Case Background
North Florida
Community Water Systems, Inc. (NFCWS or Utility) owns six water and three
wastewater systems in Duval, Alachua, Leon, Okaloosa, Franklin, and Washington
counties. The Utility provides service to approximately 2,471 water and 243
wastewater customers. The Utility’s water and wastewater system in Duval
County, formerly known as Duval Waterworks, Inc. (DWI), serves approximately 51
water customers and 33 wastewater customers. In February of 2023, the
Commission acknowledged the corporate reorganization and name change of several
systems, including DWI, to NFCWS. The corporate reorganization resulted in
no change in ownership or control of the utilities, and each FCWS system
continued to charge its own Commission-approved rates and charges.
Based on staff’s
review of DWI’s 2021 and 2022 Annual Reports, the Utility was identified as
potentially overearning. By letter dated July 22, 2022, NFCWS acknowledged the
Commission's jurisdiction over revenues in excess of the maximum of the allowed
Return on Equity (ROE) for 2022. NFCWS has worked with both the staff of the
Florida Public Service Commission as well as with the Office of Public Counsel
(OPC) to discuss the potential disposition of any portion of such earned return
above the maximum allowed ROE ("overearnings"). On May 7, 2024, NFCWS
and OPC filed a Joint Motion requesting Commission approval of a Settlement Agreement
to resolve the disposition of the 2022 and 2023 overearnings. The Settlement Agreement only addresses
customers of the Utility’s water and wastewater systems in Duval County.
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, NFCWS should refund customers of its Duval County system, formerly
DWI customers, 14.18 percent of water revenues and 32.38 percent of wastewater
revenues billed those customers for the calendar year 2022. NFCWS should also refund
12.68 percent of water revenues and 15.27 percent of wastewater revenues billed
those customers for the calendar year 2023. This refund credit should be based
upon each individual customer's billed amounts for the respective calendar
year. The refunds should be made in accordance with Rule 25-30.360, Florida
Administrative Code (F.A.C.) (Przygocki)
Staff Analysis:
As part of its ongoing surveillance activities,
staff identified possible overearnings based upon its review of DWI’s 2021 and
2022 Annual Reports, filed in 2022 and 2023, respectively. In further examining
possible overearnings, staff requests and obtains updated data over several
months to evaluate a utility’s financial position to evaluate the likelihood of
continued overearnings and to examine the level of operating revenues necessary
to support ongoing utility operations. Staff’s analysis also incorporates the
utility’s needs for continuing capital improvements and operating expenses.
In addition to working with staff, NFCWS also worked with
OPC to discuss the potential disposition of any overearnings. On May 7, 2024,
NFCWS and OPC filed a Joint Motion requesting Commission approval of a
Settlement Agreement to resolve the disposition of the 2022 and 2023
overearnings. NFCWS should refund customers of its Duval County system,
formerly DWI customers, 14.18 percent of water revenues and 32.38 percent of
wastewater revenues billed for the calendar year 2022. NFCWS should also refund
12.68 percent of water revenues and 15.27 percent of wastewater revenues billed
for the calendar year 2023. The refunds shall be made to customers of record as
of the date of the Order approving this Settlement pursuant to Rule
25-30,360(3), F.A.C. This refund credit shall be based upon each individual
customer's billed amounts for the respective calendar year.
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. Staff notes that this recommendation is consistent
with other Commission decisions regarding possible overearnings. The
proposed Settlement Agreement adequately addresses the potential overearnings identified
in 2022 and 2023. The refunds should be made in accordance with Rule 25-30.360,
F.A.C.
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. (Farooqi, Przygocki)
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.
