Findings Of Fact Respondent is a state agency whose primary purpose is to provide an adequate supply of potable water to the Florida Keys. To this end, it has acquired or constructed well fields, treatment plants, transmission pipelines, pumping stations, distribution pipelines, and other related facilities. Because of its exaggerated linear service area of 130 miles, it incurs high capital and operating costs. Chapter 76-441, Laws of Florida, Respondent's enabling act, confers upon Respondent the authority to impose the subject System Development Fee. Respondent imposed the subject System Development Fee, which is an impact fee, in December 1974. Respondent's Rule 48-3.002(1) expressed the purposes of the System Development Fee as follows: The System Development Fee is an impact fee charged to new and existing customers who modify, add or construct facilities which impose a potential increased demand on the water system. This fee is charged in order to equitably adjust the fiscal burden of a new pipeline and expanded or improved appurtenant facilities between existing customers and new water users. All system development fees are allocated to the direct and indirect costs of capital improvements made necessary by actual and expected increased demand on the water system. The term "unit" is a commonly accepted concept in the public utility industry, and impact fees are often assessed on a per "unit" basis. Respondent's Rule 48-3.002(5)(b) provides for the assessment of the System Development Fee on a per unit basis and provides, in pertinent part, as follows: 5. (b) Where the premises served consists of single or multiple commercial units, the System Development Fee shall be assessed based on each individual unit. In those cases where the individual unit will require a meter size that exceeds a 5/8" meter to properly support the unit, the System Development Fee shall be based on the meter size required to serve that unit, whether individually metered or not. ... The term "unit", as used in Respondent's System Development Fee Rule is a technical term, but it is defined by Respondent's Rule 48-2.001(19) as follows: (19) "Unit" A unit is a commercial or residential module consisting of one or more rooms with either appurtenant or common bathroom facilities and used for a single commercial purpose or single residential use. The number of units existing in a multiple unit service operation are to be determined in accordance with Rule 48-2.007(1)(c), which provides, in pertinent part, as follows: ... The number of units, whether residential or commercial, will normally be determined according to applicable city or county occupational licenses, building permits, or plans of the subject structure. In cases of discrepancy or inconsistency in definition, or interpretation, the following Florida Keys Aqueduct Authority definition will control: A unit is a commercial or residential module consisting of one or more rooms with either appurtenant or common bathroom facilities and used for a single commercial purpose or single residential purpose. Respondent grandfathers in units that were in existence prior to December 1974 when the System Development Fee was first enacted. A System Development Fee is not imposed on any unit that was in existence prior to December 1974. Of the 376 improved campsites that presently exist at Petitioners' campground, 279 were improved prior to 1974. Consequently, only the 97 campsites improved after the enactment of the System Development Fee are at issue in this proceeding. Respondent is concerned with the potential use of a unit because it must be prepared to respond to that potential use. Once a customer has paid the System Development Fee for a unit, the owner of the unit can transfer the unit without the purchaser having to pay an additional System Development Fee regardless of the use the purchaser intends to make of the unit. Respondent has consistently applied the System Development Fee charges on a per unit basis for the purposes stated in its Rule 48-3.002(1). The per unit charge was $600 when first enacted in 1974, was increased to $1,500 in 1984, and was increased to its present level of $2,000 in 1986. A widely publicized amnesty program was in effect from August 1, 1984 through October 1, 1984, during which customers who had added units to their property without reporting same to Respondent could report the units during the amnesty program and pay the System Development Fee on an installment basis. Customers were advised that after the amnesty program closed, the System Development Fee would be based on rates in effect at the time an unreported unit was discovered, not at the rate the unreported unit was constructed. This policy serves to encourage Respondent's customers to promptly report newly added "units", and the policy produces fees commensurate with the expenses to be incurred by Respondent after it learns of the new units. Petitioner George W. Eager is the owner of approximately 30 acres of real property located west of U.S. 1 at Key Largo, Florida. Mr. Eager purchased the subject property in 1969, sold it in 1974, and reacquired it in 1975 by a deed given in lieu of foreclosure. This property is located within the area served by Respondent. Petitioner Calusa Camp Resort, Inc., a closely held Florida corporation whose stock is owned by Mr. Eager and his two children, operates a campground on this real property. In addition to the 376 campsites, the campground contains a grocery store, a marina, laundry facilities, bathrooms and showers, a swimming pool, a sewage treatment plant, and a sewage pumping station. The marina was not in operation at the time of the formal hearing. Petitioners hold the two business licenses they are required to have by Monroe County. One business license is for the operation of the campground while the other one is for the operation of the grocery store. Petitioners secured all pertinent building permits during the course of the improvement of the campground. Mr. Eager opened the campground in 1969, at which time he entered into a contract for services with Respondent. Mr. Eager constructed a private water system as part of the improvements to his real property. This private water system was connected to Respondent's water transmission system in 1969, and a one inch master meter was installed at that point of delivery. This one inch master meter has served Petitioners' property at all times pertinent to this proceeding. Mr. Eager entered into a new contract for services with Respondent in 1975. This contract did not indicate that Mr. Eager's property was considered a multiple unit operation and it did not indicate in the space available the number of units to be served. By a provision in this contract, Respondent reserved the right to change its rules and regulations and the rates for use of water from time to time. In 1976, Mr. Eager entered into another contract for services with Respondent for the provision of water to a swimming pool that he had constructed. This contract did not indicate that Mr. Eager's property was considered a multiple unit operation and it did not indicate in the space available the number of units to be served. Of the thirty acres owned by Mr. Eager, approximately twenty acres are west of the access road that divides the property and approximately ten acres are east of the road. Prior to 1974, Mr. Eager developed 279 individual campsites on eighteen of the acres west of the access road. These campsites had water, electrical, and sewer hookups for recreational vehicles and could accommodate all types of camping. A grocery store, bathrooms and showers, laundry facilities, and recreational facilities were also located on these eighteen acres. The remaining two acres west of the access road were reserved as the site for the marina. Prior to 1974, the ten acres east of the access road was used for open camping, but individual campsites were not designated. Water was made available to the campers who used this area through approximately 32 spigots spaced throughout the area and the other campground facilities were available to them. The ten-acre open area would accommodate up to 125 campsites. Since the enactment of the Systems Development Fee, Petitioners converted the ten-acre open camping area into 97 campsites with each campsite having water, electrical, and sewer hookups. This development, completed in 1983, organized the camping in the ten-acre area, but it did not increase the number of potential campers in the ten-acre area over the 1974 level. This development did, however, change the type camping that could be accommodated in this area. Prior to the development, the area could not accommodate camping in large vehicles such as motorhomes and recreational vehicles. After the development, the campsites were improved to accommodate all types of camping. None of the campsites are permanently improved with any structures or rooms and Petitioner does not rent campsites with accommodations on them. Persons renting the campsites provide their own method of camping, whether it be by car, truck, motorhome, travel trailer, tent, or otherwise. In 1983, Petitioners requested that the size of the water meter serving his property be increased from one inch to two inches. At that time, Respondent's staff suspected that Petitioners may have modified the campgrounds so as to have triggered the System Development Fee. Consequently, Mary Castellano, Respondent's Policy & Procedure Coordinator wrote a letter of inquiry to Petitioners' attorney. This letter, dated May 2, 1983, provided, in pertinent part, as follows: The material submitted by you last March 2, 1983, has been reviewed. Although a planned layout of the campground was provided from 1969 showing a plan to develop 279 camp and trailer spaces, what is required, prior to approval of a change to a larger meter, is some type of proof showing the number of camp and trailer spaces in existence and actually served prior to June 13, 1974, and certification regarding the actual number of camp and trailer spaces in existence today. If those two numbers are the same, no system development fee will be assessed and Mr. Eager's request for a 2" meter will be honored upon payment of additional deposit, new service charge and tapping fee. However, if there were less camp and trailer spaces in 1974 actually in existence then than there are at the present time, then additional system development fees will be assessed on a per space basis for the difference. Ms. Castellano's letter of May 2, 1983, accurately stated Respondent's interpretation of its rule imposing the System Development Fee. The information requested by this letter was not forthcoming, and Petitioners did not pursue the request to change the master meter from one inch to two inch again until 1989. Respondent's staff did not pursue whether Petitioners owed a System Development Fee until the issue was again raised in 1989. The water bills sent by Respondent to Petitioners up until April 1989 reflected that Petitioners had been classified as a "single unit commercial" account. In April 1989, the billing reflected that Petitioners were classified as a "multiple unit commercial" account. Because Petitioners' private water system is located on private property, Respondent's staff could not discover any undeclared units except by conducting an appropriate inspection. In 1989 Respondent's staff conducted such an inspection of Petitioners' campground and determined that Petitioners had added 97 campsites, that each campsite was a "unit" within the meaning of Respondent's rules, and that a system development fee of $2,000 was due for each site. This was the first time that Respondent had inspected the property and was the first time that Respondent knew that Petitioners had improved the 97 campsites. Respondent does not routinely inspect all private water systems or keep an up-to-date count of all units within its service area because of the costs of gathering such information. On April 26, 1989, Mary Castellano, who was still employed by Respondent, but whose title had been changed to Director of Policy Administration, wrote Petitioners a letter which provided, in pertinent part, as follows: Of the 376 spaces/units currently existing, the Authority accepts the documentation submitted to establish that 279 spaces/units existed prior to June 1974, for which no System Development Fees are due. However, the following fees are assessed and due for the remaining 97 spaces/units: System Development Fee ($2,000 x 97 Units) $194,000.00 Deposit ($75 x 97 Units) 7,275.00 Service Charge ($15 x 97 Units) 1,455.00 $202,730.00* *Plus Tapping Fee * * * 4. The Authority will require the execution of a Restrictive Covenant since a potential for future expansion exists. Petitioners thereafter filed a timely request for formal hearing after Respondent's Board of Directors upheld the assessment of the System Development Fee at a duly called meeting.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent enter a final order which upholds the assessment against Petitioners of the System Development Fee based on the improvement of the 97 campsites since 1974. DONE AND ENTERED this 30th day of July, 1990, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1990. COPIES FURNISHED: Gus H. Crowell, Esquire Tittle & Tittle, P.A. P. O. Drawer 535 Tavernier, Florida 33070 Floyd A. Hennen, Esquire Florida Keys Aqueduct Authority Post Office Box 1239 Key West, Florida 33040 Patty Woodworth, Director Planning & Budgeting Executive Office of the Governor The Capitol, PL-05 Tallahassee, Florida 32399-0001 APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-5620 The following rulings are made on the proposed findings of fact submitted by Petitioner: The proposed findings of fact in paragraph 1 as being subordinate to the findings made or as being unnecessary to the conclusions reached. The proposed findings of fact in paragraphs 2-10, 12, 14, and 18-21 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 11 are adopted in part by the Recommended Order and are rejected in part as being unsubstantiated by the evidence. While it was established that one corporation operated the campground, it was not established that no additional business purpose exists at the property. The property contains, in addition to the subject campsites, a grocery store, a marina, laundry facilities, and a sewage pumping station that is available to non-campers. The proposed findings of fact in paragraph 13 are rejected as being conclusions of law. The proposed findings of fact in paragraphs 15 and 16 are rejected as being subordinate to the findings made. The proposed findings of fact in paragraphs 17 and 23 are rejected as being unnecessary to the conclusions reached. The findings of fact contained in the first three sentences of paragraph 23 are adopted in material part. The findings of fact contained in the final sentence of paragraph 23 are rejected as being unsubstantiated by the evidence. The following rulings are made on the proposed findings of fact submitted on behalf of Respondent. The paragraphs contained in the findings of fact section of Respondent's Proposed Recommended Order have been numbered 1-13 for convenience. The proposed findings of fact in paragraphs 1, 3, 6, 7, 12, and 13 are adopted in material part by the Recommended Order. The proposed findings of fact in paragraph 2 are adopted in part by the Recommended Order and are rejected in part as being unnecessary to the conclusions reached. The examples given by Respondent were not incorporated as a finding of fact because the examples used are not analogous to the facts of this case. The proposed findings of fact in paragraph 4 are rejected as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 5 are adopted in part by the Recommended Order and are rejected in part as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 8 are adopted in part by of the Recommended Order and are rejected in part as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 9 are rejected as being recitation of testimony or as being subordinate to the findings made. The proposed findings of fact in paragraph 10 are adopted in part by the Recommended Order and are rejected in part as being recitation of testimony or as being unnecessary to the conclusions reached. The proposed findings of fact in paragraph 11 are adopted in material part by the Recommended Order with the exception of the findings of fact contained in the final sentence of the paragraph, which are rejected as being unnecessary to the conclusions reached.
The Issue Whether Petitioner should be granted a certificate authorizing it to continue operating a water and sewer utility in Flagler County; and Whether Petitioner's application to increase its water and sewer rates to its customers should be granted.
Findings Of Fact The Utility The Utility, a subsidiary of ITT Community Development Corporation, owns and operates a central water and sewer system serving Palm Coast Community--a planned development of approximately 40 square miles located in Flagler County. Although the development has less than 3,000 occupied homesites, more than 40,000 homesites are planned. (Testimony of Potter; P-2, R-4.) The Water System The water system includes wells, a treatment plant, storage facilities, and distribution mains. There are 13 water supply wells with a flow capability of 3.40 MGD (million gallons per day); present peak flow is 2.00 MGD. The raw water is piped to a central water treatment plant which utilizes a lime- softening process. Present plant peak flows equal the maximum rated capacity: 2.00 MGD. There are two ground storage reservoirs (with a total capacity of 1,300,000 gallons) and two elevated storage tanks (with a total capacity of 850,000 gallons). The water distribution system consists of an extensive network of mains, valves, fire hydrants, and meters used to convey potable water from the treatment plant to customers throughout Palm Coast Community. Although during the test year ending June 28, 1980, the Utility supplied water to an average of 2,191 residential and 80 general service customers, water distribution mains have been constructed to 22,988 building sites. The total water system, as of June 28, 1980, has been constructed at a cost of $17,486,433. (Testimony of Potter; P-2, R-4.) The Sewer System The sewer system includes a collection system, 57 lift stations, a wastewater treatment plant, and effluent disposal facilities. The wastewater plant utilizes an extended aeration process and has a rated hydraulic capacity of 600,000 gallons per day. Effluent is disposed of by spray irrigation on a 65-acre disposal field. Although during the test year, the Utility supplied sewer service to an average of 1,502 residential and 39 general service customers, sewage collection mains have been constructed to 22,988 building sites. As of June 28, 1980, the sewer system has been constructed at a cost of $24,850,962. (Testimony of Potter; P-2, R-4). The Rate Increase Application By its application, the Utility seeks authorization to increase water operating revenues by $170,460 and sewer operating revenues by $106,924. If granted, annual gross water revenues would increase (by approximately 40 percent) to $422,211 and gross sewer revenues would increase (by approximately 40 percent) to $267,194. (Testimony of Deterding; 5-3 P-4, R-2.) As grounds, the Utility contends that during the test year ending June 28, 1980, it suffered an operating loss of $225,430 in its water operations, and a loss of $109,909 in its sewer operations; that it is entitled to a 13.08 percent rate of return on its rate base. (Application for Rate Increase, dated November 3, 1980). II. The Elements of Rate Making In issuing a certificate and setting rates, the Commission must determine: the rate base 2/ ; (2) the cost of providing the utility service, including debt interest, working capital, maintenance, depreciation, tax, and operating expenses; (3) a fair return on the rate base; and (4) the quality of service provided. At hearing, the Utility presented evidence on each of these rate-making elements. For the most part, the Commission did not oppose the Utility's evidence; those matters which were disputed are separately addressed below. Rate Base Rate base represents the Utility's property which provides the services for which rates are charged. There are three issues involving the establishment of rate base: (1) average or year-end rate base. (2) inclusion of cost of a 750,000 gallon water storage tank; and (3) deferral of depreciation on non-used- and-useful plant. Average or Year-End Rate Base At hearing, the Utility asserted that it had experienced extraordinary growth, justifying the utilization of year-end rate base. The Commission disputed this claim of extraordinary growth, and urged the use of a 13-month average. On June 22, 1981, the Utility filed a post-hearing "Notice of Change in the Position of the Applicant," by which it receded from its previous position and agreed that, for purposes of this proceeding, an average rate base should be used. The issue is, therefore, moot and utilization of a 13-month average rate base is accepted. However, the Utility continues to assert that a year-end rate base should be established for "purposes of certification." 3/ Such assertion is rejected as inconsistent with its June 22, 1981, acceptance of average rate base: the acceptance applied to this "proceeding," 4/ and was not limited to rate-making purposes. Moreover, the Utility has not shown why a second rate base, based on year-end figures, should be established. Year-end rate base constitutes a deviation from the standard and preferable method of using a 13-month average; it may only be used under circumstances of unusual or extraordinary growth-- circumstances which the Utility no longer claims exist. (Testimony of Deterding; R-2) Deferral of Depreciation and Amortization The Utility requests authority to defer depreciating non-used-and-useful plant and amortizing contributions-in-aid-of-construction ("CIAC") until such time as the plant or contributions become used and useful. The effect would be to preserve the original cost of the property so it may eventually be recovered from future customers benefitting from its use; because original cost would not have been reduced, rate base would be higher for those future customers. The Commission opposes the requested deferral. Both parties cite language in a previous Commission order (Order No. 7455, Docket No. 760034, In Re: Petition of North Orlando Water and Sewer Corporation) as evidence of existing Commission non-rule policy on deferral of depreciation expense on non-used-and-useful property. The Commission language in that order lends support to the opposing arguments of each party. Even if the policy was stated unequivocally it could not--without record support--establish Commission policy for purposes of this rate proceeding. The Utility's request is rejected because record evidence in this proceeding. The Utility executed a Revenue Agreement with ITT Community Development Corporation on June 27, 1980. Under that agreement, Community Development Corporation, the developer of Palm Coast Community, agreed to pay the Utility--through 1990--an amount sufficient to allow recovery of costs, including depreciation, attributable to utility property installed for unimproved lots. Such utility property is the same non-used-and-useful property for which the utility now seeks to defer depreciation and amortization. Since this revenue agreement allows the Utility to recover from the developer depreciation expenses attributable to non-used-and-useful property, deferral of depreciation--to allow recovery from future customers--is unnecessary. (Testimony of Gregg, Deterding; R2) 5/ Inclusion of Cost of Water Storage Tank The Utility proposes to include in rate base the use-and-useful portion of a 0.75 million gallon elevated storage tank. It was not completed and placed in service until after the test year. Neither was its construction explicitly ordered by government order. However, from an engineering standpoint, it was needed during this test period to maintain minimum water pressure during peak- flow periods and provide adequate flows for fire protection purposes. It now functions as an integral component of the Utility's water system. At hearing, the Commission's accountant testified that 100 percent of the cost of the water storage tank should be removed from the plant-in-service component of rate base because it was not in service during the test year. The parties agreed to his submittal of a post-hearing accounting exhibit showing adjustments resulting from his testimony. However, in his late-filed exhibit (R-2), the accountant took a position which contradicted his testimony at hearing: In this case we feel that consideration of this after test year plant must be given. The utility's used and useful portion of the other storage facilities will increase substantially. In addition this item appears to be an integral component of the plant which was operating during the test year and at present. (R-2.) (Emphasis supplied.) He included proposed schedules which: (1) include the tank as if placed in service during the last month of the test year; (2) include the total cost of the tank including interest capitalized net of the non-used-and-useful portion in calculating average rate base; and (3) show the effect of these adjustments in construction work in progress (CWIP) so that they can be easily identified and not confused with plant that was, in fact, in service by the end of the test year. Notwithstanding this significant change in its accountant's testimony, the Commission continues to advocate 6/ the accountant's earlier position at hearing--one which he has now abandoned. Thus, the Commission argues that: [T]he only correct position in calculating an average rate base is to exclude the after test year plant addition and adjust the used and useful percentage. . .as he [its accountant] originally proposed at the hearing. (Commission's Recommended Order, p. 5) This contention his rejected as inconsistent with the Commission's own accounting and engineering evidence. 7/ It also overlooks the undisputed fact that the storage tank is now operating as an essential component of the water system, and that it will continue to be used during the period in which the new rates will be in effect. The Commission's alternative treatment--as proposed by its accountant's post-hearing exhibit (R-2), is accepted as persuasive. The cost of the storage tank is thus included as CWIP, and is calculated as if placed in service during the last month of the test year; the total cost of the tank, including interest capitalized net of the non-used-and-useful portion, is utilized (Testimony of Gregg, Deterding, Chastain; R-1.) The sewer system rate base proposed by the Utility is not disputed by the Commission and is accepted. The resulting average rate bases for the water and sewer systems are $2,736,279 and $1,044,165, respectively. They are depicted below. WATER RATE BASE (Test Year Ended 6-28-80) Utility Plant in Service $12,397,249 Plant Held for Future Use (8,848,497) Construction Work in Progress 39,097 Accumulated Depreciation (216,405) Contribution-in-Aid-of-Construction (Net of Amortization) (687,787) Working Capital Allowance 35,837 Materials and Supplies 7,785 Income Tax Lag -0- RATE BASE $ 2,736,279 SEWER RATE BASE (Test Year Ended 6-28-80) Utility Plant in Service $18,461,055 Plant Held for Future Use (15,787,481) Construction Work in Progress -0- Accumulated Depreciation (109,729) Contributions-in-Aid-of-Construction (Net of Amortization) (1,551,865) Working Capital Allowance 27,186 Materials and Supplies 4,999 Income Tax tag -0- RATE BASE $ 1,044,145 (Late-filed Exhibit, R-2.) B. Operating Income The parties agree that, during the test year, the Utility had a $130,243 operating loss from its water operations, and a sewer operations. The operating statements are $95,281 operating loss from it depicted below: WATER OPERATING STATEMENT (Test Year Ended 6-28-80) Operating Revenues (Present Rates) $251,751 Operating Revenue Deductions Operation 286,694 Depreciation 75,314 Amortization 954 Taxes Other Than Income 19,032 Income Taxes -0- TOTAL OPERATING EXPENSES $381,994 s Operating Income (Loss) $(130,243) SEWER OPERATING STATEMENT (Test Year Ended 6-28-80) Operating Revenues (Present Rates) $160,270 Operating Revenue Deductions Operation 217,487 Depreciation 21,872 Amortization 767 Taxes Other Than Income 15,425 Income Taxes -0- TOTAL OPERATING EXPENSES $255,551 Operating Income (Loss) $(95,281) Since during the test year, the Utility operated its water and sewer systems at a loss; it received a negative rate of return on its rate base. (Testimony of Gregg, Deterding; Late-Filed Exhibit R-2, P-3, P-4.) Cost of Capital and Fair Rate of Return The only issue between the parties concerning cost of capital to the Utility is whether deferred taxes should be included in its capital structure. At the end of the test year, the Utility's books showed no deferred taxes; however, during the later half of 1980, it changed its accounting treatment for deferred taxes. Applying its new method, deferred taxes at the end of the test year would be $3,137,000--assuming deferred depreciation on non-used-and-useful property is disallowed. The Utility failed to establish the impropriety of applying an accounting method which it will continue to follow in the foreseeable future; it is therefore concluded that the deferred taxes should be calculated as $3,137,000, at zero cost. 8/ The resulting overall cost of capital is 12.29 percent. A reasonable rate of return falls within a range of 11.87 percent to 12.72 percent. It is depicted below: COST OF CAPITAL Weighted Component Common Stock Equity Amount $22,224,497 Weight 42.23 Cost 15.0 percent Cost 6.33 Long Term Debt 27,163,003 51.62 11.5 5.94 Customer Deposits 99,653 .19 8.0 .02 Deferred Taxes 3,137,000 5.96 -0- -0- $52,624,153 100.00 12.29 (Testimony of Kelly, Potter; R-5.) proposed Revenue The Utility seeks increased water revenues of $170,460 and increased sewer revenues of $106,924. Although the parties agree on a base facility rate design, 9/ the Commission disputes proposed charges for fire hydrants and irrigation meters. 10/ Fire Hydrant Charges The Utility presently collects, under contract, a fire hydrant charge of $70 per year per hydrant from two fire districts which serve the area. This method is favored by customers and the fire districts; because the fire districts raise their funds through tax assessments, the customers payments are tax deductable. The Commission argues that the $70 charges do not cover all of the Utility's fire protection costs and that such costs should be recovered through regular service rates. While the $70 charge was shown to be insufficient to cover fire service costs, no reason was provided why the additional funds could not be recovered by increasing charges to the fire districts. This method of paying for fire protection costs is advantageous to the customers. It is likely that the fire service districts would cooperate with the Utility in negotiating fire service charges which are adequate to cover the costs of the service provided. Consequently, it is concluded that the present method of collecting fire service charges should be retained, although the charges should be increased sufficiently to cover the attendant costs to the Utility. (Testimony of Fabelo, Public Witnesses.) Irrigation Meter Charges The Utility proposes a $2.00 base facility charge for irrigation meters, with a $4.50 charge for regular service. The Commission prefers an irrigation meter base facility charge equal to one-half of the base charge of a corresponding regular service meter, assuming both meters are on the same tap to the water main. Since the demand for water that both meters can cumulatively place on the water system is 1.5 times that placed by a regular service meter, the Commission's position is persuasive. 11/ The parties also disputed the base facility customer accounting charges for irrigation meters--the Utility contending that the additional meters impose little additional costs and the Commission asserting that customer accounting charges should be given full weight. The Utility's position is accepted as persuasive. The two meters are usually close together and easily read. Both services are included on one account and one monthly bill covers both. Thus, while the irrigation meter imposes a slight additional accounting cost, it is minimal when compared to the cost imposed by a separate regular service meter. (Testimony of Gregg, Fabelo.) Rate of Return Allowed by Proposed Revenue Adding the requested water revenue increase of $165,633 to the adjusted test-year water operating revenues of $251,751 results in total recommended operating revenues of $417,384. Subtracting test-year operating expenses of $381,994 leaves a net operating income of $35,390--a 1.29 percent return on a water rate base of $2,736,279. Adding the requested sewer revenue increase of $111,751 to the adjusted test-year sewer operating revenues of $160,270 results in total recommended operating revenues of $272,021. Subtracting test-year operating expenses of $255,551 leaves a net operating income of $16,470--a 1.58 percent return on a sewer rate base of $1,044,165. (Testimony of Deterding; R-2) Quality of Service The quality of the water furnished the Utility's customers depends on their location. Customers residing in the area most heavily populated--north of Highway 100--receive satisfactory water service. Their water is treated by the Utility's central lime-softening plant. In contrast, the customers residing in the Seminole Woods area have not received water of comparable quality. Seminole Woods lies in the south extremity of the service area; it consists of approximately eight single-family residences and one duplex. Due to the remote location and slow rate of growth of Seminole Woods, the Utility has not found it practical to interconnect with the central lime-softening plant or build a separate lime-softening plant to serve the area. Instead, the Utility pumps raw water from a nearby well to a temporary facility where it is chlorinated and then conveyed to the residences where it is treated by separate zeolite or "Culligan" water-softening devices. These devices are furnished customers by the Utility without additional charge. The residents of Seminole Woods have frequently received water with excessive chlorine or hydrogen sulfide. The Utility's efforts to monitor the chlorine levels and regularly flush the system have not solved the problems. Seminole Woods customers have repeatedly complained about the quality of their water--its excessive chlorine taste, offensive odor (similar to the smell of rotten eggs), and high sodium content. The water quality is so poor that at least three of the residents have found it undrinkable; they buy bottled water at an additional cost of approximately $20 per month. The Utility's current solution to the problem is to extend mains from the northern area to Seminole Woods. The lines are now under construction and completion is expected "within a year or so." (Tr. 253.) With the exception of the Seminole Woods area, the quality of sewer and water service provided by the Utility is acceptable and has rarely been the subject of complaints. Occasional problems of power outages have been corrected. Neither the water nor the sewer system has been or is now under any governmental citation for non-sewage or water treatment standards. Upon completion of the connecting water mains, it is likely that the residents of Seminole Woods will receive water equal in quality to that enjoyed by other residents of Palm Coast Community. (Testimony of Thomas, Sannartano, Creolino, Potter, Likins.) III. Certificate of Public Convenience and Necessity The Utility has filed with the Commission a map of its existing utility systems, a description of the area served, and all information requested by the Commission concerning its rates and charges. Neither the Commission nor the public objected to the granting of a certificate authorizing it to continue providing water and sewer services in the affected area. (Testimony of Chastain, Members of the Public; Prehearing Statement.)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Utility be granted a certificate to continue operating its water and sewer systems in the areas described, and That it be authorized to file tariffs, consistent with the provisions of this Recommended Order, designed to generate annual gross water revenues of $417,384 and annual gross sewer revenues of $272,021. DONE AND RECOMMENDED this 13th day of August, 1981, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of August, 1981.
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
Findings Of Fact Petitioner is the receiver for Bayside Club, Islamorada, Inc., a dissolved Florida corporation ("Bayside"). Mr. Joseph Popplewell is a general contractor and former president of Bayside. Respondent is the governmental entity authorized by Chapter 76-441, Section 14(1), Laws of Florida, to adopt impact fees for the water system in the Florida Keys, to equitably adjust the financial burden of a new pipeline, and to expand it or improve appurtenant facilities between existing customers and new water users. In 1986, Bayside sought to construct a 30 unit hotel on approximately one acre of land in Monroe County, Florida. The development project was formally classified as an expansion of an existing eight unit hotel. The existing hotel, however, had little, if any, useful life, and, in substance, the project involved the development of a new 30 unit hotel. Bayside obtained a building permit on June 4, 1985. In the same month, the building permit was challenged by an adjacent land owner. The challenge asserted that the existing hotel constituted a grandfathered nonconforming use and that the building permit improperly treated the development site as if it were located in a zoning district which permitted hotel usage and subsequent expansion. During the last half of 1985, the Monroe County Commission considered the challenge to the building permit and found that the building permit was valid. The adjacent landowner filed suit against Bayside. The circuit court upheld the validity of the building permit. The suit was finally decided on May 29, 1990, when the Third District Court of Appeal reversed the lower court's decision that the building permit was valid. Dowd v. Monroe County, 557 So.2d 63 (Fla. 3d DCA 1990). On May 29, 1990, the circuit court entered its order declaring the building permit invalid. In 1986, Bayside was advised by Respondent that unit water system development fees ("impact fees") were scheduled to increase from $1,500 to $2,000. Bayside chose to avoid paying impact fees at the increased unit rate and to achieve a savings in development costs. On or about April 18, 1986, Bayside executed an Agreement For Water Service. On or about April 29, 1986, Bayside issued a check payable to Respondent in the amount of $36,840, which included impact fees in the aggregate amount of $33,000. As provided in Florida Administrative Code Rule 48-3.002 2., the Agreement For Water Service expressly stated in paragraph 1 that "SAID SYSTEM DEVELOPMENT CHARGE SHALL NOT BE REFUNDABLE." Construction of the proposed hotel stopped sometime in 1986. A receivor was appointed for Bayside by the appropriate circuit court on June 14, 1991. Sometime in early 1992, the receiver for Bayside requested a refund of the impact fees. Respondent denied that request in a letter dated February 27, 1992, but refunded amounts paid by Respondent in excess of the impact fees. Respondent's denial of Petitioner's request for a refund did not constitute an unreasonable classification and did not establish a differential rate that was either unjust or inequitable. Respondent has consistently applied Florida Administrative Code Rule 48-3.002 2. to prohibit the refund of impact fees regardless of the classification or rate charged the person who paid the impact fee. Petitioner had adequate notice in Rule 48-3.002 2. and the Agreement For Water Service that the impact fees were nonrefundable. Respondent reasonably anticipated that the projected costs for expanding the water system would be incurred. The county commission and circuit court both upheld the validity of the building permit. If Bayside reasonably anticipated that projected costs for expanding the water system and appurtenant facilities would not be incurred due to a suit challenging the building permit, Bayside had the option of not paying the impact fees until the final conclusion of litigation. Bayside was on notice that the impact fees were nonrefundable and chose to forego its option not to pay the fees until the conclusion of the suit challenging the building permit. Bayside made a business decision to save money and time by paying the impact fees when it did. Viewed in the light of hindsight, that business decision was imprudent. Bayside did not notify Respondent that the costs of expanding the system were not reasonably anticipated until six years after Bayside chose to pay the impact fees. The nonrefundable impact fees imposed by Respondent in 1986 were just and equitable. Expansion of the water system pipeline and appurtenant facilities was reasonably required as a result of the development proposed by Bayside at the time that the impact fees were imposed. The costs attributable to such expansion were reasonably anticipated by Respondent at the time that the impact fees were imposed. The use of the impact fees was limited to meeting such reasonably anticipated costs of expansion. The impact fees imposed by Respondent in 1986 did not exceed a pro rata share of reasonably anticipated costs. Expansion of Respondent's water system was necessary irrespective of the proposed hotel. The expansion of Respondent's water system and appurtenant facilities was financed through the sale of debentures. The indebtedness incurred is made good through revenues in the form of rates, fees, and other charges. Under such circumstances, rates and fees were set with a view towards raising the money necessary to repay the loan. The impact fees did not cease to be just and equitable merely because they were set high enough to meet the water system's reasonably anticipated capital requirements.
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, and to what extent, Magnolia Valley Services, Inc., should be allowed to increase its water and sewer service rates.
Findings Of Fact Based on the evidence presented at hearing, the following facts are determined: I. The Application By application filed on August 14, 1980, APPLICANT sought authority to increase its water and sewer rates, on an interim and permanent basis, in amounts sufficient to produce $60,847 in annual gross water revenues, and $100,768 in sewer revenues. By Order No. 9571 dated September 30, 1980, the COMMISSION authorized an interim sewer revenue increase, under bond, of $8,205, and denied an interim increase in water revenues. The COMMISSION has approved APPLICANT's use of a test year ending December 31, 1979. At hearing, the APPLICANT amended its application by reducing its requested water revenues to $50,287, and increasing requested sewer revenues to $101,522. (Testimony of Gregg, Prehearing Statement; P-4.) II. Depreciation Rate Depreciation is a method of allocating the cost of fixed assets to their estimated useful life. As an above-the-line operating expense, it affects a utility's net operating income; by its impact on accumulated depreciation of plant-in-service and accumulated amortization of contributions-in-aid-of- construction, it also effects calculation of rate base. (Testimony of Walker, Gregg; P-3, R-1.) The COMMISSION has promulgated no rules as guidelines which establish generally, or in particular, the useful life of utility assets or the method by which their depreciation should be calculated. In practice, however, it has allowed utilities to apply a straight-line 2.5 percent depreciation rate and a 40-year useful life to all depreciable assets. Any deviation from this 2.5 percent across-the-board rate must be justified by the utility. (Testimony of Heiker.) Here, the APPLICANT proposes depreciation rates which vary according to the estimated useful life of the plant or equipment involved. In contends that its shorter estimates of useful life of specific assets reflect reality and actual experience more accurately than an across-the-board 40-year life standard. For example, rate meters are routinely replaced on a 20-year basis and lack of reserve capacity and changing voltages have substantially reduced the expected life of electrical motors and equipment. The APPLICANT's estimates of useful life were established by the opinion of a utility consultant and engineer whose qualifications went unchallenged by the COMMISSION; no competent evidence was offered to discredit or rebut his conclusions. The COMMISSION's engineer candidly admitted that depreciation "is really a nebulous thing," (Tr. 64) and declined to assert that the APPLICANT's depreciation schedules were erroneous. (Tr. 69.) The COMMISSION disputed the APPLICANT's depreciation schedules by referring to an unpublished 1973 staff memorandum retained at the agency's offices and not produced at hearing. That memorandum purportedly adopted 1973 depreciation rates developed by the American Water Works Association. Upon motion of APPLICANT, testimony concerning the contents of that memorandum was subsequently stricken. The COMMISSION engineer also testified that he was unfamiliar, even generally, with how the American Water Works Association's depreciation rates were derived. In light of the quality of the evidence presented of record, the APPLICANT's depreciation rates (including estimated useful life) are accepted as persuasive. (Testimony of Heiker, Gregg; P-1, P-3.) III. Attrition Allowance The APPLICANT seeks to include in operating expenses an attrition allowance of $1,992 for water and $8,161 for sewer operations based on alleged attrition it experienced between 1975 and 1979. It defines attrition as increased annual expenses which cannot be recovered at the time they are incurred. The COMMISSION opposes the requested attrition allowance on the grounds that: (1) the attrition study performed by the APPLICANT is unreliable, and (2) that the recent enactment of Section 367.081(4), Florida Statutes (Supp. 1980), which allows the passing through of certain increased expenses to customers, eliminates the need for a special attrition allowance. (Testimony of Gregg, Walker; P-2.) The COMMISSION's position is well taken. First, a major portion of the cost increases experienced by the APPLICANT in the past will be able to be passed through to its customers pursuant to Section 367.081, Florida Statutes (Supp. 1980). 2/ Those costs include increased power costs and ad valorem taxes. The APPLICANT responds that Section 367.081(4), supra, will not enable it to fully recover increasing expenses when they occur because rates may be adjusted, based on increased operating costs, not more than twice a year. Section 367.081(4)(e), supra. However, this new law should be implemented before it is pronounced inadequate to fulfill its purpose. Experience may show that major costs increase sporadically, or at predictable cycles, which facilitate carefully timed rate increases under Section 367.081(4), and that two such increases a year may prove fully adequate. (Testimony of Gregg, Walker; P- 2, R-1.) Secondly, the attrition study (P-2) submitted by the APPLICANT does not reasonably justify, or provide a reliable basis for projecting an attrition rate into the future. The 1975-1979 historical cost increases have not occurred at a constant rate. The 1979 increase in water operation costs was less than one- half of the average increase experienced between 1975 and 1979; in sewer operations, the 1979 cost increases were less than one-third of the four-year average. Moreover, a major factor in increased sewer costs was the 1978 conversion to a spray irrigation, total retention, sewage treatment system. Since this system meets the 1983 federal Clean Water Act standard of no- discharge, it is unlikely that increased operational costs relating to treatment changes will continue to occur. In short, the 1975-1979 historical cost increases of APPLICANT have been sporadic and do not support an assumption that they will continue to occur at the same rate. To include an attrition allowance based on such an assumption would be unwarranted. (Testimony of Gregg, Walker; P-2, R-1.) IV. Allowance of an Undocumented Operating Charge The APPLICANT proposed a $600 sewer expense item which was opposed by the COMMISSION because of lack of documentation. In response, the APPLICANT submitted--immediately prior to hearing--a cancelled check in the amount of $1,000. The discrepancy between the two amounts remains unexplained. Such action falls short of providing adequate documentation, and the proposed $600 sewer expense item must therefore be rejected. See, 25-10.77, FAC. V. Elements of Ratemaking and Applicant's Gross Revenue Requirements The parties agree: (1) that 14.5 percent is a fair and reasonable rate of return on rate base and reflects the actual cost of capital to APPLICANT; that the new rates should be designed in accordance with the base facility design concept, and that the quality of APPLICANT's water and sewer service is satisfactory. The remaining elements of ratemaking--rate base and net operating income--are not in dispute, and are depicted below: 3/ RATE BASE Test Year Ended 12/31/79 Water Sewer Plant in Service Accumulated $269,887 $511,200 Depreciation $(37,384) 4/ $(54,685) Net Plant $232,503 $456,515 Contributions in Aid of Construction (179,251) (360,055) Accumulated Amortization 22,421 Net Contributions in Aid of 4/ 41,231 4/ Construction (156,830) (318,824) Working Capital 3,515 7,082 TOTAL $ 79,188 $144,773 OPERATING STATEMENT Test Year Ended 12/31/79 Water Sewer Operating Revenues $53,300 $72,608 Operating Expenses: Operations 25,552 45,353 Depreciation 3,848 5/ 4,876 5/ Maintenance 2,572 6/ 11,306 6/ Amortization 1,439 Taxes Other Than Income 4,654 7/ 8,338 7/ TOTAL Operating Expenses $36,626 $71,312 Net Operating Income$16,674 $ 1,296 By applying a 14.5 percent rate of return against a rate base Of $79,188 for water and $144,773 for sewer, it is concluded that the APPLICANT should be allowed an opportunity to earn a return, or net operating income of $11,482 for water and $20,992 for sewer. Annual gross revenues of $48,108 (water) and $92,304 (sewer) are required to produce such a return--resulting in a net annual reduction of water revenues of $5,192 and a net increase of $19,696 in sewer revenues. VI. Interruption of Service Treatment Without Advance Notice Although the overall quality of its service has been adequate, infra, the APPLICANT has unnecessarily inconvenienced customers by interrupting water service without advance notice. These interruptions were planned in advance and not made on an emergency basis. The APPLICANT failed to adequately explain or excuse its failure to give timely notice. (Testimony of Pepper.)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That Magnolia Valley Services, Inc., be authorized to file new rates structured on the base facility charge concept and designed to generate gross annual revenues of $48,108 for water operations and $92,304 for sewer operations, based on the average number of customers served during the test year. It is further RECOMMENDED that the utility be directed to strictly comply in the future with Section 25-10.56, Florida Administrative Code, by giving advance notice of service interruptions which are not emergency in nature. DONE AND ORDERED this 1st day of April, 1981, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 1981.
Conclusions An Administrative Law Judge of the Division of Administrative Hearings has entered an Order Closing File. A copy of the Order is attached to this Final Order as Exhibit A.
Other Judicial Opinions OF THIS FINAL ORDER PURSUANT TO SECTION 120.68, FLORIDA STATUTES, AND FLORIDA RULES OF APPELLATE PROCEDURE 9.030(b)(1)(c) AND 9.110. TO INITIATE AN APPEAL OF THIS ORDER, A NOTICE OF APPEAL MUST BE FILED WITH THE DEPARTMENT’S AGENCY CLERK, 2555 SHUMARD OAK BOULEVARD, TALLAHASSEE, FLORIDA 32399-2100, WITHIN 30 DAYS OF THE DAY THIS ORDER IS FILED WITH THE AGENCY CLERK. THE NOTICE OF APPEAL MUST BE SUBSTANTIALLY IN THE FORM PRESCRIBED BY FLORIDA RULE OF APPELLATE PROCEDURE 9.900(a). A COPY OF THE NOTICE OF APPEAL MUST BE FILED WITH THE APPROPRIATE DISTRICT COURT OF APPEAL AND MUST BE ACCOMPANIED BY THE FILING FEE SPECIFIED IN SECTION 35.22(3), FLORIDA STATUTES. YOU WAIVE YOUR RIGHT TO JUDICIAL REVIEW IF THE NOTICE OF APPEAL IS NOT TIMELY FILED WITH THE AGENCY CLERK AND THE APPROPRIATE DISTRICT COURT OF APPEAL. MEDIATION UNDER SECTION 120.573, FLA. STAT., IS NOT AVAILABLE WITH RESPECT TO THE ISSUES RESOLVED BY THIS ORDER. FINAL ORDER NO. DCA09-GM-231 CERTIFICATE OF FILING AND SERVICE I HEREBY CERTIFY that the original of the foregoing has been filed with the undersigned designated Agency Clerk, and that true and correct copies have been furnished to the persons listed below in the manner described, on this ay of June, 2009. U.S. Mail: The Honorable Bram D. E. Canter Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Robert Quintin Williams Williams, Smith & Summers 380 West Alfred Street Tavares, Florida 32778-3206 Hand Delivery Matthew Davis, Esq. Assistant General Counsel Department of Community Affairs Agency Clerk LOB ge Viren Ford
Findings Of Fact Petitioner provides electric, gas and water utility service at various Florida locations. During the 1979 test year, its Fernandina Beach Water Division served an average of 2,500 residential customers, 523 general service customers and nine private fire line customers. In addition, it maintained 210 fire hydrants for the City of Fernandina Beach. Service The Utility is providing satisfactory water service. There were no service complaints presented at the public hearing, nor were there any citations or corrective orders outstanding. Rate Base The Utility seeks recognition of a $1,332,178 rate base. This amount includes $82,128 for an office building completed in the last month of the test year, a $7,600 chlorinator building completed after the test year (March, 1980) , and a pumphouse still under construction at an estimated completed cost of $106,000. Neither the amounts nor their completion dates are in dispute. However, the Commission seeks to utilize a 13-month average year rate base which would result in the exclusion of all the above facilities except for the office building investment during the final month of the test year. Both parties cite Citizens of Florida v. Hawkins, 356 So.2d 254 (Fla. 1978) in support of their positions. Although the Court discusses the various methods of computing a utility rate base, it concludes that unusual or extraordinary growth is a prerequisite to use of a year end rate base. The Utility did not demonstrate unusual or extraordinary growth. Rather, customer growth during the test year was only about two percent, mandating use of an average rate base. The Utility suggests that construction of the chlorinator was required by the federal government under the provisions of the Safe Drinking Water Act. If so, the Utility would be permitted to include this Investment in its rate base. 1/ However, the Utility was in compliance with the Safe Drinking Water Act prior to construction of the pumphouse and made no showing that it was required to undertake this project by government authority. Capitalization of interest on the funds used in construction of new facilities should be authorized. However, this amount will not be subject to inclusion in the rate base until the facility itself is included. The Utility plant was shown to be 100 percent used and useful in the public service. In view of this, and the adjustments discussed above, the Utility's average rate base for the test year is $1,103,201. See Schedule 1 for detail. Operating Revenues The Utility seeks a test year revenue authorization of $581,037 based on expenses of $456,184 and a 9.39 percent return on its proposed rate base. It seeks to include an expense item of $2,400 for tank maintenance, basing this amount on the five-year amortization of a projected $12,000 expenditure. Although this procedure is proper, since tank maintenance is periodically required, the $12,000 is the anticipated cost of future maintenance rather than an actual cost. Therefore, this figure must be adjusted to one-fifth of the last actual maintenance cost, or $1,105. Prior to December, 1979, when its office building was completed, the Utility rented the required space. Since the new building was not recognized for rate making purposes until the final month of the test year, it is proper to include the rent expense actually involved during the preceding 11 months. Therefore, an upward adjustment in expenses of $1,524 is required. Authorized expenses should also include $45,281 proposed by the Utility to meet known increases in the cost of purchased electrical power. The limitation on test year expenses is not the same as that on test year investment. Rather, Chapter 367, Florida Statutes, specifically provides for recognition of outside test year increases in electrical power costs. See Section 367.081(4)(b), Florida Statutes (1980). The Utility supported its proposed rate case expense of $5,100 by late filed exhibit. Neither the amount nor the proposed three-year amortization period were opposed by the Commission and are appropriately included herein. In view of the above findings and a 9.10 percent return on investment (discussed below) , the Utility is entitled to revise its rates to produce annual revenue of $536,970. See Schedule 2 for detail. Cost of Capital The parties agreed that 15 percent is an appropriate return on equity investment. This amount, when weighed against the current cost of debt, supports an overall 9.10 percent rate of return. Rate Structure The parties propose adoption of a base facility charge rate structure. This rate design includes a fixed charge to each customer served based on that customer's share of fixed operating costs. The second element of the base facility charge represents -- the variable cost of water actually used. This rate structure provides an equitable method of allocating service costs and is consistent with statutory requirements that rates be just and nondiscriminatory. See Section 307.081(2), Florida Statutes (1980). The Utility proposes to increase its fire hydrant charge from $8 to $12 monthly and to include this amount in its regular service rates to all customers rather than as a separate charge to the City of Fernandina Beach. The amount of the increase is consistent with overall revenue needs and was not opposed by the Commission. The procedure to include fire hydrant charges in customer charges was requested by the City Commission of Fernandina Beach and would not discriminate against any customer or group of customers, since all benefit from the fire protection represented by these charges.
Recommendation Based on the foregoing Findings of Fact and Conclusions A, of Law, it is RECOMMENDED that Florida Public Utilities Company be authorized to file revised rates structured on the base facility charge concept, designed to generate annual gross revenue of $536,970 based on the average number of customers served during the test year. DONE and ENTERED this 18th day of December, 1980, in Tallahassee, Leon County, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
The Issue The issue is whether Respondents should be subject to civil penalties and required to submit a Compliance Plan for the reasons stated in the Administrative Complaint and Order filed on January 8, 2002.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background In this enforcement action, Petitioner, Southwest Florida Water Management District (District), proposes to assess civil penalties against, and require a compliance plan from, Respondents, Balm Associates, Inc. (Balm) and Goodson Farms, Inc. (Goodson), on the grounds that from March 1999 through July 2001 they made water withdrawals from certain property in Hillsborough County, Florida, without a water use permit, and after a permit was obtained in August 2001, they continued to exceed the annual average daily withdrawals authorized under the permit through the month of November 2001, or just prior to the preparation and issuance of the Administrative Complaint and Order (Complaint).1 While not denying that excessive pumpages may have occurred, and that a permit was not obtained until August 2001, Balm points out that it is the owner-lessor of the property and not the consumptive user of the water, and contends that the District has no authority to enforce its rules against, and recover civil penalties from, the non-user of the water. In its request for a hearing, Goodson did not specifically dispute the allegation that it consumed water without a permit, or exceeded the withdrawal limits under the new permit, but contended instead that the limits were unrealistic and should be modified. At the final hearing, however, Goodson disputed the accuracy of the water consumption figures used in the Complaint. The District is the administrative agency charged with the responsibility to conserve, protect, manage, and control water resources within its boundaries and to administer and enforce Chapter 373, Florida Statutes. Balm is a corporation registered to do business in the State of Florida. Its mailing address is 2101 Huntington Avenue, Sarasota, Florida 34232. It owns approximately 220 acres of land in Section 28, Township 31 South, Range 21 East, in Hillsborough County, Florida, which is the site of the alleged wrongdoing. Goodson is a corporation registered to do business in the State of Florida. Its mailing address is Post Office Box 246, Balm, Florida 33503. Goodson is in the farming business and operates a total of 13 farms, including the farm at issue in this proceeding. Permit Requirements Under Rule 40D-2.041(1), Florida Administrative Code, a water use permit is required whenever total withdrawal capacity from any source or combined sources is greater than or equal to 1,000,000 gallons per day (gpd); annual average withdrawal from any source or combined sources is greater than or equal to 100,000 gpd; or withdrawal is from a well having an outside diameter of 6 inches or more at the surface. Rule 40D-2.351(1), Florida Administrative Code, provides that a permittee must notify the District within 30 days of the sale or conveyance of permitted water withdrawal facilities or the land on which the facilities are located. The same rule also provides that where a permit has been issued to a party whose ownership or legal control of the permitted water withdrawal facilities subsequently ends, the party who assumes control over the facilities may apply to transfer the permit to himself or herself up to the renewal date of the transferor's permit. Finally, Rule 40D-2.351(2), Florida Administrative Code, provides that until a permit is transferred or a new permit is obtained, the party subsequently controlling the permitted water withdrawal facilities will be in violation of District rules for making withdrawals without the required permit. History of Permits on the Property On September 29, 1989, the District issued Water Use Permit No. 207135.001 (the .001 permit) to James Brown (Brown) and B & T Growers Partnership (B & T) for water withdrawals from one well for agricultural purposes on Balm's property. The .001 permit authorized annual average withdrawals of 102,000 gpd of groundwater for agricultural irrigation. On August 29, 1990, the District adopted new rules applicable to District permits within the Eastern Tampa Bay Water Use Caution Area (ETBWUCA). The .001 permit was within the ETBWUCA, and Brown and B & T were provided with a Notice of Permit Modification and new Permit Conditions. The new conditions became effective November 15, 1990. New Condition No. 5 provided that By July 31, 1995, all permitted withdrawal points shall be equipped with totalizing flow meters or other measuring devices as approved in writing by the Director, Resource Regulation Department. Such devices shall have and maintain accuracy within five percent of the actual flow installed. On December 14, 1992, the District approved the transfer of the .001 permit from Brown and B & T to B. Kenda Produce. The Unpermitted Water Withdrawals On June 30, 1997, Goodson entered into a two-year agricultural lease with Balm to use a portion of the property, including acreage previously used by B. Kendra Produce. At the time the lease was entered into, neither Respondent applied to the District to have the .001 permit transferred from B. Kendra Produce. It can be reasonably inferred from the evidence that after the first lease expired, the parties continued to execute new lease agreements at least through the time of the hearing. The portion of the property which Goodson leased and farmed is referred to as the "Sweat Loop Farm" and consists of approximately 100 acres. There is one well with an outside diameter of 10 inches at the surface located on the Sweat Loop Farm. The well's total withdrawal capacity is approximately 1,500 gallons per minute (gpm), which is over 1,000,000 gpd. Thus, withdrawals from the well required a water use permit. As noted earlier, Goodson operates a total of 13 farms on approximately 2,500 acres of land. There are approximately 15 wells on all 13 farms, including the Sweat Loop Farm. Michael E. Hare, an irrigation supervisor who is responsible for the irrigation of all 13 of Goodson's farms, installed a total of approximately 8 meters on the farms, including the meter on the Sweat Loop Farm. A totalizing flow meter, which was made by MiCrometer, was installed at the Sweat Loop Farm in June 1997. Mr. Hare acknowledged that he was familiar with MiCrometer meters and would be aware if the MiCrometer flow meter on the Sweat Loop Farm was not functioning properly. Whenever metering devices on the various Goodson farms have malfunctioned in the past, Mr. Hare has taken the malfunctioning meter to a metering company to be fixed. Goodson began irrigating the Sweat Loop Farm in June 1997. Since that time, Goodson has been the sole water user of the well on the farm. In March 1999, Goodson began submitting to the District monthly pumpage reports for the groundwater withdrawals on the Sweat Loop Farm. Although some unmeasured withdrawals presumably occurred prior to March 1999, the Complaint does not identify these as being a violation. Mr. Hare and other supervisors are responsible for collecting the meter readings which go on the monthly pumpage reports and providing them to the District. The information on the reports includes the permit number; the last month's meter reading; the current month's meter reading; the total gallons of water pumped for the current month; the meter total; and the meter factor. To determine the average daily withdrawal on the Sweat Loop Farm, the District relied upon the calculations provided by Goodson as to the total gallons of water pumped for the month and divided this number by 30 days. From March 1999 through July 2001, these quantities were as follows: MONTH/YEAR AVERAGE DAILY PUMPAGE March 1999 April 1999 531,487 No data available May 1999 364,930 June 1999 0 July 1999 0 August 1999 57,410 September 1999 49,563 October 1999 222,667 November 1999 250,667 December 1999 755,003 January 2000 689,433 February 2000 695,073 March 2000 544,427 April 2000 305,153 May 2000 597,720 June 2000 0 July 2000 62,120 August 2000 86,370 September 2000 123,233 October 2000 602,020 November 2000 409,550 December 2000 145,823 January 2001 957,690 February 2001 890,213 March 2001 391,280 April 2001 467,640 May 2001 617,177 June 2001 0 July 2001 0 Under Rule 40D-2.041(1)(a)-(c), Florida Administrative Code, a water use permit was required for Goodson's withdrawals since the well's total withdrawal capacity is approximately 1,500 gpm, which is greater than 1,000,000 gpd; the annual average withdrawals exceeded 100,000 gpd; and the well has an outside diameter of 10 inches at the surface. The withdrawals on the Sweat Loop Farm were not authorized by the .001 permit since neither Goodson or Balm was a permittee under the permit. Even if Goodson could rely on the permit, which it cannot, pumpage data provided by Goodson reflects that the water withdrawals (except for nine months) were in excess of that authorized by the permit. On June 16, 2000, the District mailed a Notice of Non-Compliance for excessive water withdrawals to Goodson. The Notice indicated that if the pumpage values submitted by Goodson were incorrect, Goodson was to explain the error and provide corrected quantities. On June 26, 2000, the District received a written response to the Notice of Non-Compliance from the superintendent of the Sweat Loop Farm who indicated that the pumpage values were correct, and that the excess usage was due to a "serious drought condition" which had caused a "significant financial hardship on [the] farm." The response also indicated that Goodson would contact Mr. Haftel, owner of Balm, to request that he "revise the water use permit for spring crops." On November 22, 2000, the District mailed Goodson a Notice of Violation indicating that the quantities authorized by the .001 permit were still being exceeded and that the District might seek monetary penalties if Goodson failed to come into compliance within 30 days. Despite the foregoing Notice, Goodson continued to make withdrawals without a permit and in excess of the quantities formerly authorized under the .001 permit until August 2001 when a new permit was finally obtained. Issuance of a New Water Use Permit On January 2, 2001, the District received an application for a General Water Use Permit seeking to modify the .001 permit to increase the withdrawal quantities and to transfer the permit from B. Kendra Produce to Balm. "Seymour Haftel/ Balm Associates, Inc." was listed as the applicant, and "Donn Goodson" from " Goodson Farms" was listed as the contact or consultant. Mr. Haftel signed the application on behalf of Balm. Goodson assisted Balm in securing the permit for the Sweat Loop Farm because Goodson wanted more water for irrigation purposes. Section 2.1 of the Basis of Review for Water Use Permit Application, adopted and incorporated by reference by Rule 40D-2.091, Florida Administrative Code, provides that "[a]pplications for leased property, except property leased from the District, must be either a joint application in the name of the lessee and the property owner(s) or be only in the name of the property owner(s)." In a Request for Additional Information mailed to Balm on January 29, 2001, the District asked whether Goodson should be listed as co-applicant on the application. On April 27, 2001, Balm submitted a response which indicated that Goodson should not be listed as co-applicant. On August 6, 2001, the District issued Water Use Permit No. 200007135.002 (the .002 permit) to Seymour Haftel/Balm Associates, Inc. authorizing an increase in the annual average withdrawals to 224,300 gpd. The permit had an expiration date of September 29, 2009. The permit contained a number of special conditions, none of which were challenged by Balm. Unauthorized Withdrawals Under the .002 Permit Special Condition No. 2 of the .002 permit requires in part that the permittee: continue to maintain and operate the existing non-resettable, totalizing flow meter(s), or other flow measuring device(s) as approved by the Regulation Department Director, Resource Regulation, for District ID No(s), Permittee ID No(s)[,] G-1. Such device(s) shall maintain an accuracy within five percent of the actual flow as installed. Total withdrawal and meter readings from each metered withdrawal shall be recorded on a monthly basis and reported to the Permit Data Section, Records and Data Department, (using District forms) on or before the tenth day of the following month. In the event a permittee chooses not to use a totalizing flow meter, as required by Special Condition No. 2, the District will review information provided by the measuring device's manufacturer to determine if the measuring device would maintain a five percent accuracy as required by the Condition. The meters have to be monitored and calibrated periodically for accuracy. It is the permittee's responsibility to comply with the conditions of the permit, including Special Condition No. 2, which requires the submittal of accurate pumpage reports. Goodson submitted the meter readings on behalf of Balm beginning in September 2001, which covered the withdrawals for the month of August 2001. The District relied on the meter readings submitted by Goodson to determine the annual average daily pumpage calculation for the .002 permit. The calculation is a running 12-month average, whereby each month the annual average daily quantity is recalculated based on the previous 12-month pumpage. The running annual average daily pumpage and percentage of pumpage which exceeded the .002 permit from August 2001 through May 2002 are as follows: MONTH/YEAR ANNUAL AVERAGE DAILY PUMPAGE PERCENTAGE OVERPUMPED August 2001 378,462 69 percent September 2001 382,622 71 percent October 2001 376,687 68 percent November 2001 383,008 71 percent December 2001 379,212 69 percent January 2002 327,343 46 percent February 2002 321,530 43 percent March 2002 350,701 56 percent April 2002 356,013 59 percent May 2002 338,131 51 percent As the foregoing data reflects, the withdrawals from the Sweat Loop Farm were in excess of that authorized by the .002 permit from August 2001 through May 2002.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Southwest Florida Water Management District enter a final order determining that Respondents are guilty of the charges in its Administrative Complaint and Order except as concluded in paragraph 48 above and endnote 2 below; that Respondents be required to submit an acceptable written plan (Compliance Plan) to the District for its consideration and approval within fourteen days after entry of the final order; that the Compliance Plan describe how Respondents shall achieve full compliance with the .002 permit; that the Compliance Plan include reductions in withdrawals, water conservation measures, and development and utilization of alternative resources; that the Compliance Plan establish deadlines for implementation and completion of corrective actions; that full compliance be achieved within 120 days after entry of the final order; and that any failure of Respondents to comply with any provision of the Compliance Plan shall constitute a violation of the final order. DONE AND ENTERED this 30th day of July, 2002, in Tallahassee, Leon County, Florida. ___________________________________ DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 2002.
Findings Of Fact Cooper City Utilities, Inc. provides water and sewer service to its customers in Broward County, Florida, under the jurisdiction of the Commission pursuant to Chapter 367, Florida Statutes. The company was incorporated in 1973. All of the outstanding stock of the utility was owned by Moses Hornstein until his death on October 28, 1979, when ownership thereof became vested in the estate of Moses Hornstein, deceased. The personal representatives of this estate are Gertrude Hornstein, S. Lawrence Hornstein, and Judith A. Goldman. Gertrude Hornstein serves as president of Cooper City Utilities, Paul B. Anton as vice president, and Lawrence Lukin as secretary. Quality of Service At the hearing, a representative of the Broward County Health Department testified concerning the quality of service. Although some customer complaints had been received, there are no outstanding citations against Cooper City Utilities, Inc., and the quality of the utility's service will be improved when its new lime-softening plant, under construction, is completed in approximately August, 1980. The investigation by the Commission's staff engineer did not reveal any outstanding citations against either the water or sewer treatment facilities. Accordingly, on the basis of the entire record, the evidence supports a finding that the utility is in compliance with all state standards, and that the quality of its water and sewer service is satisfactory. Rate Base and Operating Statement Between the time in July when public hearings commenced, and September 24 when the hearings concluded, the utility abandoned its position on several matters which had been in dispute, leaving only two controverted subjects for resolution. These two remaining areas of disagreement are, (1) the cost of money [because of a pending petition for approval of additional financing (Docket No. 800562-WS)], and (2) the expense for an additional field laborer hired subsequent to the test year, which the utility seeks to have included as a pro forma expense. Based on the stipulation of the parties, the following schedule sets forth the rate base of Cooker City Utilities (Exhibit 15): Water Sewer Utility plant in service $2,331,137 $3,723,347 Plant held for future use (47,989) (166,375) Accumulated depreciation (286,651) (460,297) CIAC (net of amortization) (1,322,487) (2,302,707) Working capital allowance 51,083 37,680 Rate Base $ 725,093 831,648 Based on the stipulation of parties, prior to any consideration of the allowance of any expense for the laborer hired subsequent to the test year, the following schedule sets forth the utility's operating statement (Exhibit 15): Water Sewer Operating Revenues $ 368,562 $ 489,886 Operating Expenses: Operation 346,916 232,406 Maintenance 61,750 69,030 Depreciation 22,447 25,543 Amortization -0- -0- Taxes other than income 55,853 75,043 Other expenses -0- -0- Income taxes -0- -0- Total Operating Expenses $ 486,566 $ 402,022 Operating Income (Loss) $ (118,404) 87,864 5. On the matter of allowance of sufficient revenue to cover the cost of one additional laborer hired after the test year, the estimated annual expense is approximately $7,240. However, to the extent that this employee was hired due to an increase in the number of customers subsequent to the test year, or due to plant capacity not used and useful, it is not a proper pro forma adjustment. Without an affirmative showing that the laborer was necessary during the test year for existing customers, the adjustment should be disallowed, and there is insufficient evidence in this record to support such a finding. On the issue of cost of money, during the test year the utility's capital structure was composed of one hundred percent debt at a stated cost of ten percent. In Docket No. 800562-WS the company seeks Commission authority to borrow an additional sum of $450,000, and it plans to amend this application to include authority to borrow $400,000 more in order to make refunds to customers in compliance with a Commission order which was upheld in Cooper City Utilities, Inc. v. Mann (Fla. Sup. Ct. Case No. 58,047, September 12, 1980). However, the utility's proposed debt has not yet been approved by the Commission, and will not be incurred until some time in the future, if approved. In these circumstances, it is not appropriate to take the cost of new debt into consideration in determining cost of capital in this rate case. The evidence in the record supports a ten percent cost of capital. The earned rate of return for the water system is a negative 16.33 percent. The earned rate of return for the sewer system is 10.57 percent. Therefore, the utility's water rates should be increased, and its sewer rates should be decreased, to achieve an overall ten percent rate of return. Accordingly, the annual revenue requirement for the water system is $564,370, which amounts to an annual revenue increase of $195,808. The annual revenue requirement for the sewer system is $485,067, which amounts to an annual revenue decrease of $4,819. Rate Structure The present rates of Cooper City Utilities are structured in the conventional manner, consisting of a minimum gallonage charge and a one-step excess rate over the minimum. The utility proposes. rates with the same basic structure, but with changes in the minimum charge and the minimum gallonage allowance. However, the Commission has consistently taken the position that any rate that requires customers to pay for a minimum number of gallons, whether used or not, is discriminatory. Invariably, a base facilities type of rate structure has been required to be implemented in these circumstances. Under the base facilities charge, each customer pays a pro-rata share of the related facilities cost necessary to provide service, and in addition, pays only the cost of providing the service actually consumed under the gallonage charge. The evidence in this record supports the implementation of the base facilities charge form of rate structure. Under its tariff, Cooper City Utilities is authorized to charge guaranteed revenues in an amount equal to the minimum rate for water service and the applicable rate for sewer service for each equivalent residential connection to be served for a period of one calendar year in advance. Under the base facilities charge type of rate structure, the utility should be authorized to collect guaranteed revenues solely in the amount of the base facilities charge.
Recommendation Based upon the findings of fact and conclusions of law set forth above, it is RECOMMENDED that the application of Cooper City Utilities, Inc., 3201 Griffin Road, Suite 106, Fort Lauderdale, Florida, 33312, be granted for the water system and denied for the sewer system, and that the utility be authorized to file revised tariff pages, containing rates designed to produce annual gross revenues of $564,370 for its water system and $485,067 for its sewer system. It is further RECOMMENDED that the utility be required to implement a base facility charge type of rate structure. It is further RECOMMENDED that the utility be required to make appropriate refunds to its sewer customers in amounts to be approved by the Commission. It is further RECOMMENDED that the rate-refunding bond filed in this docket be maintained until the utility has accomplished the refunds indicated above. THIS RECOMMENDED ORDER entered on this 18th day of November, 1980, in Tallahassee, Florida. WILLIAM B. THOMAS 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 18th day of November, 1980. COPIES FURNISHED: Andrew T. Lavin, Esquire Post Office Box 650 Hollywood, Florida 33022 Sam Spector, Esquire Post Office Box 82 Tallahassee, Florida 32302 James L. Ade and William A. Van Nortwick, Esquires Post Office Box 59 Jacksonville, Florida 32201 John W. McWhirter, Jr., Esquire Post Office Box 2150 Tampa, Florida 33601 Alan F. Ruf, Esquire 2801 East Oakland Park Boulevard Fort Lauderdale, Florida 33306 William H. Harrold, Esquire Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION In re: Application of Cooper City DOCKET NO. 800415-WS (CR) Utilities, Inc. for a rate increase ORDER NO. 9699 to its water and sewer customers in DOAH CASE NO. 80-1188 Broward County, Florida. ISSUED: 12-16-80 / The following Commissioners participated in the disposition of this matter: WILLIAM T. MAYO GERALD L. GUNTER JOSEPH P. CRESSE JOHN R. MARKS, III Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William B. Thomas, held public hearings in this matter on July 16 and 17, and on September 23 and 24, 1980, in Cooper City, Florida. The Division of Administrative Hearings assigned Case No. 80-1188 to the above-noted docket. APPEARANCES: Andrew T. Lavin, Esquire Post Office Box 650 Hollywood, Florida 33022 and Sam Spector, Esquire Post Office Box 82 Tallahassee, Florida 32302 for the Petitioner, Cooper City Utilities, Inc. James L. Ade and William A. Van Nortwick, Esquires Post Office Box 59 Jacksonville, Florida 32201 for PCH Corporation Intervenor in opposition. John W. McWhirter, Jr., Esquire Post Office Box 2150 Tampa, Florida 33601 and Alan F. Ruf, Esquire 2801 East Oakland Park Boulevard Fort Lauderdale, Florida 33306 for the City of Cooper City, Florida, Intervenor in opposition. William H. Harrold, Esquire Florida Public Service Commission 101 E. Gaines Street Tallahassee, Florida 32301 for the Respondent, Florida Public Service Commission and the public generally. The Hearing Officer's Recommended Order was entered on November 18, 1980. The time for filing exceptions thereto has expired and no exceptions have been filed. After considering all the evidence in the record, we now enter our order.
