Case Background
K W Resort
Utilities Corp. (KWRU or Utility) is a Class A utility providing wastewater
service to 1,731 customers in Monroe County. A formal evidentiary hearing was
held on May 15-17, 2018 to address KWRU’s request for an increase in wastewater
rates. By Order No. PSC-2018-0446-FOF-SU (Final Order), issued September 4,
2018, the Commission approved, in part, the requested increase. The approved
revenue requirement represented an increase of $1,156,895.
On October 3,
2018, the Office of Public Counsel (OPC) and Monroe County each filed a notice
of administrative appeal to the First District Court of Appeal (First DCA). The Commission’s decision was affirmed per curiam by the First DCA, with
respect to both appeals, on March 8, 2021.
On May 18, 2021,
KWRU filed a Motion for Appellate and Remand Rate Case Expense and to Treat
Such Expense as a Regulatory Asset. In its motion, KWRU contends that it
reasonably incurred $28,987 defending the Final Order on appeal, and KWRU
expects to incur additional rate case expense of $7,500 associated with its motion,
for a total of $36,487. Due to the timing of its Motion and the amortization of
the rate case expense approved by the Final Order, the Utility believes it
would be more prudent to record the appellate rate case expense as a regulatory
asset, for which KWRU would seek recovery in its next rate proceeding.
On July 7, 2021,
KWRU filed an Amended Motion for Appellate and Remand Rate Case Expense and to
Treat Such Expense as a Regulatory Asset (Motion), requesting similar relief as in its
original motion, but increasing its incurred appellate expenses to $47,012,
with an expectation to incur additional rate case expense of $7,500, for a
total of $54,512
This
recommendation addresses the Utility’s Motion for approval to establish a
regulatory asset for recording appellate rate case expense. The Commission has
jurisdiction pursuant to Section 367.081, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission grant KWRU's motion for
appellate rate case expense and to treat such expense as a regulatory asset?
Recommendation:
The Commission should approve KWRU’s request to
establish a regulatory asset for the accounting purpose of recording the
deferral of costs associated with appellate rate case expense. The approval to
establish a regulatory asset, for accounting purposes, does not limit the
Commission’s ability to review the amounts, recovery method, recovery period,
and other related matters for reasonableness in a future proceeding in which
the regulatory asset is included. (Thurmond)
Staff Analysis:
On May 18, 2021, KWRU filed a motion for appellate
rate case expense. In its
motion, the Utility requested recovery of its appellate rate case expense in
the amount of $36,487. On July 7, 2021, KWRU filed an amended motion for
appellate rate case expense in the amount of $54,512.
To support its motion, KWRU cited decisions on remand made
by the Commission for Sunshine Utilities of Central Florida (Sunshine) and
Florida Cities Water Company – Lee County Division (Florida Cities). In
both cases, the Utility initiated the appeal process and was the cost causer.
The Commission determined that Sunshine was entitled to partially recover rate
case expense based on the number of appealed issues on which the Utility had
prevailed. The Commission determined that Florida Cities was entitled to fully
recover rate case expense, finding that, based upon supporting documents
provided, the Utility’s request for additional rate case expense for the appeal
and remand was prudent and reasonable. In the instant docket, OPC and Monroe
County filed respective appeals to the First DCA, while KWRU did not.
The concept of deferral accounting allows utilities to
defer costs due to events beyond their control and seek recovery through rates
at a later time. If the subject costs are significant, the alternative would be
for a company to seek a rate proceeding each time it experiences an exogenous
event. The costs in the instant docket are attributed to appellate rate case
expense. As the Utility is not the cost causer of these appeals, staff believes
the Utility was prudent in its decision to incur rate case expense to defend
itself. The Commission has previously ordered similar treatment of rate case
expense associated with Utilities, Inc. of Florida’s Phoenix Project and in the
2016 rate case for Utilities, Inc. of Florida.
Based on the above, staff recommends the authorization of
a regulatory asset to record appellate rate case expense. The approval to
establish a regulatory asset, for accounting purposes, does not limit the
Commission’s ability to review the amounts, recovery method, recovery period, and
other related matters for reasonableness in a future proceeding in which the
regulatory asset is included.
Issue 2:
Should this docket be closed?
Recommendation:
If no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the order, this docket should be closed
upon the issuance of a consummating order. (Trierweiler)
Staff Analysis:
If no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the order, this docket should be
closed upon the issuance of a consummating order.
