STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HYDRATECH UTILITIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 80-1181

) FPSC DOCKET NO. 790164-WS

FLORIDA PUBLIC SERVICE )

COMMISSION, )

)

Respondent. )

)

RECOMMENDED ORDER

An administrative hearing on the above matter was held by H. E. SMITHERS, Hearing Officer, on August 14, 1980, in Hobe Sound, Florida. The Petitioner was represented by Robert B. Cook, the Respondent by William H. Harrold, and Intervenor Ridgeway Mobile Homeowners Association by Wesley R. Harvin and Robert Bower.

This action commenced by the filing of an application by Hydrateck Utilities, Inc. (Petitioner, Utility or Hydrateck) with the Florida Public Service Commission (Respondent, FPSC or Commission) on February 23, 1979 to increase its rates for water and sewer service to its customers in Martin County, Florida; the FPSC suspended the application by Order 8774 on March 21, 1979. After a pre-hearing conference on September 6, 1979, the applicant was permitted to amend its application, using 1979 as the test year (Order 9156) . The amended application was also suspended with interim increased rates being authorized under bond so the utility could receive water revenues of $98,798 and for sewer, $85,000 (Order 9188 issued December 21, 1979) . At the outset of the hearing, the application was further amended so as to seek only the revenues authorized on an interim basis.

The issues are whether or not the interim revenues should be made permanent and the $65,000 refund bond canceled, and what rate structure should be used to achieve that revenue.

The record consists of 138 pages of transcript containing the testimony of two Utility witnesses, two FPSC witnesses and one Intervenor witness, and Revised Exhibits 1-4a.

Proposed findings submitted by the Respondent and Intervener are adopted unless net included as being irrelevant, immaterial or conclusions.

FINDINGS OF FACT

1. The Petitioner is a water and sewer utility subject to the jurisdiction of the FPSC.

2. The utility's water and sewer service is in compliance with governmental requirements.

   
   

3. During the test year ending December 31, 1977, the utility operated at a less and additional revenues were required to insure continued compliance with service standards.

   
   

4. The test year rate base was $83,472 for water and $83,818 for sewer.

   
   

5. The interim rates authorized by Order 9188 produce less than the established 10 percent rate of return on rate base, however, service will not suffer from the deficiency.

   
   

6. A base facility charge rate structure is appropriate since it encourages conservation, tends to eleminate discrimination between classes of customers and establishes an acceptable rate for vacation service. This rate structure provides for a base charge that covers fixed costs (property taxes and insurance, depreciation, etc.) and a consumption charge that covers costs directly related to usage.

   
   

7. Sixty percent of the residential customers use less than 3000 gallons of water a month, and nearly 69 percent use less than 4000 gallons. Should Respondent's proposed base facility charge rate structure be placed into effect to achieve the water revenue sought, the customers using less than 4000 gallons of water would be required to pay 25 percent mere than the interim rates. A similar situation exists for these same residential sewer customers. Respondent's proposed base facility charge rate structure is supposed to approximate a typical "bell" curve, however, in this instance the curve is "skewed" or "downright crooked" (tr. 104).

   
   

   CONCLUSIONS OF LAW

   
   

8. Water and sewer rates are established by the FPSC pursuant to 367.081(2), Florida Statutes (1979) which reads in pertinent part:

   
   

   "(2) The commission shall . . . fix rates which are just, reasonable, compensatory, and not unjustly discriminatory. In all such proceedings, the commission shall consider 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."

   
   

9. The parties are in agreement on all subjects except the rate structure. The residential customers do not object to the revenue requirement but prefer the present structure or a modified base facility charge structure. The FPSC

   seeks to eliminate discrimination entirely but the law only provides that the rates not be unjustly discriminatory. Therefore, modified residential rate structure should be established with the following approximate monthly rates:

   
   

10. For water - $2.50 base charge (and vacation rate) for 5/8" meter and

$1.00 for each 1000 gallons; For sewer - $5.00 base charge and $2.25 for each 1000 gallons of water up to 10,000 gallons.

It is, therefore,

RECOMMENDED that the amended application of Hydratech Utilities, Inc. be granted and that the interim revenues authorized by Order 9188 be made permanent. It is further

RECOMMENDED that the rate-refunding bond be returned to the utility. It is further

RECOMMENDED that Hydratech Utilities Inc. file revised tariff pages for approval by the FPSC according to the base facility charges set out above. It is further

RECOMMENDED that following approval by the FPSC, the utility advise its customers of the authorized rates prior to there becoming effective.

DONE and ORDERED this 17th day of October, 1980, in Tallahassee, Florida.

H. E. SMITHERS Hearing Officer

Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 17th day of October, 1980.

COPIES FURNISHED:

Robert B. Cook

860 U.S. Highway One North Palm Beach, Florida

Wesley R. Harvin

Stuart Plaza, Suite 222 951 Colorado Avenue Stuart, Florida

William H. Harrold

Florida Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Steve Tribble Commission Clerk

101 East Gaines Street Tallahassee, Florida 32301

Docket for Case No: 80-001181

Orders for Case No: 80-001181