Case Background
Royal Utility
Company (RUC or Seller) is a Class B water and wastewater utility providing
service to approximately 801 residential and 116 general service customers in Broward
County. RUC is located in the South Florida Water Management District (SFWMD).
The SFWMD has year-round landscape watering restrictions, with additional water
shortage orders issued by the SFWMD as needed. There are currently no water
shortage orders in effect. RUC’s 2019
Annual Report indicates gross revenues of $366,158 and $353,700 for water
and wastewater, respectively, and net operating income of $54,019 for water and
$53,541 for the wastewater system.
The Florida Public Service Commission (Commission) granted
original water and wastewater certificates to University Utility Corporation
in 1976.[1] The Commission approved a
transfer of majority organizational control for University Utility Corporation in 1983. In 1988, the Commission approved
the transfer of the system to RUC.[3] The rates for the utility were last set by the
Commission in 1983.[4] On August 29, 2019, Royal Waterworks,
Inc. (Royal, Buyer or Utility) filed an
application with the Commission for the
transfer of Certificate Nos. 259-W and 199-S from RUC to Royal in Broward
County.
This recommendation addresses the transfer of the water and wastewater
systems and Certificate Nos. 259-W and 199-S, the appropriate net book value of
the water and wastewater systems for transfer purposes, the need for an
acquisition adjustment, and Royal’s request to add miscellaneous service
charges, a late payment charge, non-sufficient funds charges, customer
deposits, and a new class of service to its tariff. The Commission has jurisdiction
pursuant to Sections 367.071 and 367.081, Florida Statutes (F.S.)
Discussion
of Issues
Issue 1:
Should the transfer of Certificate Nos. 259-W and 199-S
in Broward County from Royal Utility Company to Royal Waterworks, Inc. be
approved?
Recommendation:
Yes. The transfer of the water and wastewater
systems and Certificate Nos. 259-W and 199-S is in the public interest and
should be approved effective the date of the Commission’s vote. The resultant
order should serve as the Buyer’s certificate and should be retained by the
Buyer. The existing rates,
service availability charges, and billing policy should remain in effect
until a change is authorized by the Commission in a subsequent proceeding. The
tariffs reflecting the transfer should be effective for services rendered or
connections made on or after the stamped approval date on the tariffs, pursuant
to Rule 25-30.475, Florida Administrative Code (F.A.C.). The Seller is current
with respect to annual reports and regulatory assessment fees (RAFs) through
December 31, 2019. Royal should be responsible for filing annual reports and
paying RAFs for 2020 and all future years. (Doehling, M. Watts, Sewards, Bethea)
Staff Analysis:
On August 29, 2019, Royal filed an application for
the transfer of Certificate Nos. 259-W and 199-S from RUC to Royal in Broward
County. The application is in compliance with Section 367.071, F.S., and
Commission rules concerning applications for transfer of certificates. The sale
to Royal occurred on July 1, 2019, contingent
upon Commission approval, pursuant to Section 367.071(1), F.S.
Noticing, Territory, and Land
Ownership
Royal provided notice of the application pursuant to Section
367.071, F.S., and Rule 25-30.030, F.A.C. No objections to the transfer were
filed, and the time for doing so has expired. The application contains a
description of the service territory which is appended to this recommendation
as Attachment A. Royal provided a copy of a warranty deed executed on July 24,
2019, as evidence that Royal has rights to long-term use of the land upon which
the treatment facilities are located pursuant to Rule 25-30.037(2)(s), F.A.C.
Purchase Agreement and Financing
Pursuant to Rule 25-30.037(2)(i), and (j), F.A.C., the
application contains a statement regarding financing and a copy of the purchase
agreement, which includes the purchase price, terms of payment, and a list of
the assets purchased. There are no customer deposits, developer agreements, or
customer advances that must be disposed of with regard to the transfer.
According to the purchase agreement, the total purchase price of the assets is
$2,150,000. According to the application, the sale took place on July 1, 2019,
subject to Commission approval, pursuant to Section 367.071(1), F.S.
Facility
Description and Compliance
The Utility’s water system is composed of three surficial
wells with aeration, filtration, softening, and gas chloramination used as the
primary form of treatment. Wastewater treatment service is provided by the City
of Coral Springs. The last sanitary survey of the water treatment facility was
conducted on June 4, 2020, by the Department of Environmental Protection (DEP).
There were no deficiencies noted and the water system was determined to be in
compliance with the DEP’s rules and regulations.
Technical and Financial Ability
Pursuant to
Rule 25-30.037(2)(l) and (m), F.A.C., the application contains statements
describing the technical and financial ability of the Buyer to provide service
to the proposed service area. Royal’s application states that its president,
Gary Deremer, has over 30 years of Florida-related water and wastewater
industry experience with previous private utility ownership of five utility
systems. Also, Mr. Deremer is a major shareholder in 18 water and wastewater
utilities regulated by the Commission. Further, the application indicates that
Mr. Deremer has secured the services of U.S. Water Services Corporation (U.S.
Water) to provide contract operating service, billing, and collection services.
Staff reviewed the personal financial statements of Royal’s primary
shareholder, which is Mr. Deremer.
Based on its review, staff believes the Buyer has demonstrated the technical
and financial ability to provide service to the existing service territory.
Rates and Charges
Royal’s
rates were last approved in its only staff-assisted rate case in 1983.[6] The rates were subsequently
amended by 26 price indexes and pass through rate adjustments. In addition, in
1993, the Utility was granted approval to bill customers with one inch meters at
the 5/8 inch meter rate.
The Utility’s existing service availability and miscellaneous service charges
were approved prior to 1983. Royal has requested to revise its miscellaneous
service charges for water and add miscellaneous service charges for wastewater,
add late payment and non-sufficient funds (NSF) charges, implement a new class
of service for private fire protection rates, and establish customer deposits,
which are discussed in Issues 4 through 8 of this recommendation. Rule
25-9.044(1), F.A.C., provides that, in the case of a change of ownership or
control of a Utility, the rates, classifications, and regulations of the former
owner must continue unless authorized to change by this Commission. Therefore,
staff recommends that Royal’s existing rates, service availability charges, and
billing policy, as reflected in Schedule Nos. 2-A and 2-B, remain in effect,
until a change is authorized by the Commission.
Regulatory Assessment Fees and Annual Report
Staff has verified that the Seller is current with respect
to annual reports and RAFs through December 31, 2019. Royal will be responsible
for filing annual reports and paying RAFs for 2020 and all future years.
Conclusion
Based on the foregoing, staff recommends the transfer of
the water and wastewater systems and Certificate Nos. 259-W and 199-S is in the
public interest and should be approved effective the date of the Commission’s
vote. The resultant order should serve as the Buyer’s certificate and should be
retained by the Buyer. The existing rates, service availability charges, and billing policy should remain
in effect until a change is authorized by the Commission in a subsequent
proceeding. The tariffs reflecting the transfer should be effective for
services rendered or connections made on or after the stamped approval date on
the tariffs, pursuant to Rule 25-30.475, F.A.C. The Seller is current with
respect to annual reports and RAFs through December 31, 2019. Royal should be
responsible for filing annual reports and paying RAFs for 2020 and all future
years.
Issue 2:
What is the appropriate net book value for Royal's
water and wastewater systems for transfer purposes?
Recommendation:
The net book value (NBV) of the water and wastewater
systems for transfer purposes is $943,455 and $539,395, respectively, as of
July 1, 2019. Royal should be required to notify the Commission in writing that
it has adjusted its books in accordance with the Commission’s decision. The
adjustments should be reflected in the 2020 Annual Report when filed. (Sewards)
Staff Analysis:
Rate base was last established in 1983. The purpose
of establishing NBV for transfers is to determine whether an acquisition
adjustment should be approved. Royal’s request for a positive acquisition
adjustment is addressed in Issue 3. The NBV has been updated to reflect
balances as of July 1, 2019. Staff’s recommended NBV, as described below, is
shown on Schedule No. 1.
Utility Plant in Service (UPIS)
According to the Seller’s general ledger, the water and
wastewater UPIS balances were $3,187,937 and $1,814,757, respectively, as of
May 31, 2019. Staff auditors determined a significant portion of plant recorded
between January 1, 1988, and July 1, 2019, could not be verified due to lack of
supporting documentation. In order to verify the UPIS recorded in the annual
report, staff obtained the tax returns of the Seller for the years 2014 through
2018.
The Commission has previously approved this approach to calculate UPIS when
original records were not available.
In order to calculate the recommended balances for UPIS,
staff has relied upon the annual reports and the Seller’s tax returns, as well
as invoices for additions made through July 1, 2019. Therefore, staff
recommends that the Utility’s UPIS balances for water and wastewater be
$3,389,692 and $1,944,996, respectively, as of July 1, 2019. As a result, UPIS
for water and wastewater should be increased by $201,755 and $130,239,
respectively.
Land
In Order No. 19867, the Commission established the value
of land for water and wastewater to be $76,123 and $71,802, respectively. There
have been no additional land purchases since that Order was issued. Therefore,
staff recommends land balances for water and wastewater of $76,123 and $71,802,
as of July 1, 2019.
Accumulated Depreciation
According to the Seller’s general ledger, the water and
wastewater accumulated depreciation balances were $2,473,158 and $1,471,604,
respectively, as of May 31, 2019. Staff calculated the appropriate accumulated
depreciation balances, pursuant to Rule 25-30.140, F.A.C., through July 1,
2019. Based on staff’s calculation, staff recommends that the Utility’s
accumulated depreciation balances for water and wastewater be $2,522,360 and
$1,477,403, respectively, as of July 1, 2019. As a result, accumulated
depreciation for water and wastewater should be increased by $49,202 and $5,799,
respectively.
Contributions-in-Aid-of-Construction (CIAC) and
Accumulated Amortization of CIAC
According to the Seller’s general ledger, the water and
wastewater CIAC balances were $571,643 and $238,921, respectively, as of May
31, 2019. Staff reviewed the CIAC balances and there have been no additional
collections of CIAC through July 1, 2019. Therefore, staff recommends water and
wastewater CIAC balances of $571,643 and $238,921, respectively, as of July 1,
2019.
According to the Seller’s general ledger, the water and
wastewater accumulated amortization of CIAC balances were $579,047 and
$206,294, respectively. Staff auditors determined that the water and wastewater
balances were fully amortized as of July 1, 2019. Therefore, staff recommends
that the Utility’s accumulated amortization of CIAC balances for water and
wastewater are $571,643 and $238,921, respectively, as of July 1, 2019. As a
result, accumulated amortization of CIAC should be reduced by $7,404 for water,
and increased by $32,627 for wastewater.
Net Book Value
The Utility’s general ledger reflected a NBV for water and
wastewater of $798,303 and $382,328, respectively. Based on the adjustments
described above, staff recommends a NBV for the Utility’s water and wastewater
systems of $943,455 and $539,395, respectively, as of July 1, 2019. Staff’s
recommended NBV and the balances for UPIS and accumulated depreciation, based
on the National Association of Regulatory Utility Commissioners, Uniform System
of Accounts, are shown on Schedule No. 1, as of July 1, 2019.
Conclusion
Based on the above, staff recommends a NBV of Royal’s
water and wastewater systems for transfer purposes of $943,455 and $539,395,
respectively, as of July 1, 2019. Within 90 days of the date of the final
order, the Buyer should be required to notify the Commission in writing that it
has adjusted its books in accordance with the Commission’s decision. The
adjustments should be reflected in the Utility’s 2020 Annual Report when filed.
Issue 3:
Should a positive acquisition adjustment be
recognized for ratemaking purposes?
Recommendation:
No. Pursuant to Rule 25-30.0371, F.A.C., a positive
acquisition adjustment should not be granted as the Utility failed to
demonstrate extraordinary circumstances. (Sewards, Doehling)
Staff Analysis:
In its filing, the Utility requested a positive
acquisition adjustment be included in the calculation of the Utility’s rate
base. An acquisition adjustment results when the purchase price differs from
the NBV of the assets at the time of acquisition. Pursuant to Rule 25-30.0371,
F.A.C., a positive acquisition adjustment results when the purchase price is
greater than the NBV and a negative acquisition adjustment results when the
purchase price is less than the NBV. A positive acquisition adjustment, if
approved, increases rate base. There have been no positive acquisition
adjustments requested since Rule 25-30.0371, F.A.C., was enacted in 2002.
According to the purchase agreement, the Buyer purchased
the Utility for $2,150,000. As discussed in Issue 2, staff is recommending a
total NBV for the water and wastewater systems of $1,482,850 ($943,455 +
$539,395). This would result in a positive acquisition adjustment of $667,150.
Rule 25-30.0371(2), F.A.C., states, in part, the
following:
In determining whether extraordinary circumstances
have been demonstrated, the Commission shall consider evidence provided to the
Commission such as anticipated improvements in quality of service, anticipated
improvements in compliance with regulatory mandates, anticipated rate
reductions or rate stability over a long-term period, anticipated cost
efficiencies, and whether the purchase was made as part of an arms-length
transaction.
The Buyer provided information regarding improvements in
quality of service, improvements in compliance with regulatory mandates, and
anticipated cost efficiencies.
Improvements
in Quality of Service
Royal
stated in its application that through its contract with U.S. Water, it has
significantly improved the quality of service to its water and wastewater
customers. This is in part due to U.S. Water’s extensive experience in the
water and wastewater industry, as well as providing Royal with a dedicated call
center for customer service. In response to staff’s data requests, Royal
provided a list of several improvements it has made to the water treatment
plant and wastewater lift station since its acquisition. These improvements
include: rehabilitation of the lime softening unit, repair of the backwash
filters, replacement of the recirculation system service pump, and replacement
of the master lift station pumps.
Royal stated these repairs have improved water quality and reduced the number
of overflows at the lift station. Royal also stated that it has staged U.S.
Water equipment on site to enable it to provide a quicker response time for
emergencies than was provided by RUC.
Staff reviewed the complaints filed with the Commission
for the five-year period prior to the acquisition, June 2014 to June 2019, as
well as after the acquisition, July 2019 to October 14, 2020. For the time
period prior to the acquisition, the Commission recorded a total of 11
complaints pertaining to billing, quality of service, or quality of the water
product. The Commission recorded a total of two billing complaints for the time
period following the acquisition. Given the minimal number of complaints for
the entire period, before and after the acquisition, staff is unable to draw
any conclusions regarding the anticipated improvements in quality of service
since the change in ownership based upon the Commission’s customer complaint
data.
Improvements
in Compliance with Regulatory Mandates
The last sanitary survey conducted by the DEP, while the
system was owned by RUC, occurred on May 30, 2017. During this inspection six
deficiencies were noted and RUC’s system was found to be out of compliance with
the DEP’s rules and regulations. Of particular concern were holes in the roof
of the clear well tank, corroded plant components, failure to establish a
cross-connection control plan, and failure to follow the approved lead and
copper sampling plan. Based on staff’s review of DEP documents, it appears RUC
had cleared these deficiencies prior to Royal’s acquisition.
After Royal’s acquisition, on September 16, 2019, Broward
County conducted an inspection of the storage tanks on behalf of the DEP.
During the inspection, potential non-compliance was noted and a Compliance
Assistance Offer letter was sent to Royal. This was in part due to the diesel
fuel tank’s fill cap not being properly labeled and excessive rust areas on the
tank. Royal promptly labeled and painted the fill cap yellow, as well as
cleaned and painted the tank to rectify the situation.
Additionally, Royal stated that Broward County has a
requirement that fluoride be added to the public’s drinking water.
Royal found that the fluoride injection system was not in service, and RUC had
not purchased fluoride in the year prior to the sale of the system. Royal’s
review of RUC’s Monthly Operating Reports to the DEP revealed, however, that
RUC had been recording fluoride residuals. Royal installed the fluoride
injection system in October 2019 and is injecting the fluoride as required by
Broward County.
The DEP conducted a sanitary survey of Royal’s water
treatment plant on June 4, 2020. The report issued on July 1, 2020, stated that
the system was in compliance with the DEP’s rules and regulations. Also, the
complete battery of water quality tests for the DEP’s primary and secondary
water quality standards were performed on samples taken on January 29, 2020.
All contaminants were found to be below the DEP’s maximum contaminant levels
for each respective substance.
As discussed above, RUC had satisfied its deficiencies
with the DEP prior to the sale. Since the acquisition, Royal has maintained the
system in compliance with the DEP. In addition, RUC’s issues with respect to
regulatory compliance and quality of service prior to the transfer do not
appear to be especially egregious.
For this reason, staff does not believe the Utility has demonstrated
extraordinary circumstances for its requested positive acquisition adjustment.
Instead, staff believes that the improvements in quality of service and
compliance with regulatory mandates demonstrates Royal’s responsible execution
of its obligations as a utility owner.
Anticipated
Cost Efficiencies
In its application, the Buyer stated that based on
operational changes, it expects a reduction in operation and maintenance
expense. In response to staff’s third data request, the Utility calculated a
reduction of approximately $100,000, based on a comparison of 2018 expenses of
$762,373 and annualized 2020 expenses of $661,610. Staff notes bad debt expense
was not included due to the adverse effects the COVID-19 pandemic has had on
this account. Additionally, purchased wastewater expense was not included as it
is a pass-through cost and the Utility does not have control over the amount it
is charged by the provider or how those charges fluctuate from year to year.
The Buyer also stated that customers would receive a benefit through a
reduction of cost of capital. More specifically, the Buyer was able to obtain
financing through long-term debt at an interest rate of 5.25 percent, whereas
the previous owner maintained long-term debt at an interest rate of 8.65
percent.
In response to staff’s first data request, the Buyer
stated that it believes the NBV is understated. Staff has addressed the
inclusion of plant as supported by the Utility’s annual reports and tax returns
in Issue 2. However, Royal also believes certain replacements or repairs in
previous years were recorded as operation and maintenance expenses that should
have been capitalized, which has led to a further understatement of NBV. In the
past, the Commission has disallowed the inclusion of previously expensed items
in rate base. As
such, staff does not believe these adjustments are appropriate for
consideration of a positive acquisition adjustment.
Rule 25-30.0371(2), F.A.C., states that a positive
acquisition adjustment shall not be included in rate base absent a
demonstration of extraordinary circumstances. Any entity that believes a full
or partial positive acquisition adjustment should be made has the burden to
prove the existence of extraordinary circumstances. Prior to this transfer, the
Utility may have been in need of the improvements made. However, it was not in
such a dire state of operation that if the Buyer did not step in the Utility
would have failed to operate properly or provide services to its customers. While
staff acknowledges that the Buyer has made improvements and accomplished cost
savings, staff does not believe the actions performed demonstrate extraordinary
circumstances. Additionally, as discussed above, staff believes that many of
the improvements undertaken by Royal, regarding quality of service and
compliance with regulatory mandates, demonstrate responsible utility ownership
and should not be considered extraordinary circumstances.
Conclusion
Pursuant to Rule 25-30.0371, F.A.C., staff believes a
positive acquisition adjustment should not be granted as the Utility did not
demonstrate extraordinary circumstances.
Issue 4:
Should Royal’s request to
revise water and add wastewater miscellaneous service charges be approved?
Recommendation:
Yes. Royal’s request to revise water and add
wastewater miscellaneous service charges should be approved. Royal should be
required to file a proposed customer notice to reflect the Commission-approved
charges. The approved charges should be effective on or after the stamped
approval date on the tariff sheet pursuant to Rule 25-30.475(1), F.A.C. In
addition, the approved charges should not be implemented until staff has
approved the proposed customer notice and the notice has been received by
customers. Royal should provide proof of the date notice was given no less than
10 days after the date of the notice. (Bethea)
Staff Analysis:
Currently, the Utility’s existing miscellaneous
service charges for water consist of a violation reconnection charge of $5.00
for normal hours and $7.50 for after hours. There are no miscellaneous service
charges for wastewater. Section 367.091, F.S., authorizes the Commission to
change miscellaneous service charges. The Utility’s requested miscellaneous service
charges were accompanied by its reason for requesting the charges, as well as
the cost justification required by Section 367.091(6), F.S. The requested
charges are consistent with those recently approved for its sister companies:
LP Waterworks, Inc., Country Walk Utilities, Inc., and Gator Waterworks, Inc.[15] The
calculations for charges for miscellaneous service charges, shown in the tables
below, are rounded up to the nearest tenth. The Utility’s current and staff’s
recommended miscellaneous service charges are shown in Table 4-5.
Initial Connection
Charge
The initial connection charge is levied for service initiation at a
location where service did not exist previously. A Royal representative makes
one trip when performing the service of an initial connection. Based on labor
and transportation to and from the service territory, staff recommends initial
connection charges for Royal’s water and wastewater systems of $31.10 for
normal hours and $36.20 for after hours. Staff’s calculations are shown in
Table 4-1.
Table 4-1
Initial
Connection Charge Calculation
|
Activity
|
Normal Hours Cost
|
Activity
|
After
Hours Cost
|
|
Labor (Administrative)
($28/hr x1/4hr)
|
$7.00
|
Labor (Administrative)
($28/hr x1/4hr)
|
$7.00
|
|
Labor (Field)
($30.42/hr x 1/3 hr)
|
$10.14
|
Labor (Field)
($45.63/hr x 1/3 hr)
|
$15.21
|
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
|
Total
|
$31.05
|
Total
|
$36.12
|
Normal Reconnection
Charge
A normal reconnection charge is levied for the transfer of
service subsequent to a customer requested disconnection. A normal reconnection
requires two trips, which includes one to turn service on and the other to turn
service off. Based on labor and transportation to and from the service
territory, staff recommends normal reconnection charges for Royal’s water and
wastewater systems of $57.10 for normal hours and $64.70 for after hours. Staff’s
calculations are shown in Table 4-2.
Table 4-2
Normal
Reconnection Charge Calculation
|
Activity
|
Normal Hours Cost
|
Activity
|
After
Hours Cost
|
|
Labor (Administrative)
($28/hr x1/4hr x 2)
|
$14.00
|
Labor (Administrative)
($28/hr x1/4hr x 2)
|
$14.00
|
|
Labor (Field)
($30.42/hr x 1/4 hr x 2)
|
$15.21
|
Labor (Field)
($45.63/hr x 1/4hr x 2)
|
$22.82
|
|
Transportation
($0.535/mile x 26 miles-to/from x 2)
|
$27.82
|
Transportation
($0.535/mile x 26 miles-to/from x 2)
|
$27.82
|
|
Total
|
$57.03
|
Total
|
$64.64
|
Violation Reconnection
Charge
The violation reconnection charge is levied
prior to reconnection of an existing customer after discontinuance of service
for cause. The service performed for violation reconnection requires two trips,
which includes one trip to turn off service and a subsequent trip to turn on
service once the violation has been remedied. Based on labor and transportation
to and from the service territory, staff recommends violation reconnection
charges for Royal’s water system of $57.10 for normal hours and $64.70 for
after hours. For the wastewater system, staff recommends actual cost pursuant
to Rule 25-30.460, F.A.C. Staff’s calculations are shown in Table 4-3.
Table 4-3
Violation Reconnection Charge Calculation
|
Activity
|
Normal
Hours Cost
|
Activity
|
After
Hours Cost
|
|
Labor (Administrative)
($28/hr x1/4hr x 2)
|
$14.00
|
Labor (Administrative)
($28/hr x1/4hr x 2)
|
$14.00
|
|
Labor (Field)
($30.42/hr x 1/4 hr x 2)
|
$15.21
|
Labor (Field)
($45.63hr x 1/4 hr x 2)
|
$22.82
|
|
Transportation
($0.535/mile x 26 miles-to/from) x 2
|
$27.82
|
Transportation
($0.535/mile x 26 miles-to/from) x 2
|
$27.82
|
|
Total
|
$57.03
|
Total
|
$64.64
|
Premises
Visit Charge
The premises visit charge is levied when a
service representative visits the premises at the customer’s request for
complaint resolution and the problem is found to be the customer’s
responsibility. In addition, the premises visit charge can be levied when a
service representative visits a premises for the purpose of discontinuing
service for nonpayment of a due and collectible bill, and does not discontinue
service because the customer pays the service representative or otherwise makes
satisfactory arrangements to pay the bill. A premises visit requires one trip.
Based on labor and transportation to and from
the service territory, staff recommends premises visit charges of $31.10 for
normal hours and $36.20 for after hours. Staff’s calculations are shown in
Table 4-4.
Table 4-4
Premises
Visit Charge Calculation
|
Activity
|
Normal
Hours Cost
|
Activity
|
After
Hours Cost
|
|
Labor (Administrative)
($28.00/hr x1/4hr)
|
$7.00
|
Labor (Administrative)
($28.00/hr x1/4hr)
|
$7.00
|
|
Labor (Field)
($30.42/hr x 1/3 hr)
|
$10.14
|
Labor (Field)
($45.63/hr x 1/3 hr)
|
$15.21
|
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
Transportation
($0.535/mile x 26 miles-to/from)
|
$13.91
|
|
Total
|
$31.05
|
Total
|
$36.12
|
Conclusion
Based on the above, the miscellaneous service charges identified
in Table 4-5 below are appropriate and should be approved. The charges should
be effective on or after the stamped approval date on the tariff pursuant to
Rule 25-30.475, F.A.C. In addition, the approved charges should not be
implemented until staff has approved the proposed customer notice and the
notice has been received by the customers. The Utility should provide proof of
the date notice was given within 10 days of the date of the notice.
Table 4-5
Miscellaneous Service Charges
|
|
Current
|
|
Staff
Recommended
|
|
Water
|
Wastewater
|
Normal
Hours
|
After
Hours
|
|
Initial Connection Charge
|
N/A
|
N/A
|
$31.10
|
$36.20
|
|
Normal Reconnection Charge
|
N/A
|
N/A
|
$57.10
|
$64.70
|
|
Violation Reconnection Charge (Water)
|
$5.00
|
|
$57.10
|
$64.70
|
|
Violation Reconnection Charge (Wastewater)
|
|
N/A
|
Actual
Cost
|
|
Premises Visit
Charge
|
N/A
|
N/A
|
$31.10
|
$36.20
|
Issue 5:
Should Royal’s request to
implement a late payment charge of $6.50 be approved?
Recommendation:
Yes. Royal’s request to implement a late payment
charge of $6.50 should be approved. Royal should be required to file a proposed
customer notice to reflect the Commission-approved charge. The approved charge
should be effective on or after the stamped approval date on the tariff sheet
pursuant to Rule 25-30.475(1), F.A.C. In addition, the approved charge should
not be implemented until staff has approved the proposed customer notice and
the notice has been received by customers. Royal should provide proof of the
date notice was given no less than 10 days after the date of the notice.
(Bethea)
Staff Analysis:
Royal is requesting a $6.50 late payment
charge to recover the cost of labor, supplies, postage, and RAFs associated
with processing late payment notices. The Utility currently does not have a
late payment charge. Royal is requesting $6.50 for its late payment charge,
which is consistent with recent Commission practice and the charge is
consistent with that charged by other utilities managed by U.S. Water.[16] The
purpose of this charge is not only to provide an incentive for customers to
make timely payment, thereby reducing the number of delinquent accounts, but
also to place the cost burden of processing delinquent accounts solely upon
those who are cost causers. Section 367.091, F.S., authorizes the Commission to
establish, increase, or change a rate or charge other than monthly rates or
service availability charges.
Royal calculated the actual costs for its late payment
charges to be $8.07. Royal indicated that it will take approximately 15 minutes
per account to research, compile, and produce late notices. The delinquent
customer accounts will be processed by the administrative contract employee,
which results in labor cost of $7.00 ($28.00 x 0.25 hr). This is consistent
with prior Commission decisions where the Commission has allowed 10-15 minutes
per account for the administrative labor associated with processing delinquent
customer accounts.[17] However,
$8.07 would be the highest late payment charge approved amongst all other water
and wastewater utilities regulated by the Commission.[18]
Therefore, Royal is requesting a charge of $6.50, consistent with recent
Commission decisions. Royal’s calculation for its actual costs associated with
a late payment charge is shown in Table 5-1.
Table 5-1
Late Payment Charge Cost Justification
|
Activity
|
Cost
|
|
Labor
|
$7.00
|
|
Supplies
|
$0.22
|
|
Postage
|
$0.49
|
|
Markup for RAFs
|
$0.36
|
|
Total Cost
|
$8.07
|
Source:
Utility’s cost justification documentation
Conclusion
Based on the above, Royal’s request to implement a late
payment charge of $6.50 should be approved. Royal should be required to file a
proposed customer notice to reflect the Commission-approved charge. The
approved charge should be effective on or after the stamped approval date on
the tariff sheet pursuant to Rule 25-30.475(1), F.A.C. In addition, the
approved charge should not be implemented until staff has approved the proposed
customer notice and the notice has been received by customers. Royal should
provide proof of the date notice was given no less than 10 days after the date
of the notice.
Issue 6:
Should Royal be
authorized to collect Non-Sufficient Funds Charges?
Recommendation:
Yes. Royal should be authorized to collect NSF
charges. Royal should file a tariff sheet and a proposed customer notice to
reflect the Commission-approved NSF charges. The approved charges should be
effective for service rendered on or after the stamped approval date on the
tariff sheets provided customers have received notice pursuant to Rule
25-30.475, F.A.C. Royal should provide proof of noticing within 10 days of
rendering its approved notice. (Bethea)
Staff Analysis:
Section 367.091, F.S., requires that rates, charges,
and customer service policies be approved by the Commission. Staff recommends
that Royal should be authorized to collect NSF charges consistent with Section
68.065, F.S., which allows for the assessment of charges for the collection of
worthless checks, drafts, or orders of payment. As currently set forth in
Section 68.065(2), F.S., the following NSF charges may be assessed:
(1)
$25, if the face value does not exceed $50;
(2)
$30, if the face value exceeds $50 but does not exceed
$300;
(3)
$40, if the face value exceeds $300; or
(4) 5
percent of the face amount of the check, whichever is greater.
Conclusion
Approval of NSF charges is consistent with prior Commission
decisions.[19]
Furthermore, NSF charges place the cost on the cost-causer, rather than
requiring that the costs associated with the return of the NSF checks be spread
across the general body of ratepayers. As such, Royal should be authorized to
collect NSF charges. Royal should file a tariff sheet and a proposed customer
notice to reflect the Commission-approved NSF charges. The approved charges
should be effective for service rendered on or after the stamped approval date
on the tariff sheets provided customers have received notice pursuant to Rule
25-30.475, F.A.C. Royal should provide proof of noticing within 10 days of
rendering its approved notice.
Issue 7:
Should Royal’s request for
a new class of service for private fire protection be approved?
Recommendation:
Yes. Royal’s request to establish a new class of
service for a private fire protection rate of $50.96 for a six inch meter
should be approved. Royal should file a proposed tariff and customer notice to
reflect the Commission-approved rate. The approved rate should be effective on
or after the stamped approval date on the tariff sheet provided customers have
received notice pursuant to Rule 25-30.475(1), F.A.C. Royal should provide
proof of noticing within 10 days of rendering its approved notice. (Bethea)
Staff Analysis:
Royal is requesting a new class of service
for a six inch meter private fire protection rate of $50.96. Currently, the
Utility does not have any private fire protection rates. The Utility is
requesting that the private fire protection rate be consistent with Rule
25-30.465, F.A.C., which states that the rate shall be one-twelfth the
Utility’s current base facility charge (BFC) for each meter size.
At this time, the Utility does not have a BFC for a six inch meter. Royal’s
proposed rate is one-twelfth of what the BFC charge would be for a six inch
meter. Pursuant to Rule 25-30.437(6), F.A.C, the rates are first established
with the 5/8 inch x 3/4 inch meter as the foundation. The rates for the other
meter sizes are determined by factoring the BFC by the American Water Works
Association meter equivalents as provided for in Rule 25-30.055(1)(b), F.A.C.
The meter equivalent for a six inch meter is 50. Based on Royal’s existing BFC
of $12.23 for the 5/8 inch x 3/4 inch meter and the meter equivalent of 50 for
a six inch meter, the BFC for the six-inch meter is $611.50 ($12.23 x 50). Pursuant
to Rule 25-30,465, F.A.C., the resulting private fire protection rate is $50.96
($611.50/12). Therefore, staff believes the Utility’s request is reasonable and
should be approved.
Based on the above, Royal’s request to establish a new
class of service for private fire protection rate of $50.96 for a six inch
meter should be approved. Royal should file a proposed tariff and customer
notice to reflect the Commission-approved rate. The approved rate should be
effective on or after the stamped approval date on the tariff sheet provided
customers have received notice pursuant to Rule 25-30.475(1), F.A.C. Royal
should provide proof of noticing within 10 days of rendering its approved
notice.
Issue 8:
Should Royal’s request to
establish initial customer deposits be approved?
Recommendation:
Yes. Royal’s request to establish initial customer
deposits should be approved. The appropriate initial customer deposit should be
$62.26 for water and $79.08 for wastewater for the residential 5/8 inch x 3/4
inch meter size. The initial customer deposit for all other residential meter
sizes and all general service meter sizes should be two times the average
estimated bill. The approved customer deposits should be effective for
connections made on or after the stamped approval date on the tariff sheets
pursuant to Rule 25-30.475, F.A.C. The Utility should be required to collect
the approved initial customer deposits until authorized to change them by the
Commission in a subsequent proceeding. (Bethea)
Staff Analysis:
Rule 25-30.311, F.A.C., contains criteria for
collecting, administering, and refunding customer deposits. Rule 25-30.311(1),
F.A.C., requires that each utility’s tariff contain its specific criteria for
determining the amount of initial deposits. The Utility requested customer
deposits of $62.26 for water and $79.08 for wastewater, which was based on two
months of average residential monthly bills and the Utility’s proposed rates.
Customer deposits are designed to minimize the exposure of bad debt expense for
the Utility and, ultimately, the general body of ratepayers. In addition, collection
of customer deposits is consistent with one of the fundamental principles of
rate making—ensuring that the cost of providing service is recovered from the
cost-causer.
Rule 25-30.311(7), F.A.C., authorizes utilities to collect new or
additional deposits from existing customers not to exceed an amount equal to
the average actual charge for water and/or wastewater service for two billing
periods for the 12-month period immediately prior to the date of notice. The
two billing periods reflect the lag time between the customer’s usage and the Utility’s
collection of the revenues associated with that usage. Commission practice has
been to set initial customer deposits equal to two months bills based on the
average consumption for a 12-month period for each class of customers. The
Utility indicated that the average monthly residential usage is 6,000 gallons
per customer. Therefore, the average residential monthly bill is approximately
$31.13 for water and $39.54 for wastewater service, based on the Utility’s
existing rates.
Based on the above, the appropriate initial
customer deposit should be $62.26 for water and $79.08 for wastewater for the
residential 5/8 inch x 3/4 inch meter size. The initial customer deposit
for all other residential meter sizes and all general service meter sizes
should be two times the average estimated bill. The approved customer deposits
should be effective for connections made on or after the stamped approval date
on the tariff sheets pursuant to Rule 25-30.475, F.A.C. The Utility should be
required to collect the approved initial customer deposits until authorized to
change them by the Commission in a subsequent proceeding.
Issue 9:
Should this docket be closed?
Recommendation:
Yes. If no protest to the proposed agency action is
filed by a substantially affected person within 21 days of the date of the
issuance of the order, a consummating order should be issued and the docket
should be closed administratively upon Commission staff’s verification that the
revised tariff sheets have been filed, the Buyer has notified the Commission in
writing that it has adjusted its books in accordance with the Commission’s
decision, and proof that appropriate noticing has been done pursuant to Rule
25-30.4345, F.A.C. (Lherisson)
Staff Analysis:
If no protest to the proposed agency action is filed
by a substantially affected person within 21 days of the date of the issuance
of the order, a consummating order should be issued and the docket should be
closed administratively upon Commission staff’s verification that the revised
tariff sheets have been filed, the Buyer has notified the Commission in writing
that it has adjusted its books in accordance with the Commission’s decision,
and proof that appropriate noticing has been done pursuant to Rule 25-30.4345,
F.A.C.
TERRITORY DESCRIPTION
Royal Waterworks,
Inc.
Broward County
Water and Wastewater
Service
Township
48 South, Range 41 East
Section
15
The north 1/2 of Section 15, Township 48 South,
Range 41 East, situated in Broward County, Florida and containing 320 acres,
more or less.
FLORIDA PUBLIC
SERVICE COMMISSION
authorizes
Royal Waterworks, Inc.
pursuant to
Certificate Number 259-W
to provide water service in Broward
County in accordance with the provisions of Chapter 367, Florida Statutes,
and the Rules, Regulations, and Orders of this Commission in the territory
described by the Orders of this Commission.
This authorization shall remain in force and effect until superseded,
suspended, cancelled or revoked by Order of this Commission.
Order Number Date
Issued Docket Number Filing Type
7273 07/10/76 750635-W Original Certificate
12170 6/24/83 820237-WS Rate
Increase
12384 08/18/83 820275-WS Transfer
of Majority Control
19867 08/22/88 880557-WS Transfer
* * 20190170-WS Transfer
*Order Number and
date to be provided at time of issuance
FLORIDA PUBLIC
SERVICE COMMISSION
authorizes
Royal Waterworks, Inc.
pursuant to
Certificate Number 199-S
to provide wastewater service in Broward
County in accordance with the provisions of Chapter 367, Florida Statutes,
and the Rules, Regulations, and Orders of this Commission in the territory
described by the Orders of this Commission. This authorization shall remain in
force and effect until superseded, suspended, cancelled or revoked by Order of
this Commission.
Order Number Date
Issued Docket Number Filing Type
7273 07/10/76 750636-S Original Certificate
12170 6/24/83 820237-WS Rate
Increase
12384 08/18/83 820275-WS Transfer
of Majority Control
19867 08/22/88 880557-WS Transfer
* * 20190170-WS Transfer
*Order Number and
date to be provided at time of issuance
Royal Waterworks, Inc.
Schedule of Net Book Value
as of July 1, 2019
Water System
|
Description
|
Balance Per Utility
|
Adjustments
|
Staff Recommended
|
|
|
|
|
|
|
Utility Plant In Service
|
$3,187,937
|
$201,755
|
$3,389,692
|
|
Land & Land Rights
|
76,123
|
0
|
76,123
|
|
Accumulated Depreciation
|
(2,437,158)
|
(49,202)
|
(2,522,360)
|
|
CIAC
|
(571,643)
|
0
|
(571,643)
|
|
Amortization of CIAC
|
579,047
|
(7,404)
|
571,643
|
|
|
|
|
|
|
Total
|
$798,306
|
$145,149
|
$943,455
|
|
|
|
|
|
Wastewater System
|
Description
|
Balance Per Utility
|
Adjustments
|
Staff Recommended
|
|
|
|
|
|
|
Utility Plant In Service
|
$1,814,757
|
$130,239
|
$1,944,996
|
|
Land & Land Rights
|
71,802
|
0
|
71,802
|
|
Accumulated Depreciation
|
(1,471,604)
|
(5,799)
|
(1,477,403)
|
|
CIAC
|
(238,921)
|
0
|
(238,921)
|
|
Amortization of CIAC
|
206,294
|
32,627
|
238,921
|
|
|
|
|
|
|
Total
|
$382,328
|
$157,067
|
$539,395
|
|
|
|
|
|
Explanation of Staff’s
Recommended Adjustments
To Net Book Value as of July
1, 2019
|
Explanation
|
Water
|
Wastewater
|
|
|
|
|
|
Utility Plant in Service
|
|
|
|
To reflect the
appropriate amount of utility plant in service
|
$201,755
|
$130,239
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
|
To reflect the
appropriate amount of accumulated depreciation
|
($49,202)
|
($5,799)
|
|
|
|
|
|
Amortization of CIAC
|
|
|
|
To reflect the
appropriate amount of amortization of CIAC
|
($7,404)
|
$32,627
|
|
|
|
|
|
Total Adjustments
|
$145,149
|
$157,067
|
Royal Waterworks, Inc.
Schedule of Staff’s
Recommended Account Balances as of July 1, 2019
Water System
|
|
|
|
|
|
Account No.
|
Description
|
UPIS
|
Accumulated
Depreciation
|
|
302
|
Franchises
|
$713
|
($494)
|
|
304
|
Structure and Improvements
|
542,157
|
(404,877)
|
|
307
|
Wells and Springs
|
23,683
|
(23,683)
|
|
309
|
Supply Mains
|
48,267
|
(48,267)
|
|
310
|
Power Generation Equipment
|
11,948
|
(7,169)
|
|
311
|
Pumping Equipment
|
735,632
|
(728,171)
|
|
320
|
Water Treatment Equipment
|
224,484
|
(55,242)
|
|
330
|
Distribution Reservoirs and
Standpipes
|
9,100
|
(9,100)
|
|
331
|
Transmission and Distribution
Mains
|
974,103
|
(569,917)
|
|
333
|
Services
|
168,098
|
(131,089)
|
|
334
|
Meters and Meter Installations
|
335,937
|
(339,645)
|
|
335
|
Hydrants
|
68,439
|
(47,249)
|
|
339
|
Other Plant / Misc Equipment
|
60,527
|
(46,978)
|
|
340
|
Office Furniture and Equipment
|
11,693
|
(11,692)
|
|
341
|
Transportation Equipment
|
13,029
|
(13,029)
|
|
343
|
Tools, Shop and Garage Equipment
|
10,370
|
(10,370)
|
|
344
|
Laboratory Equipment
|
5,856
|
(5,856)
|
|
347
|
Misc Equipment
|
25,650
|
(25,650)
|
|
348
|
Other Tangible Plant
|
43,883
|
(43,883)
|
|
|
|
|
|
|
|
Total
|
$3,389,692
|
$2,522,360
|
Royal Waterworks, Inc.
Schedule of Staff’s
Recommended Account Balances as of July 1, 2019
Wastewater System
|
Account No.
|
Description
|
UPIS
|
Accumulated
Depreciation
|
|
354
|
Structure and Improvements
|
$145,709
|
$103,668
|
|
355
|
Power Generation Equipment
|
37,368
|
18,987
|
|
360
|
Collection Sewers-Force
|
120,328
|
120,328
|
|
361
|
Collection Sewers-Gravity
|
1,007,571
|
728,031
|
|
364
|
Flow Measuring Devices
|
81,227
|
81,227
|
|
371
|
Pumping Equipment
|
273,926
|
221,187
|
|
389
|
Other Plant/Misc Equipment
|
121,758
|
121,758
|
|
390
|
Office Furniture & Equipment
|
11,276
|
11,276
|
|
391
|
Transportation Equipment
|
13,029
|
13,029
|
|
393
|
Tools, Shop, and Garage
Equipment
|
22,947
|
22,947
|
|
394
|
Laboratory Equipment
|
26,858
|
23,768
|
|
398
|
Other Tangible Plant
|
11,197
|
11,197
|
|
|
|
|
|
|
|
Total
|
$1,944,996
|
$1,477,403
|
Royal Waterworks, Inc.
Monthly Water Rates
|
Residential
and General Service
Base
Facility Charge by Meter Size
|
|
|
|
5/8”
x 3/4"
|
|
$12.23
|
|
1"
|
|
$83.32
|
|
1
1/2"
|
|
$166.52
|
|
2"
|
|
$266.46
|
|
3"
|
|
$532.92
|
|
|
|
|
|
Charge
Per 1,000 gallons
|
|
$3.15
|
|
|
|
Billing Policy * The City of
Coral Springs requires installation of 1” meters at a minimum on all water
services provided by the Utility. In situations where the Utility believes the
customer would otherwise be entitled to a 5/8” x 3/4" meter, but for the existence
of the prevailing South Florida Building Code, the Utility will bill that
customer at the 5/8” rate for such service.
Service Availability
Charges
Customer Service Line Installation Charge
All Meter Sizes Actual Cost
Guaranteed Revenue Charge
Residential‑per ERC (615 GPD) per
month $ 3.33
Per gallon per month
$ .00542
Meter Installation Charge
5/8" x 3/4"
$100.00
1"
$190.00
1 1/2" $350.00
2"
$520.00
Over 2"
Actual Cost
Royal Waterworks, Inc.
Monthly Wastewater Rates
|
Residential
Service
|
|
|
|
All
Meter Sizes
|
|
$13.02
|
|
|
|
|
|
Charge
Per 1,000 gallons
|
|
$4.58
|
|
10,000
gallon cap
|
|
|
|
|
|
|
|
|
|
General
Service
Base
Facility Charge by Meter Size
|
|
|
|
5/8”
x 3/4"
|
|
$13.02
|
|
1"
|
|
$92.61
|
|
1
1/2"
|
|
$185.38
|
|
2"
|
|
$296.31
|
|
3"
|
|
$592.72
|
|
|
|
|
Charge
Per 1,000 gallons
|
|
$4.59
|
|
|
|
|
|
|
|
|
|
|
Service
Availability Charges
Customer Service Line
Installation Charge
All Meter Sizes
Actual Cost
Guaranteed Revenue Charge
Residential‑per ERC (350
GPD) per month $ 3.18
Per gallon per month
$
.012722
Order No. PSC-2018-0334-PAA-WU, issued June 28, 2018,
in Docket No. 20170155-WU, In re: Application for grandfather water
certificate in Leon County and application for pass through increase of
regulatory assessment fees, by Seminole Waterworks, Inc.
Order Nos. PSC-2020-0086-PAA-WU, issued March 24,
2020, in Docket No. 20190114-WU, In re:
Application for staff-assisted rate case in Alachua County, and request for
interim rate increase by Gator Waterworks, Inc.; PSC-16-0041-TRF-WU, issued
January 25, 2016, in Docket No. 20150215-WU, In re: Request for approval of
tariff amendment to include miscellaneous service charges for the Earlene and
Ray Keen Subdivisions,
the Ellison Park
Subdivision and the Lake Region Paradise Island Subdivision in Polk County, by
Keen Sales,
Rentals and Utilities,
Inc.; and PSC-15-0569-PAA-WS, issued December 16, 2015, in
Docket No. 20140239-WS, In re: Application for staff-assisted rate case in
Polk County by Orchid Springs Development Corporation.
Order Nos. PSC-2020-0086-PAA-WU, issued March 24,
2020, in Docket No. 20190114-WU, In re:
Application for staff-assisted rate case in Alachua County, and request for interim
rate increase by Gator Waterworks, Inc.; PSC-2018-0334-PAA-WU, issued June
28, 2018, in Docket No. 20170155-WU, In re: Application for grandfather
water certificate in Leon County and application for pass through increase of
regulatory assessment fees, by Seminole Waterworks, Inc.;
PSC-14-0198-TRF-SU, issued May 2, 2014, in Docket No. 20140030-SU, In re:
Request for approval to amend Miscellaneous Service charges to include all NSF
charges by Environmental Protection Systems of Pine Island, Inc.; and
PSC-13-0646-PAA-WU, issued December 5, 2013, in Docket No. 20130025-WU, In
re: Application for increase in water rates in Highlands County by Placid Lakes
Utilities, Inc.
