Findings Of Fact Quality of Service At the end of the test year (calendar year 1979), the utility provided water and sewer service to approximately 2,577 customers, most of whom reside in two mobile home parks. Of that number, seven testified at the hearing. Two were concerned with the magnitude of the increase sought by the utility, one complained of an odor emanating from the sewage treatment plant, and the remainder described the water as being discolored and having a bad taste. There were no complaints about poor water pressure or interruptions in service. At present, there are no citations or corrective orders with regard to the utility's water plant. Its sewage treatment facility is being operated pursuant to a temporary operating permit granted by the Florida Department of Environmental Regulation. The effluent from the sewage treatment facility is meeting all applicable standards. Rate Base Petitioner has proposed an average water rate base of $311,028 and a year-end sewer rate base of $426,373 (Exhibit No. 4). However, it proposes to include in water rate base additional costs associated with the construction of a water storage tank. This increases the utility's proposed average water rate base to $376,118. The Commission urges a number of adjustments to rate base which collectively have the effect of reducing the amounts proposed by the utility. These adjustments affect plant in service, construction work in progress, accumulated depreciation and working capital allowance, and should be accepted. First, a reduction in water plant and an increase in sewer plant are required to correct certain costs recorded in the wrong system account. It is also necessary to increase water plant and sewer plant to reflect the capitalization of certain costs that were improperly expensed. Second, the proposed inclusion in rate base of costs associated with the (1) automatic switching for chlorine feed and chlorine scale, (2) chlorine emergency repair kit, and (3) a 500,000 gallon concrete storage tank is improper because these expenditures are substantially beyond the scope of the test period and are not "required by (a) duly authorized governmental authority." Section 367.081(2), Florida Statutes. Third, because of the adjustment to plant in service, it is also necessary to adjust accumulated depreciation. Finally, revisions to the operation and maintenance expenses discussed hereinafter necessitate a mechanical adjustment to the utility's working capital allowance. The following schedules portray the adjusted rate bases for water and sewer operations, and a brief description of each of the adjustments made in arriving at those amounts. Ferncrest Utilities, Inc. Average Water Rate Base Year Ended December 31, 1979 COMPANY ADJUSTMENTS ADJUSTED BALANCES Utility Plant in Service $ 625,030 (1) $ 625,030 Construction Work in Progress 209,985 (200,375) (2)9,610 Accum. Depreciation (95,911) - (3) (95,911) CIAC (376,191) - (376,191) Working Capital Allowance 13,205 (244)(4) 12,961 Income Tax Lag -0- (234) (234) Adjusted Rate Base $ 376,118 $ 175,265 During the hearing, the utility revised its rate base exhibit to reflect the changes in plant in service discussed in the main body of this order (Exhibit No. 4). Accordingly, no adjustment is shown on the schedule. Reduces construction work in progress by eliminating the expected costs associated with the automatic switchings for chlorine feed and chlorine scale, chlorine emergency repair kit, and a 500,000 gallon concrete storage tank. During the hearing, the utility agreed with the change in accumulated depreciation occasioned by the revisions in plant in service in item (1)(Exhibit No. 4). Therefore, no adjustment is shown on this schedule. Restates the working capital allowance to reflect one-eighth of operation and maintenance expenses. Ferncrest Utilities, Inc. Year End Sewer Rate Base Year Ended December 31, 1979 COMPANY ADJUSTMENTS ADJUSTED BALANCES Utility Plant in Service $1,373,224 - (1) $1,373,224 Construction work in Progress 2,285 (2,285)(2) -0- Accum. Depreciation (180,902) - (180,902) CIAC (780,457) - (780,457) Working Capital Allowance 12,223 (428)(3) 11,795 Income Tax Lag -0- (603) (603) Adjusted Rate Base $ 426,373 $ 423,057 The utility revised its rate base exhibit during the hearing in accordance with the plant in service adjustments discussed above (Exhibit No. 4). Accordingly, no adjustment is reflected on the schedule. Reduces construction work in progress by eliminating those expected costs associated with the automatic switchings for chlorine feed and chlorine scale and a chlorine emergency repair kit. Restates the working capital allowance to reflect one-eighth of operation and maintenance expenses. Net Operating Income On Exhibit No. 13, the utility shows an operating loss of $39,241 for its water operations and an Operating loss of $14,857 for its sewer operations for calendar year 1979. The utility then adjusts its results of operations by including the additional revenues required to earn a fair rate of return, and additional operating and maintenance expenses that it contends should be recognized. As adjusted, Ferncrest portrays an operating income of $54,236 and $61,483 for its water and sewer operations respectively. Certain adjustments are required, however, which affect revenue, operation expense, maintenance expense, depreciation expense, taxes other than income and income taxes. Revenues must first be reduced to reflect only that amount which is being recommended hereinafter. Operation expense should be restated to (1) reflect the expenses in the proper system account, (2) show the proper accrual, (3) remove expenses that should be capitalized, (4) recognize additional expenses not reflected in test year operations, and (5) correct improper amortization periods and pro forma adjustments. Maintenance expense must necessarily be corrected to transfer out charges improperly recorded therein. Depreciation expense should be recalculated using an average depreciable base for water operations and a year-end depreciable base for sewer operations in accordance with the rate bases used above. Finally, an adjustment to gross receipts taxes and income taxes is required to conform such taxes to the appropriate amount of revenues being recommended herein. The adjusted operating incomes of the utility and a description of the adjustments made in arriving at those amounts are shown on the following schedule. FERNCREST UTILITIES, INC., Operating Income - Water Year Ended December 31, 1979 ADJUSTED COMPANY ADJUSTMENTS BALANCE Operating Revenues Operating Expenses: 178,221 (33,349) (1) $144,872 Operation $ 98,298 (2) 98,298 Maintenance 7,342 (1,957) (3) 5,385 Depreciation 3,367 - (4) 3,367 Taxes other than Income 12,211 (833) (5) 11,378 Income Taxes 2,766 (1,595) (6) 1,171 Total Operating Expenses $ 123,985 119,599 Operating Income $ 54,236 $ 25,273 Revenues are adjusted downward to reflect only that amount being recommended herein. The utility has agreed to utilize the amount of operation expenses reflected above (Exhibit No. 13) . Therefore, no adjustment is shown on the schedule. Reduces maintenance expense by eliminating the pro forma annual cost of motor maintenance, and amortizing certain repairs over a 3-year period (Exhibit No. 15, Schedule 1; Exhibit No. 17, Schedule B) Because the utility has agreed to the revision of depreciation expense stated above, the actual adjustment is not reflected on the schedule (Exhibit No. 13). Restates gross receipts taxes owed by the utility to conform with the recommended revenue increase (Exhibit No. 13) Conforms income taxes with increase in revenues. Ferncrest Utilities, Inc. Operating Income - Sewer Year Ended December 31, 1979 ADJUSTED COMPANY ADJUSTMENTS BALANCE Operating Revenues $ 181,672 (4,109) (1) $ 177,563 Operating Expenses Operation 90,312 (273) (2) 90,039 Maintenance 7,474 (3,150) (3) 4,324 Depreciation 7,478 - 7,478 Taxes other than Income 11,006 (102) (4) 11,704 Income Taxes 3,119 (105) (5) 3,014 Total Operating Expenses 120,109 116,559 Operating Income $ 61,493 $ 61 004 Adjusts revenues to reflect the actual amount being recommended heroin (Exhibit No. 13) Reduces operation expenses by using a 2-year amortization period for recalibration of a motor in lieu of charging all expenses to test year operations alone, and reclassifying STP deodorant costs to A/C 704 (Exhibit No. 15, Schedule 2). Revises maintenance expense by eliminating the pro forma annual cost of motor maintenance (Exhibit No. 17, Schedule A) Adjusts taxes other than income to reflect the appropriate amount of gross receipts taxes related to the recommended increase in revenues (Exhibit No. 13). Conforms income taxes with increase in revenues. COST OF CAPITAL The utility's application reflects it had a deficit in its equity accounts and no outstanding long-term debt as of the end of the test period. It did have approximately $600()00 in short-term debt which it characterized as "demand monies." It intends to roll over the short-term debt by borrowing $600,000 from The Dania Bank at 14 percent interest rate. The utility's capital structure would then consist of 100 percent debt at a cost rate of 14 percent. It was this return that was initially used by the utility in developing its revenue requirements. However, Commission approval is required in order to consummate that loan agreement. Such approval was denied by Order No. 9539, dated September 15, 19-30, in Docket No. 800577-US. On reconsideration the Commission approved the application by Order No. 9665, dated November 26, 1900, provided the utility use $120,000 of the proceeds as cumulative preferred stock. Accordingly, the pro forma capital structure will consist of 16.65 percent equity and 83.15 percent long term debt, By agreement of the parties, a cost rate of 14 percent should be assigned to the debt component and a 16 percent cost rate assigned to equity. The overall resulting cost of capital is 14.42 percent, and that rate should be used in determining the utility's revenue requirements. REVENUE REQUIREMENTS Given the above cost of capital, a grant of $68,540 in additional annual water revenues and $83,663 in additional annual sewer revenues should enable Ferncrest to earn a fair return on its utility operations. RATE STRUCTURE Residential water customers are now assessed a minimum monthly charge which includes a minimum number of gallons and a one-sept excess rate over that minimum gallonage. A declining block type of rate structure is used for general service water customers. Residential sewer customers with 5/8" x 3/4" meters pay a flat rate each month irrespective of usage, while those with larger meter sizes have the same structure as do residential water customers. General service sewer rates are based upon a declining block rate structure. The base facilities charge advocated by the Commission is superior to the rate designs presently used. Under this type of structure, a minimum charge will be assessed to recover the fixed or base costs of providing service, such as depreciation, taxes and a portion of billing and collecting expenses. Thereafter, a variable charge will be made for the gallons actually consumed. Because this type of rate structure offers greater control to the customer as to the amount of his bill, and allocates costs in a more equitable manner, it should be adopted. During the test year, a $5.50 fee was collected from approximately 50 customers per month who did not pay their bills in a timely fashion. This revenue ($3,300 on an annual basis) should be treated as miscellaneous revenue in designing the new rates. The utility reguests approval of a new tariff provision that governs the use of oversized lines and facilities constructed for developers (Exhibit No. 10) This provision is necessary in order to prescribe the deposit requirements for main extensions, and should be approved. The utility owns and operates a sewage collection and sewage treatment system which provides sewage treatment and disposal services to an adjacent travel park. As a result of this discharge, Ferncrest incurs chemical costs that exceed its applicable tariff rates. It proposes to amend its tariff to permit the recovery of such costs from the travel park (Exhibit No. 1) . Without this provision, the general body of ratepayers would be required to subsidize a portion of the operations. Accordingly, it should be accepted. The Commission proposes that language be added to the tariff which states: "During the period that service is not being furnished to the premises, a monthly standby charge equivalent to the base facility charge will be made. If service is terminated and resumed at the same address to the same customer within twelve months from the date of termination, an amount equal to the base facility charge for the period of the service termination will be collected as a condition precedent to the restoration of service." This change is necessary in order for the utility to recoup the fixed costs incurred in maintaining service to the customers, and it should be incorporated into the tariff. Finally, because an average rate base has been used for water operations and a year-end rate base for sewer operations, rate allocations for the systems should be based upon average and year-end customers and consumption respectively.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Ferncrest Utilities, Inc. be granted in part and that the utility be authorized to file new tariffs to be approved by the Florida Public Service Commission that will generate $68,540 and $83,663 in additional annual gross revenues for the utility's water and sewer operations. It is further RECOMMENDED that the utility file appropriate tariff sheets in conformity with the Rate Structure portion of this Order. It is further RECOMMENDED that the bond or letter of credit filed by the utility be returned for cancellation. This Recommended Order entered on this 12th day of December, 1980, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of December, 1980. COPIES FURNISHED: R.M.C. Rose, Esquire Suite 103, 1020 E. Lafayette Street Tallahassee, Florida 32301 Jerome L. Hall, Esquire Suite 304, 200 S.E. 6th Street Fort Lauderdale, Florida 33301 Marta M. Crowley, Esquire 101 East Gaines Street Tallahassee, Florida 32301
Findings Of Fact Respondent owns and operates a waste water treatment facility at Polynesian Village Mobile Home Park, owns the land at this village, leases these lots to mobile home owners, and provides them with waste water treatment. He was last issued an operating permit on January 18, 1983, by Petitioner. Respondent posted an Operational Bond (Exhibit 2) in the amount of $7,500 with Northwestern National Insurance Company as surety to faithfully operate the treatment facility and comply with all Rules and Regulations of the Petitioner. Englewood Water District, petitioner, was established by special act of the Florida Legislature in Chapter 59-931, Florida Statutes, and is given authority in Section 4 thereof to regulate use of sewers, fix rates, enjoin or otherwise prevent violations of the act or any regulation adopted by Petitioner pursuant to the act, and to promulgate regulations to carry out the provisions of the act. Pursuant to this authority, Petitioner promulgated Waste Water Treatment Facilities Design, Construction and Operation Regulations dated June 19, 1980, and revised April 28, 1983. During an inspection of Respondent's waste water treatment facility on October 17, 1983, leaching was observed at both the north and south drain fields with effluent from the system rising to the surface. Samples of this effluent when tested showed a fecal coliform count of 2800/100 ml. The basic level of disinfectant shall result in not more than 200 fecal coliform values per 100 ml of effluent sample (Rule 17-6.060(1)(b)3a, F.A.C.). Following this test, Notice of Violation (Exhibit 4) was served on Respondent. No action was taken by Respondent to correct this condition and on January 6, 1984, a Citation (Exhibit 5) was issued to Respondent scheduling a hearing for January 26, 1984. Following the issuance of that Citation frequent inspections of the facility were conducted by employees of Respondent to ascertain if steps were being taken by Respondent to correct the deficiencies. Additionally, inspections were made by inspectors from Sarasota County Pollution Control. Inspections were conducted January 9, 16, 17, 18, 20, 23, and 31; February 1, 8, 13, 14, 16, 21, 24, 25, 26, 27, 28, and 29; and March 2, 5, 8, and 9, 1984. These inspections revealed what appears to be a "blow-out" in the south drain field where effluent bubbles to the surface and flows onto the adjacent streets and propert (Exhibits 9 and 11). Effluent tested from this source had fecal coliform counts as high as 9440/100 ml. During one of these inspections effluent from the treatment plant was being discharged directly onto the road to a drainage ditch adjacent to the plant (Exhibit 8). The coliform count of a sample taken from this ditch was 13500/100 ml. Respondent was issued a second Citation on March 2, 1984, and this hearing was held on the violations alleged in that Citation, to wit: creating a public nuisance and leaching from drain field. Respondent contends that he is dealing with the Sarasota County Engineer to correct the problems and, after failing in his attempt to get the county to provide drainage from his property, he is now in the process of installing drain pipes. Respondent contends that the natural drainage of surface waters from his land to adjacent land was stopped by development on the adjacent land and the heavy rains this winter has saturated his land and inhibited percolation in the drain fields. Accordingly, the effluent from his plant could not be absorbed by the drain field. Respondent also contends that the drain field worked fine for several years before the drainage problem arose and believes it will again work well when the drainage situation is corrected.
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 Petitioner began employment with Respondent in November 1983. He was assigned to the Water and Sewer Department as a laborer. In 1986, Petitioner was transferred by the Respondent to the Water and Sewer Department water meter shop to be a water meter repairman. Petitioner continued his employment in that section until the spring of 1993. At that time, Petitioner accepted status under the Respondent's Disability Income Replacement policy. This arrangement is for an employee who is absent due to disability for more than 60 days. He then becomes eligible to receive payment of 60 percent of the employee's regular earnings. From the years 1986 into 1990, Petitioner enjoyed good health. During that period his employee work evaluations ranged from satisfactory to above satisfactory. In 1990, Petitioner developed psoriasis. In the beginning, the condition was controlled through medical treatment. However, in 1991, Petitioner was diagnosed with bladder cancer. As a result, while being treated for the bladder cancer in 1991 and 1992, to include two surgeries, Petitioner was unable to receive medical treatment for his psoriasis. Consequently the psoriasis became more severe. There was a change in supervisory personnel on April 4, 1991, which affected Petitioner's employment status together with that of other employees within the Water and Sewer Department. The change came about when Richard Davis, who headed the Water and Sewer Department was replaced by Henry Hicks. Respondent had found it necessary to replace Davis, because in Respondent's view Davis was not satisfactorily addressing the personnel issues within the Water and Sewer Department. When hired, one of the issues which Hicks felt he needed to address was a morale problem caused by employee perceptions that the Department of Water and Sewer employee rules were not being enforced in a consistent manner. Hicks was of the opinion that this perception existed, in part, because supervisors maintained a casual approach to employee counseling and discipline. Hicks, in his tenure, reminded the supervisors to formalize their procedures in dealing with employee counseling and disciplining. He required the supervisor provide documentation of any disciplinary action whether verbally given or by a written reprimand. This change in direction tended to increase the number of documented incidences of imposition of employee discipline within the Water and Sewer Department. The first employee evaluation which Petitioner received after Hicks' assumption of his position of director of the Water and Sewer Department was in 1991. The 1991 evaluation which Petitioner was given contained positive and negative remarks about Petitioner's work performance. In the spring of 1991, the Water and Sewer Department held a picnic, an activity in which the employees were encouraged to participate. As in prior years the Petitioner volunteered to be a member of the food committee for the picnic and was appointed to that committee. Members of the food committee would serve food at the picnic. At that time, the Petitioner's psoriasis was such that he was noticeably peeling and flaking. Howard Johnson, a supervisor with Respondent approached Hicks and told Hicks that several employees had stated that they, the employees, would not go to the picnic if Petitioner served food because they were afraid that Petitioner's skin would flake into the food. Having been apprised of this situation, upon a date prior to the picnic, Hicks met with Petitioner and told Petitioner what had been reported to Hicks and asked Petitioner to serve the needs of the picnic activity in some other manner than food service. Specifically, the Petitioner was offered the opportunity to help "set up" the picnic area. Petitioner did not accept the alternative offer to assist in the outing. Instead, Petitioner was offended and felt that he was unreasonably singled out due to his psoriasis. Nonetheless, the reaction by other employees to having Petitioner serve food and the response by Hicks to offer an alternative opportunity to assist in the activity did not constitute harassment or unreasonable conduct toward Petitioner. In association with the picnic for the spring of 1991, Bobby Thigpen, a supervisor with Respondent, made a comment to Petitioner about Petitioner's psoriasis and Petitioner's participation on the food committee at the picnic. Although Petitioner was mindful of Thigpen's candor about the subject, Thigpen's remarks contributed to Petitioner's hurt feelings concerning other employees not wishing Petitioner to serve food at the picnic. The remarks by Thigpen were not designed to harass Petitioner based upon Petitioner's physical condition. In addition, Petitioner did not report Thigpen's remarks to his supervisor pursuant to Respondent's "No times relevant to the inquiry, prohibited harassment on the basis of handicap status as well as other protected categories. The policy instructed the employee who believed that he had been harassed to bring the matter to the supervisor or to the Human Resource Department within the organization if the employee did not feel that he could discuss the matter with his supervisor. Respondent's employees are required to attend an annual meeting to review this policy. Petitioner did not complain to the Human Resource Department that he had been harassed by Thigpen through Thigpen's remarks regarding Petitioner's service on the food committee. No other competent proof was offered to the effect that Respondent's employees had made derogatory comments about Petitioner's physical disabilities. Because Petitioner's psoriasis was in a more severe condition, Petitioner would leave flakes of skin on chairs in the Water and Sewer Department break-room. When the Petitioner's co residue they would switch chairs rather than sit in the chair on which Petitioner had left flakes of skin. Although Petitioner found out that the other employees were switching chairs due to the flakes of Petitioner's skin being found on the initial chair, there is no competent proof that any employee ever commented to the Petitioner that the employee would be opposed to the Petitioner eating in the break-room due to his physical condition. Petitioner, together with other employees who were supervised by Dan Miller, had been harassed by Miller at times relevant to the inquiry. In Petitioner's instance, Miller's harassment was not directed to Petitioner's physical disabilities. Some of the remarks made by Miller to Petitioner were that Petitioner was short and fat and further derogatory comments about Petitioner's haircut and clothes. Miller had also called the Petitioner dumb or stupid because Petitioner asked Miller to repeat instructions over the radio that was used for communicating between the supervisor and his respective employees. Notwithstanding Petitioner's contention that he had told Miller that he was having trouble hearing because of psoriasis that had spread to Petitioner's ears, Miller denies that Petitioner had told Miller that psoriasis was affecting Petitioner's hearing, and Miller's testimony is credited. On the contrary, without knowledge of any physical disability concerning hearing which Petitioner had, and without regard for the reaction any other employees which Miller supervised might have, Miller made insulting comments to employees which he supervised when talking to them on the radio. Employees other than Petitioner to whom the insulting comments were directed had no known physical disabilities. James Scarberry, a co-employee who worked for Miller, overheard Miller yell at Petitioner on occasion having to do with Petitioner's job performance, not Petitioner's physical disability related to hearing. Petitioner asked Miller and a co-worker not to smoke in his presence because he had recently had bladder cancer surgery. Petitioner contends that this request was met with laughter and jokes. Miller testified that the request was not met with jokes or laughter. Instead, Miller recalls, and his testimony is credited, that Petitioner complained that Al Nichols, a co-worker, had smoked excessively in Petitioner's presence. The subject of Nichols' and Miller's smoking in Petitioner's presence was discussed among Miller, Nichols and Respondent, and it was agreed that Nichols and Miller would try not to smoke excessively in Petitioner's presence. No medical evidence was presented which tended to identify the necessity for Petitioner to be afforded a smoke environment due to his medical condition or that Petitioner had ever made requests other than that directed to Miller and Nichols regarding not smoking in his presence at work. Petitioner had made requests that he be provided light duty because of the problems he experienced with his knees due to psoriasis. These requests were directed to Miller, Petitioner's immediate supervisor. The requests were not always granted. When Petitioner was turned down for light duty it was based upon the fact that light duty was generally not available in the Water and Sewer Department for any employee. Moreover, at that time, employees in Petitioner's work assignment usually worked alone and it would adversely affect the production of the unit if two repairmen were dispatched to do a job which would ordinarily take only one repairman to complete. Petitioner presented no proof concerning denial of light duty at a time when a physician may have specifically recommended light duty for Petitioner. Concerning discipline directed to the Petitioner, on March 18, 1982, Petitioner stopped at a job site to which he had not been assigned. There he engaged David Lipps, an employee of Respondent, in a conversation. Lipps was a supervisor at the site and the conversation had to do with the meal policy which had been applied at the site. Eventually the conversation became an argument, at which point Lipps told Petitioner that he did not belong at the job site and asked him to leave. Lipps then reported the incident to his supervisor, Rodney Thompson and the matter eventually came to the attention of Hicks. Hicks discussed the matter with the Petitioner and Lipps and concluded that Petitioner had no business purpose for being at the Lipps' job site and that Petitioner was responsible for causing the argument with Lipps. Petitioner was issued a written warning on March 26, 1992. The disciplinary reprimand was not related to Petitioner's physical disabilities. On May 18, 1992, Petitioner received a written reprimand. The reprimand was based upon the Petitioner's conduct while on weekend standby duty. This assignment was in keeping with the periodic requirement to serve on weekend standby. On May 16, 1992, Petitioner was on a standby status with Lipps. Lipps was referred to as the "A" worker and Petitioner was the "B" worker. The "A" worker was in charge of the work team. Petitioner arrived at the first job site 34 minutes before Lipps. When Lipps arrived, Petitioner complained that Lipps was an hour late. Petitioner then told Lipps that he had somewhere else to go that day. Lipps and Petitioner went to a second job and by that time Lipps told Petitioner that he was tired of Petitioner's complaining about having to work that day and concluded that Lipps did not have Petitioner's full cooperation. As a result, Lipps determined to leave the completion of the second job until the following Monday. Lipps reported the incident to his supervisor, Rodney Thompson. Petitioner had been previously counseled about his attitude concerning standby duty. Hicks reviewed the facts surrounding Lipps' complaint and decided to issue a written reprimand to Petitioner for making negative verbal remarks about Petitioner's duties and for failing to cooperate with his supervisor on standby duty. The disciplinary action was not for purposes of discriminating against Petitioner because of Petitioner's physical disabilities. Moreover, Hicks had reprimanded two other employees, Ed Swift and Bob Buckley for making negative verbal comments about job duties. Hicks did not know these other individuals to be suffering from any form of physical disability. In June of 1992, Petitioner applied for and was granted a leave of absence for an unspecified period. By June 2, 1992, Petitioner knew that he would need to go on extended leave beginning June 8, 1992. He failed to inform any of his supervisors that he was going on this medical leave. He did not show up for work on June 8, 1992. Hicks inquired of Petitioner on June 8, 1992, about not telling his supervisor that he was going to be on medical leave. Petitioner responded to the inquiry by indicating that he had told Scarberry, Petitioner's co-worker, of his intention to go on medical leave and that he had told a city clinic nurse that he was going on leave of absence. Hicks pointed out, correctly, that telling the nurse and Scarberry of Petitioner's intentions to take medical leave did not relieve Petitioner of the duty to directly inform a supervisor of that intention. Moreover, Scarberry had told the Petitioner that he, Scarberry, would not be at work the first day of Petitioner's medical leave, making it questionable that Scarberry would have advised a supervisor that Petitioner was hoping to be absent from work that day. Scarberry made Hicks aware that Scarberry had pointed out to Petitioner that he would not be at work on June 8, 1992. Petitioner's assertion that he wrote a note to his immediate supervisor, Miller, regarding the plan to be out on June 8, 1992, if true, is of no utility because the note was not given directly to Miller and was never indirectly received by Miller. Miller had not been at work June 5, 1992, the friday before Petitioner was missing from his job duty on June 8, 1992. Petitioner knew that Miller was not at work on June 5, 1992. As a consequence of not informing a supervisor that he was going to be on extended medical leave, Petitioner was disciplined. The action by Respondent on which Petitioner was given a written reprimand for failure to inform a supervisor that Petitioner was going to take extended medical leave did not constitute discrimination against Petitioner based upon his physical disabilities. Petitioner was allowed to take the extended medical leave. Noel Werner, a secretary in the Water and Sewer Department had also been reprimanded by Hicks for failing to follow proper procedures for obtaining authorization to take medical leave. Hicks is unaware of any physical disability that Ms. Werner may have. When Petitioner took leave in June of 1992, he believed that he would be eligible for Disability Income Replacement. However, in August 1992, Petitioner was informed that the Respondent's Risk Management Department had determined that he was ineligible because he was under the care of a licensed health counselor as opposed to an M.D. or a Ph.D. Carol Ingham, Respondent's Human Resource Director, learned of this circumstance and contacted the Assistant City Manager, Dick Lewis, and requested that Petitioner be granted an exception to the policy of not being eligible for Disability Income Replacement when using a licensed health counselor. As a result, Petitioner's request was reevaluated and he was ruled eligible for Disability Income Replacement through the policy pertaining to that status for the period August 4 through 30, 1992. Concerning his physical condition, in the spring of 1992, Petitioner was diagnosed with osteoarthritis in his knees. This meant he was disabled to do any persistent bending or kneeling, which was a requirement of his employment in the Water and Sewer Department. His condition also disabled him from doing his assigned work because his work as a water meter repairman involved walking distances of a 100 feet or more on a persistent basis and standing all day. Concerning the medical leave of absence which Petitioner took in the summer of 1992, this subject was discussed by Ingham in conversation with the city clinic nurse, Holly McLaughlin. They talked about the stress which Petitioner seemed to be experiencing and the failure to follow the policy of informing his supervisor of his intention to take medical leave. On June 15, 1992, Ms. Ingham met with Petitioner and his wife to discuss Petitioner's stress. At that time, Petitioner reported to Ms. Ingham that Petitioner's supervisor Miller had treated him badly and that Miller had also treated other employees badly. Petitioner told Ingham that Miller had called Petitioner stupid and had been abusive in conversation over the radio. No claim was made by Petitioner that Miller had made comments directed to Petitioner's physical disabilities. As a follow Ingham discussed Petitioner's remarks about Miller's conduct with a number of the Petitioner's co-workers. Ingham decided that Miller had, in fact, yelled and cursed at a number of employees he supervised, to include Petitioner. No other employee reported to Ingham that Miller had made derogatory comments in their presence concerning Petitioner's physical disabilities. Based upon Ingham's findings, Hicks determined to discipline Miller for his conduct directed toward employees whom Miller supervised. Miller received a written reprimand and was given the option of being demoted or seeking counseling through an employee assistance program. Miller opted to go to the employee assistance program. Moreover, Miller was told that if conduct toward subordinates continued that he would be subject to more severe discipline to include discharge. Miller's treatment of the employees he supervises has improved since the imposition of discipline. Petitioner returned to work in August 1992, following his leave of absence for medical purposes. At that time, he was issued a service truck which another employee had been using. Petitioner felt that he should have been issued a new truck which the Water and Sewer Department operated. The truck that Petitioner had been issued was dirty and smelly. Miller told Petitioner that the newer truck was assigned to an employee who needed the larger truck because that employee would be performing heavier work than Petitioner would be called upon to perform. Miller offered to have the truck which Petitioner had been issued cleaned up or detailed. Petitioner declined that offer. Petitioner complained about the truck that he had been assigned to a co-worker, Fred Sauls. He told Sauls that he was going to take the truck he was issued and drive it to city hall to show Ingham, the Human Resource Director. In fact, Petitioner reported the incident to Ms. Ingham. The Petitioner received a letter of reprimand on September 4, 1992, for complaining to a co-worker and Ms. Ingham about an everyday work related problem rather than following the chain of command. Prior to receiving that written reprimand, Petitioner had been specifically counseled by Hicks concerning handling everyday work related problems through Petitioner's supervisor. Those specific instructions on everyday work related problems were not countermanded by the general opportunity which Hicks had described for employees to go outside the chain of command when they did not feel that they would get satisfaction from an immediate supervisor, and the open door opportunity to consult with the Human Resource Director. In this instance, the response from Miller was adequate to meet Petitioner's needs in confronting an everyday work related problem and Petitioner had no reason to complain to Sauls or to complain to Ingham. The written reprimand given to Petitioner was not designed to discriminate against Petitioner based upon his physical disabilities. Hicks and Ingham became aware of the Petitioner's inability to perform his assigned job duties due to his physical disabilities and they looked for other duties that the Respondent might be able to perform in view of his physical disabilities. The only positions that were found for which Petitioner was otherwise qualified and physically able to perform were part-time positions that did not offer medical benefits. Upon further reflection, Ingham and Hicks offered to combine these two positions in the Respondent's Recreation Department into a single job which would allow Petitioner to continue working and to receive benefits. The combined position was at a lesser pay than the present position which he held. Petitioner decided that he would prefer to be placed in the status of Disability Income Replacement in lieu of the combined jobs. In April 1993, Petitioner accepted the status of Disability Income Replacement and has not returned to work.
Recommendation Based upon the findings of fact and conclusions of law reached, it is, RECOMMENDED: That a final order be entered by the Florida Commission on Human Relations which dismisses the Petitioner's claims. DONE and ENTERED this 13th day of June, 1994, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of June, 1994. APPENDIX The following discussion is given concerning the Proposed Findings of Fact of the parties: Petitioner's Facts: Paragraphs 1 through 6 are subordinate to facts found. Paragraphs 7 through 14 are contrary to facts found. Respondent's Facts: Paragraphs 1 through 26 are subordinate to facts found. COPIES FURNISHED: William A. Ramputi, Esquire Scott, Gleason & Pope, P.A. 409 Southeast Fourteenth Street Ocala, Florida 34471 David H. Spalter, Esquire Fisher & Phillips 2310 One Financial Plaza Fort Lauderdale, Florida 33394 Sharon Moultry, Clerk Human Relations Commission Building F Suite 240 325 John Knox Road Tallahassee FL 32303-4149 Dana Baird, General Counsel Human Relations Commission Building F Suite 240 325 John Knox Road Tallahassee FL 32303-4149
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
The Issue Whether Respondents' Division of Hotel and Restaurants' license should be suspended or revoked, or a civil penalty assessed for alleged violation of Division Rule 7C-4.01(5)(c) and Florida Statute s. 509.221, as set forth in Notice to Show Cause issued by the Petitioner.
Findings Of Fact On April 19, 1977, Johnny Bell, inspector for petitioner's Division of Hotels and Restaurants, received notification from the Health Department of Sarasota County that respondents' place of business, Port-of-Call, resort apartments located at Longboat Key, Florida, was not connected to the sewerage system of Longboat Key. Bell inspected respondents' premises and discovered that a septic tank system was in use at the Port-of-Call. He informed respondents that they must connect to an "approved" sewerage system within sixty (60) days. On June 20, 1977, Bell returned to the premises and found that no action had been taken to connect to the Longboat Key system. Respondent Edward W. Henderson informed him that he should not have to go on such a system because his septic tanks were adequate and functioning properly. Bell did not examine the septic tanks or ascertain if they were, in fact, in proper condition and operating satisfactorily. He proceeded to issue a Notice to Show Cause as to why respondents' license No. 68-606H should not have a civil penalty assessed against it or be suspended or revoked. The stated cause for such intended action was as follows: "Division Rule 7C-4.01(5)(c) ; Florida Statutes 509.221 -- Failure to have sewage system hooked into public sewerage system." The Notice to Show Cause also informed respondents of their right to an Administrative Hearing under Chapter 120, Florida Statutes. Respondents thereafter requested such a hearing. There is no food operation at the Port-of- Call. (Testimony of Bell, Exhibit 1)
Recommendation That the charges against respondents be dismissed. Done and Entered this 10th day of October, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Lawrence C. Winson, Esquire Department of Business Regulation The Johns Building, Suite 210 725 South Bronough Street Tallahassee, Florida 32304 John W. Meshad, Esquire 100 South Washington Boulevard Sarasota, Florida 33577
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner, Pinellas County Construction Licensing Board, (Board), was the Pinellas County agency responsible for the certification and regulation of construction specialties. Respondent was certified by the Board as an irrigation systems specialty contractor under license C-5997 in force at the time. Respondent was the qualifying contractor for Sun City Lawn Irrigation. On or about May 17, 1994, Respondent contracted with William J. Schneider, who resided at 5661 25th Avenue North in St. Petersburg, to install a lawn irrigation system in Mr. Schneider's front lawn. The automatic system was to incorporate 2 zones and was, according to the contract and the testimony of Mr. Schneider, to be connected to Schneider's then existing 1/2 horsepower electric pump which drew water from several wells on his property. Mr. Schneider claims there are four wells. No evidence was introduced to contradict that. On the day the system was installed, Mr. Schneider was not at home. Respondent's employees performed a test of the water capacity on Mr. Schneider's property. At first, the wells produced 10 gpm, which was adequate for the system, but after a few minutes of drawdown, they found that the wells were producing only 4 gpm, along with some air. At that time Mr. Freestone, Respondent's sales manager, spoke with Mrs. Schneider about the situation, advising her there were two options open. One was to install a larger pump and the second was to connect the system to the city water supply. Mrs. Schneider returned to the house, presumably to call Mr. Schneider to get his decision on the matter. He claims she did not reach him. Respondent claims that she thereafter returned with directions to install a water line for connection to the city system. This is completely contrary to what Mr. Schneider had wanted and to what is included in the contract. Mr. Schneider claims he did not want to connect to city water because of the added expense of doing so, and he claims he made this very clear to Respondent's employees at the beginning and at all times thereafter. In any case, the system was installed and was, somehow, connected to the city water system near the place where the water line enters the house. In addition, no backflow preventer was installed to insure against contamination getting into the water system as is required by the building code. Most, if not all, the work on this project was completed by Respondent's son and employee, Scott, who was not present at the hearing. Respondent attempted to introduce an unsworn written statement by Scott Bosworth, but it was not accepted. Scott advised Mr. Schneider, when he returned from work that day, that they had been unable to use his pump and wells. Nonetheless, Mr. Schneider paid Respondent in full for the work for which he had contracted, except for a supplemental charge in the amount of $190.95 for the tie in to the city water and the valves and other items connected therewith. Mr. Schneider claims that he made several calls to Respondent's office in an effort to correct the situation but was unable to reach anyone who could give him satisfaction. However, the evidence indicates that on at least one occasion, Mr. Schneider got through and was called back by Mr. Freestone with whom he discussed the situation and the additional charges. He was subsequently advised by counsel that he did not have to pay the additional sum and did not do so. Some time thereafter, Mr. Schneider was advised by the city that he would be fined because of the illegal installation. He then contacted another irrigation company, run by Mr. Williams, who examined the system and determined that the irrigation system installed by Respondent had been connected to the city water system and that no backflow preventer had been installed. A check with the city's building department revealed that no permit had been procured for this installation. Respondent's license to install irrigation systems does not include authority to connect that system with the public water system. That procedure must be done by a licensed plumber. Respondent and Mr. Freestone, the only individuals in the company who had the authority to arrange with a plumber to make the actual hook up to the city system, both deny that any arrangement was made by them to have the system connected to the city water system. Mr. Schneider arrived home on the day in question to find only Respondent's son, Scott, at work on the project. Scott indicated it would be necessary to move two bushes near the house to facilitate connection of the system with the water supply. Mr. Schneider contracted with Scott to move the bushes and remove them from the premises. Scott moved them but failed to remove them. In light of the fact that Scott was working on the system at the time Mr. Schneider arrived home, and the system was found to be connected to the city system thereafter without anyone else touching it, it must be concluded that the connection was made him. Respondent admits he did not come to the property in question while the system was being installed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued by the Board suspending the license of the Respondent for a period of six months with provision for withholding execution of the suspension for a period of one year conditioned upon such criteria as may be deemed appropriate by the Board. RECOMMENDED this 31st day of March, 1995, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 1995. COPIES FURNISHED: William J. Owens Executive Director Pinellas County Construction Licensing Board 11701 Belcher Road Largo, Florida 34643-5116 Larry J. Bosworth 8901 14th Street North St. Petersburg, Florida 33716
The Issue Whether Petitioner's application to increaseits water and sewer rates to its customers in Seminole County should be granted.
Findings Of Fact Based upon the evidence presented at hearing, including consideration of the demeanor and credibility of witnesses, the following facts are determined: I. Application and Retroactive Implementation of Interim Rate Increase By its application, the UTILITY, seeks to increase its water revenue to $158,890, and its sewer revenue to $83,830, by increasing service rates to its customers in Winter Springs, Seminole County, Florida. During the test year ending September 30, 1979, the UTILITY suffered combined losses from its water and sewer operation of $420,692. This is the first rate increase requested by the UTILITY since its inception in 1973. On April 24, 1980, the COMMISSION issued Order No. 9344 which suspended the UTILITY's proposed rate increases but granted it an interim increase under bond. The UTILITY was directed to file revised tariff pages containing residential and general service rates which would allow it to earn total annual gross revenue for water service of $139,277 and total annual gross revenues for sewer service of $83,830. The Order also stated: ". . .that the rate increase contained herein shall become effective for all bills on or after thirty (30) days after the date of this order. . . (Testimony of Blair, Fabelo; P.E. 1, 2, R.E. 3.) The UTILITY implemented the interim rate increase, within its normal billing cycle, on the June 2, 1980, water and sewer service bills. However, these bills were based on meter readings taken on May 10, 1980, for service provided from April 10 to May 10, 1980. Thus, the UTILITY increased its rates to its customers fourteen (14) days prior to April 24, 1980, the effective date of the COMMISSION's order authorizing such increase. The UTILITY's action was, however, taken in good faith, and based on a COMMISSION staff member's representation that the interim rates could properly be included in the June billing. The amount of revenues received from the interim rate increase and collected prior to the effective date of Order No. 9344 is approximately $8,700. (Testimony of Fabelo, Blair; P.E. 1, R.E. 3.) However innocently imposed, the UTILITY's action constitutes improper retroactive ratemaking. The UTILITY should refund to customers of record during the period in question their pro-rata share of revenues collected by the retroactive rate increase. The amount of each refund will depend on the amount of water consumed and paid for during the period of retroactive rates-- approximately April 10 through April 24, 1980. The UTILITY may minimize costs by distributing the refunds as separately itemized credits on its regular service bills. (Testimony of Fabelo; R.E. 3.) II. Factors Relevant to Ratemaking In determining whether a rate increase is justified, the COMMISSION must consider several factors, including (1) quality of service, (2) rate base, (3) a fair rate of return on the utility's investment, and (4) operation and maintenance expenses; each is separately addressed below. (Testimony of Asmus, Lowe.) III. Quality of Service During 1979, several customers of the UTILITY experienced occasional low water pressure in their homes. It is likely that these water pressure problems were caused by fluctuating amounts of electricity supplied the UTILITY by Florida Power Corporation. The UTILITY has recently installed an electronic control panel and Florida Power has installed a direct transmission line to the UTILITY in order to prevent this from reoccurring in the future. Several times during 1980, the UTILITY had its water service interrupted due to a cable-TV company cutting its water lines while laying cable; repairs, however, were quickly made. Few customer complaints have been made to regulatory agencies concerning the quality of the water and sewer service provided by the UTILITY: one complaint on water service was made to the Florida Department of Environmental Regulation in 1979, and subsequently determined to he unfounded; no complaints were made to the Department concerning sewer service. Although several customers testified that the water sometimes caused irritation, tests show that the water meets Florida and federal safe drinking water standards. The sewage treatment provided by the UTILITY also complies with state and federal requirements. The water and sewer service is, therefore, determined to he of satisfactory quality. (Testimony of Blair, Bostwick, Customers.) IV. Rate Base A regulated utility is entitled to an opportunity to earn a fair rate of return on its investment in plants and facilities which are used and useful in providing water and sewer service to the public. The utility investment is referred to as "rate base". Here, the average water and sewer rate base for the UTILITY's test year ending September 30, 1979, is calculated as follows: AVERAGE RATE BASE WATER SEWER Utility Plant in Service $847,287 2/ $1,218,363 Utility Plant held for Future Use (271,153) (608,476) Accumulated Depreciation (82,099) (97,306) Contributions in Aid of Construction (183,749) 3/ (178,456) 3/ (CIAC)--Net Allowance for Working Capital 11,983 4/ 11,851 TOTAL RATE BASE $322,627 $ 354,433 (Testimony of Blair, Asmus, Heiker, Lowe; Respondent's Proposed Findings of Fact and Conclusions of Law, Pg. 3; P.E. 4, R.E. 2.) V. Rate of Return A fair rate of return is the percentage factor that, when multiplied by the rate base, produces revenue that will pay the costs of capital--interest on debt to lenders, and return on equity to stockholders. In this case, after considering the UTILITY's capital structure and that of its parent company, Gulfstream Land and Development Corporation, the parties stipulated that a fair rate of return is determined to be 12.40 percent, and is calculated: COST OF CAPITAL Test Year Ending September 30, 1979 COMPONENT RATIO COST RATE WEIGHTED COST Common Equity 33.3 percent 15.50 percent 5.16 percent Long-Term Debt 53.0 13.67 7.24 Cost-Free Capital 13.7 -0- -0- TOTAL 100.0 percent Midpoint 12.40 percent (Testimony of Lowe, Asmus; Joint Stipulation of Parties, Joint Exhibit 2; P.E. 10.) VI. Operations and Maintenance Expenses The adjusted operation and maintenance expenses, including depreciation and taxes, of the UTILITY for the test year are set out below: CONSTRUCTED STATEMENT OF OPERATIONS Test Year Ending September 30, 1979 WATER SEWER Operating Revenues: $160,531 5/ $83,830 5/ Operating Expenses: Operation 84,275 6/ 90,480 7/ Maintenance 11,586 4,324 Depreciation 12,219 16,014 Taxes Other than Income Tax 7,330 8/ 4,581 8/ Provision for Income Taxes 9,786 9/ -0- TOTAL EXPENSES $125,196 $115,399 Operating Income (Loss): $35,334 ($31,569) (Testimony of Asmus, Lowe; COMMISSION's Proposed Findings of Fact; P.E. 10, R.E. 1.) The depreciation expense indicated above includes an adjustment of $2,015 (water) and $6,788 (sewer) proposed by the UTILITY as a result of a rate base adjustment which properly reclassified plant balances to their proper month. The UTILITY had inadvertently posted plant additions to a year-end entry, rather than to the months the additions were completed. At hearing, the COMMISSION agreed to the rate base adjustment and agreed, "in principle", to the UTILITY's proposed correlative adjustment to depreciation expense. However, in its posthearing Proposed Findings of Fact, the COMMISSION's counsel disputed the UTILITY's adjustment, and offered a substitute adjustment: ". . .However, in actual calculation, the. . . [COMMISSION] disagrees. The utility's adjustment does not consider used and useful as applied to the expense. In addition, the. . . [UTILITY's] adjustment includes expense on pro-forma plant. The. . .[COMMISSION's] calculation considers these adjustments. (Pg. 4, Paragraph D.) Because factual issues are difficult to resolve by posthearing submittal, evidence should be presented at hearing, where it is subject to cross- examination and rebuttal. At hearing, the COMMISSION did not object to the depreciation expense adjustment presented by the UTILITY; neither did it cross- examine to elicit the method used for its calculation nor move for a continuance based on surprise or inability to adequately verify the UTILITY's figures. Rather, it chose to defer examination of and rebuttal to the UTILITY's evidence until after the conclusion of hearing. Under such circumstances, the COMMISSION's posthearing submittal is insufficient to overcome the competent evidence adduced by the UTILITY. (Testimony of Asmus, Lowe; Respondent's Proposed Findings of Fact, Pg. 3, 4; P.E. 10.) VII. Tariff Modifications By its application, the UTILITY also requested COMMISSION approval of proposed water and sewer tariff modifications. By stipulation of the parties, the following modifications to the UTILITY's tariffs are warranted: The initial connection charge and reconnect charge on delinquent accounts is TEN AND NO/100 DOLLARS ($10.00) during working hours and FIFTEEN AND NO/100 DOLLARS ($15.00) after working hours. Customer deposit shall be FIFTY AND NO/100 DOLLARS ($50.00) for both water and sewer service and TWENTY-FIVE AND NO/100 DOLLARS ($25.00) for either water service alone or sewer service alone. Customer deposits may be increased to the foregoing sums on delinquent accounts after giving thirty (30) days' written notice, which notice shall be separate and apart from any bill for service. (Testimony of Fabelo; Prehearing Stipulation; P.E. 1, R.E. 3.) VIII. Rates The UTILITY seeks, and the COMMISSION recommends approval of these specific rates and charges: WATER RATES RESIDENTIAL RATES Base facility charge per month based on meter sizes for zero consumption. METER SIZE 5/8" x 3/4" $ 5.00 1" 12.50 1-1/2" 25.00 2" 40.00 Gallonage Charge-Per 1,000 gallons .75 General Service Base Facility charge per month based on meter sizes for zero consumption. METER SIZE 5/8" x 3/4" $ 5.00 1" 12.50 1-1/2" 25.00 2" 40.00 3" 80.00 4" 125.00 Gallonage Charge-Per 1,000 gallons .75 SEWER RATES RESIDENTIAL RATES Base facility charge per month $ 5.00 First 10,000 gallons-Per 1,000 gallons .75 Over 10,000 gallons-Monthly flat rate 12.50 General Service Base facility charge per month based on motor size for zero consumption. METER SIZE 5/8" x 3/4" 5.00 1" 12.50 1-1/2" 25.00 2" 40.00 3" 80.00 4" 125.00 Gallonage Charge-Per 1,000 gallons .75 These requested rates are structured using a base facility charge (BFC) rate design. This rate design requires customers to pay: (1) their pro-rata share of the UTILITY's fixed facility costs, and (2) a charge for pumping, treating, and delivering the actual water gallonage consumed, by 1,000 gallon increments; it equally distributes the costs of providing utility service and the COMMISSION encourages its use. (Testimony of Fabelo; Respondent's Proposed Findings of Fact; P.E. 1, P.E. 3.) These rates proposed by the UTILITY will generate water revenues of $158,890 and sewer revenues of $58,865, which provide a rate of return on water rate base of 10.52 percent, and a zero return on sewer rate base. Combined water and sewer operations will earn a rate of return of .35 percent, whereas a fair rate of return in this case has been stipulated to be 12.40 percent. Although the proposed rates will not provide the UTILITY with a fair return, the quality of its present water and sewer service will not suffer, or be decreased in any manner. (Testimony of Blair, Asmus; P.E. 10.)
Conclusions The water and sewer rate increases and tariff modifications requested by Petitioner are just, reasonable, not unjustly discriminatory, and should be granted. Although the rates will provide less than a fair return, it has not been shown that Petitioner's service will suffer. Petitioner's collection of interim rate increases from its customers prior to the effective date of Order No. 9344 violates Section 367.081(1), Florida Statutes (1979); all revenue so collected should be refunded to its customers. Revised tariff pages should be filed, a letter explaining the rate increases should be sent to Petitioner's customers, and the Petitioner's letter of credit, returned.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the UTILITY's application for approval of the rates specified in Paragraph 11, infra, be granted; That the UTILITY be required to submit, for COMMISSION approval, revised tariff pages containing the new rates and rate structure; That the UTILITY be required to send to its customers a letter, approved in form by the COMMISSION, explaining the rate increases and reasons therefore; That the irrevocable letter of intent drawn on the Pan American Bank, dated May 3, 1980, be returned to the UTILITY and the bank releaned thereafter; That the tariff modifications contained in Paragraph 10, infra, be approved; and That the UTILITY be required to expeditiously refund to its customers the interim rate increases collected prior to the effective date of PSC Order No. 9344. DONE AND ENTERED this 24th day of November, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
The Issue Whether Petitioner was wrongfully denied general permits to construct an extension to a public water supply distribution system and to construct a waste water treatment system at a camp being constructed by Petitioner.
Findings Of Fact On December 11, 1991, the Department of Environmental Regulation (DER), Ft. Myers office, received applications from the Orange Blossom Baptist Association, Petitioner, submitted by its project engineer, for general permits to install an extension to provide water to, and construct a waste water treatment facility for, a camp being built by Petitioner. These applications were reviewed by the Respondent, and on January 2, 1992, James Oni telephoned Petitioner's engineer to tell him the applications were incomplete and additional information was required. Some of this additional information was submitted by Petitioner on January 7, 1992, but the word "vertical" was left out of the application to indicate what the 18 inch separation of the water and sewer lines represented; no pump out was provided for the lift station; the flotation formula as submitted contained a typographical error where an "s" was substituted for a "5", leaving the calculation of storage capacity of the system indeterminable; the lift station was only 4.5 feet deep and should normally be 10 feet; the configuration of the sump to insure solids would settle to the bottom was not provided, nor was the amount of concrete to be used to obtain this configuration shown; and the type of equipment to be used was not clearly shown. In summary, when submitted the application was not technically correct, and it remained technically incorrect after the additional information was submitted by the applicant. General permits are required to be processed by DER within 30 days of their receipt, and if not denied within that 30 day period they must be approved regardless of their compliance with the statutes and regulations.
Recommendation It is recommended that a Final Order be entered denying Orange Blossom Baptist Association general permits to install a waste water treatment facility and to construct an extension to a public water supply distribution system in Highlands County, Florida. ORDERED this 6th day of May, 1992, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of May, 1992. COPIES FURNISHED: William N. Clark, P.E. 233 E. Park Avenue Lake Wales, FL 33853 Francine M. Ffolkes, Esquire Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, FL 32399-2400 Daniel H. Thompson General Counsel Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, FL 32399-2400 Carol Browner Secretary Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, FL 32399-2400
