STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OLD BRIDGE UTILITIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 80-1577

) Docket No. 790677-S

STATE OF FLORIDA, PUBLIC )

SERVICE COMMISSION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before William E. Williams, Hearing Officer, Division of Administrative Hearings, on January 15, 1981, in Fort Myers, Florida, on the application of Old Bridge Utilities, Inc. for a rate increase to its customers in Lee County, Florida.

APPEARANCES

For Petitioner: William E. Sundstrom, Esquire

Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street

Tallahassee, Florida 32301

For Respondent: William H. Harrold, Esquire

Florida Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

For Intervenor, Karl L. Johnson, Esquire

Foxmoor Nuckolls, Parsons, Johnson and Fernandez Condominium 2701 Cleveland Avenue

Association: Fort Myers, Florida 33902

On November 30, 1979, Old Bridge Utilities, Inc. ("Utility" or "Petitioner") submitted its application for a rate increase to be charged to its customers in Lee County, Florida. Old Bridge Utilities, Inc. is wholly owned by Old Bridge Corporation. Thee Utility provides sewer service to a residential community in Lee County, Florida.

By Order No. 9187, dated December 21, 1979, the Florida Public Service Commission ("PSC") authorized the utility to file, on an interim basis, revised tariffs, that would generate increased revenues of $57,369 for the sewer system. The utility was also directed to post a bond in the penal sum of $40,000, conditioned upon a refund to its customers should those rates be determined to be excessive. Subsequently, upon proper motion and by stipulation of the parties, Foxmoor Condominium Association, Inc. was allowed to intervene as a party to this proceeding.

At the final hearing, Petitioner called John Carroll as its only witness.

Petitioner offered Petitioner's Exhibit Number 1, which was received into evidence. PSC called Marty Deterding, Thomas Walden, Joyce Fabelo and James Gollahon as its witnesses. PSC offered Respondent's Exhibits 1 through 4, which were received into evidence. Foxmoor Condominium Association, Inc. called Frederick Lobue as its only witness. Also admitted into evidence was Hearing Officer's Exhibit Number 1.

FINDINGS OF FACT

Quality of Service

1. During the test year Petitioner provided sewer service to an average of

   533 multi-family customers, nine residential customers and two general service customers. Foxmoor Condominium Association, Inc., a customer of Petitioner, has indicated its willingness to cooperate with the utility in its attempt to obtain a copy of the water bill for the condominium from Lee County, which provides the water service. This information will enable the utility to utilize a base facility charge type of rate structure.

   
   

2. Evidence of record indicates that Petitioner is in compliance with regulations of the Florida Department of Environmental Regulation, although the utility, through testimony, acknowledged the existence of a consent order between DER and the utility, whereby certain changes should take place regarding the utility operations. The evidence in the record, therefore, supports a finding that the utility's sewer service is presently satisfactory.

   
   

   Rate Base

   
   

3. A rate base of $170,087 suggested by PSC staff was acceptable to the utility (see Tr. 84-87). In accepting the rate base figure, the utility did not abandon its request that certain overheads be capitalized and added to rate base. However, necessary information to accomplish this was not timely filed, and, rather than delay this proceeding for presentation and audit, it was agreed that this issue be left open for a future rate case proceeding (see Tr. 20, 21, 41). The complete rate base schedule is attached as Schedule No. 1.

   
   

   Net Operating Income

   
   

4. After eliciting the testimony of the various witnesses and considering the various stipulations between the parties, the sole issue remaining in dispute in this proceeding was the appropriate level of compensation for the chief executive officer of the utility. The utility had requested a salary of

   $13,000 per year. However, based upon the fact that the chief executive officer was actually paid only $3,400 during the test year, that figure is determined to be the appropriate amount of compensation to be allowed in this proceeding.

   Upon reaching that conclusion the appropriate amount of gross annual revenues is

   $63,133 (see Schedule No. 2, attached) Cost of Capital

5. The utility had 100 percent debt at a cost of 10.59 percent (see Exhibit R-4), a figure which the utility agreed to as the accepted cost of capital finding for the purposes of this rate case proceeding only (see Tr. 79).

   
   

   Revenue Requirement

6. As indicated in Schedule No. 2, the revenue requirement for the sewer system is $63,133. The revenues produce an overall rate of return of 10.59 percent on sewer rate base. Accordingly, the utility should file revised tariff pages containing rates designed to produce the above-noted amount of gross revenues.

   
   

   Rate Structure

   
   

7. The evidence in this proceeding establishes the utility has been improperly billing some customers, and that the utility should be required to make refunds (see Tr. 65). The utility has agreed to make the refunds requested (see Exhibit 3-R).

   
   

8. Petitioner's master metered, multi-family customers should be billed on a base facility charge type rate structure. Residential customers should be billed on a flat rate basis because of the relatively small number of these customers during the test period, and because of the difficulty of obtaining information concerning the water consumption due to the fact that water service is provided by the county.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the subject matter of, and the parties to this proceeding. Section 120.57(1), Florida Statutes.

   
   

10. The provisions of Section 367.081, Florida Statutes require the Florida Public Service Commission to fix rates which are just, reasonable, compensatory and not unfairly discriminatory. Petitioner has established by a preponderance of the evidence that the quality of service being rendered to the public is satisfactory. The evidence also demonstrates that after giving consideration to the reasonable and necessary costs for providing sewer service, the utility should be authorized to increase its sewer rates by $45,505 for an annual revenue requirement of $63,133. This revenue requirement provides for a

1. percent return on rate base of $170,087.

   
   

   RECOMMENDATION

   
   

   Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

   1. That the application of Old Bridge Utilities, Inc. be granted and the utility be authorized to file revised tariff pages, containing rates designed to produce gross annual sewer revenues of $63,133;

      
      

   2. That the utility be required to utilize the rate structure described in the body of this Recommended Order;

      
      

   3. That the issue of capitalization of overhead be left open for resolution in a future proceeding;

      
      

   4. That the rate refunding-bond, filed by the utility, be returned for cancellation, and

      
      

   5. That the refunds reflected in the attached schedules discussed herein be made.

DONE and ORDERED this 7th day of April, 1981, in Tallahassee, Florida.

WILLIAM E. WILLIAMS

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 7th day of April, 1981.

COPIES FURNISHED:

William H. Harrold, Esquire Florida Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

William E. Sundstrom, Esquire Myers, Kaplan, Levinson, Kenin

& Richards

1020 East Lafayette Street Tallahassee, Florida 32301

Karl L. Johnson, Esquire Nuckolls, Parsons, Johnson

and Fernandez

2701 Cleveland Avenue

Fort Myers, Florida 33902

================================================================= AGENCY FINAL ORDER

================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION

In re: Application of OLD BRIDGE DOAH CASE NO. 80-1577 UTILITIES, INC. for a rate DOCKET NO. 790677-S

increase to its sewer customers ORDER NO. 1-10152 in Lee County, Florida. ISSUED: 7-21-81

/

The following Commissioners participated in the disposition of this matter:

JOSEPH P. CRESSE, CHAIRMAN JOHN R. MARKS, III

SUSAN W. LEISNER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, WILLIAM E. WILLIAMS, held a public hearing on January 15, 1981, in Fort Myers, Florida, on the application of Old Bridge Utilities, Inc. for a rate increase to its sewer customers in Lee County, Florida. The Division of Administrative Hearings assigned Case No. 80-1577 to the above-noted docket.

APPEARANCES: WILLIAM E. SUNDSTROM

Attorney at Law

Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street

Tallahassee, Florida 32301 On behalf of Petitioner, Old Bridge Utilities, Inc.

KARL L. JOHNSON

Attorney at Law

Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue

Fort Myers, Florida 33902 On behalf of Intervenor,

Foxmoor Condominium Association.

WILLIAM H. HARROLD

Attorney at Law

101 East Gaines Street Tallahassee, Florida 32301

On behalf of the staff of the Florida Public Service Commission and the public generally.

The Hearing Officer's Recommended Order was entered on April 7, 1981. The time for filing exceptions thereto has expired and no exceptions have been filed. After considering all of the evidence in the record, we now enter our order.

ORDER

BY THE COMMISSION:

The Hearing Officer's Recommended Order is as follows:

"On November 30, 1979, Old Bridge Utilities, Inc. ("Utility" or "Petitioner") submitted its application for a rate increase to be charged to its customers in Lee County, Florida. Old Bridge Utilities, Inc. is wholly owned by Old Bridge Corporation. The Utility provides sewer service to a residential community in Lee County, Florida.

By Order No. 9187, dated December 21, 1979, the Florida Public Service Commission ('PSC') authorized the utility to file, on an interim basis, revised tariffs, that would generate increased revenues of $57,369 for the sewer system. The utility was also directed to post a bond in the penal sum of $40,000, conditioned upon a refund to its customers should those rates be determined to be excessive. Subsequently, upon proper motion and by stipulation of the parties, Foxmoor Condomium (sic) Association, Inc. was allowed to intervene as a party to this proceeding.

At the final hearing, Petitioner called John Carroll as its only witness. Petitioner offered Petitioner's Exhibit Number 1, which was received into evidence. PSC called Marty Deterding, Thomas Walden, Joyce Fabelo and James Gollahon as its witnesses. PSC offered Respondent's Exhibits 1 through 4, which were received into evidence. Foxmoor Condominium Association, Inc. called Frederick Lobue as its only witness. Also admitted into evidence was Hearing Officer's Exhibit Number 1.

FINDINGS OF FACT

Quality of Service

During the test year Petitioner provided sewer service to an average of 533

multi-family customers, nine residential customers and two general service customers. Foxmoor Condominium Association, Inc., a customer of Petitioner, has indicated its willingness to cooperate with the utility in its attempt to obtain a copy of the water bill for the condominium from Lee County, which provides the water service. This information will enable the utility to utilize a base facility charge type of rate structure.

Evidence of record indicates that Petitioner is in compliance with regulations of the

Florida Department of Environmental Regulation, although the utility, through testimony, acknowledged the existence of a consent order between DER and the utility, whereby certain changes should take place regarding the

utility operations. The evidence in the record, therefore, supports a finding that the utility's sewer service is presently satisfactory.

Rate Base

A rate base of $170,087 suggested by PSC staff was acceptable to the utility (see Tr. 84-87). In accepting the rate base figure, the utility did not abandon its request that certain overheads be capitalized and added to rate base. However, necessary information to accomplish this was not timely filed, and, rather than delay this proceeding for presentation and audit, it was agreed that this issue be left open for a future rate case proceeding (see Tr. 20, 21, 41). The complete rate base schedule is attached as Schedule

No. 1.

Net Operating Income

After eliciting the testimony of the various witnesses and considering the various stipulations between the parties, the sole issue remaining in dispute in this proceeding was the appropriate level of compensation for the chief executive officer of the utility.

The utility had requested a salary of $13,000 per year. However, based upon the fact that the chief executive officer was actually paid only $3,400 during the test year, that figure is determined to be the appropriate amount of compensation to be allowed in this proceeding. Upon reaching that conclusion the appropriate amount of gross annual revenues is $63,133 (see Schedule No. 2, attached).

Cost of Capital

The utility had 100 percent debt at a cost of

10.59 percent (see Exhibit R-4), a figure which the utility agreed to as the accepted cost of capital finding for the purposes of this rate case proceeding only (see Tr. 79).

Revenue Requirement

As indicated in Schedule No. 2, the revenue requirement for the sewer system is $63,133. The revenues produce an overall rate of return of 10.59 percent on sewer rate base.

Accordingly, the utility should file revised tariff pages containing rates designed to produce the above-noted amount of gross revenues.

Rate Structure

The evidence in this proceeding establishes the utility has been improperly billing some

customers, and that the utility should be required to make refunds (see Tr. 65). The utility has agreed to make the refunds requested (see Exhibit 3-R)

Petitioner's master metered, multi-family customers should be billed on a base facility charge type rate structure. Residential customers should be billed on a flat rate basis because of the relatively small number of these customers during the test period, and because of the difficulty of obtaining information concerning the water consumption due to the fact that water service is provided by the county.

CONCLUSIONS OF LAW

1. The Division of Administrative Hearings has jurisdiction over the subject matter of, and the parties to this proceeding. Section 120.57(1), Florida Statutes.

   
   

2. The provisions of Section 367.081, Florida Statutes, require the Florida Public Service Commission to fix rates which are just, reasonable, compensatory and not unfairly discriminatory. Petitioner has established by a preponderance of the evidence that the quality of service being rendered to the public is satisfactory. The evidence also demonstrates that after giving consideration to the reasonable and necessary costs for providing sewer service, the utility should be authorized to increase its sewer rates by

$45,505 for an annual revenue requirement of

$63,133. This revenue requirement provides for a 10.59 percent return on rate base of

$170,087.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED:

1. That the application of Old Bridge Utilities, Inc. be granted and the utility be authorized to file revised tariff pages, containing rates designed to produce gross annual sewer revenues of $63,133;

   
   

2. That the utility be required to utilize the rate structure described in the body of this Recommended Order;

3. That the issue of capitalization of overhead be left open for resolution in a future proceeding;

   
   

4. That the rate refunding bond, filed by the utility, be returned for cancellation, and

   
   

5. That the refunds reflected in the attached schedules discussed herein be made."

After review of the record, we find the Hearing Officer's findings to be supported by the record, and, therefore, adopt his findings. The interim rates generated more revenues than the utility is entitled to, in accordance with the revenue requirements found herein. The amount of the refund is $7,763, based upon the test year, and this must be refunded. On an interim basis, the utility was authorized a rate of $11.50 per month. The rates that will produce the revenues authorized by the provisions of this order are $14.50 for residential and commercial customers and the guaranteed revenue customers will pay the base facility charge of $6.65 per month (Tr. 68). Because the final rate has increased for residential and commercial customers we do not believe they are entitled to any of the refund from the interim rates. The guaranteed revenue customers' rate is being reduced and, therefore, they shall receive the refund of interim revenues discussed above.

The refund of interim revenues is separate and distinct from the other refund required by the provisions of this order, which arose due to the utility improperly billing some customers. The utility has agreed to make these refunds (Tr. 65 and Exhibit 3-R).

After reviewing this case some questions remain concerning guaranteed revenues. We, therefore, believe it is appropriate to direct our Water and Sewer Department to investigate the guaranteed revenue practices utilized by Old Bridge Utilities, Inc. It is, therefore,

ORDERED by the Florida Public Service Commission that the application of Old Bridge Utilities, Inc., Post Office Box 2547, Fort Myers, Florida, 33902, for a rate increase be granted as discussed herein. It is further

ORDERED that the utility be required to file revised tariff pages containing rates designed to produce annual sewer revenues of $63,133. It is further

ORDERED that the utility be required to utilize the rate structure described in the body of this order. It is further

ORDERED that the issue of capitalization of overheads be left open for resolution in a future proceeding. It is further

ORDERED that the refunds discussed in the body of this order be accomplished within thirty (30) days from the date of this order. It is further

ORDERED that after filing and approval of the revised tariff pages and verification that the required refunds have been made, the rate refunding bond, filed by the utility, shall be returned for cancellation.

By Order of the Florida Public Service Commission, this 21st day of July, 1981.

(SEAL)

STEVE TRIBBLE

Commission Clerk

Docket for Case No: 80-001577

Orders for Case No: 80-001577