Discussion
of Issues
Issue 1:
Is the quality of service provided by Sunlake
Estates Utilities, L.L.C. satisfactory?
Recommendation:
No.
While Sunlake’s product is in compliance with the rules
and regulations of the Florida Department of Environmental Protection
(DEP), staff does not believe the Utility adequately demonstrated an ability to
address customer satisfaction due to concerns regarding recordkeeping and
communications with its customers. Staff recommends the quality of service be
considered marginal, and the Utility be required to file a plan outlining how
it will improve its recordkeeping and customer communications within 30 days of
an Order becoming final. Staff does not recommend a penalty at this time. (Willis)
Staff Analysis:
Pursuant to Section 367.081(2)(a)(1), F.S., and
Rule 25-30.433(1), Florida Administrative Code (F.A.C.), in water rate cases,
the Commission shall determine the overall quality of service provided by the utility.
This determination is made from an evaluation of the quality of the Utility’s
product and the Utility’s attempt to address customer satisfaction. The rule
further states that the most recent chemical analyses for the water system,
outstanding citations, violations, and consent orders on file with the DEP and
the county health department, and any DEP and county health department
officials’ testimony, comments, or complaints received by the Commission are
also reviewed. The operating condition of the water system is addressed in
Issue 2.
Quality of the Utility’s Product
To evaluate Sunlake’s product quality, staff reviewed the
Utility’s compliance with the DEP’s primary and secondary drinking water
standards. Primary standards protect public health, while secondary standards
regulate contaminants that may impact the taste, odor, and color of drinking
water. In the DEP’s last Sanitary Survey Report dated July 2, 2024, no chemical
or bacteriological exceedances, except for the groundwater nitrate levels, were
noted for the previous 12 months. The DEP indicated on the Discharge Monitoring
Report from April 2024 that the nitrate limit of 10.0 milligrams per liter
(mg/L) was exceeded at 11 mg/L. However, DEP indicated that the exceedance was
an isolated event and no further action was required from the Utility. Other
than groundwater quality, the Utility was determined to be in compliance with
the DEP standards. In the Utility’s last Consumer Confidence Report dated June
12, 2025, no violations of contaminant levels were detected for the testing
period.
The Utility’s Attempt to Address Customer
Satisfaction
Staff reviewed the complaints filed in the Commission’s
Consumer Activity Tracking System (CATS), complaints received by the Utility,
and complaints filed with the DEP for the test year and four years prior. There
was one complaint filed in CATS during that period regarding the number of line
breaks, service interruptions, and boil-water notices (BWN). A review of the
complaint indicates the Utility responded to the Commission and customer, but
failed to do so within 15 days of the complaint being filed with the Commission
as required by Rule 25-30.355(1), F.A.C. The Utility reported that it received
no complaints during this timeframe. The DEP responded that it received no
complaints during this timeframe.
Staff held a Customer Meeting on May 15, 2026, where eight
customers provided comments. The comments included the frequency of BWNs, water
line breaks, and service interruptions, the state of the water infrastructure,
and the concerns regarding the impact of the proposed rate increase. Customers
also voiced concerns regarding the amount of unaccounted for water. In
addition, there were approximately 145 customer comments filed in the docket as
of June 30, 2026. For reference, the Utility serves approximately 467
customers, which includes 454 residential customers.
Table 1-1 shows a total of 396 different comments (provided
verbally at the customer meeting and written via the docket file) over six
categories. A single customer comment was counted in multiple categories if it
addressed multiple issues. The majority of the comments expressed concern with
the overall rate increase. However, there were a number of comments expressing
concerns regarding the overall quality of service and the frequency of outages.
The Other category captured all other concerns, such as water conservation,
lawn maintenance, unmetered water use, and unaccounted for water.
Table 1-1
Number of Comments Received,
Organized by Category and Source
|
Comment Category
|
Verbal Comments
|
Written Comments
|
Total*
|
|
Quality of Service
|
7
|
65
|
72
|
|
Outages and/or BWNs
|
7
|
69
|
76
|
|
Improper Billing
|
-
|
3
|
3
|
|
Meter Concerns
|
2
|
1
|
3
|
|
Rate Increase Concerns
|
7
|
144
|
151
|
|
Other
|
4
|
87
|
91
|
|
Total
|
27
|
369
|
396
|
*A single customer comment
could be counted multiple times if it is associated with multiple categories.
As summarized in Table 1-1, several comments addressed outages
and BWNs. Specifically, comments were centered around communication concerns
and the frequency of line breaks. Customers reported inadequate communication
to the community when water-related issues occurred and the inability to
directly contact the Utility. Currently, a phone number to the Sunlake Estates’
community management is provided to the Utility’s customers, which then
forwards calls to the Utility staff as needed.
Customer comments suggest that this indirect communication might result in an
undercount of historic complaints.
Rule 25-30.130, F.A.C., requires that the utility to maintain
records of all complaints for a minimum of five years. Pursuant to Rule
25-30.355, F.A.C., a complaint is defined as an objection made to a utility by
a customer. Staff recommends that the Utility should record information
required by Rule 25-30.130, F.A.C., for all customer complaints regardless of
whether the complaints are received directly from the end-use customer or
indirectly through Sunlake Estates’ community management.
Regarding the frequency of line breaks, Commission staff
inquired what steps, if any, Sunlake intended to take to reduce service
interruptions. As an initial measure, the Utility installed valves in 2022 to isolate
portions of the system, as prior outages would impact the entire water system.
The Utility responded that a full system replacement was not necessary based on
the nature and frequency of the line breaks.
Instead, the Utility explained that it relies on a repair and maintenance
approach rather than system wide replacement since these interruptions were
deemed to be isolated or localized rather than systemic.
Pursuant to Rule 25-30.251, F.A.C., the utility is
required to maintain a record of all interruptions in service which affect 10
percent or more of its customers and to notify the Commission of the
interruptions. The rule further states the utility must provide the cause of
the interruption, the date, time, duration, remedy, and steps taken to prevent
reoccurrence. In response to staff’s sixth data request, the Utility provided
service interruption data for the period 2021 through 2026. According
to the Utility’s data, complete system outages impacting all the customers
happened once each in 2022 and 2023, seven times in 2024, and twice in 2025. In
addition, there were five line breaks impacting between 14 to 42 percent of
customers in 2025, and entries for several other service interruptions with
multiple sites listed as impacted in the description, but for which the Utility
stated there were no sites impacted in its total. Some customer comments provided
a different number of interruptions than those reported by the Utility.
Overall, there were at least 18 instances between 2022 and 2026 that the
Utility should have informed the Commission of, but did not do so. Subsequent
to staff’s data request, the Utility stated it has now established a protocol
to comply with Rule 25-30.251(2), F.A.C.
A small fraction of customers also had concerns regarding
water meter accuracy, calibration, and inconsistencies. Rule 25-30.265, F.A.C.,
outlines the intervals that utilities must inspect and test their meters, with
a maximum interval of 8 to 10 years between tests for commonly used residential
meter sizes. In response to staff’s sixth data request, Sunlake reported it did
not have a formal meter testing program and that meter testing and inspections
were performed on an as-needed basis.
Sunlake indicated it had only received one customer request for meter testing
since 2020.
Staff performed a supplemental review of the complaints
filed in CATS following the customer meeting and found two additional complaints
as of June 30, 2026. Both complaints were associated with service
interruptions.
Managerial Concerns
Overall, staff’s review of the Utility’s attempt to
address customer satisfaction demonstrates issues related to poor recordkeeping
and reporting by Utility management. Such actions can negatively impact the
customer service provided by Sunlake. Sunlake has committed to properly notify
the Commission of service interruptions. However, staff recommends that Sunlake
be required to submit, within 30 days of the Commission’s Order becoming final,
a plan describing how it will accomplish the following, to remedy the remaining
concerns raised by customers:
1.
Regarding complaints, the Utility must document and
maintain records of all customer complaints whether received directly from the
customer or indirectly through another entity such as Sunlake Estates’
community management, pursuant to Rule 25-30.130, F.A.C. In addition, when the
Utility provides acknowledgement and responses to a complaint pursuant to Rule
25-30.355, F.A.C., it should do so to the original customer who provided the
complaint, even if it was indirectly provided to the Utility by its parent or
affiliate companies.
2.
Regarding meter testing, the Utility must begin
conducting regular meter testing at the required intervals pursuant to Rule
25-30.265, F.A.C. Additionally, the Utility must perform meter tests upon
customer request and keep and maintain records of all tests performed.
Conclusion
While Sunlake’s product is in compliance with the rules and regulations of
the DEP, staff does not believe the Utility adequately demonstrated an ability
to address customer satisfaction due to concerns regarding recordkeeping and
communications with its customers. Staff recommends the quality of service be
considered marginal, and the Utility be required to file a plan outlining how
it will improve its recordkeeping and customer communications within 30 days of
this Order becoming final. Staff does not recommend a penalty at this time.
Issue 2:
Are the infrastructure and operating conditions of
Sunlake Estates Utilities, L.L.C. in compliance with DEP regulations?
Recommendation:
Yes.
Sunlake Estates Utilities, L.L.C.’s water system is in compliance with the
rules and regulations of the DEP. (Willis)
Staff Analysis:
Rule 25-30.225(2), F.A.C., requires each water
utility to maintain and operate its plant and facilities by employing qualified
operators in accordance with the rules of the DEP. Rule 25-30.433(2), F.A.C.,
requires consideration of whether the infrastructure and operating conditions
of the plant and facilities are in compliance with Rule 25-30.225, F.A.C. In making
this determination, the Commission must consider testimony of the DEP and
county health department officials, sanitary surveys for water systems,
citations, violations and consent orders issued to the utility, customer
testimony, comments, complaints, utility testimony, and responses to the
aforementioned items.
Water System Operating Conditions
Sunlake’s water system has a permitted capacity of 639,000
gallons per day and has two 12-inch diameter wells and one hydropneumatic
storage tank. Well No. 1 has a pumping capacity of 500 gallons per minute
(gpm). Well No. 2 has a pumping capacity of 588 gpm. The single hydropneumatic
storage tank has a capacity of 10,500 gallons. The groundwater is treated by
hypochlorination. The DEP conducted an inspection of Sunlake’s water treatment
plant (WTP) on July 2, 2024. The resulting Sanitary Survey Report indicated the
facility was in compliance with the DEP’s rules and regulations, except for the
groundwater quality, which was resolved, as stated in Issue 1.
Conclusion
Sunlake’s water treatment facility is in compliance with
the rules and regulations of the DEP.
Issue 3:
What
are the used and useful (U&U) percentages of Sunlake Estates Utilities,
L.L.C.’s water treatment plant (WTP) and water distribution system?
Recommendation:
Sunlake’s
WTP and water distribution system should both be considered 100 percent
U&U. Additionally, an 11.78 percent adjustment should be made to reduce the
operating expenses for chemicals and purchased power for excessive unaccounted
for water (EUW). (Willis)
Staff Analysis:
As
stated in Issue 2, Sunlake’s water system is served by two 12-inch diameter
wells rated at 500 gpm and 588 gpm. The Utility’s WTP is permitted by DEP to treat
an average of 639,000 gallons per day. In response to staff’s data requests,
the water distribution system is composed of 3,102 feet of 2-inch and 8,389
feet of 6-inch Polyvinyl Chloride pipe.
Additionally, the system has 40 fire hydrants.
Excessive Unaccounted for Water
Rule 25-30.4325, F.A.C., provides factors to be considered
in determining whether adjustments to operating expenses are necessary for EUW.
EUW is defined by Rule 25-30.4325, F.A.C., as “unaccounted for water in excess
of 10 percent of the amount produced.” Unaccounted for water is all water that
is not sold, metered, or accounted for in the records of the utility.
EUW is calculated by subtracting both the gallons sold to
customers and the gallons used for other services such as line flushing, from
the total gallons pumped and purchased for the test year, and dividing by the
sum of the gallons pumped and purchased. The amount in excess of 10 percent of
the amount pumped and purchased, if any, is the EUW percentage.
A review of Sunlake’s 2024 monthly operating reports on
file with the DEP indicates the Utility produced 47,507,000 gallons of water
during the test year. In response to staff’s data requests, the Utility
indicated that it purchases no water and identified that it flushes the 40 fire
hydrants in its service territory every three (3) months, or quarterly. The
Utility provided multiple estimates of flushing values, ranging from 400,000
gallons to 2,508,572 gallons based on different flow rates. Staff recommends
the amount of water used for line and hydrant flushing should be estimated to
be approximately 400,000 gallons per year, based on the more typical 500 gpm
rate.
The Utility provided an estimate of line losses from known water breaks during
the test year, but the estimated water lost exceeded the amount produced in all
months and during the test year as a whole when properly calculated, therefore
staff made no adjustment for line losses.
An examination of the Utility’s billing records indicated 32,391,440 gallons
were sold to residential and 4,370,718 gallons were sold to general service
customers for a total of 36,762,158 gallons sold.
The calculation (47,507,000 + 0 – 36,762,158 – 400,000)/(47,507,000 + 0)
results in 21.78 percent unaccounted for water. The Rule allows a 10 percent
margin; therefore, there is 11.78 percent EUW.
Used and Useful Percentages
Rule 25-30.4325, F.A.C., also addresses the method by
which the U&U percentage of a water system is determined. Rule
25-30.4325(4), F.A.C., states that a water treatment system is considered 100
percent U&U if the service territory the system is designed to serve is
built out and there is no apparent potential for expansion of the service territory,
or the system is served by a single well. During its original certification, issued
in 2014, the Commission determined that the territory was built-out, resulting
in a 100 percent U&U for the WTP and distribution system.
Because there have been no significant changes to the water system or service
territory since this determination, the U&U percentage for Sunlake’s WTP
and distribution system should be considered to be 100 percent.
Conclusion
Sunlake’s WTP and water distribution system should both be
considered 100 percent U&U. Additionally, an 11.78 percent adjustment for excessive
unaccounted for water should be made to reduce the operating expenses for
chemicals and purchased power.
Issue 4:
What is the appropriate
average test year rate base for Sunlake Estates Utilities, L.L.C.?
Recommendation:
The
appropriate average test year rate base for Sunlake is $677,077. (Lenberg)
Staff Analysis:
The
appropriate components of the Utility’s rate base include utility plant in service
(UPIS), land and land rights, accumulated depreciation (AD), capital recovery,
accumulated
amortization of capital recovery,
contributions-in-aid-of-construction (CIAC), accumulated amortization of CIAC
(AA of CIAC), and working capital. Staff selected the test year ended December
31, 2024, for this rate case. A summary of each component and the recommended
adjustments are
discussed below.
Pro Forma Plant Additions
When evaluating a utility’s request for pro forma plant
additions, staff requests the Utility provide, among other things the: (i)
need; (ii) reasonableness; (iii) cost; (iv) in-service date(s); and (v)
alternatives, as they relate to each project. Additionally, it is Commission
practice for staff to evaluate whether a minimum of three bids were solicited
for each project or the Utility’s reasoning as to why three could not be
obtained. Table 4-1 shows six pro forma plant projects all of which the Utility
classified as emergencies, and therefore did not seek bids. Each of the
Utility’s requested pro forma projects are described below.
Table 4-1
Pro Forma Projects
|
|
Project
|
In-Service Date
|
Account Number
|
Amount
|
Retirement
|
|
1.
|
Auto Transfer Switch at WTP Generator
|
4/2025
|
320
|
$2,000
|
$1,500
|
|
2.
|
New LAN Gateway System for Electronic Water Reads
|
10/2025
|
346
|
4,463
|
3,347
|
|
3.
|
Water Line Break at J31
|
2/2025
|
331
|
6,936
|
5,202
|
|
4.
|
Water Line Break 0U14
|
7/2025
|
331
|
5,890
|
4,418
|
|
5.
|
Water Line Replacement 0U02
|
7/2025
|
331
|
1,632
|
1,224
|
|
6.
|
Water Main Break
|
7/2025
|
331
|
5,487
|
4,115
|
|
|
Total
|
|
|
$26,408
|
$19,806
|
Source: Sunlake’s supplemental
response to staff’s first data request.
Project No. 1 – Auto Transfer Switch at WTP
Generator
Project No. 1 is the replacement of the auto transfer
switch for the backup generator power. The purpose of the transfer switch is
for the water treatment plant to automatically switch to generator power in the
event of power failure. Sunlake stated that the project was deemed an emergency
because the existing auto transfer switch had failed. The Utility provided the
invoice for the project, which totaled $2,000 and was completed April 2025.
Rule 25-30.250, F.A.C., states that each utility must make all reasonable
efforts to provide continuous service. Therefore, after reviewing the project,
staff agrees that the project was an emergency and recommends the approval of
$2,000 for the replacement of the auto transfer switch to provide generator
power in the event of a power outage.
Project No. 2 – New LAN Gateway System for
Electronic Water Reads
Project No. 2 is the replacement of the local access
network gateway. The gateway collects consumption data ensuring accurate
billing for each customer. Sunlake stated that the project was deemed an
emergency because the existing gateway was damaged by lightning. The Utility
provided invoices from Speedread Technologies L.L.C. and Electrical Works
Florida, totaling $4,463. The project was completed October 2025. Rule
25-30.335, F.A.C., states that the utility is obligated to timely correct any
problems within the utility’s control causing the need to estimate bills.
Therefore, staff agrees the project was an emergency and recommends approval of
$4,463 for the replacement of the local access network gateway.
Project No. 3 – Water Line Break at J31
Project No. 3 is the replacement of 10 feet of a 6” water
main line feeding a fire hydrant. The replacement of the main water line
serving a fire hydrant was required to be in compliance with regulations
necessitating that the fire hydrant be operational. The Utility provided an
invoice for the replacement of 10 feet of 6” pipe and necessary fittings
totaling $6,936, which was completed February 2025. Section 633.312, F.S.,
states that the maintenance of fire hydrants and fire protection systems as
well as corrective actions on deficient systems is the responsibility of the
owner of the system or hydrant. Staff agrees the project was an emergency and
recommends approval of $6,936.
Project No. 4 – Water Line Break 0U14
Project No. 4 is the removal and replacement of 10 feet of
a 6” water main line that had failed. The removal and replacement of the broken
section of pipe was required to maintain water service. Sunlake provided an
invoice for the repair of the water main totaling $5,890, which was completed
July 2025. Rule 25-30.250, F.A.C. states should interruption in service occur,
each utility must restore service with the shortest delay. Therefore, staff
agrees the project was an emergency and recommends approval of $5,890.
Project No. 5 – Water Line Replacement 0U02
Project No. 5 is the removal and replacement of 10 feet of
a 3/4” polyethylene line. The removal and replacement of the broken section of
water line was required to maintain water service. Sunlake provided an invoice
for the repair of the water line totaling $1,632, which was completed July
2025. Pursuant to Rule 25-30.250, F.A.C., requiring the
utility to restore service with the shortest delay, staff agrees the project
was an emergency and recommends approval of $1,632.
Project No. 6 – Water Main Break
Project No. 6 is the replacement of 10 feet of 1”
polyethylene pipe and necessary fittings. The water line had a break underneath
the road causing water to bubble underneath the asphalt and needed to be
replaced. Sunlake provided an invoice for the removal and replacement of 10
feet of polyethylene pipe and asphalt patch totaling $5,487,
which was completed July 2025. Rule 25-30.250, F.A.C., requires the utility to
restore service with the shortest delay possible. Therefore, staff agrees the
project was an emergency and recommends approval of $5,487.
Utility Plant in Service
The Utility recorded a UPIS balance of $942,813. The Utility did not
maintain complete ledgers or property records for several years. Therefore,
staff reconstructed UPIS using Commission Order No. PSC-2014-0018-PAA-WS,
annual reports, and available invoices.[13]
Audit staff
corrected misclassified additions, applied previously-ordered adjustments, and
removed items that had been improperly booked or recorded in the wrong period.
These adjustments increased UPIS by $97,415. Staff also increased UPIS by
$64,868 to reflect an averaging adjustment.
The Utility
did not record retirements from December 31, 2012, through December 31, 2024.
Thus, staff decreased UPIS by $227,469 to reflect the appropriate period
retirements. Further, staff reclassified operation and maintenance (O&M)
expenses that were incorrectly recorded in UPIS. Lastly, staff decreased UPIS
by $19,806 for pro forma retirements and increased it by $26,408 for pro forma
additions.
Overall,
staff’s adjustments result in a net decrease of $58,584. Therefore, staff
recommends a UPIS balance of $884,229.
Capped
Retirement
In general,
it is Commission practice to use the 75 percent of plant addition methodology
to estimate the retirement amount of assets being replaced when the original
cost is unknown. In this case, for certain accounts, application of the 75
percent retirement methodology results in an overall negative plant balance.
Therefore, staff has capped the retirement amounts at the plant balance for
respective accounts in the relevant years. This methodology has been utilized
in Docket No. 20160101-WS and was approved by Order No. PSC-2017-0361-FOF-WS.[14] In that
order, the Commission found that: “the amount of retirement to plant in service
and accumulated depreciation reflected in the adjusted test year shall be
calculated based on either the 75 percent methodology . . . or on the actual
balance in the impacted plant in service account . . . if that balance would be
negative as a result of the 75 percent methodology.”[15]
Due to the
capped retirement, two accounts have remaining undepreciated plant balances.
Staff believes that these remaining balances should be recovered as
amortization expense over a seven-year period. Although Rule 25-30.433(10),
F.A.C., prescribes the formula for determining the appropriate amortization
period for forced abandonment or the prudent retirement of plant assets prior
to the end of their depreciable life, staff recommends an amortization period
of seven years. Staff notes that an alternate amortization period is permitted
under the rule. Staff’s recommendation is intended to spread the recovery of
these costs over a longer period to mitigate the immediate annual rate impacts.
Staff identified two accounts that have remaining undepreciated plant balances,
as reflected in Table 4-2 below.
Table 4-2
Water System
Capital Amortization
|
Account
|
Plant Balance
|
Accumulated Depreciation
|
Undepreciated Plant Balance
|
Amortization Expense
|
|
309
|
$2,888
|
$89
|
$2,799
|
$400
|
|
334
|
53,480
|
30,736
|
22,744
|
3,249
|
|
Total
|
$56,368
|
$30,825
|
$25,543
|
$3,649
|
Source: Staff calculations.
Staff
recommends capital recovery of $25,543 over a seven-year amortization period.
The corresponding annual amortization expense is $3,649.
Accumulated Amortization
of Capital Recovery
As a result
of the capped retirement, staff increased this amount by $1,825 to reflect an
averaging adjustment. Therefore, staff recommends an accumulated amortization
balance of $1,825.
Contributions-in-Aid-of-Construction
The Utility did not record a CIAC
balance. Staff reconciled the CIAC balance using the amount approved in
Commission Order No. PSC-2014-0018-PAA-WS..
Therefore, staff recommends a CIAC balance of $6,790
Accumulated Amortization
of CIAC
The Utility did not record an AA
of CIAC balance. Staff calculated the AA of CIAC balance using the amount
approved in Commission Order No. PSC-2014-0018-PAA-WS.
Therefore, staff recommends an AA of CIAC balance of $2,052.
Land and Land Rights
The Utility
did not record a land and land rights balance. There were no land and land
rights balances in the Order granting the Utility certificates for the water
and wastewater systems.[18] The
Utility operates on leased land with an annual rent of $1. The Utility stated
that there have been no changes made to the lease terms since the
above-referenced order and no new land leases have been entered into since.
Staff made no adjustments to this amount and therefore, recommends a land and land
rights balance of $0.
Used and Useful
As discussed
in Issue 3, the Utility’s system is considered 100 percent U&U. Therefore, no U&U
adjustment is necessary.
Accumulated Depreciation
The Utility
recorded accumulated depreciation of $329,643. Audit staff increased this
amount by $30,816 to reflect corrections to UPIS and the application of the
correct depreciation rates per Rule 25-30.140, F.A.C.
Staff
increased this amount by $69,165 to reflect an averaging adjustment, but also
decreased this amount by $19,545 to reflect pro forma additions and
retirements.
Additionally,
staff decreased this amount by $170,155 to reflect the appropriate retirements
of assets, to correct over-depreciation associated with Account 364 – Flow
Measuring Devices, and to reflect the updated depreciation expense associated
with updated plant retirements. Staff’s adjustments to accumulated depreciation
result in a net decrease of $89,719. Therefore, staff recommends accumulated depreciation
balance of $239,924.
Working Capital Allowance
Working
capital is defined as the short-term investor-supplied funds that are necessary
to meet operating expenses. Consistent with Rule 25-30.433(3), F.A.C., staff
used the one-eighth O&M expense (less rate case expense) formula for
calculating the working capital allowance.[19]
As such, staff removed the rate case expense of $3,001. This resulted in an
adjusted O&M expense balance of $110,340. Applying this formula, staff
recommends a working capital allowance of $13,792.
Rate Base Summary
Based on the
foregoing, staff recommends an appropriate average test year rate base of $677,077.
Rate base is shown on Schedule No. 1-A. The related adjustments are shown on
Schedule No. 1-B.
Issue 5:
What
is the appropriate return on equity and overall rate of return for Sunlake
Estates Utilities, L.L.C.?
Recommendation:
The
appropriate return on equity (ROE) is 8.58 percent with a range of 7.58 percent
to 9.58 percent. The appropriate overall rate of return is 8.58 percent.
(Lenberg)
Staff Analysis:
The
Utility’s capital structure consists solely of common equity. The Utility’s
capital structure has been reconciled to staff’s recommended rate base. The ROE
is 8.58 percent based on the Commission-approved leverage formula currently in
effect.[20] Staff
recommends an ROE of 8.58 percent with a range of 7.58 percent to 9.58 percent,
and an overall rate of return of 8.58 percent. The ROE and overall rate of
return are shown on Schedule No. 2.
Issue 6:
What are the appropriate test
year operating revenues for the water system of Sunlake Estates Utilities,
L.L.C.?
Recommendation:
The appropriate test year
operating revenues for Sunlake Estates’ water system are $134,638. (Rashawn)
Staff
Analysis:
The Utility recorded total
test year operating revenues of $108,001 for water. The water revenues
consisted of $108,001 in service revenues and no miscellaneous revenues.
Staff’s review of the audit indicated that the Utility’s billing register
contained several inaccuracies for the water system during the test year. The
Utility billed an incorrect base facility charge (BFC) of $11.22 rather than
the Commission-approved BFC of $11.44 for the 5/8-inch x 3/4-inch meter size,
which resulted in an undercharge of $0.22 per month. During the test year, some
residential usage data was missing and the general service customers were not
billed.
During
the test year, residential service customers’ bills classified by the Utility
as landowners were not reflected in the billing data. In addition, some of the
residential billing data was incomplete due to customer move ins and move outs.
In response to audit staff’s request, the Utility provided revised billing data
to reflect the landowners that were not billed during the test year, which
reflected 573,929 gallons. Staff utilized the customers’ average monthly usage
for the year to supplement the incomplete billing data. Staff’s average of the
missing residential usage resulted in a total of 436,842 gallons. These
additional residential gallons total 1,010,771 (573,929 + 436,842). These
adjustments resulted in total residential usage of 32,391,440.
For
general service, staff discovered that the Utility’s certificate case included
several general service customers that were not reflected in the billing
register.[21] During the preliminary phase
of the case, the Utility provided billing determinants and meter sizes for only
seven general service customers. Later, a review of the Utility’s site map
indicated more general service customers than reported in the staff report.
Staff noticed that the general service customers shown on the site map were
also the same customers identified in the Utility's original 2013 certificate
case. Therefore, staff contacted the Utility requesting additional billing
determinants and the appropriate meter sizes for the unaccounted-for general
service customers. In response to staff’s inquiry, the Utility provided 2024
test year usage data reflecting only seven general service customers, which
staff believed was insufficient data.
On
March 17, 2026, staff contacted the Utility by email requesting information
regarding 12 potential general service customers. On March 23, 2026, the
Utility responded by providing meter sizes for the same seven general service
customers, which did not include usage data. On May 1, 2026, staff sent its fifth
data request requesting the most recent 12-month usage for the seven general
service customers as well as other general service customers shown on the
Utility’s site map. In response to staff's fifth data request, the Utility
provided 2025 data indicating higher usage totaling 3,547,500 gallons for the
seven general service customers and an irrigation customer.
However,
based on the site map, there were five customers that were still unaccounted
for, which consisted of four irrigation customers and a general service
customer. Staff ultimately elected to use the 2013 data from the certificate
case to determine the usage data and meter sizes for these customers. Staff
calculated an average of the customer’s 2013 usage data and multiplied the
average by twelve months, which resulted in a total of 823,218 gallons for the
five customers. The golf course owns its well and is not serviced by the
Utility.[22] Based on the above, there is
a total of eight general service customers and five irrigation customers, which
reflects usage of 4,370,718 (3,547,500 + 823,218) gallons.
Finally,
the Utility was approved for a price index rate adjustment outside of the test
year effective June 13, 2025. Therefore, staff annualized test year operating revenues
by applying the adjusted number of billing determinants to the rates
effective June 13, 2025. As
a result, staff determined test year service revenues should be $134,638 for
water. This results in an increase to service revenues of $26,637 ($134,638 - $108,001)
for water. Based on the above, the appropriate test year operating revenues for
Sunlake Estates’ water system are $134,638.
Issue 7:
What
are the appropriate operating expenses for Sunlake Estates Utilities, L.L.C.?
Recommendation:
The
appropriate operating expenses for Sunlake are $160,038. (Lenberg)
Staff Analysis:
The
Utility recorded operating expenses of $183,940. The test year expenses have
been reviewed by staff, including invoices and other supporting documentation.
Staff has made several adjustments to the Utility’s operating expenses as
described below.
Operation and Maintenance Expenses
Salaries
and Wages – Employees (601)
The Utility recorded a salaries and wages expense of $9,643, which included payroll taxes. Staff decreased this amount by $655
to reclassify payroll taxes to Taxes Other Than Income (TOTI) and to
reflect an audit adjustment. Therefore, staff recommends a salaries and wages
expense of $8,988.
Purchased
Power (615)
The Utility recorded purchased power expense of $9,239. Staff increased this amount by $545 to reflect an
audit adjustment based on invoices and the appropriate allocation for the test
year provided by the Utility.
As discussed in Issue 3, EUW is 11.78 percent. Staff decreased
purchased power by $1,088 to reflect EUW. Staff’s net adjustment to purchased
power results in a decrease of $543. Therefore, staff recommends a purchased
power expense of $8,696.
Fuel for Power
Production (616)
The Utility did
not record fuel for power production expense. Staff increased this amount by $2,206 to reflect an audit adjustment as well as the reclassification of
generator fuel expense in the amount of $1,103 from Account 650 –
Transportation Expense. Therefore, staff recommends a fuel for power production
expense of $2,206.
Contractual Services
– Billing (630)
The Utility recorded contractual services – billing expense of $4,028. Staff made no adjustments to this amount. Therefore, staff recommends
a contractual services – billing expense of $4,028.
Contractual Services
– Professional (631)
The Utility recorded contractual services – professional expense of $42,373. Audit staff decreased this amount by $6,207 to reclassify legal expenses to Account 633 – Contractual Services -
Legal. Staff increased this amount by $1,170 to reflect an
increase in contracted operator costs. Staff further increased this amount by $1,818
to reclassify and properly allocate Environmental Protection Agency
(EPA) expenses that had been inappropriately recorded in Account 633 –
Contractual Services – Legal, and not allocated between the water and
wastewater systems.
As discussed in Issue 3, EUW is 11.78 percent. During the test year,
Sunlake contracted with General Utilities to provide water treatment services,
including the supply of treatment chemicals. Staff reviewed supporting documentation
and determined that chemical expense was $5,912, resulting in an EUW adjustment
of $696. Therefore, staff decreased contractual services – professional expense
by $696.
Staff’s net adjustment to contractual services – professional expense
results in a decrease of $3,915. Therefore, staff
recommends a contractual services – professional expense of $38,458.
Contractual Services
– Accounting (632)
The Utility did not record contractual services – accounting expense.
The Utility requested recovery of a pro forma accounting consulting expense to
ensure compliance with the National Association of Regulatory Utility
Commissioners (NARUC) Uniform System of Accounts (USOA). This pro forma expense
is a non-recurring cost, associated with the water and wastewater systems, with
an invoice amount of $5,850. Pursuant to Rule 25-30.433(9), F.A.C., staff
allocated half of this expense to water and amortized it over five years,
resulting in an increase to the test year expense of $585. Therefore, staff
recommends contractual services – accounting expense of $585.
Contractual Services
– Legal (633)
The Utility did
not record contractual services – legal expense. Audit staff increased this
amount by $12,247 to reclassify legal expenses that were not properly recorded. Staff
decreased this amount by $3,637 to reclassify EPA expenses to Account 631 – Contractual Services –
Professional. Additionally, staff decreased this amount by $6,092 to reflect
the removal of legal expenses related to the Utility’s 2023 SARC. Staff’s net
adjustment to contractual services – legal expense results in an increase of $2,518. Therefore, staff recommends a contractual services – legal expense of
$2,518.
Contractual Services
– Other (636)
The
Utility recorded contractual services – other expense of $76,288. Audit staff
decreased this amount by $75,378 to capitalize expenses that had been recorded
in this account. In response to the Audit Report, the Utility filed a letter
indicating that the work performed that was capitalized by audit staff “are
examples of maintenance and routine repairs, and part of the Utility’s ongoing
cost of service, the Utility offers that these costs were properly categorized
as operating expenses.”[23]
Staff
agrees these costs should be expensed; however, staff does not believe the test
year is representative of a typical year. The Utility further noted that “[t]he
2024 cost is approximately three to five times as much as cost incurred in
other years.” Therefore, staff
determined a baseline contractual services – other expense using a five-year
average based on the Utility’s Annual Reports from 2019 through 2023, which
resulted in an increase of $36,094.
Additionally,
staff increased this account by $7,857 to reflect the difference between the
five-year average and the Utility’s appropriate test year balance for this
account, amortized over five years, to spread the impact of unusually high
costs incurred during the test year.
Staff’s
net adjustment to contractual services – other expense results in a decrease of
$31,427. Therefore, staff recommends a contractual services – other expense of
$44,861.
Transportation
Expense (650)
The Utility
recorded transportation expense of $1,103. Audit staff decreased this amount by
$1,103
to reclassify generator fuel expense to Account 616 – Fuel for Power
Production. Therefore, staff does not recommend a transportation expense.
Rate Case Expense
(665)
The
Utility did not record any rate case expense for this docket. The Utility is
required by Rule 25-22.0407, F.A.C., to mail notices of the rate case overview,
final rates, and four-year rate reduction. Staff calculated noticing costs to
be $1,630.
Staff
calculated the distance from the Utility office in Grand Island, Florida, to
Tallahassee as 222 miles. Based on the 2026 Internal Revenue Service (IRS)
business mileage rate of $0.725, staff calculated round trip travel and lodging
expense to the Commission Conference of $522. The Utility also paid a filing
fee of $1,000.
Under
Section 367.0814(3), F.S., the Commission may grant rate case expense for
attorney fees or fees of other outside consultants after the initial staff
report. On June 23, 2026, the Utility provided documentation to support $9,594
in additional rate case expenses, including legal expenses and consulting fees
incurred to date and estimated through the end of the PAA process.
Staff
reviewed the supporting documentation and found that the requested attorney
hourly rate of $695 is approximately 24 percent higher than the $560 hourly
rate recently approved by the Commission for Jones Walker’s associated legal
fees in the GCP Plantation, Gulfstream, and Water Oak SARC proceedings
involving Sun Communities.
Although
Jones Walker stated that their rates are based on prevailing rates for similar
services, staff is not aware of the
Commission approving a $695 hourly rate for attorneys in any SARC proceeding. The
average attorney hourly rate approved in two recent SARC proceedings was $465.
However, staff believes the most appropriate comparison is the $560 hourly rate
recently approved for Jones Walker in the GCP Plantation, Gulfstream, and Water
Oak SARC proceedings involving Sun Communities. Therefore,
staff recommends limiting the recoverable attorney hourly rate for the Sunlake
SARC to $560 as to maintain consistency with the Commission’s previously
approved rates for proceedings involving Sun Communities. This results in an
adjustment of $743.
Staff increased
total rate case expense by $12,746, consisting of noticing costs, consulting
fees, travel and lodging expenses, and filing fee. Staff
decreased this amount by $743 to reflect the attorney hourly rate adjustment.
This resulted in an adjusted total rate case expense of $12,003, which
amortized over four years is $3,001. Therefore, staff recommends a total
recoverable rate case expense of $12,003, amortized over four years, resulting
in annual rate case expense of $3,001.
Bad Debt
(670)
The
Utility did not record any bad debt expense. In its three most recent Annual
Reports (2023, 2024, and 2025), the Utility reported bad debt expenses of $0 in
all three years. In response to staff’s second data request, the Utility
confirmed that this reporting accurately reflects its accounting records.[29]
The Utility has not recorded bad debt expense in the test year or in recent
historical periods, thus, staff recommends a bad debt expense of $0.
Operation and
Maintenance Expense Summary
The Utility
recorded test year O&M expense of $142,674. Based on the above adjustments,
staff recommends O&M expense be decreased by $29,334. This results in a
total O&M expense of $113,340. Staff’s recommended adjustments to O&M
are shown on Schedule No. 3-C.
Depreciation Expense
The Utility recorded depreciation
expense of $36,406. Based on the depreciation rates prescribed in Rule
25-30.140, F.A.C., audit staff decreased this amount by $4,581. Staff increased
this amount by $261 to reflect pro forma additions and retirements. In
addition, staff increased this amount by $673 to reflect the correct
depreciation rates prescribed by the above-mentioned Rule and to reflect
changes to UPIS.
Staff’s net
adjustments to depreciation expense result in a decrease of $3,647. Therefore,
staff recommends a depreciation expense of $32,759.
Capital Recovery
Amortization Expense
The
Utility did not record a capital recovery amortization expense. As discussed in
Issue 4, staff recommends a capital recovery schedule of $25,543 over a
seven-year amortization period. The corresponding annual amortization expense
is $3,649. Therefore, staff recommends a capital recovery amortization expense
of $3,649.
CIAC Amortization Expense
The Utility
did not record a CIAC amortization expense. Staff calculated the CIAC amortization
expense using the amount approved in Commission Order No.
PSC-2014-0018-PAA-WS.
There have been no changes to the CIAC amortization expense since the last
Commission Order. Therefore, staff recommends a CIAC amortization expense of $179.
Taxes Other Than Income
(TOTI)
The Utility
recorded TOTI of $4,860. Audit staff increased this amount by $373 to reflect
an increase in Regulatory Assessment Fees (RAFs) based on an audit revenue
adjustment. Staff increased payroll taxes by $654 to reflect the reclassification of payroll taxes that had been recorded
in Account 601 – Salaries and Wages.
Based on
revenues discussed in Issue 6, TOTI should be increased by $825 to reflect a RAF rate of 4.5 percent applied to the adjustment in revenues.
As discussed
in Issue 9, staff recommends revenues be increased by $83,459 to reflect the
increased revenue required to cover expenses and allow an opportunity to earn
the recommended rate of return. As a result, TOTI should be increased by $3,756
to reflect a RAF rate of 4.5 percent applied to the change in revenues. Staff’s
adjustments result in a total increase of $5,608. Therefore, staff recommends a
TOTI of $10,468.
Operating Expense
Summary
The Utility recorded operating expenses of $183,940. The application of staff’s recommended adjustments to the Utility’s
operating expense results in a total operating expense of $160,038, a decrease of $23,902. Operating expenses are
shown on Schedule No. 3-A, and the related adjustments are shown on Schedule
No. 3-B.
Issue 8:
Does
Sunlake Estates Utilities, L.L.C. meet the criteria for application of the
operating ratio methodology?
Recommendation:
No,
Sunlake Estates Utilities, L.L.C. does not meet the requirement for application
of the operating ratio methodology for calculating the revenue requirement.
(Lenberg)
Staff Analysis:
Rule
25-30.4575(2), F.A.C., indicates that in rate cases processed under Rule
25-30.455, F.A.C., the Commission will use the operating ratio methodology to
establish the Utility’s revenue requirement when its rate base is not greater
than 125 percent of O&M expenses, less regulatory commission expense, and
the use of the operating ratio methodology does not change the Utility’s
qualification for a SARC.
With respect
to Sunlake, staff has recommended a rate base of $677,077. After removal of rate
case expense, staff has calculated an adjusted O&M expense of $110,340.
Based on staff’s recommended amounts, the Utility’s water rate base is 613.63
percent of its adjusted O&M expense. Based on this, the Utility does not
qualify for application of the operating ratio methodology.
Issue 9:
What
is the appropriate revenue requirement for Sunlake Estates Utilities, L.L.C.?
Recommendation:
The
appropriate revenue requirement is $218,097, resulting in an annual increase of
$83,459 (61.99 percent). (Lenberg)
Staff Analysis:
Sunlake
Estates Utilities, L.L.C. should be allowed an annual increase of $83,459 (61.99
percent). This should allow the Utility the opportunity to recover its expenses
and earn an 8.58 percent rate of return. The calculations of revenue
requirement are shown on Table 9-1.[31]
Table 9-1
Revenue Requirement
|
Water Rate Base
|
$677,077
|
|
Rate of Return
|
8.58%
|
|
Return on Rate Base
|
$58,059
|
|
Water O&M Expense
|
113,340
|
|
Depreciation Expense
|
32,759
|
|
Amortization
|
3,470
|
|
Taxes Other Than Income
|
10,468
|
|
Revenue Requirement
|
$218,097
|
|
Less Test Year Revenues
|
$134,638
|
|
Annual Increase
|
$83,459
|
|
Percent Increase
|
61.99%
|
Source: Staff
calculations.
Issue 10:
What are the appropriate rate structure and rates
for Sunlake Estates Utilities, L.L.C.?
Recommendation:
The recommended rate structure
and monthly water rates are shown on Schedule No. 4. 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 by affidavit within 10 days of the date of the
notice. (Rashawn)
Staff
Analysis:
Sunlake Estates provides
water services to approximately 454 residential customers, 8 general service
customers, and 5 irrigation customers. A review of the billing data indicated
that 5 percent of the residential customer bills during the test year had zero
gallons, which reflects a non-seasonal customer base. The average residential
water demand was 5,892 gallons per month. The Utility’s current rate structure for the water system consist of a BFC
and a two-tier inclining block rate. The rate blocks are: 1) 0-5,000 gallons
and 2) all usage in excess of 5,000 gallons. The general service rate structure
consists of a monthly BFC and uniform gallonage charge.
Staff
performed an analysis of the Utility’s billing in order to evaluate the
appropriate rate structure for the residential water customers. The goal of the
evaluation was to select the rate design parameters that: (1) produce the
recommended revenue requirement; (2) equitably distribute cost recovery among
the Utility’s customers; (3) establish the appropriate discretionary usage
threshold for restricting repression; and (4) implement, where appropriate,
water conserving rate structures consistent with Commission practice.
Due
to the Utility’s non-seasonal customer base, staff recommends that 40 percent
of the revenues be generated from the BFC, which will provide sufficient
revenues to design gallonage charges that will send the appropriate pricing
signals to customers using above the non-discretionary level. The average
number of people per household is 2.48;[32] therefore, based on the
number of people per household, 50 gallons per day, per person, and the number
of days per month, the discretionary usage threshold should be 4,000 gallons
per month. Staff’s review of the billing data indicates that discretionary
usage above 4,000 gallons represents approximately 41 percent of the bills,
which accounts for approximately 55 percent of water demand. This indicates
that there are some customers with high discretionary usage above 4,000
gallons.
Staff
recommends a two-tier inclining block rate structure, which includes separate
gallonage charges for non-discretionary and discretionary usage for water
rates. Due to the high usage above 4,000 gallons per month, staff believes that
it is appropriate in this case to recommend rate factors of 1.00 in the first
tier and 1.50 in the second tier because it will target those customers with
higher levels of consumption. General service
customers should continue to be billed a BFC and uniform gallonage charge.
Based
on staff’s recommended revenue increase of 61.99 percent, the residential
consumption can be expected to decline by 9,738,000 gallons resulting in an
anticipated average residential demand of 4,121 gallons per month. Staff
recommends a 30.1 percent reduction in test year residential gallons for
ratesetting purposes. As a result, the corresponding
reduction for purchased power is $2,303 and $109 for RAFs to reflect the
anticipated repression, which results in a post repression revenue requirement
of $215,685.
Based
on the above, staff’s recommended rate structure and monthly water rates are
shown on Schedule No. 4. 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 by affidavit within
10 days of the date of the notice.
Issue 11:
What
are the appropriate revisions to miscellaneous service charges for Sunlake
Estates Utilities, L.L.C.?
Recommendation:
The
appropriate revisions to miscellaneous service charges are to remove the
initial connection and normal reconnection charges and update the definition of
the premises visit charge to be consistent with Rule 25-30.460, F.A.C. The
Utility should be required to file a proposed customer notice to reflect the removal
of those charges. The changes should be effective for service rendered or
connections made on or after the stamped approval date on the tariff sheet
pursuant to Rule 25-30.475, F.A.C. In addition, the tariff sheets should be
approved upon staff’s verification that the tariffs are consistent with the
Commission’s decision and that the proposed customer notice is adequate.
(Rashawn)
Staff Analysis:
The
Utility did not request to revise its existing miscellaneous service charges.
Section 367.091, F.S., authorizes the Commission to establish, increase, or
change rate or charge other than monthly rates or service availability charges.
Rule 25-30.460, F.A.C., does not allow for initial connection and normal
reconnection charges. The Utility’s initial connection and normal reconnection
charges are obsolete and inconsistent with the rule. The definitions for
initial connection charges and normal reconnection charges were subsumed in the
definition of the premises visit charge. Based on the above, staff recommends
that the initial connection and normal reconnection charges be removed, and the
definition for the premises visit charge be updated to comply with Rule
25-30.460, F.A.C. The Utility’s existing late payment charge and non-sufficient
funds charge should remain unchanged. Shown below in Table 11-1 are the
existing charges and in Table 11-2 are staff’s recommended charges.
Table 11-1
Existing Utility Charges
|
Charge Type
|
Normal
Hours
|
After
Hours
|
|
Initial Connection Charge
|
$21.00
|
$42.00
|
|
Normal Reconnection Charge
|
$21.00
|
$42.00
|
|
Violation Reconnection Charge
|
$21.00
|
$42.00
|
|
Premises Visit Charge
|
$21.00
|
$42.00
|
Table 11-2
Staff’s Recommended Charges
|
Charge Type
|
Normal
Hours
|
After
Hours
|
|
Violation Reconnection Charge
|
$21.00
|
$42.00
|
|
Premises Visit Charge
|
$21.00
|
$42.00
|
Conclusion
Based on the above, staff recommends that the
appropriate revisions to miscellaneous service charges are to remove the initial
connection and normal reconnection charges and update the definition of the
premises visit charge to be consistent with Rule 25-30.460, F.A.C. The Utility
should be required to file a proposed customer notice to reflect the removal of
those charges. The changes should be effective for service rendered or
connections made on or after the stamped approval date on the tariff sheet
pursuant to Rule 25-30.475, F.A.C. In addition, the tariff sheets should be
approved upon staff’s verification that the tariffs are consistent with the
Commission’s decision and that the proposed customer notice is adequate.
Issue 12:
What
is the appropriate amount by which rates should be reduced four years after the
published effective date to reflect the removal of the amortized rate case
expense?
Recommendation:
The
rates should be reduced as shown on Schedule No. 4, to remove rate case expense
grossed-up for RAFs and amortized over a four-year period. Pursuant to Section
367.081(8), F.S., the decrease in rates should become effective immediately
following the expiration of the rate case expense recovery period. Sunlake
should be required to file revised tariffs and a proposed customer notice
setting forth the lower rates and rationale no later than one month prior to
the effective date of the new rates. If the Utility files revised tariffs
reflecting this reduction in conjunction with a price index or pass-through
rate adjustment, separate data should be filed for the price index and/or
pass-through increase and the reduction in the rates due to the amortized rate
case expense. (Lenberg, Rashawn)
Staff Analysis:
Section
367.081(8), F.S., requires that the rates be reduced by the amount of the rate
case expense previously included in rates immediately following the expiration
of the recovery period. The reduction will reflect the removal of revenue
associated with the amortization of rate case expense and the gross-up for
RAFs. The total reduction is $3,142.
Staff
recommends that the rates should be reduced as shown on Schedule No. 4, to
remove rate case expense grossed-up for RAFs and amortized over a four-year
period. Pursuant to Section 367.081(8), F.S., the decrease in rates should
become effective immediately following the expiration of the rate case expense
recovery period. Sunlake should be required to file revised tariffs and a
proposed customer notice setting forth the lower rates and rationale no later
than one month prior to the effective date of the new rates. If the Utility
files revised tariffs reflecting this reduction in conjunction with a price
index, and/or pass-through rate adjustment, separate data should be filed for
the price index and/or pass-through increase and the reduction in the rates due
to the amortized rate case expense.
Issue 13:
Should
the recommended rates be approved for Sunlake Estates Utilities, L.L.C. on
temporary basis, subject to refund with interest, in the event of a protest
filed by a party other than the Utility?
Recommendation:
Yes.
Pursuant to Section 367.0814(7), F.S., the recommended rates should be approved
for the Utility on a temporary basis, subject to refund with interest, in the
event of a protest filed by a party other than the Utility. Sunlake should file
revised tariff sheets and a proposed customer notice reflecting the
Commission-approved rates. The approved rates should be effective for services
rendered on or after the stamped approval date on the tariff sheet, pursuant to
Rule 25-30.475(1), F.A.C. In addition, the temporary rates should not be
implemented until staff has approved the proposed notice, and the notice has
been received by the customers. Further, prior to implementing any temporary
rates, the Utility should provide appropriate financial security.
If the recommended rates are approved on a temporary basis, the rates
collected by the Utility should be subject to the refund provisions discussed
below in the staff analysis. In addition, after the increased rates are in
effect, pursuant to Rule 25-30.360(6), F.A.C., the Utility should file reports
with the Commission’s Office of Commission Clerk no later than the 20th of each
month indicating both the current monthly and total amount subject to refund at
the end of the preceding month. The report filed should also indicate the
status of the security being used to guarantee repayment of any potential
refund. (Lenberg)
Staff Analysis:
This
recommendation proposes an increase in rates. A timely protest might delay a
rate increase resulting in an unrecoverable loss of revenue to the Utility.
Therefore, pursuant to Section 367.0814(7), F.S., in the event of a protest
filed by a party other than the Utility, staff recommends that the proposed
rates be approved on a temporary basis. Sunlake should file revised tariff
sheets and a proposed customer notice reflecting the Commission-approved rates.
The approved rates should be effective for services rendered on or after the
stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1),
F.A.C. In addition, the temporary rates should not be implemented until staff
has approved the proposed notice, and it has been received by the customers.
The additional revenue produced by staff’s recommended rates and collected by
the Utility should be subject to the refund provisions discussed below.
Sunlake
should be authorized to initiate the temporary rates upon staff’s approval of
an appropriate security for the potential refund and cost of the proposed
customer notice. Security should be in the form of either a bond or letter of
credit in the amount of $56,997. Alternatively, the Utility may establish an
escrow agreement with an independent financial institution.
If the
Utility chooses a bond for securing the potential refund, the bond should
contain wording to the effect that it will be terminated only under the
following conditions:
1. The Commission approves the rate
increase; or,
2. If the Commission denies the increase,
the Utility shall refund the amount collected that is attributable to the
increase.
If the
Utility chooses a letter of credit for securing the potential refund, the
letter of credit should contain the following conditions:
1. The letter of credit is irrevocable for the period it is in
effect.
2. The letter of credit will be in effect
until a final Commission order is rendered, either approving or denying the
rate increase.
If security
is provided through an escrow agreement, the following conditions should be
part of the agreement:
1. The Commission Clerk, or his or her
designee, must be a signatory to the escrow agreement.
2. No monies in the escrow account may be
withdrawn by the Utility without the prior written authorization of the
Commission Clerk, or his or her designee.
3. The escrow account shall be an interest-bearing account.
4. If a refund to the customers is
required, all interest earned by the escrow account shall be distributed to the
customers.
5. If a refund to the customers is not
required, the interest earned by the escrow account shall revert to the
Utility.
6. All information on the escrow account
shall be available from the holder of the escrow account to a Commission
representative at all times.
7. The amount of revenue subject to refund
shall be deposited in the escrow account within seven days of receipt.
8. This escrow account is established by
the direction of the Florida Public Service Commission for the purpose(s) set
forth in its order requiring such account. Pursuant to Cosentino v. Elson, 263
So. 2d 253 (Fla. 3d DCA 1972), escrow accounts are not subject to garnishments.
9. The account must specify by whom and on whose behalf such
monies were paid.
In no
instance should the maintenance and administrative costs associated with the
refund be borne by the customers. These costs are the responsibility of, and
should be borne by, the Utility. Irrespective of the form of security chosen by
the Utility, an account of all monies received as a result of the rate increase
should be maintained by the Utility. If a refund is ultimately required, it
should be paid with interest calculated pursuant to Rule 25-30.360(4), F.A.C.
The Utility should maintain a record of the amount of the bond, and the
amount of revenues that are subject to refund. In addition, after the increased
rates are in effect, pursuant to Rule 25-30.360(6), F.A.C., the Utility should
file reports with the Commission Clerk’s office no later than the 20th of every
month indicating the monthly and total amount of money subject to refund at the
end of the preceding month. The report filed should also indicate the status of
the security being used to guarantee repayment of any potential refund.
Issue 14:
Should Sunlake Estates Utilities, L.L.C. be required to notify the
Commission within 90 days of an effective order finalizing this docket, that it
has adjusted its books for all the applicable NARUC USOA?
Recommendation:
Yes.
Sunlake should be required to notify the Commission, in writing, that it has
adjusted its books in accordance with the Commission’s decision. The Utility
should submit a letter within 90 days of the Commission’s final order in this
docket, confirming that the adjustments to all applicable NARUC USOA primary
accounts have been made to the Utility’s books and records. In the event the
Utility needs additional time to complete the adjustments, a notice providing
good cause should be filed not less than seven days prior to the deadline
requesting an extension. Upon providing a notice of good cause, staff should be
given administrative authority to grant an extension of up to 60 days.
(Lenberg)
Staff Analysis:
Sunlake should be required to notify the
Commission, in writing, that it has adjusted its books in accordance with the
Commission’s decision. The Utility should submit a letter within 90 days of the
Commission’s final order in this docket, confirming that the adjustments to all
applicable NARUC USOA primary accounts have been made to the Utility’s books
and records. In the event the Utility needs additional time to complete the
adjustments, a notice providing good cause should be filed not less than seven
days prior to the deadline requesting an extension. Upon providing a notice of
good cause, staff should be given administrative authority to grant an
extension of up to 60 days.
Issue 15:
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, the docket should
stay open for staff’s verification that the Utility has filed its plan
outlining how it will improve its recordkeeping and customer communications as
set forth in Issue 1. Once these actions are complete, the docket should be
closed administratively. (Farooqi)
Staff Analysis:
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, the docket should stay open for staff’s verification that the Utility
has filed its plan outlining how it will improve its recordkeeping and customer
communications as set forth in Issue 1. Once these actions are complete, the
docket should be closed administratively.
