Discussion
of Issues
Issue 1:
Should the transfer of the wastewater assets of
Placid Lakes Utilities, Inc., and the amendment of Wastewater Certificate No.
347-S in Highlands County to Sunshine Water Services Company be approved?
Recommendation:
Yes. The transfer of the wastewater system and
amendment of Certificate No. 347-S 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 as shown on Schedule No. 4 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 application indicates
that the Placid Lakes wastewater system has operated as an exempt utility and,
therefore, has not been subject to Commission jurisdiction or Regulatory
Assessment Fees (RAFs). Upon Commission approval and completion of the
transaction, SWS will become responsible for all future regulatory obligations
associated with the certificated wastewater system, including filing annual
reports and paying RAFs. (York, Lewis, Brownless)
Staff Analysis:
Legal Standard
The transfer of the assets from an exempt utility to a
regulated utility are governed by Sections 367.071 and 367.045(2), F.S. and
Rules 25-30.036 and 25-30.037(3), F.A.C. Section 367.071, F.S., 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 exempt utility. To demonstrate that the transferee can do so, Rule
25-30.037(3), F.A.C., 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 formal objections 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 wastewater
treatment system consists of a small gravity collection system with 15 manholes,
2 pump stations, and a packaged-type concrete wastewater treatment facility
with a 0.015 million gallons per day permitted capacity. Wastewater is treated
using extended aeration with a chlorine disinfection system that processes influent
through aeration, clarification, chlorine disinfection, and a rapid infiltration
basin for effluent disposal. The wastewater system serves a condominium,
clubhouse, restaurant, and commercial units. SWS provided a copy of Placid Lakes’
current permit from the Department of Environmental Protection (DEP) pursuant
to Rule 25-30.037(2)(r)1., F.A.C.
On December 18, 2023, the DEP conducted an inspection of
the wastewater facilities and noted potential deficiencies associated with
recordkeeping. For example, the facility did not keep a separate log showing
meter calibrations, and the percent capacity on the Discharge Monitoring
Reports were calculated improperly. The Utility corrected its record keeping and
no further action was required. The facility was deemed in compliance on April
23, 2024.
Purchase Agreement and Financing
Per Rule
25-30.037(3), F.A.C., SWS is acquiring all assets and operations associated
with the Placid Lakes exempt non-regulated wastewater system. Consistent with
the requirements of Rule 25-30.037(3)(c) and 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 all assets and operations associated with the Placid Lakes regulated
water system and the exempt non-regulated wastewater system for a total
purchase price of $5,750,000 with $5,645,998 allocated towards water and
$103,999 allocated towards wastewater. The transfer in this docket is
specifically for the non-regulated wastewater 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 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. 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
alternative procedure 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 served 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 water system annual reports and the financial
statements of its parent company, Nexus Regulated Utilities, LLC (Nexus). Since
1976, SWS has served thousands of customers across Florida, and its financial
stability is backed by Nexus. 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.
Continuation of Existing Rates
The Placid
Lakes wastewater system is an exempt utility located in Highlands County. The
current wastewater rates shown on Schedule No. 4 were effective July 1, 2022. 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 this Commission. Therefore,
SWS will maintain the existing rates in effect for the former Placid Lakes
customers and the wastewater tariff sheets will become part of SWS’ tariff.
Based on the above, staff recommends that the appropriate service rates for the
Placid Lakes wastewater system are its existing rates, as shown on Schedule No.
4. These rates should remain in effect until a change is authorized by the
Commission in a subsequent proceeding
Regulatory Assessment Fees and Annual Reports
The Placid
Lakes wastewater system has operated as an exempt wastewater utility and,
therefore, has not been subject to Commission jurisdiction. As a result, the
Utility has not been required to file annual reports or pay RAFs. The
application states that no pre-closing RAFs or Commission fines are applicable
to the exempt wastewater system. Upon completion of the transfer, SWS will
become responsible for filing annual reports and paying RAFs associated with
the certificated wastewater system. Staff believes these representations satisfy
the Commission's transfer requirements.
Conclusion
The transfer of the exempt wastewater assets and the
amendment of Certificate No. 347-S 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 transfer order,
the Buyer should file a status update in the docket file. The Utility’s
existing rates as shown on Schedule No. 4 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
application indicates that the Placid Lakes wastewater system has operated as
an exempt utility and, therefore, has not been subject to Commission
jurisdiction or RAFs. Upon Commission approval and completion of the
transaction, SWS will become responsible for all future regulatory obligations
associated with the certificated wastewater system, including filing annual
reports and paying RAFs.
Issue 2:
What is the appropriate Net Book Value of the
wastewater system for transfer purposes?
Recommendation:
The appropriate NBV of the Placid Lakes wastewater
system should be $39,199, 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:
Pursuant to Section 367.071, F.S., and Rule
25-30.037, F.A.C., staff reviewed the information provided by the Utility and
the results of the Commission audit to determine the appropriate NBV of the
wastewater system for transfer purposes as of January 31, 2026.
Unlike Commission-regulated utilities, the Placid Lakes
wastewater system operated as an exempt utility and did not maintain its
accounting records using the National Association of Regulatory Utility
Commissioners (NARUC) Uniform System of Accounts (USOA). The audit determined
that the Utility maintained transaction detail reports and depreciation
schedules rather than a general ledger. Accordingly, audit staff scheduled the
Utility's plant balances into the appropriate NARUC accounts and recalculated
accumulated depreciation using the Commission-approved depreciation rates
contained in Rule 25-30.140, F.A.C.
Utility Plant in Service
The audit determined that the Utility did not maintain
Utility Plant in Service (UPIS) using NARUC account classifications. Instead,
the Utility relied upon transaction detail reports and depreciation schedules
to support its recorded balances. Audit staff reviewed the supporting
documentation, assigned the assets to the appropriate NARUC accounts, and
determined that the recorded UPIS balance appropriately reflected the assets
providing wastewater service. Staff discovered that one addition and related
retirement of a plant asset was inadvertently attributed to NARUC Account 371 –
Pumping Equipment but should have been included in Account 360 – Collecting
Sewers – Force. This difference is reflected in Schedule No. 3, Schedule of
Wastewater Account Balances. This does not affect the total UPIS balance.
As a result of the audit, no adjustment to the total UPIS
was required. Therefore, staff recommends a UPIS balance of $75,751, as of
January 31, 2026. Although no financial adjustment is necessary, staff agrees
with the audit staff recommendation that the Buyer should maintain its
accounting records using the NARUC USOA following the transfer.
Land Balance
The
Utility recorded a land balance of $8,138. Audit staff reviewed the warranty
deeds associated with the property and confirmed that ownership had not changed
since 2017. Although a corrective deed was recorded during 2022 to revise legal
survey language, the audit determined that no change in ownership had occurred,
and no adjustment was required. Therefore, staff recommends a land balance of $8,138.
Accumulated Depreciation
The Utility recorded accumulated depreciation of $48,774
as of January 31, 2026. Audit staff independently recalculated accumulated
depreciation using the Commission-approved Class B depreciation rates
prescribed by Rule 25-30.140, F.A.C., and identified adjustments due to
incorrect accounting for early retirements and incorrect depreciation rates,
resulting in accumulated depreciation of $44,692, which was a decrease of
$4,082.
Due to the
differences in the individual plant account balances discussed in the UPIS section
above, staff recalculated accumulated depreciation, resulting in an additional
decrease of $2 and a revised accumulated depreciation balance of $44,690,
representing a total decrease of $4,084. Accordingly, staff recommends an
accumulated depreciation balance of $44,690 as of January 31, 2026.
Contribution in Aid of Construction (CIAC)
The
wastewater system was constructed entirely with Utility funds and no customer
or developer CIAC was received. Accordingly, no CIAC or accumulated
amortization balances exist, and staff recommends CIAC and accumulated
amortization of CIAC balances of $0.
Net Book Value
The
Utility’s general ledger reflected NBV of $35,115 for wastewater. Staff’s
recommended NBV and NARUC USOA balances for UPIS, accumulated depreciation,
CIAC, and accumulated amortization of CIAC are shown on Schedule No. 1, as of
January 31, 2026. No audit adjustments were made to UPIS, Land, CIAC, or
Accumulated Amortization of CIAC. Based on the audit adjustments to accumulated
depreciation discussed above, staff recommends an adjusted NBV of $39,199 for
transfer purposes as of January 31, 2026.
Fair Market Value Rate Base 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 the Placid
Lakes water and wastewater systems using the alternative procedure. Based
on 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. By
Order No. PSC-2026-0366-FOF-WS, the Commission approved SWS’ petition. Docket
No. 20260031-WS will remain open until the applicable appeal period expires.
Conclusion
The appropriate NBV of the Placid Lakes wastewater system
for transfer purposes is $39,199, 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 charges and customer
deposits for the Placid Lakes wastewater system?
Recommendation:
The appropriate charges for the Placid Lakes
wastewater system are as shown on Schedule No. 4. The Utility should be
required to file a proposed customer notice to reflect the Commission-approved
charges. The approved charges should be effective for service rendered or
connections made on or after the stamped approval date on the tariff sheets,
provided customers have received notice pursuant to Rule 25-30.475(2), F.A.C. In
addition, the approved charges should not be implemented until staff has
approved the proposed customer notice and the notice has been received by
customers. The Utility should provide proof of the date the notice was given within
10 days of the date of the notice. The Utility should be required to charge the
approved miscellaneous service charges until authorized to change them by the
Commission in a subsequent proceeding. (Sibley)
Staff Analysis:
In its application, SWS did
not reflect any charges for the Placid Lakes wastewater system. In response to
staff’s inquiry in regard to whether the wastewater system had any existing
charges, staff learned that Placid Lakes has no existing charges. SWS responded
that, since the Placid Lakes wastewater system is being absorbed into the
existing tariff, SWS’ existing miscellaneous service charges, service availability
charges, and terms and conditions should apply on a going forward basis. Staff
agrees that is appropriate for the miscellaneous service charges to be
applicable.
For the service availability
charges, currently, SWS’ existing main extension charge is at actual cost for
all systems. Based on staff’s audit, it appears that the infrastructure for the
wastewater system was paid fully by the current owners and was not contributed
by developers. Therefore, staff believes the existing main extension charge is
appropriate.
Additionally, SWS has a
connection charge at actual cost for all systems. 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. Thus, staff believes the existing customer connection charge is
appropriate. However, for the plant capacity charge, SWS has system specific
charges. Therefore, since Placid Lakes does not have a current plant capacity
charge and SWS’ plant capacity charges are system specific, a plant capacity
charge is not appropriate at this time.
Customer Deposits
In its application, SWS did not
provide tariffs reflecting customer deposits for the Placid Lakes wastewater
system. The Placid Lakes wastewater customers are all general service. Historically,
the Commission has set initial customer deposits equal to two times the average
estimated bill.[10] SWS’ wastewater existing customer deposits
for general service and all other meter sizes over 5/8 X 3/4 inch is two times
the estimated average bill. Therefore, staff believes that it is appropriate
for the Placid Lakes wastewater customer deposits to be applicable on a going
forward basis.
Conclusion
Based on the above, staff recommends that the appropriate charges
for the Placid Lakes wastewater system are as shown on Schedule No. 4. The
Utility should be required to file a proposed customer notice to reflect the
Commission-approved charges. The approved charges should be effective for
service rendered or connections made on or after the stamped approval date on
the tariff sheets, provided customers have received notice pursuant to Rule
25-30.475(2), F.A.C. In addition, the approved charges should not be
implemented until staff has approved the proposed customer notice and the
notice has been received by customers. The Utility should provide proof of the
date the notice was given within 10 days of the date of the notice. The Utility
should be required to charge the approved miscellaneous service charges until
authorized to change them by the Commission in a subsequent proceeding.
Issue 4:
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 proposed agency action portion 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 proposed agency action portion 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 amendment.
