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State of Florida
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Public Service Commission
Capital Circle Office Center ● 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE:
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February 22, 2024
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TO:
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Office of Commission Clerk (Teitzman)
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FROM:
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Office of the General Counsel (Sapoznikoff,
Dike) SMC
Division of Accounting
and Finance (Cicchetti, Higgins, Mouring) ALM
Division of Economics (Guffey,
Hudson) EJD
Division of Engineering
(Ballinger, King, Ramos, Watts) TB
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RE:
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Docket No. 20230123-WS – Proposed Rule
25-30.0372, Alternative Procedure for Establishing Rate Base Value of
Acquired Utility System.
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AGENDA:
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03/05/24 – Regular Agenda – Rule
Proposal – Interested Persons May Participate
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Passidomo
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RULE STATUS:
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May Not Be Deferred. Rule must
be proposed by April 1, 2024, pursuant to Section 120.74(5), F.S.
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SPECIAL INSTRUCTIONS:
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None
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Case Background
In
2023,
the Florida Legislature passed SB 194 to enact Section 367.0811, Florida
Statutes (F.S.), entitled “Rates; alternative procedure for establishing rate
base value of acquired utility system.” Section 367.0811, F.S., creates an
alternative process to the cost method contained in Section 367.081, F.S., for
certain, qualifying water and/or wastewater utilities to establish a rate base
value when acquiring a water and/or wastewater utility system.
The Statute
Being Implemented: Section 367.0811, F.S.
For ease of reference, a copy of Section
367.0811, F.S., is appended to this recommendation as Attachment C.
Section
367.0811(1), F.S., states:
It
is in the public interest to promote consolidation efforts with water and
wastewater utility systems in order to encourage economies of scale, better
access to lower material and supply costs, better access to capital,
improvement in utility infrastructure, and improvement in the quality of
service overall.
Section 367.0811(3)(b), F.S.,
allows certain water and/or wastewater utilities to establish a rate base value
using the lesser of the purchase price negotiated between the parties to the
acquisition transaction or the average of the three appraisals conducted by
“licensed appraisers.” To qualify for this new procedure, the transaction must
be at arm’s length and the acquiring utility must either provide water or
wastewater service, or both, to more than 10,000 customers or be permitted to
produce at least 3 million gallons per day of drinking water. Section
367.0811(8), F.S.
The rate base value
established under this new process will be used for ratemaking purposes in the
acquiring utility’s next general rate case. Section 367.0811(3)(b), F.S.
However, Section 367.0811(7), F.S., allows the Commission “to classify the
acquired utility system as a separate entity for ratemaking purposes if it is
deemed to be in the public interest.”
Section 367.0811(4)(a), F.S.,
requires the utility system being acquired to be appraised in conformance with
the Uniform Standards of Professional Appraisal Practice by “three licensed
appraisers chosen from a list established by the commission.” It further
requires the acquiring utility pay for the three appraisals. The statute is
silent as to how the “licensed appraisers” are to be chosen from the
Commission’s list. Section 367.0811(3)(b), F.S., allows reasonable transaction
and closing costs incurred by the acquiring utility and reasonable fees paid to
the “licensed appraisers” to be included in the rate base value.
Section 367.0811(4)(b), F.S.,
requires the acquiring utility and the utility system being acquired to jointly
retain a licensed engineer to assess “the tangible assets of the utility system
being acquired.” The engineering assessment must be used by the three “licensed
appraisers” in determining the value of the utility system being acquired.
Section 367.0811(5), F.S.,
specifies what information must be contained in the petition. Section
367.0811(5)(d), F.S., requires the petition to include a 3-year plan to address
each deficiency identified in the engineering assessment, but does not state
what must be included in the 3-year plan. Section 367.0811(5)(e), F.S.,
requires the petition to contain “the 5-year projected rate impact on the
customers of the utility system being acquired” and specifies some, but not
all, of what the 5-year projected rate impact should include. Section
367.0811(5)(h), F.S., requires the petition to contain a rate stabilization
plan if the acquisition would result in a “significant individual increase in
rates during the first five years.” However, the statute does not set forth
what would constitute “a significant individual increase in rates” or what must
be contained in the rate stabilization plan.
Section 367.0811(6), F.S.,
requires that no later than eight months after receiving a complete petition
the Commission must “grant the petition, in whole or in part, or with
modifications, or may deny the petition.” Sections 367.0811(6)(a)-(b), F.S.
However, the statute is silent as to how to determine whether a petition is
complete or when the petition must be filed.
Section 367.0811(9), F.S.,
indicates what, at a minimum, the Commission must consider in determining whether
a rate base value petition serves the public interest and pursues the statutory
goals. Part of the consideration must include improvements to the quality of
service and compliance with regulatory requirements.
Section 367.0811(11), F.S.,
requires the Commission to adopt rules to implement the statute.
Procedural
Matters
In furtherance of the
Legislature’s directive, staff initiated rulemaking to adopt a new rule to
implement Section 367.0811, F.S. The Commission’s Notice of Development of
Rulemaking was published in Volume 49, Number 211, of the Florida
Administrative Register on October 30, 2023. That notice included one rule:
Rule 25-30.0372, Florida Administrative Code (F.A.C.), titled “Alternative
Procedure for Establishing Rate Base Value of Acquired Utility System.”
Staff held a rule development
workshop on November 14, 2023, to obtain stakeholder comments on the draft rule.
Prior to the workshop, Sunshine Water Services (Sunshine) submitted
pre-workshop comments. Representatives of the Office of Public Counsel (OPC), Sunshine,
American Water, U.S. Water Services Corporation (U.S. Water), Southwest Florida
Company and Florida Utilities (SWFCFU), Central States Water Systems (Central),
and CSWR-Florida (CSWR) attended the workshop. U.S. Water, OPC, CSWR, and
Sunshine submitted post-workshop comments.
This recommendation addresses
whether the Commission should propose new Rule 25-30.0372, F.A.C. The
Commission has jurisdiction pursuant to Sections 120.54, 350.127(2), and
367.121(1), F.S.
Discussion
of Issues
Issue 1:
Should the Commission propose the adoption of Rule
25-30.0372, F.A.C., Alternative Procedure for Establishing Rate Base Value of
Acquired Utility System?
Recommendation:
Yes. The Commission should propose the adoption of
Rule 25-30.0372, F.A.C., as set forth in Attachment A. The Commission should
also certify the rule as a minor violation rule. (Sapoznikoff, Cicchetti, Watts,
Guffey)
Staff Analysis:
The purpose of this rulemaking is to adopt Rule
25-30-0372, F.A.C., to implement the requirements of Section 367.0811, F.S.
Staff recommends that the Commission propose adoption of Rule 25-30.0372,
F.A.C., as set forth in Attachment A. Below is a detailed explanation of each
section of the rule that staff recommends and stakeholder comments on the rule
provisions.
Subsection (1) - Definitions
Staff drafted this section to define certain terms used in
the rule, either because the term had no clear meaning or to simplify and
streamline discussion of other components of the rule by using a specific
definition.
Paragraph (1)(a) - Definition of “Licensed Appraiser”
Section
367.0811(4)(a), F.S., requires three appraisals to be performed by “licensed
appraisers chosen from a list established by the [C]ommission.” However, it does
not define “licensed appraiser.” Florida’s Department of Business and
Professional Regulation has not issued a license for the category of “licensed
appraiser” since July 1, 2003. See
Section 475.611(1)(t), F.S.
Accordingly, staff believes that the rule needs to define that term.
The
definition of “licensed appraiser” that staff is recommending includes
individuals who hold the following certifications or designations: Accredited
Senior Appraiser by the American Society of Appraisers (ASA), designation as a
Certified Valuation Analyst by the National Association of Certified Valuators
and Analysts (NACVA), designation as a Certified Business Appraiser by the
Institute of Business Appraisers (IBA), or designation as Accredited in
Business Valuation by the American Institute of Certified Public Accountants
(AICPA). Staff’s recommended definition is designed to identify those
individuals who would have the skills necessary to perform the valuation of the
utility being acquired. Staff reviewed the standards adopted in other
jurisdictions that allow for a similar valuation of acquired water and
wastewater utilities. Staff also looked at the credentials held by valuation
experts who have testified before the Commission in other matters and the
credentials required to be on the Approved Appraiser List of Florida’s
Department of Environmental Protection, Division of State Lands, Bureau of
Appraisal. In doing so it was discovered that most of these valuation experts
are not necessarily appraisers, but are also engineers and certified public
accountants.
Sunshine’s
pre-workshop comments express that the criteria to be on the Commission’s list
of “licensed appraisers” are too narrow; however, its post-workshop comments are
silent in that regard. OPC suggests that the rule be revised to add additional membership
designations as qualifications to be on the approved list of “licensed
appraisers.” The rule reflects the expanded membership designations. All of the
organizations have stringent educational and continuing education requirements,
ethical standards, and qualification criteria related to the valuation of
utility systems.
Paragraph (1)(b) - Definition of “Price Index”
Paragraph (1)(b) defines “price index.” This term is used in paragraph
(3)(f) of the draft rule in discussing when a rate stabilization plan is
required. Section 367.0811(5)(h), F.S., requires the petition include a rate
stabilization plan when the alternative rate base value results in a “significant
individual increase in rates.” Staff included this definition as an expedient
way to refer to the most recent annual order entered pursuant to Section
367.081(4)(a), F.S., titled “In re: Annual reestablishment of price increase or
decrease index of major categories of operating costs incurred by water and
wastewater utilities established by the Commission by order entered pursuant to
Section 367.081(4)(a), F.S.” The term “price index” is used in paragraph (3)(f)
of the draft rule in addressing whether there is a “significant individual
increase in rates” that requires the petition to include a rate stabilization
plan.
While use of the price index in the draft rule to measure whether there
is a “significant individual increase in rates” is disputed, no stakeholder provided
comment on the definition of “price index.”
Subsection (2) - Appraisals
As
previously mentioned, Section 367.0811(4)(a), F.S., requires the utility system
being acquired to be appraised by “three licensed appraisers chosen from a list
established by the [C]ommission,” However, the statute is silent as to how the
utility being acquired is to be appraised, how the “licensed appraisers” are to
be chosen from the Commission’s list, how “licensed appraisers” can be added to
or removed from the list, and how the list can be accessed.
Paragraph
(2)(a) - Type of Appraisal
Paragraph
(2)(a) requires that each appraisal value the utility system being acquired
according to its intended use. This provision ensures that appraisals are not
based on valuation of the land for non-utility purposes. No stakeholder provided
comment on this provision of the draft rule.
Paragraph
(2)(b) - How “Licensed
Appraisers” Are Chosen
Just
as Section 367.0811(4)(a), F.S., does not define “licensed appraiser,” it also
does not state how the “licensed appraisers” should be chosen. Paragraph (2)(b)
of the draft rule states that the acquiring utility and the utility being
acquired will each select a “licensed appraiser,” and the third “licensed
appraiser” will be chosen at random by the Commission. This provision resolves
concerns raised at the workshop by CSWR and OPC.
CSWR’s
post-workshop comments express concern with what would happen if the two
utilities each chose a “licensed appraiser,” but could not agree on the third.
OPC’s comments suggest that the Commission choose the third “licensed appraiser.”
Accordingly, by having the Commission randomly select the third appraiser, the
rule incorporates OPC’s comment and eliminates the basis for CSWR’s concern
that there might be an impasse on selecting the third “licensed appraiser.”
Paragraph (2)(c) - The “Licensed Engineer” May Not
Also Be a “Licensed Appraiser”
Because
the definition of “licensed appraiser” includes engineers, paragraph (2)(c) of
the draft rule indicates that the licensed engineer who performs the
statutorily required engineering assessment may not also serve as a “licensed
appraiser” on the same acquisition transaction. Staff believes it is important
to keep these roles independent. Staff is concerned that an appraisal performed
by the engineer who also conducts the engineering assessment may have the
appearance of being biased against the other appraisals.
CSWR
objects to this limitation asserting there is no conflict of interest between
the two roles and the engineer would be in the best position to appraise the
system. While there may not be a conflict of interest, staff believes each role
has distinct duties. Moreover, the fact that CSWR suggests that the engineer
would be in the best position to appraise the system supports staff’s concern
that the appraisal performed by the engineer who also conducts the engineering
assessment may have the appearance of being biased against the other appraisals.
The engineering report will be made available to all three licensed appraisers and
incorporated in each appraisal, so all the appraisals can rely on the same
information.
Paragraph (2)(d) - How the Appraiser List May Be
Accessed
Section
367.0811(4)(a), F.S., requires the Commission to establish a list of “licensed
appraisers” from which the three “licensed appraisers” will be chosen to
perform the appraisals. Paragraph (2)(d) of the draft rule facilitates this
requirement by describing how the list the Commission establishes may be
accessed – either on the Commission’s website or from the
Office of the Commission Clerk. No stakeholder provided comment regarding this provision
of the draft rule.
Paragraph (2)(e) - How a “Licensed Appraiser” May
Be Added to the List
Paragraph
(2)(e) of the draft rule indicates how a “licensed appraiser” may be added to
the list the Commission is statutorily required to maintain, and what
information must be provided. The information required contains not only the
name and contact information for the “licensed appraiser,” but also that the “licensed
appraiser” satisfies the requirements of paragraph (1)(a) of the draft rule and
is qualified to be on the list of “licensed appraisers.” This information is
necessary to maintain the statutorily-required list. No stakeholder provided
comment regarding this provision of the draft rule.
Paragraph (2)(f) - “Licensed Appraiser” is Responsible
for the Accuracy of information
Paragraph
(2)(f) of the draft rule places the burden on the “licensed appraiser” to
ensure their information remains updated and correct. The list needs to be
up-to-date and correct to ensure that only qualified individuals are performing
the appraisals. In addition, the list needs to be up-to-date and correct to
ensure that all individuals may be readily contacted in the selection process
or if any question or concern arises. The “licensed appraiser” is in the best
position to know when information changes. No stakeholder provided comment
regarding this provision of the draft rule.
Paragraph (2)(g) - Removing a “Licensed Appraiser”
from the list
Paragraph
(2)(g) of the draft rule indicates how and why a licensed appraiser may be
removed from the list. A “licensed appraiser” may request to be removed from
the list simply by requesting such in writing via the email provided. Inclusion
on the list is voluntary, so this paragraph provides the means by which a
“licensed appraiser” may opt out of participation. No stakeholder provided
comment regarding this provision of the draft rule.
Subsection (3) - Petition
The statute contains a prescriptive list of what the petition may
contain. However, staff is recommending provisions in the draft rule to clarify
ambiguous terms in the statute and the procedures for handling the petition
before the Commission.
Paragraph (3)(a) - Petition Filing Date and
Determination of Completeness
Section
367.0811, F.S., is silent as to when the petition must be filed. Paragraph
(3)(a) of the draft rule allows that the petition “may be filed concurrent with
the application to transfer the certificate(s) of authorization, but must be
filed no later than 6 months after the issuance of the final order approving
the transfer of the certificate(s) of authorization or the closing date of the
sale.” Staff believes simultaneous filing allows for regulatory efficiency and
comprehensive resolution of issues related to the transfer. This timing
requirement incorporates comments from Sunshine and CSWR.
OPC
alleges that customers may be harmed if a higher rate base is established
without sufficient justification and before all factors are known. Staff
believes that the notice requirement of subsection (5) of the draft rule addresses
OPC’s concern because notice will be provided to customers allowing them to
intervene in the alternative rate base proceeding.
CSWR’s
comments also suggest that the petition filing deadline should be able to be extended
upon good cause shown by the acquiring utility. CSWR alleges there could be
circumstances outside the acquiring utility’s control that cause a delay, such
as in obtaining the required engineering assessment and appraisals.
The
draft rule does not allow for extensions of time to file the petition as
requested by CSWR. Most of the information necessary for the petition will be
known well in advance of the petition. In requesting that the rule allow the
petition to be filed at the time of the transfer application CSWR even admits,
“there are many instances where the materials required to be filed with the
petition are available at the time of the transfer application.”
Paragraph (3)(b) - 3-year Plan Data required if Deficiencies
Noted in the Engineering Assessment
If
the engineering assessment required by Section 367.0811(4)(b), F.S., identifies
any deficiencies, paragraph (3)(b) of the draft rule requires certain
information to be contained in the 3-year plan required by Section
367.0811(5)(d), F.S. The 3-year plan “must address impact on quality of service
and any planned improvement to water quality.” Moreover, in considering the
rate base value petition, one thing the Commission must consider, at a minimum,
is improvements to quality of service. Section 367.0811(9)(a), F.S. The
information required by the draft rule provides the Commission the data necessary
to evaluate water quality and improvements to quality of service.
This
language is supported by comments from OPC and U.S. Water. However, U.S. Water
opines that improvements in both quality of service and compliance with
regulatory requirements should have been included in the filing requirements
for petition. However, the statute is prescriptive about what the petition may
contain, so water quality information could not be added as an extra
requirement. Because the statute requires the Commission to consider water
quality, requiring this information to be provided if there is a deficiency is
appropriate because it allows the Commission to assess whether the 3-year plan
is sufficient.
Paragraph (3)(c) - CPVRR Required
Under
paragraph (3)(c) of the draft rule, staff is recommending a new Cumulative Present Value of the Revenue Requirement (CPVRR)
form that must be filed as part of the 5-year projected rate impact
required under Section 367.0811(5)(e), F.S. Paragraph (3)(d) of the draft rule
specifies what information the projected 5-year rate impact must include. The
form and the required data will provide the Commission the information
necessary to evaluate the stated rate impact.
None
of the stakeholders object to the concept of a CPVRR being required to
substantiate the projected 5-year rate impact or dispute the Commission’s need
to obtain the information the CPVRR provides. OPC supports the draft rule’s
required use of a standardized worksheet. CSWR and Sunshine want use of the
CPVRR worksheet to be optional. CSWR indicates that in providing its own
analysis of the 5-year projected rate impact, the utilities would provide “all
data and assumptions used in the analysis, including the spreadsheet with
formulas intact.”
Staff
agrees with OPC that use of the CPVRR form provides consistency in evaluating
these types of petitions. Having a consistent spreadsheet will facilitate staff
being able to determine if all the filing requirements have been met. Because
the utilities suggest that the same information would be provided under their
individualized worksheets, use of the CPVRR form places no additional requirements
on the utilities.
Paragraph (3)(d) - CPVRR Data
As
discussed regarding the CPVRR, the Commission needs certain data (base facility
charge, gallonage charge, and billing determinants) to assess the 5-year
projected rate impact. This information includes the items set forth in
paragraph (3)(d) of the draft rule. U.S. Water indicates that billing
determinants may be too difficult to determine. CSWR asserts that obtaining
this data may not be feasible in all cases and should only be required if those
matters can be reasonably calculated.
Staff
points out that the current residential and general service base facility
charges and gallonage charges are available in a utility’s tariff. In addition,
billing determinants data reflects the number of customers. The draft rule
allows utilities to present standard components of rates (base facility
charges, gallonage charges, and billing determinants) in support of its 5-year
projected rate impact, which information provides the Commission the data
necessary to fulfill its statutory duty to consider whether there are rate
reductions or rate stability over a long term.
Paragraph (3)(e) - NARUC Uniform System of
Accounts Journal Entries
Because
of the uniqueness of this rate base determination process, paragraph (3)(e) of
the draft rule requires the acquiring utility to set forth the journal entries
under the 1996 National Association of Regulatory Utility Commissioners (NARUC)
Uniform System of Accounts associated with the information provided as part of
the 5-year projected rate impact. This information is necessary for the
Commission to fully analyze how an increase in a utility’s rate base value will
affect its customers. The Commission needs to know how the utility plans to
account for an increase in the revenue requirement and if that increase will be
amortized over a certain period of time. No stakeholders provided comment
regarding this provision of the draft rule.
Paragraph (3)(f) - “Significant Individual
Increase in Rates”
Under
Section 367.0811(5)(h), F.S., the petition must include a rate stabilization
plan if the acquisition would result in a “significant individual increase in
rates.” Staff recommends that the draft rule define “significant individual
increase in rates” as a rate increase during any twelve consecutive months of
the 5-year projected rate impact period in excess of the price index over the
current rates of the utility system being acquired. “Price index” is defined in
paragraph (1)(b) of the draft rule as “the most recent annual price increase or
decrease index of major categories of operating costs incurred by water and
wastewater utilities established by the Commission by order entered pursuant to
Section 367.081(4)(a), F.S.”
CSWR
asserts the Commission should instead use an inflation factor or an
affordability index, but staff believes the rule language adequately
encompasses those considerations. While Sunshine suggests a significant
increase occurs when the rate increase over the projected rate impact exceeds
1.5 times a seller’s current rates, staff believes a threshold increase of 50
percent will not encapsulate all significant increases.
Staff
believes, and OPC agrees, that the annual price index provides a reliable
metric by which to define a substantial increase in rates. Under Rule
25-30.420, F.A.C., water and wastewater utilities may seek a change in rates
based on application of the price index without a hearing.
Accordingly, an increase greater than the price index is certainly substantial
and a rate stabilization plan should be required. Staff recommends that the
Commission include this requirement in the draft rule because it is necessary information.
Subsection (4) - General Filing Instruction
Given
the eight month deadline imposed by Section 367.0811(6), F.S., for the
Commission to enter a final order following the filing of a complete petition, subsection
(4) of the draft rule requires, as a general filing requirement, that the
acquiring utility file prepared direct testimony and exhibits for each of its
witnesses at the time the petition is filed.
This
requirement is consistent with Commission practice in other industries in which
there are statutory deadlines for the Commission to issue a final order in a
case.
Subsection (5) - Notice
Section
367.0811, F.S., provides a new process to establish the rate base value of the
utility system being acquired. Before the acquiring utility files its petition
under Section 367.0811, F.S., it will know the projected rate impact over the
next five years. Given the due process concerns raised by OPC in its comments
that a rate impact has, staff recommends that the draft rule require direct
notice to customers of the acquiring utility’s use of this new process, the
projected rate impact for customers of both the acquiring system and the system
being acquired, and the rights of substantially affected customers to
intervene. In the event the petition for alternative procedure for establishing
an alternative rate base and the application for transfer are filed
concurrently, utilities would be allowed to combine the notice required by this
draft rule with the notice regarding the application to transfer, thus allowing
them to avoid duplication of efforts in a short time frame.
Minor Violation Rule Certification
Pursuant to Section 120.695, F.S., for each
rule filed for adoption, the agency head shall certify whether any part of the
rule is designated as a rule the violation of which would be a minor violation.
Under Section 120.695(2)(b), F.S., a violation of a rule is minor
if it does not result in economic or physical harm to a person or adversely
affect the public health, safety, or welfare or create a significant threat of
such harm. Rule 25-30.0372, F.A.C., should be listed as a
minor violation rule by the Commission. This rule is a minor violation rule
because the violation of this rule would not result in economic or physical
harm to a person, cause an adverse effect on the public health, safety, or
welfare, or create a significant threat of such harm. Violations of Rule
25-30.0372, F.A.C., would be minor violations. Therefore, for the purposes of
filing the rule for adoption with the Department of State, staff recommends
that the Commission certify Rule 25-30.0372, F.A.C., as a minor violation rule.
Statement of Estimated Regulatory Costs
Section
120.54(3)(b)1., F.S. encourages agencies to prepare a Statement of Estimated
Regulatory Costs (SERC) before the adoption, amendment, or repeal of any rule.
A SERC was prepared for this rulemaking and is appended as Attachment B. As
required by Section 120.541(2)(a)1., F.S., the SERC analysis includes whether
the rule is likely to have an adverse impact on economic growth, private sector
job creation or employment, or private sector investment in excess of $1
million in the aggregate within five years after implementation.
The
SERC concludes that the rule will likely not directly or indirectly increase
regulatory costs in excess of $200,000 in the aggregate in Florida within one
year after implementation. Further, the SERC concludes that the rule will not
likely increase regulatory costs, including any transactional costs, or have an
adverse impact on business competitiveness, productivity, or innovation, in
excess of $1 million in the aggregate within five years of implementation.
Thus, pursuant to Section 120.541(3), F.S., the rule do not require legislative
ratification.
In
addition, the SERC states that the rule would have no adverse impact on small
businesses, would have no implementation or enforcement costs on the Commission
or any other state or local government entity, and would have no impact on
small cities or small counties. The SERC states that there will be no
transactional costs likely to be incurred by individuals and entities required
to comply with the requirements. None of the impact/cost criteria established
in Section 120.541(2)(a), F.S., will be exceeded as a result of the rule.
Conclusion
Based on the foregoing, staff recommends the
Commission should propose the adoption of Rule 25-30.0372, F.A.C., as set forth
in Attachment A. Staff also recommends the Commission certify the rule as a
minor violation rule.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If no requests for hearing or comments are
filed, the rule should be filed for adoption with the Department of State, and
the docket should be closed. (Sapoznikoff)
Staff Analysis:
If no requests for hearing or comments are filed,
the rule should be filed for adoption with the Department of State, and the
docket should be closed.
25-30.0372 Alternative Procedure for Establishing
Rate Base Value of Acquired Utility System.
(1) Definitions. For the
purposes of this rule, the following definitions apply:
(a)
“Licensed Appraiser,” as referenced in Section 367.0811(4)(a), F.S., means a
person who meets all the following criteria:
1.
Has certification as an Accredited Senior Appraiser
by the American Society of Appraisers (ASA), designation as a Certified
Valuation Analyst by the National Association of Certified Valuators and
Analysts (NACVA), designation as a Certified Business Appraiser by the Institute
of Business Appraisers (IBA), or designation as Accredited in Business
Valuation by the American Institute of Certified Public Accountants (AICPA), and
2. Is in good standing with the
ASA, NACVA, IBA, or AICPA.
(b) “Price Index” means the most recent annual price
increase or decrease index of major categories of operating costs incurred by
water and wastewater utilities established by the Commission by order entered pursuant
to Section 367.081(4)(a), F.S.
(2) Appraisals.
(a) Each
appraisal must assess the value of the utility system being acquired according
to its intended use.
(b) The
acquiring utility will choose one licensed appraiser, the utility being
acquired will choose one licensed appraiser, and the Executive Director of the
Florida Public Service Commission or their designee will randomly choose the
third licensed appraiser. The process the Commission will use to randomly
select the third licensed appraiser is as follows:
1. The
licensed appraiser will be selected from the list of licensed appraisers
referenced in paragraph (1)(d) of this rule by the Executive Director or their designee
using a computationally-generated random number.
2. If
the licensed appraiser randomly selected has already been selected by the acquiring
utility or the utility being acquired, the process will be repeated until a
third licensed appraiser is selected.
(c) The licensed engineer who performs the engineering
assessment required by Section 367.0811(4)(b), F.S., may not also serve as a licensed
appraiser on the same acquisition transaction.
(d) The
list of licensed appraisers required by Section 367.0811(4)(a), F.S., can be
found at www.floridapsc.com/appraiserlist
or obtained from the Office of the Commission Clerk, Florida Public Service
Commission, 2540 Shumard Oak Boulevard, Tallahassee, Florida 32399-0850.
(e) A
licensed appraiser will be included on the Commission’s list of approved licensed
appraisers by submitting all of the following to appraiserlist@psc.state.fl.us
or the Office of the Commission Clerk, Florida Public Service Commission, 2540
Shumard Oak Boulevard, Tallahassee, FL 32399-0850:
1. The licensed
appraiser’s name, mailing address, telephone number, and email address;
2. The
name of any company with which the licensed appraiser is employed or
associated; and
3.
Proof of the information required by paragraph (1)(a) above.
(f) It is the responsibility of the licensed appraiser
to ensure that correct and updated information remains on file with the
Commission. The licensed appraiser must submit updated information to appraiserlist@psc.state.fl.us
within 30 days of any change of information. If the Commission determines that
a person no longer meets the requirements to be a licensed appraiser on the
Commission’s list, that person will be removed from the list. Upon request and
upon providing proof that the requirements listed in paragraph (1)(a) above are
met, a person will be added back to the list.
(g) The
licensed appraiser can be removed from the list by submitting a request for
removal in writing to appraiserlist@psc.state.fl.us.
(3) Petition. Section 367.0811(5), F.S., sets forth the
filing requirements a petition to establish the rate base value must contain.
(a)
The petition may be filed concurrent with the application to transfer the
certificate(s) of authorization, but must be filed no later than 6 months after
the issuance of the final order approving the transfer of the certificate(s) of
authorization or the closing date of the sale. Commission staff will review the
petition and within 30 days of receipt of the petition will notify the acquiring
utility whether the petition is complete or identify the information required
by Section 367.0811(5), F.S., which is missing from the petition. If an amended
petition is filed, Commission staff will review the amended petition and within
30 days of receipt of the amended petition will notify the acquiring utility
whether the amended petition is complete or identify the information required
by Section 367.0811(5), F.S., which is missing from the amended petition. This
process will continue until Commission staff determines the petition satisfies
the requirements of Section 367.0811(5), F.S. The date a petition is complete
under Section 367.0811(6), F.S., is the date that all documents required by
Section 367.0811(6), F.S. have been filed.
(b)
If the assessment of tangible assets required by Section 367.0811(4)(b), F.S.,
identifies deficiencies, the 3-year plan required by Section 367.0811(5)(d),
F.S., must include the following regarding the system being acquired:
1. A
copy of the most recent DEP and/or county health department sanitary survey,
compliance inspection report, primary and secondary standards drinking water
report; and
2. A
copy of all correspondence with the DEP, county health department, and water
management district, including consent orders and warning letters, and the
utility’s responses to the same, for the past five years.
(c)
Form PSC 1035 (03/24), entitled “Water and/or Wastewater Cumulative Present
Value of the Revenue Requirement for Alternate Rate Base Worksheet” (CPVRR), which
is incorporated by reference in this rule and may be obtained from [hyperlink], must be
included in the petition to show the 5-year projected rate impact required by
Section 367.0811(5)(e), F.S. The form can also be found at www.floridapsc.com, or obtained from the Office of the Commission Clerk,
Florida Public Service Commission, 2540 Shumard Oak Boulevard, Tallahassee,
Florida 32399-0850.
(d)
The 5-year rate impact required by Section 367.0811(5)(e), F.S., must also
include the following for each year for residential and general service
customers, and the CPVRR must support the projections for the following:
1.
Base facility charge,
2.
Gallonage charge, and
3. Billing
determinants.
(e)
The information filed under Section 367.0811(5)(e), F.S., must include the
acquiring utility’s proposed journal entries anticipated to result from the
acquisition, including tax entries and account numbers in conformance with the 1996
NARUC Uniform System of Accounts, which is incorporated by reference in Rule
25-30.115, F.A.C.
(f) For purposes of determining whether the petition must
include a rate stabilization plan under Section 367.0811(5)(h), F.S., “significant
individual increase in rates” means a rate increase during any twelve
consecutive months of the 5-year projected rate impact period in excess of price
index over the current rates of the utility system being acquired. A copy of
the most recent Commission order establishing the price index can be obtained
from the Public Service Commission, Division of Accounting & Finance, 2540
Shumard Oak Boulevard, Tallahassee, Florida 32399-0850.
(4) General
filing instruction. Prepared direct
testimony and exhibits for each witness testifying on behalf of the acquiring utility
must be filed at the time the petition is filed.
(5) Notice. At the time the petition is
filed with the Commission, the acquiring utility must provide a draft notice
for review by Commission staff. Commission staff will review the draft notice
within 7 days. Once staff has approved the notice, the acquiring utility must
provide notice by regular mail to the Office of Public Counsel and by regular
mail or personal service to each customer and owner
of property located within the service area for both the acquiring utility and
the utility being acquired, to the extent the utilities’ customers are within
the Commission’s jurisdiction. The notice required by this rule may be combined
with the notice of Application for Authority to Transfer issued pursuant to
Rule 25-30.030, F.A.C. The notice must contain:
(a) Title: Notice of Utility’s Petition to Establish Rate
Base Value Using Alternative Procedure;
(b) A statement that
the utility has filed a petition with the Commission to establish rate base
value of acquired utility system using the alternative procedure set forth in
Section 367.0811, F.S.;
(c) The date the petition was filed with the Commission;
(d) The docket number associated with the petition;
(e) A statement of the 5-year projected rate impact or the
anticipated effect of the requested rate base on rates for the next five years;
(f) A statement that the utility’s petition is available on
the Commission’s website;
(g) The acquiring utility’s address, telephone number, and
business hours; and
(h) A statement that any customer substantially affected by
the petition may file a motion to intervene in accordance with Rule 28-106.205,
F.A.C.
Rulemaking Authority 367.0811(11), FS. Law
Implemented 367.0811, FS., History–New___
