Case Background
On June 20,
2017, the Board of County Commissioners of Leon County (County) passed and
adopted Resolution No. R17-12 (Resolution), transferring regulation of the
privately-owned, for profit water and wastewater utilities in Leon County to
the Florida Public Service Commission (Commission). Effective upon the adoption
of the Resolution, all non-exempt water and wastewater systems in Leon County
became subject to the provisions of Chapter 367, Florida Statutes (F.S.). By
Commission Order No. PSC-2017-0357-FOF-WS, the Commission acknowledged the
Resolution.[1]
Pursuant to Section 367.171(2)(b), F.S.,
each utility engaged in the operation or construction of a system shall be
entitled to receive a certificate for the area served by such utility on the
day the chapter becomes applicable to the utility. On November 30, 2017, Lake
Talquin Water Company, Inc. (LTWC) filed an application for a certificate under
grandfather rights to provide water service in Leon County pursuant to Section
367.171(2)(b), F.S., and Rule 25-30.035, Florida Administrative Code (F.A.C.).
Docket No. 20170253-WU was established to process LTWC’s
grandfather application. On March 30, 2020, Seminole Waterworks, Inc.
(Seminole) acquired the utility from LTWC. Seminole transferred the utility to Lake
Talquin Waterworks, Inc. (Lake Talquin or Utility) on the same date.
Accordingly, the prior docket (20170253-WU) was closed and the current docket
(20200195-WU) was opened to address the grandfather application filed by Lake
Talquin Waterworks, Inc.
On August 4, 2020, Lake Talquin filed an
application for a certificate under grandfather rights to provide water service
in Leon County pursuant to Section 367.171(2)(b), F.S., and Rule 25-30.035, F.A.C.
In its application, the Utility simultaneously filed a request for approval of
a pass through increase for regulatory assessment fees (RAFs) pursuant to
Section 367.081(4)(b), F.S. Lake Talquin’s application was found to be
deficient, and staff sent a deficiency letter to the Utility on September 14,
2020. The Utility cured the deficiencies on October 27, 2020.
On August 14, 2020, the Utility filed a
petition for waiver or variance of Rule 25-30.120, F.A.C., which requires that RAFs
be paid for any year during which a utility is subject to the Commission’s jurisdiction
as of December 31 of that year. The Commission has 90 days to grant or deny the
waiver pursuant to Section 120.542(8), F.S. The Utility agreed to waive the
statutory deadline to March 2, 2021.
Lake Talquin provides water service to
approximately 237 residential customers, in single family and mobile homes,
located next to Lake Talquin in southwest Leon County. Wastewater service is
provided by septic tank. The Utility’s service area is located in the Northwest
Florida Water Management District.
This
recommendation addresses the application for a grandfather water certificate,
rates and charges, the petition for a variance or waiver of Rule 25-30.120,
F.A.C., the approval of a revised late fee and initial customer deposit, and
approval of a non-sufficient funds (NSF) charge. The Commission has
jurisdiction pursuant to Section 367.171, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Lake Talquin
Waterworks, Inc.’s request for waiver or variance of Rule 25-30.120, F.A.C.?
Recommendation:
Yes. The Utility has demonstrated that the
underlying purpose of the statute will be or has been achieved by other means,
and that strict application of the rule would place a substantial hardship on
the Utility. Therefore, staff recommends that the Commission approve Lake
Talquin Waterworks, Inc.’s request for a waiver or variance of Rule 25-30.120,
F.A.C., until such time as the Utility is authorized to increase its rates
pursuant to Section 367.081(4)(b), F.S., or within three months of the
Commission’s vote on the waiver, whichever occurs first. (Lherisson)
Staff Analysis:
On August 14, 2020, Lake
Talquin filed a Petition seeking waiver or variance of a requirement of Rule
25-30.120, F.A.C., which requires that RAFs be paid for any year during which a
utility is subject to the Commission’s jurisdiction as of December 31 of that
year. The Utility requests the waiver or variance of Rule 25-30.120, F.A.C.,
until such time as the Utility is authorized to increase its rates pursuant to
Section 367.081(4)(b), F.S. Rule 25-30.120(2), F.A.C., provides that “[t]he
obligation to remit the regulatory assessment fees for any year shall apply to
any utility that is subject to this Commission’s jurisdiction on or before
December 31 of that year or for any part of that year.” The effect of this
request would be to permanently waive any RAFs that would have been otherwise
due for 2020 up until the time the Application is considered by the Commission.
Section 120.542(2), F.S.,
authorizes the Commission to grant waivers or variances from agency rules where
the petitioner subject to the rule has demonstrated that the purpose of the
underlying statute will be or has been achieved by other means, and that a
strict application of the rule would cause the applicant substantial hardship
or would violate the principles of fairness. “Substantial hardship,” as defined
in this section, means demonstrated economic, technological, legal, or other
hardship. A violation of the “principles of fairness” occurs when the literal
application of a rule affects a particular person in a manner significantly
different from the way it affects other similarly situated persons who are
subject to the rule.
As acknowledged in Order No.
PSC-2017-0357-FOF-WS,
issued September 20, 2017, the Board of County Commissioners of Leon County on
June 20, 2017, passed and adopted Resolution No. R17-12, transferring regulation
of the privately-owned for profit water and wastewater utilities in the County
to the Florida Public Service Commission. Effective upon the adoption of the Resolution,
all non-exempt water and wastewater systems in Leon County became subject to
the provisions of Chapter 367, F.S.
On August 4, 2020, Lake Talquin
filed its application for a grandfather certificate pursuant to Section
367.171(2), F.S., and Rule 25-30.035, F.A.C. Also, in the same filing the
Utility filed its request for approval of a pass through increase for RAFs pursuant
to Section 367.081(4)(b), F.S. That portion of the request was in relation to
the RAFs required under Section 367.145, F.S., and Rule 25-30.120, F.A.C.
Section 367.081(4)(b), F.S., states that:
[t]he
approved rates of any utility shall be automatically increased or decreased
without hearing, upon verified notice to the commission 45 days prior to its
implementation of the increase or decrease that the utility’s costs for any
specified expense item have changed. . . . The new rates authorized shall
reflect, on an amortized or annual basis, as appropriate, the cost of or the
amount of change in the cost of the specified expense item. The new rates,
however, shall not reflect the costs of any specified expense item already
included in a utility’s rates. Specified expense items that are eligible for
automatic increase or decrease of a utility’s rates include, but are not
limited to: . . . [t]he regulatory assessment fees imposed upon the utility by
the commission.
The underlying
statutory provision pertaining to RAFs and Rule 25-30.120, F.A.C., are Sections
367.145(1) and (3), F.S., which state that:
(1) The commission shall set by rule a regulatory
assessment fee that each utility must pay in accordance with s. 350.113(3);
. . . .
(3) Fees collected by the commission
pursuant to this section may only be used to cover the cost of regulating water
and wastewater systems. Fees collected by the commission pursuant to chapters
364 and 366 may not be used to pay the cost of regulating water and wastewater
systems.
Pass through items authorized by Section 367.081(4)(b),
F.S., cannot be approved without “approved rates” by the Commission. Further,
the Commission’s RAFs are not included in the current existing rates for Lake
Talquin since the Utility was not regulated by the Commission prior to June
2017. The Utility notes that a pass through of the RAFs is not permissible
until such time as the Utility receives its Grandfather Certificate and its
rates are approved (grandfathered in). For that reason, the Utility argues it
is placed at an unfair financial disadvantage due to its inability to collect
those RAFs.
The purpose of assessing RAFs is to defray the cost of utility
regulation. The Utility contends that there have been minimal to no
costs of regulating Lake Talquin under Chapter 367, F.S., absent the review of
its grandfather application. The Utility also notes that it has paid the
applicable filing fee of $1,000 as required by Section 367.145(2), F.S., and
Rule 25-30.020, F.A.C., for the processing of its grandfather filing.
Based on the foregoing analysis and the information
provided within the Utility’s petition, staff believes that Lake Talquin has
met the requirements of Section 120.542, F.S., and has demonstrated that the
purpose of the underlying statute will be or has been achieved by other means,
because minimal regulation has been required at this point and the Utility has
been very cooperative with staff’s requests. Further, the strict application of
Rule 25-30.120, F.A.C., would place a substantial hardship on the Utility by
requiring the Utility to pay regulatory expenses for which it is not
compensated through rates. Therefore, staff recommends that the Commission
approve the Utility’s requested waiver or variance of Rule 25-30.120, F.A.C.,
until such time as the Utility is authorized to increase its rates pursuant to
Section 367.081(4)(b), F.S., or within three months of the Commission’s vote on
the waiver, whichever occurs first.
Issue 2:
Should Lake Talquin Waterworks, Inc.’s application
for a grandfather water certificate in Leon County be acknowledged?
Recommendation:
Yes. Lake Talquin’s application should be
acknowledged and the Utility should be issued Certificate No. 678-W, effective August
4, 2020, to serve the territory described in Attachment A. The resultant order
should serve as Lake Talquin’s certificate and should be retained by the
Utility. (M. Watts, D. Andrews)
Staff Analysis:
The Utility’s application for a certificate under
grandfather rights to provide water service in Leon County is in compliance
with Section 367.171(2)(b), F.S., and Rule 25-30.035, F.A.C. The application
contains a warranty deed as proof of ownership of the land on which the
Utility’s facilities are located, an accurate territory description, and
adequate service territory and system maps. The territory description is
provided in Attachment A.
As stated in the case background, Lake Talquin serves
approximately 237 residential customers located in Leon County. The Utility
does not currently have any outstanding citations, violations, or consent
orders on file with the Florida Department of Environmental Protection.
The Utility
is aware of its obligation to submit its 2020 Annual Report pursuant to Rule
25-30.110, F.A.C., and is also aware of its obligation to pay RAFs pursuant to
Rule 25-30.120, F.A.C. In addition, the Utility is aware that it must maintain
its books and records according to the National Association of Regulatory Utility
Commissioners’ Uniform System of Accounts.
Based on the above, staff recommends that Lake Talquin be
granted Certificate No. 678-W to serve the territory described in Attachment A.
The resultant order should serve as Lake Talquin’s certificate and should be
retained by the Utility.
Issue 3:
What rates and charges should be approved for Lake
Talquin Waterworks, Inc.?
Recommendation:
The Utility’s monthly service rates and charges that
were in effect when Leon County transferred jurisdiction to the Commission,
shown on Schedule No. 1, should be approved. The Utility’s revised late payment
charge and initial customer deposit, and non-sufficient funds charge, are
separately addressed in Issues 4, 5, and 6. The rates and charges should be
effective for services rendered on or after the stamped approval date on the
tariff pursuant to Rule 25-30.475, F.A.C. The Utility should be required to
charge the approved rates and charges until authorized to change them by this
Commission in a subsequent proceeding. (Sibley)
Staff Analysis:
According to the Utility’s
application, Lake Talquin’s current rates, charges, and customer deposits were
established in 2016 by Lake Talquin Water Company, Inc. and have been assessed
by Lake Talquin since the acquisition. The Utility’s current monthly service
rates consist of a base facility charge and a gallonage charge per 1,000
gallons. In addition, the Utility has miscellaneous service charges, a late
payment charge of $10, a service availability charge, and customer deposits. Staff
believes the Utility’s current monthly rates and charges except for the late
payment charge and customer deposits are reasonable and should be approved. Staff’s
recommendation with respect to the late payment charge is discussed in Issue 4
and customer deposits in Issue 6. Further, the Utility requests to implement
non-sufficient funds (NSF) charges, which is addressed in Issue 5.
Based on the above, the Utility’s
monthly service rates and charges that were in effect when Leon County
transferred jurisdiction to the Commission, except for customer deposits and
the late payment charge, shown on Schedule No. 1, should be approved. Those
charges are addressed separately in Issues 6 and 4, respectively. Approval of a
new, non-sufficient funds charge is also addressed in Issue 5. The rates and
charges should be effective for services rendered on or after the stamped
approval date on the tariff pursuant to Rule 25-30.475, F.A.C. The Utility
should be required to charge the approved rates and charges until authorized to
change them by this Commission in a subsequent proceeding.
Issue 4:
Should Lake Talquin Waterworks, Inc. late payment
charge be revised?
Recommendation:
Yes. Lake Talquin’s late payment charge should be
revised to $6.50. The Utility 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. The Utility should provide proof of the
date notice was given no less than 10 days after the date of the notice. (Sibley)
Staff Analysis:
Lake Talquin
is requesting a $6.50 late payment charge to recover the cost of labor,
supplies, postage, and RAFs associated with processing late payment notices. Lake
Talquin’s current late payment charge is $10.00. Lake Talquin is requesting
$6.50 for its late payment charge, which is consistent with recent Commission
practice and is the same charge approved by the Commission for its sister utilities
managed by U.S. Water.[4] 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 charge. The processing of delinquent accounts for Lake
Talquin are done by U.S. Water, the managing company; as a result staff
believes the request to revise the late payment charge is reasonable and should
be approved.
Based on the
above, Lake Talquin’s late payment charge should be revised to $6.50. The Utility
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. The Utility should provide proof of the date notice was given no
less than 10 days after the date of the notice.
Issue 5:
Should Lake Talquin Waterworks, Inc. be authorized
to collect NSF charges?
Recommendation:
Yes. Lake Talquin should be authorized to collect
NSF charges. Staff recommends that the Utility revise its tariffs to reflect
the NSF charges currently set forth in Section 68.065, F.S. The NSF charges
should be effective on or after the stamped approval date on the tariff sheets
pursuant to Rule 25-30.475(1), F.A.C. Furthermore, the charges should not be
implemented until staff has approved the proposed customer notice and the
notice has been received by customers. The Utility should provide proof of the
date the notice was given within 10 days of the date of the notice. (Sibley)
Staff Analysis:
Lake Talquin currently does not have NSF charges in place. Section 367.091,
F.S., requires rates, charges, and customer service policies to be approved by
the Commission. The Commission has authority to establish, increase, or change
a rate or charge. Staff believes that Lake Talquin 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. five percent of the face amount of the
check, whichever is greater.
Approval of NSF charges is
consistent with prior Commission decisions.[5]
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, Lake Talquin should be
authorized to collect NSF charges. Staff recommends that Lake Talquin revise
its tariff sheets to reflect the NSF charges currently set forth in Section
68.065, F.S. The NSF 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.
Furthermore, the NSF charges should not be implemented until staff has approved
the proposed customer notice and the notice has been received by customers. The
Utility should provide proof of the date the notice was given within 10 days of
the date of the notice.
Issue 6:
Should
Lake Talquin Waterworks, Inc.’s initial customer deposit be revised?
Recommendation:
Yes. Lake Talquin’s initial customer deposit should
be revised to reflect $86 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. (Sibley)
Staff Analysis:
Rule 25-30.311, F.A.C., provides the
criteria for collecting, administering, and refunding customer deposits.
Customer deposits are designed to minimize the exposure of bad debt expense for
the Utility and, ultimately, the general body of ratepayers. An initial
customer deposit ensures that the cost of providing service is recovered from
the cost causer. Historically, the Commission has set initial customer deposits
equal to two times the average estimated bill. Currently, the Utility’s initial
customer deposit for the 5/8 inch x 3/4 inch meter size is $125 for water and
is not consistent with Commission practice. The Utility’s average monthly
residential usage is 3,000 gallons per customer. Therefore, the average residential monthly
bill is approximately $43 based on the existing rates.
Based on the
above, Lake Talquin’s initial customer deposit should be revised to
reflect $86 for the residential 5/8 inch x 3/4 inch
meter size. The initial customer deposit for all other residential meter sizes
and all
general service meter sizes should be two times the average estimated bill.
The approved customer deposits should be effective for connections made on or
after the stamped approval date on the tariff sheets pursuant to Rule
25-30.475, F.A.C. The Utility should be required to collect the approved
initial customer deposits until authorized to change them by the Commission in
a subsequent proceeding.
Issue 7:
Should this docket be closed?
Recommendation:
If no person whose substantial interests are
affected by the proposed agency action portion of this recommendation files a
protest within 21 days of the issuance of the order, a consummating order
should be issued. The docket should remain open for staff’s verification that
the revised tariff sheets have been filed by the Utility and approved by staff.
Once this action is complete, this docket should be closed administratively.
(Lherisson)
Staff Analysis:
If no person whose substantial interests are
affected by the proposed agency action portion of this recommendation files a
protest within 21 days of the issuance of the order, a consummating order should
be issued. The docket should remain open for staff’s verification that the
revised tariff sheets have been filed by the Utility and approved by staff.
Once this action is complete, this docket should be closed administratively.
