Case Background
Leighton Estates
Utilities, LLC (Leighton Estates or Utility) is a Class C water utility serving
approximately 86 customers in Marion County, Florida. On December 22, 2022, the
Florida Public Service Commission (Commission) authorized a 10.45 percent return
on equity (ROE) with an authorized range of 9.45 percent to 11.45 percent and a
rate of return of 6.83 percent, as codified by Order No. PSC-2022-0435-PAA-WU.
Based on the review of Leighton Estates’ 2024 Annual Report, Commission staff
identified potential overearnings with a reported rate of return of 7.82
percent and an achieved ROE of 20.03 percent.
On November 21,
2025, the Office of Public Counsel (OPC) filed a letter with the Commission
outlining concerns of potential water and wastewater utilities overearning,
with Leighton Estates being the only utility requiring a reduction. On December
12, 2025, OPC and Commission staff held a conference call to discuss the
possible overearnings of Leighton Estates and other utilities. On December 22,
2025, the owner of Leighton Estates, Mike Smallridge, reached out to staff and
inquired about a voluntary rate reduction and a refund to customers. Leighton
Estates and OPC (collectively known as the Parties) conducted informal meetings
to analyze the financial data provided by Leighton Estates and to determine the
appropriate disposition of the potential overearnings. On January 29, 2026, the
Parties filed a joint motion requesting Commission approval of a Settlement
Agreement to resolve the potential overearnings and to avert future
overearnings.
The purpose of
this recommendation is to present the Parties’ Settlement Agreement to the
Commission for approval. The Joint Motion and Settlement Agreement are attached
as Attachment A. The Commission has jurisdiction pursuant to Sections 367.081,
367.082, and 367.121, Florida Statutes.
Discussion
of Issues
Issue 1:
Should the Commission grant the Joint Motion and approve
the Settlement Agreement by the Parties?
Recommendation:
Yes. The proposed Settlement Agreement
adequately addresses the potential overearnings staff identified during its
ongoing earnings surveillance activities. As outlined in the proposed
Settlement Agreement, Leighton Estates should reduce its rates by 11.60 percent.
Additionally, Leighton Estates should refund customers 11.60 percent of water revenues
billed from January 1, 2026, until the effective date of the rate reduction. The
refund should be made pursuant to Rule 25-30.360, Florida Administrative Code
(F.A.C). The Utility should file a proposed customer notice reflecting the
Commission’s decision within 15 days of the Commission vote. The approved rates
should be effective for service rendered on or after the stamped approval date
of 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. (Gatlin, Sibley)
Staff Analysis:
As stated in the case background, staff identified
possible overearnings based upon a review of Leighton Estates’ 2024 Annual Report.
On January 29, 2026, the Parties filed a Joint Motion to request Commission
approval of a Settlement Agreement to resolve the disposition of ongoing
overearnings. Leighton Estates agreed to reduce its rates by 11.60 percent to
ensure it will remain within range of its ROE. Furthermore, Leighton Estates
agreed to refund customers 11.60 percent of water revenues billed from January
1, 2026, until the effective date of the rate reduction. The refund credit will
be based upon each individual customer’s billed amounts from January 1, 2026,
until the effective date of the rate reduction, and will be made pursuant to
Rule 25-30.360, F.A.C.
In keeping with the Commission’s long-standing policy and
practice of encouraging parties to settle issues whenever possible, staff
recommends that the Commission grant the Joint Motion and approve the Settlement
Agreement by the Parties. The settlement provides protections for Leighton Estates’
customers for possible overearnings in subsequent years. Staff notes that this
recommendation is consistent with other Commission decisions regarding possible
overearnings.
Schedule No. 1 reflects the Utility’s existing rates and staff’s recommended
rates per the Utility’s settlement proposal. Staff will continue to monitor the
earnings of the Utility, and if any subsequent overearnings are identified,
staff may open a formal earnings investigation.
Conclusion
The proposed Settlement Agreement adequately addresses the
potential overearnings staff identified during its ongoing earnings
surveillance activities. As outlined in the proposed Settlement Agreement,
Leighton Estates should reduce its rates by 11.60 percent. Additionally,
Leighton Estates should refund customers 11.60 percent of water revenues billed
from January 1, 2026, until the effective date of the rate reduction. The
refund should be made pursuant to Rule 25-30.360, F.A.C. The Utility should
file a proposed customer notice reflecting the Commission’s decision within 15
days of the Commission vote. The approved rates should be effective for service
rendered on or after the stamped approval date of 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 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. (M. Thompson)
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.
