STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOUTHERN STATES UTILITIES, INC. ) (CITRUS COUNTY) )

)

Petitioner, )

)

vs. ) DOAH CASE NO. 81-258

) PSC DOCKET NO. 800361-WS FLORIDA PUBLIC SERVICE COMMISSION )

)

Respondent, )

and )

)

OFFICE OF PUBLIC COUNSEL, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on March 10, 1981, in the Old Citrus County Courthouse, Inverness, Florida. The broad issue originally raised for determination at the hearing was whether the rates proposed in the petitioner's application for increased rates and charges for water and sewer service are just, reasonable, compensatory and not unfairly discriminatory. A Prehearing Stipulation entered into by the petitioner and the respondent, prior to the intervention of the Office of Public Counsel, narrowed the issue for this hearing to the quality of water and sewer service provided by the petitioner to its customers, with certain other financial issues to be reserved for a later hearing.

APPEARANCES

For Petitioner: R. M. C. Rose

Myers, Kaplan, Levinson, Kenin and Richards

Suite 103, 1020 East Lafayette Street

Tallahassee, Florida 32301

For Respondent: M. Robert Christ

Legal Department

Florida public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

For Intervenor: Jack Shreve

Public Counsel

Room 4, Holland Building Tallahassee, Florida 32304

INTRODUCTION

By application filed with the Florida Public Service Commission on July 23, 1980, petitioner Southern States Utilities seeks a rate increase for the water and sewer service it provides in Citrus County, Florida. Interim rates were authorized by Florida Public Service Commission Order Number 9545 dated September 16, 1980.

In a Prehearing Stipulation filed prior to the intervention of the Office of Public Counsel, the petitioner and the respondent stipulated to certain financial facts, and reserved the issues of petitioner's capital structure, cost of money, rate of return and federal and state income tax treatment for a later proceeding now pending as Division of Administrative Hearings Case No. 81-972.

This reservation of issues was occasioned by the Public Service Commission remanding another case involving Southern States Utilities (Order No. 9835, PSC Docket Nos. 790760- WS and 790761-WS) for a hearing on the issue of the effect of a loan by petitioner to its parent company. That issue is now pending in consolidated Division of Administrative Hearings Case Numbers 81-970, 81-971,

81-972, 81-973 and 81-974 and is presently scheduled for final hearing on May 26 and 27, 1981. The only issue remaining for determination in the instant proceeding is the quality of water and sewer service provided by petitioner to its customers in Citrus County, Florida.

At the hearing, seven water and sewer service customers testified, and twenty-five other customers adopted the testimony of one of the witnesses who testified. The petitioner presented the testimony of Charles Sweat, petitioner's vice president of operations, and Barry K. Asmus, who provided accounting and rate structure consulting services to petitioner in this case. Received into evidence at the hearing were Hearing Officer's Exhibit 1, with attachments A through G, and Public Counsel's Exhibit A. Official notice was taken of Florida Public Service Commission Orders Number 9545 and 8752.

At the conclusion of the hearing, it was announced that the parties would have ten days from the date of receipt of the transcript within which to file proposed findings of fact, proposed conclusions of law and a proposed recommendation. The transcript was received by the Division of Administrative Hearings on March 17, 1981. Counsel for the petitioner and the intervenor filed proposed recommended orders on March 30, 1981, and counsel for the Public Service Commission filed a proposed recommended order on April 14, 1981. To the extent that the carties' proposed findings of fact are not incorporated in this Recommended Order, they are rejected as being either irrelevant or immaterial to the issues for determination, not supported by competent, substantial evidence adduced at the hearing, or as constituting conclusions of law as opposed to findings of fact.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following facts relevant to the issue presented for determination are found:

1. Customers who testified at the hearing and those who adopted the testimony of others had three major complaints as to the quality of water and sewer service received from the petitioner. These included the inconsistency of the quality of the water, billing procedures and practices, and plant and system management.

2. The quality of the water which petitioner provides to its customers has not been consistent. While quality has greatly improved since November of 1980, the water does, on occasion, appear rusty, muddy or yellowish and does, on occasion, discolor laundry and ice cubes. No evidence was offered as to the frequency of such occasions.

   
   

3. Some customers have received a bill for a vacant lot upon which there was no sewer connection or water meter. Another customer was billed at the wrong address after notifying the petitioner of a change in address. A customer who spent some eighteen months in Michigan continued to receive bills in full service amounts after he had requested that his water be disconnected. His correspondence on this problem was not responded to by Petitioner.

   
   

4. Petitioner's main office is located in Orlando, approximately one hour away from Inverness. When major breakdowns in the water and sewer system occur, a crew can be dispatched from the Orlando area.

   
   

5. Petitioner purchased the subject water and sewer operation in June of 1978. At that time the condition of the mechanical and electrical aspects of the operation was poor and the water was high in iron content, thus causing the water to have an almost constant rusty appearance. Petitioner installed a chemical called "aquamag" to hold the iron in suspension. Aquamag does not, however, remove the iron from the water, and petitioner is presently engaged in research concerning the possibility of a new water supply. It is possible that petitioner could have a new well in operation by June of 1981.

   
   

6. Neither the water system nor the sewer system of petitioner are currently under any citations from local or state officials or agencies.

   
   

7. Prior to November of 1980, petitioner employed three or four operators who were not able to provide the customers with the best quality of water possible. A new operator was employed in November of 1980 and service and the quality of water has greatly improved since that time. This operator is capable of handling routine operations. If major breakdowns occur, petitioner's mechanics and electricians in Orlando can be radio dispatched to the system for any type of repairs.

   
   

8. Petitioner's Orlando office has had a toll-free 800 number for the convenience of customers for the past eight months to one year. The number is displayed at some of petitioner's plants, but is not presently printed on the bills which the customers receive. At the time of the hearing, the customer bills were being restructured to include the petitioner's toll-free number.

   
   

9. Prior to the acquisition of the water and sewer system by the petitioner, the former owners had approval in their tariffs filed with the Public Service Commission to charge fees for vacant lots. Such charges were dropped in May of 1979, and the bills which the customers are presently receiving containing such a charge are actually past due bills from a time prior to May of 1979.

   
   

10. During the 1979 test year, the annual average of customers served by petitioner was 166 for water service and 130 for sewer service. At the time of the hearing, petitioner estimates approximately 235 lots for water service and

    159 or 160 active sewer service customers.

    CONCLUSIONS OF LAW

    
    

11. Disputed financial and attendant legal issues having been reserved by the parties for a future hearing, the only issue presently before the Hearing Officer concerns the quality of the services which the petitioner provides to its customers in Citrus County, Florida.

    
    

12. Among the considerations which the Florida Public Service Commission must take into account when it fixes water and sewer rates which are just, reasonable, compensatory and not unfairly discriminatory are the value and the quality of the service provided. Florida Statutes, Section 367.081(2). While value and "quality" of service have not been specifically defined by the Legislature or by the Public Service Commission in its rules, it must be concluded that these terms would include the quality of the water delivered to the customer. Section 367.111 (2), Fla. Stats. (1980 Supp.), provides as follows:

    
    

    "Each utility shall provide to each person rea- sonably entitled thereto such safe, efficient, and sufficient service as is prescribed by the Florida Safe Drinking Water Act and the Florida Air and Water Pollution Control Act, or rules adopted pursuant thereto, or, if applicable,

    chapter 17-22, Florida Administrative Code; but such service shall not be less safe, less efficient, or less sufficient than is consistent with the approved engineering design of the system and the reasonable and proper operation of the utility in the public interest."

    
    

13. Here, the evidence adduced at the hearing illustrates that petitioner's water and sewer systems are not presently under citation by any local or state agency. It must therefore be presumed that petitioner's water and sewer systems are in compliance with local and state regulatory standards with regard to quality.

    
    

14. The evidence does indicate that on occasion, and the incidents have been less frequent since the new operator came in November of 1980, the water provided by petitioner to its customers has a rusty or yellowish appearance. The testimony adduced at the hearing by the petitioner's customers did not establish the frequency of the occurrence of such discoloration, and no further inquiry was made of these witnesses by either counsel for the Public Service Commission or the Office of Public Counsel.

    
    

15. According to the petitioner's vice president for operations, the rusty or yellowish appearance in the water is the result of the water's high iron content. Steps to alleviate this problem are presently being undertaken by the petitioner in the form of the addition of a chemical to suspend the iron in the water and research into the possibility of locating another source of water supply.

    
    

16. The evidence as a whole illustrates that the quality of water provided customers has improved over what it has been in the past, but that, on some occasions the frequency of which has not been established, the water takes on a rusty or yellowish appearance. Standing by itself, this evidence is not sufficient upon which to base a conclusion that water service provided by petitioner to its customers is unsatisfactory.

17. The remaining dissatisfactions of the customers relating to billing errors and plant maintenance were not sufficiently proven to justify a conclusion of inefficient service or management. Customers are no longer being billed for vacant lots. There was no evidence that dispatching a service crew from Orlando for major breakdowns created any inconvenience to customers or resulted in delays in maintenance or repair of the petitioner's water or sewer operations.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the quality of service provided by petitioner to its customers in Citrus County be found to be satisfactory and that no adverse consequences be imposed upon the petitioner as a result of the quality of its service.

Respectfully submitted and entered this 16th day of April, 1981, in Tallahassee, Florida.

DIANE D. TREMOR, 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 16th day of April.

COPIES FURNISHED:

R.M.C. Rose

Myers, Kaplan, Levinson, Kenin and Richards

Suite 103, 1020 East Lafayette Street

Tallahassee, Florida 32301

M. Robert Christ Legal Department

Florida Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Jack Shreve Public Counsel

Room 4, Holland Building Tallahassee, Florida 32301

Steve Tribble, Clerk

Florida public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Joe Cresse, Chairman

Florida Public Service Commission

101 East Gaines Street Tallahassee, Florida 32301

Docket for Case No: 81-000258

Orders for Case No: 81-000258