STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ATLANTIS UTILITIES COMPANY, )

)

Petitioner, )

)

vs. ) DOAH CASE NO. 82-439

) FPSC DOCKET NO. 810057-WS

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., conducted a formal hearing in this case on May 7, 1982, in Lake Worth, Florida.

APPEARANCES

For Petitioner: Margaret L. Cooper, Esquire

Post Office Drawer E

West Palm Beach, Florida 33402

For Respondent: M. Robert Christ, Esquire

101 East Gaines Street Tallahasee, Florida 32301

ISSUES PRESENTED

1. Whether accounting fees charged in connection with petitioner's rate increase application should be included as rate case expense; and

   
   

2. Whether anticipated accounting fees for "pass-through" rate increase requests should be included in annual operating expenses.

BACKGROUND

On June 10, 1981, petitioner Atlantis Utilities Company ("Atlantis") applied for authority to increase its water and sewer rates. After reviewing the application, respondent Florida Public Service Commission ("Commission") issued its proposed agency action on December 9, 1981. Atlantis timely objected to the Commission's proposed exclusion of two expense items and requested a Section 120.57 hearing. On February 12, 1982, the Commission forwarded this case to the Division of Administrative Hearings for assignment of a hearing officer.

At hearing, Atlantis called Phillip D. Mitchell and Don Neville as its witnesses and offered Petitioner's Exhibit 1/ Nos. 1 and 2 (late-filed) into evidence. The Commission called Floyd M. Deterding as its only witness and offered Respondent's Exhibit No. 1 into evidence.

The transcript of hearing was filed on May 21, 1982. Both parties subsequently filed proposed findings of fact by June 10, 1982.

FINDINGS OF FACT I.

Accounting Fees as Part of Rate Case Expense

1. At issue was whether Atlantis had substantiated the accounting fees it sought to include as rate case expense. Without objection, Atlantis agreed to submit a late-filed exhibit (P-2) itemizing the accounting tasks performed, the time required, and the fees charged. After reviewing that exhibit, the Commission agreed that the accounting fees were justified and should be included in rate case expenses. Consequently, operating expenses included in the Commission's proposed agency decision 2/ should be increased $2,659 for both water and sewer systems; this represents actual rate case expenses of $15,954 amortized over three years, allocated equally to each system. ($15,954/3 =

   $5,318/2 = $2,659.) (Testimony of Mitchell, Deterding; Commission's Recommended Order; P-2, R-1.)

   
   

   II.

   
   

   Accounting Fees for Projected "Pass-Through" Rate Increase Requests

   
   

2. Atlantis is a small private utility providing water and sewer service to customers located in the City of Atlantis, Palm Beach County, Florida. On December 31, 1980, it had 893 residential- and 65 general-service water customers; 877 residential- and 28 general-service sewer customers. (Commission Order No. 10445.)

   
   

3. The City of Lake Worth pumps Atlantis sewage effluent to the West Palm Beach regional sewer plant for treatment and disposal. The regional plant imposes a treatment charge which Lake Worth passes on to Atlantis. Twice a year the regional plant has increased its treatment charge to Lake Worth which, in turn, has passed on the increased costs to Atlantis. Such increases may be recovered by filing a "pass-through" rate increase request with the Commission. (Testimony of Mitchell, Deterding.)

   
   

4. In the past, Atlantis employed a certified public accountant to assist in preparing "pass-through" rate increase requests. The accountant charged approximately $900 per "pass-through" request. He worked 25-30 hours per request at $36 per hour. Much of his time was spent preparing a billing analysis-- showing the number of bills rendered, cumulative gallons consumed, cumulative bills, and a consolidated factor. (Testimony of Mitchell, Neville.)

   
   

5. Atlantis wishes to continue retaining the accountant for this purpose in the future by including $1,800 in operating expenses in anticipation of biannual "pass-through" rate increase requests. It contends that such an accounting expense is reasonable and necessary because of its limited staff: one full-time bookkeeper who handles billing and one part-time accountant who supervises daily office procedures and bookkeeping routines. The Commission contends that this anticipated accounting expense is unnecessary--that a "pass- through" rate increase request and the necessary documentation could easily be prepared by the staff bookkeeper. (Testimony of Mitchell, Neville, Deterding.)

6. There is conflicting expert testimony on whether the preparation of such "pass-through" rate increase requests require the supervision and assistance of a certified public accountant. Phillip Mitchell, the accountant who performed this service for Atlantis in the past, testified that it is necessary; Floyd Deterding, the Commission's accountant, testified that it was not. Mr. Deterding's opinion is accepted as persuasive. Don Neville, the accountant who manages the daily affairs of Atlantis, testified that it would be much "easier" having Mr. Mitchell assist in preparing the "pass-through" requests; but he admitted that he thought the bookkeeper was competent enough to perform the work if Mr. Mitchell was unavailable. (Tr. 30.) Furthermore, a billing analysis (containing a consolidated factor and consumption by customer groups) is not a requirement for filing a "pass-through" request. The only items required are:

   
   

   1. A schedule of monthly charges for sewage treatment from governmental authority.

   2. A schedule of monthly gallons of purchased sewage treatment.

   3. A schedule of sewage treatment sold (billings to customers in gallons) by month.

   4. A schedule of the proposed rates

      which will pass the increased costs through, showing calculations thereof.

   5. A[n] affirmation from an officer that the increase will not cause the util- ity to overearn.

   6. A copy of the notice of the increase to customers.

   7. A certified copy of the letter,

      Order or Ordinance setting out the increased charges from the governmental authority.

      
      

      Finally, Mr. Mitchell was not a disinterested witness since--as the outside accountant--he stood to gain from including the $1,800 accounting fee in annual operating expenses. (Testimony of Neville, Deterding, Mitchell.)

      
      

      CONCLUSIONS OF LAW

      
      

7. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Fla. Stat. (1981).

   
   

8. The Commission is empowered to fix fair, just, and reasonable rates which may be charged and collected by a public utility. Section 366.06(1), Fla. Stat. (1981). In fixing such rates, the Commission is authorized to consider various rate-making elements, including rate base, adequacy of service, cost of providing such service, and a reasonable rate of return. Sections 366.06(1), 366.041(1), supra.

   
   

9. The burden of proof in a Commission proceeding is always on the utility seeking a rate change. See, Florida Power Corporation v. Joseph P. Cresse, et al., So.2d (Fla. 1982) (Case No. 60,604, Opinion filed April 29, 1982). The utility must prove, among other things, that its operating expenses are reasonable and necessary. Id. In the instant case, Atlantis failed to prove that the requested $1,800 operating expense item (accounting fees for anticipated biannual "pass-through" rate increase requests) was reasonable and

   necessary; this expense item must therefore be rejected. However, the accounting fees charged in connection with this rate increase request have been substantiated to the Commission's satisfaction and should be allowed. In all other respects, the parties are in agreement with the Commission's proposed agency action dated December 9, 1980.

   
   

10. To the extent the parties' proposed findings' of fact are incorporated in this recommended order, they are adopted; otherwise, they are rejected as unsupported by the necessary quantum of evidence or unnecessary to resolution of the issues presented.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

That the application of Atlantis to increase its water and sewer rates be granted, consistent with the Commission's proposed agency action dated December 9, 1981, and this recommended order.

DONE AND RECOMMENDED this 2nd day of July, 1982, 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 2nd day of July, 1982.

ENDNOTES

1/ Petitioner's and Respondent's Exhibits will be referred to as "P- ," and "R- ," respectively. Pages of the transcript will be referred to as "Tr.

."

2/ The Commission's proposed agency decision is contained in Order No. 10445 entered December 9, 1981.

COPIES FURNISHED:

Margaret L. Cooper, Esquire Post Office Drawer E

West Palm Beach, Florida 33402

M. Robert Christ, Esquire Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Steve Tribble, Commission Clerk Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Docket for Case No: 82-000439

Orders for Case No: 82-000439