Case Background
West Lakeland Wastewater, LLC
(West Lakeland or Utility) is a Class C utility providing wastewater service to approximately 317 residential and
general service customers in Polk County, Florida. On July 22, 2025, the Florida Public
Service Commission (Commission) authorized an 11.24 percent return on equity
(ROE) with an authorized range of 10.24 percent to 12.24 percent and a rate of
return of 5.92 percent, as codified by Order No. PSC-2025-0284-PAA-SU. Based on
the review of West Lakeland’s 2025 Annual Report, Commission staff identified
possible overearnings with a reported earned rate of return of 45.30 percent.
On
April 24, 2026, the Office of Public Counsel (OPC) filed a letter with the
Commission outlining concerns of potential water and wastewater utilities
overearning, with West Lakeland being the only utility
requiring a reduction. On May 1, 2026, Mike Smallridge, the owner of West
Lakeland, consented to the Commission’s jurisdiction over revenues which
exceeded the high end of West Lakeland’s return on equity on a prospective
basis. West Lakeland and the OPC (the Parties) conducted further discussions and
evaluations of the potential overearnings. On June 30, 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 consideration. 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, West Lakeland should reduce its rates by 2.65 percent. Additionally,
West Lakeland should refund customers 2.65 percent of wastewater revenues
billed from May 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. (Ford-Green, Bethea)
Staff Analysis:
As stated in the case background, staff
identified possible overearnings based upon a review of West Lakeland’s 2025
Annual Report. On June 30, 2026, the Parties filed a Joint Motion to request
Commission approval of a Settlement Agreement to resolve the disposition of
ongoing overearnings. West Lakeland agreed to reduce its rates by 2.65 percent
to ensure it will remain within the Commission authorized range. Furthermore,
West Lakeland agreed to refund customers 2.65 percent of wastewater revenues
billed from May 1, 2026, until the effective date of the rate reduction. The
refund credit will be based upon each individual customer’s billed amounts from
May 1, 2026, until the effective date of the rate reduction, and will be made
pursuant to Rule 25-30.360, F.A.C. Additionally, West Lakeland will withdraw
its price index adjustment application, filed April 1, 2026, and not request a
price index adjustment in 2026.
Staff recommends that the Commission grant the Joint Motion and
approve the Settlement Agreement by the Parties. The Settlement Agreement
provides protections for West Lakeland’s customers for possible overearnings
in subsequent years. Staff notes that this recommendation is consistent with
other Commission decisions regarding possible overearnings. Attachment A
reflects the Utility’s existing rates and the reduced 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, West Lakeland
should reduce its rates by 2.65 percent. Additionally, West
Lakeland should refund customers 2.65
percent of wastewater revenues billed from May 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 was given within 10 days of the date
of the notice. Furthermore, West Lakeland should withdraw its application for a
price index adjustment and not request a price index adjustment in 2026.
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, this
docket should be placed into monitoring status upon issuance of the
consummating order to allow staff to verify completion of the refunds discussed
in Issue 1. Staff should be granted administrative authority to close this
docket after verifying that the Utility has completed the refunds in accordance
with Rule 25-30.360, F.A.C. (Stiller)
Staff Analysis:
If no timely protest is received from a
substantially affected person upon expiration of the protest period, this
docket should be placed into monitoring status upon issuance of the
consummating order to allow staff to verify completion of the refunds discussed
in Issue 1. Staff should be granted administrative authority to close this
docket after verifying that the Utility has completed the refunds in accordance
with Rule 25-30.360, F.A.C.
