Discussion
of Issues
Issue 1:
Should the transfer of Certificate No. 647-W in St.
Johns County from Camachee Island Company, Inc. d/b/a Camachee Cove Yacht Harbor Utility
to Windward
Camachee Marina Owner LLC d/b/a Camachee Cove Yacht Harbor Utility, be
approved?
Recommendation:
Yes. The transfer of the water system and
Certificate No. 647-W is in the public interest and should be approved
effective the date that the sale becomes final. The resultant Order should
serve as the Buyer’s certificate and should be retained by the Buyer. The
Utility’s existing rates and late payment charge, as shown on Schedule No. 3,
should remain in effect until a change is authorized by the Commission in a
subsequent proceeding. The tariff pages reflecting the transfer should
be effective on or after the stamped approval date on the tariff sheet,
pursuant to Rule 25-30.475(1), F.A.C. The Utility is current with respect to
regulatory assessment fees (RAFs) and annual reports and should be responsible
for filing annual reports and paying RAFs for all future years. (Lewis, Veaughn, Bethea)
Staff
Analysis: On December 1, 2021, Windward filed an
application for the transfer of Certificate No. 647-W from Camachee
to Windward in St. Johns County. The application complies with Section 367.071,
F.S., and Commission rules concerning applications for transfer of
certificates. The sale to the Buyer occurred on August 31, 2021, contingent
upon the Commission’s approval, pursuant to Section 367.071(1), F.S.
Noticing,
Territory, and Land Ownership
Windward 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. Windward provided a copy of a recorded
utility easement on November 22, 2022, as evidence that Windward 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)(g),(h) and (i), F.A.C., the
application contains a statement regarding financing and a copy of the Purchase
Agreement, which included the purchase price, terms of payment, and a list of
the assets purchased. There are no customer deposits, guaranteed revenue
contracts, developer’s agreements, customer advances, leases, or debt of Camachee that must be disposed of with regard to the
transfer. According to the Purchase Agreement,
the total purchase price for the entire marina, including the water utility
assets, is $32,885,000. On November 14, 2022, the Buyer stated the specific
purchase price of the water utility assets should be set equal to the net book
value (NBV) as established by the Commission.
As discussed in Issue 2, staff has calculated a NBV of $228,846 for the water
system. Therefore, staff recommends a purchase price of $228,846 for the water
utility assets should be recognized.
Facility
Description and Compliance
The
Utility’s water treatment plant is rated at 70,977 gallons per day (gpd). Raw
water is drawn from two ground wells and treated by reverse osmosis, aeration,
and chlorination. Water is stored in a 24,000-gallon ground tank and a 264-gallon
bladder tank before distribution. The Florida Department of Environmental
Protection (DEP) conducted an inspection of the water treatment facilities on
June 14, 2021, and it was found to be in compliance with the DEP’s rules and
regulations, including primary and secondary standards.
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. As referenced in the transfer application, the
Buyer will fulfill the commitments, obligations, and representation of the
Seller with regards to utility matters. The Buyer indicated that it has no
experience in the water or wastewater industry; however, Windward retained the
existing plant operators and office personnel to ensure the continued operation
of the water facilities.
Furthermore,
the Buyer has stated that it will use its sister company, Windward Marina St.
Augustine, to provide funding to the Utility. Staff reviewed the financial
statement of Windward Marina St. Augustine, and believes the Buyer has
documented adequate resources to support the Utility’s operations. Based on the
above, staff recommends that the Buyer has demonstrated the technical and
financial ability to provide service to the existing service territory.
Rates
and Charges
The
Utility’s rates were last approved in a 2017 limited proceeding rate case for
water.[6] Subsequently, the rates have
been amended by four price index rate adjustments with the last one being in
2020. The Utility has no initial customer deposits, no service availability
charges, and the Utility is built out. The late payment charge was approved in
2009.[7] 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.
In
addition, the Utility has miscellaneous service charges, which were also
approved in 2009. However, the miscellaneous service charges do not conform to
Rule 25-30.460, F.A.C., and are discussed in Issue 3. Therefore, staff
recommends that the Utility’s existing rates and late payment charge as shown
on Schedule No. 3, should remain in effect, until a change is authorized by the
Commission in a subsequent proceeding. The tariff pages reflecting the transfer
should be effective on or after the stamped approval date on the tariff sheets
pursuant to Rule 25-30.475(1), F.A.C.
Regulatory Assessment Fees and Annual Report
In its
application, the Buyer indicated that it will be responsible for paying the
Utility’s RAFs and filing its annual reports for the year of transfer and
subsequent years. The Seller fulfilled the Utility’s RAF and annual report requirements
for 2020 and the Buyer fulfilled these requirements for 2021. The Buyer is responsible
for the Utility’s 2022 RAFs and annual report, which are due by March 31, 2023.
Based on the above, staff has verified that the Utility is current with respect
to its RAFs and annual reports.
Conclusion
Based on the foregoing, the
transfer of the water system and Certificate No. 647-W is in the public
interest and should be approved effective the date that the sale becomes final.
The resultant Order should serve as the Buyer’s certificate and should be
retained by the Buyer. The Utility’s existing rates and late payment charge, as
shown on Schedule No. 3, should remain in effect until a change is authorized
by the Commission in a subsequent proceeding. The tariff pages reflecting the
transfer should be effective on or after the stamped approval date on the
tariff sheet, pursuant to Rule 25-30.475(1), F.A.C. The Utility is current with
respect to regulatory assessment fees (RAFs) and annual reports and should be
responsible for filing annual reports and paying RAFs for all future years.
Issue 2:
What is the appropriate net book value for the Windward
Camachee Marina Owner LLC d/b/a Camachee Cove Yacht Harbor Utility water system
for transfer purposes, and should an acquisition adjustment be approved?
Recommendation:
The appropriate net book value (NBV) of the water
system for transfer purposes is $228,846, as of August 31, 2021. No acquisition
adjustment is warranted as the purchase price is equal to NBV. Within 90 days
of the date of the final order, the Utility 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
2022 Annual Report when filed. (Veaughn)
Staff Analysis:
Rate base was last established for the Utility as of
December 31, 2008.
The purpose of establishing NBV for transfers is to determine whether an
acquisition adjustment should be approved. The NBV does not include normal
ratemaking adjustments for used and useful plant or working capital. The
Utility’s NBV has been updated to reflect balances as of August 31, 2021.
Staff’s recommended NBV is shown on Schedule No. 1.
Utility Plant in Service (UPIS)
The Utility reflected a UPIS balance of $573,206 as of August 31, 2021.
Audit staff determined the Seller did not make the Commission ordered
adjustments established in Order No. PSC-10-1026-PAA-WU to reflect the correct
plant balance as of December 31, 2008. Using staff’s work papers from the last
rate case to establish the beginning balances, and supporting invoices for
plant additions, audit staff calculated a UPIS balance of $554,392 as of August
31, 2021. Therefore, staff recommends a UPIS balance of $554,392 as of August
31, 2021.
Land
The Utility reflected a land balance of $10,000 as of
August 31, 2021. Camachee’s land balance was established in Order No.
PSC-2010-1026-PAA-WU. There have been no additions to land since December 31,
2008. Therefore, staff recommends a land balance of $10,000 as of August 31,
2021.
Accumulated Deprecation
The Utility reflected an accumulated depreciation balance
of $339,350 as of August 31, 2021. Camachee recorded accumulated depreciation
as a grand total; it was not broken down by plant account. Staff auditors
recalculated depreciation accruals for all water accounts since the last rate
case through August 31, 2021, using the audited UPIS balances and the
depreciation rates established by Rule 25-30.140, F.A.C. As a result, staff
recommends that the accumulated depreciation balance be decreased by $3,805.
Accordingly, staff recommends a total accumulated depreciation balance of $335,545
as of August 31, 2021.
Contributions-in-Aid-of-Construction (CIAC)
and Accumulated Amortization of CIAC
The Utility reflected CIAC and accumulated amortization of
CIAC balances of $0 as of August 31, 2021. The Utility has no authorized
service availability charges, and has not received any donated property. Therefore,
staff recommends a CIAC balance of $0, and accumulated amortization of CIAC
balances of $0, as of August 31, 2021.
Net Book Value
The Utility reflected a NBV of $243,855 as of August 31,
2021. Based on the adjustments described above, staff recommends a NBV of
$228,846. Staff’s recommended NBV and the National Association of Regulatory
Utility Commissioners, Uniform System of Accounts balances for UPIS and
accumulated depreciation are shown on Schedule Nos. 1 and 2, as of August 31,
2021.
Acquisition Adjustment
Under Rule 25-30.0371, F.A.C., an acquisition adjustment
results when the purchase price differs from the NBV of the assets at the time
of the acquisition. As discussed in Issue 1, the Buyer stated the purchase price of
the water utility and its assets should be set equal to the NBV established by the
Commission. Because the NBV for this Utility at the time of transfer is equal
to the purchase price, an acquisition adjustment is not warranted.
Conclusion
Based on the above, staff recommends a NBV of $228,846, as
of August 31, 2021. No acquisition adjustment should be included in rate base.
Within 90 days of the date of the consummating 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 2022 Annual Report when filed.
Issue 3:
Should Windward Camachee Marina Owner LLC d/b/a
Camachee Cove Yacht Harbor Utility's miscellaneous service charges be revised
to conform to amended Rule 25-30.460, F.A.C.?
Recommendation:
Yes. The miscellaneous service charges should be
revised to conform to the recent amendment to Rule 25-30.460, F.A.C. The tariff
should be revised to reflect the removal of the initial connection and normal
reconnection charges. Windward 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 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. Windward
should be required to charge the approved miscellaneous services charges until
authorized to change them by the Commission in a subsequent proceeding.
(Bethea)
Staff Analysis:
Effective
June 4, 2021, Rule 25-30.460, F.A.C., was amended to remove initial connection
and normal reconnection charges.[9] The
definitions for initial connection charges and normal reconnection charges were
subsumed in the definition of the premises visit charge. The Utility’s
miscellaneous service charges consist of initial connection and normal
reconnection charges. The normal reconnection charge is more than the premises
visit charge. Since the premises visit entails a broader range of tasks, staff
believes the premises visit charge should reflect the amount of the normal
reconnection charge of $30. Therefore, staff recommends that the initial
connection and normal reconnection charges be removed, the premises visit
charge should be revised to $30, and the definition for the premises visit
charge be updated to comply with amended Rule 25-30.460, F.A.C. The Utility’s
existing and staff’s recommended miscellaneous service charges are shown below
in Table 3-1.
Table
3-1
Utility Existing and Staff Recommended Miscellaneous Service
Charges
|
|
Utility
Existing
|
Staff
Recommended
|
|
Initial Connection Charge
|
$25.00
|
-
|
|
Normal Reconnection Charge
|
$30.00
|
-
|
|
Violation Reconnection Charge
|
$30.00
|
$30.00
|
|
Premises Visit Charge
|
$15.00
|
$30.00
|
Conclusion
Based on the above, staff
recommends the miscellaneous service charges should be revised to conform to
the recent amendment to Rule 25-30.460, F.A.C. The tariff should be revised to
reflect the removal of the initial connection and normal reconnection charges.
Windward 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 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. Windward should be
required to charge the approved miscellaneous services charges until authorized
to change them by the Commission in a subsequent proceeding.
Issue 4:
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. (Sandy)
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.
Windward Camachee Marina Owner LLC
d/b/a Camachee Cove Yacht Harbor Utility
Water Service Area
St. Johns County
Township 7 South, Range 30
East
Sections 5 and 8
Territory description of portions
of Sections 5 and 8, Township 7 South, Range 30 East, St. Johns County, Florida,
Being more fully described as follows:
For point of reference, commence at an old red cedar post
found by previous surveys and described in deeds as marking the Southwest
corner of said Government Lot 3, Section 5, Township 7 South, Range 30 East,
also being the Point of Beginning; thence North 21˚03'00" West,
686.19'; thence North 60˚12'45" East, 6.66'; thence North 31˚46'56"
West, 669.00'; thence North 24˚31'19" West, 1434.26'; thence North
03˚52'55" West, 1638.13'; thence North 08˚52'55" West,
557.00'; thence North 30˚51'32" East, 60.46'; thence North
16˚38'00" West, 70.00'; thence North 03˚38'00" West,
462.00'; thence South 27˚38'00" East, 1452.00'; thence South
02˚38'00" East, 1320.00'; thence South 22˚08'00" East,
462.00'; thence South 73˚38'00" East, 130.00'; thence South
30˚56'51" East, 515.05'; thence South 18˚00'36" West,
478.81'; thence South 38˚34'49" East, 613.35'; thence North 57˚27'21"
East, 173.28'; thence North 21˚12'24" West, 76.64'; thence South
75˚55'59" East, 126.55'; thence South 30˚55'59" East,
50.00'; thence South 29˚04'01" West, 70.00'; thence South
16˚39'00" East, 133.08'; thence North 85˚12'32" East,
75.94' to the intersection with a curve being concave to the South, having a
radius of 50.00' and Delta of 33˚33'37"; thence along the chord of
said curve, North 86˚13'12" East, 28.87'; thence North
07˚10'06" West, 228.78'; thence North 63˚02'16" East, 157'
more or less to the mean highwater line; thence Southeasterly, meandering along
the mean highwater line, 1200' more or less; thence South 25˚01'07"
West, 110.00'; thence South 22˚57'00" East, 24.24'; thence South
67˚03'00" West, 115.75'; thence South 00˚31'00" East,
718.29' to the intersection with a curve being concave to the Southeast having
a radius of 2392.00' and Delta of 02˚42'18", said curve also being
the Northerly right-of-way line of State Road A-1-A; thence Southwesterly along
said curve an arc length distance of 112.93' to the Point of Curvature of said
curve; thence South 48˚31'00" West, along said Northerly right-of-way
line, 381.63'; thence North 21˚03'00" West, 1022.21' to the Point of
Beginning.
