also requested
the recovery of pro forma FUS1 common costs that have increased significantly
since FUS1 allocated common costs were approved in the West Lakeland Water
proceeding, and include the addition of a Compliance Technician position. These
items are discussed in additional detail below.
Salaries
and Wages – Employees (601/701)
As shown
in Table 1-5 below, the Commission approved $301,366 for FUS1 employee salaries
and wages in 2018. In their application, the utilities requested additional
salaries and wages of $83,502. This amount included salary increases for eight
positions and the addition of one new position. In support of their request,
the utilities provided an explanation for the increase associated with each
position and referenced the 2018 American Water Works Association (AWWA)
Compensation Survey.
A portion
of the utilities’ requested salary increases reflect index increases of $7,112
and $5,522 for 2019 and 2020, respectively.
Staff notes that all four utilities seeking increases in this docket
implemented 2019 index increases between June and December 2019. Additionally,
three of the four have implemented 2020 index increases.
Only Pinecrest has not filed for a 2020 index increase.
Because FUS1’s common costs are allocated to each of the utilities, allocated
common costs such as salaries are already included in the O&M expense used
to calculate the index increase applicable to each utility. While the amount
allocated to each utility would have been determined during each utility’s last
rate case, some allocation for FUS1 salaries is currently imbedded in O&M
for each utility. By applying 2019 and 2020 index increases to the FUS1
salaries approved in West Lakeland, staff believes that at least some portion
of the increase would result in double recovery for the utilities. Given the
abbreviated nature of LARI proceedings, the potential for double recovery, and
considering that the rate increases recommended here will be applied to rates
that already reflect 2019 and 2020 index increases at the utility level, staff
believes it would be inappropriate to include the FUS1 index increases included
in the application.
In its application, FUS1 also
requested approval of a new Compliance Technician position with an annual
salary of $45,000. The duties for the position would include developing
compliance programs and maintaining environmental compliance for FUS1’s water
and wastewater systems in areas such as permitting and regulatory reporting.
The utility stated that these duties are currently being performed by the
President of FUS1. However, with the number of systems now managed by FUS1, a
full-time position is needed to effectively perform these responsibilities.
Additionally, the Compliance Technician would also perform emergency response
duties, such as initiating and maintaining contact with vendors and
contractors, as well as managing an inventory of emergency assets.
In total,
FUS1 manages 12 water and/or wastewater utilities regulated by the Commission,
and two utilities which are not regulated by the Commission.
Considering the total number of systems and that regulatory compliance duties
are currently being handled by the President, staff believes that the
establishment of a new Compliance Technician position is reasonable.
Furthermore, given the number of recent storm events that have impacted the
state, sufficient emergency preparation and response is needed. Therefore,
staff recommends approval of the requested Compliance Technician position.
Staff’s recommended salary
increases are reflected in Table 1-5.
Table 1-5
Recommended Salary Increase
|
Position
|
Commission
Approved
(20180202-SU)
|
FUS1
Requested
Increase
|
FUS1
Requested
Salary
|
Staff
Recom.
Increase
|
Recom.
FUS1
Salary
|
|
CFO
|
$54,366
|
$2,279
|
$56,645
|
$0
|
$54,366
|
|
Office Manager
|
$39,500
|
$4,500
|
$44,000
|
$2,844
|
$42,344
|
|
Customer Service
|
$34,000
|
$1,425
|
$35,425
|
$0
|
$34,000
|
|
Billing
|
$20,800
|
$4,200
|
$25,000
|
$3,328
|
$24,128
|
|
Operations Sup.
|
$39,000
|
$13,999
|
$52,999
|
$12,364
|
$51,364
|
|
Maintenance
|
$37,900
|
$12,099
|
$49,999
|
$10,510
|
$48,410
|
|
Maintenance
|
$37,900
|
$0
|
$37,900
|
$0
|
$37,900
|
|
Maintenance
|
$37,900
|
$0
|
$37,900
|
$0
|
$37,900
|
|
Compliance
|
$0
|
$45,000
|
$45,000
|
$45,000
|
$45,000
|
|
Total
|
$301,366
|
$83,502
|
$384,868
|
$74,046
|
$375,412
|
Source:
Document No. 02809-2020, Exhibit G-1 and staff calculations.
Contractual Services – Other (636/736)
FUS1
requested recovery of the cost to replace the air conditioning system at its
New Port Richey offices. Item No. 3 of the building lease makes FUS1
responsible for “all cost and expenses whatsoever kind, character, nature or
description concerning . . . all HVAC.” According
to FUS1, the system was original to the building and could not be repaired. Since
FUS1 has no real property interest in the building, the lease and all
associated costs with the lease are expensed through the common cost allocation
method for FUS1. Two bids were obtained for air conditioning systems, totaling
$6,650 and $7,200.
The utility selected the lower bid of $6,650, which also offered a longer
warranty than the higher cost air conditioning system bid. The system was
installed in February 2020. Staff reviewed the invoice and believes the air
conditioning system’s cost of $6,650 should be amortized over five years. As
such, staff believes $1,330 ($6,650 ÷ 5 years) should be included in FUS1
common costs and allocated to all FUS1 utilities.
Insurance Expenses (655/755)
FUS1 reported auto insurance
expense of $13,283 and workman’s compensation insurance of $9,000 for 2019.
This represents total insurance expense of $22,283 ($13,283 + $9,000) for the
year. In its application, the utilities requested an increase of $6,930 for auto
insurance based on the premium for the policy
period November 2019 through November 2020, reflected on the Progressive
Insurance declaration page. The
utilities also requested an increase of $200 for workman’s compensation based
on the estimated premium for the policy period November 2019 through
November 2020. The estimate was calculated using the final premium audit amounts paid in 2018 and 2019.
As such, staff believes the utilities have supported the inclusion of the pro
forma insurance expense increase of $7,130 ($6,930 + $200) for purposes of this
LARI.
Payroll
Taxes
In
addition to the salary increase request discussed above, the utilities also
requested recovery of the associated payroll taxes. Staff utilized a payroll
tax rate of 7.65 percent based on the 2020 FICA tax rate. When applied to the
recommended salary increase of $74,046 as described above, staff recommends a
pro forma increase to payroll taxes of $5,665 ($74,046 x 0.0765).
Pro Forma Summary
Staff’s
recommended pro forma increases, allocated to the various FUS1 systems, are
provided in Table 1-6.
Table 1-6
Allocated Pro Forma
Increases
|
|
|
Contractual
|
Insurance
|
Payroll
|
System
|
|
Utility
|
Salaries
|
Services
|
Expenses
|
Taxes
|
Total
|
|
Alturas
|
$1,481
|
$27
|
$143
|
$113
|
$1,764
|
|
East Marion (water)
|
$1,111
|
$20
|
$107
|
$85
|
$1,323
|
|
East Marion (wastewater)
|
$1,111
|
$20
|
$107
|
$85
|
$1,323
|
|
Pinecrest
|
$2,962
|
$53
|
$285
|
$227
|
$3,527
|
|
Sunrise
|
$5,924
|
$106
|
$570
|
$453
|
$7,053
|
|
Non-LARI Systems
|
$61,457
|
$1,104
|
$5,918
|
$4,702
|
$73,181
|
|
Total FUS1
|
$74,046
|
$1,330
|
$7,130
|
$5,665
|
$88,171
|
Source:
Document No. 02809-2020 and staff calculations.
Rate Case Expense
The utilities
paid a combined filing fee $4,500 on July 6, 2020. The utilities did not
include any rate case expense in its filing. By Rule 25-22.0407, F.A.C., the utility
is required to mail notices of the rate case overview, notices of final rates,
and notices of four-year rate reduction to its customers. For these notices,
staff estimated $924 for postage expense, $392 for printing, and $84 for
envelopes, resulting in noticing expense of $1,400 ($924 + $392 + $84).
The utilities
expect to incur $4,180 in legal fees to complete this LARI. The utilities
provided invoices from Dean Mead Attorneys at Law (Dean Mead) through August
15, 2020, reflecting actual expenses associated with the rate case totaling
$1,900, and estimated an additional $2,280 to complete the case.
These amounts included 5 hours of actual time and 6 hours of time to complete
the LARI. No adjustments were made to legal fees.
Additionally,
the utilities expect to incur $3,990 in accounting fees to complete the current
docket. The utilities provided invoices from OCBOA Consulting, LLC. (OCBOA)
through August 15, 2020, reflecting actual expenses of $3,681, and estimated an
additional $309 to complete the case.
These amounts included 38.75 hours of actual time and 3.25 hours of time to
complete the LARI. Staff made no adjustments to accounting fees.
Due to the
current restrictions on travel and large gatherings, no in-person customer
meetings were conducted, and the October 6, 2020, Agenda Conference will take
place via teleconference. As such, no travel expense was included in rate case
expense. The noticing costs and consulting fees were allocated among the four
utilities in this docket based on the number of customers as shown in Table 1-7
below.
Based on
the information above, staff recommends total rate case expense of $14,070
($4,500 + $1,400 + $4,180 + $3,990), which amortized over four years results in
a rate case expense of $3,517 ($14,070 ÷ 4).
Table 1-7
Allocated Rate Case Expense
|
Utility
|
Allocation
|
Filing
Fee
|
Noticing
Costs
|
Legal
Fees
|
Accounting
Fees
|
Total
RCE
|
|
Alturas
|
10%
|
$1,000
|
$138
|
$410
|
$392
|
$1,940
|
|
East Marion (water)
|
9%
|
$1,000
|
$132
|
$396
|
$378
|
$1,906
|
|
East Marion (wastewater)
|
9%
|
$500
|
$132
|
$396
|
$377
|
$1,405
|
|
Pinecrest
|
25%
|
$1,000
|
$355
|
$1,060
|
$1,012
|
$3,427
|
|
Sunrise
|
47%
|
$1,000
|
$643
|
$1,918
|
$1,831
|
$5,392
|
|
Total
|
100%
|
$4,500
|
$1,400
|
$4,180
|
$3,990
|
$14,070
|
Source: Utility filings and staff calculations.
Table 1-8
Amortized Rate Case Expense
|
|
Total
|
Amortized
|
|
Utility
|
RCE
|
RCE
|
|
Alturas
|
$1,940
|
$485
|
|
East Marion (water)
|
$1,906
|
$477
|
|
East Marion (wastewater)
|
$1,405
|
$351
|
|
Pinecrest
|
$3,427
|
$857
|
|
Total
|
$8,678
|
$2,170
|
Source: Staff Calculations.
While all four LARI utilities were included for purposes
of determining the allocations and the rate case expense applicable to each
system, no rate case expense is included in the increase calculated for Sunrise.
The calculated increase for Sunrise is greater than the 20 percent allowed by Rule
25-30.457(1), F.A.C.
As such, staff capped Sunrise’s increase at 20 percent. Accordingly, no
four-year rate reduction (Issue 4) would be required for Sunrise. The total rate case expense for the
other systems should be amortized over four years. The appropriate amortized
rate case expense for each system is reflected in Table 1-8.
Conclusion
The data presented in the application was based on
annualized revenues by customer class and meter size for the period ended
December 31, 2019, the most recent 12-month period. Table 1-9 summarizes
staff’s recommended adjustments for each utility. Table 1-10 displays the
annualized revenues, the percent increase, and the resulting annual increase in
revenues that produce the total annual service revenues for each system and
include staff’s adjustments. Staff’s annualized revenues reflect the 2020 index
increases for Alturas, East Marion, and Sunrise, which had an effective date of
June 5, 2020.
Table 1-9
Summary of Adjustments
|
|
Allocated
|
Allocated
|
Pro
|
|
Adj.
|
Increase
|
|
|
|
O&M
|
Payroll
|
Forma
|
|
for
|
Capped
|
Total
|
|
Utility
|
Adj.
|
Adj.
|
Increase
|
RCE
|
RAF
|
At 20%
|
Increase
|
|
Alturas
|
$986
|
$76
|
$1,763
|
$485
|
$156
|
$0
|
$3,466
|
|
East Marion (water)
|
$739
|
$57
|
$1,323
|
$476
|
$122
|
$0
|
$2,717
|
|
East Marion (wastewater)
|
$739
|
$57
|
$1,323
|
$351
|
$116
|
$0
|
$2,586
|
|
Pinecrest
|
($571)
|
$51
|
$3,527
|
$857
|
$182
|
$0
|
$4,046
|
|
Sunrise
|
$3,941
|
$305
|
$7,054
|
$1,348
|
$596
|
($1,512)
|
$11,731
|
Source: Staff calculations
Table 1-10
Staff Recommended Increase
|
|
|
|
|
Total Annual
|
|
|
Annualized
|
Percentage
|
Revenue
|
Service
|
|
Utility
|
Revenue
|
Increase
|
Increase
|
Revenue
|
|
Alturas
|
$24,666
|
14.05%
|
$3,466
|
$28,132
|
|
East Marion (water)
|
$31,213
|
8.71%
|
$2,717
|
$33,930
|
|
East Marion (wastewater)
|
$43,976
|
5.88%
|
$2,586
|
$46,562
|
|
Pinecrest
|
$60,640
|
6.67%
|
$4,046
|
$64,686
|
|
Sunrise
|
$58,656
|
20.00%
|
$11,731
|
$70,387
|
Source:
Document No. 02809-2020 and staff calculations.
Pursuant to Rule 25-30.457(7), F.A.C., the utility is
required to hold any revenue increase granted subject to refund with interest
in accordance with Rule 25-30.360(4), F.A.C.
To ensure overearnings will not occur because of these
rate increases, staff will conduct earning reviews of the twelve-month period
following the implementation of the revenue increase. At the end of the
twelve-month period, each utility has 90 days to complete and file Form PSC
1025 (03/20), entitled “Limited Alternative Rate Increase Earnings Review.” In
the event a utility needs additional time to complete the form, that utility
may request an extension of time supported by a statement of good cause that
must be filed with Commission staff within seven days prior to the 90-day
deadline. If staff’s earnings review demonstrates that the utility exceeded the
range of its last authorized rate of return on equity, such overearnings, up to
the amount held subject to refund, with interest, shall be disposed of for the
benefit of the customers. If staff determines that the utility did not exceed
the range of its last authorized return on equity, the revenue increase will no
longer be held subject to refund.
Based on the information described above, staff recommends
approval of the utilities’ application with the modifications discussed above.
Issue 2:
What are the appropriate monthly service rates for
Alturas, East Marion, Pinecrest, and Sunrise?
Recommendation:
The existing service rates for the utilities should
be increased as shown below to generate the recommended revenue increase in
accordance with Rule 25-30.457, F.A.C.
|
Utility
|
% Rate Increase
|
|
Alturas
|
14.05%
|
|
East Marion (water)
|
8.71%
|
|
East Marion (wastewater)
|
5.88%
|
|
Pinecrest
|
6.67%
|
|
Sunrise
|
20.00%
|
The
appropriate staff recommended service rates are shown on Schedule No. 1. The
utilities should file 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. In addition, the rates should not be
implemented until staff has approved the proposed customer notice. The
utilities should provide proof of the date notice was given no less than 10
days after the date of the notice. (Bethea, Sibley, Bruce)
Staff Analysis:
Based on staff’s recommended approval of the
utilities’ LARI in Issue 1, the existing service rates for the utilities should
be increased by the individual percentage rate increases shown in Table 2-1,
which are in accordance with Rule 25-30.457, F.A.C.
Table 2-1
Staff Recommended Percentage Rate
Increase
|
Utility
|
% Rate Increase
|
|
Alturas
|
14.05%
|
|
East Marion (water)
|
8.71%
|
|
East Marion (wastewater)
|
5.88%
|
|
Pinecrest
|
6.67%
|
|
Sunrise
|
20.00%
|
Source: Staff Calculations
Therefore, staff calculated rates by applying the
percentage rate increases across-the-board to the existing base facility and
gallonage charges for each utility. The appropriate staff recommended service
rates are shown on Schedule No. 1. The utilities should file 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. In
addition, the rates should not be implemented until staff has approved the
proposed customer notice. The utilities should provide proof of the date notice
was given no less than 10 days after the date of the notice.
Issue 3:
What is the appropriate amount by which the 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 in
Schedule No. 1, to remove rate case expenses 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. Alturas, East Marion, and Pinecrest should
be required to file revised tariffs and proposed customer notices setting forth
the lower rates and the reason for the reductions no later than one month prior
to the actual date of the required rate reductions. If this reduction is filed in
conjunction with price index or pass-through rate adjustments, separate data
should be filed for the price index and/or pass-through increase or decrease
and the reductions in the rates due to the amortized rate case expenses. (Bruce,
Richards, D. Brown) (Procedural Agency Action)
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 expenses previously included in rates. These reductions will
reflect the removal of revenue associated with the amortization of rate case expenses
and the gross-up for RAFs. The total reductions for each system are listed in
Table 4-1 below.
Table 3-1
Four-Year Rate Reduction
|
Utility
|
Reduction
|
|
Alturas
|
$508
|
|
East Marion (water)
|
$499
|
|
East Marion (wastewater)
|
$368
|
|
Pinecrest
|
$897
|
Source: Staff
calculations.
Staff recommends that the rates should be reduced, as
shown in Schedule No. 1, 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. Alturas, East Marion, and
Pinecrest should be required to file revised tariffs and proposed customer
notices setting forth the lower rates and the reason for the reductions no
later than one month prior to the actual date of the required rate reductions.
If this reduction is filed in conjunction with price index or pass-through rate
adjustments, separate data should be filed for the price index and/or pass-through
increases or decreases and the reductions in the rates due to the amortized
rate case expenses.
Issue 4:
Should the recommended rates be approved for
Alturas, East Marion, Pinecrest, and Sunrise on a temporary basis, subject to
refund, in the event of a protest filed by a party other than the utility?
Recommendation:
Yes. Pursuant to
Rule 25-30.457(9), F.A.C., in
the event of a protest of
the Proposed Agency Action (PAA) Order by a substantially affected
person other than one of the aforementioned utilities, the utilities should be authorized to implement the rates
established in the LARI PAA Order on a temporary basis subject to refund upon
filing a SARC application within 21 days from the date the protest is filed.
Each utility should file revised tariff sheets and a
proposed customer notice to reflect the Commission-approved rates. The
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. If the recommended rates are approved on a temporary basis,
the incremental increase collected by the utility
will be subject to the refund provisions outlined in Rule 25-30.360, F.A.C.
Pursuant to Rule 25-30.457(9),
F.A.C., if a utility fails to
file a SARC application within 21 days in the event there
is a protest, the application for a
LARI will be deemed withdrawn.
(Richards, D. Brown) (Procedural Agency Action)
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 for the aforementioned utilities. Therefore,
pursuant to Rule 25-30.457(9), F.A.C., the utilities should be authorized to
implement the rates established in the LARI PAA Order on a temporary basis
subject to refund upon filing a SARC application within 21 days from the date
the protest is filed.
Each utility should file revised tariff sheets and a
proposed customer notice to reflect the Commission-approved rates. The 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. If the recommended
rates are approved on a temporary basis, the incremental increase collected by
the utility will be subject to the refund provisions outlined in Rule
25-30.360, F.A.C. Pursuant to Rule 25-30.457(9), F.A.C., if a utility fails to
file a SARC application within 21 days in the event there is a protest, the
application for a LARI will be deemed withdrawn.
Issue 5:
Should this docket be closed?
Recommendation:
No. In the event of a protest, the utilities
may implement the rates established in the PAA Order on a temporary basis,
subject to refund with interest, upon the utility’s filing of a SARC
application within 21 days of the date the protest is filed. If the
utilities fail to file a SARC within 21 days, the utility’s petition for a
LARI will be deemed withdrawn pursuant to Rule 25-30.457(9), F.A.C. If no
person whose substantial interests are affected by the proposed agency action
files a protest within 21 days of the issuance of the PAA Order, a Consummating
Order should be issued. The docket should remain open for staff’s verification
that the revised tariff sheets reflecting the Commission-approved rates, and
the customer notice, have been filed by the utilities and approved by
staff, so that staff may conduct an earnings review of the utility pursuant
to Rule 25-30.457(8), F.A.C. Upon staff’s approval of the tariff and completion
of the earnings review process as set forth in Rule 25-30.457(8), F.A.C., this
docket should be closed administratively. (Passidomo, Weisenfeld)
Staff Analysis:
In the event of a protest, the utilities may
implement the rates established in the PAA Order on a temporary basis, subject
to refund with interest, upon the utility’s filing of a SARC application
within 21 days of the date the protest is filed. If the utilities fail to
file a SARC within 21 days, the utility’s petition for a LARI will be
deemed withdrawn pursuant to Rule 25-30.457(9), F.A.C. If no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the PAA Order, a Consummating Order
should be issued. The docket should remain open for staff’s verification that
the revised tariff sheets reflecting the Commission-approved rates, and the
customer notice, have been filed by the utilities and approved by staff,
so that staff may conduct an earnings review of the utility pursuant
to Rule 25-30.457(8), F.A.C. Upon staff’s approval of the tariff and completion
of the earnings review process as set forth in Rule 25-30.457(8), F.A.C., this
docket should be closed administratively.
