STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
FLORIDA CITIES WATER COMPANY, )
)
Petitioner, )
)
vs. ) DOAH CASE NO. 80-2193
) FPSC DOCKET NO. 800323-W FLORIDA PUBLIC SERVICE COMMISSION )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on January 27, 1981, in Fort Myers, Florida.
APPEARANCES
For Petitioner: B. Kenneth Gatlin, Esquire
Post Office Box 669 Tallahassee, Florida 32302
For Respondent: Marta M. Crowley, Esquire
Public Service Commission
101 East Gaines Street Tallahassee, Florida 32301
James O. Collier, Jr. Class B Practitioner
Water and Sewer Department Public Service Commission
101 East Gaines Street Tallahassee, Florida 32301
ISSUE
Whether the application of Petitioner Florida Cities Water Company, to increase the ratios it charges customers for water service in Lee County should be granted.
CONCLUSIONS and RECOMMENDATION
Conclusions:
Factors pertinent to ratemaking and enumerated in Section 367.081, Florida Statutes, have been considered in this pro- ceeding. The Petitioner utility has not justified use of "year-end" rate base; those adjustments which it has supported
with a preponderance of evidence have been accepted, those lacking sufficient eviden- tiary support have been rejected. Peti- tioner's application for rate increase should be granted to the extent provided in this Recommended Order; the resulting rates are just, reasonable, compensatory, and not unjustly discriminatory.
Recommendation:
That the Commission recalculate adjusted rate base, operating income, and the result- ing additional and total gross revenues in a manner consistent with this Recommended Order, and that Petitioner be authorized to
file new rates structured on the Base facility charge concept designed to generate the addi- tional and total annual gross revenues so specified.
BACKGROUND
By application filed on July 1, 1980, Petitioner, Florida Cities Water Company ("UTILITY"), sought approval to increase its water rates in Lee County sufficiently to produce gross revenues of $3,935,964, representing a return of
percent on its rate base.
By Order No. 9510, the Respondent, Florida Public Service Commission ("COMMISSION") , suspended the rate schedules filed with the application, and refused to authorize increased rates on an interim basis. The test period approved for use in this proceeding consists of the twelve-month period ending March 31, 1980.
On November 18, 1980, the COMMISSION forwarded this case to the Division of Administrative Hearings for the conducting of a Section 120.57(1) hearing. The parties' request that final hearing be held on January 27, 1981, was granted.
At hearing, the parties presented evidence on the following issues, among others, pertaining to the UTILITY's requested rate increase:
Whether Allowance for funds Used During Construction (AFUDC) should be included
in rate base;
Whether "average" or "year-end" rate base should be utilized; and
The appropriate rate structure and rate design, including the applicability of
the base facility charge structure.
Customers who testified were critical of the magnitude of the proposed rate increase, the equity of the UTILITY's current rate structure, and the quality of the water furnished.
The UTILITY called as its witnesses Antone A. Reeves and Keith R. Cardey, and offered Petitioner's Exhibit 1/ Nos. 1 through 12, inclusive, each of which was received into evidence. The COMMISSION called as its witnesses James
Collier, Jr., Marty Deterding, and Richard A. Byrd, and offered Respondent's Exhibit1 Nos. 1 through 4, inclusive, into evidence. In addition, the following customers and interested members of the public presented testimony in opposition to the requested rate increase:
Dr. Henry Adenstett Mark Gully Alexander L. Frazier Chauncey A. Borine
William E. duBrul R. Hart McIntyre, III Kevin Dillon Harold Thompson Barbara Miller
The UTILITY was permitted to file an additional exhibit after hearing, identified as Petitioner's Late Filed Exhibit 12. Both parties filed proposed findings of fact by February 16, 1981.
FINDINGS OF FACT
Based upon the evidence presented at hearing, the following facts are determined:
I.
The Application
By its application, the UTILITY seeks authority to increase its rates sufficiently to generate additional annual gross revenues of $1,483,300. It attributes the need for increased revenues to extensive additions recently made to its water plant pursuant to COMMISSION Order No. 6209 entered in Docket 74176-W. The UTILITY claims that the increased investment and higher operating expenses associated with such plant additions effectively reduce its rate of return to 4.2 percent; it asserts that the requested additional revenues are necessary to allow it to earn a fair and reasonable rate of return of 12 percent. (Testimony of Reeves, Cardey; P-2, P-8.)
II.
Rate Base
There are three issues involving the proper determination of rate base in this case: (1) whether "year-end", rather than "average" rate base should be used, (2) whether an Allowance for Funds Used During Construction (AFUDC) for post-test period additions allowed in rate base is proper, and (3) whether connection fees collected from 1969 to 1973 should be recorded as Contributions in Aid of Construction (CIAC) "Year-end" v. "Average Rate Base
In determining rate base, absent extraordinary or emergency conditions or situations, "average" rather than "year- end" investment during the test period should be used. City of Miami v. Florida Public Service Commission, 208 So.2d (Fla. 1968). The Florida Supreme Court has suggested that average investment "should not be departed from except in the most unusual and extraordinary situations where not to do so would result in rates too low as to be confiscatory to the utility." Id. at 258. Year-end investment may be used only when a utility is experiencing extraordinary growth. Citizens v. Hawkins, 356 So.2d 254 (Fla. 1978).
The UTILITY has not established that it meets the standard for utilization of "year-end" rate base, i.e. , that it has experienced unusual and extraordinary growth. Its customer growth rate averaged 8.2 percent for the last seven years, with a 10.56 percent gain during the test year. This growth rate has been experienced by many other Florida utilities of similar size and is neither extraordinary nor unusual. Neither is the UTILITY's growth extraordinary when measured in terms of water sold. Between 1975 and 1979, its growth in water sales averaged approximately 11 per- cent, in 1980--6 percent. In terms of plant growth, the UTILITY averaged 19.37 percent over the last seven years; the growth rate for 1979 was 12.03 percent. However, in 3980, its investment in gross plant grew at a 33 percent rate. The UTILITY's growth rate was repeatedly described as "substantial" by its consultant, K. R. Cardey, but substantial growth does not equate to extraordinary or unusual growth as defined by the Florida Supreme Court. Furthermore, the UTILITY did not establish that failure to use "year-end" rate base would reduce its rates to a confiscatory level. See, City of Miami, supra. It follows that "average" investment during the test period is the proper method to utilize in determining rates in this case. (Testimony of Cardey, Deterding.)
Appropriateness of Allowance for Funds Used During Construction (AFUDC)
After the test period, the UTILITY completed five major additions to its plant, all of which were required by previous order of the COMMISSION. (Order No. 6209, Docket 74176-W.) The COMMISSION agrees that, since it required these post-test period additions, they should be included in rate base at full weight. Since these additions, which total $5,966,569, were under construction during the test period, the COMMISSION contends they should be recorded as Construction Work in Progress (CWIP). The UTILITY agrees that these additions should be included in rate base but seeks to include, as well , an AFUDC allowance in the amount of $326,422.2 AFUDC represents interest that was capitalized on each of these additions while they were under construction during and after the test period. Since these additions are already included in rate base at full weight, the inclusion of AFUDC in rate base would allow the UTILITY to duplicate earnings on its investment. Such a result would be unreasonable, improper, and should not be allowed. (Testimony of Reeves, Deterding; P-1, P-3, P-10, R-2.)
Connection Fees: CIAC or Revenue
From 1969 through 1973, the UTILITY operated under the regulatory jurisdiction of Lee County, not the COMMISSION. During those years, it was the UTILITY's practice and policy to record connection fees, which totaled $226,582, as revenue, not CIAC. Since connection fees are ordinarily considered CIAC, the COMMISSION proposes to adjust CIAC by $226,582. (Testimony of Deterding, Cardey; P-8, R-2.)
Contributions in Aid of Construction are defined as monies used to offset the acquisition, improvement, or construction cost of utility property used to provide service to the public. Section 367.081(2), Florida Statutes (1980). The UTILITY's consultant testified that connection fees collected and credited to revenue by the UTILITY during 1971, 1972, and 1973, totaling
$176,773, were "not used to offset the improvements or construction costs of the [UTILITY's] property. (P-8, p. 6.) The COMMISSION, on cross-examination, did not question the accuracy or impeach the credibility of this statement; neither did it present any evidence to controvert or rebut the UTILITY's assertion as to
how the connection fees were used. The only evidence on the question presented by the COMMISSION consisted of its accountant's conclusion:
"During the years from 1969 to 1973, Florida Cities Water Company recorded many tap-in fees collected as revenue. These should properly be recorded as contributions in
aid to construction. This adjustment [of
$226,582] adds these contributions."
p. 5.)(Testimony of Deterding, Cardey; P-8, R-2.)
In its Proposed Recommended Order, the COMMISSION asserts that the UTILITY has the burden of showing: (1) the correctness of collecting funds normally authorized for service availability and using them for another purpose, and (2) the exact manner in which the funds were used. (Proposed Recommended Order, p. 6.) However, there was no evidence in the record to show that the UTILITY's treatment of connection fees during 1971 through 1973, was incorrect or violative of Lee County's regulatory standards. Neither is there any evidence to show that the connection fees collected in those years were used as contributions in aid of construction, i.e., to offset acquisition, improvement, or construction costs. The only evidence presented as to how those fees were actually used was that of the UTILITY's consultant; he testified that those funds were used only to defray operation and other expenses associated with the new customers. This evidence was sufficient to shift to the COMMISSION the burden of presenting evidence on the question or discrediting the evidence presented by the UTILITY. The COMMISSION did neither. It is found, therefore, that the $176,773, representing connection fees collected between 1971 and 1973, do not constitute CIAC, the UTILITY's testimony in this regard being persuasive. (Testimony of Cardey, Deterding; P-8, R-2.)
However, as to the years 1969 through 1970, the UTILITY presented no evidence that the $48,809 in connection fees collected during that time were used only for operating and maintenance expenses and not to offset acquisition, improvement, or construction costs. In the absence of such evidence, the COMMISSION testimony that connection fees should ordinarily be treated as CIAC is persuasive. The connection fees collected during 1969 and 1970, calculated to be $49,809, are therefore properly included as CIAC. (Testimony of Deterding, Cardey; P-8, R-2.)
In light of the above findings and the absence of disagreement concerning other adjustments proposed by the COMMISSION, the elements of the UTILITY's adjusted rate base are:
RATE BASE
Test Year Ended March 31, 1980
Utility Plat in Service | $ 11,178,094 | |
Construction Work in Progress | 5,966,569 | 3/ |
Accumulated Appreciation | (626, 160) | |
CIAC,(Net of Amortization) | (3,041,747) | 4/ |
Advances for Construction | (111,567) | |
AFUDC | (326,422) | 5/ |
Working Capital Allowance | 146,911 | |
Materials and Supplies | 117,450 | |
Income Tax Lay | [To be calculated |
based on additional gross revenues rec- opmended herein.]
RATE BASE [To be determined upon recalculation.]
In order to determine the adjusted rate base which should be utilized, Income Tax Lag requires recalculation in a manner consistent with the above findings and Section III below. (Testimony of Cardey, Deterding; P-1, P-3, P-8, P-10, R- 2.)
III.
Operating Income Operating Expense: Water Royalty Charge
In calculating operating income for the test year, the UTILITY included $18,577 as an operating expense attributed to a $.03 per gallon royalty charge it paid an affiliate for water pumped from the Green Meadows well field. The UTILITY operates this water field on a 21-acre site and has easements to locate 26 wells. It pays no other cost for the water. The COMMISSION disputes the reasonableness of this charge because it is not an arms-length transaction, and the UTILITY has not explained the basis of the $.03 charge, the cost to the affiliate of the land involved and its subsequent sales price (the affiliate reserving the water use rights) , and the identity of the present owner. The COMMISSION's accountant testified that reasonableness of the charge could be determined by analyzing the costs of the rental of the land based on the original cost of the property to the affiliate. In response, the UTILITY established that the $18,577 expense is less than it would cost tide UTILITY, in terms of annual revenue requirements, to purchase the land involved. But the UTILITY failed to address the cost of renting the property, based on the affiliate's acquisition costs, or furnish information necessary to make such a determination. The COMMISSION is entitled to clearly scrutinize the expenses claimed by a utility and require that their reasonableness be shown. Tide UTILITY did not adequately explain or support the reasonableness of its claimed royalty expense, and it should therefore be disallowed. (Testimony of Reeves, Deterding; P-6, R-2.) Depreciation and Taxes: Adjustments Attributable to
Post-Test Period Plant Additions
The parties disagree on whether adjustments should be made to test year operating expenses to reflect increases in depreciation and taxes due to the five post-test year plant additions completed subsequent to the test period.
The evidence is uncontroverted that these plant additions, including the Green Meadows water treatment plant and related facilities, were required by prior COMMISSION order and that they were necessary to provide service to existing customers of the UTILITY. The parties have also agreed that the full cost of these additions should be included in rate base, at full weight. The operating expenses of the UTILITY during the test year should be adjusted as was rate base, for known and no net changes in order to reflect conditions which will prevail when the rates become effective. The UTILITY's 2.1 percent composite depreciation rate should thus be applied against the new plant additions, and tide resulting depreciation expense included in the cost of providing service. Similarly, taxes (other than income) on the $5,960,569 worth of plant additions are known and eminent, are a cost of providing service, and should be included as an adjustment to test year taxes. The COMMISSION presented no policy or factual justification or explanation for its opposition to these adjustments to test year operating expenses. It does not contend that these expenses are other than known and eminent, attributable to the government-ordered plant additions, and will be part of the cost of providing service during the period the new rates will be in effect. The UTILITY's evidence in support of these adjustments is therefore persuasive. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R-2.)
Similarly, the UTILITY contended that test year income tax should be adjusted to reflect changes in revenue, operating expenses, depreciation, taxes, and interest expenses attributed to operation of the new plant addition. The COMMISSION offered no reason or explanation why such an income tax adjustment should not be made; changes in income tax due to the operation of the plant additions are known and eminent, and should be allowed as adjustments to test year expenses in order to adequately represent the UTILITY's future costs of service. However, due to the findings herein relating to use of "average rate base, the AFUDC allowance, treatment of connection fees previously collected, the water royalty charge, depreciation, and taxes, the income tax adjustment proposed by the UTILITY requires recalculation. (Testimony of Cardey, Deterding; P-1, P-0, P-10, R-2.)
In light of the above findings, and the UTILITY's lack of opposition to other adjustments proposed by the COMMISSION, the known elements of adjusted operating income are: operating revenues of $2,419,437 and operating expense (operation) of $1,175,291. In order to determine adjusted operating income which should be used in this case, depreciation, taxes other than income, and income taxes require recalculation consistent with the findings contained in Sections II and III, infra. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R- 2.)
IV.
Capital Structure, Cost of Capital, and Rate of Return
The parties agree that UTILITY's capital structure and cost of capital are as follows:
CAPITALIZATION COMPOSITE WEIGHT
Rate 15 pct. 16 pct.
Long-Term Debt 49.33 pct. 10.68 pct. 5.27 pct. 5.27 pct.
Equity Capital 41.25 15-18 6.19 6.60
Subtotal 90.58 pct. 11.46 pct. 11.87
Deferred Federal
Income Taxes 4.74 | pct. | -0- | -0- | -0- | |
Customer Deposits .90 | 8.00 | .07 | .07 | ||
subtotal 96.22 Investment Tax Credit 3.79 | pct. | Average | 11.53 .45 | pct. | 11.94 pct. .45 |
TOTAL 100.00 | pct. | 11.98 | pct. | 12.39 pct. |
They are also in agreement that a 12 percent return on the UTILITY's rate base, including a 15-16 percent return on equity, is a fair and reasonable rate of return. (COMMISSION's Proposed Recommended Order, p. 7; P-8, P-5.)
V.
Additional Required Revenues
In order to determine the additional gross revenues which the UTILITY should file rates designed to generate, the authorized operating income should be computed by multiplying 12 percent times the adjusted rate base computed pursuant to Paragraph 10 above. The UTILITY should then be authorized to earn additional gross revenues equivalent to thee difference between the authorized operating income and the adjusted test year operating income computed pursuant to Paragraph 14 above.
VI.
Rate Structure and Rates
The UTILITY proposes, with the COMMISSION's concurrence, that its new rates be structured in accordance with the Base Facility Charge Rate Design (BFC) and that the 25 percent surcharge currently imposed on general service customers be eliminated. The new BFC rate structure design contains a customer charge and a gallonage charge, both of which are directly related to the cost of providing the service. The customer charge assures that all customers pay their pro rata share of certain fixed and operating costs of the UTILITY which are not related to the amount of water used by the customer. The gallonage charge is based on the actual amounts of water used. With implementation of the base facility charge system, the UTILITY should lower its current $20 charge for reconnections during working hours to $10; similarly, its current $25 charge for reconnection after working hours should be reduced to $15. These lower charges are sufficient to cover the costs associated with the service rendered. The UTILITY also proposes various increases in its service availability, or connection charges. These increases, based on increased construction costs, will be used to finance additional facilities and stabilize rates to existing customers. The BFC rate design system proposed by the UTILITY is fair, reasonable, and nondiscriminatory. In light of the foregoing, it is unnecessary to consider the "alternative" rate structure which was presented to the COMMISSION staff on the day of hearing. With such time constraints, meaningful review of the "alternative" rate structure proposal was not possible.
(Testimony of Byrd, Collier; R-1, R-3.)
VII.
Adequacy of Service
Customer testimony criticized the 25 percent surcharge currently Imposed on general service customers, and the magnitude of the requested rate
increase. Several customers complained of the quality of the water supplied. Under the proposed rate structure, tide surcharge on general service customers will be eliminated. While several customers complained of sediment in their drinking water, testimony established that the new Green Meadows softening plant should help alleviate that problem. The water supplied by the UTILITY meets all regulatory and health standards of the Health Department and the Florida Department of Environmental Regulation. The UTILITY is currently under no citation for violation of any regulatory standards. It is found that the quality of the water service offered by the UTILITY is adequate. (Testimony of Collier, Reeves, Customers; P-7.)
VIII.
Franchise Fees
The UTILITY has collected $395,000 in "franchise fees" for Lee County, but has not paid them to the county due to questions surrounding the legality of the franchise fee. Neither have the funds been placed in a special escrow account pending resolution of this controversy. The UTILITY should ensure that such franchise fees are deposited in a special interest-bearing escrow account, and take steps to ensure that this controversy is resolved without further delay. (Testimony of Cardey; Late-filed Exhibit P-12.)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57, Florida Statutes (1979)
The COMMISSION is empowered to fix and approve utility rates and charges which are just, reasonable, compensatory, and not unjustly discriminatory. Section 367.001(i) , (2) , and (3) , Florida Statutes (Supp. 1980). In carrying out this function, the COMMISSION is required to consider, among other things:
the value and quality of the service
and the cost of providing the service, which shall include, but not be limited to, debt interest; the utility's requirements for working capital; maintenance, depreciation, tax, and operating expenses incurred in the operation of all property used and useful
in the public service; and a fair return on the utility's investment in property used and useful in the public service. .
The commission shall also consider the utility's investment in property required by duly authorized governmental authority to be constructed in the public interest within a reasonable time in the future, not to exceed 24 months.
(3) The commission, in fixing rates,
may determine the prudent cost of providing service during the period of time the rates will be in effect following the entry of a final order relating to the utility's rate
request and may use such costs to determine the revenue requirements that will allow the utility to earn a fair rate of return on its rate base." Section 367.081(2) and (3), Fla. Stat. (Supp. 1980)
The UTILITY bears the burden of establishing entitlement to the requested rate increase. See, Sections 25-10.175(1), 28-6.08 (3), Florida Administrative Code.
It is concluded that each of the factors pertinent to ratemaking, and enumerated in Section 367.081 have been considered in this proceeding. The UTILITY has not established unusual and extraordinary growth, or that use of "average" rate base during the test year would result in rates which are so low as to be confiscatory. Citizens v. Hawkins, supra, at 256, City of Miami v. Florida Public Service Commission, supra, at 258. Neither has it presented sufficient evidence to support use of AFUDC in rate base, or the reasonableness of the water royalty charge paid to an affiliate. A preponderance of evidence supports the exclusion from CIAC of connection fees collected between 1971 and 1973, and the inclusion in CIAC of such fees collected in 1969 and 1970. The UTILITY's proposed post-test period adjustments to depreciation and taxes are supported by the evidence and consistent with law. They are known and eminent charges which must be taken into account in order for the test year to fairly represent the conditions which will prevail in the immediate future when the rates go into effect. Utility rates are fixed for the future and known changes that will affect future rates cannot be ignored. Gulf Power Company v. Bevis,
289 So.2d 401, 404 (Fla. 1974). Adjusted rate base and net operating income, must be recalculated in order to determine the additional and total gross revenues the UTILITY should be allowed to generate on an annual basis.
It is concluded, therefore, that the UTILITY's application to increase its rates should be granted to the extent described in this order and that such rates will be just, reasonable, compensatory, and not unjustly discriminatory. Section 367.081(2), Fla. Stat. (Supp. 1980).
Findings of fact submitted by the parties which are not incorporated herein are rejected as being unsupported by a preponderance of evidence or irrelevant and unnecessary to the issues presented.
RECOMMENDATION
Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:
That the COMMISSION recalculate adjusted rate base, operating income, and the resulting additional and total gross revenues in a manner consistent with this Recommended Orders and that Petitioner be authorized to file new rates structured on the base facility charge concept designed to generate the additional and total annual gross revenues so specified.
DONE AND ENTERED this 27th day of February, 1981, in Tallahassee, Florida.
R. L. CALEEN, JR. Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 1981.
ENDNOTES
1/ Petitioner' and Respondent's Exhibits will he referred to as "P- " and "I-- ", respectively.
2/ It is assume that this figure relates to the revised cost-of the additional plant additions, $5,966,569 and not the earlier estimate of $5,334,300
3/ Includes revised total cost of plant additions.
4/ Reflects rejection of COMMISSION's proposed CIAC connection fee adjustment to extent of $176,773. If the $176,773 adjustment is not a figure net of amortization, it requires recalculation.
5/ If this figure does not relate to the total revised cost of the plant additions, it should be recalculated and the AFUDC deduction increased, accordingly.
COPIES FURNISHED:
B. Kenneth Gatlin, Esquire Post Office Box 669 Tallahassee, Florida 32302
Marta M. Suarez-Murias, Esquire Public Service Commission
101 East Gaines Street Tallahassee, Florida 32301
================================================================= AGENCY FINAL ORDER
================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION
In re: Application of FLORIDA )
CITIES WATER COMPANY for ) DOCKET NO. 800323-W(R)
authority to increase its rates ) ORDER NO. 10033 and charges in Lee County, ) ISSUED: 5-28-81
Florida. ) DOAH CASE NO. 80-2193
)
)
The following Commissioners participated in the disposition of this matter: JOSEPH P. CRESSE, Chairman
JOHN R. MARKS, III KATIE NICHOLS SUSAN W. LEISNER
ORDER
BY THE COMMISSION:
Pursuant to notice, an administrative hearing was held before R. L. CALEEN, JR., Hearing Officer with the Division of Administrative Hearings, on January 27, 1981, in Fort Myers, Florida, on the application of Florida Cities Water Company for an increase in water rates to its customers in Lee County, Florida. Appearances were as follows:
APPEARANCES
For Petitioner: B. KENNETH GATLIN
Attorney at Law Post Office Box 669
Tallahassee, Florida 32302
For Respondent: MART M. SUAREZ-MURIAS
Staff Counsel
Florida Public Service Commission
101 East Gaines Street Tallahassee, Florida 32301
For the Public: JAMES O. COLLIER
Water and Sewer Department Florida Public Service Commission
101 East Gaines Street Tallahassee, Florida 32301
The Hearing Officers recommendation was filed on February 27, 1981. The Hearing Officer recommended as follows:
FINDINGS OF FACT
Based upon the evidence presented at hearing, the following facts are determined:
I.
The Application
By its application, the UTILITY seeks authority to increase its rates sufficiently to generate additional annual gross revenues of $1,483,100. It attributes the need for increased revenues to extensive additions recently made to its water plant pursuant to COMMISSION Order No. 6209 entered in Docket No. 74176-W. The UTILITY claims that the increased investment and higher operating expenses associated with such plant additions effectively reduce its rate of return to 4.2 percent; it asserts that the requested additional revenues are necessary to allow it to earn a fair and reasonable rate of return of 12 percent. (Testimony of Reeves, Cardey; P-2, P-8).
II.
Rate Base
There are three issues involving the proper determination of rate base in this case: (1) whether "year-end", rather than "average" rate base should be used, (2) whether an Allowance for Funds Used During Construction (AFUDC) for post-test period additions allowed in rate base is proper, and (3) whether connection fees collected from 1969 to 1973 should be recorded as Contributions in Aid of Construction (CIAC).
"Year-end" v. "Average" Rate Base
In determining rate base, absent extraordinary or emergency conditions or situations, "average" rather than "year-end" investment during the test period should be used. City of Miami v. Florida Public Service Commission, 208 So. 2nd (Fla. 1968). The Florida Supreme Court has suggested that average investment "should not be departed from except in the most unusual and extraordinary situations where not to do so would result in rates too low as to be confiscatory to the utility." Id. at 258. Year-end investment may be used only when a utility is experiencing extraordinary growth. Citizens v. Hawkins, 356 So.2d 254 (Fla. 1978).
The UTILITY has not established that it meets the standard for utilization of "year-end" rate base, i.e., that it has experienced unusual and extraordinary growth. Its customer growth rate averaged 8.2 percent for the last seven years, with a 10.56 percent gain during the test year. This growth rate has been experienced by many other Florida utilities of similar size and is neither extraordinary nor unusual. Neither is the UTILITY's growth extraordinary when measured in terms of water sold. Between 1975 and 1979, its growth in water sales averaged approximately 11 percent, in 1980--6 percent. In terms of plant growth, the UTILITY averaged 19.37 percent over the last seven years; the growth rate for 1979 was 12.03 percent. However, in 1980, its investment in gross plant grew at a 33 percent rate. The UTILITY's growth rate was repeatedly described as "substantial" by its consultant, K. R. Cardey but substantial growth does not equate to extraordinary or unusual growth as defined by the Florida Supreme Court. Furthermore, the UTILITY did not establish that failure to use "year-end" rate base would reduce its rates to a confiscatory level. See, City of Miami, supra. It follows that "average" investment during
the test period is the proper method to utilize in determining rates in this case. (Testimony of Cardey, Deterding).
Appropriateness of Allowance for Funds Used During Construction (AFUDC)
After the test period, the UTILITY completed five major additions to its plant, all of which were required by previous order of the COMMISSION. (Order No. 6209, Docket 74176-W). The COMMISSION agrees that, since it required these post-test period additions, they should be included in rate base at full weight. Since these additions, which total $5,966,569, were under construction during the test period, the COMMISSION contends they should be recorded as Construction Work in Progress (CWIP). The UTILITY agrees that these additions should be included in rate base but seeks to include, as well, an AFUDC allowance in the amount of $326,422. 2/ AFUDC represents interest that was capitalized on each of these additions while they were under construction during and after the test period. Since these additions are already included in rate base at full weight, the inclusion of AFUDC in rate base would allow the UTILITY to duplicate earnings on its investment. Such a result would be unreasonable, improper, and should not be allowed. (Testimony of Reeves, Deterding; P-1, P-3, P-10, R-2).
Connection Fees: CIAC or Revenue
From 1969 through 1973, the UTILITY operated under the regulatory jurisdiction of Lee County, not the COMMISSION. During those years, it was the UTILITY's practice and policy to record connection fees, which totaled $226,582, as revenue, not CIAC. Since connection fees are ordinarily considered CIAC, the COMMISSION proposes to adjust CIAC by $226,582. (Testimony of Deterding, Cardey; P-8,R-2)
Contributions in Aid of Construction are defined as monies used to offset the acquisition, improvement, or construction cost of utility property used to provide service to the public. Section 367.081(2), Florida Statutes (1980). The UTILITY's consultant testified that connection fees collected and credited to revenue by the UTILITY during 1971, 1972, and 1973, totaling
$176,773, were "not used to offset the improvements or construction costs of the (UTILITY's) property." (P-8, p.6) The COMMISSION, on cross-examination, did not question the accuracy or impeach the credibility of this statement; neither did it present any evidence to controvert or rebut the UTILITY's assertion as to how the connection fees were used. The only evidence on the question presented by the COMMISSION consisted of its accountant's conclusion:
"During the years from 1969 to 1973, Florida Cities Water Company recorded many tap-in fees collected as revenue. These should properly be recorded as contributions in aid to construction. This adjustment (of $226,582) adds these contributions." (R-2, p. 5.)
(Testimony of Deterding, Cardey, P-8, R-2).
In its Proposed Recommended Order, the COMMISSION asserts that the UTILITY has the burden of showing: (1) the correctness of collecting funds normally authorized for service availability and using them for another purpose, and (2) the exact manner in which the funds were used. (Proposed Recommended Order, p. 6.) However, there was no evidence in the record to show that the UTILITY's treatment of connection fees during 1971 through 1973, was incorrect
or violative of Lee County's regulatory standards. Neither is there any evidence to show that the connection fees collected in those years were used as contributions in aid of construction, i.e., to offset acquisition, improvement, or construction costs. The only evidence presented as to how those fees were actually used was that of the UTILITY's consultant; he testified that those funds were used only to defray operation and other expenses associated with the new customers. This evidence was sufficient to shift to the COMMISSION the burden of presenting evidence on the question or discrediting the evidence presented by the UTILITY. The COMMISSION did neither. It is found, therefore, that the $176,773, representing connection fees collected between 1971 and 1973, do not constitute CIAC, the UTILITY's testimony in this regard being persuasive. (Testimony of Cardey, Deterding; P-8, R-2.)
However, as to the years 1969 through 1970, the UTILITY presented no evidence that the $48,809 in connection fees collected during that time were used only for operating and maintenance expenses and not to offset acquisition, improvement, or construction costs. In the absence of such evidence, the COMMISSION testimony that connection fees should ordinarily be treated as CIAC is persuasive. The connection fees collected during 1969 and 1970, calculated to be $49,809, are therefore properly included as CIAC. (Testimony of Deterding, Cardey; P-8, R-2.)
In light of the above findings and the absence of disagreement concerning other adjustments proposed by the COMMISSION, the elements of the UTILITY's adjusted rate base are:
Rate Base
Test Year Ended March 31, 1980
Utility Plant in Service | $11,178,094 | |
Construction Work in Progress | 5,966,569 | 3/ |
Accumulated | (626,166) | |
Depreciation | (3,841,747) | 4/ |
CIAC (Net of Amortization) | (111,567) | |
Advances for Construction | (326,422) | 5/ |
AFUDC | 146,911 | |
Working Capital Allowance | 117,450 |
Materials and Supplies (To be calculated
Income Tax Lag based on additional gross revenues recommended herein
RATE BASE (To be determined
upon recalculation
In order to determine the adjusted rate base which should be utilized, Income Tax Lag requires recalculation in a manner consistent with the above findings and Section III below. (Testimony of Cardey, .Deterding; P-1, P-3, P-8, P-10, R-2.)
III.
Operating Income Operating Expense: Water Royalty Charge
In calculating operating income for the test year, the UTILITY included $18,577 as an operating expense attributed to a $.03 per gallon royalty
charge it paid an affiliate for water pumped from the Green Meadows well field. The UTILITY operates this water field on a 21-acre site and has easements to locate 26 wells. It pays no other cost for the water. The COMMISSION disputes the reasonableness of this charge because it is not an arms-length transaction, and the UTILITY has not explained the basis of the $.03 charge, the cost to the affiliate of the land involved and it subsequent sales price (the affiliate reserving the water use rights), and the identity of the present owner. The COMMISSION's accountant testified that reasonableness of the charge could be determined by analyzing the costs of the rental of the land based on the original cost of the property to the affiliate. In response, the UTILITY established that the $18,577 expense is less that it would cost the UTILITY, in terms of annual revenue requirements, to purchase the land involved. But the UTILITY failed to address the cost of renting the property, based on the affiliate's acquisition costs, or furnish information necessary to make such a determination. The COMMISSION is entitled to clearly scrutinize the expenses claimed by a utility and require that their reasonableness be shown. The UTILITY did not adequately explain or support the reasonableness of its claimed royalty expense, and it should therefore be disallowed. (Testimony of Reeves, Deterding; P-6, R-2.)
Depreciation and Taxes: Adjustments Attributable to Post-Test Period Plant Additions
The parties disagree on whether adjustments should be made to test year operating expenses to reflect increases in depreciation and taxes due to the five post-test year plant additions completed subsequent to the test period. The evidence is uncontroverted that these plant additions, including the Green Meadows water treatment plant and related facilities, were required by prior COMMISSION order and that they were necessary to provide service to existing customers of the UTILITY. The parties have also agreed that the full cost of these additions should be included in rate base, at full weight. The operating expenses of the -UTILITY during the test year should be adjusted as was rate base, for known and eminent changes in order to reflect conditions which will prevail when the rates become effective. The UTILITY's 2.1 percent composite depreciation rate should thus be applied against the new plant additions, and the resulting depreciation expense included in the cost of providing service. Similarly, taxes (other than income) on the $5,966,569 worth of plant additions are known and eminent, are cost of providing service, and should be included as an adjustment to test year taxes. The COMMISSION presented no policy or factual justification or explanation for its opposition to these adjustments to test year operating expenses. It does not contend that these expenses are other than known and eminent, attributable to the government-ordered plant additions, and will be part of the cost of providing service during the period the new rates will be in effect. The UTILITY's evidence in support of these adjustments is therefore persuasive. (Testimony of Cardey, Deterding, P-1, P-8, P-10, R-2.)
Similarly, the UTILITY contended that test year income tax should be adjusted to reflect changes in revenue, operating expenses, depreciation, taxes, and interest expenses attributed to operation of the new plant addition. The COMMISSION offered no reason or explanation why such an income tax adjustment should not be made; changes in income tax due to the operation of the plant additions are known and eminent, and should be allowed as adjustments to test year expenses in order to adequately represent the UTILITY'S future costs of service. However, due to the findings herein relating to use of "average" rate base, the AFUDC allowance, treatment of connection fees previously collected, the water royalty charge, depreciation, and taxes, the income tax adjustment
proposed by the UTILITY requires recalculation. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R-2.)
In light of the above findings, the UTILITY'S lack of opposition to other adjustments proposed by the COMMISSION, the known elements of adjusted operating income are: operating revenues of $2,419,437 and operating expense (operation) of $1,175,291. In order to determine adjusted operating income which should be used in this case, depreciation, taxes other than income, and income taxes require recalculation consistent with the findings contained in Sections II and III, infra. (Testimony of Cardey, Deterding, P-1, P-8, P-10, R- 2.)
IV.
Capital Structure, Cost of Capital, and Rate of Return
The parties agree that UTILITY's capital structure and cost of capital are as follows:
CAPITALIZATION COMPOSITE WEIGHT
Rate 15 percent | 16 | percent | |||
Long-term debt | 49.33 | 10.68 | 5.27 | 5.27 | |
Equity Capital | 41.25 | 15-16 | 6.19 | 6.60 | |
Subtotal | 90.58 percent | percent | 11.46 percent | 11.87 percent | |
Deferred Federal Income Taxes Customer Deposits | 4.74 .90 | -0- 8.00 | -0- .07 | -0- .07 | |
Subtotal | 96.22 | 11.53 | 11.94 | ||
Investment Tax Credit | 3.78 | Average | .45 | .45 | |
TOTAL | 100.00 | 11.98 | 12.39 | ||
They are also in agreement that a 12 percent return on the UTILITY's rate base, including a 15-16 percent return on equity, is a fair and reasonable rate of return. (COMMISSION's Proposed recommended Order, p. 7; P-8, P-5.)
V.
Additional Required Revenues
In order to determine the additional gross revenues which the UTILITY should file rates designed to generate, the authorized operating income should be computed by multiplying 12 percent times the adjusted rate base computed pursuant to Paragraph 10 above. The UTILITY should then be authorized to earn additional gross revenues equivalent to the difference between the authorized operating income and the adjusted test year operating income computed pursuant to Paragraph 14 above.
VI.
Rate Structure and Rates
The UTILITY proposes, with the COMMISSION's concurrence, that its new rates be structured in accordance with the Base Facility Charge Rate Design (BFC) and that the 25 percent surcharge currently imposed on general service
customers be eliminated. The new BFC rate structure design contains a customer charge and a gallonage charge, both of which are directly related to the cost of providing the service. The customer charge assures that all customers pay their pro rata share of certain fixed and operating costs of the UTILITY which are not related to the amount of water used by the customer. The gallonage charge is based on the actual amounts of water used. With implementation of the base facility charge system, the UTILITY should lower its current $20 charge for reconnections during working hours to $10; similarly its current $25 charge for reconnection after working hours should be reduced to $15. These lower charges are sufficient to cover the costs associated with the service rendered. The UTILITY also proposes various increases in its service availability, or connection charges. These increases, based on increased construction costs, will be used to finance additional facilities and stabilize rates to existing customers. The BFC rate design system proposed by the UTILITY is fair, reasonable, and nondiscriminatory. In light of the foregoing, it is unnecessary to consider the "alternative" rate structure which was presented to the COMMISSION staff on the day of hearing. With such time constraints, meaningful review of the "alternative" rate structure proposal was not possible.
(Testimony of Byrd, Collier; R-1, R-3.)
VII.
Adequacy of Service
Customer testimony criticized the 25 percent surcharge currently imposed on general service customers, and the magnitude of the requested rate increase. Several customers complained of the quality of the water supplied. Under the proposed rate structure, the surcharge on general service customers will be eliminated. While several customers complained of sediment in their drinking water testimony established that the new Green Meadows softening plant should help alleviate that problem. The water supplied by the UTILITY meets all regulatory and health standards of the Health Department and the Florida Department of Environmental Regulation. The UTILITY is currently under no citation for violation of any regulatory standards. It is found that the quality of the water service offered by the UTILITY is adequate. (Testimony of Collier, Reeves, Customers; P-7.)
VIII.
Franchise Fees
The UTILITY has collected $395,000 in "franchise fees" for Lee County, but has not paid them to the county due to questions surrounding the legality of the franchise fee. Neither have the funds been placed in a special escrow account pending resolution of this controversy. The UTILITY should ensure that such franchise fees are deposited in a special interest-bearing escrow account, and take steps to ensure that this controversy is resolved without further delay. (Testimony of Cardey; Late-filed Exhibit P-12.)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57, Florida Statutes (1979).
The COMMISSION is empowered to fix and approve utility rates and charges which are just, reasonable, compensatory and not unjustly discriminatory. Section 367.081(1), (2), and (3), Florida Statutes (Supp.
1980). In carrying out this function, the COMMISSION is required to consider, among other things:
". . .the value and quality of the service and the cost of providing the service, which shall include, but not be limited to, debt interest; the utility's requirements for working capital; maintenance, depreciation tax, and operating expenses incurred in the operation of all property used and useful in the public service; and a fair return on the utility's investment in property used and useful in the public service. The commission shall also consider the utility's investment in property required by duly authorized governmental authority to
be constructed in the public interest within a reasonable time in the future, not to exceed
24 months.
(3) The commission, in fixing rates, may determine the prudent cost of providing service during the period of time the rates will be in effect following the entry of a final order relating to the utility's rate request and may use such costs to determine the revenue requirements that will allow the utility to earn a fair rate of return on its rate base." Section 367.081(2) and (3), Fla. Stat. (Supp. 1980).
The UTILITY bears the burden of establishing entitlement to the requested rate increase. See, Sections 25-10.175(1), 28-6.08(3), Florida Administrative Code.
It is concluded that each of the factors pertinent to ratemaking, and enumerated in Section 367.081 have been considered in this proceeding. The UTILITY has not established unusual and extraordinary growth, or that use of "average" rate base during the test year would result in rates which are so low as to be confiscatory. Citizens v. Hawkins, supra, at 256, City of Miami v. Florida Public Service Commission, supra, at 258. Neither has it presented sufficient evidence to support use of AFUDC in rate base, or the reasonableness of the water royalty charge paid to an affiliate. A preponderance of evidence supports the exclusion from CIAC of connection fees collected between 1971 and 1973, and the inclusion of CIAC of such fees collected in 1969 and 1970. The UTILITY's proposed post-test period adjustments to depreciation and taxes are supported by the evidence and consistent with law. They are known and eminent charges which must be taken into account in order for the test year to fairly represent the conditions which will prevail in the immediate future when the rates go into effect. Utility rates are fixed for the future and known changes that will affect future rates cannot be ignored. Gulf Power Company v. Bevis,
289 so.2d 401, 404 (Fla. 1974). Adjusted rate base and net operating income must be recalculated in order to determine the additional and total gross revenues the UTILITY should be allowed to generate on an annual basis.
It is concluded, therefore, that the UTILITY'S application to increase its rates should be granted to the extent described in this order and that such
rates will be just, reasonable, compensatory, and not unjustly discriminatory. Section 367.081(2), Florida Statutes (Supp. 1980).
Findings of fact submitted by the parties which are not incorporated herein are rejected as being unsupported by a preponderance of evidence or irrelevant and unnecessary to the issues presented.
RECOMMENDATION
Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED
That the COMMISSION recalculate adjusted rate base, operating income, and the resulting additional and total gross revenues in a manner consistent with this Recommended Order, and the Petitioner be authorized to file new rates structured on the base facility charge concept designed to generate the additional and total annual gross revenues so specified."
On March 6, 1981, Florida Cities Water Company filed exceptions to the Hearing Officer's recommendation that franchise fees be placed in escrow. No other objection was made by the utility. On March 26, 1981, the Commission staff notified the utility of the staffs intention to recommend that the Hearing Officer's recommendation be rejected with respect to certain findings concerning the treatment of service availability fees. The utility made no further filings after said notification.
The Hearing Officer found that connection fees of $176,773 paid to the company between 1971 and 1973 did not constitute CIAC, since the company asserted that such funds were used for the operation and maintenance of the system, and not for the construction, acquisition, or improvement of it facilities. The Hearing Officer's conclusion is deficient and unsupported by the facts in the record. It is also incorrect as a matter of law, since it appears to be based, at least in part, on the incorrect assumption that the Commission lacked jurisdiction over Lee County between 1971 and 1973.
We note Order No. 4836 in Docket No. 5818-WS, issued March 2, 1970. That order acknowledged Commission jurisdiction of Lee County on February 27, 1970. Since the utility came under Commission jurisdiction in 1970, the provisions of Section 367.101, Florida Statutes (1971), are applicable. That section grants the Commission jurisdiction over service availability matters. This jurisdiction coupled with the fact that the NARUC System of Accounts treats service availability/connection fees as CIAC, persuades us to overrule the Hearing Officer and find that the $176,773 of connection fees collected between 1971 and 1973 should be treated as CIAC. The provisions of Rule 25-10.04, F.A.C., water and sewer utilities are required to use the Uniform System of Accounts prescribed by the National Association of Regulatory Utility Commissioners. Within that system of accounts, we note Account No. 271, Contributions-in-Aid-of-Construction, defined as follows:
"This account shall include donations or contributions in cash, services, or property from states, municipalities or other governmental agencies, individuals, and others for construction purposes."
The company's consultant's mere assertion that the funds were used for operating and maintenance expenses does not rebut the presumption that service availability fees are collected to help defray the cost of the system's construction. The connection fees collected by the utility were for service availability, as opposed to monthly charges for service. The utility is authorized to collect connection fees (service availability fees) and these fees fall within the definition of CIAC. An individual utility's use of the funds is not dispositive of the question of the accounting treatment of those funds.
Rather, the purpose for which the fees are authorized and collected is the crucial consideration.
We find that the authority to collect connection fees or service availability fees include an obligation to record these fees as CIAC. We note that in this company's 1977 rate case, this Commission treated the $176,773 as CIAC (see Docket No. 770786-WS, Order No. 8586).
The Hearing Officer recommended that the company place in escrow the
$395,000 of franchise fees which it has collected and not yet paid to Lee County. We have reviewed the company's position with respect to the franchise fees and we find it to be without merit. The company has apparently not resolved with Lee County the matter of the county's authority to collect franchise fees. The company apparently plans to continue the collection of those fees indefinitely and has made no provisions to safeguard the interest of its ratepayers. We find that the funds presumably collected for the payment of franchise fees should be segregated in an interest-bearing escrow account. In selecting the conditions of the escrow account, the company should act prudently in the interest of its customers. Any amounts collected as franchise fees over and above the $395,000 already mentioned should similarly be treated. No withdrawal of funds from the account shall be made without prior Commission approval.
We concur with the Hearing Officer with respect to all other findings of fact and conclusions of law. The attached schedules properly depict the utility's rate base and net operating income, which result in a revenue requirement of $3,638,500. The Hearing Officer recommended that the Base Facility Charge Rate Design (BFC) be adopted and that the present 25 percent surcharge imposed on general service customers be eliminated. This elimination will result in a substantial shift in the revenue generated by classification as noted by the percentage factors listed on the data sheet. Since sewer charges for general service customers are determined by applying a percentage factor to the water bill, this factor should be changed from the present 127 percent to
90.76 percent, with the implementation of the "Base Facility Charge" rate structure. The Hearing Officer also recommended that the current $20 charge for reconnection during working hours be reduced to $10 and that its current $25 charge for reconnection after working hours should be reduced to $15. We agree with his conclusions.
We acknowledge that the company has notified this Commission of its intent to place the rates recommended by the Commission staff into effect for meter readings on or after April 30, 1981. The company has submitted an irrevocable letter of credit dated May 21, 1981, to support the collection of those rates prior to the effective date of this Order, pursuant to the provisions of Section 367.081, Florida Statutes. It is, therefore,
ORDERED by the Florida Public Service Commission that Florida Cities Water Company, 2112 Gulf Gate Drive, Sarasota, Florida, 33579, be authorized to increase its rates in order to generate annual gross revenues of $3,638,500, on
the basis of the base facility charge concept, and the average number of customers served during the test year, as follows:
MONTHLY WATER RATES
Residential Service
Meter Size Base Facility Charge 5/8" x 3/4" $ 4.76
3/4" 6.60
1" 10.27
1 1/2" 19.44
2" 30.45
Gallonage Charge - $2.56 per 1,000 gallons
General Service Meter Size | Base | Facility Charge |
5/8" x 3/4" | $ 4.76 | |
3/4" | 6.60 | |
1" | 10.27 | |
1 1/2" | 19.44 | |
2" | 30.45 | |
3" | 59.81 | |
4" | 92.84 | |
6" | 184.59 | |
8" | 294.69 |
Gallonage Charge - $2.56 per 1,000 gallons Private Fire Protection Service
Fire Line Size Base Facility Charge
1 1/2" | $ 7.21 |
2" | 10.88 |
3" | 20.66 |
4" | 31.67 |
6" | 62.25 |
8" | 98.95 |
10" | 141.77 |
It is further
ORDERED that the rate schedules will not become effective until after tariff pages are filed and approved. It is further
ORDERED that the rates approved as a result of this order shall be effective for meter readings on or after thirty (30) days from the date of this order. It is further
ORDERED that the utility shall notify each customer of the increase authorized herein, and explain the reasons for said increase; the letter of explanation to be submitted to the Commission for prior approval. It is further
ORDERED that the utility establish a special interest-bearing escrow account for collected franchise fees collected within thirty (30) days, in the manner discussed above. It is further
ORDERED that the utility take all necessary steps to resolve any existing dispute with Lee County with respect to the payment of franchise fees.
By ORDER of the Florida Public Service Commission, this 28th day of May, 1981.
COMMISSION CLERK
ENDNOTES
2/ It is assumed that this figure relates to the revised cost of the additional plant additions, $5,966,569, and not the earlier estimate of $5,334,300.
3/ Includes revised total cost of plant additions.
4/ Reflects rejection of COMMISSION's proposed CIAC connection fee adjustment to extent of $176,773. If the $176,773 adjustment is not a figure net of amortization, it requires recalculation.
5/ If this figure does not relate to the total revised cost of the plant additions, it should be recalculated and the AFUDC deduction increased, accordingly.
*NOTE: FLORIDA CITIES WATER COMPANY OPERATING STATEMENT WATER
TEST YEAR ENDED 3/31/80 (Schedule 1, Docket No. 800323) IS NOT A PART OF THIS ACCESS DOCUMENT BUT IS AVAILABLE FOR REVIEW IN THE DIVISION'S CLERKS OFFICE
FLORIDA CITIES WATER COMPANY | ||
ADJUSTMENT TO RATE BASE FOR THE TEST YEAR ENDED MARCH 31, 1980 | ||
Amount | ||
1. Plant in Service | ||
a) To remove after test year additions from plant and place them in CWIP | $(5,334,300) | |
b) To adjust the year in balance in plant to a 13 month average as calculated by staff | (1,217,317) | |
Total Adjustment | $ (6 551,617) | |
2. Construction Work in Progress | ||
a) To place the after test year additions in CWIF rather than plant as shown on the utility's | ||
schedules | $ 5,966,569 | |
b) To remove AFUDC charged to plant required by governmental agencies and added after the test year | ( 326,442) | |
Total Adjustment $ 5,640,147
Accumulated Depreciation
To adjust the year end balance in accumulated depreciation to a 13 month average balance $ 57.201
Contributions in Aid of Construction (Net of Amortization)
To increase CIAC for tap-in fees recorded
as revenue from 1969-73 ( 226,582)
To adjust the year end balance in CIAC to
a 13 month average 473,816
To adjust the balance in CIAC for staff adjusted average accumulated amortization on
CIAC ( 4,426)
Total Adjustment $ 242,768
Advances for Construction
To adjust the year end balance in advances
to a 13 month average balance ( $ 16,684)
Working Capital Allowance
To adjust the working capital allowance to
one-eighth of staff adjusted O & M expense ( 3,889)
Income Tax Lag
To adjust the income tax lag to 20 percent of
actual test year taxes per utility $ 39,787 ADJUSTMENTS FOR REVENUES RECOMMENDED
Income Tax Lag
To increase the income tax lag to 20 percent of
income taxes on recommended revenue $( 48,909)
*NOTE: FLORIDA CITIES WATER COMPANY OPERATING STATEMENT WATER
TEST YEAR ENDED 3/31/80 (Schedule 2, Docket No. 800323) IS NOT A PART OF THIS ACCESS DOCUMENT BUT IS AVAILABLE FOR REVIEW IN THE DIVISION'S CLERKS OFFICE
FLORIDA CITIES WATER COMPANY ADJUSTMENTS TO OPERATING STATEMENT
FOR THE TEST YEAR ENDED MARCH 31, 1980
Amount
Operating Revenues
To reduce operating revenues to the actual
test year amount $ (1,483,100)
b) To add revenues from fire protection which were not collected during the test year per | |
Staff Rate Analyst | 37,756 |
c) To reduce revenues for the amounts related to sales to Lee County and San Carlos Utilities who are eliminating or reducing purchases from this utility | ( 71,183) |
Total Adjustment $ (1,516,527)
Operating Expenses
To remove "royalties" paid to an affiliate
for water pumped from wells at Green Meadows $( 18,577)
b) To remove interest on truck proforma used for lime sledge hauling | ( | 2,250) |
c) To reduce the estimate for additional main- tenance on the new water plant per engineering staff. | ( | 5,000) |
d) To remove chemical and electric expense re- lated to the reduction in water sold to Lee County and San Carlos Utilities per Engineering Staff | ( | 5,665) |
Total Adjustment $( 31,492)
Depreciation Expense
To adjust depreciation expense to the amount calculated by staff on average plant in service net of average CIAC. advances, non-depreciable
plant $( 138,698)
Taxes Other Than Income
To adjust personal property and real estate
taxes to the actual amount paid for 1980 ( 90,384)
To remove gross receipts taxes on the re- quested revenues so as to show actual test year
results ( 37,077)
Total Adjustments $( 127,461)
Income Taxes
To reduce income taxes to show the actual
test year amounts per utility $( 199,433)
ADJUSTMENTS FOR REVENUES RECOMMENDED
Operating Revenues
To increase revenues to the amount necessary to
produce a return of 12.0 percent on rate base $ 1.219,062
Taxes Other Than Income
To include additional gross receipts taxes on
recommended revenues $ 30,477
Income Taxes
To include income taxes on the additional
revenues recommended $ 244,543
| Issue Date | Proceedings |
|---|---|
| Jun. 15, 1990 | Final Order filed. |
| Feb. 27, 1981 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| May 28, 1981 | Agency Final Order | |
| Feb. 27, 1981 | Recommended Order | Petitioner's year end rate base is suspect. Respondent may ask Petitioner to recalculate for determination of rate increase. |
FLORIDA PUBLIC UTILITIES COMPANY vs. PUBLIC SERVICE COMMISSION, 80-002193 (1980)
MANGONIA PARK UTILITY COMPANY, INC. vs. PUBLIC SERVICE COMMISSION, 80-002193 (1980)
BAYSIDE CLUB, ISLAMORADA. INC. vs FLORIDA KEYS AQUEDUCT AUTHORITY, 80-002193 (1980)
JOHN V. SMITH WATER COMPANY vs. PUBLIC SERVICE COMMISSION, 80-002193 (1980)
MAGNOLIA VALLEY SERVICES, INC. vs. PUBLIC SERVICE COMMISSION, 80-002193 (1980)
