Discussion
of Issues
Issue 1:
Should the transfer of Certificate No. 401-W in
Highlands County from Placid Lakes Utilities, Inc. to Sunshine Water Services
Company be approved?
Recommendation:
Yes. The
transfer of the water system and Certificate No. 401-W is in the public
interest and should be approved effective the date that the sale becomes final.
The resultant order should serve as the Buyer’s certificate and should be
retained by the Buyer. The Buyer should submit the executed and recorded deed
for continued access to the land upon which its facilities are located, a copy
of its permit transfer application, and a copy of its signed and executed
contract for sale to the Commission within 90 days of the order approving the
transfer, which is final agency action. If the sale is not finalized within 90
days of the transfer order, the Buyer should file a status update in the docket
file. The Utility’s existing rates, initial customer deposits, violation
reconnection charge, late payment charge, and Non-Sufficient Funds (NSF) charge
are shown on Schedule Nos. 4 and 5 and should remain in effect until a change
is authorized by the Commission in a subsequent proceeding. The tariff pages
reflecting the transfer should be effective on or after the stamped approval
date on the tariff sheets, pursuant to Rule 25-30.475(1), Florida
Administrative Code (F.A.C.). The Utility is current with respect to regulatory
assessment fees (RAFs) and annual reports through December 31, 2025. Based on
the application, the Seller will be responsible for RAFs and annual reports
until closing. The Buyer should be responsible for filing annual reports and
paying RAFs for all future years. (Lewis, Sibley, York, Brownless)
Staff Analysis:
Legal Standard:
Transfers of certificates are governed by Section 367.071,
F.S., and by Rule 25-30.037, F.A.C. The
statute provides that the Commission may approve the transfer if it is in the
public interest and the transferee will fulfill the commitments, obligations,
and representations of the utility. To
demonstrate that the transferee can do so, the rule requires the transferee to
show the financial and technical ability to operate the utility.
Noticing, Territory, and Land Ownership
SWS provided notice of the
application pursuant to Sections 367.045 and 367.071, F.S., and Rule 25-30.030,
F.A.C. No objections to the transfer were filed, and the time for doing so has
expired. SWS provided adequate service territory maps and descriptions to
Commission staff. The description of the Utility’s service territory is
appended to this recommendation as Attachment A. Pursuant to Rule
25-30.037(2)(s), F.A.C., SWS provided an unrecorded warranty deed as evidence that the Buyer will have rights
to long-term use of the land upon which the treatment facilities are
located. SWS committed to providing the executed and recorded deed to the
Commission within 90 days of the order approving this transfer.
Facility Description and Compliance
The Utility’s water system
consists of three wells, three 15,000-gallon hydropneumatic tanks, one of which
is currently out of service, and two concrete ground storage tanks, each with a
capacity of 150,000 gallons. The third hydropneumatic tank failed and imploded
in September 2023. As stated in SWS’ application that the replacement of the
tank may not be necessary because the high service pumps are now equipped with
variable-frequency drives (VFD) and a pressure control system. The design
capacity of the water treatment plant is 1,104,000 gallons per day treated by
hypo-chlorination. SWS provided a copy of Placid Lakes’ current permit from the
SWFWMD pursuant to Rule 25-30.037(2)(r)1., F.A.C.
Staff reviewed the Utility’s most recent sanitary survey
inspection report, dated March 28, 2024. During this inspection, the Department
of Environmental Protection (DEP) identified potential compliance issues
involving missing storage tank inspection reports, bio-growth on aerators,
cracks in the pad of Well No. 1, improper raw water sampling taps at Well Nos.
1 and 2, and incomplete operator timekeeping records. On July 15, 2024, the DEP
determined that Placid Lakes had resolved the potential non-compliance issues,
and the Utility was found to be in compliance
Purchase Agreement and Financing
Pursuant
to Rule 25-30.037(2)(i) and (j), F.A.C., the application contains a statement
regarding financing and a copy of the purchase agreement, which includes the
purchase price, terms of payment, and a list of the assets purchased.
SWS is
acquiring both the regulated water system and the non-regulated wastewater
system assets and operations of Placid Lakes; however, this transfer is
specifically for the regulated water system. SWS is assuming liabilities
related to obligations to current customers for liabilities occurring after closing,
for executable refundable advance agreements from customers who paid to install
water lines that cross vacant lots to access their property, and the lease of
the storage barn. SWS is not assuming any other of the Seller's liabilities or
obligations. Any customer deposits will be refunded to customers by the Seller
prior to the closing. According to the purchase and sale agreement, the total
purchase price for the water and wastewater assets and operations is
$5,750,000, with $5,645,998 allocated towards water and $103,999 allocated
towards wastewater. According to the Buyer, the closing has not yet taken place
and is dependent on Commission approval of the transfer and of establishment of
the rate base value of an acquired system using the FMV alternative methodology
specified in Rule 25-30.0372, F.A.C.
Technical and Financial Ability
Pursuant to Rule 25-30.037(2)(l) and (m), F.A.C., the
application contains statements describing the technical and financial ability
of the Buyer to provide service to the proposed service area. As referenced in
the application, the Buyer will fulfill the commitments, obligations, and representations
of the Seller with regard to utility matters. SWS is a private water and
wastewater utility provider that has operated in Florida since 1976. SWS serves
approximately 35,000 water and 30,000 wastewater customers across 10 counties and
owns and operates 11 utilities certificated by the Commission. The Buyer plans to
obtain safety, compliance, operational, financial, project management, billing,
customer service, human resources, administrative, and local leadership support
from within its company, as well as hire three full-time operations technicians
for the Placid Lakes water and wastewater systems.
In its
application, SWS provided its annual reports and the financial statements of
its parent company, Nexus Regulated Utilities, LLC. SWS stated that it intends
to continue maintaining its approved regulatory capital structure and intends
to fund the acquisition accordingly. Staff has reviewed the annual reports and
the parent company’s financial statements. Based on the above, staff believes the
Buyer has demonstrated the technical and financial ability to provide service
to the existing service territory.
Rates, Charges, and Initial Customer Deposits
Placid Lakes’ rates were last
approved in 2019 in a file and suspend rate case. Subsequently,
the rates were amended by four price indexes and three pass-through adjustments
with the last increase approved effective June 1, 2026. The miscellaneous
service charges were last approved in a file and suspend rate case in 2013.
The Utility’s service availability charges for water were approved in a request
for revised tariff sheets, new service availability policy, and new refundable
advance agreement in 2006.
The Utility’s initial customer deposits
were approved in 1999 in a tariff filing docket, wherein Placid Lakes requested
allowance to collect customer deposits. Finally,
the Utility’s allowance for funds prudently invested charges were last approved
in 1997. Rule
25-9.044(1), F.A.C., provides that, in the case of a change of ownership or
control of a utility, the rates, classifications, and regulations of the former
owner must continue unless authorized to change by the Commission.
Some of the Utility’s existing
miscellaneous service charges, which consist of the violation reconnection,
premises visit, late payment, and NSF charges are appropriate. However, the
remaining miscellaneous service charges do not conform to Rule 25-30.460,
F.A.C., and are discussed in Issue 3. Therefore, staff recommends that the
Utility’s existing rates, the appropriate miscellaneous service charges, initial
customer deposits, service availability charges, and AFPI charges shown on
Schedule Nos. 4 and 5, should remain in effect until a change is authorized by
the Commission in a subsequent proceeding. The tariff pages reflecting the
transfer should be effective on or after the stamped approval date on the
tariff sheets pursuant to Rule 25-30.475(1), F.A.C.
Regulatory Assessment Fees and Annual Reports
Staff has verified that the
Utility is current on the filing of annual reports and RAFs through December
31, 2025. The Seller will remain responsible for filing annual reports and
paying RAFs until the closing of the sale. Upon closing, SWS will be
responsible for filing annual reports and paying RAFs for all future years.
Conclusion
Based on the foregoing, staff
recommends that the transfer of the water system and Certificate No. 401-W is
in the public interest and should be approved effective the date that the sale
becomes final. The resultant order should serve as the Buyer’s certificate and
should be retained by the Buyer. The Buyer should submit the executed and
recorded deed for continued access to the land upon which its facilities are
located, copies of its permit transfer application, and a copy of its signed
and executed contract for sale to the Commission within 90 days of the order
approving the transfer, which is final agency action. If the sale is not
finalized within 90 days of the date of the transfer order, the Buyer should
file a status update in the docket file. The Utility’s existing rates, initial
customer deposits, violation reconnection charge, late payment charge, and NSF
charge as shown on Schedule Nos. 4 and 5 should remain in effect until a change
is authorized by the Commission in a subsequent proceeding. The tariff pages
reflecting the transfer should be effective on or after the stamped approval
date on the tariff sheets, pursuant to Rule 25-30.475(1), F.A.C. The Utility is
current with respect to RAFs and annual reports through December 31, 2025.
Based on the application, the Seller will be responsible for RAFs and annual
reports until closing. The Buyer should be responsible for filing annual
reports and paying RAFs for all future years.
Issue 2:
What is the appropriate Net Book Value for Placid
Lakes Utilities, Inc.'s water system for transfer purposes?
Recommendation:
The appropriate NBV of the Placid Lakes water system
should be $1,138,297, as of January 31, 2026. Within 90 days of the date of the
final order, SWS should notify the Commission in writing that it has adjusted
its books in accordance with the Commission's decision. These adjustments
should be reflected in SWS’ first annual report filed following the closing of
the transfer. (York)
Staff Analysis:
Rate base for the water
system was last established for the Utility as of December 30, 2019, by Order
No. PSC-2019-0551-PAA-WU. The NBV does not include normal
ratemaking adjustments for used and useful plant or working capital. The
Utility’s NBV has been updated to reflect balances as of January 31, 2026.
Utility Plant in Service (UPIS)
The
Utility’s general ledger reflected a water UPIS balance of $4,098,168, as of
January 31, 2026. Audit staff recalculated the plant balances, reviewed UPIS
additions and retirements, and identified several accounting entries that
resulted in the Utility's recorded plant balances differing from the balances
supported by the underlying records, and as such, recommends an adjustment to
increase UPIS by $18,758. With this adjustment, staff recommends a UPIS balance
of $4,116,927, as of January 31, 2026.
Land Balance
The land balance recorded by the
Utility is $4,355, as documented in the previous rate case. Audit staff
recommends no adjustment to this amount as there have been no additions nor
changes in the use of the land. As such, staff recommends a land balance of
$4,355.
Accumulated Depreciation
The
Utility’s general ledger reflected an accumulated depreciation balance of
$2,277,404, as of January 31, 2026, for the Utility’s water system. Audit staff
recalculated accumulated depreciation using the Commission-approved
depreciation rates contained in Rule 25-30.140, F.A.C, and compared those
calculations to the Utility's recorded balances. As a result of several
instances of the Utility using the wrong service life, incorrectly calculating
retirements, over depreciation, and the Utility improperly recording insurance
reimbursement, staff recommends that accumulated depreciation should be
decreased by $136,907. Therefore, staff recommends an accumulated depreciation
balance of $2,140,498 as of January 31, 2026.
Contributions in Aid of Construction (CIAC) and
Accumulated Amortization of CIAC
As of
January 31, 2026, the Utility’s general ledger reflected a water CIAC balance
of $2,418,667, and accumulated amortization of CIAC balance of $1,576,393.
Staff recalculated the Utility's CIAC balances as of January 31, 2026, and identified
several adjustments necessary to properly reflect customer and developer
contributions received for construction of utility facilities. Audit staff
determined that the CIAC balance should be increased by $336. As such, staff
recommends a CIAC balance of $2,419,003 as of January 31, 2026.
Staff also
recalculated accumulated amortization of CIAC and determined that accumulated
amortization should be increased by $123 to properly reflect amortization
associated with the revised CIAC balances. Therefore, staff recommends an
accumulated amortization of CIAC balance of $1,576,516.
Net Book Value
The
Utility’s general ledger reflected NBV of $982,844 for water. Based on the
adjustments above, staff recommends that the NBV for the system as of January 31,
2026, is $1,138,297.
Staff’s recommended NBV and National Association of Regulatory Utility
Commissioners Uniform System of Accounts balances for UPIS, accumulated
depreciation, CIAC, and accumulated amortization of CIAC are shown on Schedule
No. 1, as of January 31, 2026.
Fair Market Value
On
February 27, 2026, SWS filed a petition pursuant to Section 367.0811, F.S., and
Rule 25-30.0372, F.A.C., to establish the rate base value of the acquired
Placid Lakes water and wastewater systems using the FMV alternative procedure.
Under the Purchase and Sale Agreement dated December 18, 2025, the purchase
price for the utility assets is $5,750,000. SWS requested that this amount be
established as the alternative rate base value for the acquired systems. The Commission
approved SWS’ alternative rate base valuation by Order No.
PSC-2026-0366-FOF-WS. Docket No. 20260031-WS will remain open until
the applicable appeal period expires.
Conclusion
The appropriate NBV of the Placid Lakes water system
should be $1,138,297, as of January 31, 2026. Within 90 days of the date of the
final order, SWS should notify the Commission in writing that it has adjusted
its books in accordance with the Commission's decision. These adjustments
should be reflected in SWS’ first annual report filed following the closing of
the transfer.
Issue 3:
What are the appropriate revisions to miscellaneous
service charges for Placid Lakes Utilities, Inc.?
Recommendation:
The appropriate revisions to miscellaneous service
charges for Placid Lakes should be the removal of initial connection and normal
reconnection charges and update of the definition of the premises visit charge
to be consistent with Rule 25-30.460, F.A.C. SWS should be required to file a
proposed customer notice 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(1), F.A.C. Furthermore, the
approved charges should not be implemented until staff has approved the
proposed customer notice and the notice has been received by customers. SWS
should provide proof of the date notice was given, no less than 10 days after
the date of the notice. (Sibley)
Staff Analysis:
The Utility did not request to revise its existing
miscellaneous service charges. Section 367.091, F.S., authorizes the Commission
to establish, increase, or change a rate or charge other than monthly rates or
service availability charges. The Utility’s miscellaneous service charges
consist of initial connection and normal reconnection charges. Rule 25-30.460,
F.A.C., does not allow for initial connection and normal reconnection charges.
The definitions for initial connection charges and normal reconnection charges
were subsumed in the definition of the premises visit charge. Therefore, staff
recommends that the initial connection and normal reconnection charges be
removed and the definition for the premises visit charge be updated to comply
with Rule 25-30.460, F.A.C.
Based on the above, staff recommends that the appropriate
revisions to miscellaneous service charges for Placid Lakes should be the
removal of initial connection and normal reconnection charges and updating the
definition of the premises visit charge to be consistent with Rule 25-30.460,
F.A.C. SWS should be required to file a proposed customer notice 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(1), F.A.C. Furthermore, the approved charges should not be
implemented until staff has approved the proposed customer notice and the
notice has been received by customers. SWS should provide proof of the date
notice was given, no less than 10 days after the date of the notice.
Issue 4:
What is the appropriate action to take regarding
Placid Lakes Utilities, Inc. assessing the incorrect customer connection
(tap-in) charge?
Recommendation:
Staff recommends that no action be taken. SWS should
assess the appropriate charge of $460.15 prospectively. (Sibley)
Staff Analysis:
As indicated in the audit
report, staff auditors determined that Placid Lakes has billed an incorrect customer connection
(tap-in) charge since May 2020. The Commission-approved tap-in charge is
$460.15; however, the Utility charged $460.17 per connection. Staff reviewed
the past five years of Utility annual reports beginning in 2020 and determined
that 293 customers were assessed the incorrect tap-in charge, which resulted in
a total overcharge of $5.86 ($134,829.81-$134,823.95). The overcharge is de
minimis, and the administrative task of any refund would be cost prohibitive.
Based on the above, staff recommends that no action be
taken. SWS should assess the appropriate charge of $460.15 prospectively.
Issue 5:
Should this docket be closed?
Recommendation:
Yes. If no protest to the proposed agency action is
filed by a substantially affected person within 21 days of the date of the
issuance of the order, a Consummating Order should be issued and the docket
should be closed administratively upon Commission staff’s verification that the
revised tariff sheets have been filed, that proof has been provided that
appropriate noticing has been done pursuant to Rule 25-30.475, F.A.C., the
Buyer has notified the Commission in writing that it has adjusted its books in
accordance with the Commission’s decision, the Buyer has submitted the executed
and recorded warranty deed, that the Buyer has submitted a copy of its
application for permit transfer to the DEP, and that the Buyer has submitted a
signed and executed copy of its contract for sale within 90 days of the
Commission’s order approving the transfer. (Brownless)
Staff Analysis:
If no protest to the proposed agency action is filed
by a substantially affected person within 21 days of the date of the issuance
of the order, a Consummating Order should be issued and the docket should be
closed administratively upon Commission staff’s verification that the revised
tariff sheets have been filed, that proof has been provided that appropriate
noticing has been done pursuant to Rule 25-30.475, F.A.C, the Buyer has
notified the Commission in writing that it has adjusted its books in accordance
with the Commission’s decision, the Buyer has submitted the executed and
recorded warranty deed, that the Buyer has submitted a copy of its application
for permit transfer to the DEP, and that the Buyer has submitted a signed and
executed copy of its contract for sale within 90 days of the Commission’s order
approving the transfer.
Sunshine Water
Services Company
Highlands
County
Placid
Lakes Utilities, Inc. Water Service Area
THE
COMPOSITE WATER DESCRIPTION INCLUDES ORDERS NOS. 12594, 17372, 22164,
PSC-97-1148-FOF-WU AND THIS AREA. ORDER NO. 12594 GRANTED PLACID LAKES THEIR
ORIGINAL TERRITORY. ORDER NO. 17372 REMOVED A PORTION OF THIS TERRITORY. ORDER
NO. 22164 ADDED ADDITIONAL TERRITORY. IT
SHOULD BE NOTED THAT ORDER NO. 22164 GRANTS AREA IN SECTION 22, TOWNSHIP 37
SOUTH, RANGE 29 EAST AND IN SECTION 19 OF PLACID LAKES, A PLANNED COMMUNITY. ALL
OF THIS AREA IS IN SECTIONS 22 AND 23, TOWNSHIP 37 SOUTH, RANGE 29 EAST. ORDER
NO. PSC-97-1148-FOF-WU GRANTED THE AREA
KNOWN AS CATFISH CREEK.
TOWNSHIP 37
SOUTH, RANGE 29 EAST
SECTION 9
THE
EAST 1/2 OF SECTION 9
SECTION 10
ALL
OF SAID SECTION 10 LYING SOUTH AND WEST OF LAKE JUNE IN WINTER (ALSO, KNOWN AS
LAKE STEARNS)
SECTION 11
ALL
OF SAID SECTION 11 LYING SOUTH AND WEST OF CATFISH CREEK
SECTION 14
ALL
OF SAID SECTION 14 LYING SOUTH AND WEST OF CATFISH CREEK
SECTION 15
THE
EAST 1/2 OF SECTION 15
SECTIONS 22, AND
23
ALL
OF SAID SECTIONS 22 AND 23
CATFISH
CREEK ROAD
TOWNSHIP 37
SOUTH, RANGE 29 EAST IN SECTIONS 2 AND 11
COMMENCE
AT THE SOUTHEAST CORNER OF SECTION 2, TOWNSHIP 37 SOUTH, RANGE 29 EAST; THENCE
RUN NORTH 00°13'00"
WEST ALONG THE EAST SECTION LINE OF SAID SECTION 2 FOR A DISTANCE OF 780.16
FEET TO THE POINT OF BEGINNING; THENCE CONTINUE NORTH 00°13'00" WEST ALONG THE
EAST SECTION LINE OF SAID SECTION 2 FOR A DISTANCE OF 962.36 FEET; THENCE RUN
SOUTH 83°
36' 00" WEST FOR A DISTANCE OF 455.19 FEET; THENCE RUN SOUTH 01°38'25"
EAST FOR A DISTANCE OF 739.01 FEET; THENCE RUN SOUTH 50°42'02" WEST FOR A
DISTANCE OF 1,599.11 FEET; THENCE RUN SOUTH 59°55'57" WEST FOR A
DISTANCE OF 1,888.03 FEET; THENCE RUN SOUTH 82°07'25" WEST FOR A
DISTANCE OF 1,070.81 FEET, THENCE RUN SOUTH 38°16'10" EAST FOR A
DISTANCE OF 310.00 FEET; THENCE RUN ALONG THE ARC OF A CURVE TO THE LEFT HAVING
THE FOLLOWING ELEMENTS: (RADIUS 500.00 FEET, CENTRAL ANGLE = 08°52'00".
ARC LENGTH 77.38 FEET, CHORD LENGTH = 77.30 FEET, CHORD BEARING = SOUTH 42°41'44"
EAST), THENCE RUN SOUTH 47°08'10" EAST FOR A DISTANCE OF 888.54 FEET; THENCE
RUN NORTH 42°51'50"
EAST FOR A DISTANCE OF 373.44 FEET; THENCE RUN NORTH 65°22'58" EAST FOR A
DISTANCE OF 470.85 FEET; THENCE RUN NORTH 80°57'52" EAST FOR A
DISTANCE OF 605.70 FEET; THENCE RUN NORTH 80°58'39" EAST FOR A
DISTANCE OF 815.00 FEET; THENCE RUN SOUTH 89°08'52" EAST FOR A
DISTANCE OF 130.75 FEET; THENCE RUN SOUTH 88°47'43" EAST FOR A
DISTANCE OF 386.18 FEET; THENCE RUN ALONG THE ARC OF A NON-TANGENTIAL CURVE TO
THE LEFT HAVING THE FOLLOWING ELEMENTS: (RADIUS 1,000.00 FEET, CENTRAL ANGLE =
79°00'52".
ARC LENGTH 1,379.06 FEET, CHORD LENGTH = 1,272.35 FEET, CHORD BEARING = NORTH
23°59'16"
WEST); THENCE RUN NORTH 54°25'00" EAST FOR A DISTANCE OF 1,704.89 FEET TO THE
POINT OF BEGINNING, CONTAINING 4,135,082 SQUARE FEET OR 94.9284 ACRES MORE OR
LESS.
TOWNSHIP 37 SOUTH, RANGE 29
EAST
SECTION 13
ALL OF SAID SECTION 13 LYING
SOUTH AND WEST OF CATFISH CREEK.
SECTION 24
ALL OF SAID SECTION 24 LYING
SOUTH AND WEST OF CATFISH CREEK AND WEST OF LAKE PLACID, EXCLUDING THE AREA
SOUTH OF A LINE DESCRIBED THUSLY:
COMMENCE AT THE SOUTHWEST CORNER
OF SECTION 24, TOWNSHIP 37 SOUTH, RANGE 29 EAST; THENCE RUN NORTHERLY ALONG THE
WEST SECTION LINE OF SAID SECTION 24 FOR A DISTANCE OF APPROXIMATELY 660 FEET
TO THE POINT OF THE BEGINNING; THENCE RUN EASTERLY UNTIL REACHING LAKE PLACID.
