Case Background
Black Bear
Waterworks, Inc. (Black Bear or Utility) is a Class C utility serving
approximately 331 water customers in Lake County. Black Bear was previously
identified as potentially over earning in 2017, and agreed to refund 10.44
percent of water revenues billed for 2017, as a result of a Commission-approved
Settlement Agreement in that case. Based on its review of Black Bear’s 2020
Annual Report, Commission staff identified potential 2021 overearnings. By
letter dated August 5, 2021, Black Bear acknowledged the Commission’s
jurisdiction over revenues in excess of the maximum of the allowed Return on
Equity (ROE) for 2021. On October 15, 2021 and October 27, 2021, informal
meetings were held between Black Bear and the Office of Public Counsel (OPC) (collectively
referred to as Parties) to discuss the final disposition of potential 2021 overearnings.
On November 5, 2021, Black Bear and OPC filed a Joint Motion requesting
Commission approval of a Settlement Agreement to resolve potential 2021
overearnings.
The purpose of
this recommendation is to present the Settlement Agreement proposal to the
Commission for approval. The Joint Motion and Settlement Agreement have been
attached as Attachment A to this recommendation. The Commission has
jurisdiction pursuant to Sections 367.081, 367.082, and 367.121, Florida
Statutes.
Discussion
of Issues
Issue 1:
Should the Commission approve the Joint Motion and
Settlement Agreement by the Parties?
Recommendation:
Yes. The proposed Settlement Agreement adequately
addresses the potential overearnings staff had identified during its ongoing
earnings surveillance activities. As outlined in the proposed Settlement
Agreement, Black Bear should refund 16.57 percent of water revenues billed for
the calendar year 2021. (Mouring)
Staff Analysis:
As stated in the Case Background, as part of its
ongoing surveillance activities, staff identified possible overearnings based
upon a review of Black Bear’s 2020 Annual Report. On November 5, 2021, the
Parties filed a Joint Motion requesting Commission approval of Settlement
Agreement to resolve the disposition of 2021 overarnings, and address possible
overearnings for 2022. With respect to 2021 overearnings, Black Bear should
refund, via bill credits, 16.57 percent of water revenues billed for the
calendar year 2021. The bill credits are anticipated to total approximately
$32,500, and are expected to be issued during the first quarter of 2022. The
refunds should be made in accordance with Rule 25-30.360, Florida
Administrative Code (F.A.C.)
In its letter dated August 5, 2021, the Utility indicated
that it intends to consolidate Black Bear, as well as nine other subsidiary
systems that are located within the same geographic vicinity, into a new corporation.
This merger is intended to recognize efficiencies and resolve the historical
difficulties in earnings for these systems. Many of the systems included in the
planned consolidation have habitually earned below the bottom of their
authorized rate of return on equity, while others have occasionally overearned
while having relatively low rates.
The Settlement Agreement also provides protections for
customers for possible overearnings of Black Bear in 2022. Black Bear has
agreed to hold subject to refund all revenues received during calendar year
2022 that are above its authorized ROE range until a final review of its 2022
Annual Report.
In keeping with the Commission’s long-standing policy and
practice of encouraging parties to settle issues whenever possible, staff
recommends that the Commission approve the Joint Motion and Settlement
Agreement by the Parties. The proposed Settlement Agreement adequately
addresses the potential overearnings staff had identified during its ongoing
earnings surveillance activities and provides protections for Black Bear’s
customer for possible overearnings in 2022.
Issue 2:
Should this docket be closed?
Recommendation:
No. If no timely protest is received from a
substantially affected person upon expiration of the protest period, the PAA
Order will become final upon the issuance of a Consummating Order. However,
this docket should remain open to allow staff to verify completion of the
refunds discussed in Issue 1. Once staff has verified that the refunds have
been made in accordance with Rule 25-30.360, F.A.C., the docket should be
closed administratively. (J. Crawford, Mouring)
Staff Analysis:
If no timely protest is received from a
substantially affected person upon expiration of the protest period, the PAA
Order will become final upon the issuance of a Consummating Order. However,
this docket should remain open to allow staff to verify completion of the
refunds discussed in Issue 1. Once staff has verified that the refunds have
been made in accordance with Rule 25-30.360, F.A.C., the docket should be
closed administratively.
