Case Background
At its September
4, 2025 Agenda Conference, the Florida Public Service Commission (Commission)
approved a rate increase for LP Waterworks, Inc. (LP or utility) in this
staff-assisted rate case (SARC). The approved revenue requirements were $197,112
for water and $149,156 for wastewater, which increased the staff adjusted test
year operating revenues by $6,911 (3.63 percent) for water and $6,044 (4.22
percent) for wastewater. The rates approved were a result of the percentage
increases, adjusted for the removal of miscellaneous revenues, applied across-the-board
to the utility’s rates at the time of filing.
However, on
September 18, 2025, the utility’s representative notified staff that the test
year operating revenues were overstated because staff did not consider
adjustments the utility had made to the test year billing determinants. Staff
determined that the utility was correct and the adjustments to remove duplicate
bills had been inadvertently overlooked. As a result of the test year operating
revenues being overstated, the percentage increase to achieve the revenue requirement
was understated. Because the rates approved by the Commission were determined
by applying the percentage as an across-the-board increase to the utility’s
existing rates, the rates will not allow the utility to generate the revenue
requirements for water and wastewater approved by the Commission at the
September 4, 2025 Agenda Conference. Due to the need of correcting the rates, a
PAA Order regarding Commission approval of the proposed rates at the September
4, 2025 Agenda Conference has not been issued yet.
This
recommendation addresses the correction of LP’s test year operating revenues
and rates. The Commission has jurisdiction in this case pursuant to Sections
367.011, 367.081, 367.0812, 367.0814, 367.091, and 367.121, Florida Statutes
(F.S.).
Discussion
of Issues
Issue 1:
What are the appropriate test year operating
revenues and rates for LP Waterworks, Inc.’s water and wastewater systems?
Recommendation:
Staff recommends that the appropriate test year operating
revenues are $177,972 for water system and $135,878 for
the wastewater system. Furthermore, staff recommends that the rate increase of 10.97
percent for water and 9.92 percent for wastewater be applied as an
across-the-board increase to service rates. The recommended water and
wastewater rates are shown on Schedule Nos. 4-A and 4-B, respectively. The utility
should file revised tariff sheets and a proposed customer notice to reflect the
Commission-approved rates. The approved rates should be effective for service
rendered on or after the stamped approval date on the tariff sheets pursuant to
Rule 25-30.475(1), Florida Administrative Code (F.A.C.). In addition, the
approved rates should not be implemented until staff has approved the proposed
customer notice and the notice has been received by the customers. The utility
should provide proof of the date notice was given within 10 days of the date of
the notice. (Bethea)
Staff Analysis:
Test Year Revenues
During the test year, the utility had a rate change. When
there is a rate change in a month, the prorated base facility charge shows up
as two bills with a proration of usage for each customer in the utility’s
billing system. The duplicate bills will overstate the operating revenues. The
prorated usage will understate the operating revenues for a tiered rate
structure because the total usage would not be reflected in the appropriate
tier. LP’s adjustments included in its application for a SARC had corrected the
duplicate bills; however in reviewing the billing analysis in preparation for writing
this recommendation, staff determined that LP did not adjust the usage. Staff
adjusted the billing determinants and billing analysis to correct the issues
that take place when there is a rate change during the month.
Annualizing the operating revenues using the rates at the
time of filing and the revised billing determinants, staff
determined test year service revenues should be $174,455
for water and $133,899 for wastewater. The utility recorded service
revenues of $167,675 for water and $124,080 for wastewater. The
corrections discussed above result in an increase to service revenues of $6,780
($174,455 – $167,675) for water and $9,819 ($133,899 – $124,080) for wastewater.
Staff recommends no change to the miscellaneous revenues of $3,517 for the water
system and $1,979 for the wastewater system as approved at the September 4,
2025 Agenda Conference.
Based on the above, the appropriate test year
operating revenues for LP’s water system are $177,972 ($174,455 + $3,517) and
$135,878 ($133,899 + $1,979) for the wastewater system.
Water and Wastewater Rates
Staff’s adjustment to the billing determinants and
test year operating revenues did not change the revenue requirement of $197,112
for water and $149,156 for wastewater approved at the September 4, 2025 Agenda
Conference. However, the difference between the revised test year operating
revenues and the approved revenue requirement results in a higher revenue
increase and percentage increase. As shown on Schedule Nos. 3-A and 3-B, the
revenue increase is $19,140 (10.75 percent) and $13,279 (9.77 percent) for
wastewater. Schedule No. 3-C reflects
the related fall out adjustments to operating revenues and taxes other than
income for regulatory assessment fees.
To determine the appropriate percentage
increase to apply to the water and wastewater service rates, miscellaneous
revenues should be removed from the test year operating revenues.
|
Water
|
|
Total
Test Year Revenues
|
$177,972
|
|
Less:
Miscellaneous Revenues
|
$3,517
|
|
Test
Year Revenues from Service Rates
|
$174,455
|
|
Revenues
Increase
|
$19,140
|
|
%
Service Rate Increase (Line 4/ Line 3)
|
10.97%
|
|
Wastewater
|
|
Total
Test Year Revenues
|
$135,878
|
|
Less:
Miscellaneous Revenues
|
$1,979
|
|
Test
Year Revenues from Service Rates
|
$133,899
|
|
Revenues
Increase
|
$13,279
|
|
%
Service Rate Increase (Line 4/ Line 3)
|
9.92%
|
Based on the above, the
appropriate test year operating revenues for LP’s water
system are $177,972 ($174,455 + $3,517) and $135,878 ($133,899 + $1,979) for
the wastewater system. Furthermore, staff recommends that the rate increase of
10.97 percent for water and 9.92 percent for wastewater be applied as an
across-the-board increase to service rates. The recommended water and
wastewater rates are shown on Schedule Nos. 4-A and 4-B, respectively. The utility
should file revised tariff sheets and a proposed customer notice to reflect the
Commission-approved rates. The approved rates should be effective for service
rendered on or after the stamped approval date on the tariff sheets pursuant to
Rule 25-30.475(1), F.A.C. In addition, the approved rates should not be
implemented until staff has approved the proposed customer notice and the
notice has been received by the customers. The utility should provide proof of
the date notice was given within 10 days of the date of the notice.
Issue 2:
Should this docket be closed?
Recommendation:
No. 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, a
consummating order should be issued. The docket should remain open for staff’s
verification that the revised tariff sheets and customer notice have been filed
by the utility and approved by staff. In addition, this docket should remain
open until the report with the summary of the results of the customer meeting
has been submitted by the utility. Once these actions are complete, this docket
should be closed administratively. (Imig)
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, a consummating order
should be issued. The docket should remain open for staff’s verification that
the revised tariff sheets and customer notice have been filed by the utility
and approved by staff. In addition, this docket should remain open until the
report with the summary of the results of the customer meeting has been
submitted by the utility. Once these actions are complete, this docket should
be closed administratively.
