Discussion
of Issues
Issue 1:
Is the overall quality of service provided by the
Utility satisfactory, and, if not, what systems have quality of service issues and
what action should be taken by the Commission?
Recommendation:
Yes, staff recommends that CSWR-Florida’s overall
quality of service is satisfactory. However, the quality of service for the
Sunshine and Sebring Ridge systems should be deemed marginal due to the
operational and managerial deficiencies discussed in Issue 2. No adjustments
are recommended. (P. Buys)
Position of the Parties
CSWR-Florida:
The quality of service is satisfactory for all
systems.
OPC:
No. At a
minimum, the quality of service of CSWR-Florida’s systems is deficient. The
Commission should find these systems have marginal or unsatisfactory quality of
service. The Commission should reduce the leverage graph-determined return on
equity for the Utility by 25 basis points.
Staff Analysis:
Pursuant to Section 367.081(2)(a)l., F.S., and Rule
25-30.433(1), Florida Administrative Code (F.A.C.), the Commission, in every
rate case shall make a determination of the quality of service provided by the Utility
by evaluating the quality of the Utility’s product (water) and the Utility’s
attempt to address customer satisfaction (water and wastewater). The rule
requires that the most recent chemical analyses, outstanding citations,
violations, and consent orders on file with the Florida Department of
Environmental Protection (DEP) and the county health department, along with any
DEP and county health department officials’ testimony concerning quality of
service shall be considered. In addition, any customer testimony, comments, or
complaints shall also be considered. The operating condition of the water and
wastewater systems is addressed in Issue 2.
One virtual and three in-person service hearings were held
in March 2026. A total of 18 customers testified at the service hearings. Most
of the customers who testified expressed their dissatisfaction with
CSWR-Florida’s proposed rate increase; some customers also expressed concerns
regarding the need to buy bottled water, use water filters, boil water notices
(BWNs), and the Utility’s customer service representatives not having answers
to questions. (SH Trans 1-4) CSWR-Florida serves approximately 20,207 customers
across 11 systems (29 water and 9 wastewater individual systems) throughout six
counties. (EXH 132, BSP E761) The customer participation at the service
hearings represents less than one percent of the Utility’s customer base.
The DEP provided compliance and complaint data for
CSWR-Florida’s systems from January 2020 through January 2025, which was
included in the hearing record. (EXH 166) The DEP received a total of 32
complaints during this five-year period: 14 for water and 18 for wastewater.
The water complaints were primarily regarding odor, color, water pressure, and
BWNs. The wastewater complaints were regarding odor and sanitary sewer overflows
(SSOs). (EXH 166, BSP E7240-E7241)
CSWR-Florida provided a redacted copy of the complaints it
received during the test year and since acquiring the systems in Vol. III of
its MFR Schedules. (EXH 73, BSP J15132-J15152) Through discovery, CSWR-Florida
provided an unredacted Utility complaint log which contained 2,410 billing complaints,
262 service complaints, and 7,304 product quality complaints. The complaints
included secondary water quality standards issues, such as water odor and
color, as well as complaints regarding low water pressure, leaks, and outages. In
CSWR-Florida’s response to staff, the Utility stated that it understands a
“complaint” to be a concern identified by a customer, whether by telephone,
email, written correspondence, or through the Utility’s website, regarding
CSWR-Florida’s charges, facilities, or service that requires action. (EXH
134, BSP E843-E844, E852-E1473, EXH 145, E2324; EXH 148, E2400-E2401)
As of August 7, 2026, 31 customers filed comments in the
docket, with some customers submitting multiple comments. This equates to
approximately 0.15 percent of the Utility’s customer base. Staff analyzed the
comments, and 29 customers expressed their discontent with the proposed rate
increase. In addition, one customer provided comments regarding the acquisition
adjustments, and one customer opposed the consolidation of rates. Ten customers
provided additional comments concerning the quality of service and their
dissatisfaction with the frequency of BWNs, poor water quality, poor
communication, and lack of timely responses.
The Commission received 83 complaints from February 1, 2021,
through January 31, 2025, with 29 percent of the complaints concerning billing
issues, and 71 percent concerning quality of service issues. (TR 622, C9-1012) Of
the 83 complaints, nine complaints were made prior to CSWR-Florida taking
ownership of the systems. Staff witness Plescow testified that most complaints
for the analyzed 5-year period came from Marion County, with 68 complaints. Of
the Marion County complaints, 51 concerned quality of service issues. (EXH 127;
EXH 128) Staff notes that CSWR-Florida serves approximately 4,936 water and 743
wastewater customers in Marion County, which contains the BFF, CFAT, Sunshine,
and Tradewinds systems. (EXH 132, BSP E761) The total customer complaints
received by the Commission represent 1.2 percent of CSWR-Florida’s customer
base within Marion County, and 0.42 percent of the Utility’s customer base in
its entirety. Witness Plescow also stated that the Utility may have violated
the Commission’s rules for 26 of the 83 complaints received by the Commission. Of
these potential rule violations, witness Plescow testified that 12 complaints were
about service quality, and the remaining 14 complaints were related to billing
issues.
(TR 623, C9-1013)
Pursuant to Rule 25-30.437, F.A.C., CSWR-Florida provided
the required additional engineering information in Vol. III of its MFRs, which
included the DEP’s most recent primary and secondary drinking water standards
chemical analyses. (EXH 71; EXH 72; EXH 73) Primary standards protect public
health, while secondary standards regulate contaminants that may impact the
taste, odor, and color of drinking water. Of the 11 CSWR-Florida water systems,
Aquarina was the only system that had an exceedance, which was for odor, a
secondary contaminant. (EXH 71, BSP J8243) The overall DEP compliance for each
system will be addressed in Issue 2.
CSWR-Florida argued that it has significantly improved the
operational performance and customer service of the systems it acquired by
leveraging its operational, technical, managerial, and financial expertise. The
Utility contended that it has implemented technology to improve the tracking
and resolution of customer complaints, enhance customer communications through
welcome letters, annual updates, and construction notices, as well as contract
with a third-party vendor to provide 24-hour customer service and online
account access. CSWR-Florida also stated that it strengthened its regulatory compliance
efforts by establishing an Environmental, Health, and Safety team, hiring a
dedicated escalation specialist to improve responses to Commission complaints,
and implementing internal processes to monitor and resolve customer concerns.
(TR 350, C6-605; TR 356, C6-611; TR 498-499, C4-362-C4-363; TR 501, C4-365; TR
533-535; CSWR-Florida BR 7-10)
In its rebuttal, CSWR-Florida further argued that many of
the complaints identified by staff and customers are attributable to conditions
inherited from prior system owners rather than its own operations. According to
the Utility, numerous DEP odor complaints and SSO events predated its
ownership, and complaints involving outages, water quality, and water pressure
reflected longstanding infrastructure deficiencies. CSWR-Florida also disputed witness
Plescow’s testimony on complaint violations regarding the Utility’s response
time to Commission complaints. CSWR-Florida argued that it provided prompt and
substantive responses. In addition, CSWR-Florida hired an escalation specialist
to monitor, track, and escalate the Commission’s complaints to ensure responses
are timely, complete, and properly documented. The Utility also maintained that
BWNs are precautionary regulatory requirements and do not necessarily indicate
unsafe drinking water. (TR 368-372, D5-74-D5-78; TR 516-518, D3-44-D3-46)
Further, CSWR-Florida contended that staff witness
Plescow’s testimony fails to distinguish between legacy system issues,
operational complaints, and customer dissatisfaction with the requested rate
increases. The Utility asserted that many customer comments filed in the docket
concern the rates rather than service quality. CSWR-Florida maintained that its
customer satisfaction efforts are reflected in post-call survey scores
exceeding 94 percent and that these results demonstrate its commitment to
providing quality customer service. In addition, after the service hearings, CSWR-Florida
representatives reached out to the customers expressing concerns with service
quality issues, billing issues, and operational concerns to answer their
questions. (TR 516-517, D3-44-D3-45; TR 517-518, D3-45-D3-46; TR 518-519,
D3-46-D3-47; TR 521-522, D3-49-D3-50; CSWR-Florida BR 12-14)
Although OPC did not provide any testimony on quality of
service, it argued in its brief that the record demonstrated that
CSWR-Florida’s customer service and billing practices have generated a high
level of customer dissatisfaction. OPC asserted that the evidence shows a
pattern of recurring billing errors, meter reading deficiencies, improper
application of rates, and repeated apparent rule violations that continued for
years after the system acquisitions occurred. Further, OPC argued that after
acquiring and beginning to manage the systems, CSWR-Florida’s Commission
complaint totals have steadily increased, rather than demonstrating
improvements in service, and that the trend shows a deteriorating customer
experience. According to OPC, historical complaint data demonstrates that many
of the acquired systems generated relatively few complaints before acquisition,
suggesting that the increase in complaints is due to CSWR-Florida’s management
and operational practices. (OPC BR 4-5)
OPC further argued that CSWR-Florida has received more
complaints per customer since acquiring its systems than Sunshine Water
Services Company, which is the largest investor-owned water and wastewater Utility
in Florida. OPC asserted that the Commission has previously found that
mismanagement is evidence of imprudence and has subjected a Utility to a
penalty for mismanagement. OPC contended that CSWR-Florida’s lack of timely
responses to the complaints logged with the Commission points to a level of
willfulness and should have warranted an investigation. OPC argued that
allowing CSWR-Florida rate relief without consequence would send the wrong
regulatory signal and would require customers to pay more for suboptimal
service. As such, OPC recommended that the Commission should deem
CSWR-Florida’s quality of service unsatisfactory and impose at least a 25-basis
point reduction to CSWR-Florida’s return on equity to recognize deficient
service, protect customers from management failures, and create a meaningful
incentive to fix the systems. (OPC BR 7-9)
Staff does not agree with OPC’s recommendation that
CSWR-Florida’s quality of service should be deemed unsatisfactory or that a
reduction to the Utility’s return on equity is warranted. As discussed above,
CSWR-Florida’s complaint log is expansive and appears to have captured routine customer
contacts and correspondence, in addition to complaints. Further, staff does not
believe it is appropriate to compare the complaint totals of this Utility to
another regulated utility, given the potential differences in system size,
number of customers, operating conditions, and complaint reporting practices.
In addition, the Commission had previously determined the Aquarina
system was marginal, and the Sebring Ridge
system was unsatisfactory before CSWR-Florida acquired them. Accordingly, staff
does not believe a reduction to the Utility’s return on equity (ROE) is
warranted, as recommended by OPC.
Because it appears that CSWR-Florida has taken steps to
improve its responsiveness to customer complaints, all of the Utility’s
systems, except Aquarina, are in compliance with the DEP’s primary and
secondary water quality standards, and customer participation at the service
hearings was limited, staff recommends that CSWR-Florida’s quality of service
be deemed satisfactory for all systems except Sebring Ridge and Sunshine.
Sebring Ridge and Sunshine should be deemed marginal based on the operational
and managerial deficiencies discussed in Issue 2.
Conclusion
Staff recommends that CSWR-Florida’s overall quality of
service is satisfactory. However, the quality of service for the Sunshine and
Sebring Ridge systems should be deemed marginal due to the operational and
managerial deficiencies discussed in Issue 2. No adjustments are recommended.
Issue 2:
Are the infrastructure and operating conditions of
the Utility's water and wastewater systems in compliance with Florida
Department of Environmental Protection?
Recommendation:
Yes, in part. The Utility’s water and wastewater
treatment facilities are currently in compliance with DEP regulations, except
for 14 of the 23 Sunshine water systems, as identified in Table 2-1, and the CFAT,
North Peninsula, Rolling Oaks, Sebring Ridge, and Tymber Creek wastewater
systems. (P. Buys)
Position of the Parties
CSWR-Florida:
Yes, in part. 30
of 38 systems were not compliant with FDEP regulations upon acquisition. Three
rely on purchased treatment. Of the 27 remaining, 15 have been brought into
compliance. Four systems environmental compliance is imminent. Thus, eight
systems remain out of compliance but have long-term renovation solutions.
OPC:
No. CSWR-Florida has multiple
ongoing compliance issues with the Department of Environmental Protection. CSWR-Florida’s
post-acquisition trend of ongoing encounters with the Florida Department of
Environmental Protection is indicative of chronic compliance problems.
Staff Analysis:
Rule 25-30.225(2), F.A.C., requires each water and
wastewater 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 follow 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,
compliance evaluation inspections for wastewater systems, citations, violations
and consent orders issued to the Utility, customer testimony, comments,
complaints, Utility testimony, and responses to the aforementioned items.
CSWR-Florida provided notices of violation, consent
orders, and warning letters from the county health departments and the DEP in
Vol. III of its MFR Schedules. Through discovery, staff verified if the
deficiencies were cured. (EXH 73, BSP J14081-J15123; EXH 132, BSP E722,
E724-E726, E728-E729, E733-E740, E742-E743, E745; EXH 150, BSP E2427-E2435,
E2441-E2442, E2563-E2577, E3470-E3477, E3518-E3552, E5358-E5369) CSWR-Florida witness
Freeman testified to the description of each system, the condition of each
system at the time of acquisition, each system’s compliance history, the
projects that CSWR-Florida completed, and the future projects planned for each
system. (TR 96 –287, C3-48 – C3-239) Staff also requested the current
compliance status of CSWR-Florida’s systems from the DEP. On March 10, 2026, in
response to staff’s request, the DEP provided the compliance status of each
system, including a compliance summary for each system from 2020 through 2025,
and provided copies of compliance-related correspondence, including consent
orders, warning letters, and compliance assistance offers. (EXH 166)
Additionally, during the hearing, CSWR-Florida provided several DEP letters
indicating that some systems had been returned to compliance, subsequent to the
submission of the DEP information provided March 10, 2026. (EXH 167)
CSWR-Florida argued that most of its acquired systems were
out of compliance with DEP requirements due to years of deferred maintenance
and deteriorated infrastructure under prior ownership. The Utility maintained
that many violations reflected longstanding conditions rather than deficiencies
arising during CSWR-Florida’s ownership, that DEP records do not distinguish
between pre-existing and post-acquisition compliance issues, and that the DEP
information provided to staff was outdated because several systems had since
been confirmed to have returned to compliance.
The Utility contended that it has made significant progress by restoring
numerous systems to compliance, completing rehabilitation projects, and
implementing long-term capital improvements for the remaining systems, many of
which require extensive design, permitting, and construction and are being
addressed under DEP consent agreements. (TR 74; TR 291, D2-23; TR 292, D2-24;
TR 323-324; TR 373, D5-79)
CSWR-Florida noted that, of the 38 individual water and
wastewater systems acquired by the Utility, only eight systems were in
compliance with the DEP at the time of acquisition, and three of those systems,
BFF wastewater, Tradewinds wastewater, and Tymber Creek water, purchase either
water or wastewater service from another Utility. That equates to a total of 27
separate water and wastewater systems that were out of compliance at the time
of acquisition. CSWR-Florida argued that 15 of those systems have returned to
compliance with the DEP. Furthermore, eight non-compliant systems require
extensive capital plans such as a new treatment plant or extensive plant
replacements. (CSWR-Florida BR 14-17)
OPC did not directly address compliance issues in
testimony but argued in its brief that the DEP’s records reveal systemic and
recurring patterns of compliance failures across numerous CSWR-Florida systems.
This included repeated enforcement actions, open consent orders, missed
monitoring, and sampling requirements, permitting deficiencies, and operational
failures. (OPC BR 9-11) While acknowledging that some violations predated
CSWR-Florida’s ownership, OPC contended that many systems remain out of
compliance and that new violations have occurred under CSWR-Florida’s
ownership, undermining the Utility’s claim that its acquisitions have improved
regulatory compliance. (OPC BR 9-15)
Based on the record, staff determined the compliance
status for each of CSWR-Florida’s water and wastewater systems, as shown in
Table 2-1.
Table 2-1
Staff Recommended DEP
Compliance Status
|
Water Systems
|
DEP Compliance
Status
|
|
Aquarina
|
In Compliance
|
|
CFAT
|
In Compliance
|
|
Neighborhood
|
In Compliance
|
|
Rolling Oaks
|
In Compliance
|
|
Sunshine – Ashley Heights
|
Non-Compliance
|
|
Sunshine – Belleview
|
In Compliance
|
|
Sunshine – Country Walk
|
Non-Compliance
|
|
Sunshine – Eleven Oaks
|
Non-Compliance
|
|
Sunshine – Emil Mar
|
Non-Compliance
|
|
Sunshine – Florida Heights
|
In Compliance
|
|
Sunshine – Floyd Oaks
|
In Compliance
|
|
Sunshine – Fore Oaks
|
Non-Compliance
|
|
Sunshine – Hill Top at Lake Weir
|
In Compliance
|
|
Sunshine – Little Lake Weir
|
In Compliance
|
|
Sunshine – Oakcrest Villas/Sun Resorts
|
Non-Compliance
|
|
Sunshine – Oak Haven
|
Non-Compliance
|
|
Sunshine – Oakhurst
|
In Compliance
|
|
Sunshine – Ocala Garden
|
In Compliance
|
|
Sunshine – Ocala Heights
|
In Compliance
|
|
Sunshine – Ocklawaha
|
Non-Compliance
|
|
Sunshine – Sandy Acres
|
In Compliance
|
|
Sunshine – Sun Ray
|
Non-Compliance
|
|
Sunshine – Sunlight
|
Non-Compliance
|
|
Sunshine – Whispering Sands
|
Non-Compliance
|
|
Sunshine – Winding Waters
|
Non-Compliance
|
|
Sunshine – Ponderosa (Other)
|
Non-Compliance
|
|
Sunshine – Quail Run (Other)
|
In Compliance
|
|
Tradewinds
|
In Compliance
|
|
Wastewater
Systems
|
DEP Compliance
Status
|
|
Aquarina
|
In Compliance
|
|
CFAT
|
Non-Compliance
|
|
North Peninsula
|
Non-Compliance
|
|
Rolling Oaks
|
Non-Compliance
|
|
Sebring Ridge
|
Non-Compliance
|
|
TKCB
|
In Compliance
|
|
Tradewinds
|
In Compliance
|
|
Tymber Creek
|
Non-Compliance
|
Source: EXH 73, BSP J14081-J15123; EXH 132, BSP
E722, E724-E726, E728-E729, E733-E740, E742-E743, E745; EXH 150, BSP
E2427-E2435, E2441, E2563-E2577, E3470-E3477, E3518-E3552, E5358-E5369; EXH
166; EXH 167
The compliance issues for the CFAT, North Peninsula,
Rolling Oaks, and Tymber Creek wastewater systems consist of issues such as
equipment failure, permit limits exceedances, facility corrosion, deteriorated
catwalks, sewage overflows, and an unapproved bypass. (EXH 166) These
deficiencies are expected to be addressed by the capital improvements
identified by CSWR-Florida. CSWR-Florida witness Freeman testified that
achieving DEP compliance at the CFAT, North Peninsula, and Rolling Oaks
wastewater systems will require replacement of the wastewater treatment plants.
(TR 295, D2-27; TR 301, D2-33; TR 305, D2-37) For the Tymber Creek system, witness
Freeman testified that CSWR-Florida will need to replace the lift station to
restore DEP compliance. (TR 309, D2-41) Based on the record, it appears that
CSWR-Florida has identified the corrective actions necessary to address these
deficiencies and is taking the appropriate steps to return these systems to DEP
compliance. However, the Sebring Ridge and Sunshine systems are discussed in
further detail below as staff recommends that the quality of service for these
systems be deemed marginal, as discussed in Issue 1.
Sebring Ridge
The Sebring Ridge wastewater treatment plant is an
existing 0.065 million gallons per day (MGD) three-month average daily flow
extended aeration domestic wastewater treatment facility consisting of a
16,270-gallon flow equalization basin, 74,490 gallons of aeration, dual
clarifiers with a combined capacity of 19,160 gallons, a 3,000-gallon chlorine
contact basin, and three 5,000-gallon sludge digester basins. Disinfection is
provided by liquid sodium hypochlorite in a 9,200-gallon chlorine contact
chamber. Effluent can be discharged to a rapid infiltration basin, which is a
reuse system that consists of a dual percolation pond system having a capacity
of 0.065 MGD. (EXH 73, BSP J13858) CSWR-Florida acquired this system on August
31, 2023. (TR 292, D2-24)
On January 18, 2024, under CSWR-Florida’s ownership, the
DEP sent a warning letter listing deficiencies following a DEP inspection. The
deficiencies included managerial issues, such as failure to calibrate meters in
accordance with guidelines, failure to collect samples as required by permit or
enforcement actions, failure to include required information in Field Sheets
and Chain of Custody, failure to submit annual Capacity Analysis Reports as
required by permit, and missing discharge monitoring reports (DMRs). Other
deficiencies included clogged diffusers, missing belt guards and a rusted cover
on blower motors, excessive sludge in the ponds, effluent exceedances, and a
fence around the discharge site that needed repair. In addition, the DEP noted
that CSWR-Florida failed to complete several items listed in the improvement
schedule and Administrative Order that was attached to the permit renewal in
2020. (EXH 73, BSP J13873-13875, BSP J14424-J14464) CSWR-Florida witness
Freeman testified that CSWR-Florida removed sludge and nuisance vegetation from
the ponds and a maintenance schedule was implemented to service the ponds. CSWR-Florida
replaced handrails, catwalks, and stairs around the plant. New remote
monitoring equipment and a new flow meter were installed. Witness Freeman
testified that both blowers and the motors were replaced. (TR 121, C3-73; TR
123, C3-75; TR 124 C3-76; TR 126, C3-78)
On February 20, 2025, the DEP sent another warning letter
regarding deficiencies discovered during a subsequent inspection. The
deficiency list also included managerial issues, such as failure to complete
DMRs properly, failure to maintain the land application system, failure to
provide an operation and maintenance (O&M) manual, and failure to comply
with the facility permit’s improvement schedule and Administrative Order,
including failure to submit all required quarterly status reports. Other
deficiencies included inadequate mixing in the aeration basins and excessive
splashing and leaking around the edges of the splitter tank lid. (EXH 73, BSP
J14465-J14511) When asked through discovery if the violations had been cured,
CSWR-Florida indicated that the violations would be cured upon completion of a
plant rehabilitation project, which the Utility anticipates will be completed
by the fourth quarter of 2027. (EXH 132, BSP E729)
CSWR-Florida and OPC acknowledged that the Sebring Ridge
system remains out of compliance. (CSWR-Florida BR 16-17; OPC BR 13) Although
the plant rehabilitation project is expected to address the physical DEP
deficiencies and restore compliance, it does not resolve the recurring
managerial violations documented during CSWR-Florida’s ownership, such as the
discussed reporting failures. Staff believes these ongoing compliance issues
demonstrate deficiencies in the Utility’s operation and management of the
system. Therefore, as discussed in Issue 1, staff recommends that the quality
of service for the Sebring Ridge system be deemed marginal due to the
managerial issues identified in the DEP violations.
Sunshine
The Sunshine system is comprised of 23 separate water
systems located in Marion County. Eleven systems each have one well and plant
capacities between 21,600 gallons per day (gpd) and 288,000 gpd. Nine systems
each have two wells and plant capacities between 106,560 gpd and 676,800 gpd.
The Ocklawaha and Ponderosa systems each have two plants with one well for each
plant. The Ocklawaha plant capacities are 216,000 gpd and 91,440 gpd,
respectively. The Ponderosa plant capacities are 40,320 gpd and 43,200 gpd,
respectively. (EXH 73, BSP J13436-J13605) The Sunshine systems were acquired by
CSWR-Florida on May 24, 2022. (TR 292, D2-24)
From June 2022 through December 2025, under CSWR-Florida’s
ownership, Sunshine’s water systems experienced recurring compliance issues
with the DEP across multiple systems. These issues included missed or late
monitoring and reporting requirements, sanitary survey deficiencies, failure to
provide public notices, failure to maintain monitoring records, and operational
deficiencies such as damaged or leaking tanks, unauthorized tank replacements,
failure to conduct required tank inspections by a licensed engineer, failure to
maintain well pads, failure to calibrate flow meters, and deficiencies related
to isolation valves and chlorine residuals. The DEP also issued multiple
Consent Orders addressing these violations during this timeframe, which
included damaged tanks, missed monitoring and reporting, and infrastructure and
operational deficiencies. Several systems also received warning letters or
Compliance Assistance Offer letters during this period for continued
non-compliance. While a number of individual Consent Orders were subsequently
closed after corrective actions were completed, multiple Sunshine water systems
are currently out of compliance with the DEP and continue to have open
enforcement actions or Consent Orders. As detailed in Attachment A, three
Consent Orders involving 13 of the 23 water systems address deficiencies in
water quality monitoring and sampling; operation and maintenance of wells,
tanks, and other system components; required records, plans, and manuals;
cross-connection control and backflow prevention; emergency preparedness; and
capacity and permitting. Specific violations include inadequate free chlorine residual,
missed and late sampling, failure to provide records showing that isolation
valves and
auxiliary power were being exercised, inadequate well pad
and tank maintenance, failure to conduct required tank inspections,
installation of tanks without the required approval or permit, and exceeding
maximum day capacity. The three open Consent Orders will remain open until all
corrective actions have been resolved to the DEP’s satisfaction. (EXH 73, BSP
J14513-J14528, J14531-J14552, J14555-J14594, J14597-J14603, J14606-J14651,
J14654-J14671, J14674-J14693, J14698-J14733, J14736-J14744, J14747-J14792,
J14795-J14808, J14811-J14885, J14888-J14896, J14905-J14949, J14957-J14973,
J14976-J15018)
As shown in Table 2-1, 13 of Sunshine’s 23 water systems
are currently out of compliance with the DEP. In its brief, OPC argued that
several of the Sunshine systems remain subject to active enforcement actions.
(OPC BR 12) Further, based on the above compliance summary, there was a
recurring pattern of escalation regarding non-compliance issues for several
systems including the issuance of Compliance Assistance Offers and/or Warning
Letters followed by issuance of consent orders. As indicated above, three
consent orders are still open based on the record evidence in this proceeding,
OGC Case Nos. 24-0272, 24-1941, and 24-1674, which involve multiple systems.
Some of the systems recently passed the DEP’s compliance inspections; however,
the consent orders remain open until all corrective actions for all applicable
systems have been completed. (EXH 167) In addition, as indicated in the many
notices of violations and enforcement actions, there was a recurring theme of
managerial deficiencies that continued throughout the second and third years of
CSWR-Florida’s ownership of the Sunshine systems. Although some compliance
issues may have originated prior to CSWR-Florida’s ownership, as argued by the
Utility, the continued occurrence of managerial deficiencies during
CSWR-Florida’s ownership demonstrates ongoing deficiencies in the Utility’s
operation and management of the Sunshine systems. Therefore, as discussed in
Issue 1, staff is recommending that the quality of service for the Sunshine
systems be deemed marginal due to the managerial deficiencies identified in the
DEP violations.
Conclusion
The Utility’s water and wastewater treatment facilities
are currently in compliance with DEP regulations, except for 13 of the 23
Sunshine water systems, as identified in Table 2-1, and CFAT, North Peninsula,
Rolling Oaks, Sebring Ridge, and Tymber Creek wastewater systems.
Issue 2A:
Should CSWR-Florida’s Motion to Supplement the
Record with FDEP Compliance Letter Relating to the Ocala Heights Water System
be granted?
Recommendation:
No, the Motion should be denied. (Crawford)
Staff Analysis: On July 15, 2026, CSWR-Florida filed a Motion to Supplement the
Record with FDEP Compliance Letter Relating to the Ocala Heights Water System
(Motion). In its Motion, the Utility requests that the hearing record be
supplemented with a July 7, 2026 letter from DEP. The letter provided
notification that the provisions of a Consent Order against CSWR-Florida’s
Sunshine-Ocala Heights water system had been fulfilled, the enforcement file
was closed as of the date of the letter, and the Ocala Heights water system was
in compliance with state and federal rules. The Utility contends that this
letter is relevant to Issue 2 and is similar to other letters provided by
CSWR-Florida at the hearing and admitted into evidence, without objection,
which addressed the updated DEP compliance status of several Utility systems.
(EXH 167) CSWR-Florida further argues that this would provide the Commission
with the most complete and relevant information in rendering its decision, and
would not prejudice any party. In its conferral on the Motion, CSWR-Florida
represents that OPC objects to the relief sought by the Motion. No written
objection was filed by OPC, and the time for doing so has expired.
Analysis
In
any matter which goes to hearing, the Commission reserves the right to reopen
the record if at the conclusion of the proceeding it determines that the record
is insufficient.[10] As observed in Order No.
PSC-2021-0124-PCO-WS,[11] cited by the Utility in
support of its Motion, the Commission has occasionally reopened the record of
proceedings to admit evidence when the public interest would be served by doing
so. However, Order No. PSC-2021-0124-PCO-WS – which involved admitting
corrected utility MFR schedules – also noted as follows:
All parties of record were
copied on the deficiency responses which included the corrected MFR schedules.
Commission staff and all parties of record have had access throughout this
proceeding to the corrected MFR schedules. UIF asserts that the corrected MFRs
are necessary to facilitate deliberation on UIF’s petition; therefore, the
record should be reopened to formalize their admission into the record.
Id.
at p. 1. The order also references another example where the Commission
reopened the record in Docket No. 20070299-EI to admit Gulf Power Company’s
Amended Storm Hardening Plan. In that case, the plan had been provided to all
parties, relied upon in testimony and briefing, and positions of the parties
were predicated upon it, but the plan itself had not been admitted into the
record. The Commission found that reopening the record served the public
interest, because no one was prejudiced by its admission, and excluding it
would result in unnecessary delay.[12]
In
this instance, the July 7, 2026 DEP letter that is the subject of
CSWR-Florida’s Motion did not exist until nearly a month after the hearing
record in this proceeding closed. It was not available for staff, parties, or
the Commission to conduct discovery or cross-examination. While similar DEP
letters were in existence, proffered at the hearing, and were admitted without
objection by any party or staff, that is not the case with respect to the July
7, 2026 DEP letter. (EXH. 167) While it is always ideal for the Commission to
have the most recent, correct information upon which to base its decision,
ratemaking is ongoing and prospective in nature. The admission of updated
information – especially after closure of the hearing record – must be weighed
in concert with due process and fairness to all parties. Based on the
foregoing, staff recommends that the probative value of the letter is unlikely
to outweigh the risk of prejudice to admitting the letter after the closure of
the record and the filing of post-hearing briefs.[13]
Conclusion
CSWR-Florida’s
Motion to Supplement the Record with DEP
Compliance Letter Relating to the Ocala Heights Water System should be denied.
Issue 3:
What adjustments,
if any, should be made to account for the audit adjustments related to rate
base?
Recommendation:
Adjustments
should be made to rate base as described in staff’s analysis and set forth in the
table below.
Staff Recommended Audit
Adjustments to Rate Base
|
Audit Finding
|
Rate Base
|
System
|
Water
|
Wastewater
|
|
1
|
Utility Plant in Service
|
|
|
|
|
|
|
Neighborhood
|
$3,450
|
$0
|
|
|
|
North Peninsula
|
0
|
(1,036)
|
|
|
|
Rolling Oaks
|
(266)
|
2,511
|
|
4
|
Contribution-in-Aid-of Construction (CIAC)
|
|
|
|
|
|
|
Rolling Oaks
|
(1,353)
|
(1,458)
|
|
4
|
Accumulated Amortization of CIAC
|
|
|
|
|
|
|
Aquarina
|
2,089
|
1,498
|
|
|
|
BFF
|
0
|
78
|
|
|
|
CFAT
|
0
|
(1)
|
|
|
|
Neighborhood
|
576
|
$0
|
|
|
|
Rolling Oaks
|
5,608
|
4,815
|
|
|
|
Sebring Ridge
|
0
|
673
|
|
|
|
Sunshine
|
(180)
|
0
|
|
|
|
Sunshine P-QR
|
16
|
0
|
|
|
|
Tradewinds
|
0
|
13
|
|
|
|
Total
|
$9,940
|
$(12,907)
|
(Bardin)
Position of the Parties
CSWR-Florida:
The Company agrees to Staff Audit Finding 1 (Plant
Additions); 4 (CIAC); and 7 (Working Capital). Staff withdrew Audit Finding 2
(Plant Retirements). CSWR-Florida disagrees with Staff
Audit Findings 3 (Land and Land Values) and 6 (Acquisition Adjustments; see
also Issue 17).
OPC:
The
acquisition adjustments of Aquarina, North Peninsula, and Sunshine have not
been approved by this Commission and should not be included in Rate Base.
Staff Analysis:
Based on the testimony of CSWR-Florida witness Thies
and OPC’s brief, a brief description of the audit adjustments agreed to by the
Utility and OPC are in the table below. (EXH 126, BSP C8-920 – C8-1010; CSWR-Florida
BR 5-6; OPC BR 17-22)
Table 3-1
Description of Rate Base
Audit Adjustments
|
Audit Finding
|
Description of
Adjustments
|
|
1
|
Understatement and overstatement of water and wastewater
plant.
|
|
4
|
Overstatement of water and wastewater CIAC balances and
understatement of CIAC amortization.
|
Source: EXH 126, BSP C8-920 – C8-1010
Staff witness Mouring provided testimony regarding the
audit report which was filed on January 22, 2026. Audit Findings Nos. 1 through
7 relate directly to the rate base of CSWR-Florida. In its response to the audit
report, CSWR-Florida initially agreed to the audit findings and adjustments for
Audit Findings Nos. 1, 2, 5, and 7. (EXH 137, BSP E1974)
On April 14, 2026, an errata was filed to witness
Mouring’s testimony for Audit Finding No. 4 to correct an error in the calculation
of the Contributions-in-Aid-of-Construction (CIAC) and CIAC Amortization. (EXH
126, BSP C8-1010a – C8-1010c) Given the revision, CSWR-Florida agreed with
staff’s revised Audit Finding No. 4. (CSWR-Florida BR 5)
On May 13, 2026, an errata was filed to witness Mouring’s
testimony for Audit Finding No. 1, which was reissued to correct clerical
errors of the associated depreciation related to the plant-in-service balances,
and Audit Finding No. 5, which was revised to correct errors in the calculation
of depreciation expense. (EXH 126, BSP C8-1010d – C8-1010r) Although there was
no dispute with these adjustments, technical staff did have some recalculations
that will be discussed in Issues 14 and 34.
Audit Finding No. 2 was related to retirement balances for
accounts with salvage values. On May 28, 2026, an errata was filed to witness
Mouring’s testimony for Audit Finding No. 2, which was withdrawn due to an
incorrect application of Rule 25-30.140, F.A.C., regarding plant retirements.
(EXH 126, BSP C8-1010s; TR 605) On rebuttal, CSWR-Florida witness Thies agreed
to accept revised Audit Finding No. 2, which was a removal of the finding.
(CSWR-Florida BR 5)
The errata issued on May 28, 2026, also included Audit Finding
No. 3, which was to provide adjustments to reflect the original cost of land
values for the Utility’s water and wastewater systems. (EXH 126, BSP C8-1010s –
C8-1010v) CSWR-Florida did not agree with the revision for the land values.
(CSWR-Florida BR 5) OPC did agree with witness Mouring’s revised finding
regarding land. (OPC BR 16-18) The land and land rights will be further
discussed in Issue 4.
Accumulated Depreciation and Depreciation
Expense
Accumulated depreciation adjustments and depreciation
expenses reflect the associated UPIS account adjustments from Audit Finding No.
1. (EXH 126, BSP C8-1010f – C81010g) Audit Finding No. 5 also included
adjustments for depreciation expenses. All adjustments for depreciation
expenses and accumulated depreciation will be discussed further in Issues 14
and 34.
Acquisition Adjustments
Audit Finding No. 6 was a removal of the acquisition
adjustments from this rate case. (EXH 126, BSP C8-940) These will be discussed
further in Issue 17.
Working Capital
In Audit Finding No. 7, the working capital for each of
the water and wastewater systems was recalculated and adjustments were
provided. (EXH 126, BSP C8-941 – C8-947) This will be further discussed in
Issue 18.
Audit Finding No. 1
In Audit
Finding No. 1, witness Mouring testified that adjustments were necessary to Utility-plant-in-service
(UPIS) accounts for two water systems and two wastewater systems along with the
corresponding depreciation based on a review of the supporting documentation.
(EXH 126, BSP C8-929 – C8-930) CSWR-Florida agreed with the adjustments.
(CSWR-Florida BR 5) OPC stated that plant-in-service adjustments should be
made. (OPC BR 16) witness Mouring provided the variance between the audited
value and the value recorded by CSWR-Florida. The result was an overall
increase in plant value. The following table shows these plant adjustments.
Table 3-2
Utility Plant-in-Service
Adjustments
|
System
|
Water
|
Wastewater
|
|
Neighborhood
|
$3,450
|
$0
|
|
North Peninsula
|
0
|
(1,036)
|
|
Rolling Oaks
|
(266)
|
2,511
|
|
Total
|
$3,184
|
$1,475
|
Source: EXH 126, BSP C8-929 –
C8-930
Further UPIS adjustments will be discussed in Issues 4 and 6.
Audit Finding No. 4
In the errata to his testimony for Audit Finding No. 4, witness
Mouring provided an adjustment to the CIAC to reflect an averaging adjustment
for CIAC additions in the test year. The associated CIAC accumulated
amortization adjustments were also calculated for these CIAC additions. (EXH
126, BSP C8-1010a – C8-1010c) CSWR-Florida agreed to the amounts provided in
the errata. (CSWR-Florida BR 5) OPC did not provide a position regarding the
CIAC or CIAC amortization. The following tables show these CIAC audit
adjustments.
Table 3-3
Contributions-in-Aid-of-Construction
(CIAC)
|
System
|
Water
|
Wastewater
|
|
Rolling Oaks
|
($1,353)
|
($21,458)
|
Source: EXH 126, BSP C8-1010a –
C8-1010c
Table 3-4
Accumulated Amortization of
CIAC
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
$2,089
|
$1,498
|
|
BFF
|
0
|
78
|
|
CFAT
|
0
|
(1)
|
|
Neighborhood
|
576
|
0
|
|
Rolling Oaks
|
5,608
|
4,815
|
|
Sebring Ridge
|
0
|
673
|
|
Sunshine
|
(180)
|
0
|
|
Sunshine P-QR
|
16
|
0
|
|
Tradewinds
|
0
|
13
|
|
Total
|
$8,109
|
$7,076
|
Source: EXH 126, BSP C8-1010a –
C8-1010c
Conclusion
The following table summarizes staff’s recommended audit
adjustments for water and wastewater rate base, respectively.
Staff Recommended Audit
Adjustments to Rate Base
|
Audit Finding
|
Rate Base
|
System
|
Water
|
Wastewater
|
|
1
|
Utility Plant in Service
|
|
|
|
|
|
|
Neighborhood
|
$3,450
|
$0
|
|
|
|
North Peninsula
|
0
|
(1,036)
|
|
|
|
Rolling Oaks
|
266)
|
2,511
|
|
4
|
Contribution-in-Aid-of Construction (CIAC)
|
|
|
|
|
|
|
Rolling Oaks
|
(1,353)
|
(21,458)
|
|
4
|
Accumulated Amortization of CIAC
|
|
|
|
|
|
|
Aquarina
|
2,089
|
1,498
|
|
|
|
BFF
|
0
|
78
|
|
|
|
CFAT
|
0
|
(1)
|
|
|
|
Neighborhood
|
576
|
0
|
|
|
|
Rolling Oaks
|
5,608
|
4,815
|
|
|
|
Sebring Ridge
|
0
|
673
|
|
|
|
Sunshine
|
(180)
|
0
|
|
|
|
Sunshine P-QR
|
16
|
0
|
|
|
|
Tradewinds
|
0
|
13
|
|
|
|
Total
|
$9,940
|
$(12,907)
|
Issue 4:
Should any adjustments be made to test year
plant-in-service balances?
Recommendation:
Yes. The following tables summarize staff’s
recommended adjustments for water and wastewater Land and Land Rights and CWIP
to UPIS, respectively, and are described in staff’s analysis.
Land and Land Rights
Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
(45,511)
|
($33,396)
|
|
Aquarina – Non-Potable
|
(2,989)
|
0
|
|
BFF
|
0
|
(33,172)
|
|
CFAT
|
(34,795)
|
(16,948)
|
|
Neighborhood
|
(38,628)
|
0
|
|
North Peninsula
|
0
|
(46,403)
|
|
Rolling Oaks
|
(2,434,059)
|
(2,685,084)
|
|
Sebring Ridge
|
0
|
(57,303)
|
|
Sunshine
|
(292,893)
|
0
|
|
Sunshine P-QR
|
(22,768)
|
0
|
|
TKCB
|
0
|
(47,552)
|
|
Tradewinds
|
(49,988)
|
(33,938)
|
|
Tymber Creek
|
(22,936)
|
(22,270)
|
|
Total
|
($2,944,567)
|
($2,976,066)
|
Adjustment from CWIP to UPIS
|
System
|
Water
|
Wastewater
|
|
Sunshine
|
$720,427
|
$0
|
|
Sunshine P-QR
|
372,650
|
0
|
|
Total
|
$1,093,077
|
$0
|
(Bardin)
Position of the Parties
CSWR-Florida:
The Company agrees to Staff’s Audit Finding 1: Plant
Additions. Staff withdrew Audit Finding 2: Plant Retirements which would have
affected plant-in-service balances. CSWR-Florida disagrees
with Staff Revised Audit Finding 3: Land and Land Values. See Issue 3 regarding
Land and Land Values.
OPC:
Yes. The
record supports that plant-in-service adjustments should be made.
Staff Analysis:
CSWR-Florida filed Consolidated MFRs with test year
plant-in-service balances of $14,957,464 for water and $12,318,880 for
wastewater. The Utility’s MFRs also included land and land rights balances of $3,188,983
for water and $3,193,429 for wastewater. (EXH 23, J1984-J1985)
Land and Land Rights
CSWR-Florida requested a total of $3,188,983 in land and
land rights for water and $3,193,429 for wastewater per the MFR Schedules A-1
and A-2. (EXH 8, J513 – J515; EXH 14, J1039; EXH 18, J1459-J1460; EXH 28,
J2483; EXH 33, J2976; EXH 38, J3503-J3504; EXH 43, J4007; EXH 48, J4720-J4721;
EXH 52, J5169; EXH 57, J5791-J5792; EXH 63, J6350-J6351)
For the original Audit Finding No. 3 regarding the value
of the land and land rights accounts, CSWR-Florida agreed to increases for
Tymber Creek, Rolling Oaks, and Sebring Ridge systems. (TR 667) On May 28,
2026, an errata was filed to witness Mouring’s testimony that included Audit Finding
No. 3, which was to correct the land and land rights balances to reflect the
original cost of land values. This included removing all additional amounts
such as closing costs, title
costs, property appraisals, engineering survey costs, mapping/drafting reports,
easements, and other real estate legal costs that were booked as transaction
costs and not for the acquisition of new land. This correction resulted
in a reduction of $5,920,633 for the land and land rights values claimed by
CSWR-Florida. (EXH 126, BSP C8-1010s – C8-1010v)
CSWR-Florida objected to the revised Audit Finding No. 3
for land and land rights and filed a motion to strike it from the docket and
requested that be it excluded from the hearing. In lieu of exclusion from the hearing, CSWR-Florida requested to
file a supplemental rebuttal testimony from CSWR-Florida witness Thies. On June
5, 2026, the Commission denied the motion to strike the revised audit finding but
granted the inclusion of witness Thies’ supplemental rebuttal testimony.
In his
supplemental rebuttal testimony, witness Thies argued that the staff had
interpreted the National Association of Regulatory Utility
Commissioners' Uniform System of Accounts (USoA) instructions incorrectly by not allowing closing costs, other
associated legal fees, and appraisals to be included in the land and land
rights accounts. (TR 675-676) Witness Thies stated that the land and land
rights balance should not be a static figure and based on his interpretation of
USoA Accounting Instruction 24, that additional costs, such as closing costs,
surveys, titles, appraisals, and other legal costs, should be included in the
balances. (TR 673-679)
Witness
Thies stated that CSWR, LLC had previously dealt with this issue in the state
of Tennessee. (TR 680-681)
CSWR, LLC is the parent company of Limestone Water Utility Operating Company,
LLC (Limestone). Limestone filed a rate case on July 26, 2024, in Tennessee to
seek increases in their water and wastewater rates and a consolidation of
several purchased systems. The Commission Conference was held on April 14,
2025. (EXH 174, BSP F1-38) During the Commission Conference, the Consumer
Advocate of the Office of the Tennessee Attorney General (Consumer Advocate)
objected to the Utility’s increased valuation of the land and land rights for
water and wastewater of Limestone. (EXH 174, BSP F1-78; F1-103) These
additional costs of the increased valuation for land and land rights included
various costs for closing costs, title costs, property appraisals, engineering
survey costs, mapping/drafting reports, easements, and other real estate legal
costs. (EXH 174, BSP F1-79)
The
Consumer Advocate stated that there were two reasons for its objections to the
increased land and land rights values. The first reason was that there is a
fundamental premise of the rate of return methodology for rates that is the use
of original or historical cost, which ensures that customers pay for the costs
of a service provider only one time in the amount of the actual costs. (EXH
174, BSP F1-78;
F1-103) The second reason was that Limestone had not provided any information
regarding alternative uses for the land which could possibly increase the basis
above the acquired book values. (EXH 174, BSP F1-78; BSP F1-103 – F1-104) The Consumer
Advocate proposed that the land and land rights accounts be reduced to their
original historic values by disallowing the acquisition adjustments and
transaction costs which Limestone had used to increase the values of the land
and land rights. (EXH 174, BSP F1-78; F-104)
Witness
Thies stated that the Consumer Advocate was incorrect to suggest that the
increased amounts were effectively inappropriate when the Consumer Advocate
recommended that these costs should be disallowed. (EXH 174, BSP F1-79)
After a
review by the Tennessee Commission, the Commission chose to treat the
additional costs under the guidelines governed by the Tennessee Commission
Utility Acquisitions Rule 1220-04-14-.06, instead of as additions to the land
and land rights accounts, and removed the additional costs from the land and
land rights accounts. (EXH 174, BSP F1-79 – F1-80; F1-104 – F1-105)
On
cross examination at the hearing, witness Thies admitted that the Tennessee
Commission did remove the additional closing costs, survey, titles, and other
legal costs from the land and land rights account and included those costs in
other accounts, specific to Tennessee, for transactions costs related to
acquisitions. (TR 700)
OPC agrees with the staff’s Audit Finding No. 3 errata and
recommends that the additional costs CSWR-Florida included in the land and land
rights balances should be removed. (OPC BR 18) The water and wastewater land and
land rights used by the Utility were already in service before CSWR-Florida
purchased the systems, so its acquisition-related expenses did not add new
land, expand capacity, or create additional utility plant. (OPC BR 17) Instead,
those additional costs were simply transaction expenses associated with a
change in ownership. (OPC BR 17) OPC believes that recorded land balances
should reflect the original cost previously approved by the Commissioners, and
the adjustments recommended in the audit should be approved. (OPC BR 16 – 18)
Appraisal Value
In addition to the various costs for closing costs, title costs, engineering survey
costs, mapping/drafting reports, easements, and other real estate legal costs
that CSWR-Florida has included in the land and land rights for the water and
wastewater systems, the Utility used an appraisal value to increase the land
and land rights balances for Rolling Oaks Utilities. The appraisal was
performed by Valbridge Appraisal Company in 2022. (EXH 153, BSP E5618 – E5672)
This appraisal was completed for CSWR-Florida prior to the purchase of Rolling
Oaks Utilities in November 2022, while Rolling Oaks Utilities was still under
Citrus County jurisdiction. A balance sheet was provided by Rolling Oaks
Utilities in conjunction with the sale to CSWR-Florida establishing the
historic land balances for both water and wastewater. (EXH 153, BSP
E5614-E5615) Upon Citrus County’s return of jurisdiction to the Commission, CSWR-Florida
Rolling Oaks was granted a grandfather certificate in July 2025.
Appraisal values are not part of the original acquisition
as they reflect current market conditions, and not the original cost incurred.
An appraisal value is an estimate of a property’s current market value,
determined by various valuation methods such as property characteristics,
condition, sales comparisons, or neighborhood factors. Market values of land
and land rights can fluctuate significantly over time due to changing market or
economic conditions. Including these changing market values in a land’s cost
basis could cause the land values and rates to vary considerably over time.
Pursuant to Rule 25-30.115, F.A.C., Florida adheres to the
USoA in recording land when first dedicated to public use. Also, USoA Accounting
Instruction 19A., for both water and wastewater Utilities, states that Utility
plant is to be recorded at the original cost when it was first devoted to Utility
service.
Additionally, Rule 25-30.140(1)(r), F.A.C., states that
when an asset already in public service is acquired, the original historic cost
must be recorded in plant in service.
The Valbridge
appraisal was a 2022 market estimate of both land owned by the Utility and the
hypothetical value of the easements the Utility uses. Staff recommends
disallowing the appraisal as it is a market estimate of land that had been in
public use for almost 40 years at the time of the appraisal. The appreciation
of land values over time should not be used to determine the original cost of
the land or land values for the Utility.
Staff agrees with the revised audit findings per the May
28, 2026, errata, and in adherence with the USoA and Rule 25-30.140, F.A.C. Staff
recommends that adjustments be made to reflect the original land values. Staff
noted that an incorrect value was used for Sunshine in the errata, which
affects only the adjustment value provided in the errata and does not affect
the original land value.
Table 4-1
Original Land & Land
Rights Values
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
$37,582
|
$33,680
|
|
Aquarina – Non-Potable
|
24,498
|
0
|
|
BFF
|
0
|
1,579
|
|
CFAT
|
19,500
|
39,000
|
|
Neighborhood
|
1,000
|
0
|
|
North Peninsula
|
0
|
46,800
|
|
Rolling Oaks
|
9,928
|
9,861
|
|
Sebring Ridge
|
0
|
45,716
|
|
Sunshine
|
70,777
|
0
|
|
Sunshine P-QR
|
10,000
|
0
|
|
TKCB
|
0
|
36,203
|
|
Tradewinds
|
70,000
|
0
|
|
Tymber Creek
|
1,131
|
4,524
|
|
Total
|
$244,416
|
$217,363
|
Source:
EXH 126, BSP C8-1010s-C8-1010v
Construction Work in Progress (CWIP)
Staff noted that CSWR-Florida included adjustments in the
amount of $1,093,077 to reflect construction-work-in-progress (CWIP) on its MFR
Schedules A-1 for water rate base for both Sunshine and Sunshine P-QR. (EXH 48,
J4720-J4721) The projects associated with these CWIP adjustments were completed
outside of the test year but subsequent to the Utility filing. (EXH 141,
E2000-E20001) The projects include hydropneumatic tank replacements for
Ponderosa #1 and #2, Ashley Heights, Country Walk, Oakcrest Villas, and Winding
Waters. (EXH 131, BSP E37) As such, staff removed the amounts from CWIP and
moved them into the appropriate water plant-in-service accounts. The following
table illustrates this adjustment.
Table 4-2
Adjustment from CWIP to UPIS
|
System
|
Water
|
Wastewater
|
|
Sunshine
|
$720,427
|
$0
|
|
Sunshine P-QR
|
$372,650
|
$0
|
|
Total
|
$1,093,077
|
$0
|
Source:
EXH 48, J4720-J4721; EXH 131, E37; EXH 141, E2000-E20001
Conclusion
The following tables below summarize staff recommended
adjustments for water and wastewater, respectively.
Land and Land Rights
Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($45,511)
|
($33,396)
|
|
Aquarina – Non-Potable
|
(2,989)
|
0
|
|
BFF
|
0
|
(33,172)
|
|
CFAT
|
(34,795)
|
(16,948)
|
|
Neighborhood
|
(38,628)
|
0
|
|
North Peninsula
|
0
|
(46,403)
|
|
Rolling Oaks
|
(2,434,059)
|
(2,685,084)
|
|
Sebring Ridge
|
0
|
(57,303)
|
|
Sunshine
|
(292,893)
|
0
|
|
Sunshine P-QR
|
(22,768)
|
0
|
|
TKCB
|
0
|
(47,552)
|
|
Tradewinds
|
(49,988)
|
(33,938)
|
|
Tymber Creek
|
(22,936)
|
(22,270)
|
|
Total
|
(2,944,567)
|
($2,976,066)
|
Adjustment from CWIP to UPIS
|
System
|
Water
|
Wastewater
|
|
Sunshine
|
$720,427
|
$0
|
|
Sunshine P-QR
|
372,650
|
0
|
|
Total
|
$1,093,077
|
$0
|
Issue 5:
Should adjustments be made to the Utility's pro
forma plant additions?
Approved Type 1 Stipulation:
No adjustments should be made; the CSWR-Florida has
no pro forma plant additions.
Issue 6:
What are the appropriate plant retirements to be
made in this docket?
Recommendation:
As a result of audit staff’s withdrawal of its
finding regarding plant retirements and due to CSWR-Florida recording no plant
retirements during the test year, staff recommends that no plant retirements
should be recognized in this docket. (Bardin)
Position of the
Parties
CSWR-Florida:
None. Staff
withdrew Audit Finding #2 related to Plant Retirements.
OPC:
Yes. The record supports that adjustments
should be made for plant retirements. consistent with Staff Audit
Finding 2 and in accordance with Rule
25-30.140 F.A.C.
Staff
Analysis:
The Utility reflected no plant retirements during
the test year.
(EXH 23, BSP J1987)
Audit Finding No. 2 was related to retirement balances for
accounts with salvage values. On May 28, 2026, an errata was filed to staff witness
Mouring’s testimony for this audit finding, which was withdrawn due to an
incorrect application of Rule 25-30.140, F.A.C., regarding plant retirements.
(EXH 126, BSP C8-1010s – C8-1010v; TR 605) Per CSWR-Florida witness Thies in
his rebuttal dated June 1, 2026, CSWR-Florida agreed to accept revised Audit Finding
No. 2, which was a removal of the finding. (TR 672-673)
OPC agreed with the staff’s Audit
Finding No. 2 regarding plant retirements and the net salvage value for
designated accounts that should be used in calculating depreciation. (OPC BR
18) OPC did not provide a position regarding the removal of Audit Finding No.
2.
Staff witness Mouring stated
Audit Finding No. 2 was withdrawn because it reflected an incorrect application
of Rule 25-30.140, F.A.C. (TR 615) Staff recommends the withdrawal of Audit
Finding No. 2 be accepted and not be applied. As a result, no plant retirements
should be recognized.
Conclusion
As a result of the withdrawal of Audit Finding No. 2
regarding plant retirements and due to CSWR-Florida recording no plant
retirements during the test year, staff recommends that no plant retirements should
be recognized in this docket.
Issue 7:
Do any water systems have excessive unaccounted for
water and, if so, what adjustments are necessary, if any?
Recommendation:
Yes. Staff’s calculations demonstrate the systems
identified below have excessive unaccounted for water (EUW). As such, staff
recommends adjustments be made to purchased power, chemicals, and purchased
water.
|
System
|
Recommended EUW Adjustment
|
|
CFAT
|
17%
|
|
Neighborhood
|
26%
|
|
Rolling Oaks
|
28%
|
|
Sunshine
Consolidated
|
26%
|
|
Sunshine –
Ponderosa
|
25%
|
|
Sunshine – Quail
Run
|
12%
|
|
Tradewinds
|
3%
|
|
Tymber Creek
|
23%
|
Staff’s recommended adjustments to purchased power, and
chemical expenses are shown in the table below.
|
System
|
Staff’s
Recommended Adjustment
|
|
CFAT
|
$1,509
|
|
Neighborhood
|
$3,715
|
|
Rolling Oaks
|
$78,135
|
|
Sunshine
|
$29,979
|
|
Sunshine P-QR
|
$2,385
|
|
Tradewinds
|
$710
|
|
Tymber Creek
|
$18,109
|
(P. Buys, B. York)
Position of the Parties
CSWR-Florida:
No.
OPC:
Yes. The
following systems have excessive unaccounted for water: Aquarina (29%), C.F.A.T
(16%), Neighborhood (27%), Rolling Oaks (28%), Sunshine Utilities (23%),
Tradewinds (78%), and Tymber Creek (24%). Any excessive unaccounted for water
for each system determined by the Commission must have applicable corresponding
reductions to purchased power, chemicals, and/or purchased water expenses.
Appropriate adjustments should be made in Issue 32.
Staff Analysis:
Rule 25-30.4325(1)(e), F.A.C., provides factors to
be considered in determining whether adjustments to operating expenses are
necessary for EUW. EUW is defined 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. In determining
whether adjustments to plant and operating expenses are necessary in accordance
with Rule 25-30.4325(10), F.A.C., staff considers several factors. These
include the causes of EUW, any corrective action taken, or the economic
feasibility of a proposed solution. 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, if any, is the EUW percentage.
Neither CSWR-Florida nor OPC directly addressed EUW in
testimony; however, CSWR-Florida provided calculations of EUW in its Minimum
Filing Requirements (MFR) F-1 Schedules. Table 7-1 shows CSWR-Florida’s
calculations for each system with EUW.
Table 7-1
CSWR-Florida EUW Calculations
|
System
|
Total Gallons
Pumped/Purchased
|
Other Uses
|
Gallons Sold
|
Unaccounted for
Water
|
EUW
|
|
Aquarina – Potable1
|
14,014,200
|
-
|
8,549,034
|
39%
|
29%
|
|
CFAT
|
12,596,831
|
-
|
9,261,855
|
26%
|
16%
|
|
Neighborhood
|
28,032,500
|
-
|
17,713,319
|
37%
|
27%
|
|
Rolling Oaks
|
665,898,222
|
-
|
411,716,956
|
38%
|
28%
|
|
Sunshine Consolidated
|
336,716,925
|
-
|
229,980,286
|
32%
|
22%
|
|
Sunshine – Ponderosa
|
14,167,008
|
-
|
9,176,418
|
35%
|
25%
|
|
Sunshine – Quail Run
|
10,420,198
|
-
|
8,179,492
|
22%
|
12%
|
|
Tradewinds
|
78,077,997
|
-
|
67,766,000
|
13%
|
3%
|
|
Tymber Creek2
|
14,153,000
|
-
|
9,298,050
|
34%
|
24%
|
Source: EXH
8, BSP J614; EXH 18, BSP J1549; EXH 28, BSP J2567; EXH 38, BSP J3596; EXH 48,
BSP J4842-J4848; EXH 57, BSP J5880; EXH 63, BSP J6440
Note 1: There
was no flow meter for the non-potable well during the test year. A new flow
meter was installed February 13, 2025.
Note 2: The gallonage data
provided by CSWR-Florida for Tymber Creek
is based on seven months of data.
OPC argued in its brief that several systems have EUW.
OPC’s identified systems, as well as OPC’s recommended EUW adjustments, are
similar to those identified by staff in Table 7-2 below. OPC also recommended
that the Commission make the corresponding reductions to purchased power,
chemicals, and/or purchased water expenses for the systems with EUW in Issue
32. (OPC BR 18-19)
Through discovery, staff
verified the gallons pumped with the DEP’s Monthly Operating Reports (MORs).
Staff also requested estimates for other uses, such as line flushing or line
breaks. In addition, staff verified the amount of purchased water by requesting
the purchased water invoices for the relevant systems through discovery. The
gallons sold were also verified with the consumption use provided by
CSWR-Florida. Staff’s
analysis resulted in adjustments to CSWR-Florida’s calculated EUW amounts for
the Aquarina, CFAT, Neighborhood, Sunshine Consolidated, Sunshine – Ponderosa,
and Tymber Creek systems. Staff’s calculations resulted in no EUW for the
Aquarina system. Table 7-2 shows staff’s other EUW calculations based on the
information described above.
Table 7-2
Staff Recommended EUW
|
System
|
Total Gallons
Pumped/Purchased
|
Other Uses
|
Gallons Sold
|
Unaccounted for
Water
|
EUW
|
|
CFAT
|
12,604,931
|
-
|
9,248,000
|
27%
|
17%
|
|
Neighborhood
|
28,032,500
|
109,700
|
17,696,000
|
36%
|
26%
|
|
Rolling Oaks
|
663,621,222
|
2,597,778
|
441,651,000
|
38%
|
28%
|
|
Sunshine Consolidated
|
361,723,599
|
35,000
|
229,980,286
|
36%
|
26%
|
|
Sunshine – Ponderosa
|
14,167,008
|
-
|
9,176,418
|
35%
|
25%
|
|
Sunshine – Quail Run
|
10,420,198
|
-
|
8,179,492
|
22%
|
12%
|
|
Tradewinds
|
78,077,997
|
65,000
|
67,766,000
|
13%
|
3%
|
|
Tymber Creek1
|
14,153,000
|
137,800
|
9,305,000
|
33%
|
23%
|
Source:
See footnote 17
Note 1: The gallonage data provided by CSWR-Florida for Tymber
Creek is based on seven months of data.
CSWR-Florida witness Freeman testified during cross
exanimation that the Utility has begun replacing individual customer meters, as
part of its efforts to address EUW, because aging, uncalibrated meters may
result in inaccurate water sales data. Witness Freeman testified that the
Utility has master meters on its well systems, so CSWR-Florida knows how much
water it is pumping. Comparing the water pumped with the water sold indicates
how much EUW there is in a system. CSWR-Florida argued in its brief that it has
not yet had sufficient time following its acquisitions to identify and repair
water leaks that contribute to EUW. (CSWR-Florida BR 3; TR 325-326) The Utility
argued that applying EUW adjustments at this stage would not provide a
reasonable opportunity to address inherited system deficiencies and could limit
recovery of purchased power and chemical expenses associated with excessive
water losses. CSWR-Florida further asserted that this proceeding presents the
Commission with an opportunity to consider whether EUW adjustments should be
applied differently in the context of recently acquired distressed water and
wastewater systems. (CSWR-Florida BR 24)
As shown in Table 7-3 below, the calculations for EUW by
CSWR-Florida, OPC, and staff do not vary greatly, in fact for most systems the
difference is only one or two percentage points, or the numbers are the same.
Table 7-3
EUW Comparison
|
System
|
CSWR-Florida EUW
|
OPC EUW1
|
Staff EUW
|
|
CFAT
|
16%
|
17%
|
17%
|
|
Neighborhood
|
27%
|
27%
|
26%
|
|
Rolling Oaks
|
28%
|
28%
|
28%
|
|
Sunshine Consolidated
|
24%
|
22%
|
26%
|
|
Sunshine – Ponderosa
|
26%
|
26%
|
25%
|
|
Sunshine – Quail Run
|
12%
|
12%
|
12%
|
|
Tradewinds
|
3%
|
3%
|
3%
|
|
Tymber Creek2
|
24%
|
23%
|
23%
|
Source: OPC
BR 18-19; EXH 8, BSP J614; EXH 18, BSP J1549; EXH 28, BSP J2567; EXH 38, BSP
J3596; EXH 48, BSP J4842-J4848; EXH 57, BSP J5880; EXH 63, BSP J6440
Note 1: OPC
did not provide calculations, just the displayed EUW percentages.
Note 2: The gallonage data provided by CSWR-Florida for Tymber
Creek is based on seven months of data.
While there is agreement that EUW exists, and the
calculated EUW amounts are not that different, the dispute here centers around
CSWR- Florida’s argument that the Commission apply no EUW adjustments in this
proceeding because it has not had a reasonable opportunity to address inherited
systems deficiencies. (CSWR-Florida
BR 23-24) Staff disagrees. While staff recognizes that the Utility has begun
initiating corrective actions, such as replacing meters, the Commission’s established
EUW rule is intended to ensure that rates reflect the reasonable and prudent
cost of providing service. Consistent with the rule, the purpose of an EUW
adjustment is not to penalize a Utility but rather remove the costs from rates
that are associated with excessive water losses, inaccurate meters, or poor
record keeping, which is generally in the control of the Utility, not the
customer. As noted above, the rule does provide for a consideration of 10
percent for unaccounted water, with anything above 10 percent considered
excessive.
Accordingly, staff does not believe the Utility’s inherited system deficiencies
argument provides a sufficient basis to depart from the Commission’s
established ratemaking methodology and application of the rule. Therefore,
staff recommends that adjustments for EUW be made consistent with the amounts
reflected in Table 7-2 above.
Staff’s recommended adjustments are $1,509 for CFAT,
$3,715 for Neighborhood, $78,135 for Rolling Oaks, $29,979 for Sunshine Unified
Systems, $2,385 for the combined Ponderosa and Quail Run systems, $710 for
Tradewinds, and $18,109 for Tymber Creek.
Accordingly, staff recommends that purchased power, and
chemical expenses be adjusted as reflected in the recommendation.
Conclusion
Staff’s calculations demonstrate that the systems
identified below have EUW. As such, staff recommends adjustments be made to
purchased power, chemicals and purchased water as appropriate.
|
System
|
Recommended EUW Adjustment
|
|
CFAT
|
17%
|
|
Neighborhood
|
26%
|
|
Rolling Oaks
|
28%
|
|
Sunshine
Consolidated
|
26%
|
|
Sunshine –
Ponderosa
|
25%
|
|
Sunshine – Quail
Run
|
12%
|
|
Tradewinds
|
3%
|
|
Tymber Creek
|
23%
|
Staff’s recommended adjustments to purchased power, and
chemical expenses are shown in the table below.
|
System
|
Staff’s
Recommended Adjustment
|
|
CFAT
|
$1,509
|
|
Neighborhood
|
$3,715
|
|
Rolling Oaks
|
$78,135
|
|
Sunshine
|
$29,979
|
|
Sunshine P-QR
|
$2,385
|
|
Tradewinds
|
$710
|
|
Tymber Creek
|
$18,109
|
Issue 8:
Do any wastewater systems have excessive
infiltration and/or inflow and, if so, what adjustments are necessary, if any?
Recommendation:
No. Staff recommends that there is no excessive
infiltration and inflow (I&I) for the Aquarina, TKCB, and Tradewinds
wastewater systems. Staff was unable to calculate excessive I&I for the
BFF, CFAT, North Peninsula, Rolling Oaks, Sebring Ridge, and Tymber Creek
wastewater systems due to unknown pipe sizes within these systems. Therefore, no
adjustments should be made for excessive I&I at this time. Further, staff
recommends that CSWR-Florida submit, within 30 days of the Commission’s Order,
a plan detailing for each system with unknown pipe sizes, how and when it will
complete the collection of the pipe size data to comply with Rule 25-30.125,
F.A.C. Upon receipt of this information, staff will evaluate whether further
proceedings may be advisable to address the information provided. (P. Buys, B.
York)
Position of the Parties
CSWR-Florida:
No. Due to its acquisition
of distressed systems, the Company does experience systems with infiltration
and inflow. The Company is working diligently to address this situation. Given
the distressed nature of the acquired systems, the Company does not believe
that the situation warrants an adjustment. See Issue 7.
OPC:
Yes, it is
possible that some systems have excessive infiltration and/or inflow, but CSWR-Florida
has not adequately addressed this issue in its testimony and filing and thus
has not carried its burden to refute this possibility. Any excessive
infiltration and inflow for each system determined by the Commission must have
applicable corresponding reductions to purchased power, chemicals, and/or
purchased wastewater expenses. Appropriate adjustments should be made in Issue
32.
Staff Analysis:
Rule 25-30.432, F.A.C., provides that in determining
the amount of used and useful plant, the Commission will consider I&I.
Excessive I&I is a calculation that is based on a comparison of allowable
wastewater treated to the actual amount of wastewater treated. When the actual
amount of wastewater treated does not exceed the allowable amount treated,
there is no excessive I&I.
Through discovery, staff verified the plant flows with the
DEP’s Discharge Monitoring Reports (DMRs), requested the sizes of the
collection pipes for CSWR-Florida’s wastewater systems, and requested the
purchased wastewater treatment invoices to verify the amount of purchased
wastewater treatment. However, when CSWR-Florida provided the sizes of the
collection pipes for its wastewater systems, some sections were listed as
having a diameter of zero. Pursuant to Rule 25-30.125, F.A.C., utilities shall
maintain maps of its systems showing size and locations of the facilities.
CSWR-Florida indicated that failing systems tend to have incomplete and
inaccurate records. In addition, CSWR-Florida indicated that when a pipe has an
unknown diameter, the Utility assigns a diameter of zero inches to enter the
pipe into its mapping software. CSWR-Florida stated that it will update its
mapping software when additional information becomes available through field
verification, maintenance activities, system improvements, and capital projects
to address this issue.
As such, staff was unable to determine the amount of excessive I&I, if any,
for the BFF, CFAT, North Peninsula, Rolling Oaks, Sebring Ridge, and Tymber
Creek wastewater systems. Table 8-1 shows staff’s excessive I&I analysis
for the remaining wastewater systems.
Table 8-1
Staff Recommended Excessive
I&I
|
System
|
Allowable
I&I
|
Actual
Wastewater Treated/Purchased
|
Excessive
I&I
|
|
Aquarina
|
24,751,500
|
15,851,820
|
None
|
|
TKCB
|
3,999,819
|
231,670
|
None
|
|
Tradewinds
|
3,399,327
|
1,205,000
|
None
|
Source: EXH 8, BSP J615, J623; EXH 52, BSP J5253, J5261;
EXH 57, BSP J5881, J5889; EXH 72, BSP J11686-J11828, J12887-J12956; EXH 132,
BSP E719-E720, E742-E743, E762-E765, E805-E808; EXH 134, BSP E843-E844
In its brief, CSWR-Florida stated that, due to the
distressed nature of the wastewater systems that it acquired, the Utility does
experience systems with I&I. CSWR-Florida asserted that it is working
diligently to address this issue. However, similar to its argument for EUW
adjustments in Issue 7, CSWR-Florida argued that no adjustments should be made
for excessive I&I due to the distressed nature of the acquired systems.
(CSWR-Florida BR 23-24)
OPC argued that CSWR-Florida did not meet its burden of
proof for this issue and as a result, excessive I&I cannot be calculated.
OPC also added that if the Commission does determine that any system has
excessive I&I, corresponding adjustments should be made to purchased power,
chemicals, and/or purchased wastewater treatment expenses. (OPC BR 19)
While CSWR-Florida was unable to provide the necessary
pipe sizes for all systems in order for excessive I&I to be calculated, the
Utility provided the available information regarding I&I for three systems.
As shown in Table 8-1, staff’s calculations did not result in any excessive
I&I for the three wastewater systems listed. As discussed above, staff was unable
to determine the amount of excessive I&I, if any, for the remaining
wastewater systems because CSWR-Florida was unable to provide the actual
diameter for some collection pipes.
Therefore, staff recommends that no adjustments should be made for excessive
I&I at this time. Staff recommends that CSWR-Florida should continue its
field verifications, maintenance activities, system improvements, capital
projects, and/or any other activities necessary to determine the actual
collection pipe diameters for those that are currently unknown. In addition,
staff recommends that CSWR-Florida submit, within 30 days of the Commission’s
Order becoming final, a plan detailing for each system with unknown pipe sizes,
how and when it will complete the collection of the pipe size data to comply
with Rule 25-30.125, F.A.C.
Conclusion
Staff recommends that there is no excessive I&I for
the Aquarina, TKCB, and Tradewinds wastewater systems. Staff was unable to
calculate excessive I&I for the BFF, CFAT, North Peninsula, Rolling Oaks,
Sebring Ridge, and Tymber Creek wastewater systems due to unknown pipe sizes
within these systems. Therefore, no adjustments should be made for excessive
I&I at this time. Further, staff recommends that CSWR-Florida submit,
within 30 days of the Commission’s Order becoming final, a plan detailing for
each system with unknown pipe sizes, how and when it will complete the
collection of the pipe size data to comply with Rule 25-30.125, F.A.C. Upon
receipt of this information, staff will evaluate whether further proceedings
may be advisable to address the information provided.
Issue 9:
What are the appropriate used and useful percentages
for the water treatment and related facilities of each water system?
Recommendation:
The water treatment and related facilities for each
water system are 100 percent used and useful (U&U), except for CFAT, which
is 65 percent U&U.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
CFAT
|
($8,199)
|
($684)
|
($51)
|
(P. Buys. Bardin)
Position of the Parties
CSWR-Florida:
All water treatment and related facilities are fully
used and useful. See Issue 7 regarding the applicability of disallowances
associated with Excessive Unaccounted for Water, Used and Useful Percentages,
or Infiltration and Inflow Disallowances.
OPC:
The
appropriate used and useful percentages for the water treatment and related
facilities are 100% for each
applicable system, except for the CFAT system which is 65% used and
useful consistent with its last rate case.
Staff Analysis:
Rule 25-30.4325, F.A.C., addresses the method by
which the U&U percentage of a water system is determined. To calculate
U&U for a water treatment system, the sum of the single maximum day water
flow for the test year, the growth allowance, and fire flow requirements, minus
any EUW, is divided by the firm reliable capacity of the water system. 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.
Neither CSWR-Florida nor OPC directly addressed U&U in
testimony; however, CSWR-Florida provided U&U calculations in its MFR F-5
Schedules. Table 9-1 shows CSWR-Florida’s water treatment system U&U
calculations. However, CSWR-Florida argued that each of its water treatment
systems should be considered 100 percent U&U. (CSWR-Florida BR 25)
Table 9-1
CSWR-Florida Calculated WTP
U&U (gallons per day)
|
System
|
Number of Wells
|
Maximum Day
|
Growth Allowance
|
Fire Flow
|
EUW
|
Firm Capacity
|
U&U
|
|
Aquarina – Potable
|
1
|
148,000
|
-
|
-
|
11,173
|
50,000
|
100%
|
|
Aquarina – Non-potable1
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
CFAT
|
3
|
98,000
|
-
|
-
|
5,670
|
240,000
|
38%
|
|
Neighborhood
|
2
|
148,000
|
-
|
-
|
20,666
|
240,0000
|
53%
|
|
Rolling Oaks
|
9
|
7,843,000
|
-
|
|
5112,974
|
3,733,333
|
100%
|
|
Sunshine – Consolidated2
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Sunshine – Ponderosa
|
2
|
67,300
|
-
|
-
|
9,040
|
55,680
|
69%
|
|
Sunshine – Quail Run
|
1
|
45,900
|
-
|
-
|
6,649
|
28,800
|
100%
|
|
Tradewinds
|
3
|
501,000
|
-
|
-
|
6,846
|
633,333
|
78%
|
Source: EXH
8, BSP J618; EXH 18, BSP J1553; EXH 28, BSP J2571; EXH 38, BSP J3600; EXH 48,
BSP J4856-J4861; EXH 57, BSP J5884
Note 1: CSWR-Florida did not
provide any U&U calculations for Aquarina - Non-potable.
Note 2: Ten of the 21
Sunshine consolidated systems have more than one well; however, CSWR-Florida
calculated U&U of less than 100 percent for only two systems. The overall
U&U for the Consolidated Sunshine systems is 100%.
Through discovery, staff verified the number of wells and
their respective capacities with the DEP’s inspection reports and requested the
required fire flow for each system from the Utility. Staff also verified the
maximum day water flow amounts for the test year using the DEP’s MORs. To
determine the growth allowance for each system, five years of historic data
pertaining to customer count and gallons sold is needed. However, because the
systems were acquired relatively recently, only one to two full years of
historical data were available for each system at the time of this proceeding.
As a result, there is insufficient historical information to calculate a growth
allowance for the systems. Based on staff’s analysis, and consistent with
Commission practice and each system’s last staff assisted rate case, staff
recommends that the following water treatment systems be considered 100 percent
U&U: Aquarina
– Non-potable,
Neighborhood,
Sunshine – Consolidated,
Sunshine – Ponderosa,
Sunshine – Quail Run,
and Tradewinds. The
Aquarina – Potable water treatment system should also be considered 100 percent
U&U as it was determined to have one well. Last, staff calculated CFAT’s
U&U to be 26 percent. Staff reviewed CFAT’s updated system map to determine
if the system was built out, and it appears that there are areas of the service
territory that could be developed. (EXH 71, BSP J9732d) Staff also reviewed
CFAT’s last staff assisted rate case, and the water treatment system was
determined to be 65 percent U&U.
Therefore, consistent with its last staff assisted rate case, staff recommends
that CFAT’s water treatment system be considered 65 percent U&U.
As stated above,
CSWR-Florida argued that each of its water treatment systems should be
considered 100 percent U&U. Similar to its argument discussed in Issue 7
regarding EUW adjustments, CSWR-Florida contended that applying U&U
adjustments to distressed systems acquired “as is” would discourage future
acquisitions and undermine the Commission’s goal of encouraging rehabilitation
of troubled systems. According to CSWR-Florida, unlike the original owner, an
acquiring Utility cannot resize or redesign existing infrastructure to match
the current customer base, and applying U&U adjustments would prevent it
from recovering its reasonable costs of owning and operating the systems.
(CSWR-Florida BR 24) Staff disagrees that acquired “distressed” systems should
automatically be considered 100 percent U&U. Neither the rule nor
Commission precedent accounts for adjusting U&U to provide an incentive for
larger utilities to acquire smaller, troubled systems; there are other
provisions that contemplate such an incentive. As
discussed above, Rule 25-30.4325, F.A.C, establishes a uniform methodology for
determining the U&U of water treatment and storage facilities, ensuring
only the portion of the Utility plant that is currently needed and providing
service is included in rate base while also accounting for prudent planning
through factors such as growth and EUW. Therefore, staff believes the Utility’s
argument for deeming “distressed” systems 100 percent U&U is not consistent
with this rule because it would shift the cost of unused capacity to the
customers.
Consistent with staff’s
recommendations for this issue, OPC argued in its brief that each of the water
treatment systems should be considered 100 percent U&U except for CFAT,
which OPC agreed should be considered 65 percent U&U, consistent with its
last rate case. OPC recommended that any U&U adjustments be made to Account
No. 320.3. (OPC BR 20)
As indicated above, staff
disagrees with CSWR-Florida’s position that all its water treatment systems
should be considered 100 percent U&U due to staff’s recommendation for the
CFAT water treatment system. It is Commission policy that U&U adjustments
be applied, as necessary, for systems that are not built out or served by
multiple wells. Because there appears to be potential for development in the
CFAT service territory as discussed above, staff does not believe the record
adequately demonstrated that this system is built out. Additionally, the CFAT
water treatment system is served by three wells, as shown in Table 9-1, and
therefore does not meet this criterion for a determination of 100 percent
U&U. As such, staff recommends that the CFAT water treatment system be
considered 65 percent U&U, consistent with its last staff assisted rate
case, and that adjustments be made as necessary to the appropriate accounts. In
addition, as discussed above, staff recommends that the remaining water
treatment systems be considered 100 percent U&U.
Conclusion
The water treatment and related facilities for each water
system are 100 percent U&U, except for CFAT, which is 65 percent U&U.
The appropriate fall-out adjustments are shown in the table
below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
CFAT
|
($8,199)
|
($684)
|
($51)
|
Issue 10:
What are the appropriate used and useful percentages
for the water storage and related facilities of each water system?
Recommendation:
The water storage and related facilities for each
CSWR-Florida system should be considered 100 percent U&U, with the
exception of Aquarina and CFAT, which staff recommends should be considered 61
percent and 86 percent U&U, respectively.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Aquarina
|
($6,463)
|
($191)
|
($98)
|
|
CFAT
|
($14,829)
|
($914)
|
($92)
|
|
Total
|
($21,292)
|
($1,105)
|
($190)
|
(P. Buys, Bardin)
Position of the Parties
CSWR-Florida:
All water storage and related facilities are fully
used and useful. See Issue 7 regarding the applicability of disallowances
associated with Excessive Unaccounted for Water, Used and Useful Percentages,
or Infiltration and Inflow Disallowances.
OPC:
The
following systems have water storage and related facilities less than 100% used
and useful: Aquarina (65.8%), C.F.A.T. (38%), and Neighborhood (53%).
Staff Analysis:
Rule 25-30.4325(8), F.A.C., addresses the method by
which the U&U percentage of a water storage facility is determined. The
U&U percentage for water storage is calculated by dividing the peak demand,
which is the sum of the maximum day water flow amount, the growth allowance,
and the fire flow requirement minus EUW, by the usable storage capacity of the
storage tank. Usable storage capacity less than or equal to the peak day demand
shall be considered 100 percent U&U. Hydropneumatic tanks are not
considered usable storage, elevated storage tanks shall be considered 100
percent U&U, and ground storage tanks shall be considered 90 percent
U&U if the bottom of the tank is below the centerline of the pumping unit
or 100 percent U&U if the tank has a bottom drain.
Neither CSWR-Florida nor OPC directly addressed U&U in
testimony; however, CSWR-Florida provided calculations of U&U in its MFR
F-5 Schedules. Table 10-1 shows CSWR-Florida’s water storage U&U
calculations. However, CSWR-Florida argued that all of its water storage and
related facilities should be considered 100 percent U&U. (CSWR-Florida BR
24)
Table 10-1
CSWR-Florida Calculated
Water Storage U&U (gallons)
|
System
|
Ground Storage
Capacity
|
Elevated Storage
Capacity
|
Hydro Storage
Capacity
|
Usable Ground
Storage
|
Usable Elevated
Storage
|
Usable Hydro
Storage
|
U&U
|
|
Aquarina
|
250,000
|
-
|
5,000
|
225,000
|
-
|
-
|
66%
|
|
CFAT
|
200,000
|
-
|
20,000
|
180,000
|
-
|
-
|
54%
|
|
Neighborhood
|
60,000
|
-
|
-
|
54,000
|
-
|
-
|
100%
|
|
Rolling Oaks
|
600,000
|
-
|
-
|
540,000
|
-
|
-
|
100%
|
|
Sunshine – Consolidated1
|
-
|
-
|
-
|
-
|
-
|
-
|
100%
|
|
Sunshine – Ponderosa
|
-
|
-
|
4,000
|
-
|
-
|
-
|
100%
|
|
Sunshine – Quail Run
|
-
|
-
|
3,000
|
-
|
-
|
-
|
100%
|
|
Tradewinds
|
-
|
200,000
|
15,000
|
-
|
200,000
|
-
|
100%
|
Source:
EXH 8, BSP J618; EXH 18, BSP J1553; EXH 28, BSP J2571; EXH 38, BSP J3600; EXH
48, BSP J4856-J4861; EXH 57, BSP J5884
Note 1: All of the Sunshine Consolidated systems have
hydropneumatic storage tanks, ranging in size from 300 to 12,500 gallons.
Through discovery, staff verified the number and
capacities of the storage tanks with the DEP’s inspection reports. Consistent
with Commission practice and each system’s last staff assisted rate case, the
water storage and related facilities for each of the following systems is
considered 100 percent U&U: Neighborhood,
Sunshine – Consolidated,
Sunshine – Ponderosa,
Sunshine – Quail Run,
and Tradewinds. For the
remaining systems, based on staff’s analysis, the water storage U&U for
Aquarina should be 61 percent. Last, staff calculated CFAT’s water storage
U&U to be 51 percent; however consistent with its last staff assisted rate
case, CFAT’s water storage should be considered 86 percent U&U.,
CSWR-Florida argued in its brief that the water storage U&U
for each of its systems should be 100 percent based on the same argument
detailed in Issue 9. (CSWR-Florida BR 24) However, as stated in Issue 9,
considering the U&U rule, staff does not believe it is appropriate to
automatically deem “distressed” systems 100 percent U&U. OPC argued in its
brief that the water storage U&U for the Aquarina and CFAT systems should
be considered 61 percent and 86 percent, respectively, consistent with staff’s
recommendations. Further, OPC also recommended that any water storage U&U
adjustments be made to Account No. 330. (OPC BR 20)
As indicated above, staff disagrees with CSWR-Florida that
all of its water storage systems should be considered 100 percent U&U. It
is Commission policy to apply U&U adjustments for water storage systems
that are determined to be non-U&U. Therefore,
staff recommends that the water storage U&U for the Aquarina and CFAT
systems be considered 61 percent and 86 percent, respectively, and that
adjustments be made as necessary to the appropriate accounts. In addition, as
discussed above, staff recommends that the water storage for the remaining
systems be considered 100 percent U&U.
Conclusion
The water storage and related facilities for each
CSWR-Florida system should be considered 100 percent U&U, with the
exception of Aquarina and CFAT, which staff recommends should be considered 61
percent and 86 percent U&U, respectively.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Aquarina
|
($6,463)
|
($191)
|
($98)
|
|
CFAT
|
($14,829)
|
($914)
|
($92)
|
|
Total
|
($21,292)
|
($1,105)
|
($190)
|
Issue 11:
What are the appropriate used and useful percentages
for the water distribution and related facilities of each water system?
Recommendation:
Staff recommends the water distribution and related
facilities for each system are 100 percent U&U, except for Aquarina and
Rolling Oaks, which should be considered 81 percent and 93 percent U&U,
respectively.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Aquarina
|
($36,734)
|
($1,459)
|
($554)
|
|
Rolling Oaks
|
($19,973)
|
($2,445)
|
($224)
|
|
Total
|
($56,707)
|
($3,904)
|
($778)
|
(P. Buys, Bardin)
Position of the Parties
CSWR-Florida:
All water distribution and related facilities are
fully used and useful. See Issue 7 regarding the applicability of disallowances
associated with Excessive Unaccounted for Water, Used and Useful Percentages,
or Infiltration and Inflow Disallowances
OPC:
The
appropriate used and useful percentages for water distribution and related facilities are 100% for each applicable system, except for Aquarina potable
distribution system (81%) and Rolling Oaks distribution system (93%).
Staff Analysis:
In determining if a water distribution system is
U&U, the Commission uses the following formula: the sum of the total number
of test year connections and the growth allowance divided by the total number
of lots. The Commission also considers whether the distribution system is built
out, consistent with Rule 25-30.4325(4), F.A.C., and if so, this would result
in a water distribution U&U determination of 100 percent.
Neither CSWR-Florida nor OPC directly addressed U&U in
testimony. Additionally, CSWR-Florida did not provide any calculations for
water distribution U&U as the Utility argued all of its systems to be built
out and therefore 100 percent U&U. (EXH 8, BSP J620; EXH 18, BSP J1555; EXH
28, BSP J2573; EXH 38, BSP J3602; EXH 48, BSP J4863; EXH 56, BSP J5886; EXH 63,
BSP J6446)
Through discovery, staff verified the total number of lots
for each system, along with the total number of test year connections.
Consistent with Commission practice and with each system’s last staff assisted rate
case, staff recommends the following systems should be considered 100 percent
U&U: CFAT,
Neighborhood,
Sunshine – Ponderosa,
Tradewinds, and
Tymber Creek. In
addition, staff calculated the U&U to be 100 percent for the Sunshine –
Consolidated and Sunshine – Quail Run systems. (EXH 71, BSP J9732b-J9732aj; EXH
132, BSP E719, E722, E728, E740-E742, E760-E761; EXH 135, BSP E1487-E1491)
Regarding the remaining systems, staff determined that
there are 403 total lots and 325 total customer connections for the Aquarina
system. In addition, as discussed in Issue 9, the growth allowance could not be
determined as CSWR-Florida did not have five years’ worth of data available for
its systems. In reviewing the system map for the Aquarina system, staff noticed
an 8-inch main that was located in an empty lot and was not intermingled with
the other lots being served in the service territory. When asked about this,
CSWR-Florida did not know why the main was in the empty lot. Because there is a
service line that is not currently being used, the Aquarina distribution system
does not appear to be fully built out. Therefore, staff recommends the water
distribution U&U for the Aquarina system should be 81 percent based on
staff’s analysis. (EXH 71, BSP J9732b; EXH 132, BSP E719, E722, E760-E761; EXH
135, BSP E1487-1489)
For Rolling Oaks, staff determined that there are 6,655
total lots and 6,210 total customer connections. In reviewing the system map
for Rolling Oaks, staff noticed an area consisting of 183 lots off by itself in
the service territory. When asked if CSWR-Florida was serving anyone in this
particular area, CSWR- Florida responded that it was not; however, the Utility
will be ready to provide service to those customers if requested. Because there
are service lines not currently being used and the lots are located in a
separate area of the service territory, rather than intermingled among lots
currently being served, the Rolling Oaks distribution system does not appear to
be fully built out. Therefore, staff recommends the water distribution U&U
for the Rolling Oaks system should be 93 percent based on staff’s analysis.
(EXH 71, BSP J9732h; EXH 132, BSP E719, E728, E760-E761; EXH 135, BSP
E1487-1490)
CSWR-Florida argued in its brief that the water
distribution U&U for each of its systems should be 100 percent based on the
same argument detailed in Issue 9. (CSWR-Florida BR 24) However, as stated in
Issue 9, considering the U&U rule, staff does not believe it is appropriate
to automatically deem “distressed” systems 100 percent U&U. OPC argued in
its brief that each of CSWR-Florida’s water distribution systems are 100
percent U&U, with the exception of the Aquarina – Potable and Rolling Oaks
systems, which it recommended should be considered 81 percent and 93 percent
U&U, respectively, which is consistent with staff’s recommendations. OPC
also argued that if any of the water distribution systems are not considered
100 percent U&U, then appropriate adjustments should be made to Account No.
331.4. (OPC BR 21)
As indicated above, staff disagrees with CSWR-Florida’s position
that all of its water distribution systems should be considered 100 percent
U&U. It is Commission policy to apply U&U adjustments for water
distribution systems that are determined to be non-U&U. Therefore,
staff recommends that the water distribution for the Aquarina and Rolling Oaks
systems be considered 81 percent and 93 percent U&U, respectively, and that
adjustments be made to the appropriate accounts. In addition, as discussed
above, staff recommends that the water distribution for the remaining systems
be considered 100 percent U&U.
Conclusion
Staff recommends the water distribution and related
facilities for each system are 100 percent U&U, except for Aquarina and
Rolling Oaks, which should be considered 81 percent and 93 percent U&U, respectively.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Aquarina
|
($36,734)
|
($1,459)
|
($554)
|
|
Rolling Oaks
|
($19,973)
|
($2,445)
|
($224)
|
|
Total
|
($56,707)
|
($3,904)
|
($778)
|
Issue 12:
What are the appropriate used and useful percentages
for the wastewater treatment and related facilities of each wastewater system?
Recommendation:
Staff recommends the following U&U percentages
for the wastewater treatment and related facilities:
|
System
|
U&U
|
|
Aquarina
|
56%
|
|
CFAT
|
39%
|
|
North Peninsula
|
100%
|
|
Rolling Oaks
|
55%
|
|
Sebring Ridge
|
81%
|
|
TKCB
|
100%
|
|
Tymber Creek
|
100%
|
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Aquarina
|
($28,969)
|
($1,808)
|
($516)
|
|
CFAT
|
($18,785)
|
($1,605)
|
($86)
|
|
Rolling Oaks
|
($116,899)
|
($7,214)
|
($1,523)
|
|
Sebring Ridge
|
($15,227)
|
($1,128)
|
$0
|
|
Total
|
($179,880)
|
($11,755)
|
($2,125)
|
(P. Buys, Bardin)
Position of the Parties
CSWR-Florida:
All wastewater treatment and related facilities are
fully used and useful. See Issue 7 regarding the applicability of disallowances
associated with Excessive Unaccounted for Water, Used and Useful Percentages,
or Infiltration and Inflow Disallowances.
OPC:
The
following systems have wastewater treatment and related facilities less than
100% used and useful: Aquarina (49.09%), C.F.A.T. (39%), North Peninsula (52%),
Rolling Oaks (55%), Sebring (29%), TKCB (45.45%), and Tymber Creek (47.56%).
Staff Analysis:
Rule 25-30.432, F.A.C., addresses the method by
which the U&U percentage of a wastewater treatment system is determined.
The rule sets forth provisions for flow data and permitted capacity to be used
in the equation, and other factors for consideration such as I&I, the
growth allowance, the extent to which the area served by the plant is built
out, and decreases in flows due to conservation or a reduction in customers.
Neither CSWR-Florida nor OPC directly addressed U&U in
testimony; however, CSWR-Florida provided U&U calculations for its
wastewater treatment and related facilities in the MFR F-6 Schedules. Table
12-1 shows CSWR-Florida’s wastewater treatment system U&U calculations.
However, CSWR-Florida argued that each of its wastewater treatment systems
should be considered 100 percent U&U. (CSWR-Florida BR 24)
Table 12-1
CSWR-Florida Calculated WWTP
U&U (gallons per day)
|
System
|
Used and Useful
Flow
|
Growth Allowance
|
I&I
|
Permitted
Capacity
|
U&U
|
|
Aquarina
|
48,600
|
-
|
-
|
99,000
|
49%
|
|
CFAT
|
38,485
|
-
|
-
|
99,000
|
39%
|
|
North Peninsula
|
94,300
|
-
|
-
|
181,000
|
52%
|
|
Rolling Oaks
|
545,050
|
-
|
-
|
1,000,000
|
55%
|
|
Sebring Ridge
|
51,967
|
-
|
-
|
181,000
|
29%
|
|
TKCB
|
45,000
|
-
|
-
|
99,000
|
45%
|
|
Tymber Creek
|
62,300
|
-
|
-
|
131,000
|
48%
|
Source: EXH 8, BSP J619; EXH 18, BSP J1554; EXH 33, BSP
J3064; EXH 38, BSP J3601; EXH 43, BSP J4095; EXH 52, BSP J5257; EXH 63, BSP
J6445
Through discovery, staff verified the capacity of the
wastewater treatment systems with the DEP’s permits and inspection reports.
Staff also verified the basis for the flow data for each system, which was
either annual average daily flow or three-month average daily flow. As
discussed in Issue 9, the growth allowance could not be determined as
CSWR-Florida did not have five years’ worth of data available for its systems.
In addition, as discussed in Issue 8, there was either no excessive I&I or
the amount of excessive I&I could not be determined for each system.
Consistent with Commission practice and with each system’s last staff assisted rate
case, the following wastewater treatment systems are considered 100 percent
U&U: North Peninsula,
TKCB,
and Tymber Creek.
Although staff could not determine the growth allowance for each system, as
discussed above, staff determined that the remaining wastewater treatment
systems were not built out because there appears to be potential for growth
throughout each system’s service territory based on the provided system maps.
As such, the Aquarina and Sebring Ridge wastewater treatment systems are 56
percent
and 81 percent
U&U, respectively, consistent with each system’s last staff assisted rate
case. For the remaining systems, staff agrees with CSWR-Florida’s wastewater
treatment system U&U calculations of 39 percent and 55 percent, respectively,
for the CFAT and Rolling Oaks systems.
CSWR-Florida argued in its brief that the wastewater
treatment system U&U for each of its systems should be 100 percent based on
the same argument detailed in Issue 9. (CSWR-Florida BR 24) However, as stated
in Issue 9, considering the U&U rule, staff does not believe it is
appropriate to automatically deem “distressed” systems 100 percent U&U. OPC
argued in its brief that each of CSWR-Florida’s wastewater treatment systems
are 100 percent U&U, with the exception of the Aquarina, CFAT, Rolling
Oaks, and Sebring Ridge systems, which it recommended should be considered 56
percent, 39 percent, 55 percent, and 81 percent U&U, respectively, which is
consistent with staff’s recommendations. (OPC BR 21)
As indicated above, staff disagrees with CSWR-Florida’s
position that all of its wastewater treatment systems should be considered 100
percent U&U. It is Commission policy to apply U&U adjustments for
wastewater treatment systems that are non-U&U. Therefore,
staff recommends that the U&U for the wastewater treatment system of the
Aquarina, CFAT, Rolling Oaks, and Sebring Ridge systems should be considered 56
percent, 39 percent, 55 percent, and 81 percent U&U, respectively, and that
adjustments be made to the appropriate accounts. In addition, as
discussed above, staff recommends that the wastewater treatment system U&U
for the remaining systems be considered 100 percent.
Conclusion
Staff recommends the following U&U percentages for the
wastewater treatment and related facilities:
|
System
|
U&U
|
|
Aquarina
|
56%
|
|
CFAT
|
39%
|
|
North Peninsula
|
100%
|
|
Rolling Oaks
|
55%
|
|
Sebring Ridge
|
81%
|
|
TKCB
|
100%
|
|
Tymber Creek
|
100%
|
The appropriate fall-out adjustments are shown in the table
below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Aquarina
|
($28,969)
|
($1,808)
|
($516)
|
|
CFAT
|
($18,785)
|
($1,605)
|
($86)
|
|
Rolling Oaks
|
($116,899)
|
($7,214)
|
($1,523)
|
|
Sebring Ridge
|
($15,227)
|
($1,128)
|
$0
|
|
Total
|
($179,880)
|
($11,755)
|
($2,125)
|
Issue 13:
What are the appropriate used and useful percentages
for the collection lines and related facilities of each wastewater system?
Recommendation:
Staff recommends that the wastewater collection
lines and related facilities for each wastewater system are 100 percent
U&U, with the exception of Rolling Oaks and Sebring Ridge, which should be
74 percent and 79 percent U&U, respectively.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Rolling Oaks
|
($189,333)
|
($19,592)
|
($2,467)
|
|
Sebring Ridge
|
($89,846)
|
($3,957)
|
$0
|
|
Total
|
($279,179)
|
($23,549)
|
($2,467)
|
(P. Buys, Bardin)
Position of the Parties
CSWR-Florida:
All wastewater collection lines and related
facilities are fully used and useful. See Issue 7 regarding the applicability
of disallowances associated with Excessive Unaccounted for Water, Used and
Useful Percentages, or Infiltration and Inflow Disallowances.
OPC:
CSWR-Florida’s used and useful percentages for
collection lines and related facilities are 100% except for Aquarina (86%),
Rolling Oaks (74%), and Sebring Ridge (79%). The appropriate adjustments should
be made to Account Nos. 354.2, 360.2, 361.2, 362.2, 364.2, 365.2, and 389.2.
Staff Analysis:
In determining if a wastewater collection system is
U&U, the Commission uses the following formula: the sum of the total number
of test year connections and the growth allowance divided by the total number
of lots. The Commission also considers whether the collection system is built
out, consistent with Rule 25-30.432, F.A.C., and if so, this would result in a
wastewater collection U&U determination of 100 percent.
Neither CSWR-Florida nor OPC directly addressed U&U in
testimony. Additionally, CSWR-Florida did not provide any calculations for
wastewater collection U&U as the Utility deemed all systems built out and therefore
100 percent U&U. (EXH 8, BSP J620; EXH 14, BSP J1128; EXH 18, BSP J1555;
EXH 33, BSP J3065; EXH 38, BSP J3602; EXH 43, BSP J4096; EXH 52, BSP J5258; EXH
56, BSP J5886; EXH 63, BSP J6446)
Through discovery, staff verified the total number of lots
for each system, along with the total number of test year connections.
Consistent with Commission practice and with each system’s last staff assisted rate
case, the following wastewater collection systems are considered 100 percent
U&U: North Peninsula, TKCB, Tradewinds, and Tymber Creek.
In addition, staff calculated 100 percent U&U for the Aquarina, BFF, and
CFAT wastewater collection systems. (EXH 71, BSP J9732b-J9732aj; EXH 132, BSP
E719, E722-E726, E728-E729, E744, E760-E761; EXH 135, BSP E1487-E1491)
Regarding the remaining systems, staff determined that
there are 6,655 total lots and 4,938 total customer connections for the Rolling
Oaks wastewater system. In addition, as discussed in Issue 9, the growth
allowance could not be determined as CSWR-Florida did not have five years’
worth of data available for its systems. As discussed in Issue 11, there are
currently 183 vacant lots located in an area that is not intermingled with the
lots currently being served, which CSWR-Florida is prepared to serve upon
request. Because these lots are located in a separate area of the service territory,
rather than intermingled among lots currently being served, the Rolling Oaks
collection system does not appear to be built out. Therefore, staff recommends
the U&U for the wastewater collection system for Rolling Oaks should be
considered 74 percent based on staff’s analysis. (EXH 71, BSP J9732h; EXH 132,
BSP E719, E728, E760-E761; EXH 135, BSP E1487-E1490)
For Sebring Ridge, staff determined that there are 597
total lots and 287 total customer connections. In reviewing the system map for
Sebring Ridge, staff noticed an area consisting of 147 lots off by itself in
the service territory containing one general service customer. When asked if
CSWR-Florida was serving anyone else in the area, the Utility responded that it
was not. Based on the presence and location of the lots within the Sebring
Ridge service territory and not being intermingled among lots currently being
served, the wastewater collection system does not appear to be built out. Staff
calculated a wastewater collection U&U of 48 percent for the Sebring Ridge
system; however, consistent with Sebring Ridge’s last staff assisted rate case,
staff recommends the wastewater collection system should be considered 79
percent U&U. (EXH
71, BSP J9732g; EXH 132, E719, E729, E760-E761; EXH 135, BSP E1487-E1490)
CSWR-Florida argued in its brief that the wastewater
collection system U&U for each of its systems should be considered 100
percent based on the same argument detailed in Issue 9. (CSWR-Florida BR 23-25)
However, as stated in Issue 9, considering the U&U rule, staff does not
believe it is appropriate to automatically deem “distressed” systems 100
percent U&U. OPC argued in its brief that each of CSWR-Florida’s wastewater
collection systems are 100 percent U&U, with the exception of the Aquarina,
Rolling Oaks, and Sebring Ridge systems, which it recommended should be
considered 86 percent, 74 percent, and 79 percent U&U, respectively. OPC’s
recommended wastewater collection U&U adjustments are consistent with
staff’s recommendations above, with the exception of Aquarina, which staff
believes is built out based on the locations of the collection lines and
customer lots within the system’s service territory. OPC recommended that any
wastewater collection U&U adjustments be made to Account Nos. 354.2, 360.2,
361.2, 362.2, 364.2, 365.2, and 389.2. (OPC BR 22)
As indicated above, staff disagrees with CSWR-Florida’s
position that all of its wastewater collection systems should be considered 100
percent U&U. It is Commission policy to apply U&U adjustments for
wastewater collection systems that are non-U&U.
Therefore, staff recommends that the wastewater collection system U&U for
the Rolling Oaks and Sebring Ridge systems be considered 74 percent and 79
percent U&U, respectively, and that adjustments be made to the appropriate
accounts. In addition, as discussed above, staff recommends that the wastewater
collection system U&U for the remaining systems be considered 100 percent.
Conclusion
Staff recommends that the wastewater collection lines and
related facilities for each wastewater system are 100 percent U&U, with the
exception of Rolling Oaks and Sebring Ridge, which should be 74 percent and 79
percent U&U, respectively.
The appropriate fall-out adjustments are shown in the
table below.
|
System
|
Rate Base
|
Depreciation
Expense (Net)
|
TOTI
|
|
Rolling Oaks
|
($189,333)
|
($19,592)
|
($2,467)
|
|
Sebring Ridge
|
($89,846)
|
($3,957)
|
$0
|
|
Total
|
($279,179)
|
($23,549)
|
($2,467)
|
Issue 14:
Should any adjustments be made to test year
accumulated depreciation?
Recommendation:
Yes. Staff recommends accumulated depreciation
adjustments as reflected in the following table in staff’s analysis for water
and wastewater, respectively.
Accumulated Depreciation
Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($173)
|
($195)
|
|
Aquarina – Non-Potable
|
(35)
|
0
|
|
BFF
|
0
|
117
|
|
CFAT
|
(40)
|
(200)
|
|
Neighborhood
|
31
|
0
|
|
North Peninsula
|
0
|
(270)
|
|
Rolling Oaks
|
(342)
|
(458)
|
|
Sebring Ridge
|
0
|
(141)
|
|
Sunshine
|
12,166
|
0
|
|
Sunshine P-QR
|
9,457
|
0
|
|
TKCB
|
0
|
(47)
|
|
Tradewinds
|
(39)
|
(185)
|
|
Tymber Creek
|
(30)
|
(31)
|
|
Total
|
$20,995
|
($1,410)
|
(Bardin)
Position of the Parties
CSWR-Florida:
No.
OPC:
Yes. The
record supports that adjustments should be made for test year accumulated depreciation.
Staff Analysis:
In Audit Finding No. 1, staff witness Mouring
presented adjustments to UPIS accounts for two water systems and two wastewater
systems along with the corresponding accumulated depreciation. (EXH 126, BSP
C8-929 – C8-930) Although CSWR-Florida stated that there should be no
accumulated depreciation adjustments, it agreed with Audit Finding No. 1 for
plant additions that had associated adjustments for accumulated depreciation.
(CSWR-Florida BR 5) In its brief, OPC stated that CSWR-Florida applied the
appropriate depreciation rates to its Class A and B utilities, and if consolidation
of CSWR-Florida’s systems is not approved, the Commission should make
appropriate adjustments to the respective systems consistent with Audit Finding
No. 5. (OPC BR 22)
The corresponding accumulated depreciation for Audit
Finding No. 1 was presented as a variance. Upon further investigation, staff
discovered that there were a few minor calculation errors and some of the
depreciation rates used for calculations were incorrect with the exception of
the adjustment for the Neighborhood water system. Staff recalculated the
accumulated depreciation and recommends that the following adjustments be made.
Table 14-1
Accumulated Depreciation for
Adjusted UPIS
|
System
|
Water
|
Wastewater
|
|
Neighborhood
|
$136
|
$0
|
|
North Peninsula
|
$0
|
($86)
|
|
Rolling Oaks
|
($9)
|
$125
|
|
Total
|
$127
|
$39
|
Although Audit Finding No. 5 was reissued to also include
the recalculated depreciation expenses for the test year in order to properly
factor in the salvage values to the calculation of the depreciation rate for
water plant Accounts 341–Transportation Equipment, 345–Power Operated
Equipment, and 346–Communication Equipment, and wastewater plant Accounts
391–Transportation Equipment, 395–Power Operated Equipment, and
396–Communication Equipment, as prescribed by Rule 25-30.140, F.A.C. (EXH 126, BSP
C8-1010h – C8-1010k), the accumulated depreciation was not recalculated. The
following table illustrates the calculated adjustments for accumulated
depreciation to properly include salvage values for these designated accounts.
Table 14-2
Accumulated Depreciation for
Accounts with Salvage Values
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($173)
|
($99)
|
|
Aquarina – Non-Potable
|
($35)
|
$0
|
|
BFF
|
$0
|
$117
|
|
CFAT
|
($40)
|
($200)
|
|
Neighborhood
|
($105)
|
$0
|
|
North Peninsula
|
$0
|
($184)
|
|
Rolling Oaks
|
($333)
|
($583)
|
|
Sebring Ridge
|
$0
|
($141)
|
|
Sunshine
|
($1,272)
|
$0
|
|
Sunshine P-QR
|
($161)
|
$0
|
|
TKCB
|
$0
|
($47)
|
|
Tradewinds
|
($39)
|
($185)
|
|
Tymber Creek
|
($30)
|
($31)
|
|
Total
|
($2,188)
|
($1,356)
|
Additionally,
staff noted that two of the systems, Aquarina and Sunshine, recorded
accumulated depreciation without recording any corresponding plant-in-service.
Aquarina recorded depreciation for plant account 395.5 – Power operated
equipment but recorded no plant account. (EXH 8, BSP J524 & J535) Sunshine
recorded depreciation for plant account 301.1 – Organization but recorded no
plant account for it. (EXH 48, BSP J4727 & J4739) Staff recommends that
these amounts be removed, as shown below.
Table 14-3
Adjustments for Accounts
without UPIS
|
System
|
Water
|
Wastewater
|
|
Aquarina
|
$0
|
($96)
|
|
Sunshine
|
($5,206)
|
$0
|
|
Total
|
($5,206)
|
($96)
|
Source: EXH 8,
BSP J524 & J535; EXH 48, BSP J4727 & J4739
Corresponding CWIP
Staff also calculated the corresponding accumulated
depreciation associated with the CWIP projects that staff recommends moving
into the water plant-in-service accounts. As addressed in Issue 4, staff recommends
that the following adjustments be made.
Table 14-4
Accumulated Depreciation for
Increased UPIS
|
System
|
Water
|
Wastewater
|
|
Sunshine
|
$18,648
|
$0
|
|
Sunshine P-QR
|
$9,618
|
$0
|
|
Total
|
$28,266
|
$0
|
Conclusion
Staff recommends accumulated depreciation adjustments as
reflected in the following table for water and wastewater, respectively.
Accumulated Depreciation
Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($173)
|
($195)
|
|
Aquarina – Non-Potable
|
($35)
|
$0
|
|
BFF
|
$0
|
$117
|
|
CFAT
|
($40)
|
($200)
|
|
Neighborhood
|
$31
|
$0
|
|
North Peninsula
|
$0
|
($270)
|
|
Rolling Oaks
|
($342)
|
($458)
|
|
Sebring Ridge
|
$0
|
($141)
|
|
Sunshine
|
$12,166
|
$0
|
|
Sunshine P-QR
|
$9,457
|
$0
|
|
TKCB
|
$0
|
($47)
|
|
Tradewinds
|
($39)
|
($185)
|
|
Tymber Creek
|
($30)
|
($31)
|
|
Total
|
$20,995
|
($1,410)
|
Issue 15:
Should any adjustments be made to test year CIAC
balances?
Approved Type 2 Stipulation:
Yes. CSWR-Florida accepts Staff’s Revised Audit
Finding 4 (Contributions-in-Aid-of-Construction CIAC and CIAC Amortization)
related to CIAC balances.
Issue 16:
Should any adjustments be made to test year
accumulated amortization of CIAC?
Approved Type 2 Stipulation:
While Staff did not recommend any adjustments to
amortization of CIAC, a minor adjustment may be warranted because of Staff’s
Revised Audit Finding 4 (Contribution-in-Aid-of- Construction CIAC and CIAC
Amortization) reducing the CIAC balances.
Issue 17:
Should any adjustments be made to the acquisition
adjustments included in the test year?
Recommendation:
Yes.
The Commission’s decision on acquisition adjustments for Aquarina, North
Peninsula, and Sunshine Utilities systems, as addressed in Docket Nos.
20250043-WS, 20250038-WS, and 20250047-WS, respectively, will not be final
before the Commission makes a decision in the instant docket. Therefore, the amounts
included in the Utility’s request should be removed. Rate base should be
reduced by the amounts shown below.
Acquisition
Adjustments to be Removed
|
System
|
Water
|
Wastewater
|
|
Aquarina - NP
|
$863,567
|
$0
|
|
Aquarina
|
1,145,736
|
306,986
|
|
North Peninsula
|
0
|
1,196,741
|
|
Sunshine – P-QR
|
403,712
|
0
|
|
Sunshine -
Unified
|
5,457,165
|
0
|
|
Consolidated
|
$7,870,180
|
$1,503,727
|
(McClelland)
Position of the Parties
CSWR-Florida:
As of the filing of this Post-hearing Brief, the
Commission has not granted the acquisition adjustments reflected in the MFRs. If
acquisition adjustments have not been approved in time to incorporate the
ratemaking impact of those adjustments, then the consolidated revenue
requirement should be reduced by $1,105,780.
OPC:
Yes.
Acquisition adjustments for Aquarina, North Peninsula, and Sunshine Utilities
should be excluded.
Staff Analysis:
In its MFRs, CSWR-Florida included Acquisition
Adjustments for Aquarina – Potable, Aquarina – Non-Potable, North Peninsula,
Sunshine – P-QR, and Sunshine – Unified, for a total of $7,870,180 for water
and $1,503,727 for wastewater. (EXH 8, BSP J513-J515; EXH 32, BSP J2976; EXH 48,
BSP J4720-J4721) Staff notes that the requested amount in CSWR-Florida –
Consolidated MFRs indicates a total acquisition adjustment of $7,870,180 for
water and $1,196,741 for wastewater. (EXH 23, BSP J1984-J1985) In addition to
filing its rate case in this docket, CSWR-Florida also separately filed
requests to recover acquisition adjustments for the purchase of its Aquarina,
North Peninsula, and Sunshine systems, in Docket Nos. 20250043-WS, 20250038-WS,
and 20250047-WS,
respectively.
In its brief, CSWR-Florida’s position is “if acquisition
adjustments have not been approved in time to incorporate the ratemaking impact
of those adjustments, the consolidated revenue requirement should be reduced by
$1,105,780.” (CSWR-Florida BR 26) CSWR-Florida’s brief referenced the 2024 revision
to Rule 25-30.0371, F.A.C., naming the three separate Commission dockets
addressing the requested Aquarina, North Peninsula, and Sunshine acquisition
adjustments, as well as two other acquisition adjustment petitions, the impact
of which was not included in the Utility’s MFRs. (CSWR-Florida BR 26)
CSWR-Florida noted that the petitions have been pending for up to 16 months as
of the filing of the brief. (CSWR-Florida BR 26) Staff notes that while
CSWR-Florida has generally agreed to remove the acquisition adjustments from
the test year in the general rate case proceeding, its agreement is conditional
on whether or not a final decision has been made in each respective docket. (CSWR-Florida
BR 26)
In its brief, OPC stated that the acquisition adjustments
should be excluded from the test year, justifying exclusion under the premise
that the request was “not properly at issue in this docket.” (OPC BR 22) OPC
further argued that the Utility was not eligible to recover the acquisition
adjustments due to untimeliness of their request and prior Commission denial of
the same requests in Docket Nos. 20210133-SU, 20210095-WU, and 20210093-WU.
(OPC BR 22-23) OPC further argued that the acquisition adjustments have not
provided improvements in quality of service to Utility customers. (OPC BR 23)
OPC reiterated its points by stating that the acquisition adjustments and “all
expenses, taxes, financing costs, amortization, carrying charges, and other
revenue requirement components that are directly or indirectly attributable to
acquisition adjustments should be eliminated”. (OPC BR 23)
At the time of this recommendation, Docket Nos.
20250043-WS, 20250038-WS, and 20250047-WS are scheduled to be taken up at the
September 10, 2026 Commission Conference. This rate case proceeding is also
expected to be taken up before the Commission at the September 10, 2026
Commission Conference. As the three acquisition adjustment dockets addressed in
the rate case MFRs are proceeding as proposed agency action, the order is not
scheduled to issue until 20 days following the Commission’s vote, and are
subject to an additional 21-day protest period during which they can be
contested by substantially affected parties. Even under the assumption that a
decision is reached at the September 10, 2026 Commission Conference, the
decision made in those separate dockets will not be final at the soonest until
the Consummating Order is issued on October 26, 2026. As the Commission’s
decision on these dockets will not yet be finalized, staff recommends removal
of the acquisition adjustment amounts from the revenue requirements.
Because these acquisition adjustments are being addressed
in Docket Nos. 20250043-WS, 20250038-WS, and 20250047-WS, they will not be
addressed in this general rate case proceeding, and the requested amounts
should be removed from the revenue requirements for each respective system.
Conclusion
The Commission’s decision on acquisition adjustments for Aquarina,
North Peninsula, and Sunshine Utilities systems, are being addressed in Docket
Nos. 20250043-WS, 20250038-WS, and 20250047-WS, respectively, and will not become
final agency action until after the Commission makes a decision in the instant
docket. Staff recommends removal of the acquisition adjustment amounts from the
revenue requirements. Rate base should be reduced by the amounts shown below.
Acquisition Adjustments to
be Removed
|
System
|
Water
|
Wastewater
|
|
Aquarina - NP
|
$863,567
|
$0
|
|
Aquarina
|
1,145,736
|
$306,986
|
|
North Peninsula
|
0
|
1,196,741
|
|
Sunshine – P-QR
|
403,712
|
0
|
|
Sunshine - Unified
|
5,457,165
|
0
|
|
Consolidated
|
$7,870,180
|
$1,503,727
|
Source: MFRs filed
November 21, 2025 (EXH 8, BSP J513-J515; EXH
32, BSP J2976;
EXH 48, BSP J4720-J4721)
Issue 18:
What is the appropriate working capital allowance?
Recommendation:
The appropriate working capital allowance is
$153,853 for water and $0 for wastewater. (Sewards)
Position of the Parties
CSWR-Florida:
The
Company agrees to Staff’s Audit Finding 7 related to working capital.
OPC:
The
appropriate working capital allowance should be derived in accordance with Rule
25-30.433, F.A.C., as applicable given the class size of individual systems.
Staff Analysis:
Rule 25-30.433(3), F.A.C., requires that Class A
Utilities use the balance sheet method to calculate the working capital
allowance. In its consolidated MFRs, the Utility recorded a working capital
allowance of $0 for water and $0 for wastewater. (EXH 23, BSP J1984-J1985) All
systems except for Neighborhood also reflected a working capital allowance of
$0 in their respective sets of MFRs.
In its brief, the Utility agreed with the adjustments made
to working capital in Audit Finding No. 7. (CSWR-Florida BR 27) In OPC’s brief,
it stated that if consolidation is granted, CSWR-Florida’s working capital
should be calculated using the balance sheet method and if consolidation is
disallowed, working capital should be calculated based upon the applicable size
of each system. (OPC BR 24) As discussed in Issues 41 and 43, staff is
recommending consolidation of CSWR-Florida’s systems. As such, consistent with
OPC’s position, the working capital allowance for each system should be
calculated using the balance sheet method.
As agreed to by the Utility, Audit Finding No. 7 provides
adjustments to working capital for each system. (EXH 126 BSP C8-941) After
audit adjustments, all systems except Neighborhood still reflect a negative
balance. It is Commission practice to set negative working capital allowance
balances to zero for ratemaking purposes. Staff
recommends the working capital allowance for all systems except Neighborhood be
set to zero.
In its MFRs, Neighborhood reflected a working capital
allowance of $158,903. (EXH 28 BSP J2511) Audit Finding No. 7 decreases
Neighborhood’s working capital by $5,052. (EXH 126 BSP C8-943) As such, staff
recommends a working capital allowance of $153,853 for Neighborhood.
Conclusion
Based on the discussion above, the appropriate working
capital allowance should be $153,853 for water and $0 for wastewater.
Issue 19:
What are the appropriate rate bases for the January
31, 2025 test year?
Recommendation:
Consistent with other recommended adjustments, the
appropriate rate base is $6,260,200 for water and $3,044,888 for wastewater. (Vogel)
Position of the Parties
CSWR-Florida:
The actual
rate base will be dependent on the Commission’s decision, whether in this
docket or the acquisition adjustments dockets, on pending issues such as Land
and Land Values and Acquisition Adjustments.
OPC:
This is a
fall-out issue. Pending the resolution of other issues, the proposed rate bases
for water and wastewater are subject to change.
Staff Analysis:
This is a fallout issue. Based upon the Utility’s
adjusted 13-month average test year balances and staff’s recommended
adjustments, the appropriate 13-month average rate base is $6,260,200 for water
and $3,044,888 for wastewater. Schedule Nos. 1-A and 1-B reflect staff’s
recommended rate base calculations for each system. Staff’s proposed
adjustments to rate base for each system are shown on Schedules No. 1-C.
Conclusion
Consistent with other recommended adjustments, the
appropriate rate base is $6,260,200 for water and $3,044,888 for wastewater.
Issue 20:
What amount of accumulated deferred taxes should be
approved for inclusion in the capital structure for the test year?
Approved Type 1 Stipulation:
None; CSWR-Florida has no accumulated deferred
taxes.
Issue 21:
What amount and cost rate for customer deposits
should be approved for inclusion in the capital structure for the test year?
Approved Type 1 Stipulation:
None; CSWR-Florida has no customer deposits.
Issue 22:
What amount and cost rate for short-term debt should
be approved for inclusion in the capital structure for the test year?
Approved Type 2 Stipulation:
The Company agrees to Staff’s Audit Finding 8
(Capital Structure) which reclassifies a related-party credit balance as
short-term debt. The Company also agrees to Staff’s attendant short-term debt
rate of 8.50% as reflected in Audit Finding 8.
Issue 23:
What amount and cost rate for long-term debt should
be approved for inclusion in the capital structure for the test year?
Approved Type 1 Stipulation:
None; CSWR-Florida has no long-term debt.
Issue 24:
What equity ratio should be approved for use in the
capital structure for ratemaking purposes for the test year?
Approved Type 2 Stipulation:
An equity ratio of 98.68 percent on a consolidated
basis should be approved for ratemaking purposes for the test year.
Issue 25:
What return on equity (ROE) should be approved for
use in establishing the Utility’s revenue requirement for the test year?
Recommendation:
A ROE of 8.52 percent should be approved for use in
establishing CSWR-Florida’s revenue requirement for the test year. (D. Buys)
Position of the Parties
CSWR-Florida:
CSWR-Florida agrees to Staff’s Audit Finding 8
(Capital Structure) which utilizes the most recent leverage formula approved by
the Commission in Order No. PSC-2025-0213-PAA-WA which provides for a return on
equity of 8.52%.
OPC:
The Commission should use the ROE based on the
current leverage formula in effect at the time of the Commission’s vote. The
leverage formula-derived ROE should then be reduced by 25 basis points for
deficient service quality as reflected in Issue 1.
Staff Analysis:
Section 367.081(4)(f), F.S., authorizes the
Commission to establish, not less than once each year, a leverage formula to
calculate a reasonable range of ROE for water and wastewater (WAW) utilities.
The use of the leverage formula is discretionary and provides administrative
efficiency to determine the ROE in lieu of the parties filing ROE testimony.
Neither CSWR-Florida nor OPC filed ROE testimony, and instead, relied on the
leverage formula to determine the ROE in this rate case. CSWR-Florida agreed
that the 2025 leverage formula should be used to derive a ROE of 8.52 percent
based on an equity ratio of 98.68 percent. (CSWR-Florida BR 27; TR 691-692) OPC
did not recommend a specific numerical value of the ROE that should be
approved, and argued that the Commission should use the ROE based on the
current leverage formula in effect at the time of the Commission’s vote. (OPC
BR 24) The 2026 leverage formula became effective on July 14, 2026, and would
be the current leverage formula at the time of the Commission’s vote.
The 2026 leverage formula was approved by Order No. PSC-0223-PAA-WS, and made
final by Order No. PSC-20260246-CO-WS.
OPC’s argument to use the 2026 leverage formula is inconsistent with its
argument in Issue 26 to use the average cost of capital as reflected in OPC
witness Smith’s testimony. (OPC BR 25; EXH 107, BSP C7-756) OPC witness Smith
used the 2025 leverage formula in his testimony do derive a ROE of 8.54 percent
using an equity ratio of 97.43. (TR 557; EXH 107, BSP C7-756)
In Issue 26, both parties agreed that the weighted average
cost of capital should be calculated using a ROE determined by the 2025
leverage formula. (CSWR-Florida BR 28; OPC BR 25) Accordingly, the record
supports using a ROE based on the 2025 leverage formula. The 2025 leverage formula
is as follows: ROE = 7.17% + (1.337% ÷ Equity Ratio). (TR 557-8; EXH 107, BSP
C-7-755-6)
In Issue 24, the Commission approved a Type 2 stipulation
for an equity ratio of 98.68 percent. Applying the equity ratio of 98.68
percent to the 2025 leverage formula results in a ROE of 8.52 percent as
calculated as follows: ROE = 7.17% + (1.337% ÷ 0.9868) = 7.17% + 1.35% = 8.52%.
OPC argued that the ROE should be reduced by 25 basis
points for deficient service quality and DEP compliance issues in Issues 1 and
2. (OPC BR 24) Consistent with staff’s recommendations in Issues 1 and 2, staff
does not believe a ROE penalty is supported by the record evidence.
Conclusion
Based on the stipulation in Issue 24 and record evidence,
staff recommends a ROE of 8.52 percent be approved for use in establishing
CSWR-Florida’s revenue requirement for the test year.
Issue 26:
What capital structure and weighted average cost of
capital should be approved for use in establishing the Utility’s revenue
requirement for the test year?
Recommendation:
Based on the capital components, amounts, and cost
rates associated with the capital structure for the 13-month average test year
ended January 1, 2025, as recommended in Issues 20 through 25, the capital
structure and weighted average cost of capital (WACC) that should be approved
for setting rates in this proceeding comprises a common equity ratio of 98.68 percent and a short-term debt ratio of
1.32 percent, yielding a WACC of 8.52 percent as reflected in Schedule No. 2.
(D. Buys)
Position of the Parties
CSWR-Florida:
The Company agrees to Staff’s Audit Finding 8
(Capital Structure) which utilizes the most recent leverage formula approved by
the Commission in Order No. PSC-2025-0213-PAA-WA which provides for a return on
equity of 8.52%. Thus, the capital structure should consist of 98.68% common
equity at a cost of 8.52% and 1.32% short-term debt at a cost of 8.50%. This
results in an overall weighted average cost of capital of 8.52%.
OPC:
The appropriate weighted average cost of capital is
as reflected in Exhibit RCS-2 and RCS-10, Schedule D. The resolution of this
issue is dependent upon the Commission’s decision on the consolidation of CSWR-Florida’s
numerous systems.
Staff Analysis:
In MFR Schedule D-1,
the Utility submitted its proposed capital structure with a WACC of 8.76
percent. (EXH 23, BSP J2047) CSWR-Florida’s requested capital structure
consisted of common equity in the amount of $27,339,344 and short-term debt in
the amount of $722,441. (EXH 23, BSP J2047) The Utility appropriately used the
13-month average to determine the capital structure for Class A utilities as
required by Rule 25-30.433(5) F.A.C. As shown on MFR Schedule D-2, the Utility
made a reconciliation adjustment to common equity to remove $26,433,254 that
was used for construction in progress and other plant assets not included in
rate base in the instant case. (EXH 23, BSP J2048) CSWR-Florida’s initial
requested capital structure is reflected in Table 26-1.
Table 26-1
CSWR-Florida Requested
Capital Structure and WACC
|
Capital Component
|
Amount
|
Percentage
|
Cost Rate
|
Weighted Cost
|
|
Short-Term Debt
|
$722,441
|
2.57%
|
8.50%
|
0.22%
|
|
Common Equity
|
27,399,344
|
97.43%
|
8.77%
|
8.54%
|
|
Total
|
$28,121,785
|
100%
|
|
8.76%
|
Source: EXH 23, BSP J2047
OPC argued that the appropriate weighted average cost of
capital as reflected in OPC witness Smith’s testimony and exhibits should be
reduced by 25 basis points for the deficient quality of service and DEP
compliance issues. (OPC BR 25; EXH 107, MPN C7-755-6) OPC argued that the WACC
is dependent upon the Commission’s decision of consolidating CSWR-Florida’s
systems and a corresponding reduction to ROE of 25 basis points. (OPC BR 25) OPC
did not take issue with CSWR-Florida’s requested capital structure as proposed
in MFR Schedule D-1. (TR 584; EXH 107) OPC witness Smith made a pro-rata
adjustment to the capital structure to reduce the component amounts and overall
total capital amount to reflect OPC’s recommended reduction to the rate base
amount. (TR 584-586; EXH 107, BSP C7-755) As discussed in Issue 25, OPC
proposed a ROE of 8.54 percent based on the 2025 leverage formula and an equity
ratio of 97.43 percent. (TR 584; EXH 107, BSP C7-756) OPC’s proposed capital
structure and WACC is reflected in Table 26-2.
Table 26-2
OPC Proposed Capital
Structure and WACC
|
Capital
Component
|
Amount
|
Pro rata
Adjustment
|
Adjusted Amount
|
Percentage
|
Cost Rate
|
Weighted Cost
|
|
Short-Term Debt
|
$722,441
|
($240,813)
|
$481,628
|
2.57%
|
8.50%
|
0.22%
|
|
Common Equity
|
27,399,344
|
(9,133,093)
|
18,266,251
|
97.43%
|
8.54%
|
8.32%
|
|
Total
|
$28,121,785
|
($9,373,906)
|
$18,747,879
|
100%
|
|
8.54%
|
Source: EXH 107, BSP C7-755
Staff conducted an audit on CSWR-Florida’s capital
structure and WACC. In Audit Finding No. 8, staff noted that the Utility
provided a revision to the Retained Earnings balance for January 2025 which
resulted in a decrease of $9,537 to the common equity 13-month average balance.
(EXH 126, BSP C8-948) CSWR-Florida and witness Thies agreed with the adjustment
of $9,537 in Staff’s Audit Finding No. 8. (CSWR-Florida BR 28; TR 22-24; EXH
177) The revised per books 13-month average common equity balance for the test
year was $53,823,061. (EXH 126, BSP C8-948) During the evidentiary hearing, the
Commission approved a Type 2 stipulation on Issue 24 to set the equity ratio at
98.68 percent based on staff’s Audit Finding No. 8. (TR 24) In Audit Finding
No. 8, the equity ratio of 98.68 percent was calculated using the per books
equity balance of $53,823,061 and a short-term debt balance of $722,441. (EXH
126; BSP C8-948) However, when reconciled to a rate base of $28,121,785, the
equity ratio mathematically can not be 98.68 percent if the short-term balance
remains at $722,441. To resolve this dilemma, the capital structure should be
reconciled to rate base over both common equity and short-term debt. The
resulting capital structure contains a short-term debt balance of $372,466 and
a common equity balance of $27,749,319. This adjustment is necessary to set the
equity ratio at 98.68 percent and the short-term debt ratio at 1.32 percent to
reflect the Type 2 stipulation approved by the Commission in Issue 24. (EXH
177) This is consistent with CSWR-Florida’s position in its brief and the Type
2 stipulation in Issue 24 to set the equity ratio at 98.68 percent. (CSWR-Florida
BR 28) Staff’s recommended capital structure adjustment and reconciliation
method is reflected in Table 26-3.
Table 26-3
Staff Recommended Capital
Structure Reconciliation and Ratios
|
Capital Component
|
Test Year per books
|
Audit Adjust
|
Test Year
Adjusted
|
Reconciliation Adjustment
|
Adjusted to Rate Base
|
Ratio
|
|
Short-Term Debt
|
$722,441
|
|
$722,441
|
($349,975)
|
$372,466
|
1.32%
|
|
Common Equity
|
53,832,598
|
(9,537)
|
53,823,061
|
(26,073,742)
|
27,749,319
|
98.68%
|
|
Total
|
$54,555,039
|
($9,537)
|
$54,545,502
|
($26,473,717)
|
$28,121,785
|
100%
|
Source: EXHs 23, 107, 177; staff work papers
In Issue 22, the Commission approved a Type 2 stipulation
for the short-term debt cost rate of 8.50 percent. In Issue 25, staff
recommends a ROE of 8.52 percent. In Issue 19, staff recommends a consolidated
rate base of $9,305,088. The corresponding capital structure should be reduced
by an additional $18,816,697 pro rata over short-term debt and common equity to
reconcile with staff’s recommended rate base ($28,121,785 - $18,816,697 = $9,305,088).
The resulting reconciled capital structure and cost rates yield a WACC of 8.52
percent as reflected in Table 26-4 and Schedule No. 2
Table 26-4
Staff Recommended Capital
Structure and WACC
|
Capital
Component
|
Amount
|
Pro rata
Adjustment
|
Reconciled to
Rate Base
|
Ratio
|
Cost Rate
|
Weighted Cost
|
|
Short-Term Debt
|
$372,466
|
($249,222)
|
$123,243
|
1.32%
|
8.50%
|
0.11%
|
|
Common Equity
|
27,749,319
|
(18,567,475)
|
9,181,845
|
98.68%
|
8.54%
|
8.41%
|
|
Total
|
$28,121,785
|
($18,816,697)
|
$9,305,088
|
100%
|
|
8.52%
|
Source: EXHs 23 and 107; staff work papers
Conclusion
Staff disagrees with OPC’s proposed capital structure
because it is inconsistent with the stipulations for the ratios of common
equity and short-term debt. Further, OPC’s proposed cost rate for common equity
as calculated by the leverage formula does not reflect the stipulated equity
ratio of 98.68 percent. Based on the capital components, amounts, and cost
rates associated with the capital structure for the 13-month average test year
ended January 1, 2025, as recommended in Issues 20 through 25, the capital
structure and WACC that should be approved for setting rates in this proceeding
comprises a common equity ratio of 98.68 percent and a short-term debt ratio of
1.32 percent, yielding a WACC of 8.52 percent, as reflected in Schedule No. 2.
Issue 27:
What are the appropriate test year revenues?
Recommendation:
The appropriate test year revenues for CSWR-Florida,
on a consolidated basis, are $3,877,718 for the water system and $3,391,875 for
the wastewater system. Staff recommends that the Utility’s adjusted test year
revenues be increased by $92,161 for water and decreased by $82,611 for
wastewater. Staff also recommends that the Commission direct staff to
investigate the duplication of the late payment charge for water and wastewater
for the Aquarina and Rolling Oaks systems, to assess whether further action may
be appropriate to address the issue. (Bethea)
Position of the Parties
CSWR-Florida:
The
Company disagrees with Staff’s Audit Finding 9 which reduces revenues by
$1,403,815 and would, therefore, increase the revenue requirement by a
commensurate amount. Staff failed to provide any workpapers supporting this
revenue adjustment. Therefore, the Company continues to support the amount of
operating revenues in its general ledger.
OPC:
If the test
year gallons sold data is too low, the resulting rates will, all other things
equal, be overstated. This may cause the Utility to overearn in subsequent
years. Conversely, if the test year gallons sold data is too high, then the
resulting rates will be less than compensatory. Test year revenues should be
based on the appropriate level of service-rate, billing determinants. Additionally,
any incremental increase of miscellaneous service charges approved in Issue 45
should be annualized to reflect the appropriate test year revenues for
ratemaking purposes.
Staff Analysis:
In its revised MFRs, the Utility reflected adjusted consolidated
test year revenues of $3,785,558 for water and $3,474,486 for wastewater. (EXH
23, BSP J2017 – J2018). The water revenues included $3,640,269 of service
revenues and $145,288 of miscellaneous revenues. The wastewater revenues
included $3,382,915 of service revenues and $91,571 of miscellaneous revenues.
CSWR-Florida contends that it disagrees with staff’s Audit Finding No. 9, which
reflects a reduction to test year revenues of $1,403,815 because there were no
workpapers supporting the revenue adjustment. (CSWR-Florida BR 28, EXH 137, BSP
E1974). Staff’s Audit Finding No. 9 adjustment of $1,403,815 consisted of a
decrease to service revenues of $1,225,156 for water and a decrease of $150,306
for wastewater and, for miscellaneous service revenues, a decrease of $32,541
for water and an increase of $4,188 for wastewater. (EXH 126, BSP C8-949 – BSP
C8-950)
Service Revenues
In order to calculate the appropriate test year service
revenues, staff compiled the billing determinants from each system using its
respective MFR Schedule E-14. (EXH 70) For Tymber Creek, the billing
determinants were annualized because only seven months of billing data were
reflected in its respective MFR Schedule E-14. In its brief, OPC contends that
the test year revenues should be based on the appropriate level of service
rates and billing determinants. (OPC BR 25) Staff’s determination of the
appropriate billing determinants for each respective system were multiplied by
the rates in effect at the time of filing and staff determined test year
service revenues of $3,761,592 for water and $3,332,947 for wastewater. As a
result, test year service revenues should be increased by $121,323 for water
and decreased by $49,968 for wastewater. Technical staff’s adjustment to test
year service revenues is based on the MFR Schedule E-14 provided subsequent to
the audit to cure deficiencies in the MFRs.
Miscellaneous Revenues
Staff also adjusted miscellaneous service revenues for
water and wastewater. CSWR-Florida provided a breakdown of its miscellaneous
service charges by system. (EXH 136, BSB E1504 – E1954) Staff reviewed the
breakdown provided to determine the appropriate occurrences to apply to the
miscellaneous service charges for the purposes of calculating the appropriate
test year miscellaneous revenues. During the review, staff determined that the
Utility assessed a late payment charge for both water and wastewater service
for the Aquarina and Rolling Oaks systems. Pursuant to Rule 25-30.460(1),
F.A.C., if a Utility provides both water and wastewater services, only a single
charge shall be assessed for each of the miscellaneous service charges. CSWR-Florida
asserted that the duplication of the late payment charge for both water and
wastewater was unintentional and were a result of legacy tariff provisions,
which it recognized was not consistent with Rule 25-30.460, F.A.C. (EXH 142,
BSP E2009)
Accordingly, staff did not recognize the duplicate late payment
charges in determining the appropriate test year miscellaneous revenues and
used the number of occurrences associated with the assessment of a single late
payment charge. Staff’s determination of the appropriate occurrences of each
respective system were multiplied by the respective miscellaneous service
charges in effect at the time of filing, and staff
determined test year miscellaneous revenues of $116,125 for water and $58,928 for
wastewater. As a result, test year miscellaneous revenues should be decreased
by $29,163 for water and decreased by $32,643 for wastewater.
In its brief, OPC argued that a Utility is required to annualize
test year revenues to reflect the effect of any rate increase that accrued
during the test year. (OPC BR
25) OPC contended that the miscellaneous service charges approved in Issue 45
should be annualized and test year revenues should be increased. (OPC BR 25)
OPC’s brief cited a 2009 order in which the Commission included the incremental
increase in miscellaneous revenues resulting from an approved increase in
miscellaneous service charges as an increase to test year revenues.[62]
(OPC BR 25)
Staff recognizes
the Commission’s prior treatment; however, staff does not believe it is
appropriate to increase test year revenues by the incremental increase
associated with the Utility’s requested miscellaneous service charges. Test
year revenues represent the Utility’s revenue posture absent changes in rates
or charges resulting from the instant rate proceeding. Thus, test year revenues
reflect how the Utility’s revenues would continue if the Utility had not
requested a rate increase. Therefore, requested changes to miscellaneous
service charges should not be included in test year revenues because those
changes did not occur during the test year and have not been approved by the
Commission. In a more recent decision, the Commission has recognized the
incremental increase in miscellaneous revenues and removed those revenues from
the revenue requirement for prospective ratemaking purposes; however, no adjustment
was made to test year revenues.[63]
The Utility’s adjusted and staff’s recommended test year revenues,
by system, are shown below
in Tables 27-1 for water and 27-2 for wastewater.
Table 27-1
Water Test Year Revenues by
System
|
Systems
|
Staff’s
Recommended Service Revenues
|
Staff’s
Recommended Miscellaneous Revenues
|
Staff’s Total
Test Year Revenues
|
Utility’s
Adjusted Test Year Revenues
|
Staff
Recommended Adjustment
|
|
Aquarina - P
|
$236,812
|
$1,031
|
$237,843
|
$143,514
|
$94,329
|
|
Aquarina - NP
|
200,636
|
0
|
200,636
|
301,090
|
(100,454)
|
|
C.F.A.T.
|
101,638
|
0
|
101,638
|
99,267
|
2,371
|
|
Neighborhood
|
145,233
|
5,074
|
150,307
|
164,075
|
(13,768)
|
|
Rolling Oaks
|
1,395,427
|
50,418
|
1,445,845
|
1,421,780
|
24,065
|
|
Sunshine - Unified
|
967,274
|
53,216
|
1,020,490
|
1,034,571
|
(14,081)
|
|
Sunshine – P-QR
|
78,353
|
4,006
|
82,359
|
83,495
|
(1,136)
|
|
Tradewinds
|
487,426
|
300
|
487,726
|
369,890
|
117,836
|
|
Tymber Creek
|
148,793
|
2,080
|
150,873
|
167,875
|
(17,002)
|
|
Total
|
$3,761,592
|
$116,125
|
$3,877,718
|
$3,785,557
|
$92,161
|
Table 27-2
Wastewater Test Year
Revenues by System
|
Systems
|
Staff’s
Recommended Service Revenues
|
Staff’s
Recommended Miscellaneous Revenues
|
Staff’s Total
Test Year Revenues
|
Utility’s Adjusted
Test Year Revenues
|
Staff
Recommended Adjustment
|
|
Aquarina
|
$295,819
|
$810
|
$296,629
|
$255,100
|
$41,529
|
|
BFF
|
83,803
|
0
|
83,803
|
98,495
|
(14,692)
|
|
C.F.A.T.
|
131,112
|
0
|
131,112
|
137,855
|
(6,743)
|
|
North Peninsula
|
282,533
|
884
|
283,417
|
281,531
|
1,886
|
|
Rolling Oaks
|
1,824,639
|
52,602
|
1,877,241
|
1,888,159
|
(10,918)
|
|
Sebring Ridge
|
64,094
|
2,730
|
66,824
|
114,578
|
(47,754)
|
|
TKCB
|
113,745
|
0
|
113,745
|
99,715
|
14,030
|
|
Tradewinds
|
222,285
|
0
|
222,285
|
259,106
|
(36,821)
|
|
Tymber Creek
|
314,917
|
1,902
|
316,819
|
339,947
|
(23,128)
|
|
Total
|
$3,332,947
|
$58,928
|
$3,391,875
|
$3,474,486
|
($82,611)
|
Conclusion
Based on the above, the
appropriate test year revenues for CSWR-Florida are $3,877,718 for the water
system and $3,391,875 for the wastewater system. Staff recommends that the
Utility’s adjusted test year revenues be increased by $92,161 for water and
decreased by $82,611 for wastewater. Staff also recommends that the Commission
direct staff to investigate the duplication of the late payment charge for
water and wastewater for the Aquarina and Rolling Oaks systems, to assess
whether further action may be appropriate to address the issue.
Issue 28:
What adjustments, if any, should be made to account
for the audit adjustments related to net operating income?
Recommendation:
Staff recommends the net operating income audit
adjustments be incorporated into staff’s additional recommended changes found
in Issues 32, 33, and 34. (York, Vogel)
Position of the Parties
CSWR-Florida:
The
Company agrees to Staff Audit Finding 5, which increases depreciation expense
by $21,520, Staff Audit Finding 10 which increases operations and maintenance
expense by $7,901, and Staff Audit Finding 11 which decreases Regulatory
Assessment Fees by $44,231 and Property Taxes by $3,161.
OPC:
The record
reflects that, consistent with the audit, adjustments related to net operating
income should be made.
Staff Analysis:
Staff witness Mouring provided testimony on the audit
report which was filed on January 22, 2026, and CSWR-Florida’s response was
received on March 13, 2026. Audit Findings Nos. 5, 10, and 11 relate directly
to the net operating income of CSWR-Florida. (EXH 126, BSP C8-936 - C8-939; BSP
C8-951 - C8-973) In its response to staff’s audit report, the Utility initially
agreed only to the audit finding and adjustments for Audit Finding Nos. 5 and
10. (EXH 137, BSP E1974)
Table 28-1
Description of O&M
Adjustments
|
Audit Finding
|
Description of
Adjustments
|
|
5
|
Removes
acquisition-related O&M expenses
|
|
10
|
Recalculates test
year O&M expenses
|
|
11
|
Recalculates TOTI
in O&M expenses
|
Source: EXH 126, BSP C8-936 -
C8-939; BSP C8-951 - C8-973
On May 13, 2026, an errata was filed to witness Mouring’s
testimony, revising Audit Finding No. 5, which was revised to correct errors in
the calculation of depreciation expense, and Audit Finding No. 11, which
revised staff witness Mouring’s property tax calculations. (EXH 126, BSP C8-1010e,
C8-1010h – C8-1010r) Although there was no dispute with these adjustments,
staff has recalculations to these amounts that will be discussed further in
Issues 33 and 34.
Depreciation Expense
Audit Finding No. 5 included adjustments for depreciation
expenses for systems that had been classified as Class A or B utilities, yet
based on their revenues, should have used depreciation service lives for Class
C utilities. Additionally, Audit Finding No. 5 provided adjustments for
accounts with salvage values that needed to be incorporated in the depreciation
rates. (EXH 126, BSP C8-1010h – C8-1010m) Upon further review, staff discovered
minor miscalculations with these depreciation expense adjustments, which will
be discussed further in Issue 34.
Operations and Maintenance Expense
For Audit Finding No. 10, staff witness Mouring
recalculated O&M expenses for each system using the Utility's allocation
methodology and reviewed supporting documentation for sampled transactions. (EXH
126, BSP C8-951 – C8-968) Witness Mouring identified several minor variances
between the Utility's books and the amounts reflected in the MFRs. (EXH 126, BSP
C8-951 – C8-968) CSWR-Florida agreed with the adjustments. (CSWR-Florida Brief
6) Staff recommends incorporating the audited O&M expense adjustments into
the calculation of net operating income, which increases O&M expense by
$7,901, as show in Table 28-2 below.
Table 28-2
O&M
Expense Adjustments
|
System
|
Water Variance
|
Wastewater
Variance
|
|
Aquarina Potable
|
$13
|
$0
|
|
Aquarina Non-Potable
|
17
|
15
|
|
BFF
|
0
|
21
|
|
CFAT
|
8
|
7
|
|
Neighborhood
|
(83)
|
0
|
|
North Peninsula
|
0
|
(296)
|
|
Rolling Oaks
|
1,151
|
8,003
|
|
Sebring Ridge
|
0
|
(279)
|
|
Sunshine PP QR
|
28
|
0
|
|
Sunshine
|
(40)
|
0
|
|
TKCB
|
0
|
(111)
|
|
Tradewinds
|
(759)
|
(547)
|
|
Tymber Creek
|
876
|
(123)
|
|
Total
|
$1,211
|
$6,690
|
Further O&M expense adjustments will be discussed in
Issues 32, 33, and 34.
Taxes Other Than Income
Staff witness Mouring reviewed the Utility's Taxes Other
Than Income (TOTI) and recalculated the Regulatory Assessment Fees (RAFs) and
property taxes using the adjusted operating revenues and assessed property
values. Based on that review, witness Mouring determined that RAFs should be
decreased by $44,231 and
property taxes should be decreased by $3,161, for a
total reduction of $47,392 in TOTI.
(EXH 126, BSP C8-969 – C8-973) Initially, CSWR-Florida did not agree with Audit
Finding No. 11, but in its brief, did agree with the adjustments. (CSWR-Florida
BR 6) OPC agreed with witness Mouring’s adjustments. (OPC BR 28-29) Staff’s
recommendation for TOTI will be discussed further in Issue 33.
Conclusion
Staff recommends the net operating income audit
adjustments be incorporated into staff’s additional recommended changes found
in Issues 32, 33, and 34.
Issue 29:
What is the appropriate amount of rate case expense?
Recommendation:
The appropriate amount of rate case expense is
$108,748. This expense should be amortized over four years for an annual
expense of $16,908 for water and $10,279 for wastewater. Based on the Utility’s
original filing, the annual amortization of rate case expense should be
increased by $16,908 for water and $10,279 for wastewater. The specific system
adjustments are reflected on the respective 3-C schedules. (Sewards)
Position of the Parties
CSWR-Florida:
The
Company has incurred $623,485 of rate case expense through March 30, 2026, and
proposes to update rate case expense at the time of the hearing.
OPC:
Any rate
case expense associated with MFR deficiencies or other imprudent costs should
be disallowed. All proposed rate case expense related in any way to acquisition
adjustments should be excluded from revenue requirements.
Staff Analysis:
In its MFRs, the Utility intended to include $581,661
for rate case expense. (EXH 23, BSP J2026) However, the Utility failed to
capture this amount in its requested revenue requirement. (EXH 23, BSP
J2017-J2019) Ultimately, CSWR-Florida included $0 for rate case expense in its
request.
In its brief, CSWR-Florida stated the appropriate amount
of rate case expense is $623,485. (CSWR-Florida
BR 28) However, staff requested an update of the actual rate case expense
incurred, with supporting documentation, as well as the estimated amount to
complete the case. On Feb 23, 2026, and April 27, 2026, the Utility submitted support
documentation for Radey Law Firm (Radey). (EXH 134, BSP E842; EXH 144, BSP
E2316) A breakdown of staff’s calculation of the Utility’s revised rate case
expense is as follows:
Table 29-1
CSWR-Florida’s Revised Rate
Case Expense Request
|
|
Actual
|
Additional
Estimated
|
Revised Total
|
|
Radey Law Firm
|
$337,280
|
$0
|
$337,280
|
|
CSWR, LLC
|
175,012
|
0
|
175,012
|
|
Action Legal
|
6,075
|
0
|
6,075
|
|
Scott Madden
|
38,626
|
0
|
38,626
|
|
InfoSend Inc.
|
19,057
|
0
|
19,057
|
|
Gannett Fleming
|
43,357
|
0
|
43,357
|
|
Total
|
$619,407
|
$0
|
$619,407
|
Source: EXH 134, BSP E842; EXH
144, BSP E2316
In its brief, OPC stated adjustments should be made to
remove rate case expense for MFR deficiency review and any expenses related to
acquisition adjustments. (OPC BR 26) These adjustments are discussed further
below.
Pursuant to Section 367.081(7), F.S., the Commission shall
determine the reasonableness of rate case expense and shall disallow all rate
case expense determined to be unreasonable. Staff has examined the requested
actual expenses, supporting documentation, and estimated expenses as listed
above for the current rate case. Based on its review, staff believes the
following adjustments to CSWR-Florida’s requested rate case expense are
appropriate.
Radey Law Firm
In its MFRs, CSWR-Florida included $500,000 in estimated
legal fees. (EXH 23, BSP J2026) The Utility provided updated documentation
detailing legal expenses for the law firm on Feb 23, 2026. (EXH 134, BSP E842)
In response to staff’s second request for an update to rate case expense on
April 27, 2026, the Utility provided a general ledger excerpt listing entries
related to this rate case, but did not provide any actual invoices or any other
form of support documentation for the charges. (EXH 144, BSP E2316) In total,
CSWR-Florida submitted $337,280 in legal fees. However, the majority of the
invoices provided consisted of general legal work for the Utility that was not
related to this rate case. Staff did not include legal activities performed for
CSWR-Florida outside of rate case matters. Using only the proper supporting
documentation that was provided, staff calculated $127,349 in incurred legal
fees related to this rate case. CSWR-Florida did not provide an updated estimate
for the remaining costs for the law firm over the remainder of the case.
Staff reviewed supporting documentation and identified 57.7
hours, equaling $15,827 in legal fees, related to correcting deficiencies. The
Commission has previously disallowed rate case expense associated with
correcting MFR deficiencies because of duplication of filing costs.
As such, staff recommends an adjustment to reduce legal fees by $15,827.
Staff also identified 6.9 hours, equaling $2,774 in legal
fees, related to acquisition adjustment activity. In its brief, OPC stated rate
case expense related to the acquisition adjustments should be removed. (OPC BR
26) Additionally, CSWR-Florida states in its brief that the acquisition
adjustments remain pending for North Peninsula, Aquarina, and Sunshine
Utilities of Central Florida in separate dockets and the consolidated revenue
requirement should be reduced by the acquisition adjustment amounts. (CSWR-Florida
BR 28) As the parties agree that the acquisition adjustments should be removed
from this docket, and the acquisition adjustment petitions are being addressed
in separate dockets than the rate case, staff also agrees and recommends the
removal of $2,774 in rate case expense associated with acquisition adjustment
activity.
Based on the above, staff recommends that Radey’s legal
fees be $108,748 ($127,349 - $15,827 - $2,774). This represents a reduction of
$228,532 ($337,280 - $108,748) from the requested actual expenses.
CSWR, LLC
In its filing, the Utility
included $81,661 in fees associated with work performed by CSWR, LLC employees
and executives. (EXH 23, BSP J2026) On February 23, 2026, and April 27, 2026, the
Utility provided updated documentation for the CSWR, LLC employees. The Utility
provided general ledger excerpts listing entries related to this rate case, but
did not provide any actual invoices or any other form of support documentation
for the charges. (EXH 134, BSP E842; EXH 144, BSP E2316) In total, the Utility
submitted $175,012 in fees attributed to CSWR, LLC.
In response to staff’s 12th set of interrogatories, the Utility indicated that
the full salaries of all CSWR-Florida employees and executives are included in
the allocation of salaries to CSWR, LLC (EXH 143, BSP E2023) The Commission has
previously disallowed rate case expense related to in-house employees when
their salary is already included in O&M expenses for the Utility.
As such, staff recommends removing all rate case expense related to CSWR, LLC
employees and executives.
Action Legal, Scott Madden, InfoSend Inc., and
Gannett Fleming
In its initial filing, CSWR-Florida only included entries
for Radey and CSWR, LLC on its B-10 schedule. As discussed above, in response
to staff’s requests for updates to rate case expense, the Utility provided
general ledger excerpts listing entries related to this rate case. Included in
these excerpts are entries for work performed by Action Legal, Scott Madden,
InfoSend Inc., and Gannett Fleming. (EXH 134, BSP E842; EXH 144, BSP E2316)
However, CSWR-Florida did not provide any actual invoices or any other form of
support documentation for these charges. Staff is unable to determine what work
was performed, or if it was related to this rate case or not. As such, staff
recommends disallowing rate case expense for these entities.
Amortization Period
Issue 48 addresses the appropriate amount by which rates
should be reduced after the established effective date to reflect the removal
of the amortized rate case expense. In its brief regarding Issue 48, CSWR-Florida proposed to amortize rate case expense
over a three-year period and to recover the expense through a surcharge. (CSWR-Florida
BR 38) Section 367.018(8), F.S., states the amount of rate case expense that
the Commission determines a public utility may recover through its rates shall
be apportioned for recovery over four years unless a longer period can be
justified and is in the public interest. The statute allows for the Utility to
request a longer recovery period but does not allow a shorter period to be
considered. It does not contemplate a surcharge.
As discussed in staff’s recommendation on Issue 48,
CSWR-Florida provides no argument in its brief why this departure from the
plain language of the statute and long-established Commission precedent is
appropriate. Staff does not believe rate case expense should be recovered
through a surcharge, nor for a shorter period that is afforded under the
statute.
As such, staff recommends the recovery period should be
four years and rate case expense should not be recovered through a surcharge.
Conclusion
The Utility did not provide sufficient documentation in
response to staff discovery to provide adequate record support for several
items of its requested rate case expense. Based on the adjustments discussed
above, staff recommends that CSWR-Florida’s revised rate case expense of
$619,407 be decreased by $510,658 to reflect staff’s adjustments, for a total
of $108,748. A breakdown of staff’s recommended rate case expense is in the
table below.
Staff Recommended Rate Case
Expense
|
|
Utility Revised
Actual
|
Staff
Adjustments
|
Recommended
Total
|
|
Radey Law Firm
|
$337,280
|
($228,532)
|
$108,748
|
|
CSWR, LLC
|
175,012
|
(175,012)
|
0
|
|
Action Legal
|
6,075
|
(6,075)
|
0
|
|
Scott Madden
|
38,626
|
(38,626)
|
0
|
|
InfoSend Inc.
|
19,057
|
(19,057)
|
0
|
|
Gannett Fleming
|
43,357
|
(43,357)
|
0
|
|
Total
|
$619,407
|
($510,658)
|
$108,748
|
The recommended total rate case expense is $108,748.
Pursuant to Section 367.081(8) F.S., rate case expense should be amortized over
four years unless a longer period can be justified and is in the public
interest. A longer period was not requested by the Utility, nor proposed by
OPC. As such, this represents an annual expense of $27,187. In its MFRs, CSWR-Florida
intended to include $581,661, with an annual amortization amount of $145,415. (EXH
23, BSP J2026) However, the Utility failed to capture this amount in its
requested revenue requirement. Ultimately, CSWR-Florida included $0 for rate
case expense in its request.
Based on the Utility’s original filing, the annual
amortization of rate case expense should be increased by $27,187. As such,
staff recommends an annual expense of $16,908 for water and $10,279 for
wastewater. Based on the Utility’s original filing, the annual amortization of
rate case expense should be increased by $16,908 for water and $10,279 for
wastewater. The specific system adjustments are reflected on the respective 3-C
schedules.
Issue 30:
Should any adjustment be made to the Utility's
proposed pro forma expenses?
Recommendation:
Yes.
The Utility’s adjustments to increase pro
forma O&M expense, along with the annualization of Tymber Creek expense, result
in a total increase for water of $51,054 (– $13,074 –$20,241 + $84,369) and an
increase to wastewater of $103,956 ($98,781 – $45,576 + $50,751). Staff
recommends no additional adjustments to the filing. (Bardin, York)
Position of the Parties
CSWR-Florida:
Yes, Water – $51,054; Wastewater – $103,956 for
all systems.
OPC:
No position was provided by OPC.
Staff Analysis:
CSWR-Florida
requested several pro forma Operations and Maintenance expense (O&M)
adjustments in its initial filing, including an increase in contract operations
and reductions in customer billing, property insurance, testing, chemicals, and
sludge removal, and annualization adjustments for one of its facilities. (EXH
23, BSP J2019) Staff evaluated the requests for reasonableness and reviewed
documentation provided by CSWR-Florida for appropriateness.
Contractual Services – Other
CSWR-Florida
utilizes a third-party contractor, Clearwater Solutions, LLC, for the majority
of its operations and maintenance expenses. The Utility has increased its
contracted agreement with ClearWater Solutions, LLC, to include additional
services, including testing, chemicals, and sludge removal, which has resulted
in a decrease in those non-contracted specific expenses. (EXH 149, BSP E2407,
TR 437-438)
CSWR,
LLC. also has a contract with a third-party billing provider, Nitor Billing
Services, LLC, to provide billing for all of its customers. The billing costs
are allocated to each state and system according to the customer count of
bills. A renegotiation of this contract has resulted in reduced expenses per
each water and wastewater system. (EXH 131, BSP E3 – E4; E42 – E44; TR 437) The
following Table 30-1 contains the net change in Contractual Services – Other,
including the increased contract expense, reduction in testing, chemicals, and
sludge removal, and the allocation to each system.
Table 30-1
Contracts
- Pro Forma Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina - Potable
|
$5,061
|
$14,193
|
|
Aquarina – Non-Potable
|
10,646
|
0
|
|
BFF
|
0
|
7,661
|
|
CFAT
|
8,475
|
(2)
|
|
Neighborhood
|
385
|
0
|
|
North Peninsula
|
0
|
(9,104)
|
|
Rolling Oaks
|
6,795
|
27,830
|
|
Sebring Ridge
|
0
|
(4,957)
|
|
Sunshine
|
(84,734)
|
0
|
|
Sunshine P-QR
|
2,344
|
0
|
|
TKCB
|
0
|
15,606
|
|
Tradewinds
|
3,466
|
7,922
|
|
Tymber Creek
|
34,488
|
39,632
|
|
Total
|
($13,074)
|
$98,781
|
Regarding
general liability insurance, CSWR-Florida has added additional acquisitions and
the Utility has been able to take advantage of economies of scale with a
combined policy for all systems owned by CSWR, LLC. For example, the general
liability insurance has decreased overall for the Florida acquisitions. (EXH
131, BSP E3 – E4; E42 – E44; TR 438-439) The following Table 30-2 shows the net
change in general liability insurance for each system.
Table 30-2
General
Liability – Pro Forma Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
$1,605
|
$37
|
|
Aquarina – Non-Potable
|
1,605
|
0
|
|
BFF
|
0
|
1,092
|
|
CFAT
|
(471)
|
(512)
|
|
Neighborhood
|
3,146
|
0
|
|
North Peninsula
|
0
|
1,039
|
|
Rolling Oaks
|
(61,316)
|
(44,357)
|
|
Sebring Ridge
|
0
|
5,153
|
|
Sunshine
|
34,664
|
0
|
|
Sunshine P-QR
|
2,978
|
0
|
|
TKCB
|
0
|
(1,479)
|
|
Tradewinds
|
(2,452)
|
790
|
|
Tymber Creek
|
0
|
(7,339)
|
|
Total
|
($20,241)
|
($45,576)
|
Another
component of pro forma O&M expense is management fees (administrative
expenses) which is discussed separately in Issue 31. Staff is not recommending
any further adjustments to the Utility’s proposed management fees.
Annualized O&M Expenses
One of
the water and wastewater systems, Tymber Creek, was acquired during the test
year, and as such, did not have a complete year of expenses with which to
project future costs. CSWR-Florida used an average of the various cost
components to provide an annualized projection for O&M expenses. Staff
requested additional information regarding Tymber Creek’s ongoing O&M
expense, and as a result, believes that the annualization amounts requested for
both water and wastewater O&M expenses are reasonable. Staff recommends an
increase to Tymber Creek annualized O&M expenses of $84,369 for water and
$50,751 for wastewater, with no adjustment to the filing. (EXH 146, BSP E2346;
TR 436-437)
Conclusion
Based on the O&M components discussed above, staff recommends no
additional adjustments to the filing. The Utility’s adjustments to increase pro
forma O&M expense, along with the annualization of Tymber Creek expense result
in a total increase for water by $51,054 (– $13,074 – $20,241 + $84,369) and an
increase to wastewater of $103,956 ($98,781 – $45,576 + $50,751).
Issue 31:
Should any adjustment be made to the Utility's
proposed management expenses?
Recommendation:
No. Staff recommends that no additional adjustments
be made to the adjustment amounts proposed by CSWR-Florida to decrease the
management fees of $276,674 for water and $168,212 for wastewater. (Bardin)
Position of the Parties
CSWR-Florida:
No.
OPC:
Yes.
Adjustments are appropriate, especially to the extent that such costs include
any costs related to acquisition of systems as discussed in Issue 17.
Staff Analysis:
CSWR-Florida
stated that no adjustments should be made to the proposed management expenses.
(CSWR-Florida BR 28) In OPC’s post-hearing position, it stated that adjustments
are appropriate, especially if any of the costs related to the acquisition of
any water or wastewater systems; no additional argument was provided on this
issue. (OPC BR 26) CSWR-Florida requested several pro forma Operation and
Maintenance (O&M) adjustments in its initial filing, including adjustments
for their management fees.
These
pro forma adjustments are recorded in MFR Schedules B-3, for each water or
wastewater system and are identified as Admin Expenses Transferred – Overhead
Allocation. (EXH 8, BSP J556; EXH 14, BSP J1073; EXH 18, BSP J1494; EXH 28, BSP
J2518; EXH 33, BSP J3010; EXH 38, BSP J3538; EXH 43, BSP J4041; EXH 48, BSP
J4779-J4780; EXH 52, BSP J5203; EXH 57, BSP J5826; EXH 63, BSP J6385) The
management fees (administrative expenses) are spread over each of the various
water and wastewater systems. (EXH 131, BSP E48 – E171; EXH 146, BSP E2328,
E2334, E2343-E2344) These costs are allocated using the methodology established
in the Cost Allocation Manual (CAM). (EXH 96, BSP C5-540 – C5-547)
Table 31-1
Pro Forma Management Fees
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
$(4,876)
|
($7,634)
|
|
Aquarina – Non-Potable
|
(4,876)
|
0
|
|
BFF
|
0
|
(2,537)
|
|
CFAT
|
(5,251)
|
(5,295)
|
|
Neighborhood
|
(9,862)
|
0
|
|
North Peninsula
|
0
|
(13,569)
|
|
Rolling Oaks
|
(138,646)
|
(108,817)
|
|
Sebring Ridge
|
0
|
(6,332)
|
|
Sunshine
|
(85,297)
|
0
|
|
Sunshine P-QR
|
(6,310)
|
0
|
|
TKCB
|
0
|
(6,200)
|
|
Tradewinds
|
(12,047)
|
(8,561)
|
|
Tymber Creek
|
(9,509)
|
(9,267)
|
|
Total
|
($276,674)
|
($168,212)
|
Source: EXH 8, BSP J556; EXH 14, BSP J1073; EXH 18, BSP J1494; EXH 28, BSP
J2518; EXH 33, BSP J3010; EXH 38, BSP J3538; EXH 43, BSP J4041; EXH 48, BSP
J4779-J4780; EXH 52, BSP J5203; EXH 57, BSP J5826; EXH 63, BSP J6385
Conclusion
Based upon the record evidence, staff recommends that the
adjustment amounts proposed by CSWR-Florida to decrease the management fees of
$276,674 for water and $168,212 for wastewater are appropriate, and no
additional adjustments should be made.
Issue 32:
Should any further adjustments be made to the
Utility’s test year O&M expenses?
Recommendation:
Yes. The Utility included a miscalculation in North Peninsula’s
O&M expenses, staff recommends reducing O&M expenses by $16,509 for
this error. Based on the adjustments in the prior issues and the adjustment to
North Peninsula’s miscalculation, test year O&M expense should be reduced
by $119,919 for water and $1,651 for wastewater. (Vogel, York)
Position of the Parties
CSWR-Florida:
The
Company agrees to Staff Audit Finding 10, which increases operations and
maintenance expenses by $7,901.
OPC:
Yes. Any
excessive unaccounted for water for each system determined by the Commission
must have applicable corresponding reductions to purchased power, chemicals,
and/or purchased water expenses. Any excessive infiltration and inflow for each
system determined by the Commission must have applicable corresponding
reductions to purchased power, chemicals, and/or purchased wastewater expenses.
Adjustments are appropriate. All acquisition related costs should be excluded.
Staff Analysis:
Based on the previous recommended changes to Operation
and Maintenance (O&M) expenses and the adjustment recommended in Issue 32A,
staff’s additional adjustments to the Utility’s test year O&M expenses are
discussed below.
North Peninsula O&M Miscalculation
Staff found a miscalculation in North Peninsula’s O&M
Expenses. CSWR-Florida filed O&M expenses of $218,851 with adjustments of
$21,634 for the test year, however, the “Utility Adjusted” total is $213,726.
(EXH 33, BSP J3009) The Utility’s calculations included an additional $16,509
with no explanation, staff believes this is a miscalculation and has corrected
this inclusion, removing the $16,509.
Conclusion
Based on the prior recommended adjustments, the adjustment
discussed above, and the adjustment recommended in Issue 32A, test year O&M
expenses should be reduced by $119,919 for water and $1,651 for wastewater.
Staff recommends a test year O&M expense of $4,379,821 for water and
$2,522,605 for wastewater. The following chart shows the adjustments.
Total O&M Expense
Adjustments
|
Recommended
Adjustment
|
Water
|
Wastewater
|
|
North Peninsula Miscalculation
|
$0
|
($16,509)
|
|
Audit Adjustments (Issue 28)
|
1,211
|
6,690
|
|
EUW Adjustments (Issue 7)
|
(134,542)
|
0
|
|
Rate Case Expense (Issue 29)
|
16,908
|
10,279
|
|
Lobbying Expense (Issue 32A)
|
(3,495)
|
(2,111)
|
|
Total
|
($119,918)
|
($1,651)
|
Issue 32A:
Should any adjustment be made to industry
association dues?
Recommendation:
Yes. Contractual Services – Management Fees should
be reduced by $3,495 for water, and by $2,111 for wastewater, to reflect a
removal of the portion of AWWA and NAWC industry association dues attributed to
lobbying. The adjustments by system are listed in the tables below.
Recommended Adjustment to
Industry Association Dues – Water
|
System
|
Amount
|
|
Aquarina – Water
|
($125)
|
|
BFF
|
(32)
|
|
Neighborhood
|
(126)
|
|
CFAT – Water
|
(67)
|
|
Sunshine – P-QR
|
(81)
|
|
Sunshine
|
(1,089)
|
|
Rolling Oaks – Water
|
(1,770)
|
|
Tradewinds – Water
|
(154)
|
|
Tymber Creek – Water
|
(83)
|
|
Consolidated –
Water
|
($3,495)
|
Recommended Adjustment to
Industry Association Dues – Wastewater
|
System
|
Amount
|
|
Aquarina – Wastewater
|
($97)
|
|
BFF
|
(32)
|
|
North Peninsula
|
(173)
|
|
CFAT – Wastewater
|
(68)
|
|
Sebring
|
(81)
|
|
TKCB
|
(79)
|
|
Rolling Oaks – Wastewater
|
(1,389)
|
|
Tradewinds – Wastewater
|
(109)
|
|
Tymber Creek – Wastewater
|
(81)
|
|
Consolidated – Wastewater
|
($2,111)
|
(McClelland, Vogel)
Position of the Parties
CSWR-Florida:
Company ratepayers receive benefits from the
activities, including legislative activities, provided through the Company’s
membership in the National Association of Water Companies (NAWC) and the
American Water Works Association (AWWA).
OPC:
Yes. All
lobbying included in industry association dues should be removed from expenses
and treated below the line.
Staff Analysis:
In its MFRs, filed November 24, 2025, CSWR-Florida
included $9,041.70 in total expenses for its membership dues to American Water
Works Association (AWWA) and $55,474.71 for its membership dues to National
Association of Water Companies (NAWC). (EHX 23, BSP J2021-J2022) CSWR-Florida
also parsed this information further in its responses to a staff interrogatory.
(EXH 137, BSP E56 E57, E63, E64, E68, E76, E78, E90, E91, E96, E106, E107,
E115, E116, E123, E124, E130, E132, E143, E154)
OPC witness Smith addressed the membership dues in his
testimony, stating that the portions of membership dues attributed to lobbying
expenses should be disallowed from CSWR-Florida’s expenses. (TR 572-3; BSP
C7-707 – BSP C7-708) Witness Smith explained that lobbying is a below the line
expense, meaning that it is a cost “borne by the Utility’s shareholders and is
not charged to ratepayers.” (TR 572, BSP C7-707) Witness Smith’s testimony
cited Commission Order No. PSC-04-1260-PAA-GU,
in which the Commission stated it is Commission practice to disallow lobbying
expenses from recovery. (TR 572, BSP C7-707) Witness Smith recommended
disallowing $103 of AWWA dues and $5,502 of NAWC dues. (EXH 125, BSP C7-916)
Witness Smith demonstrated the methodology for calculating
the disallowed portions of AWWA and NAWC dues in his testimony. (EXH 125, BSP
C7-916) Witness Smith provided the amounts of annual total membership dues
CSWR-Florida paid to each organization, as provided by CSWR-Florida in its
responses to staff’s discovery. (EXH 125, BSP C7-917) Witness Smith also
provided figures from the respective Internal Revenue Service (IRS) Form 990
for each organization, which showed lobbying expense and total membership dues
revenue. (EXH 125, BSP C7-917) He calculated the lobbying expense as a
percentage of total membership dues revenue, resulting in a calculation of 1.14
percent of AWWA expenses, and 9.92 percent of NAWC expenses. (EXH 125, BSP
C7-917) Witness Smith used this percentage to represent the percentage of dues
paid by CSWR-Florida that would represent lobbying expense. (EXH 125, BSP
C7-917) Using this percentage, witness Smith recommended disallowing $103 of
AWWA dues and $5,502 of NAWC dues for a total of $5,605, with $3,495 allocated
to water, and $2,111 allocated to wastewater. (EXH 125, BSP C7-916)
In his rebuttal testimony, CSWR-Florida witness Thies
disagreed with the proposed disallowance of the portion of industry association
dues, stating that witness Smith’s calculation was done “blindly” and “without
any consideration of whether those dues provide a benefit to ratepayers.” (TR
664, BSP D4-64) He stated in rebuttal that both AWWA and NAWC lobby on matters
that are beneficial to ratepayers, naming the Low-Income Household Water
Assistance Program (LIHWAP). (TR 664, BSP D4-64; TR 665, BSP D4-65; TR 666, BSP
D4-66)
At the June 8, 2026 hearing, OPC cross-examined staff
witness Mouring, asking whether “lobbying expenses are generally below the line
expenses.” (TR 616) Witness Mouring agreed, stating that “if lobbying expenses
are identified, that would be something that they would remove” in an audit.
(TR 616)
In its brief, OPC further argued that “prospective
deviation from the Commission’s long-standing practice of excluding lobbying
portion of national association dues should be done in a Commission workshop
because changing its practice could affect all jurisdictional electric, gas,
and water and wastewater investor-owned utilities who incur national
association dues.” (OPC BR 28)
It is Commission practice to disallow any below-the-line
expenses, including membership expense or industry association dues expense as
it relates to lobbying. In Order No. PSC-04-1260-PAA-GU, as cited by witness
Smith, the Commission disallowed a portion of industry association dues as
related to lobbying activities. The methodology used is similar to the
methodology suggested by witness Smith in this case. The Commission practice of
disallowing lobbying-related expenses remains consistent in more recent cases.
In Order No. PSC-2025-0196-FOF-WS,
membership for a comparable organization was partially disallowed due to
lobbying-related expenses.
While CSWR-Florida contends that customers benefit from
the Utility’s AWWA and NAWC membership, even with regard to lobbying expenses,
it did not offer a quantification of the specific benefits received by
customers relative to these organization’s lobbying efforts, or provide any
precedent that would support its position in contravention of long-established
Commission practice. (CSWR-Florida BR 28-29)
In accordance with Commission practice to disallow
below-the-line expenses, in agreement with general audit procedure to remove
identified lobbying expenses, and in agreement with OPC witness Smith’s
methodology and calculations, staff recommends disallowance of $3,495 of
Contractual Services – Management Fees for water and $2,111 of Contractual
Services – Management Fees for wastewater. This amount will be used to reduce
the total amounts recommended in Issue 32.
Staff notes that OPC’s calculation for lobbying expenses
as a percentage is based on 2024 tax documentation filed by both respective
companies, while the general rate case uses a test year of February 1, 2024,
through January 31, 2025. Although the time periods do not match up precisely,
it is generally expected that this percentage will remain constant from one
year to the next, and staff believes it to be an accurate reflection for the
test year.
Conclusion
Staff recommends disallowance of $3,495 of Contractual
Services – Management Fees for water and $2,111 of Contractual Services –
Management Fees for wastewater, to reflect a removal of the portion of AWWA and
NAWC industry association dues attributed to lobbying.
Issue 33:
Should any adjustments be made to test year taxes
other than income (TOTI)?
Recommendation:
Yes. TOTI should be decreased by $130,841 for water
and $5,788 for wastewater. (Sewards)
Position of the Parties
CSWR-Florida:
The
Company agrees to Staff Audit Finding 11.
OPC:
Yes. The
cost attributable to the forfeiture of any property tax discounts should be
treated below-the-line consistent with the Commission’s practice.
Staff Analysis:
In its brief, CSWR-Florida stated that it agreed
with the adjustments made to RAFs and property taxes in Audit Finding No. 11.
(CSWR-Florida BR 30; EXH 126, BSP C8-1010n) In its brief, OPC stated property
tax should be calculated using the property tax discount offered for early
payment. (OPC BR 28-29)
In response to staff’s 16th set of interrogatories, the
Utility stated updating property taxes to reflect the 2025 tax assessments
would be more representative of property tax expense moving forward. (EXH 147,
BSP E2395) As such, staff has recalculated property tax using the 2025 tax
assessments for each system incorporating the discount offered for early
payment. Staff recommends increasing property tax expense by $5,284 for water
and $12,117 for wastewater.
CSWR-Florida agreed with the adjustments made to RAFs in
Audit Finding No. 11, however staff has recalculated RAFs based on staff’s
adjustments to test year revenues and to remove the Utility’s requested
increase in revenue requirement. Staff recommends that RAFs should be reduced by
$135,106 for water and $13,315 for wastewater. There should also be a decrease
of $1,019 for water and $4,591 for wastewater to reflect the non-U&U
property tax adjustments. In total, test year TOTI should be decreased by
$130,841 ($135,106 – 5,284 + 1,019) for water and $5,788 ($13,315 – 12,117 +
4,591) for wastewater.
Conclusion
In total, test year TOTI should be decreased by $130,841
for water and $5,788 for wastewater.
Issue 34:
Should any adjustments be made to test year
depreciation expense?
Recommendation:
Yes. Staff recommends the depreciation expense
adjustments for water and wastewater as reflected in staff’s analysis in the
following table.
Depreciation Expense
Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($4,147)
|
($3,795)
|
|
Aquarina – Non-Potable
|
(131)
|
0
|
|
BFF
|
0
|
(289)
|
|
CFAT
|
(2,575)
|
(1,867)
|
|
Neighborhood
|
(707)
|
0
|
|
North Peninsula
|
0
|
(402)
|
|
Rolling Oaks
|
(9,287)
|
(32,727)
|
|
Sebring Ridge
|
0
|
(6,040)
|
|
Sunshine
|
16,271
|
0
|
|
Sunshine P-QR
|
9,281
|
0
|
|
TKCB
|
0
|
304
|
|
Tradewinds
|
(97)
|
(408)
|
|
Tymber Creek
|
(88)
|
(349)
|
|
Total
|
$8,520
|
($45,573)
|
(Bardin)
Position of the Parties
CSWR-Florida:
The
Company agrees to Staff Audit Finding 5, which increases depreciation expense
by $21,520.
OPC:
Yes. Depending
upon the Commission determination regarding consolidation, adjustments should
be made for incorrect net salvage percentage-driven depreciation rates in
violation of Rule 25-30.140, F.A.C.
Staff Analysis:
CSWR-Florida agreed to depreciation expenses
associated with the adjustments related to Audit Finding No. 1 regarding
increases in plant-in-service account balances, and to depreciation
recalculations for systems related to Audit Finding No. 5 regarding
depreciation recalculations for systems classified as Class C rather than Class
A/B and for plant accounts with salvage values. (CSWR-Florida BR 5; TR 667; EXH
137, BSP E1974)
OPC stated that if the Commission does not approve the
consolidation of CSWR-Florida’s water and wastewater systems, adjustments to
the depreciation expenses should be made for those systems determined to be
Class C rather than Class A/B for depreciation rates. (OPC BR 29) Additionally,
OPC agrees that corrections should be made to calculate the correct
depreciation rates for those specific plant-in-service accounts that have
stated salvage values. (OPC BR 29)
In staff’s revised Audit Finding No. 1, depreciation
expenses were recalculated for the variances found for the Utility’s
plant-in-service accounts for years ended January 31, 2022, and January 31,
2023. Upon further investigation, staff discovered that there were a few minor
calculation errors and some of the depreciation rates used for calculations
were incorrect, except for the depreciation expenses for the water system,
Neighborhood. Staff recalculated the depreciation expenses and recommended that
the following adjustments be made. (EXH 126, BSP C8-1010f – C8-1010g)
Table 34-1
Depreciation Expense for
Audit Finding No. 1 – Plant Adjustments
|
System
|
Water
|
Wastewater
|
|
Neighborhood
|
$91
|
$0
|
|
North Peninsula
|
0
|
(35)
|
|
Rolling Oaks
|
(6)
|
84
|
|
Total
|
$85
|
$49
|
Source: EXH 126,
BSP C8-1010f – C8-1010g
Audit Finding No. 5 was originally issued to recalculate
depreciation for systems within the Utility that would be classified as Class C
based on each systems operating revenues and the guidance provided by Rule
25-30.115, F.A.C., regarding classification. CSWR-Florida had calculated the
depreciation based on the operating revenues of the Company as one entity as a
Class A system. (EXH 126, BSP C8-936 – C8-939) OPC stated that these
depreciation adjustments between Class A/B and Class C systems should only be
made if the Commission does not approve consolidation for CSWR-Florida. (OPC BR
29) Staff believes that OPC’s position concerning these adjustments is
appropriate and as discussed in Issues 41 and 43, staff is recommending
consolidation of CSWR-Florida’s system. As such, staff recommends that the
depreciation expense adjustments between Class A/B and Class C system should
not be applied.
Audit Finding No. 5 was reissued to also include the
recalculated depreciation expenses for the test year in order to properly
factor in the salvage values to the calculation of the depreciation rate for
water plant Accounts 341–Transportation Equipment, 345–Power Operated
Equipment, and 346–Communication Equipment, and wastewater plant Accounts
391–Transportation Equipment, 395–Power Operated Equipment, and 396–Communication
Equipment, as prescribed by Rule 25-30.140, F.A.C. (EXH 126, BSP C8-1010h –
C8-1010k) The Utility agreed to the issued errata for the depreciation expense.
(CSWR-Florida BR 5) Likewise, OPC supported the revision to include proper
salvage values in the depreciation expense calculations. (OPC BR 29)
The following table illustrates the recalculations to
properly include salvage values for the transportation, power operated
equipment, and communication equipment for the Company’s systems. Staff agreed
with the depreciation expenses calculated for accounts with designated salvage
values, except for a few minor calculation errors that were caused by use of
the incorrect number of service life years or the use of incorrect
plant-in-service values and except for the inclusion of Aquarina’s power
operated equipment as there is no recorded corresponding UPIS in the MFRs. (EXH
126, BSP C8-1010k – C8-1010m) Staff recalculated the net depreciation expense
for these items and recommends the following adjustments be made.
Table 34-2
Depreciation Expense for
Plant Accounts with Salvage Value
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($409)
|
($489)
|
|
Aquarina – Non-Potable
|
(131)
|
0
|
|
BFF
|
0
|
(289)
|
|
CFAT
|
(976)
|
(262)
|
|
Neighborhood
|
(798)
|
0
|
|
North Peninsula
|
0
|
(367)
|
|
Rolling Oaks
|
(6,836)
|
(6,006)
|
|
Sebring Ridge
|
0
|
(956)
|
|
Sunshine
|
(2,373)
|
0
|
|
Sunshine P-QR
|
(337)
|
0
|
|
TKCB
|
0
|
304
|
|
Tradewinds
|
(97)
|
(408)
|
|
Tymber Creek
|
(88)
|
(349)
|
|
Total
|
($12,045)
|
($8,822)
|
As
mentioned above, staff noted that one of the systems, Aquarina, recorded
depreciation expense without recording any corresponding plant-in-service for
Account 395–Power Operated Equipment. Staff recommends that this depreciation
expense amount of $226 be removed. (EXH 8, BSP J524; J570)
Corresponding CWIP
Staff also calculated the corresponding depreciation
expense associated with the CWIP projects that staff recommends moving into the
water plant-in-service accounts. As addressed in Issue 4, staff recommends that
the following adjustments be made.
Table 34-3
Corresponding Depreciation
Expense for CWIP
|
System
|
Water
|
Wastewater
|
|
Sunshine
|
$18,644
|
$0
|
|
Sunshine P-QR
|
9,618
|
0
|
|
Total
|
$28,262
|
$0
|
Non-Used and Useful Net Depreciation Expense
As addressed in Issues 9 – 13, staff has recommended a
number of CSWR-Florida’s systems to include non-used and useful adjustments.
Staff recommends that the following adjustments to net depreciation expenses be
made to reflect those prior recommendations.
Table 34-4
Non-Used and Useful Net
Depreciation Expense Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina
|
($3,738)
|
($3,306)
|
|
CFAT
|
(1,599)
|
(1,605)
|
|
Rolling Oaks
|
(2,445)
|
(26,805)
|
|
Sebring Ridge
|
0
|
(5,084)
|
|
Total
|
($7,782)
|
($36,800)
|
Conclusion
Staff recommends the depreciation expense adjustments for
water and wastewater as reflected in the table below.
Depreciation Expense
Adjustments
|
System
|
Water
|
Wastewater
|
|
Aquarina – Potable
|
($4,147)
|
($3,795)
|
|
Aquarina – Non-Potable
|
(131)
|
0
|
|
BFF
|
0
|
(289)
|
|
CFAT
|
(2,575)
|
(1,867)
|
|
Neighborhood
|
(707)
|
0
|
|
North Peninsula
|
0
|
(402)
|
|
Rolling Oaks
|
(9,287)
|
(32,727)
|
|
Sebring Ridge
|
0
|
(6,040)
|
|
Sunshine
|
16,271
|
0
|
|
Sunshine P-QR
|
9,281
|
0
|
|
TKCB
|
0
|
304
|
|
Tradewinds
|
(97)
|
(408)
|
|
Tymber Creek
|
(88)
|
(349)
|
|
Total
|
$8,520
|
($45,573)
|
Issue 35:
Should any adjustments be made to test year
amortization of CIAC expense?
Approved Type 2 Stipulation:
While Staff did not recommend any adjustments to amortization
of CIAC expense, some minor adjustment may be warranted because of Staff’s
revised Audit Finding (with which CSWR-Florida agrees) reducing the CIAC
balance.
Issue 36:
Should any adjustments be made to the acquisition
adjustment amortization expense included in the test year?
Recommendation:
No. Based on the exclusion of the acquisition
adjustments and no amortization expense requested in the MFRs, staff recommends
no adjustment to acquisition adjustment amortization expense. (McClelland)
Position of the Parties
CSWR-Florida:
CSWR-Florida did not
include acquisition adjustment amortization expense in the test year.
OPC:
Yes. Acquisition-related
expenses associated with the acquisition adjustments for Aquarina, North
Peninsula, and Sunshine Utilities should be excluded to the extent that they
resemble acquisition amortization expenses or are otherwise indirectly flowing
through to customers the costs of acquisition as also discussed in Issue 17.
Staff Analysis:
As discussed in Issue 17, no acquisition adjustments
should be included in this case. If no acquisition adjustments are included in
the case, no amortization expense should be included. Additionally,
CSWR-Florida did not request acquisition adjustment amortization expense in its
MFRs.
Conclusion
Based on the exclusion of the acquisition adjustments and
no amortization expense included in the MFRs, staff recommends no adjustment to
acquisition adjustment amortization expense.
Issue 37:
Should net operating losses (NOL) be used to lower
income tax expense?
Recommendation:
No. Income tax expense should be calculated on a
stand-alone basis which ensures rates are based on the going-forward cost of
service of the regulated operations of the Company. Calculating income tax
expense on a stand-alone basis ensures income tax expense is based on the
regulated revenues, expenses, and profits determined by the Commission.
(Cicchetti, Vogel)
Position of the Parties
CSWR-Florida:
No. Customers previously
benefited from improved Utility services at adopted rates that were non-compensatory.
Therefore, shareholders incurred the burden of the net operating losses. Company
shareholders should not be denied the tax benefits of these net operating
losses.
OPC:
Yes. CSWR-Florida
has had both book and income tax in that period. NOLs in each year since its
inception. Thus, the Utility did not have positive taxable income and has not
paid income taxes. NOL carryforwards arising in tax years 4 beginning after
2020 can offset a maximum of 80% of taxable income in a single tax year. Such
NOLs can be carried forward indefinitely, but the 80% limitation applies
annually, with unused federal income tax NOLs continuing to carry forward. The
calculated state and federal taxable income before application of the NOL
carryforwards should be reduced by 80%. The income tax allowances for each
system are calculated on Schedule 17 A-1 of Exhibits RCS-3 through RCS-9 for
each water Utility and on Exhibits RCS-11 through RCS-19 to each wastewater Utility
to show the application of the NOL carryforwards to offset 80% of the
applicable state and federal taxable income.
Staff Analysis:
Under the stand-alone approach to ratemaking, a
utility is treated as an independent entity and its revenue requirement is
based on the regulated revenues, expenses, and profits associated with its cost
of service. (TR 693) In various orders, the Commission has stated that its
policy or practice is to calculate income taxes on a stand-alone basis. Under
the stand-alone approach, whether income tax is actually paid is not the
determining factor in calculating income tax expense. (TR 695)
OPC’s position is that CSWR-Florida’s NOLs should be used
to offset 80 percent of the Utility’s income tax expense, which is the maximum
allowed by the IRS. (OPC BR 30) OPC cites a Sebring Gas System Inc., rate case
and a Plantation Bay Utility Company rate case where the Commission used NOLs
to offset income tax expense. (OPC BR 31-32) However, in two more recent cases,
Labrador Utilities, Inc. and Utilities, Inc. of Sandalhaven, the Commission did
not use NOLs to reduce income tax expense. Finally,
OPC argues that recognition of the NOLs prevents an unwarranted windfall to
CSWR-Florida’s shareholders. (OPC BR 32)
CSWR-Florida’s position is that NOL’s should not be used
to offset income tax expense because customers benefited from the
non-compensatory rates that caused the NOLs and shareholders bore the cost of
the losses. (CSWR-Florida BR 31) CSWR-Florida further argued that the
Plantation Bay decision cited by OPC, appears to contain contradictory positions
regarding a deferred debit caused by NOLs, using NOLs to reduce income tax
expense, and retroactive ratemaking. (CSWR-Florida BR 33-34) As stated by
CSWR-Florida, “As indicated, it seems inconsistent for the Commission to
utilize the prohibition against retroactive ratemaking to justify the refusal
to include a net deferred debit in rate base, but simultaneously use the same
net operating losses, from the same past periods, to justify failing to include
any income taxes in rates.” (CSWR-Florida BR 33-34) Finally, CSWR-Florida cited
a Missouri case that concluded it was inappropriate to recognize past net
operating losses in the calculation of income taxes included in future rates. (CSWR-Florida
BR 32)
The IRS allows companies to use NOL carryforwards to lower
future income tax expense to smooth out income fluctuations. (TR 692) Staff
believes it is sound regulatory policy to attribute tax benefits to the party
that bears the burden of the expense that generated the tax benefit. In
rebuttal, CSWR-Florida witness Thies stated that it was CSWR-Florida’s
shareholders that bore the cost of the losses through non-compensatory rates
and staff agrees. (TR 661) Rather than providing a windfall to CSWR-Florida’s
shareholders, as claimed by OPC, using the NOLs to reduce CSWR-Florida’s future
rates would provide a subsidy to CSWR-Florida’s customers from its
shareholders. (TR 694) Further, under the stand-alone approach, rates are set
using the revenues, expenses, and profit determined by the Commission to
calculate income tax expense, and whether the tax gets paid is not
determinative. (TR 695) Finally, by using the stand-alone approach to determine
income tax expense and rates, customers will receive the appropriate price
signal enabling the efficient allocation of resources. (TR 695)
For the reasons cited above, staff recommends NOLs not be
used to lower income tax expense.
Conclusion
Income tax expense should be calculated on a stand-alone
basis which ensures rates are based on the going-forward cost of service of the
regulated operations of the Company. Calculating income tax expense on a
stand-alone basis ensures income tax expense is based on the regulated
revenues, expenses, and profits determined by the Commission.
Issue 38:
What is the appropriate amount of test year income
taxes?
Recommendation:
The appropriate
amount of test year income taxes is $178,782 for water and $86,957 for
wastewater. (Vogel)
Position of the Parties
CSWR-Florida:
Income taxes should be
calculated based upon test year net income, after accounting for all agreed
upon adjustments. The quantification of income taxes to be included in rates
should not reflect recognition of net operating losses (Issue 37) and will be
dependent on the Commission’s decision on other pending issues.
OPC:
This is a
fallout issue. Pending the resolution of other issues, the income taxes will
depend upon the specific level of revenues authorized by the Commission and the
NOL issue resolution under Issue 37.
Staff Analysis:
In Issue 37, staff recommends recovery of the appropriate
amount of income tax for CSWR-Florida and recommends that no adjustment be made
to account for NOL carryforwards. As such, staff recommends no additional
adjustment be made to test year income taxes.
As discussed in Issue 39, staff has calculated a revenue
increase of $1,695,877 for water and a revenue decrease of $228,290 for
wastewater. As a result, income taxes should be $178,782 for water and $86,957
for wastewater to reflect the change in revenues.
Conclusion
The appropriate amount of test year income taxes is $178,782
for water and $86,957 for wastewater.
Issue 39:
What are the appropriate revenue requirements for
the January 31, 2025 test year?
Recommendation:
The appropriate revenue requirements, on a consolidated
basis, are $5,573,595 for water and $3,163,585 for wastewater. (Vogel)
Position of the Parties
CSWR-Florida:
The
actual revenue requirement will be dependent on the Commission’s decision on
all the pending issues.
OPC:
The revenue
requirement issue is a fallout issue and is subject to change based on the
resolution of other issues.
Staff Analysis:
This is a fallout issue. Consistent with staff’s
recommendation regarding rate base, cost of capital, and operating income
issues, the appropriate revenue requirements are shown in the table below.
Table 39-1
Recommended Revenue
Requirement – Water
|
Water System
|
Adjusted Test
Year Revenues
|
Revenue Increase
|
% Increase
|
Revenue
Requirement
|
|
Aquarina – Potable
|
$237,843
|
($54,277)
|
(22.82%)
|
$183,566
|
|
Aquarina – Non-Potable
|
200,636
|
79,987
|
39.87%
|
280,623
|
|
CFAT – Water
|
101,638
|
127,613
|
125.56
|
229,251
|
|
Neighborhood
|
150,307
|
141,695
|
94.27
|
292,002
|
|
Rolling Oaks – Water
|
1,445,845
|
365,163
|
25.26
|
1,811,008
|
|
Sunshine – PPQR
|
82,359
|
169,708
|
206.06
|
252,067
|
|
Sunshine – Unified
|
1,020,490
|
946,029
|
92.70
|
1,966,519
|
|
Tradewinds – Water
|
487,726
|
(183,713)
|
(37.67)
|
304,013
|
|
Tymber Creek – Water
|
150,873
|
103,671
|
68.71
|
254,544
|
|
Consolidated
|
$3,877,718
|
$1,695,877
|
43.73%
|
$5,573,595
|
Source: Issue 27
Table 39-2
Recommended Revenue
Requirement – Wastewater
|
Wastewater
System
|
Adjusted Test
Year Revenues
|
Revenue Increase
|
% Increase
|
Revenue
Requirement
|
|
Aquarina – Wastewater
|
$296,629
|
($31,689)
|
(10.68%)
|
$264,940
|
|
BFF – Wastewater
|
83,803
|
47,181
|
56.30
|
130,984
|
|
CFAT – Wastewater
|
131,112
|
45,447
|
34.66
|
176,559
|
|
North Peninsula
|
283,417
|
70,765
|
24.97
|
345,182
|
|
Rolling Oaks – Wastewater
|
1,877,241
|
(468,643)
|
(24.96)
|
1,408,598
|
|
Sebring Ridge
|
66,824
|
185,543
|
277.66
|
252,367
|
|
TKCB
|
113,745
|
78,580
|
69.08
|
192,325
|
|
Tradewinds – Wastewater
|
222,285
|
(55,493)
|
(24.96)
|
166,792
|
|
Tymber Creek – Wastewater
|
316,81
|
(99,980)
|
(31,56)
|
216,839
|
|
Consolidated
|
$3,391,875
|
($228,290)
|
(6.73%)
|
$3,163,585
|
Source: Issue 27
The appropriate consolidated revenue requirement is
$5,573,595 for water and $3,163,585 for wastewater. Staff’s recommended revenue
requirement for water is $1,695,877 greater than the recommended test year
revenues of $3,877,718 or an increase of 43.73 percent. Staff’s recommended
revenue requirement for wastewater is $228,290 lower than the recommended test
year revenues of $3,391,875 or a decrease of 6.73 percent. Schedule Nos. 3-A
and 3-B reflect staff’s recommended net operating income and resulting revenue
requirement for each system. Staff’s recommended adjustments to operating income
are shown on Schedule Nos. 3-C for each system.
Conclusion
The appropriate revenue requirement, on a consolidated
basis, is $5,573,595 for water and $3,163,585 for wastewater.
Issue 40:
What, if any, limits should be imposed on subsidy
values that could result if stand-alone rates are converted to consolidated
rate structure for the water and wastewater systems?
Recommendation:
Staff recommends
a water subsidy limit of $16.01 at 6,000 gallons, and a wastewater subsidy
limit of $31.13 at a 10,000 gallon wastewater cap. (Bethea)
Position of the Parties
CSWR-Florida:
None.
Consolidation is a rate mitigation device. Recognizing that all systems will
eventually require the same types of large capital investments over time, any
perceived inequities or subsidies associated with rate consolidation will
render those concerns invalid in the long-run.
OPC:
No post hearing position or argument was provided in
the brief.
Staff Analysis:
In
prior dockets, the Commission has approved rate consolidation because it
encourages larger utilities to acquire smaller utilities; recognizes the
economies of scale associated with combined operations; reduces the costs of
regulatory filings; and promotes rate stability across all systems. The
consolidation of rates for previously stand-alone systems inherently creates
subsidies among customers because customers of one Utility system may pay a
portion of the costs of providing service to customers of another Utility
system.
In
evaluating consolidated rates in prior decisions, the Commission has set a
subsidy limit to minimize subsidies. The subsidy limit is used to evaluate the
consolidated rates at the average consolidated residential demand for the
individual water systems. For wastewater, the subsidy limit is evaluated at the
consolidated wastewater gallonage cap for the individual systems. The Utility
indicated that it did not formally conduct a subsidy analysis because the
evaluation of stand-alone versus consolidated rates informed its conclusion
that a consolidated rate structure is appropriate and in the overall interest
of customers. (EXH 149, BSP E2406)
In
2009, the Commission set a subsidy limit of $12.50 based on consolidated average
consumption of 7,000 gallons for the water systems and a 6,000 gallon cap for
the wastewater systems for Aqua Utilities Florida, Inc.[72]
In evaluations of subsidies in subsequent dockets involving consolidated rates,
the Commission has indexed the subsidy and converted the subsidy limit to a per
1,000 gallon basis to account for higher or lower residential average
consumption and wastewater gallonage caps.[73]
The last indexed subsidy limit set by the Commission was $18.23, which was
adjusted consistent with the 2025 Commission-approved index. Adjusting the
subsidy limit using the Commission-approved 2026 price index, results in a
subsidy limit of $18.68 for the instant docket.
The indexed subsidy limit is based on 7,000 gallons for
water and 6,000 gallons for wastewater. In the instant case, the consolidated
residential average consumption is approximately 6,000 gallons and the
consolidated wastewater gallonage cap is 10,000 gallons. Therefore, the
appropriate subsidy limits to coincide with CSWR-Florida’s consolidated average
consumption of 6,000 gallons and consolidated 10,000 gallon wastewater cap are
$16.01 [($18.68/7)*6] for water and $31.13 [($18.68/6)*10] for wastewater.
Conclusion
Based on the above, staff
recommends a water subsidy limit of $16.01 at 6,000 gallons, and a wastewater
subsidy limit of $31.13 at a 10,000 gallon wastewater cap.
Issue 41:
Which water systems, if any, should be consolidated
into a single rate structure?
Recommendation:
Staff recommends all water systems be consolidated
into a single tariff rate structure. (Bethea)
Position of the Parties
CSWR-Florida:
All water
systems should be consolidated into a single rate structure. See Issue 40.
OPC:
No post hearing position or argument was provided in
the brief.
Staff Analysis:
In its
MFRs, the Utility requested that its current rate structure and rates for the Florida water and wastewater systems be
consolidated into a single rate structure and rates. (EXH 23) The Utility is
comprised of 29 water systems; however, there are seven, in this proceeding, that
CSWR-Florida proposed be consolidated. (TR 33, C1-7; TR 407, C2-38)
In his
testimony, CSWR-Florida witness Duncan stated that it has been CSWR-Florida’s
experience that rate consolidation provides several benefits that: 1)
encourages the acquisition of small, troubled water and wastewater systems by
spreading costs to a larger customer base; 2) mitigates rate impacts and
promotes affordability; 3) promotes shared services across CSWR-Florida systems
through common service costs, use of the same third-party operations firm, and
consistent service quality standards; 4) promotes regulatory, administrative,
and billing efficiency through a single set of tariffs, reducing the need to
maintain multiple rules and rates and lowering customer costs; 5) mitigates
perceived inequities from system subsidization as future capital investments
across all systems are expected to balance out differences over time; and most
of all, 6) promotes a more consumer friendly approach by simplifying rates and
rules through consolidated tariffs. (TR 407-408; C2-38-39; CSWR-Florida BR 35)
Furthermore,
CSWR-Florida witness Cox argued that traditional regulation alone does not
solve the problem with failing water and wastewater systems and consolidation
is necessary. (TR 59-61) Witness Cox contends that stand-alone systems are too
small to be sustainable and lack economies of scale. (TR 59-60; CSWR-Florida BR
35) When costs are borne by a small number of customers, rates are
unaffordable. (TR 61; CSWR-Florida BR 35) Witness Cox testified that costs for
maintenance and upgrades are spread over a small number of customers making
sustainability impossible. (TR 60; CSWR-Florida BR 35) Based on the necessary
economics, the Utility believes that rate consolidation will be the necessary
scale to prevent economic failure. (CSWR-Florida BR 35)
Witness
Cox testified the Utility’s request to consolidate the small systems across all
its Florida systems will result in economies of scale, which makes
sustainability possible. (TR 61) Witness Cox testified that CSWR-Florida
affiliates operating in various states have been approved for consolidated
rates by other state Commissions. (TR 56, C1-30) Witness Cox further testified
that rate consolidation moderates rate increases, allows necessary investment
and improves operational efficiency. He contended that rate consolidation
creates a more understandable rate structure. (TR 62) Witness Cox stated that
although costs between systems may be temporarily different, over time, all
systems will require the same amount of reinvestment. He stated that
consolidation ensures that these costs are shared fairly and responsibly. (TR
62)
The
Commission has had several requests from other utilities to consolidate rates
and rate structures. In prior dockets, the Commission has approved rate
consolidation because it encourages large utilities to acquire small utilities;
recognizes economies of scale attributable to large utilities with respect to
combined operations; results in cost savings associated with regulatory
filings; and produces rate stability across all systems.[74]
The benefits of rate consolidation identified above by witnesses Duncan and Cox
appear to be persuasive and are consistent with some of the benefits the
Commission has recognized when approving consolidated rates in the past.
Furthermore, there is no opposing testimony or record evidence disputing the
asserted benefits.
An analysis was performed to determine which
water systems should be consolidated. When evaluating consolidated rates in
prior decisions, the Commission set a subsidy limit and evaluated the
consolidated rates at the average residential demand for the individual
systems. As discussed in Issue 40, staff recommends a subsidy limit of $16.01
for the water systems based on the consolidated average consumption of 6,000
gallons. As shown in Table 41-1, Rolling Oaks and Tradewinds will pay a subsidy
based on staff’s recommended consolidated rates.
Table 41-1
Residential Water Bill
Comparison based on 6,000 Gallons a Month
|
System
|
Bill at Stand-Alone
Rates
|
Bill at
Consolidated Rates
|
Subsidy Paid
(Received)
|
|
Aquarina – P
|
$58.14
|
$33.40
|
($24.74)
|
|
C.F.A.T H20
|
$112.16
|
$33.40
|
($78.76)
|
|
Neighborhood
|
$73.22
|
$33.40
|
($39.82)
|
|
Rolling Oaks
|
$20.70
|
$33.40
|
$12.70
|
|
Sunshine – Unified
|
$40.90
|
$33.40
|
($7.50)
|
|
Sunshine – P-QR
|
$77.97
|
$33.40
|
($44.57)
|
|
Tradewinds
|
$21.39
|
$33.40
|
$12.01
|
|
Tymber Creek
|
$52.70
|
$33.40
|
($19.30)
|
Source: Calculations based on staff’s recommended revenue
requirement and rates
Based on the above, staff’s
proposed consolidation of rates results in rates that are below the subsidy
limit of $16.01 for those systems paying a subsidy based on the average
consumption. This is consistent with the Commission’s previous analysis
methodology for similar dockets. Therefore, staff recommends all water systems
be consolidated into a single rate structure.
Issue 42:
What are the appropriate rate structures and rates
for the water systems?
Recommendation:
The recommended rate structure and monthly water
rates are shown on Schedule No. 4-A. The Utility should file revised tariff
sheets and proposed customer notices 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 notices and the notices have been received by
the customers. The Utility should provide proof of the date notice was given
within 10 days of the date of the notice. (Bethea)
Position of the Parties
CSWR-Florida:
The proposed rate structure should: (1) contain a
base facility charge and volumetric charge per 1,000 gallons and (2) reflect
consolidated single tariff pricing for all water systems.
OPC:
No post hearing position or argument was provided in
the brief.
Staff Analysis:
The Commission has jurisdiction to set rates that
are just, reasonable, compensatory, and not unfairly discriminatory,
considering the value, quality, and cost of the service pursuant to Section
367.081(2)(a)1., F.S.
On a consolidated basis, for the seven water systems in
this proceeding, CSWR-Florida provided water
service to approximately 11,941 residential (potable) customers, 111
residential irrigation (non-potable) customers and 267 general services
customers. A review of the consolidated billing data indicates approximately 15
percent of the residential customer bills during the test year had zero
gallons, indicating a non-seasonal customer base. The average residential water
demand is 5,115 gallons per month. The average water demand excluding zero
gallon bills is 6,193 gallons per month. The seven water systems have various
rate structures. For residential customers, the rate structure consists of a
base facility and gallonage charges. One of the Utility’s water systems has a
uniform gallonage charge, while the other systems have tiered block rate
structures with various consumption levels included within the tiers. For
general service, one of the Utility’s water systems have a base facility charge
with a tiered block rate structure which contains various consumption levels
included within the tiers, while the other systems have a BFC and uniform
gallonage charge.
Staff performed several analyses to determine the
customer’s current usage characteristics in the rate design 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 non-discretionary usage threshold for restricting repression; and
(4) implement, where appropriate, water conserving rate structures consistent
with Commission practice.
Rate Structure Analysis
CSWR-Florida witness Silas testified the Utility developed
its base water rate according to the meter/line size of the customer served by
the service line because the base rate is in place to ensure that CSWR-Florida
can recover the fixed cost of providing service, as well as a baseline level of
volumetric costs. He further stated that the volumetric charge is designed to
recover costs that vary due to larger consumption of water by a customer.
Therefore, CSWR-Florida proposed to recover 25 percent of revenues from the
volumetric charge for those reasons. (TR 508; EXH 136, BSP E1497)
The Commission’s baseline allocation of the revenues to
the BFC is 40 percent. The Commission typically assigns a higher allocation to
the BFC only if a utility illustrates high seasonality, which does provide
greater revenue stability. Staff’s analysis of the Utility’s aggregated billing
data illustrates a non-seasonal customer base. Staff also performed various
allocations to the BFC and determined that a 40 percent revenue allocation
provides sufficient revenues to design gallonage charges that will send pricing
signals to customers who are using above the non-discretionary levels of
consumption. Furthermore, the recommended BFC allocation is consistent with
those approved in prior Commission cases.
The average people per household served by the Utility’s aggregated counties is
2.5; therefore, based on the number of people per household, 50 gallons per day
per person, and the number of days per month, the appropriate non-discretionary
threshold should be 4,000 gallons. Staff’s review of the billing analysis
indicates that the usage above 4,000 gallons represents 42 percent of the
bills, which account for approximately 38 percent of the water demand.
For the consolidated rate structure, staff recommends a
BFC and a three-tier inclining block rate structure, which includes separate
gallonage charges for non-discretionary and discretionary usage for residential
water customers. The rate blocks are: (1) 0-4,000 gallons, (2) 4,000-10,000 gallons,
(3) all usage in excess of 10,000 gallons per month. This rate structure sends
the appropriate pricing signals because it targets customers with high
consumption levels and minimizes price increases for customers at
non-discretionary levels. General service customers should be billed a BFC and
a uniform gallonage charge.
Repression
A water repression adjustment quantifies changes in
consumption patterns in response to an increase in price. The Commission has
estimated that the rate residential customers will reduce their water
consumption in response to an increase in price, elasticity of demand, is at
four percent of discretionary usage for every ten percent increase in price.
It has been Commission practice to restrict repression for non-discretionary
consumption. For its proposed consolidated rates, CSWR-Florida did consider
repression. Through discovery, staff inquired if CSWR-Florida considered it
important to account for repression in its proposed rate design and whether it
believes the level of water usage can decrease in response to price increases.
In response, the Utility explained it understood
repression to refer to potential reductions in customer usage that may occur
following the implementation of higher rates, which could result in actual
revenues being lower than those projected using historical billing
determinants. (EXH 136, BSP E1497) CSWR-Florida asserted that its proposed
structure places a meaningful portion of revenue recovery in fixed charges,
which reduces the sensitivity of revenues to changes in customer usage and
mitigates the potential impact of any usage reduction following a rate increase.
(EXH 136, BSP E1497) The Utility concluded that if the Commission determines
that a repression adjustment is appropriate, CSWR-Florida understands that such
an adjustment can be applied. (EXH 136, BSP E1498)
As discussed in Issue 41, staff’s subsidy analysis
indicates Rolling Oaks and Tradewinds are the two systems that would pay a
subsidy. However, the consolidated rates are lower than Tradewinds’ rates in
effect at the time of filing. Therefore, Rolling Oaks was used to determine the
appropriate repression adjustment. Based on staff’s analysis, residential
discretionary consumption can be expected to decline by an overall reduction of
135,204.000 gallons, which results in 18.4 percent reduction to consumption.
Other corresponding reductions are $64,248 for purchased power, $6,028 for
chemicals, and $3,311 for RAFs. Furthermore, the anticipated repression results
in a post repression revenue requirement of $5,240,240 for designing service
rates.
Removal of Miscellaneous Revenues for
Calculating Service Rates
During its review of the Utility’s MFRs, staff determined CSWR-Florida
did not remove miscellaneous revenues from its calculation of its proposed
consolidated rates. In response to an interrogatory, the Utility stated that it
did not remove miscellaneous service revenues from total revenues because it
believed such revenues are inherently uncertain, nonrecurring, and not directly
tied to normalized billing determinants. Further, CSWR-Florida stated,
excluding these revenues from the rate design would require assumptions about
future collections that cannot be reliably forecasted and could increase the
risk of under-recovery of the Commission approved revenue requirement. (EXH
136, BSP E1498)
It is Commission practice to exclude miscellaneous
revenues when designing service rates.
The recovery of staff’s recommended revenue requirement is through two
components: service revenues generated from billing determinants and
miscellaneous revenues generated from miscellaneous service charges. The test
year represents a snapshot in time and provides the basis for determining the
Utility’s appropriate revenue requirement. While both billing determinants and
miscellaneous service occurrences may fluctuate from year to year, the revenue
requirement itself remains the total amount of revenue necessary for the
Utility to provide service. Therefore, miscellaneous revenues should be removed
when determining the appropriate service revenue recovered through rates;
otherwise, not removing miscellaneous revenues could result in rates designed
to collect more revenue than the approved revenue requirement coupled with the
miscellaneous revenues.
Irrigation Rates (Non-Potable)
In its consolidated filing,
CSWR-Florida proposed irrigation rates. (EXH 23, BSP J2056) The
water for irrigation is supplied from groundwater that is pumped from a
dedicated well and piped directly to irrigation customers without treatment. The
billing determinants associated with the proposed irrigation rates are from the
Aquarina non-potable system. There are no other non-potable systems. Therefore,
the proposed rates would only be applicable to the Aquarina service territory.
The Aquarina system provides non-potable water for irrigation to
approximately 111 customers. (EXH 8, BSP J598) The
Aquarina
system’s existing BFC and gallonage charge rate structure was approved by the
Commission in 2020.[78]
As mentioned earlier, the Commission’s baseline
allocation of the revenues to the BFC is 40 percent. Staff performed various
allocations to the BFC and determined that a 35 percent revenue allocation
provides a fixed revenue stream while sending the appropriate pricing signals
to target those customers with high levels of consumption. The average irrigation
water demand is 64,200 gallons per month. Therefore, staff recommends 35
percent of the irrigation revenues be allocated to the BFC for ratesetting purposes.
This will allow lower bills for irrigation and promote the continued use of
non-potable water for irrigation purposes.
Conclusion
The recommended rate structure and monthly water rates are
shown on Schedule No. 4-A. The Utility should file revised tariff sheets and
proposed customer notices 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 notices and the notices have been received by the
customers. The Utility should provide proof of the date notice was given within
10 days of the date of the notice.
Issue 43:
Which wastewater systems, if any, should be
consolidated into a single rate structure?
Recommendation:
Staff recommends all wastewater systems should be
consolidated into a single tariff rate structure. (Bethea)
Position of the Parties
CSWR-Florida:
All wastewater systems should be consolidated into a
single rate structure. See Issue 40.
OPC:
No post hearing position or argument was provided in
the brief.
Staff Analysis:
In its MFRs, the Utility requested that its current
rate structure and rates for the Florida water and wastewater systems be
consolidated into a single rate structure and rates. (EXH 23) CSWR-Florida
proposed that all nine of its wastewater systems be consolidated. (TR 33, C1-7;
TR 407, C2-38)
As discussed in Issue 41, CSWR-Florida contends that rate
consolidation promotes the acquisition and long-term sustainability of small
systems by creating economies of scale, spreading costs and future capital
investments across a larger customer base, mitigating rate impacts, improving
operational and administrative efficiencies, and simplifying rates and tariffs
for customers. The Utility further asserts that, although costs among individual
systems may differ in the short term, those differences will balance over time
as all systems require ongoing investment. (TR 56, 59-62, 407-408; C1-30;
C2-38-39; CSWR-Florida BR 35)
The Commission has had several requests from other
utilities to consolidate rates and rate structures. In prior dockets, the
Commission has approved rate consolidation because it encourages large
utilities to acquire small utilities; recognizes economies of scale
attributable to large utilities with respect to combined operations; results in
cost savings associated with regulatory filings; and produces rate stability
across all systems.
The benefits of rate consolidation identified above by witnesses Duncan and Cox
appear to be persuasive and are consistent with some of the benefits the
Commission has recognized when approving consolidated rates in the past.
Furthermore, there is no opposing testimony or record evidence disputing the
asserted benefits.
An analysis was performed to determine which wastewater
systems should be consolidated. When evaluating consolidated rates in prior
decisions, the Commission set a subsidy limit and evaluated the consolidated
rates at the average residential demand for the individual systems. As
discussed in Issue 40, staff recommends a subsidy limit of $31.13 at the 10,000
residential wastewater cap. As shown in Table 43-1, Rolling Oaks is the only
system that will pay a subsidy based on staff’s recommended consolidated rates
Table 43-1
Residential Wastewater Bill Comparison
based on 10,000 Gallon Cap
|
System
|
Bill at Stand-Alone
Rates
|
Bill at
Consolidated Rates
|
Subsidy Paid
(Received)
|
|
Aquarina
|
$74.78
|
$37.41
|
($37.37)
|
|
BFF
|
$188.35
|
$37.41
|
($150.94)
|
|
C.F.A.T. H20
|
$87.45
|
$37.41
|
($80.36)
|
|
North Peninsula
|
$48.80
|
$37.41
|
($50.04)
|
|
Rolling Oaks
|
$28.27
|
$37.41
|
($11.39)
|
|
Sebring
|
$199.68
|
$37.41
|
$9.14
|
|
TKCB
|
$106.66
|
$37.41
|
($162.27)
|
|
Tradewinds
|
$130.55
|
$37.41
|
($69.25)
|
|
Tymber Creek
|
$72.89
|
$37.41
|
($93.14)
|
Source: Calculations based on
staff’s recommended revenue requirement and rates.
Conclusion
Based on the above, staff’s
proposed consolidation of rates results in rates that are below the subsidy
limit of $31.13 for those systems paying a subsidy based on the average
consumption. This is consistent with the Commission’s previous analysis
methodology for similar dockets. Therefore, staff recommends all wastewater
systems be consolidated into a single rate structure.
Issue 44:
What are the appropriate rate structures and rates
for the wastewater systems?
Recommendation:
The recommended rate structure and monthly
wastewater rates are shown on Schedule 4-B, which denies CSWR-Florida’s
proposed consolidated flat rate structure. 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 (Hudson, Bethea)
Position of the Parties
CSWR-Florida:
The proposed rate structure should: (1) contain a
base facility charge with no volumetric charge and (2) reflect consolidated
single tariff pricing for all wastewater systems.
OPC:
No post hearing position or argument was provided in
the brief.
Staff Analysis:
In its filing, CSWR-Florida proposed a flat rate
structure for its consolidated wastewater rates. (EXH 23, BSP J2057)
CSWR-Florida witness Silas contended that the proposed rates represent a just
and reasonable allocation of costs that is consistent with principles of cost
causation routinely adopted by regulators across the country. Witness Silas
maintained that the flat rate structure has been approved for CSWR, LLC.
affiliates in Missouri, Kentucky, Louisiana, Mississippi, Texas, and Tennessee.
(TR 506, C4-370) According to witness Silas, the Utility proposed revenue
requirement should be collected through a single flat charge multiplied by the
appropriate equivalent residential connection (ERC). (TR 506, C4-370) Witness
Silas explained that the Utility seeks to maintain the ERCs currently assigned
to general service customers of the Sebring Ridge and North Peninsula systems. (TR
507, C4-371)
The Commission has jurisdiction to set rates that are
just, reasonable, compensatory, and not unfairly discriminatory, considering
the value, quality, and cost of the service pursuant to Section
367.081(2)(a)1., F.S. Pursuant to Rule 25-30.437(5), F.A.C., in proposing
rates, each Utility must use the base facility and usage charge rate structure,
unless an alternative rate structure is adequately supported by the applicant.
Consistent with the Rule, the Commission’s traditional wastewater rate
structure consists of a uniform BFC for all meter sizes and gallonage charge
for residential customers. For general service customers, the rate structure
typically consists of a BFC based on meter size and a gallonage charge 1.2
times the corresponding residential gallonage charge. CSWR-Florida’s
existing wastewater rate structure, except for the North Peninsula system, is
currently a base facility and usage charge rate structure.
Flat Rate Structure
Historically, the Commission has migrated away from flat
rate structures in conformance with the Commission rules unless there were
impediments to implementing a BFC and gallonage charge rate structure. Although
some Commission regulated utilities still currently have flat rates, in those
instances, the Commission determined that installing water meters was cost
prohibitive for the water system or, in the case of a wastewater only system,
that the Utility was unable to obtain the water consumption data necessary for
volumetric wastewater billing. Witness
Silas claimed that, in the wastewater industry, the reliance on a flat
residential or commercial charge is due to the fact that wastewater customers
do not have a meter on their wastewater output or that the wastewater provider
does not have access to water usage information. (TR 506, C4-370) In this
instance, the record does not demonstrate that CSWR-Florida has any material impediments
to a BFC and gallonage rate structure or the continuation of its existing BFC
and gallonage charge rate structure.
The Utility currently has access to the water consumption
for volumetric wastewater billing and does not believe the access would change
going forward. (EXH 142, BSP E2006 – E2007). Witness Silas argued that one of
the benefits of a flat rate structure is the removal of costs associated with
accessing the water usage from the water provider. (TR 532). According to the
Utility, out of its three wastewater only systems with volumetric billing, the
TKCB system is the only system CSWR-Florida pays a fee to the water provider.
(EXH 142, BSP E2007). CSWR-Florida pays approximately $4,800 per year to City
of Cocoa for not only the water usage but also billing services, whereby the
wastewater charge is included on the City of Cocoa’s bill alongside the
customers City of Cocoa’s water charge. (EXH 142, BSP E2007) In this instance,
staff believes the Utility’s cost for obtaining water usage is relatively
immaterial on a consolidated basis and is insufficient justification for
implementing an across-the-board flat rate for all wastewater systems.
Witness Silas argued that the flat rate is appropriate
because the demand for wastewater service is relatively inelastic and there is
little to no variance in the cost of service on the residential level due to
higher demands placed on the system by varying water usage. (TR 507, C4-371)
Staff agrees that, in terms of customers’ responsiveness to price changes, the
demand for residential wastewater is relatively inelastic. However, staff
believes the appropriate rate structure should be based on cost causation
principles, which is consistent with the Commission’s preferred rate structure
defined in Rule 25-30.437(5), F.A.C. Witness Silas contended that the vast
majority of costs in the wastewater cost of service are fixed and do not vary
with fluctuating residential usage. (TR 507, C4-371) CSWR-Florida did not
provide any supporting documentation demonstrating that there is no variability
in cost associated to usage. In addition, witness Silas asserted that a flat
rate structure provided revenue certainty because usage fluctuates due to
seasonality and weather and, for customers, he asserted that the flat rate
structure provides simplified billing which provides for predictable billing
and reduced complexities associated with usage-based billing. (TR 507, C4-371)
The Commission has recognized that wastewater systems are
capital intensive in nature and that a significant portion of wastewater costs
are fixed. Historically, when designing wastewater rates, the Commission has
recognized a minimum 50 percent of fixed cost to the BFC, with the remaining
costs being recovered through the gallonage charge.
The wastewater billing analysis indicates that approximately 50 percent of the
bills reflect usage of less than 2,000 gallons and represents only
approximately 30 percent of the total gallons, while 20 percent has no usage at
all. Under a flat rate structure, customers using 2,000 gallons or less would
pay the same rate as customers needing a substantially greater amount of
wastewater treatment.
Rule 25-30.437(5), F.A.C., establishes the BFC and
gallonage charge as the preferred rate structure, unless alternative is
supported by the evidence. Since CSWR-Florida already has processes in place to
obtain the data necessary for billing volumetric wastewater and provided no
support that there is little to no variance for in the cost of service on the
residential level due to water usage, staff believes the Utility has not
supported a deviation from the Commission rule. Therefore, staff believes that
a continuation of the base facility gallonage charge rate structure is
appropriate on a consolidated basis, except for North Peninsula, as discussed
further below.
Base Facility and Gallonage Charge Rate
Structure
On a consolidated basis of the
systems in this proceeding, wastewater service is provided to approximately 7,731
residential customers and 157 general service customers. Currently, except for
North Peninsula, the wastewater rate structure for residential customers
consists of a monthly uniform BFC for all meter sizes and a gallonage charge
with varying wastewater gallonage caps among the individual systems. For
general service, except for North Peninsula, customers are billed a BFC by
meter size and a gallonage charge that is 1.2 times higher than the residential
gallonage charge.
Staff performed an analysis of
the Utility’s billing data in order to evaluate various BFC cost recover
percentages and gallonage caps for residential wastewater customers. The goal
of the evaluation was to select the rate design parameters that: 1) produce the
recommended revenue requirement; 2) equitable distribute cost recovery among
the Utility’s customers; and 3) implement a gallonage cap that considers
approximately the amount of water that may return to the wastewater system.
Consistent with Commission practice, staff allocated 50
percent of the wastewater revenue to the BFC due to the capital intensive
nature of wastewater plants. The individual systems wastewater gallonage caps
range from 6,000 to 10,000 gallons. It is Commission practice to set the
wastewater cap at approximately 80 percent of residential water sold, which
typically results in gallonage caps. The wastewater gallonage cap recognizes
that not all water used by the residential customers is returned to the wastewater
system. In order to determine the appropriate consolidated wastewater gallonage
cap, staff analyzed the consolidated billing analysis and determined that at
approximately 80 percent of the water gallons are captured at the 14,000 gallon
consumption level. Typically, wastewater gallonage caps are set no higher than
10,000 gallons. Therefore,
staff recommends that the gallonage cap for residential customers be set at
10,000 gallons. Staff also recommends that the general service gallonage charge
continue to be 1.2 times greater than the residential gallonage charge, which
is consistent with Commission practice.
Repression
Based on the expected reduction in water demand described
in Issue 42, staff recommends that a repression adjustment also be made for wastewater.
Because wastewater rates are calculated based on customers’ water demand, if
those customers water demand is expected to decline, then the billing
determinants used to calculate wastewater rates should also be adjusted. Therefore,
staff recommends a repression adjustment be made to calculate wastewater rates.
Based on the billing analysis for the consolidated wastewater system, staff recommends
a wastewater repression adjustment of 14,602,000 gallons to correspond to the
water repression for the Rolling Oaks system. The corresponding adjustments are
$10 for sludge removal, $1,279 for purchased power, $2,265 for chemicals, and
$160 for RAFs to reflect the anticipated repression, which results in a post
repression revenue requirement of $3,081,233.
Sebring Ridge and North Peninsula Systems
In its proposed flat rate
structure, CSWR-Florida assigned 252 ERCs to a condominium with 252 units.
Historically, the condominium has been billed on a per unit basis pursuant to a
prior Commission approval.
The 252 units were not reflected in the E-2 Schedule for Sebring; instead, they
were reflected as 12 bills with no usage shown. Staff imputed the appropriate
number of bills based on per unit billing and used the average consumption from
the Sebring billing analysis to impute the usage.
In a prior docket, it was determined that obtaining water
usage data from the City of Ormond Beach for North Peninsula customers would be
cost prohibitive for purposes of implementing volumetric billing. Based on this
circumstance, North Peninsula is the only system for which a flat rate is
appropriate. North Peninsula’s general service customers are primarily
condominiums rather than traditional commercial establishments. Therefore, staff
used the wastewater gallons treated to determine the gallons attributable to
North Peninsula customers for purposes of calculating the consolidated
wastewater rates. The calculation of the flat rate for North Peninsula should
consist of a combined fixed and variable component, with the variable component
based on the consolidated residential average consumption for wastewater.
Conclusion
The recommended rate structure and monthly wastewater
rates are shown on Schedule 4-B, which denies CSWR-Florida proposed
consolidated flat rate structure. 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 45:
What are the appropriate miscellaneous service
charges?
Recommendation:
Staff recommends the miscellaneous service charges
shown below in Table 45-1 should be approved for all CSWR-Florida systems. The
Utility should assess only a single charge for each of the miscellaneous
service charges for systems with both water and wastewater service pursuant to
Rule 25-30.460(1), F.A.C. The Utility should be required to file a proposed
customer notice and tariff to reflect the Commission-approved charges. The
approved charges should be effective 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.
(Bethea)
Position of the Parties
CSWR-Florida:
The appropriate miscellaneous service charges are as follows:
|
Type
|
Business Hours
|
After Hours
|
|
Initial Connection Charge
|
$50.75
|
$101.50
|
|
Normal Reconnection Charge
|
$50.75
|
$101.50
|
|
Violation Reconnection Charge
|
$50.75
|
$101.50
|
|
Premises Visit Charge (in lieu of disconnection)
|
$50.75
|
$101.50
|
|
Insufficient Check Charge
|
Pursuant to 68.065 F.S.
|
Pursuant to 68.065 F.S.
|
|
Meter Tampering
|
$50
|
$50
|
|
Credit Card Charge
|
2.25% of Bill
|
2.25% of Bill
|
|
ACH Charge
|
$0.75
|
$0.75
|
|
Late Payment Charge
|
$7.00
|
$7.00
|
Exhibit 104, pages
40 - 41; Exhibit 105, pages 45 – 46
OPC:
The
appropriate miscellaneous service charges should be based on supporting cost
justification. Test Year Operating Revenues should be adjusted to reflect the
impact of these new charges that will be collected when rates are implemented.
Staff Analysis:
The Commission is authorized to establish, increase,
or change a rate or charge other than monthly rates or service availability
charges pursuant to Section 367.091, F.S. The Utility requested water and
wastewater miscellaneous services charges based on charges already approved and
contained in the Commission-approved tariffs of its individual systems to avoid
incurring the additional rate case expense associated with conducting a cost
study. (TR 509-510, C4-373- C4-374; EXH 142, BSP E2008) However, staff notes
that Section 367.091(6), F.S., specifically provides that an application to
establish, increase, or change a rate or charge other than the monthly rates
for service or service availability charges must be accompanied by a cost
justification, which was not provided by the Utility. Staff therefore analyzed
the cost data which was ultimately provided in the record of this proceeding.
CSWR-Florida proposed $50.75 during normal hours and
$101.50 after hours for initial connection, normal, violation, and premises
visit charges adopted from the existing charges of the Rolling Oaks system. For
the consolidated rate payment charge, the Utility proposed to adopt the $7 late
payment charge of the Aquarina system. (EXH 23, BSP J2061) In addition,
CSWR-Florida proposed nonsufficient funds charges pursuant to Section 68.065, F.S.,
a credit card charge of 2.25 percent of the bill, an automated clearing house
(ACH) charge of $0.75, and a meter tampering of $50. (EXH 23, BSP J2061)
Initial Connection, Normal Reconnection,
Violation Reconnection, and Premises Visit Charges
The
Utility requested $50.75 each for initial connection, normal reconnection,
violation reconnection, and premises visit charges consistent with the charges,
which is currently approved for Rolling Oaks system on a stand-alone basis.
Subsequent to CSWR-Florida filing for the instant rate case, the Commission
modified Rolling Oaks miscellaneous service charges by removing the initial
connection, normal reconnection charges, and subsuming those definitions into
the definitions of the premises visit charge to be consistent with Rule
25-30.460 F.A.C.[85] In addition, the wastewater
violation reconnection was approved at actual cost pursuant to Rule
25-460(2)(b), F.A.C.
In
support of adopting Rolling Oaks’ charge of $50.75, the Utility indicated its
third-party vendor’s contract labor is $112.50 hours and 30 minutes of operator
time is $56.75 and exceeds the proposed charge of $50.75. (EXH 142, BSP E2008) For
after hours, the third-party vendor’s contract labor is $225.00 and 30 minutes
of operator time is $112.50, which exceeds the proposed after hours charge of
$101.50. (EXH 142, BSP E2008) Staff believes this support is sufficient and
reasonable to justify adopting a charge of $50.75 for normal hours and $101.50
after hours for water and wastewater premises visit. The wastewater violation
reconnection charge should be at actual cost pursuant to the rule. For the
water violation reconnection charge, this charge is levied prior to reconnection of an existing customer after discontinuance of
service for cause. The Commission has allowed this charge to be represented by
one trip to turn off service and a subsequent trip to turn on service once the
violation has been remedied.[86] Based on the information
in the record, staff believes the appropriate water violation charge for normal
hours should be $101.50.
Late Payment Charge
CSWR-Florida
requested a late payment charge of $7.00 for water and wastewater, which is
currently approved for its Aquarina system on a stand-alone basis. Aquarina’s
existing late payment charge was approved by the Commission in 2014.[87]
Witness Silas contended that the $7.00 represents a just and reasonable charge
to incentivize payment and reduce spreading further cost across other customers
through bad debt expense. (TR 510-511, C4-374-C4-375) Staff believes the late
payment charge is reasonable and appropriate for a consolidated late payment
charge.
Non-Sufficient Funds (NSF) Charge
In
its MFRs, CSWR-Florida requested NSF charges currently
set forth in Section 68.065, F.S. (EXH 142, BSP E2008) Staff agrees that the
Utility should be authorized to collect NSF charges consistent with Section
68.065, F.S., which allows for the assessment of charges for the collection of
worthless checks, drafts, or orders of payment. As currently set forth in
Sections 68.065(2), F.S., the following NSF charges may be assessed:
1.
$25, if the face value does not exceed $50.
2.
$30, if the face value exceeds $50 but does not exceed $300.
3.
$40, if the face value exceeds $300, or 5 percent of the face amount of the
check, whichever is greater.
Approval
of NSF charges is consistent with prior Commission decisions. Furthermore, NSF
charges place the cost on the cost-causer, rather than requiring that the costs
associated with the return of the NSF checks be spread across the general body
of ratepayers
Investigation of Meter Tampering Charge and
Meter Tampering Charge
In
its MFRs, CSWR-Florida requested a meter tampering charge of $50 for water.
Rule 25-30.320(2)(i), F.A.C., provides that a customer’s service may be
discontinued without notice in the event of tampering with the meter or other
facilities furnished or owned by the Utility. In addition, Rule
25-30.320(2)(j), F.A.C., provides that a customer’s service may be discontinued
in the event of an unauthorized or fraudulent use of service. The rule requires
a customer to reimburse the Utility for all changes in piping or equipment
necessary to eliminate the illegal use and to pay an amount reasonably
estimated as the deficiency in revenue resulting from the customer’s fraudulent
use before restoring service.
CSWR-Florida’s requested charge is
approved for its Sunshine system on a stand-alone basis, as the investigation of meter tampering at $50. The Sunshine
system’s existing investigation of meter tampering charge was approved by the
Commission in 2012.[88]
This charge should only be considered as cost recovery for an investigation of
meter tampering, and should only be assessed where an investigation reveals
evidence of meter tampering. If meter tampering is revealed, Rule 25-30.320,
F.A.C., allows the Utility to assess actual cost of any damages incurred. In
addition, the Rolling Oaks system is currently approved for a tampering or
prohibited use charge for actual cost. As mentioned previously, the
Commission modified and approved Rolling Oaks’ miscellaneous service charges,
including meter tampering charges at actual cost in 2025.[89]
Therefore, staff recommends an investigation of meter tampering charge of $50
and a meter tampering charge at actual cost.
Credit Chard Charge and ACH Charge
In its MFRs, the Utility requested a credit card charge of 2.25
percent of the customer’s bill and an ACH charge of $0.75 per transaction when
the customer elects to make a payment via ACH through the online payment
portal. (EXH 23, BSP J2061; EXH 142, BSP E2007 - E2008) CSWR-Florida indicated
that it partners with Invoice Cloud, the third-party vendor, as its payment
processor. The Utility explained that the credit card and ACH charges are
derived, created, and controlled by the third-party vendor based the payment of
choice through the payment portal. (EXH 136, BSP E1494; EXH 142, BSP E2008)
Since these charges are the third-party vendor’s charges, staff does not
believes it is necessary for the charges to be in CSWR-Florida’s tariff.
Table 45-1
Staff Recommended
Miscellaneous Service Charges
|
Charges
|
Utility’s
Proposed
Charges
|
Staff Recommended
Charges
|
|
|
Normal Hours
|
After Hours
|
Normal Hours
|
After Hours
|
|
Violation Reconnection - Water
|
$50.75
|
$101.50
|
$101.50
|
$101.50
|
|
Violation Reconnection - Wastewater
|
$50.75
|
$101.50
|
Actual Cost
|
|
Premises Visit
|
$50.75
|
$101.50
|
$50.75
|
$101.50
|
|
Late Payment
|
$7.00
|
$7.00
|
|
NSF Charge
|
Pursuant to Section 68.065(2)
|
Pursuant to Section 68.065(2)
|
|
Investigation of Meter Tampering Charge
|
Not applicable
|
$50.00
|
|
Credit Card Charge
|
2.25% of Bill
|
Not applicable
|
|
ACH Charge
|
$0.75
|
Not applicable
|
|
Meter Tampering Charge
|
$50.00
|
Actual Cost
|
Conclusion
Staff recommends the
miscellaneous service charges shown below in Table 45-1 should be approved for
all CSWR-Florida systems. The Utility should assess
only a single charge for each of the miscellaneous service charges for systems
with both water and wastewater service pursuant to Rule 25-30.460(1), F.A.C.
The Utility should be required to file a proposed customer notice and tariff to
reflect the Commission approved charges. The approved charges should be
effective 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 will 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 46:
What are the appropriate service availability
charges?
Recommendation:
The appropriate service availability charges for the
distribution and collection lines for each respective system are contained on
Table 46-1. The customer connection charge should be at actual cost. The meter
installation charge should be $378 for the residential 5/8 inch x 3/4 inch
meter size and actual cost for all other residential and general service meter
sizes. For systems with existing plant capacity charges, the charges should
remain unchanged. The Utility should provide notice of the approved service availability
charges to potential customers who have requested service within the 12
calendar months prior to the month the application was filed and up until the
Commission’s order issues. (Hudson)
Position of the Parties
CSWR-Florida:
The Company proposes to charge actual cost for
various service availability charges (i.e.,
connections / tap fees, meter installation fees, inspection fees, and main
extensions).
OPC:
No post hearing position or argument was provided in
the brief.
Staff Analysis:
In its MFRs, CSWR-Florida proposed main extension,
customer connection, and meter installation charges at actual cost because,
according to CSWR-Florida witness Silas, those charges are often challenging to
quantify and very difficult to determine the cost underlying the service charge.
(TR 510) The Utility is not seeking to adjust the plant capacity charges of the
individual systems. (EXH 23, J2068) CSWR-Florida also proposed meter bench test
deposits, which are consistent Rule 25-30.266, F.A.C. The deposits are a
standard in all Commission-approved tariffs consistent with the rule.
Main Extension Charge
A main extension charge is
defined in Rule 25-30.515(12), F.A.C., as a charge to recover all or part of a
utility’s capital costs associated with extending off-site water or wastewater
facilities to provide service to a specified property. The rule requires the
charge to be based on a hydraulic share basis or another method reasonably
related to the cost of providing service. Historically, the Commission has
calculated main extension charges by allocating original cost of the applicable
transmission, distribution, or collection facilities and divided by the
system’s design ERC, resulting in a specific charge rather than at actual cost.[90]
Quantifying a main extension charge is tied to the cost of the mains at the
time they were installed. Absent a specific new extension and associated
incremental capital cost, the Commission’s original cost methodology provides a
more appropriate basis for the charge. Therefore, staff evaluated each
individual system for the appropriateness of a main extension charge.
Aquarina
The Aquarina system’s existing main extension charges are
$500 per ERC and $50 per ERC for its potable and non-potable systems,
respectively. (EXH 8, BSP J608) These charges were approved by the Commission
in 2016.[91] At that time, the
Commission also discontinued Aquarina’s wastewater main extension charge based
on the system’s contribution level. Because the existing main extension charges
were established using the Commission’s original cost based methodology, staff
believes they remain appropriate to continue at this time. The record does not
demonstrate that additional water or wastewater facilities have been installed
or that new facilities are being constructed to serve additional territory.
Although Aquarina’s wastewater contribution level has changed since the
Commission discontinued the wastewater main extension charge, the change is
attributable to the accounting treatment of existing facilities, including
plant retirements, accumulated depreciation, and CIAC amortization, rather than
the installation of additional facilities for serving additional customers.
Therefore, staff does not believe the change in contribution level warrants
reinstating a wastewater main extension charge. Staff recommends the main
extension charges for the Aquarina system remain unchanged.
BFF
The BFF system's existing $1,620 system capacity charge
was established in 1990.[92]
(EXH 14, BSP J1117) A system capacity charge is a single service availability
charge that includes the cost of both plant and lines. For a utility that
receives donated lines from a developer, an individual customer connecting to
those lines should only be responsible for a service availability charge that
reflects plant costs. Therefore, separate charges are typically developed to
reflect the customer’s share of plant costs (plant capacity charges) and the
cost of lines in lieu of donated lines (main extension charges).[93] The BFF collection
system is built out. (EXH 14, BSP J1128) In addition, BFF’s wastewater
treatment facility was abandoned at the time of interconnection with another
utility.[94] As a result, staff
recommends the existing system capacity charge should be discontinued rather
than converted to separate main extension and plant capacity charges.
CFAT
The CFAT system does not have existing main extension
charges for water and wastewater. (EXH 18, BSP J1543 – J1544) The territory,
which comprises the CFAT system was originally part of Tradewinds’ certificated
territory but was separate and noncontiguous from Tradewinds’ original service
territory when it was added by Order No. 19688, issued July 19, 1988, in Docket
No. 19880552-WS. The amended territory had its own water and wastewater
facilities. The territory was later subject to foreclosure, resulting in the
Resolution Trust Corporation obtaining ownership of the water and wastewater
facilities serving the territory, where a portion of the facilities were
developer contributed lines and a lift station.[95]
The existing facilities have also been subject to depreciation and, where
applicable, amortization of contributed property over their service lives. As
stated in Issue 9, there is room for growth in the CFAT territory. However, the
record does not demonstrate any additional lines installed for growth.
Therefore, staff believes that establishing a main extension charge for the
existing CFAT territory is not appropriate.
Neighborhood
Currently, the Neighborhood system does not have an
approved main extension charge. (EXH 28, BSP J2562) A main extension charge is
not appropriate for Neighborhood because the Commission has already imputed the
cost of the transmission and distribution lines pursuant to Rule 25-30.570,
F.A.C.[96] Neighborhood’s
distribution systems are entirely built out. (EXH 28, BSP J2573) The existing
transmission and distribution infrastructure has already been recognized as
contributed facilities, and there is no evidence in the current record of any
additional infrastructure or new main extension being constructed to serve new
customers. Therefore, a main extension charge is not appropriate at this time
for the Neighborhood system.
North Peninsula
In 2016, the Commission approved a main extension charges
of $762 per ERC where a road crossing is required and $444 per ERC where no
road crossing is required for the North Peninsula system.[97]
(EXH 33, J3054) The charges were established based on the Commission’s
methodology of requiring new customers to pay their pro rata share of the
average cost of the infrastructure necessary to provide service, while taking
into consideration the varying costs and number of connections associated with
the proposed service areas. Because the proposed service areas involved
existing developed properties being converted to wastewater service, the timing
of individual connections was uncertain and the Commission recognized that
service could be requested at varying times. Although the charges were
established in 2016 and the cost of constructing the necessary facilities may
have changed since that time, CSWR-Florida has not provided estimated costs or
other supporting information to develop an updated main extension charge using
the methodology previously approved for North Peninsula. In the absence of such
supporting cost information, staff believes the existing Commission-approved
charges remain appropriate for new customers and are consistent with the
Commission’s established methodology for North Peninsula.
Rolling Oaks
Rolling Oaks’ existing service-availability charges
include no water main extension charge, and a wastewater main extension charge
of $491 per ERC. (EXH 38, BSP J3590 – J3591) Staff was unable to determine
whether the existing wastewater main extension charge was established under the
Commission’s jurisdiction or while Rolling Oaks was under Citrus County
jurisdiction. However, staff was able to determine that Rolling Oaks
historically collected CIAC for its water system, as reflected in a CIAC
gross-up docket, where the Commission’s review of the Utility’s 1995 Annual
Report indicated that the water system had reached the 75 percent contribution
level established by Rule 25-30.580, F.A.C.[98]
This historical contribution level provides a reasonable explanation for the
absence of a water main extension charge. For this reason, staff does not
believe it is appropriate to reinstitute a water main extension charge at this
time. Although the current water system contribution level is approximately 36
percent, the reduction reflects the effects of depreciation of plant and the
amortization of CIAC over time. In Issue 13, for the wastewater collection
system, staff indicated that there remaining lots to be served. Therefore, staff
believes the existing $491 per ERC wastewater main extension charge remains
reasonable and appropriate.
Sebring Ridge
The Sebring Ridge system’s existing wastewater main extension
charge is $385 per ERC for residential customers and $1.10 per gallon for all
other customers. (EXH 43, BSP J4085) The Commission approved the main-extension
charges in 1996 and recognized imputed CIAC in the same proceeding.[99] However,
the imputed CIAC appears to have been associated with the service availability
charges applicable during that period rather than an imputation of the cost of
the existing wastewater collection facilities. In Issue 13, staff identified
additional lots available to be served based on the system map and is
recommending that the wastewater collection system be recognized as 79 percent used
and useful. Therefore, staff recommends that the existing wastewater main
extension charge remain in effect.
Sunshine
The Sunshine system currently does not have a main extension
charge. (EXH 48, BSP J4837) Historically, the Sunshine system's service availability
charges included a system capacity charge which consists of a combined recovery
associated with lines and plant capacity. In a 2012 proceeding, Sunshine
requested that its service availability charges be made uniform; however, the
Commission denied the requested uniform charge. Instead, the Commission
discontinued the system capacity charge because the contribution level exceeded
the 75 percent guideline established in Rule 25-30.580, F.A.C.[100] In its
MFRs, CSWR-Florida indicated that the Sunshine system's water distribution
system is entirely built-out. (EXH 48, J4863) With the Commission's prior
determination concerning the Sunshine system's contribution level, the
discontinuation of the system capacity charge, and the Utility's current
indication that the distribution system is built out, staff does not believe a
main extension charge should be reinstituted at this time.
TKCB
The TKCB system has never had a Commission-approved main
extension charge. The TKCB system’s prior proceedings did not establish a main
extension charge. The collection system is fully built out. (EXH 52, J5258) The
absence of an existing Commission-approved main extension charge, the system’s
fully built-out status, and the lack of evidence of additional facilities or
incremental capital costs required to serve new customers, staff believes that
a main extension charge is not appropriate at this time.
Tradewinds
The Tradewinds system currently has no water or wastewater
main extension charges. (EXH 57, BSP J5874) In 2011, the Commission determined
that the Tradewinds service territory was built out and that growth was not a
factor in evaluating the water distribution and wastewater collection systems.[101] At that time, the
Commission determined both the water distribution and wastewater collection
systems to be 100 percent used and useful. In addition, CSWR-Florida indicated
that the distribution and collection systems are entirely built out. (EXH 57,
BSP J5886) Therefore, staff recommends that no water or wastewater main
extension charge be established for Tradewinds at this time. If facilities are
required to accommodate future growth, the Utility may seek Commission approval
of an appropriate service availability charge based on the specific facilities
and costs associated with that growth.
Tymber Creek
The Tymber Creek systems’ existing service availability
charges consist of a $100 per ERC main extension charge for water and a $600
per ERC main extension charge for wastewater. Staff evaluated the water
distribution and wastewater collection systems based on the total number of
lots and total number of connections and determined both systems to be 100
percent used and useful. In addition, CSWR-Florida states in its MFRs that the
water distribution and wastewater collection systems are entirely built out.
(EXH 62, BSP J6341) Therefore, staff recommends discontinuing the existing
water and wastewater main extension charges, as there is no demonstrated need
for a main extension charge for systems that are fully built out.
While some areas have vacant lots and others are built
out, the current record does not identify or support the need for additional
water distribution or wastewater collection facilities to serve future growth.
If additional facilities are needed in the future, the Utility may seek
Commission approval of an appropriate main extension charge based on the
specific facilities and costs necessary to provide service.
Connection Charge
Rule 25-30.515, F.A.C., defines a customer connection
charge as payment to the utility for the cost of installing a connection from
the utility’s water or wastewater lines, including but not limited to the cost
of piping and meter installation. Unlike a main extension charge, which
recovers a customer’s pro rata share of the cost of utility infrastructure
serving an area, a customer connection charge relates to new connection
facilities that are not part of the Utility’s existing infrastructure and are
installed when an individual customer requests service. Using actual cost in
this circumstance provides for recovery of the incremental cost of the new
connection without establishing a predetermined charge for facilities that have
not yet been installed. Thus, for the consolidated CSWR-Florida systems, staff
recommends an actual cost customer connection charge.
Meter Installation Charge
Pursuant to Rule 25-30.515, F.A.C., the meter installation
charge is design to recover the cost of installing the water measuring devise
at the point of delivery including materials and labor required. Historically,
the Commission has established specific meter installation charges for the
5/8-inch x 3/4-inch meter rather than requiring actual cost and actual cost for
other meter sizes.[102] CSWR-Florida's
existing systems have Commission-approved meter installation charges ranging
from $100 to $150 for a 5/8-inch x 3/4-inch meter size. The Commission has also
used one hour of labor in establishing a standardized charge for this meter
size. [103]
CSWR-Florida proposes an actual cost meter installation
charge. In response to staff interrogatory, the Utility provided a meter cost
of $265 and a third-party vendor labor rate of $112.50 per hour. (EXH 142, BSP
E2010, E2020, E2021) Staff believes actual cost is not appropriate for the
5/8-inch x 3/4-inch meter size because the Commission has historically
established a specific installation charge, while actual cost remains
appropriate for other meter sizes.
Applying one hour of the documented third-party vendor labor rate to the $265
meter cost results in a cost of $377.50. Staff recommends establishing a $378
meter installation charge for a 5/8-inch x 3/4-inch meter and actual cost for
all other meter sizes.
Table 46-1
Main Extension Charge per ERC
by System
|
System
|
Existing Charge
|
Staff
Recommended Charge
|
|
Aquarina - P
|
$500
|
$500
|
|
Aquarina - NP
|
$50
|
$50
|
|
BFF - Wastewater
|
$1,620
|
N/A
|
|
CFAT - Water
|
N/A
|
N/A
|
|
CFAT – Wastewater
|
N/A
|
N/A
|
|
Neighborhood-Water
|
N/A
|
N/A
|
|
North Peninsula - Wastewater
|
Road Crossing - $762
No Road Crossing-
$444
|
Road Crossing - $762
No Road Crossing-
$444
|
|
Rolling Oaks - Water
|
N/A
|
N/A
|
|
Rolling Oaks - Wastewater
|
$491
|
$491
|
|
Sebring - Wastewater
|
$385
|
$385
|
|
Sunshine - Water
|
N/A
|
N/A
|
|
TKCB - Wastewater
|
N/A
|
N/A
|
|
Tradewinds - Water
|
N/A
|
N/A
|
|
Tradewinds - Wastewater
|
N/A
|
N/A
|
|
Tymber Creek - Water
|
$100
|
N/A
|
|
Tymber Creek - Wastewater
|
$600
|
N/A
|
Conclusion
Based on the above, the appropriate service-availability
charges for the distribution and collection lines for each respective system
are contained on Table 46-1. The customer connection charge should be at actual
cost. The meter installation charge should be $378 for the residential 5/8 inch
x 3/4 inch meter size and actual cost for all other residential and general
service meter sizes. For systems with existing plant capacity charges, the
charges should remain unchanged. The Utility should provide notice of the
approved service-availability charges to potential customers who have requested
service within the 12 calendar months prior to the month the application was
filed and up until the Commission’s order becomes final.
Issue 47:
Should any portion of the interim revenue increases
granted be refunded?
Recommendation:
Yes. The appropriate refund amounts should be
calculated by using the same data used to establish final rates, excluding rate
case expense and other items not in effect during the interim period. The
revised revenue requirements for the interim collection period should be
compared to the amount of interim revenues granted. Based on these
calculations, staff recommends interim refunds of $455,055 and $418,192 for the
water and wastewater systems, respectively. The refunds should be made on a
per-system basis as shown in Table 47-1. The refunds should be made with
interest in accordance with Rule 25-30.360(4), F.A.C. The Utility should be
required to submit proper refund reports pursuant to Rule 25-30.360(7), F.A.C.
The Utility should treat any unclaimed refunds as CIAC pursuant to Rule
25-30.360(8), F.A.C. Once the appropriate amounts of interim revenues are
refunded and the refund amounts are verified by staff, the corporate
undertaking should be released. (Vogel)
Position of the Parties
CSWR-Florida:
No.
OPC:
The
Commission should follow the steps set forth in Florida Statute section 367.082
to compute the refund of interim rates. In no event should costs that are
disallowed in final rates be allowed for interim rates.
Staff Analysis:
By Order Nos. PSC-2025-0361-PCO-WS, issued September
24, 2025, and PSC-2025-0404-PCO-WS, issued October 27, 2025, the Commission authorized
the collection of interim water and wastewater rates, subject to refund,
pursuant to Section 367.082, F.S. Collective interim revenue requirements of
$5,676,185 and $3,335,182 were granted for the water and wastewater systems,
respectively.
According to Section 367.082, F.S., any refund should be
calculated to reduce the rate of return of the utility during the pendency of
the proceeding to the same level within the range of the newly authorized rate
of return. Adjustments made in the rate case test period that do not relate to
the period interim rates are in effect should be removed.
In this rate case, the test period for establishment of
interim and final rates is the 12-month period ended January 31, 2025.
CSWR-Florida’s approved interim rates did not include any provisions for pro
forma plant or projected operating expenses. The interim increase was designed
to allow recovery at the lower limit of the last authorized range of return on
equity.
To establish the proper refund amount, staff calculated a
revised interim revenue requirement utilizing the same data used to establish
final rates. Pro forma plant and rate case expense were excluded because these
items are prospective in nature and did not occur during the interim collection
period. Staff’s revised interim revenue requirement is $5,302,212 and
$2,936,716, for the water and wastewater systems, respectively. These revised
amounts reflect a difference of $373,973 ($5,676,185 - $5,302,212) for water
and $398,466 ($3,335,182 - $2,936,716) for wastewater. However, not every
system required a refund and the total refund amounts for the systems that do
require a refund is equal to $455,055 for water and $418,192 for wastewater. Table
47-1 details each system’s interim and revised interim revenue requirements,
along with the appropriate refund amount and percentage.
Table 47-1
Interim Refund Calculations
per System
|
System
|
Approved Interim
|
Revised Interim
|
Refund Amount
|
Refund
Percentage
|
|
Aquarina – Water
|
$194,053
|
$183,275
|
$10,778
|
5.55%
|
|
Aquarina – Wastewater
|
$254,016
|
$264,463
|
$0
|
0%
|
|
Aquarina – Non-potable
|
$274,095
|
$280,315
|
$0
|
0%
|
|
BFF
|
$128,620
|
$130,808
|
$0
|
0%
|
|
CFAT – Water
|
$229,358
|
$228,920
|
$438
|
0.19%
|
|
CFAT – Wastewater
|
$180,424
|
$176,227
|
$4,197
|
2.33%
|
|
Neighborhood
|
$275,011
|
$291,383
|
$0
|
0%
|
|
North Peninsula
|
$375,892
|
$353,336
|
$22,556
|
6.00%
|
|
Rolling Oaks – Water
|
$2,182,628
|
$1,802,176
|
$380,452
|
17.43%
|
|
Rolling Oaks – Wastewater
|
$1,769,409
|
$1,401,704
|
$367,705
|
20.78%
|
|
Sebring Ridge
|
$244,887
|
$251,978
|
$0
|
0%
|
|
Sunshine – Unified
|
$1,983,516
|
$1,961,213
|
$22,303
|
1.12%
|
|
Sunshine – Other
|
$193,193
|
$251,683
|
$0
|
0%
|
|
TKCB
|
$194,694
|
$191,934
|
$2,760
|
1.42%
|
|
Tradewinds – Water
|
$344,331
|
$303,247
|
$41,084
|
11.93%
|
|
Tradewinds - Wastewater
|
$187,240
|
$166,266
|
$20,974
|
11.20%
|
Source: Order Nos. PSC-2025-0361-PCO-WS and
PSC-2025-0404-PCO-WS
Conclusion
Based on the above, staff recommends refunds of $455,055
and $418,192 for the water and wastewater systems, respectively. The refunds
should be made on a per-system basis as shown in Table 47-1. The refunds should
be made with interest in accordance with Rule 25-30.360(4), F.A.C. The Utility
should be required to submit proper refund reports pursuant to Rule
25-30.360(7), F.A.C. The Utility should treat any unclaimed refunds as CIAC
pursuant to Rule 25-30.360(8), F.A.C. Once the appropriate amounts of interim
revenues are refunded and the refund amounts are verified by staff, the
corporate undertaking should be released.
Issue 48:
What is the appropriate amount by which rates should
be reduced after the established effective date to reflect the removal of the
amortized rate case expense?
Recommendation:
CSWR-Florida’s water and wastewater rates should be
reduced as shown on Schedule Nos. 4-A and 4-B, respectively. This is to remove
rate case expense, grossed up for RAFs, which is being amortized over a
four-year period and will result in a reduction of $18,345 for water, $311 for
Aquarina non-potable water, and $10,742 for wastewater. The decrease in rates
should become effective immediately following the expiration of the four-year
rate case expense recovery period pursuant to Section 367.081(8), F.S. CSWR-Florida
should be required to file revised tariff sheets no later than one month prior
to the actual date of the required rate reduction. The Utility should also be
required to file a proposed customer notice of the lower rates and the reason
for the reduction. If CSWR-Florida files 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. (Sewards, Bethea)
Position of the Parties
CSWR-Florida:
The Company proposes to amortize its rate case
expenses over three years, allocate between water and wastewater operations,
and recover through a surcharge based upon equivalent residential units. Since
rate case expense would be collected through a surcharge, rates would not need
to be reduced, the surcharge would simply end.
OPC:
This is a
fallout issue and pending the resolution of Issue 29.
Staff Analysis:
Section 367.081(8), F.S., provides as follows:
The amount of rate case expense that the commission
determines a public utility may recover through its rates pursuant to this
chapter shall be apportioned for recovery over 4 years unless a longer period
can be justified and is in the public interest. At the conclusion of the
recovery period, the public utility shall immediately reduce its rates by the
amount of the rate case expense previously included in rates.
CSWR-Florida’s post-hearing position is to amortize rate
case expense over three years, to be recovered through a surcharge. It provides
no argument in its brief why this departure from the clear directive of the
statute and long-established Commission precedent is appropriate.
After weighing the
evidence put forth in the record, staff believes that a four-year amortization
period is appropriate. The reduction in revenues will result in the rate
decrease as shown on Schedule Nos. 4-A and 4-B, which will remove rate case
expense grossed-up for RAFs of $18,345 for water, $311 for Aquarina non-potable
water, and $10,742 for wastewater.
Conclusion
CSWR-Florida’s water and wastewater rates should be
reduced as shown on Schedule Nos. 4-A and 4-B, respectively. This is to remove
rate case expense, grossed up for RAFs, which is being amortized over a
four-year period and will result in a reduction of $18,345 for water, $311 for CSWR-Florida’s
water and wastewater rates should be reduced as shown on Schedule Nos. 4-A and
4-B, respectively. This is to remove rate case expense, grossed up for RAFs,
which is being amortized over a four-year period and will result in a reduction
of $18,345 for water, $311 for Aquarina non-potable water, and $10,742 for
wastewater. The decrease in rates should become effective immediately following
the expiration of the four-year rate case expense recovery period pursuant to
Section 367.081(8), F.S. CSWR-Florida should be required to file revised tariff
sheets no later than one month prior to the actual date of the required rate
reduction. The Utility should also be required to file a proposed customer
notice of the lower rates and the reason for the reduction. If CSWR-Florida
files 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.
Issue 49:
Should the Utility be required to notify, within 90
days of an effective order finalizing this docket, that it has adjusted its
books for all the applicable National Association of Regulatory Utility
Commissioners (NARUC) Uniform System of Accounts (USOA) associated with the
Commission approved adjustments?
Approved Type 1 Stipulation:
Yes, CSWR-Florida should be required to notify,
within 90 days of an effective order finalizing this docket, that it has
adjusted its books for all the applicable National Association of Regulatory
Utility Commissioners (NARUC) Uniform System of Accounts (USOA) associated with
the Commission approved adjustments.
Issue 50:
Are the resulting rates affordable within the
meaning of just, reasonable, compensatory, and not unfairly discriminatory,
pursuant to Sections 367.081 and 367.121 Florida Statutes?
Recommendation:
The Commission has broad discretion to carry out its
legislative mandate of ensuring rates are just, reasonable, compensatory, and
not unfairly discriminatory. However, there exists no statutory authority to
infer a specific definition of affordability absent express legislative
authorization. To the extent the Commission can consider the “affordability” of
customer bills, it must do so within the context of its governing statutes in
Chapter 367, F.S. (Bloom, J. Crawford)
Position of the Parties
CSWR-Florida:
There is no statutory authority for a finding on
affordability of service.
OPC:
No. Pursuant
to Sections 367.081 and 367.121, Florida Statutes, the Commission must approve
only rates that are fair, just, reasonable, and not unfairly discriminatory.
The Commission should disallow all unreasonable, imprudent, unsupported, or
unnecessary costs to ensure customers pay no more than necessary for safe and
reliable Utility service. The resulting rates must balance the Utility's
opportunity to earn a fair return with the affordability interests of its
customers.
Staff Analysis:
Section 367.081, F.S., sets forth the factors the
Commission must consider in a water and wastewater rate case. However, there is
no mention of “affordability” in Chapter 367. What the statutes explicitly
require is for the Commission to approve rates that are “just, reasonable,
compensatory, and not unfairly discriminatory.” Section 367.081(2)(a)1., F.S.
In order to effectuate a determination of “just, reasonable, compensatory, and
not unfairly discriminatory rates,” the Commission considers a number of
factors, the weight of which may vary slightly from one rate proceeding to
another. For example, the Commission must consider and weigh evidence on the
value and quality of the service,
as well as the ability for the Utility to recover a fair return on its
investment of Utility in property that is used and useful in the public
service.
Furthermore, pursuant to Section 367.081(2)(a)2.c., F.S., the Commission must
approve certain expenses that are associated with “environmental compliance
costs,” as well as allow cost recovery for “reasonable rate case expense
incurred during a rate proceeding.” These factors are typically discrete issues
supported by testimony and evidence.
OPC asserts in its brief that the Commission should
consider affordability as a factor in this case, but it fails to adequately
address the fact that the word “affordable” is not defined, let alone
referenced, in Chapter 367, F.S. (OPC BR 34-35) The Commission does not have
such enabling legislation, because nowhere in Chapter 367, F.S., is
“affordability” mentioned as a factor that the Commission can or should
consider when setting rates. The record in this case does not support findings
on “affordability,” nor does it allow for the Commission to weigh testimony or
evidence on affordability.
Further, OPC contends that approving CSWR-Florida’s
requested rates “without considering the prospect of future recovery of tens of
millions of dollars in acquisition-related costs risks subjecting customers to
a continuing cycle of rate increases that may ultimately render service
unaffordable.” (OPC BR 34) However, OPC appears to be referencing CSWR-Florida’s
separately-docketed petitions for acquisition adjustment; as discussed
previously in the recommendation, approval and cost recovery for the
acquisition adjustments are not part of this proceeding. Consideration of such
costs in the current docket are both speculative and premature.
CSWR-Florida provides its post-hearing position in its
brief, but does not provide further argument on this issue. (CSWR-Florida BR
38)
Conclusion
The
Commission has broad discretion to carry out its legislative mandate of
ensuring rates are just, reasonable, compensatory, and not unfairly
discriminatory. However, there exists no statutory authority to infer a
specific definition of affordability absent express legislative authorization.
To the extent the Commission can consider the “affordability” of customer
bills, it must do so within the context of its governing statutes in Chapter
367, F.S.
Issue 51:
Should this docket be closed?
Recommendation:
No. This docket should remain open for staff’s
verification that the Utility has filed the revised tariff sheets, customer
notices have been filed, and that the Utility has notified the Commission in
writing that the adjustments set forth have been made. Once these actions are
complete, this docket should be closed administratively. (Bloom)
Position of the Parties
CSWR-Florida:
Yes.
OPC:
No.
Staff Analysis:
No. This docket should remain open for staff’s
verification that the Utility has filed the revised tariff sheets, customer
notices have been filed, and that the Utility has notified the Commission in
writing that the adjustments set forth have been made. Once these actions are
complete, this docket should be closed administratively.
