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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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June 24, 2026
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TO:
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Office of Commission Clerk (Teitzman)
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FROM:
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Division of Accounting and Finance (Kelley,
Buys, Cicchetti, Cohn, DSa, Higgins, Norris, Souchik, Worrall) MC
Division of Economics
(Bruce, Hudson) EJD
Division of Engineering
(Ramirez-Abundez, Ramos, Thompson) LVK
Office of the General
Counsel (Bloom, Crawford) JSC
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RE:
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Docket No. 20250130-WS – Petition for an
acquisition adjustment for a non-viable utility, by CSWR-Florida Utility
Operating Company, LLC.
Docket No. 20250136-WS –
Petition for an acquisition adjustment for a non-viable utility, by
CSWR-Florida Utility Operating Company, LLC.
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AGENDA:
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07/07/26 – Regular Agenda – Motion to Dismiss – Oral Argument Not
Requested – Participation is at the Commission’s Discretion
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Ortega (20250130-WS)
Clark
(20250136-WS)
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CRITICAL DATES:
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None
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SPECIAL INSTRUCTIONS:
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None
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Case Background
Pursuant to Rule
25-30.0371, Florida Administrative Code (F.A.C.), a positive acquisition
adjustment may occur when the purchase price of a utility is greater than the
net book value of the acquired utility’s assets. If approved, a positive acquisition
adjustment increases rate base. Rule 25-30.0371, F.A.C., was amended on June
17, 2024. The previous version of the rule required a showing of extraordinary
circumstances to be entitled to a positive acquisition adjustment, and
utilities requested the acquisition adjustment at the time of transfer. The
amended version of the rule provides a list of factors that the Florida Public
Service Commission (Commission) must consider in determining whether a positive
acquisition adjustment is warranted. The amended version of the rule also allows
utilities to seek approval of the acquisition adjustment at either the time of
transfer or at anytime within 3 years of the Commission order approving the
transfer of the certificate of authorization.
While the prior
version of Rule 25-30.0371, F.A.C., was still effective, Central States Water Resources-Florida
Utility Operating Company, LLC (CSWR or Utility) requested and was denied
positive acquisition adjustments with respect to its acquisition of its North
Peninsula, Aquarina, and Sunshine systems. CSWR subsequently filed petitions for
positive acquisition adjustments under the amended rule, to which the Office of
Public Counsel (OPC) filed motions to dismiss, arguing that administrative
finality had attached to the Commission’s denial of acquisition adjustments at
the time the three systems were transferred to CSWR. By Order No.
PSC-2025-0250-PCO-WS, the Commission denied OPC’s motions to dismiss, finding
that administrative finality did not attach and that the new acquisition
adjustment rule was not being applied retroactively. The three acquisition adjustment dockets
associated with North Peninsula, Aquarina, and Sunshine are currently pending
before the Commission.
At issue in this
recommendation are CSWR’s requests for a positive acquisition adjustment with
respect to its purchase of two additional utilities, Neighborhood Utilities,
Inc. (Neighborhood) and Rolling Oaks Utilities, Inc. (Rolling Oaks).
In Commission Docket
No. 20220019-WU, CSWR applied for the transfer of Neighborhood, and included a
request for a positive acquisition adjustment at the time of the transfer to
CSWR under the prior version of Rule 25-30.0371, F.A.C. The Commission approved
the transfer but denied the request for a positive acquisition adjustment, stating
that the utility failed to demonstrate extraordinary circumstances.
CSWR purchased
Rolling Oaks, located in Citrus County, on December 30, 2021. At that time,
Citrus County regulated all water and wastewater utilities in that county which
would otherwise be subject to regulation by the Commission, under Section
367.171(8), Florida Statutes (F.S.). By Resolution No. 2022-108, dated November
7, 2022, the Citrus County Board of Commissioners approved the sale and
transfer of Rolling Oaks to CSWR. However, the County denied CSWR’s request for
a positive acquisition adjustment, stating that CSWR failed to demonstrate
extraordinary circumstances. Citrus County subsequently returned jurisdiction
over its water and wastewater utilities to the Commission, and the Commission granted CSWR a
grandfather certificate with respect to its Rolling Oaks system.
On October 14,
2025, and November 7, 2025, CSWR filed petitions requesting positive
acquisition adjustments relating to its purchases of Neighborhood and Rolling
Oaks under the amended version of Rule 25-30.0371, F.A.C. These requests
were assigned Docket Nos. 20250130-WS and 20250136-WS, respectively. Neither
petition referenced the Commission’s or Citrus County’s prior denials of CSWR’s
request for a positive acquisition adjustment at the time of the transfers.
Rather, the petitions listed information required under the amended rule, such
as planned infrastructure additions and maintenance needed to improve the
utilities’ quality of service or compliance with environmental regulations.
On April 30, 2026, the Office of Public Counsel (OPC)
filed Motions to Dismiss CSWR’s petition for an acquisition adjustment in both
the Neighborhood and Rolling Oaks dockets. In
each Motion to Dismiss, OPC argues that the doctrine of administrative finality
precludes CSWR from obtaining a positive acquisition adjustment on each of its
utilities that were previously denied a positive acquisition adjustment at the
time of transfer.
On May 7, 2026, CSWR filed responses to each Motion to
Dismiss (Responses). In its Responses, CSWR contends that administrative
finality did not attach to the previous acquisition adjustment denials, that
there are changed circumstances that warrant a positive acquisition adjustment
in the instant cases, and that the requested positive acquisition adjustments
are in the public interest.
Staff’s recommendation addresses OPC’s Motions to Dismiss
CSWR’s petitions for acquisition adjustments and CSWR’s Responses. No request
for oral argument was filed concurrently with either of OPC’s Motions to
Dismiss under Rule 25-22.0022(7)(a), F.A.C.; however, participation on these
items are within the Commission’s discretion. The
Commission has jurisdiction pursuant to Sections 367.071 and 367.121, F.S.
Discussion
of Issues
Issue 1:
Should OPC’s Motions to Dismiss the Neighborhood and
Rolling Oaks acquisition adjustment petitions be granted?
Recommendation:
No, staff recommends that the Commission deny OPC’s
Motions to Dismiss the Neighborhood and Rolling Oaks acquisition adjustment
petitions. Staff recommends that changed circumstances and the public interest
warrant consideration of CSWR’s requests for positive acquisition adjustments
concerning its Neighborhood and Rolling Oaks utilities. Additionally, staff
disagrees with OPC’s contention that CSWR is seeking retroactive application of
amended Rule 25-30.0371, F.A.C. (Crawford, Bloom)
Staff Analysis:
Law
In the seminal case of Peoples
Gas Systems, Inc. v. Mason, the Florida Supreme Court held:
[O]rders of administrative agencies must eventually
pass out of the agency’s control and become final and no longer subject to
modification. This rule assures that there will be a terminal point in every
proceeding at which the parties and the public may rely on a decision as being
final and dispositive of the rights and issues involved therein.
187 So. 2d 335, 339 (Fla. 1966). While administrative
finality generally applies to final orders, finality does not attach “when
there has been a significant change of circumstances or there is a demonstrated
public interest.” Delray Medical Center,
Inc., v. State Agency for Health Care Administration, 5 So. 3d 26, 29 (Fla.
4th DCA 2009).
When an administrative rule is revised, retroactive
application of the new rule is generally prohibited. Envtl. Trust v. Dept. of Envtl. Prot., 714 So. 2d 493, 500 (Fla.
1st DCA 1998). However, “retroactive application of a rule may be proper if the
rule merely clarifies or explains a previous rule.” Id. A revised rule “is presumed to operate prospectively in the absence
of express language to the contrary.” Jordan
v. Dept. of Prof. Reg., 522 So. 2d 450, 453 (Fla. 1st DCA 1988).
Res judicata and administrative finality both prevent
relitigation, but they differ in scope. Res judicata, a common law doctrine,
applies to court judgments and bars relitigation of the same claim between the
same parties. Administrative finality, on the other hand, applies to
administrative agency decisions. See
Delray at 29. The Florida Supreme Court has recognized that the legal
principles of res judicata do not neatly fit within the scope of administrative
proceedings, because the actions of administrative agencies are usually
concerned with deciding issues according to a public interest that often
changes with shifting circumstances and passage of time. Id. (citing Peoples Gas Sys., Inc. v. Mason,
187 So. 2d 335, 339 (Fla. 1966)).
Standard of Review
A motion to dismiss raises as a question of law the
sufficiency of the facts alleged to state a cause of action. In
order to sustain a motion to dismiss, the moving party must show that,
accepting all allegations as true, the petition still fails to state a cause of
action for which relief may be granted.
The moving party must specify the grounds for the motion to dismiss, and all
material allegations must be construed against the moving party in determining
if the petitioner has stated the necessary allegations. A
sufficiency determination should be confined to the petition and documents
incorporated therein, and the grounds asserted in the motion to dismiss.
To evaluate a motion to dismiss, all allegations in the
petition must be viewed as true and in the light most favorable to the
petitioner in order to determine whether there is a cause of action upon which
relief may be granted.
The “[d]ismissal of a petition shall, at least once, be without prejudice to
petitioner's filing a timely amended petition curing the defect, unless it
conclusively appears from the face of the petition that the defect cannot be
cured.”
OPC’s Motions to Dismiss
In its Motions to Dismiss the Neighborhood and Rolling
Oaks acquisition adjustment petitions, OPC argues that administrative finality
has attached to the prior denials of CSWR’s positive acquisition adjustments
and that CSWR cannot reapply for the same. OPC contends that CSWR failed to
demonstrate the applicability of the exceptions to administrative finality, of
a significant change in circumstances or a demonstrated public interest.
Specifically, OPC claims that the only change in circumstance from CSWR’s
previous petitions is the amendment to the acquisition adjustment rule, and
that the amended rule does not have retroactive application. Consequently, OPC
believes that administrative finality has attached to CSWR’s requests for
positive acquisition adjustments and that the Neighborhood and Rolling Oaks
petitions should be dismissed.
CSWR’s Response
In its Responses, CSWR rejects OPC’s contentions primarily
based on the argument that administrative finality did not attach to the
denials of the acquisition adjustments it requested in the transfers at issue. CSWR
argues that administrative finality does not attach because rather than asking
the Commission to second-guess the earlier denials of the acquisition
adjustments, CSWR is instead presenting the Commission with new applications
involving different facts and applying a different law. CSWR cites to
Commission precedent wherein the Commission allowed OPC’s requests for negative
acquisition adjustments where the same negative acquisition adjustments were
previously denied.
CSWR contends that OPC is changing its position from those previous cases in
which OPC argued that administrative finality did not attach to previously
denied acquisition adjustments.
In its Responses, CSWR argues that it is not asking the
Commission to reconsider its prior decisions under the prior version of the
rule. Instead of seeking reconsideration in which the Commission would
second-guess its prior denial of acquisition adjustments, CSWR contends that it
has timely filed a new petitions under the new version of the rule. CSWR claims
that while OPC refers to administrative finality, OPC is really arguing res
judicata to prohibit CSWR from requesting acquisition adjustments a second
time.
CSWR claims that the facts and circumstances have changed
since the time of the transfers for the two systems for which a positive
acquisition adjustment is requested. Specifically, CSWR claims that in the
three years since the purchases, it has learned significant facts about the
systems that had not yet occurred or were not known at the time of the
transfers, such as the extreme level of deterioration of wastewater treatment
facilities, the work needed to come into environmental compliance, and the
former owner’s insolvency and how that impacted the operation of the systems.
CSWR asserts that these new facts and changed conditions demonstrate that administrative
finality cannot apply to the denied acquisition adjustments for these systems.
CSWR contends that no person has taken any action in
reliance on the Commission’s or Citrus County’s prior denials of the requested
acquisition adjustments. In addition, the Utility argues that the public
interest favors considering the petitions on their merits as the purpose of the
amended rule is to encourage consolidation and acquisition of failing water and
wastewater systems. CSWR claims that under the prior version of the rule, no
positive acquisition adjustment was ever granted thereby limiting the
acquisition and rehabilitation of failing systems and harming customers of
those systems.
CSWR asserts that it is not applying the new version of
the rule retroactively. Rather, CSWR claims it is making new petitions based on
new facts and cost and revenue projections rather than a single event that
occurred before the new rule became effective. CSWR contends that the amended
rule allows for petitions for acquisition adjustments to be filed within three
years of the transfer order and that the new rule recognizes that facts
relating to the condition of the transferred systems and the impact of the
transfer on customers take time to become fully developed. Rather than applying
the new rule to completed events, CSWR claims that its application applies the
current procedural standards to new petitions properly brought before the
Commission.
CSWR notes, as discussed in the Case Background, that the
Commission has previously rejected the same arguments that OPC is making in the
instant cases for Neighborhood and Rolling Oaks. On April 17, 2025, OPC moved
to dismiss three CSWR acquisition adjustment petitions with respect to CSWR’s North
Peninsula, Aquarina, and Sunshine systems, on the same grounds asserted in the
present motions. By Order No. 2025-0250-PCO-WS, the Commission denied OPC’s
motions to dismiss the three petitions, finding that administrative finality
did not attach and that the new acquisition adjustment rule was not being
applied retroactively.
Staff Analysis
For the reasons set forth below,
staff recommends that OPC’s Motions to Dismiss should be denied, and CSWR should
be allowed to proceed with the instant petitions for acquisition adjustment for
Neighborhood and Rolling Oaks.
A.
Interpretation of Rule 25-30.0371, F.A.C.
Although not presented as an argument by OPC, staff notes
that a strict reading of Rule 25-30.0371, F.A.C., would lead to the conclusion
that CSWR’s purchase of Rolling Oaks is not eligible for a subsequent
acquisition adjustment. Subsection 2 of the rule provides that “[a] utility may
seek approval of a positive acquisition adjustment at the time the utility
seeks approval to transfer the certificate of authorization or anytime within 3
years of the issuance date of the Commission order approving the
transfer of the certificate of authorization.” (emphasis added.) For the
Rolling Oaks system, the order approving the transfer was issued by the Citrus
County Board of Commissioners, not the Commission, thus no Commission order
approving the transfer exists. As a general proposition, in interpreting
administrative rules, words should be given their plain and ordinary meaning. Gar-Con Dev., Inc. v. State, Dept. of Envtl.
Reg., 468 So. 2d 413 (Fla. Dist. Ct. App. 1985) (citing State, Dept. of Health and Rehab. Services
v. McTigue, 387 So. 2d 454 (Fla. Dist. Ct. App. 1980)). If this were the
case, then CSWR’s petition regarding Rolling Oaks in Docket No. 20250136-WS
should be dismissed for failing to comply with a plain reading of the rule.
Such a dismissal would be with prejudice, because it conclusively appears from
the face of the petition that the defect cannot be cured.
However, staff believes the rule can be reasonably read to
interpret that the three years run from the date an appropriate regulatory body
issues an order approving the transfer of a water or wastewater system,
and that a utility should not be penalized for the subsequent transfer in
regulatory jurisdiction, as occurred for Rolling Oaks in Citrus County.
B.
Administrative Finality
Staff does not believe that
administrative finality has attached to CSWR’s previously denied positive
acquisition adjustments. CSWR has adequately demonstrated both a significant
change of circumstances and that it is in the public interest for the
Commission to proceed on the instant petitions for positive acquisition
adjustments.
1.
Significant Change of Circumstances
Staff agrees with CSWR that facts
and circumstances have significantly changed since the time of transfer for the
Rolling Oaks and Neighborhood systems for which a positive acquisition
adjustment is requested. Staff particularly notes CSWR’s allegations regarding
the extreme level of deterioration at these systems’ facilities, the work
needed to come into environmental compliance, and the impact of the former
owners’ insolvency on the operation of these systems. The details of these
conditions were not known at the time the Commission or Citrus County previously
denied CSWR’s requests for positive acquisition adjustments for these systems.
Therefore, staff disagrees with OPC’s contention that the only change in
circumstances since the previous applications is the amendment to the
acquisition adjustment rule, and believes that CSWR has adequately demonstrated
a change in circumstances sufficient to allow consideration of an acquisition
adjustment for these systems under the amended rule.
2.
Public Interest
In addition to changed
circumstances, staff also believes that it is in the public interest to allow
CSWR’s requests for acquisition adjustments to go forward. Positive acquisition
adjustments create an incentive for larger, more sophisticated entities to
purchase struggling, non-viable water and wastewater systems. Staff believes
that these types of transfers benefit customers because they inject much-needed
capital into their water and wastewater systems to improve both water quality
and customer service. Additionally, such transfers may provide the benefits of
economies of scale and promote operational and financial stability in otherwise
struggling, non-viable systems. Staff therefore believes that it is in the public
interest to allow CSWR to go forward with its requests for positive acquisition
adjustments for these two systems.
C.
Application of Rule 25-30.0371, F.A.C.
Staff disagrees with OPC’s
contention that CSWR is seeking retroactive application of amended Rule
25-30.0371, F.A.C. Rather than a substantive rule change, staff believes that
the amended rule merely provided a procedural clarification of the previous
rule. Furthermore, instead of seeking retroactive rule application, CSWR is
making fresh applications under the amended rule. The amended rule allows utilities
to come in any time within three years of transfer of systems to request an
acquisition adjustment. CSWR has come in within the three-year window and
therefore should qualify for relief under the amended rule.
Conclusion
For the reasons stated above, staff recommends that the
Commission deny OPC’s Motions to Dismiss. Staff believes that changed
circumstances and the public interest warrant consideration of CSWR’s instant petitions
for positive acquisition adjustments for Neighborhood and Rolling Oaks.
Additionally, staff disagrees with OPC’s contention that CSWR is seeking
retroactive application of amended Rule 25-30.0371, F.A.C. Whether the
petitions for positive acquisition adjustment should be approved will be
addressed in a later staff recommendation.
Issue 2:
Should these dockets be closed?
Recommendation:
Docket Nos. 20250130-WS and 20250136-WS should
remain open to allow the Commission to address CSWR’s requested acquisition adjustments
for Neighborhood and Rolling Oaks. (Crawford, Bloom)
Staff Analysis:
Docket Nos. 20250130-WS and 20250136-WS should
remain open to allow the Commission to address CSWR’s requested acquisition
adjustments for Neighborhood and Rolling Oaks.