Findings Of Fact Although numerous customers were present, four of them testified at the hearing. No service quality problems were described with regard to either water or sewer service. Indeed, several of the customers described water quality as being good or excellent. The primary concern of the customers was the magnitude of the proposed rate increase, although a number of then opined that some increase in rates may he necessary. Expert engineering witnesses presented by both the Comission and the Petitioner established that the Utility has not been cited by any local, state or federal agency for health or environmentally related violations. No corrective orders are in force either by the Department of Environmental Regulation, the Lee County Health Department, or the Public Service Commission. The water and sewer treatment exceeds all governmental quality standards extant. In order to enhance service quality, the company has constructed a one million gallon ground storage tank and has installed an additional high-service pump. All parties agree that the cost of these improvements should be added to the Utility's rate base for purposes of this proceeding. Rate Base The Utility propounded evidence alleging its proper water rate base to be $1,872,470.00 and the appropriate sewer rate base to be $1,917,931.00. In arriving at the Utility's net investment in property used in the public service (rate base), it is necessary to calculate the amount of contributions-in-aid-of-construction, which serve to decrease the Utility's investment. Normally, where there has been a previous rate case for a utility in which the utility's net investment would have been determined by the Commission, the calculation of the utility investment in a current rate case is generally competed by adding additions to plant-in-service and subtracting additional contributions-in-aid-of construction in order to arrive at the current net "return yielding" investment. In the instant proceeding, however, Lehigh has elected to take issue with the amount of contributions-in-aid-of-construction (CIAC) previously determined by the Commission in the last rate case. In that last case (Docket No. R-73384-WS), the amount of CIAC was determined by multiplying water connections by $350.00 and sewer connections by $400.00. (See Exhibits 10, 19 and 20) The Utility in the prior proceeding agreed with that method of calculation and, further, two land sales contracts in evidence show that a charge of $750.00 for "sales price of water and sewer" to purchasers of houses in the service area has been imposed by the Utility or its predecessor, Lehigh Corporation (development company), when the Utility was merely a division of the development company. Notwithstanding that prior position, the Utility in this proceeding has elected to attempt to prove its level of CIAC ab initio and has conducted a "Special CIAC Study" in an attempt to show that the amount of contributions is now substantially less than the amount it and the Commission agreed to be applicable in the last rate proceeding and that which the Commission maintains is germane to this proceeding. The Utility thus is alleging that the appropriate charge per connection for CIAC is $650.00 for a water and sewer connection as opposed to the Commission's contention that the figure should be $750.00 per connection. Although a developer's agreement with an affiliated company shows a water and sewer connection charge of $650.00, the testimony of a senior officer of the Utility establishes that there were a total of 1,308 such contracts indicating a sales price for water and sewer service of $750.00. The Utility contends that only $650.00 of the $750.00 charge in question was actually transferred to the utility company and that, therefore, the $650.00 is the appropriate amount to attribute to CIAC. There is no question, however, that with regard to these 1,308 land sales contracts, that $750.00 was actually collected from the lot purchasers involved as the sales price of water and sewer service. Thus, the actual amount of CIAC paid by those 1,308 customers was $750.00 each, for a total of $981,000.00 for water and sever service and that figure represents in its entirety contributions-in-aid-of-construction. The contracts for which the customers involved paid $750.00 for water and sewer service, were entered into in the latter 1960's and early 1970's. Prior to that time, the same type of contracts carried an amount of $650.00 for water and sewer and following the period of time when the fee was $750.00, the line item in the contract was changed so that there was no longer any separate item providing for "sales price of water and sewer." The water and sewer charge was thereafter included in the amount charged for "sales price of improvements." Thus, contrary to the position of Lehigh, because of the segregation of the items in the purchase price shown in these land sales contracts into separate figures for price and for the sales price of water and sewer service, there have been shown to be definite, proven amounts of contributions-in-aid-of-construction supported by company records. The remaining portion of the contributions attributable to the Utility and not represented by these contracts were contributed in the sum of $650.00 per connection, with which figure both parties agree. An additional issue regarding contributions and the "Special CIAC Study" concerns contributions recorded as income from the inception of the Utility operation until November 30, 1964. As demonstrated by Exhibit 12, the amount of contributions recorded as income equals $756,656.00. The Utility's own "Special CIAC Study" refers to contributions recorded as income and Lehigh received sums of money for the availability of water and sewer service in the early 1960's which it treated as income. During the early 1960's when the Utility was regulated by Lee County, the Lee County regulatory board allowed it and other water and sewer utilities to receive and record service availability fees as revenue. This was done in order to enhance the apparent financial posture of the utilities and therefore improve their credit status as an aid to financing improvements. There is no question that those fees during this time period were paid into the Utility or its predecessor for water and sewer service availability and hence should properly be accounted for as CIAC. It might be argued, as the Utility does, that if Lehigh declared the contributions it received to be revenues with the Internal Revenue Service, then the benefit of those contributions or the amount of revenue they represent to the Utility would be reduced by the amount of the resulting income tax, and that if they are now determined to be contributions instead of revenue that an additional detriment to the Utility would occur by the reduction by that amount of its rate base and, therefore, its dollar return. It should be pointed out, however, that because of the tax advantages of the Utility's demonstrated operating loss carry-overs and investment tax credits, as well as accelerated depreciation, all of which tax advantages this Utility has been able to employ, no actual income tax has been paid on such "revenue." Further, Lehigh is depreciating this $756,655.00 in assets in its returns to the Internal Revenue Service and is thereby recovering the costs of the assets. If the Utility is permitted to treat them for regulatory rate-making purposes as revenue instead of CIAC, then the effect would be to maintain rate base and return at a correspondingly higher level than if these amounts are determined to be CIAC, which would reduce rate base and thereby the net investment upon which a return could be earned for regulatory purposes. Thus, the appropriate amount of contributions-in-aid-of-construction for the water system as of the closing date of March 31, 1979, equals $1,057,000.00. The amount of contributions-in-aid-of-construction attributable to the sewer system as of that date equals $1,389,977.00. (Net of amortization). The detailed calculations and adjustments supportive of the above findings with regard to rate base are attached hereto and incorporated by reference herein as Schedules I, II and II. The first issue to be concerned with in calculating the operating expense basis for the revenue requirement is the cost of the above-referenced CIAC study. The Utility prepared this special CIAC study because of its fear that, in view of the Commission's decision in Tamarac Utilities, Inc. v. Hawkins, 354 So.2d 437, that it would not otherwise be able to meet its burden of proof on the issue of contributions and therefore would suffer a dismissal of the petition. In the Tamarac case, the Public Service Commission auditors encountered numerous problems resulting from a lack of primary data supporting the amount of contributions and the Commission issued an order allowing the Utility to provide clarifying evidence. When the Utility failed to satisfactorily perform this task, it ultimately suffered a dismissal of its petition and a refund of monies collected under interim rates. In this case, however, it has been demonstrated that there is no dearth of primary data or books and record supportive of the level of CIAC; nor has an order been issued requiring this Utility to provide such clarification or a "study" of its CIAC. Moreover, in the case of this utility, a previous rate case has been finalized wherein it was found by the Commission that there was a definite, specific level of contributions which were also consistent with those alleged by the petitioner in that proceeding. Thus, there is adequate primary data upon which a determination of CIAC can be computed in this proceeding without resort to a "Special CIAC Study" and the additional increment of rate case expense it represents. It should be further noted that even if the instant case involved a "Tamarac situation" where financial books and records were not adequate to properly document contributions-in-aid-of-construction that, in that event, if a CIAC study were made, then the proper rate-making treatment would be to amortize tile cost of that study over several years, since it is a large, nonrecurring expense in the Utility's operation, as opposed to allowing the entire expense to be written off (and charged to the customers through rates) based upon one year. The Utility has alleged that certain additional pro-forma adjustments to various expense items should be accomplished in order to arrive at the appropriate revenue which will support an adequate rate of return. Thus, the increased costs alleged for purchases of lime, chlorine and gasoline, depicted in the attached schedules incorporated herein, were undisputed, agreed to, are reasonable and therefore should be accepted. The alleged pro-forma cost for payroll is a mere estimate and not supported by competent, substantial evidence. Additionally, it was established by the Commission's accounting witness that certain rate case expenses arose from a prior rate case and therefore should be removed from consideration in arriving at revenue requirements for purposes of this proceeding. This adjustment was not contested, nor were similar adjustments to remove depreciation expense on construction work in progress, to remove depreciation expense on the contributed property, to remove unsupported property taxes, and to remove property tax as an expense and depreciation expense attributable to non-used and useful portions of the Utility's invested plant. None of these adjustments were disputed by the Utility. They are appropriate and reasonable and should be adopted. The Utility has also requested allowance of a $55.00 annual fire hydrant charge and a $10.00 charge for the initial commencement of service. The Utility submitted evidence (Exhibits 6 and 7) supportive of the actual number of water and sewer connections made during the test years as well as the costs upon which the initial commencement of service charge requested is based. The Commission did not dispute, therefore, the requested $10.00 charge for initial commencement of service and, inasmuch as the current $25.00 annual fire hydrant charge was established in the late 1960's and was shown to be no longer sufficient to cover costs, the Commission also did not dispute the increase in the annual fire hydrant charge from $25.00 to $55.00, which accordingly should be increased. Cost of Capital The Utility has requested a rate of return of 11.76 percent which includes an attrition allowance of .78 percent. There is no dispute as to the debt-equity ratios in the capital structure of the Utility. The common stock equity represents approximately 49.57 percent of the total capitalization. Long-term debt makes up 35.96 percent of capital and cost-free capital items make up 14.47 percent. The cost rate of the equity in the capital structure was established by the Commission's financial expert witness to be 14.5 percent or the midpoint in a range for companies and utility companies possessing a similar degree of risk to equity investors of 13.5 percent to 15.5 percent. The 14.5 percent cost of equity figure represents an accurate assessment of the opportunity costs of equity capital for such a company. The imbedded cost of long-term debt is 8.3 percent, which is a very advantageous rate to be enjoyed by such a company in today's money market and reflects a high degree of management efficiency on the part of the operation and management personnel of the petitioner. These two items, when combined with a zero cost factor shown to be appropriate for the cost-free capital items, results in a calculated rate of return of 10.35 percent, which does not take into account an attrition allowance due to inflation. The Utility advocated an attrition allowance equal to 10 percent of the weighted cost of equity capital to help offset the erosion in earnings caused by inflation. There can be little doubt that attrition of earnings due to significant inflation in costs of operation experienced by such companies is a very real factor. However, this record contains no substantial and competent evidence to demonstrate whether the utility wants coverage of capital attrition or attrition of its ability to cover operation and maintenance expenses nor which could justify the alleged 10 percent factor or any other quantification of attrition of earnings which may be experienced. Thus in the absence of a definitive establishment of the appropriate attrition factor, a cost of equity and a corresponding return on rate base in the midpoint of the range found above is appropriate. Thus, the proper return on rate base for this Utility has been shown to be 10.35 percent, which is within the range 9.85 percent to 10.84 percent. A summary of the cost of capital structure and weighted cost of capital calculation is depicted as follows: CALENDAR YEAR 1979 COMMON STOCK EQUITY RATIO 49.57 COST RATE 14.5 WEIGHTED COST 7.19 LONG TERM DEBT 35.96 8.8 3.16 COST FREE 14.47 -0- -0- 10.35 Floor CSE at 13.5 9.85 Ceiling CSE at 15.5 10.34 In summary, the required operating revenue for the Utility's water system should be $658,451.00 which results in an operating income of $211,407.00. The sewer system requires an annual, gross operating revenue of $475,629.00 in order to obtain a return or operating income of $130,017.00. The operating expenses and adjustments supportive of these figures are depicted in more detail in Schedules IV, V and VI attached hereto and incorporated by reference herein. The sewer revenue requirement found herein is less than the interim revenues authorized for sewer service, thus a refund is in order.
Recommendation In consideration of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Lehigh Utilities, Inc. be granted in part, and that the Utility be authorized to receive a gross annual water revenue of $658,451.00 and gross annual sewer revenue of $475,629.00 to be achieved by rates filed with and approved by the Public Service Commission. It is further RECOMMENDED that the Utility be required to file revised tariff pages containing rates designed to produce annual revenues in the above amounts. It is further RECOMMENDED that the Utility be required to refund the interim sewer revenues previously authorized in this proceeding which exceed those sewer revenues determined to be appropriate herein. It is further RECOMMENDED that the above refunds be accomplished within ninety (90) days. This Recommended Order entered this 13th day of October, 1980, in Tallahassee, Florida. P. MICHAEL RUFF 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 13th day of October, 1980. COPIES FURNISHED: R. M. C. Rose, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301 William H. Harrold, Esquire 101 East Gaines Street Tallahassee, Florida 32301
Findings Of Fact Based upon the parties' factual stipulations, the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: On August 28, 1992, Petitioner submitted to the Department its application for licensure as a mortgage lender. 1/ On October 28, 1992, the Department sent Petitioner a letter announcing its intent to deny Petitioner's application for licensure as a mortgage lender. The text of the letter read as follows: This is to inform you that your Application for Licensure as a Mortgage Lender for Citifirst Mortgage Corp. is hereby denied. The denial is based on Section 494.0072(2)(k), Florida Statutes. Section 494.0072(2), Florida Statutes, "Each of the following acts constitutes a ground for which the disciplinary actions specified in subsection may be taken: . . . (k) Acting as a mortgage lender or correspondent mortgage lender without a current active license issued under ss. 494.006-494.0077." The Department's investigation revealed Citifirst Mortgage Corp. has acted as a mortgage lender without a current, active license. Please be advised that you may request a hearing concerning this denial to be conducted in accordance with the provisions of Section 120.57, Florida Statutes. Requests for such a hearing must comply with the provisions of Rule 3-7.002, Florida Administrative Code (attached hereto) and must be filed in duplicate with: Clerk Division of Finance Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 (904) 487-2583 within twenty-one (21) days after receipt of this notice. Failure to respond within twenty-one days of receipt of this notice shall be deemed to be a waiver of all rights to a hearing. Should you request such a hearing, you are further advised that at such a hearing, you will have the right to be represented by counsel or other qualified representative; to offer testimony, either oral or written; to call and cross examine witnesses; and to have subpoenas and subpoenas duces tecum issued on your behalf. Petitioner timely requested a formal hearing on the proposed denial of its application. The matter was referred to the Division of Administrative Hearings, where it is still pending.
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 Whether, and to what extent, Magnolia Valley Services, Inc., should be allowed to increase its water and sewer service rates.
Findings Of Fact Based on the evidence presented at hearing, the following facts are determined: I. The Application By application filed on August 14, 1980, APPLICANT sought authority to increase its water and sewer rates, on an interim and permanent basis, in amounts sufficient to produce $60,847 in annual gross water revenues, and $100,768 in sewer revenues. By Order No. 9571 dated September 30, 1980, the COMMISSION authorized an interim sewer revenue increase, under bond, of $8,205, and denied an interim increase in water revenues. The COMMISSION has approved APPLICANT's use of a test year ending December 31, 1979. At hearing, the APPLICANT amended its application by reducing its requested water revenues to $50,287, and increasing requested sewer revenues to $101,522. (Testimony of Gregg, Prehearing Statement; P-4.) II. Depreciation Rate Depreciation is a method of allocating the cost of fixed assets to their estimated useful life. As an above-the-line operating expense, it affects a utility's net operating income; by its impact on accumulated depreciation of plant-in-service and accumulated amortization of contributions-in-aid-of- construction, it also effects calculation of rate base. (Testimony of Walker, Gregg; P-3, R-1.) The COMMISSION has promulgated no rules as guidelines which establish generally, or in particular, the useful life of utility assets or the method by which their depreciation should be calculated. In practice, however, it has allowed utilities to apply a straight-line 2.5 percent depreciation rate and a 40-year useful life to all depreciable assets. Any deviation from this 2.5 percent across-the-board rate must be justified by the utility. (Testimony of Heiker.) Here, the APPLICANT proposes depreciation rates which vary according to the estimated useful life of the plant or equipment involved. In contends that its shorter estimates of useful life of specific assets reflect reality and actual experience more accurately than an across-the-board 40-year life standard. For example, rate meters are routinely replaced on a 20-year basis and lack of reserve capacity and changing voltages have substantially reduced the expected life of electrical motors and equipment. The APPLICANT's estimates of useful life were established by the opinion of a utility consultant and engineer whose qualifications went unchallenged by the COMMISSION; no competent evidence was offered to discredit or rebut his conclusions. The COMMISSION's engineer candidly admitted that depreciation "is really a nebulous thing," (Tr. 64) and declined to assert that the APPLICANT's depreciation schedules were erroneous. (Tr. 69.) The COMMISSION disputed the APPLICANT's depreciation schedules by referring to an unpublished 1973 staff memorandum retained at the agency's offices and not produced at hearing. That memorandum purportedly adopted 1973 depreciation rates developed by the American Water Works Association. Upon motion of APPLICANT, testimony concerning the contents of that memorandum was subsequently stricken. The COMMISSION engineer also testified that he was unfamiliar, even generally, with how the American Water Works Association's depreciation rates were derived. In light of the quality of the evidence presented of record, the APPLICANT's depreciation rates (including estimated useful life) are accepted as persuasive. (Testimony of Heiker, Gregg; P-1, P-3.) III. Attrition Allowance The APPLICANT seeks to include in operating expenses an attrition allowance of $1,992 for water and $8,161 for sewer operations based on alleged attrition it experienced between 1975 and 1979. It defines attrition as increased annual expenses which cannot be recovered at the time they are incurred. The COMMISSION opposes the requested attrition allowance on the grounds that: (1) the attrition study performed by the APPLICANT is unreliable, and (2) that the recent enactment of Section 367.081(4), Florida Statutes (Supp. 1980), which allows the passing through of certain increased expenses to customers, eliminates the need for a special attrition allowance. (Testimony of Gregg, Walker; P-2.) The COMMISSION's position is well taken. First, a major portion of the cost increases experienced by the APPLICANT in the past will be able to be passed through to its customers pursuant to Section 367.081, Florida Statutes (Supp. 1980). 2/ Those costs include increased power costs and ad valorem taxes. The APPLICANT responds that Section 367.081(4), supra, will not enable it to fully recover increasing expenses when they occur because rates may be adjusted, based on increased operating costs, not more than twice a year. Section 367.081(4)(e), supra. However, this new law should be implemented before it is pronounced inadequate to fulfill its purpose. Experience may show that major costs increase sporadically, or at predictable cycles, which facilitate carefully timed rate increases under Section 367.081(4), and that two such increases a year may prove fully adequate. (Testimony of Gregg, Walker; P- 2, R-1.) Secondly, the attrition study (P-2) submitted by the APPLICANT does not reasonably justify, or provide a reliable basis for projecting an attrition rate into the future. The 1975-1979 historical cost increases have not occurred at a constant rate. The 1979 increase in water operation costs was less than one- half of the average increase experienced between 1975 and 1979; in sewer operations, the 1979 cost increases were less than one-third of the four-year average. Moreover, a major factor in increased sewer costs was the 1978 conversion to a spray irrigation, total retention, sewage treatment system. Since this system meets the 1983 federal Clean Water Act standard of no- discharge, it is unlikely that increased operational costs relating to treatment changes will continue to occur. In short, the 1975-1979 historical cost increases of APPLICANT have been sporadic and do not support an assumption that they will continue to occur at the same rate. To include an attrition allowance based on such an assumption would be unwarranted. (Testimony of Gregg, Walker; P-2, R-1.) IV. Allowance of an Undocumented Operating Charge The APPLICANT proposed a $600 sewer expense item which was opposed by the COMMISSION because of lack of documentation. In response, the APPLICANT submitted--immediately prior to hearing--a cancelled check in the amount of $1,000. The discrepancy between the two amounts remains unexplained. Such action falls short of providing adequate documentation, and the proposed $600 sewer expense item must therefore be rejected. See, 25-10.77, FAC. V. Elements of Ratemaking and Applicant's Gross Revenue Requirements The parties agree: (1) that 14.5 percent is a fair and reasonable rate of return on rate base and reflects the actual cost of capital to APPLICANT; that the new rates should be designed in accordance with the base facility design concept, and that the quality of APPLICANT's water and sewer service is satisfactory. The remaining elements of ratemaking--rate base and net operating income--are not in dispute, and are depicted below: 3/ RATE BASE Test Year Ended 12/31/79 Water Sewer Plant in Service Accumulated $269,887 $511,200 Depreciation $(37,384) 4/ $(54,685) Net Plant $232,503 $456,515 Contributions in Aid of Construction (179,251) (360,055) Accumulated Amortization 22,421 Net Contributions in Aid of 4/ 41,231 4/ Construction (156,830) (318,824) Working Capital 3,515 7,082 TOTAL $ 79,188 $144,773 OPERATING STATEMENT Test Year Ended 12/31/79 Water Sewer Operating Revenues $53,300 $72,608 Operating Expenses: Operations 25,552 45,353 Depreciation 3,848 5/ 4,876 5/ Maintenance 2,572 6/ 11,306 6/ Amortization 1,439 Taxes Other Than Income 4,654 7/ 8,338 7/ TOTAL Operating Expenses $36,626 $71,312 Net Operating Income$16,674 $ 1,296 By applying a 14.5 percent rate of return against a rate base Of $79,188 for water and $144,773 for sewer, it is concluded that the APPLICANT should be allowed an opportunity to earn a return, or net operating income of $11,482 for water and $20,992 for sewer. Annual gross revenues of $48,108 (water) and $92,304 (sewer) are required to produce such a return--resulting in a net annual reduction of water revenues of $5,192 and a net increase of $19,696 in sewer revenues. VI. Interruption of Service Treatment Without Advance Notice Although the overall quality of its service has been adequate, infra, the APPLICANT has unnecessarily inconvenienced customers by interrupting water service without advance notice. These interruptions were planned in advance and not made on an emergency basis. The APPLICANT failed to adequately explain or excuse its failure to give timely notice. (Testimony of Pepper.)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That Magnolia Valley Services, Inc., be authorized to file new rates structured on the base facility charge concept and designed to generate gross annual revenues of $48,108 for water operations and $92,304 for sewer operations, based on the average number of customers served during the test year. It is further RECOMMENDED that the utility be directed to strictly comply in the future with Section 25-10.56, Florida Administrative Code, by giving advance notice of service interruptions which are not emergency in nature. DONE AND ORDERED this 1st day of April, 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 1st day of April, 1981.
The Issue The issue is to determine the amount of the fee to be awarded to Florida Medical Center. FEE CALCULATION Florida Medical Center was represented before the Department in its attempt to obtain a hearing and before the District Court of Appeal, First District in Florida Medical Center vs. Department of Health and Rehabilitative Services and Humana, Inc., appellate case no. BD-46, by Eric B. Tilton, who has been a member of The Florida Bar since 1977. He also handled the appeal of the denial of Florida Medical Center's petition for a hearing on the approval of additional beds for University, appellate case BD-45. An associate, Thomas W. Stahl, assisted Mr. Tilton in both those cases. Mr. Tilton filed, on behalf of Florida Medical Center, the following pleadings: a petition seeking a Section 120.57 hearing to challenge the certificate of need HRS agreed to grant to Humana Bennett. The petition was denied in a final order of the Department without referral to the Division of Administrative Hearings for the assignment of a hearing officer or other proceedings; a notice of appeal to the District Court of Appeal, First District; a consolidated initial brief for both cases BD-46 (challenging the Humana Bennett certificate of need) and BD-45 (challenging the University certificate ofneed); a consolidated reply brief in both cases. The following papers also were filed by Mr. Tilton in case 50-46: motion for expedited review; petition for stay; reply to response to petition for stay; request for oral argument; motion to consolidate; response to motion to transfer to Fourth District Court of Appeal; response to notion to supplement record; response to motion for judicial notice; motion to strike portion brief of HRS; motion to strike answer brief of Humana Bennett; motion to strike amended answer brief of University; response to motion to correct record; response to Humana's motion to consolidate; motion for attorney's fees; motion for rehearing; response to Humana Bennett's motion for rehearing. The record on appeal before the Court of Appeals in Case BD-46 was quite brief, consisting of a petition for a hearing, a final order denying a hearing and a notice of appeal, which total 16 pages. The criteria found in Chapter 4 of the Rules Regulating The Florida Bar, Rule 4-1.5(B)(1)-(8) and (C) govern the determination of a reasonable fee. These are the criteria which had been contained in the former Code of Professional Responsibility, and applied by the Supreme Court of Florida in Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145, 1150 and n.6 (Fla. 1985) when the Court adopted the lodestar approach for fee determinations developed by the federal courts. Time and Labor Required, Novelty and Difficulty of Questions and Skill Requisite to Perform Legal Service Properly. Rule 4-1.5(B)(1) Mr. Tilton and his associate, Mr. Stahl, devoted 219.15 and 142.3 hours to this litigation, respectively. These hours were included in billings sent to the client, which were paid as presented without protest. The first step in determining a reasonable fee is to find the number of hours reasonably expended on the litigation. Rowe, supra, 472 So.2d 1150. The United States Supreme Court held in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), when assessing attorney's fees in civil rights litigation under identical ethical principles that [t]he most useful starting point for deter- mining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. This calculation provides an objective basis on which to make an initial estimate of value of a lawyer's services. 461 U.S. at 433, 103 S.Ct. at 1939. The Department of Health and Rehabilitative Services has not argued that any of the hours claimed were not reasonably expended on the litigation, in the sense of being the product of inaccurate or questionably reconstructed time records. The records were contemporaneously kept. Neither is there evidence of over staffing e.g., that more than one attorney attended or participated in oral argument without proof that such multiple representation was necessary. The appeal was not simply one in which the appellant argued that, as a competitor, it was entitled to a hearing as a matter of law. After initially indicating an intention to deny additional beds to both applicants, a hearing had been conducted which resulted in a Hearing Officer's recommendation that both 1931 applications be denied and the Department had entered a final order to that effect. Florida Medical Center's attorneys canvassed the entire record of the administrative proceeding on the 1981 applications of Humana Bennett and University to see whether there was any basis in it for the Department's abrupt change of position. Granting Humana Bennett and University new beds to settle the appeals in the Fourth District Court of Appeal was a fundamental shift in Department policy. The time spent in reviewing that record while preparing Florida Medical Center's appellate filings was appropriate. The time devoted to research on Florida, federal and other states' law on the authority of an agency to abandon a position taken after the conclusion of formal proceedings in order to settle an appeal from the agency's final action, while also refusing to allow others to challenge the agency's new and directly contrary position, was reasonable. Of course, "[a] lawyer in private practice ethically is obligated to exclude [excessive, redundant, or otherwise unnecessary] hours from his fee submission . . . . Hours that are not properly billed to one's client also are not properly billed to one's adversary . . . Nestle v. Eckerhart, 461 U.S. at 434, 103 S.Ct. at 1940, quoting, Copeland v. Marshall 205 U.S.App.D.C. 390, 401, 641 F.2d 880, 891 (1980) (en banc) (emphasis by the Court). There has been no suggestion that the bills submitted to Florida Medical Center were not the product of a proper exercise of billing judgment. Payment of the bills as presented also betokens the reasonableness of the hours claimed. Complaint or objection by the client to the hours billed would suggest that the hours expended may have been excessive. The evidence that Mr. Tilton expended 219.15 hours and Mr. Stahl 142.3 hours on the case is accepted. The Fee Customarily Charged iii the Locality for Similar Legal Services. Rule 4-1.5(B)(3). Much of the case law concerning a reasonable hourly rate has grown up in civil rights litigation where determining a reasonable hourly rate requires after-the-fact construction. When the services were rendered in those cases, the lawyer was not working for the client at an agreed hourly rate. A survey of hourly rates paid by clients seeking legal services on an hourly basis becomes a proxy for reasonable hourly compensation for the fee claimant's lawyer. Blum v. Stenson, 465 U.S. 886, 895 & n.11, 104 S.Ct. 1541, 1547 & n.11, 79 L.Ed.2d 891 (1984). Here, in an arms-length transaction, Florida Medical Center paid Mr. Tilton $150 per hour and Mr. Stahl $100 per hour. The $100 hourly rate for Mr. Stahl may be at the upper end of the market for attorneys admitted to the bar in 1982, but he had experience in health care law as a law clerk before admission to the bar which should be considered. These hourly rates are paid by other clients to these lawyers. Free market transactions are powerful evidence of what a reasonable hourly rate is. For lawyers of the experience of Mr. Tilton and Mr. Stahl, the rates claimed are reasonable. No persuasive evidence has been presented that these rates are exorbitant, or are out of line with a prevailing market rate for other private counsel of comparable experience, skill and reputation. Based on these calculations the lodestar amount is: HOURS HOURLY RATE Tilton 219.15 x $150.00 = $32,872.50 Stahl 142.3 x $100.00 = $14,230.00 $47,102.50 TOTAL FEE Results Obtained. Rule 4-1.5(B)(4). The Department of Health and Rehabilitative Services objects to paying for all hours billed. A major issue raised by Florida Medical Center in its appellate brief was that after having entered a final order denying Humana Bennett's 1981 application for additional beds (the subject of the appeal in the Fourth District Court of Appeal), the Department could not recede from or modify that order as part of a settlement. This argument was rejected by the First District Court of Appeal, and the Department believes the lodestar amount should be reduced to recognize Florida Medical Center's limited appellate success. The short answer to this objection is that the District Court of Appeal certainly knew this, but did not specifically condition the attorney's fee award on some segregation of the amount of work devoted to different issues on the appeal. The Court did condition its order granting attorney's fees upon proof that Florida Medical Center had not waived its point of entry; it also could have limited the fee award to the standing issue on which Florida Medical Center prevailed, but it did not. Florida Medical Center met the only condition the Court imposed and is entitled to fees for all services rendered by its attorneys. If the issue whether fees should be reduced for incomplete appellate success is open, it would be inappropriate to reduce the number of compensable hours here. The erroneous decision of the Department denying a hearing caused Florida Medical Center to incur appellate fees. The issue of the authority of an agency to recede from a final order in a settlement was one of first impression in Florida law. Although unsuccessful, the argument advanced in the appellate court was reasonable. To be made whole, Florida Medical Center should be reimbursed for hours attributable to that issue. If a party brings unrelated claims which carry attorney's fees to federal court and fails to prevail on all claims, fees are not granted for the unsuccessful claims. The focus, however, is on whether the partially successful party pursued "distinctly different claims for relief that are based on different facts and legal theories". Hensley v. Eckerhart, 461 U.S. at 434, 103 S.Ct. 1940. Here, the relief sought was reversal of the order denying Florida Medical Center the right to participate in the Department's decision to grant additional beds to Humana Bennett. That same relief was available on either theory proposed by Florida Medical Center: that its status as a competitor of Humana Bennett conferred standing as a matter of law under Section 381.494(6)(c), Florida Statutes, or that HRS was not entitled to rescind through settlement a final order denying Humana Bennett additional beds after denial had been recommended by a Hearing Officer following a Chapter 120 formal proceeding in which the applicant, competitors and the Department had been heard, and HRS had adopted that order as its final agency action. Florida Medical Center did not advance distinctly different claims for relief based on different facts and legal theories; it presented a single claim for relief based on alternate theories. Cf., Taylor v. Sterrett, 640 F.2d 663, 669 (5th Cir. 1981) ("[T]he proper focus is whether the plaintiff has been successful on the central issue as exhibited by the fact that he has acquired the primary relief sought.") As the Supreme Court said in Hensley, "The result is what matters." id., 461 U.S. at 435, 1030 S.Ct. at 1940. As the result of its appeal Florida Medical Center has participated in a lengthy Section 120.57 formal proceeding on remand which has permitted it to oppose the addition of 53 beds to a competitor. The potential competitive impact on Florida Medical Center of the opening of those new beds is sufficiently serious to make the hours reasonably expended a satisfactory basis for the fee award. That the record on appeal was brief, and the consolidated initial and reply briefs succinct (totaling 23 pages) does not mean the hours expended on the appeal are not properly compensable. Other Factors None of the other factors in Rule 4-1.5(B) would vary the lodestar amount. "When . . . the applicant for a fee has carried his burden of showing that the claimed rate and number of hours are reasonable, the resulting product is presumed to be the reasonable fee to which counsel is entitled." Pennsylvania v. Deleware Valley Citizens Council, U.S. , 106 S.Ct. 3088, 3398 (1986) quoting, Blum v. Stenson, 465 U.S. 886, 897, 104 S.Ct. 1541, 1548, 79 L.Ed.2d 891 (1984) (emphasis by the Court). The fee is not contingent, and no special time limitations were imposed by the client or the circumstances, Rule 4-1.5(B)(8), (5). The nature and length of the professional relationship with the client is not significant here since that factor is encompassed in the determination of the hourly rate to which Florida Medical Center and its attorneys agreed, as is the factor on experience, reputation and ability of the lawyer performing the services. Rule 4-1.5(B)(6), (7). Equal Access to Justice Act The argument of the Department of Health and Rehabilitative Services that the $15,000 cap on fees which may be awarded under the Equal Access to Justice Act, Section 57.111, Florida Statutes, should be applied to this case is rejected. The fees the District Court of Appeal ordered HRS to pay were not awarded pursuant to that Act. That cap is permissible because an award of fees is in derogation of the American rule that a party shall bear its own fees. See, e.g., Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Having statutorily created the entitlement to fees, the legislature may also cap those fees. The record shows that Florida Medical Center's motion to the Court which prompted this fee award was one based on Section 120.57(1)(b)(9), Florida Statutes (1985), which authorizes the courts to award "reasonable attorney's fees and costs" without any cap. The purpose of the award is to make Florida Medical Center whole for the fees and costs incurred as the result of Departmental action which was a gross abuse of agency discretion." Section 120.57(1)(b)(9), Florida Statutes (1985). The fee will not go to Florida Medical Center's attorneys--they have already been paid. As the statute prescribes, the court has awarded the fee to "the prevailing party." It is no defense to an award under the statute that the hourly rate assessed is more than the agency pays to counsel it hires. The argument advanced by the expert witness for the Department that the focus should not be on the amount the private client was willing to pay, but on what the public will approve is not accepted. The statutory standard is that the fee shall be reasonable, and the provisions of the Rules Regulating The Florida Bar identify factors for applying the test of reasonableness. Public antipathy to awards made to private parties with public funds to redress grossly abusive agency conduct lacks legal significance. Costs Florida Medical Center is entitled to recover the $50.00 filing fee for Case No. BD-46, the cost of the record on appeal of $4.00, and $63.74 for printing of the reply brief. The total allowable costs are $117.74.
Recommendation Based on the foregoing, it is RECOMMENDED that fees in the amount of $47,102.50 be awarded with costs of $117.74. DONE AND ORDERED this 7th day of April 1987, in Tallahassee, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 7th day of April 1987. COPIES FURNISHED: Eric B. Tilton, Esquire Post Office Drawer 550 Tallahassee, Florida 32302 R. S. Power, Esquire Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Raymond E. Rhodes, Clerk District Court of Appeal First District State of Florida Tallahassee, Florida 32399-1850
Findings Of Fact Based upon the record evidence, the following findings of fact are made: Okeechobee Health Care Facility (OHCF) is a licensed nursing home facility located in Okeechobee County, Florida. OHCF was formerly owned and operated by Okeechobee Health Care Facility, Ltd. (Okeechobee). Okeechobee was a limited partnership. Faye Williamson and her husband were its general partners. In March, 1988, Okeechobee was granted, pursuant to its request, a certificate of need (CON 5454) to add a 30-bed wing to OHCF at a cost of $810,000.00. On December 8, 1989, Okeechobee filed its final project cost report with Respondent. The report reflected that actual expenditures had exceeded the approved cost of the project by more than $650,000.00. By letter dated December 13, 1989, Respondent advised Okeechobee that it was necessary for Okeechobee "to request an expedited review for a cost overrun on this project." On February 22, 1990, Okeechobee filed a certificate of need application (CON application 6150) seeking such expedited review. The application was accompanied by a check in the amount of $750.00. Ms. Williamson, who submitted the application on behalf of Okeechobee, did so thinking that the application was complete. Following her submission of the application, she awaited Respondent's response. Based upon her prior experiences with Respondent in these matters, it was her understanding that if Respondent determined that the application was incomplete, it would so notify her. On or about March 2, 1990, Williamson, who was identified on the application as Okeechobee's authorized representative and contact person, was telephoned by an employee of Respondent's who advised her that she needed to remit an additional $1,990.04 on behalf of Okeechobee to cover the full application filing fee. Immediately following this telephone conversation, Williamson wrote out a check in the amount of $1,990.04 and mailed it to Respondent. On or about April 11, 1990, Williamson was informed that, notwithstanding what she had been telephonically advised the previous month, the $2,740.04 that already had been remitted did not constitute payment in full of the application filing fee and another $1,990.00 was still required. Upon being provided this information, Williamson sent a third check, in the amount of $1,990.00, to Respondent. In the aggregate, Respondent received $4,730.04 from Okeechobee in connection with the filing of CON application 6150. On or about April 23, 1990, Respondent, by certified mail, sent to Williamson at the address indicated on the application as her mailing address (Post Office Box 728, Okeechobee, Florida 34973), an "omissions" letter, which read in pertinent part as follows: Your application on behalf of Okeechobee Health Care Facility, Ltd. has been received for a certificate of need for a cost overrun on Certificate of Need Number 5454, to be located in Okeechobee, Florida. Certain specified elements are omitted from your proposal which are nee to implement formal review. Please respond to the items noted below. For an existing health care facility, HMO or hospice, audited financial statements of the applicant for the two previous years. (The applicant's most recent complete fiscal years of operation immediately preceding the 120 day period described above). Update for period ending December 31, 1989. 7B. Please furnish a certified copy of the resolution of the board of directors pursuant to 381.709(1)(c), Florida Statutes. Conditions predicated upon award. 2C1. Terms of Financing (Appendix 5(2C1)). Letter of commitment omitted. Section 381.709(3)(a), Florida Statutes, requires that you respond to the above omissions by May 14, 1990. Failure to provide responses by this date may result in your application being deemed incomplete and administratively withdrawn from further consideration. The United States Postal Service delivered this "omissions" letter on April 27, 1990. Kasee Wherrell was the person to whom delivery was made. At the time, Wherrell was an employee of Professional Accounting Systems of Okeechobee (PASO), which had contracted with Okeechobee to perform certain clerical and administrative services in connection with the operation of OHCF. Among Wherrell's duties as an employee of PASO was to go to the post office, pick up the regular mail in the OHCF post office box, bring it back to the OHCF business office and distribute it to the appropriate person(s). She was not authorized, however, to sign for and receive any certified mail. Wherrell never gave Williamson the "omissions letter she had retrieved from the post office. Consequently, neither Williamson nor any other Okeechobee representative responded to the letter within the time frame specified in the letter. Not having received such a response, Respondent sent Williamson the following letter, dated May 25, 1990: In accordance with the provisions of Section 381.707 and 381.709, Florida Statutes, you were given until May 14, 1990 to respond satisfactorily to the omissions noted in the correspondence from this office dated April 23, 1990 relative to your proposal for a cost overrun on Certificate of Need Number 5454. Because of your failure to provide a detailed listing of the needed capital expenditures, including sources of funds; and a certified copy of a resolution by the board of directors, your proposal has been withdrawn from further consideration, effective May 14, 1990. You have the right to request an administrative hearing on this decision under the provisions of Florida's Administrative Procedure Act, Chapter 120, Florida Statutes, and under Department Rule 10-5.010, Florida Administrative Code. A request for hearing, if any, must be actually received by this department within 21 days of the first day of publication of notice of the withdrawal in the Florida Administrative Weekly. A request for hearing must contain the information required in Rule 28-5.201, Florida Administrative Code, and must make reference to the "CON Action Number" referred to in this lit The original and one copy of each request for hearing may be filed with or mailed to the following location: Sam Power, Agency Clerk, Assistant General Counsel, Department of HRS, 1323 Winewood Blvd., Building 1, Suite 406, Tallahassee, Florida 32399-0700. Upon receiving this letter, Williamson contacted her attorney, who in turn telephoned Amy Jones, Respondent's Deputy Assistant Secretary for Regulation and Health Facilities, to explain the circumstances surrounding Okeechobee's failure to timely respond to the "omissions" letter. After Williamson's attorney made his presentation, Jones advised him that, if he desired to have Respondent formally consider the matter, he would have to submit a petition for an administrative hearing in accordance with the May 25, 1990, letter that had been sent to Williamson. Such a petition was filed with Respondent's Agency Clerk on June 21, 1990. Okeechobee no longer owns or operates OHCF. The current owner and operator of the facility is Lifestyles and Healthcare, Ltd., (Lifestyles) which acquired the facility from Okeechobee in the spring of 1990, following the submission of CON application 6150. Okeechobee was dissolved upon Lifestyles' acquisition of OHCF. On or about September 14, 1990, Lifestyles was issued a license by Respondent's Office of Licensure and Certification authorizing Lifestyles to operate OHCF. The effective date of the license, as indicated on its face, was June 19, 1990.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Health and Rehabilitative Services enter a final order (1) dismissing the instant petition on the ground that the issue raised therein has become moot as a result of Okeechobee's voluntary withdrawal of CON application 6150, and (2) declining to refund the certificate of need application filing fee paid by Okeechobee in connection with the submission of CON application 6150. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 28th day of December, 1990. STUART M. LERNER 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 28th day of December, 1990.
Findings Of Fact Petitioner provides electric, gas and water utility service at various Florida locations. During the 1979 test year, its Fernandina Beach Water Division served an average of 2,500 residential customers, 523 general service customers and nine private fire line customers. In addition, it maintained 210 fire hydrants for the City of Fernandina Beach. Service The Utility is providing satisfactory water service. There were no service complaints presented at the public hearing, nor were there any citations or corrective orders outstanding. Rate Base The Utility seeks recognition of a $1,332,178 rate base. This amount includes $82,128 for an office building completed in the last month of the test year, a $7,600 chlorinator building completed after the test year (March, 1980) , and a pumphouse still under construction at an estimated completed cost of $106,000. Neither the amounts nor their completion dates are in dispute. However, the Commission seeks to utilize a 13-month average year rate base which would result in the exclusion of all the above facilities except for the office building investment during the final month of the test year. Both parties cite Citizens of Florida v. Hawkins, 356 So.2d 254 (Fla. 1978) in support of their positions. Although the Court discusses the various methods of computing a utility rate base, it concludes that unusual or extraordinary growth is a prerequisite to use of a year end rate base. The Utility did not demonstrate unusual or extraordinary growth. Rather, customer growth during the test year was only about two percent, mandating use of an average rate base. The Utility suggests that construction of the chlorinator was required by the federal government under the provisions of the Safe Drinking Water Act. If so, the Utility would be permitted to include this Investment in its rate base. 1/ However, the Utility was in compliance with the Safe Drinking Water Act prior to construction of the pumphouse and made no showing that it was required to undertake this project by government authority. Capitalization of interest on the funds used in construction of new facilities should be authorized. However, this amount will not be subject to inclusion in the rate base until the facility itself is included. The Utility plant was shown to be 100 percent used and useful in the public service. In view of this, and the adjustments discussed above, the Utility's average rate base for the test year is $1,103,201. See Schedule 1 for detail. Operating Revenues The Utility seeks a test year revenue authorization of $581,037 based on expenses of $456,184 and a 9.39 percent return on its proposed rate base. It seeks to include an expense item of $2,400 for tank maintenance, basing this amount on the five-year amortization of a projected $12,000 expenditure. Although this procedure is proper, since tank maintenance is periodically required, the $12,000 is the anticipated cost of future maintenance rather than an actual cost. Therefore, this figure must be adjusted to one-fifth of the last actual maintenance cost, or $1,105. Prior to December, 1979, when its office building was completed, the Utility rented the required space. Since the new building was not recognized for rate making purposes until the final month of the test year, it is proper to include the rent expense actually involved during the preceding 11 months. Therefore, an upward adjustment in expenses of $1,524 is required. Authorized expenses should also include $45,281 proposed by the Utility to meet known increases in the cost of purchased electrical power. The limitation on test year expenses is not the same as that on test year investment. Rather, Chapter 367, Florida Statutes, specifically provides for recognition of outside test year increases in electrical power costs. See Section 367.081(4)(b), Florida Statutes (1980). The Utility supported its proposed rate case expense of $5,100 by late filed exhibit. Neither the amount nor the proposed three-year amortization period were opposed by the Commission and are appropriately included herein. In view of the above findings and a 9.10 percent return on investment (discussed below) , the Utility is entitled to revise its rates to produce annual revenue of $536,970. See Schedule 2 for detail. Cost of Capital The parties agreed that 15 percent is an appropriate return on equity investment. This amount, when weighed against the current cost of debt, supports an overall 9.10 percent rate of return. Rate Structure The parties propose adoption of a base facility charge rate structure. This rate design includes a fixed charge to each customer served based 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 structure provides an equitable method of allocating service costs and is consistent with statutory requirements that rates be just and nondiscriminatory. See Section 307.081(2), Florida Statutes (1980). The Utility proposes to increase its fire hydrant charge from $8 to $12 monthly and to include this amount in its regular service rates to all customers rather than as a separate charge to the City of Fernandina Beach. The amount of the increase is consistent with overall revenue needs and was not opposed by the Commission. The procedure to include fire hydrant charges in customer charges was requested by the City Commission of Fernandina Beach and would not discriminate against any customer or group of customers, since all benefit from the fire protection represented by these charges.
Recommendation Based on the foregoing Findings of Fact and Conclusions A, of Law, it is RECOMMENDED that Florida Public Utilities Company be authorized to file revised rates structured on the base facility charge concept, designed to generate annual gross revenue of $536,970 based on the average number of customers served during the test year. DONE and ENTERED this 18th day of December, 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 On or about July 7, 1980, Timberland Utilities (hereinafter "Petitioner") filed a petition for permanent rate relief and immediate interim rate relief with the State of Florida, Public Service Commission (hereinafter "Commission") seeking authority to increase its authorized rates to realize an increase in authorized revenues from the provision and sale of natural gas to its customers within its service area pursuant to chapter 366, Florida Statutes. Petitioner is a public utility as that term is defined within Section 366.02, Florida Statutes. Petitioner provides and sells natural gas to its subscribing customers within its service area which comprises Cantonment, Florida, and the immediately surrounding rural and unincorporated territory in Escambia County, Florida. Petitioner was last granted permanent rate relief by the Commission on or about June 25, 1975, pursuant to Commission Order No. 6746, Docket No. 74768- GU. For purposes of this proceeding the Commission authorized Petitioner to use the twelve months beginning January 1, 1979 through and including December 3, 1979 as the test year period for this proceeding. During the test period, at its existing rate structure Petitioner experienced a loss in net operating income of $24,680.00. On or about September 4, 1980, the Commission authorized an interim rate increase under bond for Petitioner of $34,644.00, before taxes, pursuant to the Commission's Order No. 9520, Docket No. 800200-GU. Petitioner and the Commission have agreed on the following salient points: Capital Structure and Rate of Return The capital structure as of December 31, 1979, is: WEIGHTED AMOUNT RATIO COST COST Partner's Equity $137,465 55.18 12.34 6.81 Short Term Debt 96,280 38.65 13.46 5.20 Customer Deposits 15,381 6.17 8.00 .49 $249,126 100.00 12.50 The Commission has agreed to accept Petitioner's proposed overall return of 12.50 percent based on the year end 1979 capital structure. Rate Base The Petitioner and Commission agree on the following rate base as proposed by the Petitioner and adjusted by the Commission. Utility's adjusted year end Rate Base: $359,485.00 Commission adjustments (explained below): $ 79,007.00 Rate Base (December 31, 1979): $280,478.00 Calculation of 13 Months Average Plant in Service: Petitioner used a year end rate base in determining its requested rate relief whereas a 13-month average rate base is more appropriate. A 13-month rate base has been calculated which has the effect of increasing the Petitioner's rate base by $24,584.00. Extraordinary Property Loss: During the last month of the test year, Petitioner abandoned certain cathodic protection plant which was not used and useful. This was the result of a show-cause proceeding in Docket No. 79-650-GU, regarding the noncompliance with certain rules and regulations related to the cathodic protection of its distribution system. Since this plant was retired during the last month of the test year, it was not included in Petitioner's rate base but is included in the 13-month average rate base. This plant was not used and useful during the test year, therefore, it would be appropriate to remove it from plant in service together with the related reserve for depreciation which results in a net reduction to rate base in the amount of $19,268.00. Pro Forma Plant Adjustment - 1981 and 1982 Construction Labor: Petitioner included in its pro forma plant adjustment $23,380.00 and $14,476.00 for estimated 1981 and 1982 labor for constructing its replacement of abandoned plant in service related to its cathodic protection system. Since this adjustment relates to estimated expenditures, so far removed from the test year, it should be disallowed from Petitioner's constructed rate base. Meter and Regulator Change Out: Petitioner included in its pro forma plant adjustment $33,523.00 and $9,900.00 for changing out 683 meters and regulators, or virtually all of its meters and regulators. Petitioner is only required by Commission rules and regulations to change out 10 percent of its meters and regulators each year or a complete change out over a 10-year period. Because of the plant replacement program being undertaken currently, Petitioner has deferred this change out. However, in order to make the test period as normal as possible, it would be appropriate to allow at least a 10 percent change out, or approximately 70 meters and regulators, which would require a reduction in Petitioner's constructed rate base of $38,453.00. Plant In Service - Credit Memo Subsequent to its test year, Petitioner received a credit memo from Sherrod and Associates for work performed during the test year and recorded in plant. Therefore, it is appropriate to reduce test year plant in service by $600.00. Plant In Service - Misclassified Expenses: During the test year, Petitioner classified certain expenditures totalling $1,213.00 which more appropriately should have been expensed. This adjustment also affects the Company's Pro Forma Expense Adjustment No. (f), related to annual surveys and is discussed under Net Operating Income Adjustment No. (f). Plant In Service - Radio Tower: Petitioner recorded on its books a radio tower which was owned by a previous partner and not used by the utility. Petitioner and the Commission agreed to reduce Petitioner's rate base by the net cost of $124.00. and Working Capital - 1/8 Operating and Maintenance and Tax Lag: Because of certain adjustments to operating and maintenance expenses together with two items involving taxes other than income taxes, which were improperly classified as operating expenses, it is appropriate to reduce the allowance by $804.00. Also, since adjustments were made to income taxes, it is also appropriate to reduce rate base for the related tax lag in the amount of $273.00. Net Operating Income The Petitioner shows a net operating loss of $24,680.00 for the test year. The commission has made adjustments of $38,616.00 as described below to show an adjusted net operating income of $19,936.00. The utility has accepted these adjustments which are: Interim Increase in Revenues: Petitioner was authorized by Order No. 9520, issued September 4, 1980, to increase its rates on an interim basis, which would generate $34,644.00 in additional annual revenues. N.O.I. was increased by this amount less related revenue taxes of $34,081.00. Insurance Expense: Subsequent to the test year, Petitioner changed insurance agents resulting in lower insurance rates in the amount of $2,453.00. N.O.I. was adjusted by this amount which is proper to reflect known changes. Non-Utility and Out-of-Period Expenses: During the test year, Petitioner recorded as operating expenses $1,118.00 which related to a prior period and non-utility expenses. Therefore, it is appropriate to reduce expenses by this amount. Depreciation Expense: During the test year, Petitioner depreciated certain plant that was abandoned subsequent to the test year. The abandoned plant was removed from plant as a pro forma adjustment but the related depreciation expense was not adjusted. Depreciation expense was accordingly reduced by $1,698.00, since it is nonrecurring in nature. Amortization Expense: Petitioner originally included certain items in its extraordinary property loss account, which more appropriately should have received normal retirement treatment. Since these items were improperly included in the amortization of these property losses, Petitioner and the Commission have agreed to reduce same by $298.00. Pro Forma Survey & Consultant Fees: Petitioner made a pro forma adjustment to this expense to reflect a normal recurring cost of performing annual surveys. Petitioner stated that the annual recurring amount was $1,952.00 but it recorded only $950.00 for the test year, because of $1,213.00 in expenses misclassified as plant in service during the test year. After adjusting the Company's pro forma adjustment, the effect is to reduce this expense by $211.00. State and Federal Income Taxes: Petitioner was originally organized as a partnership and has not been subject to state and federal income taxes. However, effective January 1, 1981, Petitioner plans to incorporate and will be subject to these taxes. Net operating income, therefore, has been adjusted to recognize income taxes as a proper expense in the amount of $1,243.00. Rate Design (a) Petitioner and the Commission have agreed to the use of flat rates for residential and commercial rate schedules. Petitioner and the Commission have agreed to eliminate the net gross billing feature for residential and commercial rate schedules. Petitioner has agreed that its tariff should be revised to comply with current Commission rules, practices and procedures. Petitioner has agreed that revised pages 75, 76, 86, 88, 89 in the "R" section of the MFR's will be filed consistent with discussion with Commission staff at Petitioner-Staff conference. Petitioner has agreed with the Commission to increase the connection and reconnection charges for village and rural service areas to $10.00 and $15.00, respectively. Petitioner and the Commission have agreed that the N.O.I. deficiency, expansion factor and revenue requirements are as follows: Timberland Utilities Revenue Requirements Calculation Staff Adjusted Rate Base: $ 280,478.00 Rate of Return (Requested by Petitioner): 12.5 percent Required N.O.I.: $ 35,060.00 Staff Adjusted N.O.I.: 13,936.00 N.O.I. Deficiency $ 21,124.00 N.O.I. Deficiency at 17 percent Rate: $ 17,570.00 Expansion Factor at 17 percent F.I.T. Rate: :- 78.0888 percent Revenue Requirements: $ 22,500.00 N.O.I. Deficiency at 20 percent Rate: $ 3,554.00 Expansion Factor at 20 percent F.I.T. Rate: :- 75,3553 percent Revenue Requirements $ 4,716.00 TOTAL ADDITIONAL REVENUE REQUIREMENTS: $ 27,216.00
Findings Of Fact Quality of Service During the test year Petitioner provided sewer service to an average of 533 multi-family customers, nine residential customers and two general service customers. Foxmoor Condominium Association, Inc., a customer of Petitioner, has indicated its willingness to cooperate with the utility in its attempt to obtain a copy of the water bill for the condominium from Lee County, which provides the water service. This information will enable the utility to utilize a base facility charge type of rate structure. Evidence of record indicates that Petitioner is in compliance with regulations of the Florida Department of Environmental Regulation, although the utility, through testimony, acknowledged the existence of a consent order between DER and the utility, whereby certain changes should take place regarding the utility operations. The evidence in the record, therefore, supports a finding that the utility's sewer service is presently satisfactory. Rate Base A rate base of $170,087 suggested by PSC staff was acceptable to the utility (see Tr. 84-87). In accepting the rate base figure, the utility did not abandon its request that certain overheads be capitalized and added to rate base. However, necessary information to accomplish this was not timely filed, and, rather than delay this proceeding for presentation and audit, it was agreed that this issue be left open for a future rate case proceeding (see Tr. 20, 21, 41). The complete rate base schedule is attached as Schedule No. 1. Net Operating Income After eliciting the testimony of the various witnesses and considering the various stipulations between the parties, the sole issue remaining in dispute in this proceeding was the appropriate level of compensation for the chief executive officer of the utility. The utility had requested a salary of $13,000 per year. However, based upon the fact that the chief executive officer was actually paid only $3,400 during the test year, that figure is determined to be the appropriate amount of compensation to be allowed in this proceeding. Upon reaching that conclusion the appropriate amount of gross annual revenues is $63,133 (see Schedule No. 2, attached) Cost of Capital The utility had 100 percent debt at a cost of 10.59 percent (see Exhibit R-4), a figure which the utility agreed to as the accepted cost of capital finding for the purposes of this rate case proceeding only (see Tr. 79). Revenue Requirement As indicated in Schedule No. 2, the revenue requirement for the sewer system is $63,133. The revenues produce an overall rate of return of 10.59 percent on sewer rate base. Accordingly, the utility should file revised tariff pages containing rates designed to produce the above-noted amount of gross revenues. Rate Structure The evidence in this proceeding establishes the utility has been improperly billing some customers, and that the utility should be required to make refunds (see Tr. 65). The utility has agreed to make the refunds requested (see Exhibit 3-R). Petitioner's master metered, multi-family customers should be billed on a base facility charge type rate structure. Residential customers should be billed on a flat rate basis because of the relatively small number of these customers during the test period, and because of the difficulty of obtaining information concerning the water consumption due to the fact that water service is provided by the county.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the application of Old Bridge Utilities, Inc. be granted and the utility be authorized to file revised tariff pages, containing rates designed to produce gross annual sewer revenues of $63,133; That the utility be required to utilize the rate structure described in the body of this Recommended Order; That the issue of capitalization of overhead be left open for resolution in a future proceeding; That the rate refunding-bond, filed by the utility, be returned for cancellation, and That the refunds reflected in the attached schedules discussed herein be made. DONE and ORDERED this 7th day of April, 1981, in Tallahassee, Florida. WILLIAM E. WILLIAMS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 1981. COPIES FURNISHED: William H. Harrold, Esquire Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 William E. Sundstrom, Esquire Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 Karl L. Johnson, Esquire Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue Fort Myers, Florida 33902 ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION In re: Application of OLD BRIDGE DOAH CASE NO. 80-1577 UTILITIES, INC. for a rate DOCKET NO. 790677-S increase to its sewer customers ORDER NO. 1-10152 in Lee County, Florida. ISSUED: 7-21-81 / The following Commissioners participated in the disposition of this matter: JOSEPH P. CRESSE, CHAIRMAN JOHN R. MARKS, III SUSAN W. LEISNER Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, WILLIAM E. WILLIAMS, held a public hearing on January 15, 1981, in Fort Myers, Florida, on the application of Old Bridge Utilities, Inc. for a rate increase to its sewer customers in Lee County, Florida. The Division of Administrative Hearings assigned Case No. 80-1577 to the above-noted docket. APPEARANCES: WILLIAM E. SUNDSTROM Attorney at Law Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 On behalf of Petitioner, Old Bridge Utilities, Inc. KARL L. JOHNSON Attorney at Law Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue Fort Myers, Florida 33902 On behalf of Intervenor, Foxmoor Condominium Association. WILLIAM H. HARROLD Attorney at Law 101 East Gaines Street Tallahassee, Florida 32301 On behalf of the staff of the Florida Public Service Commission and the public generally. The Hearing Officer's Recommended Order was entered on April 7, 1981. The time for filing exceptions thereto has expired and no exceptions have been filed. After considering all of the evidence in the record, we now enter our order.
Findings Of Fact Quality of Service There were no customers of the utility present at the public hearing, except for the Department of the Navy. As a result, there is no public testimony in the record relating to the quality of the water and sewer service provided by the utility. However, a representative of the Department of Environmental Regulation and an engineer from the Public Service Commission agree that the utility's water treatment meets all relevant quality standards, and its sewage treatment is within acceptable limits. Nevertheless, there exist problems of infiltration into the company's sewage lines which have resulted in variations in its level of treatment efficiency. The Department of the Navy acknowledges that some of these infiltration problems originate at the Navy housing facility, and the Navy asserts that corrective measures will be undertaken. In the meantime, the Navy contends that the sewage flows from its housing facility have been underestimated, resulting in an overstatement of revenue to the utility. However, there is insufficient specific evidence in the record to support a finding of fact resolving this issue. Since the variations in the utility's sewage treatment efficiency are within acceptable levels, the Company's wastewater treatment is found to be satisfactory. Rate Base By its exhibits, the utility has alleged its adjusted rate base to be $59,401 for water and $87,134 for sewer. Public Service Commission adjustments reduce and correctly state the water rate base to be $19,356 and the sewer rate base to be $65,552. The utility contests the removal of $16,530 from sewer rate base as a contribution in aid of construction (CIAC). This amount is the difference between the $155,000 paid by the Duval County School Board to a partnership consisting of the utility's partners and others, and the $138,170 recorded on the books of the utility. It contends the $16,330 represents a contractor's profit to one of the former partners of utility, but this amount is properly recordable as CIAC and should be removed from rate base. Other adjustments are either not contested, or make no material difference in the utility's revenue requirements, and should be accepted. The accompanying schedules 1 and 3 detail the rate base for both water and sewer with appropriate explanations for the adjustments. Cost of Capital Representatives from the utility and from the Public Service Commission presented evidence on the issue of cost of capital. The major area of disagreement relates to the company's capital structure. The Commission contends that the utility is 100 percent debt, while the utility asserts the capital structure to be 52.97 percent equity and 47.03 percent debt. The Commission's contention is based on the annual reports filed by the utility wherein a deficit is reported in the equity account. The utility, however, has made several adjustments to the investment shown in the annual reports which it alleges increase equity from a deficit of $39,804 to a positive amount of $92,727. The first adjustment made by the utility is in the amount of $22,700 to make the amount of investment equal to rate base, in accordance with principles of double entry bookkeeping. However, because revenue requirements of public utilities are based on used and useful plant in service rather than on total assets, it is not uncommon for the rate base to be different in amount from the total capitalization. Thus, this adjustment is unnecessary and improper. The utility's second adjustment increases the amount of investment by $39,464 as the Unrecovered Cost of Abandonment of Utility Plant. The plant to which this adjustment refers was abandoned, and because of the hazards presented by the abandoned structure, it was disassembled and scrapped. The unrecovered costs were written off for tax purposes, but were not written off for regulatory purposes. This amount should be treated as any other loss, and the adjustment to increase investment should be disallowed. When a utility has recovered the cost of a loss due to abandonment through a write off against income, the placement of the amount of the investment in the capital account results in accounting twice for the loss. The third adjustment involves an amount of $57,067 representing loans procured by the utility's partners from a financial institution. Although these loans were made directly to the partners, the proceeds were used by the utility and the company services the debt. The utility contends that these funds are equity, and it has increased the investment account by the amount thereof. However, the intent of the parties to the transaction was that the funds borrowed by the partners were loaned to the utility, not invested in it. Accordingly, the utility's adjustment is improper; the amount of the loan should be considered as debt in the utility's capital structure; and it should be allowed to earn the embedded cost of this debt, but not an equity return on the amount thereof. In summary, since this utility's equity account has a deficit balance, the appropriate capital structure is 100 percent debt. The cost of this debt is its embedded cost, estimated to be 11.75 percent overall, and the weighted cost is 10.21 percent, as shown in the following table. CAPITAL STRUCTURE COMPONENT PERCENT OF AMOUNT CAPITAL COST RATE WEIGHTED COST Mortgage Note $36,593 20.9 8.00 2.312 Loans Outstanding 48,162 38.0 9.69 3.681 Proposed Note 41,870 33.1 12.76 (est) 4.220 TOTAL $126,625 100.0 10.213 perc. These "Amounts" are the non-current portion of the debt. Operating Statements The accompanying schedules 2 and 4 detail the operating statements for both water and sewer, with appropriate adjustments. The utility contests the Commission's disallowance of depreciation on its proforma plant acquisition. However, the plant has not yet been constructed. Thus, although the proforma plant adjustments have been agreed to, depreciation expense thereon cannot be allowed. The utility further challenges a Commission adjustment disallowing depreciation expense on contributed assets. This adjustment is proper and should be allowed. The utility also contends that it should be allowed income taxes, asserting that an unincorporated proprietorship is entitled to the same income tax expense as a corporation, and that the related income taxes do not have to be paid, merely accrued. However, the purpose of the income tax accounts in the NARUC Uniform System of Accounts is to allow entities which pay income accounts in which to record them. There is no provision in the uniform system for recordation of a nonexistent expense. Since the utility admits that the partnership has paid no income taxes, the disallowance is proper. Finally, the utility contests what it claims is disallowance by the Commission of all its proposed amortization of abandoned plant. However, the exhibits reflect that the Commission increased the amount of amortization expense from $2,790 to $3,284 for water, and from $3,016 to $6,468 for sewer, to allow for amortization of the abandoned plant. Revenue requirements The application of a 10.21 percent rate of return to the adjusted rate base for both water and sewer requires that the utility receive gross annual revenues of $33,752 for water and $81,432 for sewer. These revenues represent increases of $9,381 and $23,446 for water and for sewer, respectively. See Schedules 2 and 4 attached). Rate structure The utility provides water service to an average of 67 residential customers, 12 general service customers and 11 multi-dwelling customers (Average 346 Units). It provides sewer service to an average of 26 residential customers, 12 general service customers and 4 multi-dwelling customers (Average 645 Units). The present residential water rates are structured to provide for a minimum quarterly charge, which includes a minimum number of gallons, and a one- step excess rate over that minimum. The proposed rates follow the same basic structure. The present general service water rates are structured in the same manner, except that the rates for this classification are approximately 25 percent higher than residential. The proposed rates follow the same basic structure. The present multi-dwelling water rates are structured in compliance with the provisions of the old Rule 25-10.75, Florida Administrative Code, which provided that the rate for master metered multiple dwelling structures should be 66 2/3 percent of the minimum residential rate, with an equal minimum gallonage allowance included within the unit minimum charge. The total number of gallons to be included within the minimum gallonage allowance was determined by the number of units served, with excess gallons over the cumulative allowance to be billed at the excess residential rate. The proposed races follow the same basic structure for determining the minimum gallonage allowance and excess gallonage over the minimum allowance. The proposed minimum charge per unit has been structured approximately 25 percent higher than the proposed minimum unit charge for residential service. The proposed excess rate has been structured at the same level as general service, which is approximately 25 percent higher than the residential service rate. Any rate structure that requires a customer to pay for a minimum number of gallons, whether those gallons are used or not, is discriminatory. Over 27 percent of this utility's basic residential customers did not use as much as the minimum gallonage allowance during the test year. The average number of gallons consumed in the gallon brackets below the minimum allowance bracket was 3,197 gallons per customer per quarter. A rate structure that requires the general service customers to pay a higher rate than the other classifications of service is also discriminatory. Since the Cost of Service to Multiple Dwelling Structures Rule 25- 10.75, Florida Administrative Code, was repealed by Commission Order No. 7590, issued January 18, 1977 in Docket No. 760744-Rule, it has been the practice of the Public Service Commission to structure this type customer in the general service classification, and to structure water rates under the Base Facility Charge form of rate design. The basic concept of this type rate design is to determine a base charge whose foundation is based on the associated costs of providing service to each type customer. The charge covers associated costs such as transmission and distribution facility maintenance expenses, depreciation, property taxes, property insurance, an allocated portion of customer accounts expenses, etc. The amount of the charge is determined by an equivalent residential connection formula using the standard meter size as the base. There are not any gallons included within the frame of the Base Facility Charge. The second structure is to determine the appropriate charge for the water delivered to the customer. This charge would cover related costs such as pumping expenses; treatment expenses, an allocated portion of customer accounts expenses, etc. The primary reasoning supporting this type structure is that each customer pays a prorata share of the related facility costs necessary to provide service, and thereafter the customer pays for only the actual number of gallons consumed under the gallonage charge. The present residential sewer rates are structured in the manner of a quarterly flat-rate charge for all residential customers. The proposed rates are structured with a minimum charge, which includes a minimum number of gallons and an excess rate above that minimum. The present general service sewer rates are structured so that a percentage factor is applied to the water bill to determine the sewer charge. The rates for this classification are structured approximately 25 percent higher than residential. The proposed rates are structured with a minimum charge, which includes a minimum number of gallons and an excess rate above the minimum. The proposed rates are structured approximately 25 percent higher than residential. The present multi-dwelling sewer rates are structured in compliance with the provisions of the old Rule 25- 10.75, Florida Administrative Code, which provided that the rate for sewer service to multiple dwelling units should be 66 2/3 percent of the basic charge for sewer service to single residential units. The proposed rates are structured with a minimum charge for each unit, which includes a minimum number of gallons, and an excess rate over the minimum. The minimum charge per unit and the excess rate are structured approximately 25 percent higher than residential. Since the repeal of Rule 25-10.75, Florida Administrative Code, it has been the practice of the Public Service Commission to structure this type customer in the general service classification of customers, and to structure sewer rates under the Base Facility Charge form of rate design. This should be implemented by the utility for both water rates and sewer rates. The utility has been misapplying its schedule of rates for the commercial sewer classification of service. The schedule calls for 250 percent of the water bill with a minimum charge of $0.15 monthly ($24.45 quarterly). However, the utility has been billing its commercial sewer customers 250 percent of the water bill plus the minimum charge. This amounted to an overcharge to this customer classification of approximately $1190 during the test period. The utility should be required to make the appropriate refund to each commercial sewer customer, and the amount of this overcharge has been removed from test year revenues on the attached schedule 4. The utility is collecting a meter installation charge of $200, and a charge of $246 for each connection to the sewer system, without any apparent tariff authority. Further, the charges made for customer reconnect after disconnection for nonpayment are not adequate to cover the associated costs of this service. An investigation docket should be opened to consider the appropriateness of the meter installation charge, and to receive evidence of actual costs of service restoration. Finally, insufficient facts were presented to support a finding relative to the validity of the utility's sewer service contract with the Navy or the compatibility of the charges for sewer service to the Navy with the utility's tariff. These issues should be revisited during the course of the investigation docket. However, the utility's practice of requiring customer deposits when service is billed in advance should be discontinued.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Buccaneer Service Company, 1665 Selva Marina Drive, Atlantic Beach, Florida 32233, be granted in part, and that the utility be authorized to receive gross annual water revenue of $33,752, and gross annual sewer revenue of $81,423, by rates to be approved by the Public Service Commission. It is further RECOMMENDED that the utility be required to adopt a Base Facility charge form of rate design for both water and sewer rates, and to make appropriate changes in its tariff. It is further RECOMMENDED that the utility be required to refund to each commercial sewer customer a prorata portion of the total amount of overcharges collected since the beginning of the test year. It is further RECOMMENDED that an investigation docket be opened for the purpose of making further inquiry into the appropriateness of the utility's meter installation charge, to receive evidence of actual costs of service restoration, and to determine the validity of the utility's contract for sewer service with the Navy and the appropriate rate to be charged for this service. And it is further RECOMMENDED that the utility be required to discontinue the practice of collecting customer deposits for service which is billed in advance. THIS RECOMMENDED ORDER entered on this 6th day of August, 1980. WILLIAM B. THOMAS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
