Findings Of Fact Service At the end of the test year (calendar year 1978), the utility provided water service to approximately 203 customers located in the Country Estates Subdivision in Holiday, Pasco County, Florida. The system was connected to the Pasco Water Authority (PWA) in June, 1977, and approximately 80 percent of the water sold to its customers is derived from that source. The utility has no further growth potential inasmuch as it is presently operating at full capacity. Two customers testified at the hearing. One was dissatisfied with the requirement that Valmont be connected to the PWA, and complained of a sulfur- type odor emanating from the system. The other complained of excess water pressure and salt water intrusion in the water, both of which began after the connection of the system to the PWA pipeline. Notwithstanding the above complaints, the utility is now meeting all State Standards for water quality, quantity and pressure. The few complaints previously lodged with regulatory agencies have been expeditiously resolved. Rate Base The utility has proposed an average water rate base in the amount of $20,295 (Exhibit No. 6). This figure is derived by taking the balance in plant in service as reflected on the books of the utility, subtracting accumulated depreciation and contributions in aid of construction, and adding a working capital allowance. The following schedule portrays the appropriate rate base to be used herein. Valmont, Inc. Average Water Rate Base Year Ending December 31, 1978 Utility Plant in Service $42,385 Accumulated Depreciation (11,534) CIAC (Net of amortization) (14,215) Working Capital Allowance 3,767 Rate Base $20,295 Operating Income The utility reflects a per books operating loss for the test year of $3,156 (Exhibit No. 7). After including changes in the level of various expenses and the additional revenues sought herein ($10,305), the utility's proposed adjusted operating income is $2,638. The Commission agrees with the computations presented by the utility, and this amount should be accepted. The following schedule depicts the pro forma operating income of the utility for calendar year 1978. Valmont, Inc. Operating Income Year Ended December 31, 1978 Operating Revenues $34,911 Operating Expenses: Operation 29,397 Maintenance 736 Depreciation 516 Misc. Taxes 1,084 Income Taxes 540 Total Expenses 32,283 Operating Income $ 2,638 Cost of Capital The capital structure of the utility is composed of 100 percent common equity. The Commission advocates a cost rate of 13 percent be assigned to equity based upon a regression analysis of interest rates since 1946. The utility agrees this is an appropriate cost of capital, and it should be used in determining the revenue requirements of the utility. Revenue Requirements Based upon a 13 percent overall cost of capital, the utility should be entitled to increase its water revenues by $10,305 on an annual basis in order to achieve that return. Rate Design The utility presently has three customer classifications for water service: residential, general service and commercial. However, it has no customers receiving service under the general service category. The billing structure for each of the three classifications is based upon a minimum charge, depending on the size of the motor, and an excess charge for each 1000 gallons used thereafter. The base facilities charge advocated by the Commission is superior to the rate design presently used. Under this type of structure, a minimum charge will be assessed to recover the fixed or base costs of providing service, such as depreciation, taxes, insurance and a portion of billing and collecting expenses. Thereafter, a variable charge will be made for the gallons actually consumed. Because this type of rate structure offers greater control to the customer as to the amount of his bill, and allocates costs in a more equitable manner, it should be adopted.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent Valmont, Inc. be authorized to file new tariffs to be approved by the Public Service Commission that will generate $10,305 in additional annual gross revenues for its water operations. It is further RECOMMENDED that the utility file appropriate tariff sheets in conformity with the Rate Design portion of this Order. This Recommended Order entered on this 9th day of December, 1980, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 1980. COPIES FURNISHED: Marta M. Crowley, Esquire 101 East Gaines Street Tallahassee, Florida 32301 William E. Sundstrom, Esquire Suite 103, 1020 East Lafayette Street Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the stipulation of facts contained in the parties' Prehearing Stipulation, the following relevant facts are found: STANDING The Florida Waterworks Association (FWA) is comprised of fifty water and/or sewer companies, forty-four of which are regulated by the PSC. The subject matter of the challenged rules is within the FWA's general scope of interest and activity on behalf of its members. The eight named petitioners, five of which are FWA members, are all regulated by the PSC. Several of the utility members of the FWA have applications pending before the PSC for changes in rates, service availability and the issuance of new certificates. Statistics compiled from Annual Reports filed with the PSC by members of the FWA and the three non-member petitioners reveal that eight utilities have CIAC in levels exceeding 75 percent and thirty-one have less than 55 percent CIAC, through it was not established whether these companies were operating at designed capacity. The intervenor Florida Home Builders Association (FHBA) is a statewide organization representing the building industry in Florida. Some 54 percent of residential building in Florida is performed by members of the FHBA. Numerous members of local homebuilder associations are serviced by water and sewer utilities regulated by the PSC, and many members own and operate water and sewer companies regulated by the PSC. The PSC staff presently reviews the service availability policy and charges for compliance with maximum and minimum CIAC levels in applications for rate increases and for original certificates. If a utility is found to be not in compliance with the minimum and maximum guidelines and declines to voluntarily come within the guidelines, the matter may be referred to the Commissioners for review. The maximum and minimum CIAC requirements have been applied by the PSC to utilities which have not specifically requested a change in service availability charges or policies. CIAC--Definition (Proposed Rule 25-30.513(3)) (4) CIAC is defined by statute as including any amount or item of money, services, or property received by a utility, from any person or governmental agency, any portion of which is provided at no cost to the utility, which represents a donation or contribution to the capital of the utility, and which is utilized to offset the acquisition, improvement, or construction costs of the utility property, facilities, or equipment used to provide utility services to the public. Section 367.081(2) Florida Statutes. The challenged proposed rule utilizes the same definition, but substitutes the words "addition or transfer" for "donation or contribution." Proposed Rule 25-30.513(3). Within the water and sewer industry, the term "addition" generally means an increase in plant and a "transfer" can be a transfer of property for which a utility itself might pay. On the other hand, the words "contribution or donation" generally mean property, money or services with no liability on the utility's part. By substituting the words "addition or transfer" for "donation or contribution," it was the intention of the PSC to clarify the latter two words and not to change the statutory definition of CIAC. Inasmuch as the words "donate or contribute" have a connotation of being a gift or something voluntarily given to a charity, the words "addition or transfer" to the capital of a utility, when qualified by the prior words "at no cost to the utility" more clearly characterize CIAC. CIAC is given to obtain service. It is not necessarily voluntarily given. GUIDELINES (Proposed Rule 25-30.58) The challenged proposed guideline rule (Rule 25-30.58) sets a limit on the amount of CIAC in the amount of 75 percent of the total original cost, net of accumulated depreciation, of the utility's facilities and plant when they are at their designed capacity. While a specific minimum percentage figure for CIAC is not stated in the proposed rule, the minimum amount of CIAC is not to be less than the percentage of the facilities and plant represented by the water transmission and distribution lines and the sewage collection systems. In other words, the percentage of the utility plant represented by the water transmission and distribution system and/or the sewage collection system is the guideline for the minimum percentage of CIAC under the proposed rules. For the average Florida water and sewer company, this minimum CIAC level will be approximately 55 percent for water systems and approximately 65 percent for sewer systems. A utility may be exempt by the PSC from compliance with these minimum and maximum guidelines in cases of "unusual hardship or unreasonable difficulty" and where it is shown that it is not in the best interests of the customers to require compliance. A utility may earn a fair rate of return only on its own investment. Since CIAC is contributed or donated, it is excluded from the rate base of a utility. The utility is not entitled to earn a return on the value of its CIAC, nor is a regulated utility entitled to collect a depreciation expense on CIAC. CIAC is virtually synonymous with service availability charges. The acceptance of CIAC by a utility is beneficial to both the utility and the customer. It is a cost-free source of capital for the utility and, because it is not included as a part of the utility's rate base, it reduces the long-run monthly or periodic cost of utility service to the customer. Excessive amounts of CIAC can be detrimental to the operation of a utility in two respects. First, since CIAC is not included in rate base, the utility may not earn a return on the amount it receives from CIAC. Thus, if the utility faces an increase in operating and maintenance expenses, and it is heavily financed by CIAC, it may find itself in a cash-flow crisis with no income to cover increased expenses. The absence of a rate of return on rate base leaves the utility more vulnerable to the negative effects of operating attrition. Such a cash-flow problem could affect the utility's ability to provide adequate service and could cause abandonment of the plant. A second negative effect of very high levels of CIAC, and consequently very low levels of owner investment, is that the owners, with no opportunity to earn a return on the system, may lose their incentive and commitment to maintain and operate the system in a quality, cost-efficient manner. The appropriate maximum level of CIAC, and the consequent appropriate level of owner investment, was the subject of a study and recommendation made by Theodore Barry and Associates, a consulting firm hired by the PSC. Based upon discussions with members of the industry, a review of PSC statistics and records, and a simulation of the effects of a 10 percent increase in unreimbursed costs on a utility, it was recommended that a minimum owner investment level of 20 percent to 25 percent would be appropriate to maintain quality of service and to alleviate the effects of operating attrition. While there is evidence that very high levels of CIAC may have contributed to the abandonment of two small utilities in Florida, there is no concrete statistical data from existing utilities which conclusively illustrates that a high level of CIAC, by itself, adversely affects owner incentive or quality of service or which supports the direct relationship between higher invested capital and greater efficiency. There are other methods to prevent operating attrition from diminishing funds necessary for the operation of a water and/or sewer utility. Other means of increasing the cash flow of a utility include indexing adjustments, provisions for the "pass through" of increases in taxes and purchased electricity, water or sewer services, the allowance of depreciation on CIAC and the allowance of a management fee on CIAC. As noted above, the minimum level of CIAC established as a guideline in the proposed rule is not a stated percentage figure but is, instead, the amount of plant represented by the utility's transmission, distribution and/or collection system. The rationale for a minimum level of CIAC based upon the distribution or collection system is that these systems have a longer useful life than the treatment facilities and that the customer or developer should bear the costs of these systems since they primarily determine the location and consequent costs of the distribution and collection lines. Numerous factors affect the decision as to the appropriate capital structure and management of water and sewer companies in Florida. These include the geology of the area, the size of the plant, the size and configuration of the service area, usage patterns, population densities, the degree of applicable environmental or governmental regulation, operation and maintenance expenses and the authorized rate of return on investment. Also, levels of investment and CIAC may vary over the life cycle of a single water or sewer utility. For these reasons, a specified numerical CIAC percentage requirement for every regulated water and sewer utility would be unreasonable, and a range is preferable. If every utility were required, without exception, to maintain a maximum level of CIAC in the amount of 75 percent and a minimum level in the amount of 55 percent (water) or 65 percent (sewer), various problems could be encountered. For example, there may be occasions where the minimum required level of CIAC exceeds the authorized maximum level. This could occur if the utility were connected to a regional facility and a portion of its plant is no longer in use. Utilities which have more than 75 percent of their total capital involved in water distribution and sewer collection lines do exist. Another problem could result where the utility already has 25 percent owner investment and additional funds are needed to replace or repair contributed property. If the owner could obtain borrowed money, he would not be permitted to earn a return on this money. Also, if a utility system is 100 percent "built out," its CIAC level will gradually diminish and, if there are no more customers, a small utility would have no means of increasing its level of CIAC. As noted above, the proposed rule which sets guidelines for minimum and maximum CIAC levels also provides an exemption for utilities where it is illustrated that compliance would introduce an unusual hardship or unreasonable difficulty and that compliance would not be in the best interest of the customers of the utility. IMPUTATION (Rule 25-30.57) Challenged proposed rule 25-30.57 provides for the imputation of CIAC in cases where the actual amount of CIAC has not been recorded on the utility's books and the utility does not submit competent substantial evidence as to the amount of CIAC it has received. In such cases, the amount imputed will be the amount of plant costs charged to the cost of land sales for tax purposes, if available, or the proportion of the cost of the facilities and plant attributable to the water transmission and distribution system and the sewage collection system. Again, the proposed rule provides for the waiver of imputation where there is unusual hardship or unreasonable difficulty and where such imputation would not be in the best interest of the utility's customers. Water and sewer utilities regulated by the PSC are required to keep records according to the NARUC Uniform Systems of Accounts. The NARUC system requires the recording of CIAC, and records kept according to that system will satisfy the requirements of the proposed rule. Also, almost all utilities have records which establish rate base. Since rate base is investment, the remaining plant and facilities would be CIAC. Almost all regulated water and sewer utilities in Florida accept CIAC. If CIAC were imputed to a utility which previously claimed little or no amounts of CIAC, its rate base and revenues would be reduced. Likewise, if CIAC were the sole source of plant acquisition, the rule would impute investment where there was none. APPLICABILITY (Rule 25-30.51) The challenged proposed rules become applicable to a utility when the utility files for a change in its service availability policy or charges or when the PSC initiates a show cause proceeding to require the utility to change such policy or charges. The rules are not applicable to policies implemented or contracts entered into prior to the effective date of the rules. All regulated water and sewer utilities are presently required to have their rates, charges and service availability policies on file with the PSC. Absent an approved change in the tariff on file with the PSC, a utility is required to follow what is outlined in the tariff on file. REPEAL OF PRIOR RULES AND DELETION OF CERTAIN PROVISIONS (PSC Order No. 11006 and Rule 25-30.53(3)(b) and 25-30.545(3)(b) The PSC's repeal of prior existing Rules 25-10.120 through 25-10.144, in connection with the wording of the applicability section of the challenged proposed rules, has the effect of leaving those utilities which have not filed for a change in their service availability charges or policy or which have not had a show cause proceeding instituted against them with no rules relating to service availability charges and conditions. The original draft of the proposed rules authorized the collection of costs of compliance with an ordinance, regulation or other specification of a public authority and the collection of costs of relocating facilities after a determination of final grades of a right-of-way. These provisions were deleted in the final revision to the proposed rules. (Rule 25-30.53 (3)(b) and (e) and Rule 25-30.545(3)(b)) The deletion of these provisions does not necessarily preclude recovery of such costs. Specific areas of recovery were not enumerated in the proposed rules because such an enumeration would carry the inference that other costs associated with compliance with ordinances or regulations, extension of services or relocations of plant could not be collected. To be consistent with the remaining proposed rules, it must be determined whether the customer or the utility bore certain costs and the ratios of investment and CIAC to total plant must be considered. The cause of the cost does not determine the party which initially pays the cost. COMPLAINTS AND DEVELOPER'S AGREEMENTS (Rules 25-30.54(4) and 25-30.585) Proposed Rule 25-30.54(4) authorizes an applicant for extension of service to file a complaint with the PSC if it believes that the charges required by a utility are unreasonable. No competent substantial evidence was offered by the petitioners or intervenor in support of the claim in their petition that this proposed rule is discriminatory in favor of developers or an invalid exercise of delegated legislative authority. The PSC is statutorily charged with the responsibility to investigate agreements or proposals for conditions and charges to be made by a utility for service availability. Section 367.101(1), Florida Statutes. As presently proposed, Rule 25-30.585 makes reference to a Rule 25- 30.11. No such rule exists. Prior to the renumbering, the rule containing the guidelines for designing service availability policy (Rule 25-30.50) was numbered 25-30.11. Petitioners' complaints regarding the vagueness of the terms "basic principles" and "potential impact" of Rule 25-30.585 were not supported by competent substantial evidence. ECONOMIC IMPACT STATEMENT The Economic Impact Statement (EIS), as revised, prepared for the challenged proposed rules notes that the implementation of the proposed rules will involve the cost of reviewing information to determine compliance with the new CIAC guidelines and the cost of show cause proceedings requiring new service availability policies of those companies not compliance. Inasmuch as the PSC presently has the responsibility of reviewing service availability policies and charges, it is anticipated that existing resources of the PSC will be sufficient to implement the proposed rules. The EIS notes the economic effect upon the water and sewer industry of the proposed rules relating to applicability of the rules and the "grandfather" provision, the reporting of original cost information, the limitations on the minimum and maximum CIAC levels, the imputation of CIAC and further notes that the impact upon the industry will be mitigated by the waiver and/or exemption provisions in cases of undue hardship. The economic effect of the proposed rules upon potential new entrants into the industry are also recognized. The EIS makes reference to the economic costs and benefits of the proposed rules' CIAC requirements upon existing customers and new customers. While specific dollar figures are not provided in the EIS, the Statement notes the overall economic effects of the minimum and maximum CIAC guidelines upon the industry and customers of water and sewer utilities. The proposed rules' impact on competition and employment is addressed in the EIS. It is estimated that, inasmuch as entry into the industry would be restricted to those companies which can finance at least 25 percent of the required investment, competition in the industry will be decreased. Because of the restrictions upon wells and/or septic tanks in some areas, it is noted that housing development in those areas could be limited if no water and sewer company desires to enter the market. It is further concluded that the smaller utilities may be more financially stable as a result of the rules. The EIS notes that the proposed rules would have "no apparent direct effect on employment." In preparing the EIS, the PSC relied upon data collected as a part of the Theodore Barry & Associates (TB&A) study of the water and sewer industry in Florida and additional data collected from annual reports on file with the PSC. In its statement of methodology, it was recognized that the data utilized was limited in scope and duration. The TB&A study does contain several statistical errors and the statistics included therein do not conclusively establish a numerical relationship between the level of CIAC and the viability or efficiency of a utility. Other reasons for problems within the water and sewer industry are noted in the study. The TB&A study, while referenced in the EIS, is not a part of the EIS and is not the EIS. It is logical to assume that if housing development is limited in certain areas, competition and costs for existing housing may be increased and employment in the housing industry may be affected. These effects are more in the nature of "ripple," rather than "direct," effects of the proposed rules. No evidence was presented by the petitioners or intervenor to establish that the economic impact upon the PSC or upon persons directly affected by the proposed rules was different than that estimated by the EIS, that the petitioners or intervenor were prejudiced by any alleged omission or inadequacy in the Statement or that the PSC did not fully consider the economic factors and impact of the proposed rules.
Recommendation That pursuant to Article 12.1.2, General Conditions of the Contract for construction of State Project Number HSMB-6115, Drivers License facility, Hillsborough County, Florida, a change order be approved and issued increasing the total contract sum in the amount of $6,788.00 as authorized under Paragraph 8.5 of the aforesaid contract. DONE AND ENTERED this 7th day of April 1976 in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: May Jo Carpenter, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida Stephen C. Cheeseman, Esquire Gordon and Maney 2919 First Financial Tower Tampa, Florida
Findings Of Fact Mr. Dayton Andrews is the President and owner of half of the stock of Marathon Trailerama, Inc. d/b/a Marathon Trailerama, Respondent, located at 1571 Overseas Highway, Marathon, Florida. Mr. Andrews acquired his interest in Marathon Trailerama in 1972, and has maintained the sewage disposal system in place at the time he acquired Respondent. He states that he has received no complaints about the system from the residents of the trailer park, and the two residents who testified stated they had no complaints about the system. Respondent has a 99 year lease for the property on which the trailer park is located, and the term of the lease began in 1962. The property owner, Juanita Matheny, testified that under the terms of the lease she has no responsibility, in her opinion, for the operation or maintenance of a sewage disposal system in the trailer park. Respondent holds trailer park permit number 44-067-85 which was most recently issued by Petitioner on January 1, 1985. This permit authorizes 125 independent trailer spaces, and grants Respondent the authority to operate as long as health laws and rules are observed. The permit is revokable at any time for failure to properly operate the trailer park. The original permit to operate a trailer park where Respondent is now located was issued in 1985 to Seven Mile Bridge Trailer Park and was for 45 trailers. On the application for this original permit, the method of sewage disposal to be used was shown as "cesspools 15 ft. below sea level (vented)." State Board of Health records from 1956 show the sanitarian for the Monroe County Health Department described and complained to the State Board of Health about the method of sewage disposal being used at Seven Mile Bridge Trailer Park, and that in response to said complaint the Chief of the Environmental Sanitation Section of the State Board of Health advised that " . . . we have not been able to locate any reference in our records in regard to the approval by the State Board of Health for a connection of this type . . . It is our opinion that this sewage collection device is undesirable because it permits the possible harborage of vermin and result in the creation of a sanitary nuisance." Despite this expression of concern in 1956, no enforcement action has ever been taken against Respondent, or its predecessor Seven Mile Bridge Trailer Park, prior to this action. In connection with the issuance of an operational permit for Marathon Trailerama in 1971, Petitioner notified the Monroe County Health Department that sewage flows in excess of 1200 gallons per day (more than 5 trailers) are required to be centrally collected for approved disposal, and flows in excess of 2000 gallons per day (more than 13 trailers) require a licensed engineer to prepare plans and specifications for the treatment process and disposal works in compliance with state health rules. The former owner of Marathon Trailerama, B. S. Ford, from whom Mr. Dayton Andrews acquired his interest, was copied on this notice. Currently Respondent has 125 trailer spaces in the park. Many of the trailer owners reside at Marathon Trailerama for only part of the year although there are some permanent residents. Petitioner inspected Marathon Trailerama on May 3 and 7, 1984 and also February 26, 1985. During the course of those inspections, thirty-two cesspools were identified in the trailer park, and the evidence presented supports Petitioner's contention that these cesspools were, and continue to be, in use. A cesspool is basically a hole in the ground into which raw sewage is deposited. The sides of a cesspool are usually porous, and the tidewater and ground water can pass directly into the cesspool and carry raw, untreated sewage away. Based on the evidence presented, the Respondent's cesspools fit this general description. Although there is no evidence of their presence in this case, dangerous diseases can result from the seepage of raw sewage from cesspools since the effluent is not properly treated before discharge. Petitioner did not take any water samples from nearby canals, nor were any tests done on the sewage in the cesspools to determine if diseases were present. Based upon standards for sewage produced per trailer, Petitioner estimates that 200 gallons of raw sewage are produced each day by each trailer, and therefore up to 25,000 gallons of raw sewage per day may be deposited in Respondent's cesspools when all trailer spaces are occupied. However, there is evidence of one septic tank and a community toilet facility in the park which is not on a cesspool, and these factors would reduce the total amount of sewage disposal using cesspools. On July 27, 1984 Petitioner notified Respondent that the operation of cesspools was a violation of the law and had to be corrected within ten days. Respondent regularly pumps out the cesspools and immediately corrects any leaks. However, there is minimal benefit to health from pumping out a cesspool since the raw sewage immediately passes through the porous walls and does not remain in the cesspool for treatment. Unlike a septic tank in which the resulting effluent is treated, and solid materials deposited in the bottom of the tank over a long time can be pumped out, there is an almost immediate discharge of raw sewage from a cesspool. Therefore pumping would have to be almost constant in order to avoid the discharge of raw sewage and, thus, be beneficial. One of Respondent's cesspools is located seven feet from an adjacent canal which is used for boating and fishing. There was evidence of occasional, but not frequent, cesspool failure with resulting spillage of raw sewage on the grounds of the trailer park. Respondent promptly corrected such failures when they occurred. Petitioner's representatives saw German cockroaches and palmetto bugs in the cesspools, and testified that these insects can carry dangerous diseases under these conditions. However, no tests were done to determine if, in fact, disease was present in this case. Residents at Marathon Trailerama have no concerns or complaints about their sewage disposal. There have been no noxious odors in the park and no adverse effects on the health of the residents. The parties have submitted posthearing proposed findings of fact pursuant to Section 120.57(1)(b)4, F.S. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where such proposed findings of fact have been rejected as subordinate, cumulative immaterial, or unnecessary.
Recommendation Based upon the foregoing, it is recommended that Petitioner issue a Final Order imposing a $1500 fine against Respondent. DONE and ENTERED this 16th day of May, 1985 at Tallahassee, Florida. DONALD D. CONN, 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 May, 1985. COPIES FURNISHED: Morton Laitner, Esquire 1350 N.W. 14th Street Miami, Florida 33125 Alfred K. Frigola Esquire Post Office Box 177 Marathon, Florida 33050 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Steve Huss Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact The Petitioner is a wholly owned subsidiary of Florida Land Company which is, in turn, a wholly owned subsidiary of the Continental Group, Inc., a New York corporation. The parent developer companies are providing and will continue to provide the required financial backing. The Utility served 421 primarily residential customers at the end of 1979, the test year agreed to by the parties. This was the first rate proceeding involving the Utility since it was established in 1975. Service The Utility is providing satisfactory water and sewer service. There were no service complaints presented at the public hearing by the customers, nor were there any citations or corrective orders outstanding. Rate Base The Utility experienced rapid growth during the 1976 - 1979 period, increasing the number of customers served from 62 to 421. Therefore, year end rate base rather than average rate base should be utilized. 1/ The water and sewer rate bases are $155,920 and $179,360 respectively. These amounts are based on the computations detailed below and incorporate proposed Commission adjustments to which the utility stipulated. In addition, reductions to plant in service and construction work in progress (CWIP) were made by the Utility to reflect excess plant capacity which is of no benefit to current customers. The Utility replaced its reverse osmosis water treatment plant with a lime softening system in 1979. The new facility will be somewhat more expensive to operate but will improve water quality and fire flow (pressure). Because of the reverse osmosis water treatment plant retirement, the $3,615 in building and $34,541 in treatment plant assets remaining on the Utility books should be removed. This is a total adjustment to Utility Plant in Service of $38,156. A further reduction in both water and sewer rate base is needed to adjust the working capital allowance to the standard authorization, which is one-eighth of operation and maintenance expenses. The proper amounts to he authorized in these accounts are $5,338 water and $2,931 sewer. TEST YEAR PER UTILITY UTILITY ADJ. TEST ADJ. TO YEAR PER COMM. ADJ. & CORRECT. TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR $820376. $-551059. $269317. $-38156. $231161. 57866. -57866. 0. 0. 0. -18841. 17155. -1686. 0. -1686. -238419. 159526. -78893. 0. -78893. Water Rate Base Plant in Svc. C.W.I.P. Accum. Depr. C.I.A.C. Net of Amort. Working Capital Allowance 4755. 1421. 6176. -838. 5338. Income Tax Lag 0. 0. 0. 0. 0. Rate Base $625737. $-430823. $194914. $-38994. $155920. Sewer Rate Base UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Plant in Svc. $591945. $-205690. $386255. $0. $386255. C.W.I.P. 77919. -77919. 0. 0. 0. Accum. Depr. -2815. 2551. -264. 0. -264. C.I.A.C. Net of Amort. -321611. 112049. -209562. 0. -209562. Working Capital Allowance 2558. 401. 2959. -28. 2931. Income Tax Lag 0. 0. 0. 0. 0. Rate Base $347996. $-168608. $179388. $-28. $179360. Operating Revenues The Utility is seeking water revenue of $41,429 and sewer revenue of $35,550. Computations and adjustments in support of these amounts along with test year expenses are detailed below. Because of the extraordinary expenses associated with replacement of the water treatment plant, it would not be appropriate to utilize test year data to determine operating costs. Therefore, a projected or pro forma operating expense of $42,789 removing replacement expenses is proper. A further adjustment to water operations is required to eliminate $1,987 of depreciation expense on contributed property as not authorized by current law. 2/ In addition, the useful life of various items of equipment should be increased to periods of 20 to 40 years. These extended depreciation periods are based on an engineering study which the Utility does not challenge. Finally, the requested revenue increase of $27,432 and the associated gross receipts tax of $686 are reversed to show test year operating results. The requested sewer revenue increase of $19,413 and gross receipts tax of $485 are also reversed on the sewer operating statement to show test year operating results. As with the water plant, depreciation on contributed sewer plant is disallowed, reducing depreciation by $5,261. Water Operating Statement UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR $ 14006. $ 27423. $ 41429. $-27423. $ 14006. 38039. 11368. 49407. -6678. 42789. 0. 0. 0. 0. 0. 6325. 3762. 10087. -5525. 4562. 0. 0. 0. 0. 0. 1979. 500. 2479. -686. 1793. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. Oper. Revenues Oper. Expenses Operation Maintenance Depreciation Amortization Taxes Other Than Income Other Expenses Income Taxes UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Total Operating Expenses $46343. $15630. $61975. $-12889 $49084. Oper. Income -32337. 11793. -20544. -14534. -35078. Rate Base $ 825737. $ 194914. $ 155920. Rate of Return -5.17 pct. -16.54 pct. -22.50 pct. Oper. Sewer Operating Statement UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Revenues $16137. $19413. $35550. $-19413. $16137. Oper. Expenses Operation 20462. 3208. 23670. -233. 23437. Maintenance 0. 0. 0. 0. 0. Depreciation 619. 9060. 9679. -5261. 4418. Amortization 0. 0. 0. 0. 0. Taxes Other Than Income 1747. 630. 2377. -485. 1892. Other Expenses 0. 0. 0. 0. 0. Income Taxes 0. 0. 0. 0. 0. Total Operating Expenses $22828. $12898. $35726. $-5979. $29747. Oper. Income $-6691. $6515. $-176. $-13434. $-13610. Rate Base $847996. $179388. $179360. Rate of Return -1.92 pct. -10. pct. -7.59 pct. Capitalization Debt $ 555,624. 60.96 percent Customer Deposits 6,195. .68 The capitalization of the Utility is as follows: Amount Percent to Total Common Equity 349,627. 38.36 $ 911,446. 100.00 percent Rate Design Both parties seek adoption of a base facility charge rate structure. This rate design provides a fixed charge to each customer served computed on that customer's share of fixed operating costs. The second element of the base facility charge represents the variable cost of water actually used. This rate design provides an equitable method of allocating service costs and has been adopted in virtually all recent water and sewer rate proceedings. The base facility charge should also be utilized where there is a temporary discontinuance of service. The Commission proposes a tariff revision incorporating a monthly standby charge equal to the base facility charge. Again, this method allocates the Utility's readiness to serve costs equitably among both active and temporarily inactive customers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the petition of Sugar Mill Utility Company be granted in part, and that Petitioner be authorized to file new rates structured on the base facility charge concept, designed to generate gross water revenue of $41,429 annually, and gross sewer revenue of $35,550 annually, based on the number of customers served at the end of the test year. It is further RECOMMENDED that the Petitioner be permitted to retain interim revenues collected pursuant to Respondent's Order No. 9392, and that tie rate refunding bond requirement of said order be cancelled. DONE and ENTERED this 20th day of November, 1980, in Tallahassee, Leon County, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
Findings Of Fact The Petitioner is a water and sewer utility subject to the jurisdiction of the FPSC. The utility's water and sewer service is in compliance with governmental requirements. 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. The test year rate base was $83,472 for water and $83,818 for sewer. 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. 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. 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).
The Issue What is the appropriate rate to charge for providing waste water treatment services to the customers of Ranch Mobile WWTP, Inc.?
Findings Of Fact Ranch Mobile WWTP, Inc., is a Class "C" wastewater treatment facility located in the City of Largo, Florida. The original certificate currently held by Ranch Mobile was issued on March 22, 1977 to Midway Service Corporation and was transferred on April 17, 1985 to Ranch Mobile. Ranch Mobile serves three mobile home parks, Ranch Mobile, Down Yonder and Twin Palms. The utility is owned by its largest customer, Ranch Mobile, a cooperative mobile home park with 488 members. Down Yonder has 229 members, and Twin Palms has 149 members. After purchasing the utility, Ranch Mobile commenced efforts to bring the utility in compliance with Department of Environmental Regulation's requirements. These efforts included preparing new percolating ponds, which, when completed, did not allow the utility to meet DER requirements. Faced with disciplinary action by DER, Ranch Mobile was offered the option by DER of connecting to the City of Largo's wastewater treatment facility in lieu of much more expensive procedures which were not guaranteed to meet DER requirements. Suffice it to say, Ranch Mobile opted for connecting to the City of Largo system and did so. It is to recover the costs of the services provided by the City of Largo that Ranch Mobile seeks the rate increase here involved. On April 3, 1990, Ranch Mobile filed for a staff-assisted rate case and paid the filing fee. On May 22, 1990, the PSC staff engineer conducted a field investigation resulting in memorandum dated June 4, 1990. (Exhibit 1) The PSC Division of Audit and Finances reviewed the utilities operation expense, files, and rate application to establish reasonableness of the original cost, utility plant retirements, and quality of service, resulting in the memorandum dated August 21, 1990. (Exhibit 3) On September 27, 1990, a customer meeting was held to allow customers to provide testimony regarding the qualify of service being provided by the utility. No adverse testimony to quality of service was offered. Although Petitioners' witness questioned some minor costs allowed by the PSC staff report, this witness was not qualified as an expert in utility rate proceedings, and his opinion is given little, if any, credence. The rates proposed in Exhibit 2 are just, reasonable, compensatory, and not unfairly discriminatory, and conform to the requirements of Section 367.081 and 367.0814, Florida Statutes.
Recommendation It is recommended that a Final Order be entered approving and establishing rates for Ranch Mobile to charge its customers as set forth in the Final Order granting temporary rates in Event of Protest and Notice of Proposed Agency Action, Order Approving Increased Rates and Charges. ENTERED this 29th day of May, 1991, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of May, 1991. COPIES FURNISHED: Thomas E. Reynolds, Esquire Suite 300, 100 2nd Avenue North St. Petersburg, FL 33701 Vernon R. Wagner, Esquire 4508 Central Avenue St. Petersburg, FL 33711 Robert J. Pierson, Esquire E. Gaines Street Tallahassee, FL 32399-0863 Steve Tribble Director of Records and Recording East Gaines Street Tallahassee, FL 32399-0850 Susan Clark General Counsel Public Service Commission 101 East Gaines Street Room 212 Tallahassee, FL 32399-0850 David Swafford Executive Director Public Service Commission 101 East Gaines Street Room 116 Tallahassee, FL 32399-0850
The Issue Petitioner has alleged that Respondent violated the Florida Civil Rights Act of 1992 and its predecessor statute by discriminating against him based on his age and national origin in the following: denial of promotion to liftstation mechanic; disparate treatment with regard to training opportunities, transfers, overtime opportunities and disciplinary actions; ridicule and other demeaning actions, such as being escorted to the restroom; and other harassment in retaliation for his complaints. Both parties have requested attorney's fees and costs and it is necessary to determine if such award is appropriate. The primary issue for disposition is whether the alleged violations occurred, and, if so, what relief is appropriate. Although other actions, including termination, have occurred since the complaint was filed, the parties have concurred that those actions are not the subject of this proceeding.
Findings Of Fact Emiliano Santos was born in Puerto Rico in 1944 and came to the United States in 1964. Spanish is his first language, and, in his words, he has been struggling with English since 1964. Mr. Santos was employed by the City of Melbourne on January 8, 1990. His first job was as a custodian helper in the auditorium. Approximately six months later he applied for positions as Maintenance Worker I and Maintenance II in the city sewer department; he was given the Maintenance II position, the higher level, because of his employment with the city. Robert Klaproth is the Melbourne water and sewer administrator in charge of the day-to-day operations of the water and sewer division. Tom Hogeland is the water and sewer operations superintendent for the City of Melbourne and has been in that position for approximately five years. Under his supervision is Greg Williams, supervisor of the sewer collection division, who in turn directly supervises Doug Hammond, the liftstation maintenance foreman, and Bob Lyons, the maintenance and construction crewleader. Under those two latter individuals are technical workers such as liftstation mechanics, the liftstation electrician, equipment operators, and other crew leaders. At the entry-level or laborer level are the maintenance workers I and II and utility system service workers. As of January 1992, that entry level in the sewer collection division included, among others, Mr. Santos, William Spann, Joseph Concepcion, and Martin Koehler. The Liftstation Mechanic Promotion Some time in the summer of 1992, an opening came up in a liftstation mechanic position; and Tom Hogeland was directly involved in the recruitment and hiring process. Five applicants sought the position: Mr. Santos, William Spann, Elmer Cross, Oscar Vega and Cecil Smith. The position was advertised in-house as a promotional opportunity. It called for five years mechanical experience in the repair and maintenance of pumps, motors and other associated mechanical equipment. Each applicant was given a copy of the job description in advance of the interview. At the individual interviews Tom Hogeland described the physical condition of the job and asked the individual whether he was familiar with the position description. He also asked four questions to determine the applicant's basic familiarity with pumps and equipment used in liftstations, and he asked each about his background and experience. Of the five applicants, Tom Hogeland found only two had the minimum five years' experience: William Spann and Elmer Cross. Hogeland verified the experience of each applicant. William Spann had claimed experience in the Marine Corps and Hogeland called and spoke with someone in the Corps who was familiar with Spann's experience. Hogeland verified Elmer Cross' experience with his city supervisor, as Cross was working in the Melbourne wastewater treatment plant. Emeliano Santos claimed on his application that he had the requisite experience in a prior job with the John Deere company. When Hogeland called the company he was told that Mr. Santos had not worked as a mechanic, but was a machinist, assembling and operating machines. He had no pump mechanic experience at John Deere. Because of his seniority with the city, Hogeland recommended Elmer Cross for the opening. However, it was not a promotion for Cross and he told Hogeland that he decided to turn down the transfer. The position was then offered to William Spann, who accepted it. At hearing, Mr. Santos admitted that he did not have the requisite five years' experience. He claimed, however, that William Spann did not have the experience either. William Spann is a white male in his 20's who was hired as a maintenance worker I in 1990 in the sewer division. His prior experience was as a maintenance sergeant at Camp LeJeune, including the responsibility for maintaining and servicing the wells and pumps at the facility. This military experience and his experience with the city, when he was assigned to assist the liftstation mechanic, combined to provide him the requisite minimum five years. Contrary to Mr. Santo's claim that he was the only one who was quizzed on his knowledge, both William Spann and Oscar Vega (an Hispanic) testified that their interviews included the questions described by Tom Hogeland. Training Opportunities The city sponsors or pays for its employees' attendance at various training sessions and tries to insure that everyone has an opportunity for such training each year. Tom Hogeland generally makes the final decisions where there is a dispute about who can participate. As required by union contract, the educational opportunities are posted on the bulletin board, and commonly there is no dispute because selections for attendees are made on the basis of seniority and rotation. Selections are also made based on whether the opportunity relates to an individual's job. Mr. Santos alleges that he and other minorities were passed over in favor of white employees who were given training opportunities. He was selected, and attended, a pump school in Orlando, but he contends that the city denied any employee's attendance at another pump school when a number of minorities signed up for the school. Robert Klaproth has cancelled training opportunities twice, both in the wastewater treatment division. On one occasion the opportunity was posted and employees applied, but the school could not be approved because there was no money for it in the budget. On another occasion twenty people signed up, and when the union could not resolve who should go, the opportunity was cancelled. In neither case was race or ethnicity of the employees an issue. There is no evidence that race, age or ethnicity has been an issue in any decision by the city in providing training opportunities. Over-time Opportunities There are three types of overtime for employees in the sewer division. The first is a voluntary on-call overtime for which employees sign up and take one week at a time. During that week the employee forfeits his free time and must be available for emergency response. The second type of overtime is the scheduled emergency overtime which occurs when repairs need to be scheduled after hours when there is reduced demand on the system, or when an emergency occurs which cannot be handled by the on-call person, alone. The third type of overtime occurs when a job is not finished by quitting time and the crew needs to stay over to get the system back together. Generally the crew who starts the job has the opportunity to stay and finish it. Overtime is voluntary and is granted on rotation. The list is posted, by seniority, and when the individual's name comes up, the opportunity is offered, and if it is declined, the individual's name goes back to the bottom of the list. Overtime is compensated at time and a half, either in pay or compensatory time off, at the employee's option. There was a period during 1991 or 1992 when Mr. Santos declined overtime. He claims he declined because it was not being handled fairly, that the rotation was not being followed and that he was being passed over. Aside from some evidence that the overtime postings were removed from the employees' bulletin board for a brief period by some unknown person, there is no evidence that the union-prescribed rotation system was not followed. The 1992 records maintained by Greg Williams reflect a substantial amount of overtime available to Mr. Santos and no evidence that he or the other minorities in the division were being passed over. In 1993, Mr. Santos was provided more than the average amount of overtime hours provided to other employees in the sewer division. Disciplinary Incidents Mr. Santos has been disciplined on several occasions. On one occasion, he, Joseph Concepcion (an Hispanic) and Perry McThenney (Black) were disciplined for leaving the city limits in the city truck to buy some work shoes for Mr. Concepcion. Neither Mr. Concepcion nor Mr. McThenney considered the discipline unwarranted; they understood they violated city policy and did not consider the discipline as discriminatory. On another occasion, incentive points which were used to obtain a raise in pay were removed by the city after it learned that Mr. Santos forged the signatures of his supervisor and other employees on documents related to those incentive points. Mr. Santos freely admits the forgery but dismisses its significance, as he claims he was attending the classes on his own time, and received academic credit for the classes. These were classes taken in coordination with an on-job training program which required the periodic certification by the city that Mr. Santos was working as an electrical apprentice. In October 1992, Mr. Santos was given a written reprimand and leave without pay for taking a full day off for a medical appointment that was approved for a half-day. That discipline was rescinded after Mr. Santos explained to Robert Klaproth that he needed the day to go to the doctor, go to the bank to get money for his prescription and to buy the prescription. Other Hispanic employees have been disciplined from time to time. There is a union grievance procedure in place and it has been used by Mr. Santos and others. In some instances the grievance has been upheld and the discipline rescinded; in other cases the discipline has been upheld. No evidence was presented that the disciplinary process or grievance process have been used by the city to discriminate against Hispanics or other minorities; that is, no competent evidence was presented that white employees received less or no discipline for similar infractions. Ridicule, Harassment or Retaliation Claims Sewer collection division supervisor, Greg Williams, received complaints from other workers, including Joseph Concepcion, that Mr. Santos was taking the truck to make telephone calls or to go to the bathroom and the crew was left at the field site without a vehicle or tools. He also heard complaints that Mr. Santos was leaving to go to the bathroom right after the crew left the breakroom. Greg Williams spoke with crew leader, Bobby Lyons, about telling everyone, and not just Mr. Santos, that the crew members should check with the others before leaving to see if anyone else needed to go; and to be sure that tools and equipment were left at the job site. Greg Williams did not instruct Bobby Lyons to "escort" Mr. Santos to the bathroom. Bobby Lyons did go with Mr. Santos to the bathroom on two occasions after that. The record does not reflect whether Mr. Lyons also went to the bathroom or had other errands to run at the same time. The crews in the city water and sewer division are a diverse group, comprised of whites, blacks and Hispanics. The work can be rough and difficult, and there is ample opportunity for banter and joking to get out of hand. Mr. Santos was involved on several occasions in such verbal spats and was orally chastised, along with the other employee. In the course of one verbal exchange, he called Martin Koehler a "prick" and Koehler called him an "asshole." These are not racial or ethnic epithets. Mr. Santos also complained that Joseph Concepcion was calling him names. Mr. Concepcion, a Hispanic, was not harassing Mr. Santos because of his ethnicity. Two employees in particular in the water and sewer division were commonly heard to say "nigger," or to call Mr. Santos "Puerto Rican": Mike Carouso and Martin Koehler. When this language was brought to the attention of the supervisors, the men were reprimanded, either in writing (in Carouso's case) or verbally. When the union steward, Robert Bray, complained to Robert Klaproth that ethnic remarks were being made, Mr. Klaproth immediately convened a general meeting of the employees in the division and made it clear that such language would not be tolerated. Although it is obvious that the meeting did not cure the problem entirely, the name-calling and epithets did not take place in front of the supervisors. The city's policy is to discipline employees who engage in language that is derogatory to minorities and the city has taken severe action against two high-ranking employees, a police sergeant and a fire battalion chief, for single incidents of such language. Mr. Santos' claims of retaliation are not substantiated. The incidents of disciplinary action which he described were justified, or in the case of the medical leave, was properly rescinded after he explained the circumstances to his supervisors. None of the grievance proceedings described in Mr. Santos' testimony and in copious documents received in evidence, including transcripts of the proceedings, support his claims of retaliation or harassment. The Experience Of Other Minorities Carlos Colon is a sixty-two year old Hispanic employee in the city's park department. He was hired nine years ago, when he was fifty-three. He was disciplined once for accidently damaging a city tractor that he was driving, and he failed to receive a promotion for which he considered himself qualified, but he does not believe that the city or his supervisor discriminated against him. The top manager in the parks department is Felix Rodriquez, a Puerto Rican. Joseph Concepcion, also Puerto Rican, considers his ethnic background an asset because of his bi-lingual ability. He has been regularly promoted in his seven years with the city. He has not observed discrimination in the choice of employees for training, for promotions or for overtime. He has heard Martin Koehler use derogatory language regarding blacks and Hispanics, but not directly toward Mr. Santos and not when any supervisors were around. When he heard Mr. Koehler, a co-worker talking like that, Mr. Concepcion walked into the breakroom at lunch and invited anyone who did not like Puerto Ricans and blacks to come outside and "talk" to him. No one came out; and as far as he was concerned, that was the end of the issue. Perry McThenney is a black employee who has worked for the city for eight years and has been promoted three times. He has not experienced nor observed discrimination in promotions, overtime and training opportunities. Robert Bray, the union steward, is a black city employee. Mr. Santos complained frequently to him about racial slurs against his Hispanic origin but never complained about age discrimination. The one time that Mr. Bray went to Mr. Klaproth with the racial slur complaint, a meeting was held the next day to inform the entire division staff that such language would not be tolerated. Mr. Bray believes that the city should come up with some kind of sensitivity program, but he has not actually suggested that remedy to anyone yet. The employees whom Mr. Brag was aware had used derogatory language were the same two mentioned by Mr. Santos and others: Martin Koehler and Michael Carouso. Pedro Diaz, an Hispanic, was passed over for promotion in favor of a sixty year old white employee. At the time, Mr. Diaz felt he should have gotten the promotion because of his longer seniority with the city; however, he conceded that the successful employee could have had better experience. Mr. Diaz has been promoted by the city since then. Mr. Diaz encountered a series of problems with a supervisor who is no longer employed by the city. Since that supervisor left, no other management employee has given him a hard time or discriminated against him because of his ethnic background. Oscar Vega was born in Cuba and has worked for the city approximately 6-1/2 years. He has been promoted during that period. He has also applied for positions which he did not get; in one case, he was not qualified and agrees that the best person got the job; in another case, he filed a grievance with the help of Robert Bray and received the job. He feels the city has treated him fairly and has not discriminated against him based on his Hispanic origin. Summary of Findings The City of Melbourne has not discriminated against Emiliano Santos based on his age or ethnic origin. The demeanor and credibility of the witness have, in part, contributed to this finding. Specifically, the hearing officer has considered, and rejected, the suggestion that the presence of Robert Klaproth, as Respondent's representative, throughout the proceeding, influenced the testimony of the several black and Hispanic employees called as witnesses by Mr. Santos. There is no doubt that Mr. Santos is bitter and frustrated with his employment experience with the city. He has been subjected to other discipline or personnel action which, by stipulation, was not at issue in this proceeding. He has engaged in crude and disruptive verbal exchanges with co-workers. Whether he was the instigator of those exchanges or not, there is no evidence that they were racially or ethnically motivated. He has been disciplined for good cause, or when he explained the circumstances (as with the medical leave), the discipline was rescinded. He was passed over for a promotion, but did not have the requisite experience, and, as best as the city could determine, the successful applicant did have the experience. There was uncontroverted evidence that at least two non-supervisory employees have used racially derogatory or abusive language in the work place. They were disciplined, and the supervisors attempted to address the problem with a general meeting. Although the language continued, it was not because such was tolerated by the supervisors, and it was not so pervasive as to create an abusive or offensive work environment.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that Petitioner's Petition for Relief dated February 28, 1994, be dismissed. DONE AND ENTERED this 5th day of April, 1995, in Tallahassee, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of April, 1995. COPIES FURNISHED: James L. Reinman, Esquire 1825 S. Riverview Drive Melbourne, FL 32901 Susan K. W. Erlenbach, Esquire ERLENBACH AND ERLENBACH, P.A. 400 Julia Street Titusville, Florida 32796 Sharon Moultry, Clerk Commission on Human Relations 325 John Knox Road, Building F Suite 240 Tallahassee, Florida 32303-4149 Dana Baird, General Counsel Commission on Human Relations 325 John Knox Road, Building F Suite 240 Tallahassee, Florida 32303-4149
The 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.
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.)
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.
