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DATE:

May 22, 2014

TO:

Office of Commission Clerk (Stauffer)

FROM:

Division of Accounting and Finance (Vogel, Golden, T. Brown, Mouring, Prestwood)

Division of Economics (Roberts)

Division of Engineering (Watts)

Office of the General Counsel (Tan)

RE:

Docket No. 130243-WS – Application for staff-assisted rate case in Highlands County by Lake Placid Utilities Inc.

AGENDA:

06/05/14Regular Agenda – Proposed Agency Action – Except Issue Nos. 12 through 15 – Interested Persons May Participate

COMMISSIONERS ASSIGNED:

All Commissioners

PREHEARING OFFICER:

Brown

CRITICAL DATES:

03/02/15 (15-Month Effective Date (SARC))

SPECIAL INSTRUCTIONS:

None

 


Table of Contents

Issue       Description                                                                                                                     Page

               Case Background. 3

1             Quality of Service (Watts) 3

2             Used and Useful (Watts) 3

3             Phoenix Project (T. Brown, Vogel, Golden) 3

4             Rate Base (Vogel, Golden) 3

5             Rate of Return (Vogel, Golden) 3

6             Test Year Revenues (Roberts) 3

7             Operating Expense (Vogel, Golden) 3

8             Revenue Requirement (Vogel, Golden) 3

9             Rate Structures and Rates (Roberts) 3

10           Customer Deposits (Roberts) 3

11           Late Payment Charge (Roberts) 3

12           Four-Year Rate Reduction (Roberts, Vogel, Golden) 3

13           Temporary Rates (Vogel, Golden) 3

14           Proof of Adjustments (Vogel, Golden) 3

15           Close Docket (Tan) 3

               Schedule No. 1-A  Water Rate Base. 3

               Schedule No. 1-B  Wastewater Rate Base. 3

               Schedule No. 1-C  Adjustments to Rate Base. 3

               Schedule No. 2      Capital Structure. 3

               Schedule No. 3-A  Water Operating Income. 3

               Schedule No. 3-B  Wastewater Operating Income. 3

               Schedule No. 3-C  Adjustments to NOI 3

               Schedule No. 3-D  Water O&M Expense. 3

               Schedule No. 3-E  Wastewater O&M Expense. 3

               Schedule No. 4-A  Water Recommended and Alternative Rate Structures. 3

               Schedule No. 4-B  Water Rates. 3

               Schedule No. 4-C  Wastewater Recommended and Alternative Rate Structures. 3

               Schedule No. 4-D  Wastewater Rates. 3

 


Case Background

Lake Placid Utilities, Inc. (Lake Placid or Utility) is a Class C utility serving approximately 120 water and 121 wastewater customers in Highlands County.  Lake Placid is owned by Utilities, Inc. (UI), an Illinois corporation that owns approximately 72 utilities in 15 states, including 12 water and wastewater utilities in Florida.  Lake Placid’s service territory is located in the Southwest Florida Water Management District (SWFWMD) and is in a water use caution area.  The Utility’s 2013 annual report shows total gross revenues of $58,538 for water and $72,135 for wastewater, with net operating losses of $9,863 and $5,290 for water and wastewater, respectively.

Lake Placid began providing service in 1969.  The water and wastewater systems were subsequently granted grandfather Certificate Nos. 414-W and 347-S in 1983, when Highlands County transferred jurisdiction of its water and wastewater utilities to the Florida Public Service Commission (PSC or Commission).[1]  UI purchased the systems in 1993 through a bankruptcy proceeding, and the certificates were transferred to Lake Placid Utilities, Inc.[2]  The Utility’s certificates were subsequently amended to include additional territory to serve up to 52 potential connections in the Village Del Mar development in 2010.[3]  Lake Placid’s rate base was last established in its 2009 staff-assisted rate case (SARC) by Order No. PSC-11-0015-PAA-WS.[4]

In the instant docket, Lake Placid filed its application for a SARC on September 30, 2013, and subsequently completed the Commission’s filing requirements.  December 2, 2013 was established as the official filing date in this case.

On March 7, 2014, staff filed a preliminary recommendation (Staff Report) pending further review of this case.  A customer meeting was subsequently held on April 3, 2014, at the Deeann Lakefront Estates Clubhouse in Lake Placid.  Approximately 16 customers attended the meeting, 4 customers spoke, 2 of the customers who spoke also provided letters, and 6 additional individuals representing 4 customer accounts provided letters.  The customers expressed concerns about the rate increase and some quality of service issues.  On April 22, 2014, the Office of Public Counsel (OPC) filed a letter in this docket to address several concerns related to the customer meeting and Staff Report.  The concerns raised by the customers and OPC will be discussed further within the recommendation.

 

The Commission has jurisdiction in this case pursuant to Sections 367.0814, Florida Statutes (F.S.).


Discussion of Issues

Issue 1

  

 Should the quality of service provided by Lake Placid be considered satisfactory?

Recommendation

 Yes.  Lake Placid is current in meeting water quality standards for all required chemical analyses and the water provided by Lake Placid is meeting applicable primary and secondary standards as prescribed in the Florida Department of Environmental Protection (DEP) rules.  In addition, staff recommends the condition of the wastewater and water treatment facilities is satisfactory.  It also appears the Utility has attempted to address the customers’ concerns.  Therefore, the overall quality of service for the Lake Placid system in Highlands County is satisfactory.  (Watts)

Staff Analysis

 Pursuant to Rule 25-30.433(l), Florida Administrative Code (F.A.C.), the Commission shall determine the overall quality of service provided by a utility by evaluating three separate components of water and wastewater operations.  These components are the quality of the utility’s product, the operating conditions of the utility’s plant and facilities, and the utility’s attempt to address customer satisfaction.  The Rule further states that sanitary surveys, outstanding citations, violations, and consent orders on file with DEP and the County Health Department over the preceding three-year period shall be considered, along with input from the DEP and health department officials and consideration of customer comments or complaints.

 

Quality of Utility’s Product and Operating Conditions of the Utility’s Plant and Facilities

 

Lake Placid’s raw water source is ground water, which is obtained from two wells.  The processing sequence for this water treatment system is to pump raw water from the aquifer, inject liquid chlorine, pressurize/storage in a tank, and distribute.  Wastewater service is provided via a wastewater treatment plant with percolation ponds.

 

Staff reviewed the Utility’s and DEP records.  According to DEP, Lake Placid is current in all of the required chemical analyses for both water and wastewater and Lake Placid’s water and wastewater finished products comply with all regulatory standards. 

 

A review of sanitary surveys and compliance inspection reports over the last three years indicates that Lake Placid has generally met all requirements for both water and wastewater.  No deficiencies were noted in its 2012 inspection and deficiencies noted in its 2011 inspections had been corrected.  The DEP’s April 18, 2013 inspection of the water treatment plant’s condition found two deficiencies (the well pad on the first well did not extend all the way to the casing and its motor was not bolted down, and the second well had its pad entirely covered with sand and vegetation).  Staff verified during its April 3, 2014 field inspection that Lake Placid corrected these deficiencies.  Therefore, staff recommends that the quality of drinking water delivered to the customers, the wastewater effluent quality, and the operating condition of the water and wastewater facilities should be considered satisfactory.


The Utility’s Attempt to Address Customer Satisfaction

 

Staff reviewed the Commission’s complaint records and found that there were no complaints recorded with the Commission during the test year.  The Utility received six complaints during the test year, all of which were satisfactorily resolved.  Three were due to meter reading errors, two due to low water pressure that was caused by a leak, and one was an odor problem resolved by flushing the line.  Further, staff reviewed the DEP’s records and found no customer complaints on file. 

 

Staff conducted a customer meeting on April 3, 2014.  This meeting gave the customers an opportunity to express specific concerns regarding the Utility’s attitude and responsiveness to quality of service issues.  All quality of service complaints were investigated and were taken into consideration during the preparation of staff’s final recommendation.

 

The customer meeting was held in Lake Placid, Florida.  Approximately 16 customers attended the meeting and four customers spoke with concerns about Lake Placid.  The customers stated that (1) staff’s proposed rates were higher than the average for cities with a population similar to Lake Placid, Florida; (2) the water pressure at the top of two apartment buildings (known as The Towers) was too low; and (3) the Staff Report was not available in the public library for inspection as noticed.  The Utility provided a copy to the library the following day.

 

Immediately following the customer meeting, Mr. Patrick Flynn and Mr. Mike Wilson of the Utility went with the customers who complained about The Towers’ water pressure to investigate the situation.  The customers explained that, due to DEP requirements, they had hired a plumber to install a backflow prevention device on the water main to The Towers.  To maintain water pressure at the top of The Towers, they also had to have the plumber install a booster pump.  Mr. Flynn measured the water pressure to the booster pump and found it was within the acceptable range.  The booster pump, however, cycles on and off too rapidly to be effective and the constant cycling of the pump raises the residents’ power bills.  Mr. Flynn noted that the plumber had wired the booster pump control panel improperly such that it was not in compliance with National Electric Code standards and advised the board members to hire an electrician to install it properly.  He also provided suggestions on viable solutions to the water pressure problem.

 

Staff contacted The Towers’ representative on May 12, 2014, to follow up on the water pressure problem.  The representative stated he had worked with contractors to address the problem and had thought the pressure problem was resolved.  However, during the previous week the issue had returned.  The representative said he would continue to contact the contractors until the pressure problem is resolved.

 

As of May 20, 2014, eight customers have sent comments to the Commission regarding this rate case.  The majority of the customers stated they were opposed to a rate increase.  One customer stated that the water was cloudy, had an odor, and that water pressure was not consistent.  Staff determined that this customer had not filed a complaint with the Utility, so staff responded with a letter advising him to contact the company with his water quality concerns.

 


Summary

 

Lake Placid is current in meeting water quality standards for all required chemical analyses and the water provided by Lake Placid is meeting applicable primary and secondary standards as prescribed in the DEP rules.  In addition, staff recommends the condition of the wastewater and water treatment facilities is satisfactory.  It also appears the Utility has attempted to address the customers’ concerns.  Therefore, staff recommends the overall quality of service for the Lake Placid system in Highlands County is satisfactory.


Issue 2: 

 What are the used and useful percentages for the Utility’s water and wastewater treatment, distribution and collection systems?

Recommendation

 Lake Placid’s water treatment plant (WTP), water distribution, and wastewater collection system should be considered 100 percent Used and Useful (U&U).  The Utility’s wastewater treatment plant (WWTP) should be considered 28.5 percent U&U.  Staff recommends that a 1.85 percent adjustment to purchased power and chemical expenses for the WTP should be made for excessive unaccounted for water (EUW).  No adjustment is recommended for excessive infiltration and inflow (I&I).  (Watts)

Staff Analysis

 Lake Placid has one WTP with two 6-inch wells operating at depths of 392 and 649 feet and rated at a total capacity of 400 gallons per minute (gpm).  The raw water pumped from the wells is treated with liquid chlorine, which is injected prior to entry into the 5,000-gallon hydropneumatic tank.  The treated water from the tank is then pumped into the water distribution system.

 

Lake Placid’s WWTP is an extended aeration activated sludge plant with 4 lift stations located within the service area.  The collection system is composed of gravity and force mains.  The WWTP capacity is permitted by DEP at 0.090 million gallons per day (MGD) per Annual Average Daily Flow (AADF).  The plant consists of 2 aeration tanks (a 57,863-gallon tank and a 42,363-gallon tank), a 16,900-gallon clarifier, a 2,626-gallon chlorine contact tank, and 2 digester tanks (a 1,913-gallon tank and a 5,000-gallon tank).  The Utility’s land application for effluent disposal consists of 2 percolation ponds.

 

Excessive Unaccounted for Water (EUW)

            Unaccounted for water is all water that is produced that is not sold, metered or accounted for in the records of the utility.  Rule 25-30.4325, F.A.C., describes EUW as unaccounted for water in excess of 10 percent of the amount produced.  When establishing the Rule, the Commission recognized that some uses of water are readily measurable and others are not.  The Rule provides that to determine whether adjustments to operating expenses, such as purchased electrical power and chemicals cost are necessary, the Commission will consider all relevant factors resulting in EUW, solutions implemented to correct the problem, or whether a proposed solution is economically feasible.  The unaccounted for water is calculated by subtracting both the gallons used for flushing during the test year and the gallons sold to customers during that period from the total gallons pumped for the test year.  Lake Placid pumped a total of 5.2709 million gallons, used 0.1285 million gallons for flushing, and sold 4.518 million gallons to customers.  Thus, Lake Placid’s unaccounted for water for the test year is 0.6244 million gallons, or 11.85 percent, with a resulting EUW of 1.85 percent of the total gallons pumped.  Staff recommends that a 1.85 percent adjustment be made to purchased power and chemical expenses for the WTP.

 

Infiltration and Inflow

            Typically, infiltration results from groundwater entering a wastewater collection system through broken or defective pipes and joints; whereas, inflow results from water entering a wastewater collection system through manholes or lift stations.  The allowance for infiltration is 500 gallons per day per inch diameter pipe per mile, and an additional 10 percent of water sold is allowed for inflow.  The Utility’s records indicated that there was no excessive I&I for the test year.

 

Water Treatment Plant

The water treatment system has 2 wells rated at 200 gpm.  The processing sequence is to pump raw water from the aquifer, treat with liquid chlorine, pressurize/storage, and then the treated water is pumped into the water distribution system.  There has been no growth in the service area for the past 5 years and no apparent potential for additional development.  Therefore, pursuant to Rule 25-30.4325(4), F.A.C., the water treatment plant should be considered 100 percent U&U.

 

Wastewater Treatment Plant

 

Pursuant to Rule 25-30.432, F.A.C., the U&U percentage of the wastewater treatment plant was calculated by taking the AADF plus the growth allowance minus the excess I&I, and dividing the sum by the permitted capacity of the plant (0.090 MGD).  The customer demand for the test year based on the AADF was 16,540 gpd.  Projected growth for the Utility over the next 5 years is zero equivalent residential connections (ERCs) per year.  Lake Placid does not have excessive I&I based on a comparison of the wastewater treated and an allowance for I&I based on the size and length of the collection system.  Using the information above, the wastewater treatment plant should be considered 18.4 percent U&U (see Eq. 2.1).  However, in the last case, the Commission approved a U&U percentage of 28.5 percent, and it has been Commission practice not to use a lower percentage unless there has been a change in capacity of the plant.  In that rate case,[5] the Utility had excessive I&I of 15,734 gallons, whereas for the test year in the instant case, the Utility had no excessive I&I.  Based on all of these considerations, staff recommends that the WWTP be considered 28.5 percent U&U.

                                                                                                                                

[16,540 + 0 – 0]/90,000 = 18.4% Used and Useful

Eq. 2.1

 

 

Water Distribution and Wastewater Collection Systems

 

            The U&U calculations for the water distribution and the wastewater collection systems are based on the number of customers connected to the systems divided by the capacity of the systems.  Consideration is given for growth. Because the Utility’s current distribution and collection systems are needed to serve the existing customers and a significant portion of the distribution and collection systems were contributed to the Utility, staff recommends that the water distribution and wastewater collection systems be considered 100 percent U&U.

 


Conclusion

            Based on the analysis above, staff recommends Lake Placid’s WTP, water distribution, and wastewater collection system be considered 100 percent U&U.  Its WWTP should be considered 28.5 percent U&U.  Staff recommends that a 1.85 percent adjustment to operation and maintenance expenses should be made for EUW.  No adjustment is recommended for I&I.


Issue 3: 

  Should any adjustments be made to the Utility’s Project Phoenix Financial/Customer Care Billing System (Phoenix Project)?

Recommendation

 Yes.  Plant should be reduced by $1,325 for water and $1,478 for wastewater.  Corresponding adjustments should be made to reduce accumulated depreciation by $1,288 for water and $1,305 for wastewater and to reduce depreciation expense by $373 for water and $391 for wastewater.  Computer maintenance expense should be reduced by $216 for water and $219 for wastewater.  In addition, consistent with the Commission’s previous decisions, Lake Placid should be authorized to create a regulatory asset or liability for costs associated with the Phoenix Project, and to accrue interest on the regulatory asset or liability at the 30-day commercial paper rate until the establishment of rates in the Utility’s next rate proceeding.  Furthermore, when appropriate, the regulatory asset or liability should be amortized over four years.  (T. Brown, Vogel, Golden)

Staff Analysis

 The purpose of the Phoenix Project is to improve accounting, customer service, customer billing, and financial and regulatory reporting functions of UI and its subsidiaries.  UI’s Phoenix Project became operational in December 2008.  Since 2009, the Commission has approved recovery of the cost of the Phoenix Project in several UI rate cases.[6]  In those cases, UI allocated the Phoenix Project costs based on the ratio of each subsidiary’s ERCs to UI’s total ERCs.  In the instant case, UI allocated 0.09 percent of its costs to Lake Placid based on the ratio of its ERCs to the total ERCs at the corporate level.  According to UI, the total Phoenix Project costs for the test year are $22,561,496,[7] of which approximately $21,701 was allocated to Lake Placid.

2009 Divestitures of UI Subsidiaries

            In 2009, UI divested several Florida subsidiaries including Miles Grant Water and Sewer Company, Utilities, Inc. of Hutchinson Island, and Wedgefield Utilities, Inc., as well as subsidiaries in other states.  By Order No. PSC-10-0585-PAA-WS, the Commission found that allocating costs according to ERCs is an appropriate methodology to spread the cost of the Phoenix Project, but it did not believe the Phoenix Project costs previously allocated to the divested subsidiaries should be reallocated to the surviving utilities.[8]  Because no added benefit was realized by the remaining subsidiaries, the Commission found that it was not fair, just, or reasonable for ratepayers to bear any additional allocated Phoenix Project costs.  Thus, the Commission ruled that the divested subsidiaries’ allocation amounts should be deducted from the total cost of the Phoenix Project before any such costs are allocated to the remaining UI subsidiaries.


Affiliate Audit Finding Nos. 2 and 3

 

            By Order No. PSC-10-0407-PAA-SU, the Commission established the total cost of the Phoenix Project as of December 31, 2008, at $21,617,487 and then required UI to deduct $1,724,166 from the total cost of the Phoenix Project for divestitures, resulting in a balance of $19,893,321, before allocating costs to the remaining UI subsidiaries.[9]  Commission audit staff conducted an affiliate transactions audit in Docket No. 130212-WS that addressed affiliate transactions related to both Cypress Lakes Utilities, Inc. (Cypress Lakes) and Lake Placid.[10]  According to staff’s affiliate audit report, UI did not make adjustments to the computer balances on its books to reflect the amounts ordered for the Phoenix Project.  Affiliate Audit Finding No. 2 recommends that plant and accumulated depreciation be reduced to reflect the allocated share of the Commission-ordered Phoenix Project cost of $19,893,321.  UI shows the Phoenix Project balance at December 31, 2008, to be $21,525,403.  The difference between UI’s balance and the ordered amount is $1,632,082. 

 

            In Affiliate Audit Finding No. 3, audit staff discovered that UI did not change the depreciable life for the Phoenix Project from eight to ten years as directed by Order No. PSC-10-0407-PAA-SU.  Audit staff adjusted the accumulated depreciation and depreciation expense on the Phoenix Project from eight to ten years to comply with the Order. 

 

The Utility did not file a response to the Lake Placid portion of the affiliate audit, but did file a response regarding Cypress Lakes.  Specifically, in Docket No. 130212-WS, Cypress Lakes responded that it did not object to the affiliate audit findings.  However, Cypress Lakes believes that the treatment of Phoenix Project costs in Affiliate Audit Finding No. 2 should be held in abeyance pending the outcome of the UI Generic Docket No. 120161-WS.[11]  Staff believes that the appropriate depreciable life for the Phoenix Project is still ten years.  Therefore, staff has decreased water and wastewater plant by $732 and $737, respectively.  Corresponding adjustments should also be made to decrease accumulated depreciation by $1,258 for water and $1,268 for wastewater, and decrease depreciation expense by $314 for water and $317 for wastewater.  Based on Affiliate Audit Finding Nos. 2 and 3, the Commission’s prior orders, and the additional subsidiary divestitures discussed below, staff believes that additional adjustments need to be made to plant, accumulated depreciation, and depreciation expense.

 

Additional Divestitures of UI Subsidiaries

            In 2010, UI divested four additional systems and subsidiaries in North Carolina, South Carolina, and Florida.  The four divested systems collectively represent 9,518 ERCs.  By Order No. PSC-12-0206-PAA-WS, the Commission further reduced the total cost of the Phoenix Project for systems divested in 2010.[12]  In 2011 and 2012, a total of 9 additional systems were divested by UI, representing an additional 7,909 ERCs.  Consistent with prior Commission decisions, the adjustment to deduct the proportional amount of the divested companies from the total cost of the Phoenix Project should also be made for subsequent divestitures.  By Order No. PSC-14-0025-PAA-WS, the Commission further reduced the total cost of the Phoenix Project for systems divested in 2011 and 2012.[13]  No additional divestitures were reported through 2013.  For purposes of this adjustment, the net number of ERCs related to the divested systems is 17,427 (9,518 + 7,909), or 6.57 percent of the total number of ERCs through the 2012 test year for UI.  The divested systems and the corresponding ERCs are shown in the table below. 

 

Table 3-1

ERC/Percentage of Divested Subsidiaries

System

ERCs

ERC%

Bio Tech Admin.

0

0.00%

Carolina Water Serv., Inc. of N.C.

327

0.12%

South Carolina Utilities, Inc. (United Utility Company)

246

0.09%

Alafaya Utilities, Inc. (as of 12/31/07)

8,945

3.37%

Carolina Water Serv., Inc. of N.C.

512

0.19%

Cabarrus Woods

5,175

1.95%

Forest Ridge

518

0.20%

Lamplighter Village

349

0.13%

Britley

123

0.05%

Windsor Chase

135

0.05%

Bayside Utility Services

437

0.16%

Sandy Creek Services

370

0.14%

Woodbury Subdivision

290

0.11%

Total

17,427

6.57%

 

            Consistent with the Commission’s prior decisions, the total cost of the Phoenix Project for UI should be reduced by an additional 6.57 percent, or $1,481,788 ($22,561,496 x 0.06567849), to account for the divestiture of subsidiaries through 2012.  The effect on the filing decreases water and wastewater plant by $593 and $741, respectively.  Corresponding adjustments should also be made to decrease water and wastewater accumulated depreciation by $30 and $37, respectively.  Water and wastewater depreciation expense should also be decreased by $59 and $74, respectively.

 


Tables 3-2 through 3-4 show the plant, accumulated depreciation, and depreciation expense adjustments described above by water and wastewater service, as well as the total adjustment for each service which is reflected on the appropriate Schedule Nos. 1-C and 3-C.

Table 3-2

Plant Adjustments

 

Divestiture

Prior Order

Total

System

Plant Adj.

Plant Adj.

Adjustment

Water

($593)

($732)

($1,325)

Wastewater

(741)

(737)

(1,478)

    Total

($1,334)

($1,469)

($2,803)

Table 3-3

Accumulated Depreciation Adjustments

System

Divestiture

Acc. Dep. Adj.

Prior Order

Acc. Dep. Adj.

Total

Adjustment

Water

$30

$1,258

$1,288

Wastewater

37

1,268

1,305

    Total

$67

$2,526

$2,593

Table 3-4

Depreciation Expense Adjustments

System

Divestiture

Dep. Exp. Adj.

Prior Order

Dep. Exp. Adj.

Total

Adjustment

Water

($59)

($314)

($373)

Wastewater

(74)

(317)

(391)

    Total

($133)

($631)

($764)

 

 

Computer Maintenance Expense

            In several recent rate cases involving Lake Placid’s sister companies, the Commission recognized the volatility of computer maintenance expense.  Due to this volatility, the Commission determined that a five-year average is an appropriate basis for ratemaking purposes, and excluded the portion of Phoenix Project IT maintenance charges associated with UI divested systems, consistent with the Commission’s treatment of the Phoenix Project costs per ERC.[14]  Based on the five-year average and Lake Placid’s ERC allocation percentage, staff calculated a reduction of $208 for water and $210 for wastewater.  Moreover, to remove the Phoenix Project computer maintenance charge for the divested systems’ share, computer maintenance expense should be further reduced by $8 for water and $9 for wastewater.  The following table shows the adjustments described above by water and wastewater service.  The total adjustments are reflected on Schedule No. 3-C.

Table 3-5

Computer Maintenance Expense Adjustments

System

5-yr. Avg. Exp. Adj.

Divest. Adj.

Total

Adjustment

Water

($208)

($8)

($216)

Wastewater

(210)

(9)

(219)

    Total

($418)

($17)

($435)

 

 

Creation of a Regulatory Asset or Liability

            In Docket No. 110153-SU, as part of a proposed settlement of PAA protests, UI (Lake Placid’s parent company), with the consent and support of OPC, petitioned the Commission to open a separate generic docket to address the protested issue relating to the Utility's Phoenix Project.  In that Agreement, the Parties agreed, and the Commission subsequently ordered,[15] that if there is an upward or downward adjustment to the previously approved revenue requirement for Utilities Inc. of Eagle Ridge resulting from a final Commission decision in Docket No. 120161-WS, the Utility should be authorized to create a regulatory asset or liability, and accrue interest on the regulatory asset[16] or liability,[17] at the 30-day commercial paper rate until the establishment of rates in Utilities Inc. of Eagle Ridge’s next rate proceeding.  The Commission also ordered that the regulatory asset or liability be amortized over four years.  The Commission has ordered this same treatment for other Lake Placid sister companies, including Sanlando Utilities Corporation, Utilities, Inc. of Pennbrooke, and Utilities, Inc. of Florida.[18]  Therefore, consistent with the Commission’s actions in Docket No. 110153-SU and subsequent dockets, staff recommends that Lake Placid be authorized to create a regulatory asset or liability for costs associated with the Phoenix Project, and to accrue interest on the regulatory asset or liability at the 30-day commercial paper rate until the establishment of rates in Lake Placid’s next rate proceeding.  Furthermore, the regulatory asset or liability should be amortized over four years.


Conclusion

            Staff recommends that plant be reduced by $1,325 for water and $1,478 for wastewater.  Corresponding adjustments should be made to reduce accumulated depreciation by $1,288 for water and $1,305 for wastewater and reduce depreciation expense by $373 for water and $391 for wastewater.  Computer maintenance expense should be reduced by $216 for water and $219 for wastewater.  In addition, consistent with the Commission’s previous decisions, Lake Placid should be authorized to create a regulatory asset or liability for costs associated with the Phoenix Project, and to accrue interest on the regulatory asset or liability at the 30-day commercial paper rate until the establishment of rates in Lake Placid’s next rate proceeding.  Furthermore, the regulatory asset or liability should be amortized over four years.

 


Issue 4: 

 What is the appropriate average test year rate base for Lake Placid?

Recommendation

 The appropriate average test year rate base for Lake Placid is $162,872 for water and $74,297 for wastewater.  (Vogel, Golden)

Staff Analysis

 Lake Placid’s rate base was last established in its 2009 SARC by Order No. PSC-11-0015-PAA-WS, issued January 5, 2011.[19]  The test year ended December 31, 2012, was used for the instant case.  Commission audit staff conducted two audits for this case.  The first audit reviewed the direct costs associated only with the Lake Placid water and wastewater systems (Lake Placid audit).  The second audit reviewed affiliate transactions, and focused on the parent company and regional office costs that are allocated to the Lake Placid systems.  Staff has incorporated adjustments from both audits in this recommendation.  Also, staff has incorporated adjustments to address concerns expressed in OPC’s April 22, 2014 letter.  A summary of each component of rate base and the recommended adjustments are discussed below.

 

Utility Plant in Service (UPIS):  The Utility recorded UPIS of $495,095 for water and $798,135 for wastewater.  The Lake Placid audit noted no exceptions to the Utility’s UPIS balances.  The affiliate transaction audit noted that some vehicles were reassigned during the test year to employees whose time is not allocated to Lake Placid.  In addition, the motor pool vehicles and special equipment were allocated with an incorrect ERC factor for Florida.  Based on audit staff’s supplemental audit workpapers, staff has decreased UPIS by $3,367 for water and $3,394 for wastewater to reflect the appropriate allocation of vehicles.[20]  Also, as discussed in Issue 3, staff has decreased UPIS by a total of $1,325 for water and $1,478 for wastewater to reflect the appropriate Phoenix Project allocations for Lake Placid.  Staff has also decreased UPIS by $560 for water and $564 for wastewater to reflect the appropriate allocation of Illinois and Florida Headquarters’ plant to Lake Placid.  Finally, staff has decreased UPIS by $4,114 for water and $92 for wastewater to reflect an averaging adjustment to plant.  Staff’s net adjustments to UPIS are decreases of $9,366 and $5,528 for water and wastewater, respectively.  Therefore, staff’s recommended UPIS balance is $485,729 for water and $792,607 for wastewater.

 

Land & Land Rights:  The Utility recorded a test year land value of $2,796 for water and $21,665 for wastewater.  No adjustments are necessary, therefore, staff recommends that the appropriate land balances are $2,796 and $21,665 for water and wastewater, respectively.

 

Non-Used and Useful Plant:  As discussed in Issue 2, Lake Placid’s distribution and collection systems should be considered 100 percent U&U.  In addition, the water treatment plant should be considered 100 percent U&U.  The wastewater treatment plant should be considered 28.5 percent U&U.  In the Utility’s 2006 and 2009 rate cases, a U&U percentage was applied to Account No. 380 – Treatment and Disposal, and to an additional $170,670 of plant recorded in Account No. 354 – Structures and Improvements, that was transferred from Account No. 380 to Account No. 354 in 2005.[21]  In its April 22 letter, the OPC noted that plant additions were made to the treatment plant portion of Account No. 354 after 2005 that were not reflected in the 2009 rate case, and that the test year balance related to treatment plant has increased to $237,176.  The OPC believes the U&U percentage should be applied to the test year balance rather than the balance used in the 2006 and 2009 rate cases.

 

Staff has reviewed the Utility’s records related to the treatment plant portion of the structures and improvements account and agrees with OPC that the test year balance, including utility additions and previous commission-ordered adjustments, is $237,176.   Further, staff agrees with OPC that it is appropriate to apply the U&U percentage to the test year balance of $237,176.  In addition, OPC believes the U&U percentage should be applied to the test year balance of the treatment plant portion of Account No. 380 – Treatment and Disposal, which equals $54,607.  Staff agrees with OPC, however, staff believes the adjustment should be applied to the full balance of Account No. 380, which includes an additional $46 for the Lagoon and increases the test year balance to $54,653.  Application of the U&U percentage to the average plant balances and associated average accumulated depreciation balances results in a net adjustment of $97,006.  Therefore, wastewater rate base should be reduced by $97,006 to remove the 71.5 percent of the wastewater treatment plant that is non-U&U.

 

Contributions In Aid of Construction (CIAC):  The Utility recorded CIAC balances of $235,199 for water and $335,881 for wastewater.  Commission audit staff reviewed CIAC additions from January 1, 2009 through December 31, 2012, and determined that no adjustments are necessary.  Therefore, staff’s recommended CIAC is $235,199 and $335,881 for water and wastewater, respectively.

 

Accumulated Depreciation:  Lake Placid recorded a test year accumulated depreciation balance of $184,889 for water and $575,669 for wastewater.  Audit staff recalculated accumulated depreciation using the prescribed rates set forth in Rule 25-30.140, F.A.C., and reflected depreciation associated with plant additions and retirements.  No exceptions were noted in the Lake Placid audit initially.  However, in its April 22 letter, the OPC questioned the cause and accuracy of two Utility income tax adjustments that appeared to contribute to the net debit deferred income tax balance reflected in the Utility’s capital structure.  Additional review by Commission audit staff revealed that in 2009, the Utility recorded a commission-ordered adjustment to accumulated depreciation, which increased (credited) the reserve by $93,983.[22]  This same adjustment was recorded a second time in 2011, at which time the Utility recorded an adjustment of $35,366 that decreased (debited) deferred income taxes.  The 2011 adjustment of $93,983 should be removed.  In addition, the Utility failed to accrue depreciation expense of $275 per year for 2009 through 2012.  Therefore, accumulated depreciation should be decreased (debited) by $92,884 ($93,983 - $1,099 ($274.85 x 4)) and depreciation expense should be increased (debited) by $275.  The 2011 reduction to deferred taxes made by the Utility should not have been made.  Therefore, as will be reflected in Issue 5, deferred taxes should be increased (credited) by $35,366.   Further, as will be reflected in Issue 7, wastewater depreciation expense should be increased (debited) by $275.

 

As discussed above in the UPIS section, the affiliate transactions audit determined that several adjustments were necessary to UPIS related to the allocation of vehicles, Project Phoenix, and headquarters’ plant.  Staff’s corresponding adjustments to accumulated depreciation are shown in Table 4-1 below, along with the adjustment to Account No. 351 discussed above and an averaging adjustment to direct accumulated depreciation.

Table 4-1

Summary of Adjustments to Accumulated Depreciation

 

Adjustment Description

Water

Wastewater

1.

To reflect appropriate accumulated depreciation for Acct. No. 351 – Organization.

N/A

$92,884

2.

To reflect appropriate allocation of vehicles based on supplemental audit workpapers.

$2,236

2,254

3.

To reflect appropriate Phoenix Project allocation per Order No. PSC-10-0407-PAA-SU and for 2010-2012 divestitures.

1,288

1,305

4.

To reflect appropriate allocation of Illinois and Florida Headquarters’ accumulated depreciation.

901

909

5.

To reflect an averaging adjustment.

10,657

14,507

 

     Total

$15,082

$111,860

 

As a result of staff’s recommended adjustments, the accumulated depreciation accounts should be decreased by $15,082 and $111,860 for water and wastewater, respectively.  Staff recommends accumulated depreciation balances of $169,807 for water and $463,809 for wastewater.

 

Accumulated Amortization of CIAC:  The Utility recorded amortization of CIAC of $78,650 for water and $155,911 for wastewater.  Amortization of CIAC has been calculated by audit staff using composite depreciation rates, and no exceptions were noted in the Lake Placid audit.  Staff has decreased this account by $3,953 for water and $5,105 for wastewater to reflect an averaging adjustment.  Staff’s adjustments to this account result in amortization of CIAC balances of $74,697 for water and $150,806 for wastewater.

 

Working Capital Allowance:  Working capital is defined as the investor-supplied funds that are necessary to meet operating expenses or going-concern requirements of the Utility.  Consistent with Rule 25-30.433(2), F.A.C., staff used the one-eighth of the operation and maintenance (O&M) expense formula approach for calculating the working capital allowance.  Applying this formula, staff recommends a working capital allowance of $4,655 for water (based on O&M expense of $37,240/8), and $5,915 for wastewater (based on O&M expense of $47,320/8).

 

Rate Base Summary:  Based on the foregoing, staff recommends that the appropriate average test year rate base is $162,872 for water and $74,297 for wastewater.  Water and wastewater rate base is shown on Schedule Nos. 1-A and 1-B, respectively.  The related adjustments are shown on Schedule No. 1-C.


Issue 5: 

 What is the appropriate return on equity and overall rate of return for Lake Placid?

Recommendation

 The appropriate return on equity (ROE) is 10.45 percent with a range of 9.45 percent to 11.45 percent.  The appropriate overall rate of return is 7.99 percent.  (Vogel, Golden)

Staff Analysis

 Because all the capital improvements for this Utility are funded by its parent company, UI, the relative percentages of investor sources of capital of the parent company are used for Lake Placid.  According to staff’s audit, Lake Placid’s test year capital structure reflected the parent company’s common equity of $170,132,500, long-term debt of $180,000,000, and short-term debt of $250,000, along with Lake Placid’s specific customer deposits of $770 and negative (debit) accumulated deferred income taxes of $22,175.  However, as discussed in Issue 4, deferred taxes should be increased (credited) by $35,366.  The correction results in a positive (credit) deferred income tax balance of $13,191 for ratesetting purposes. The credit deferred income taxes have been included in the capital structure at a zero cost.

The Utility’s capital structure has been reconciled with staff’s recommended rate base.  The appropriate ROE for the Utility is 10.45 percent based upon the Commission-approved leverage formula currently in effect.[23]  Staff recommends an ROE of 10.45 percent, with a range of 9.45 percent to 11.45 percent, and an overall rate of return of 7.99 percent.  The ROE and overall rate of return are shown on Schedule No. 2.


Issue 6: 

 What are the appropriate test year revenues?

Recommendation

 The appropriate test year revenues for this Utility are $57,778 for water and $70,940 for wastewater.  (Roberts)

Staff Analysis

 Lake Placid recorded total test year revenues for water of $57,538 and wastewater of  $70,751, including service revenues of $57,046 for water and $70,373 for wastewater and miscellaneous revenues of $492 and $378, for water and wastewater, respectively.  Based on staff’s review of the Utility’s billing determinants and the rates that were in effect during the test year, staff recommends the Utility’s service revenues be increased by $240 and $189 for water and wastewater, respectively, to reflect the appropriate test year revenues.  Based on the above, staff recommends that the appropriate test year revenues for water and wastewater are $57,778 and $70,940, respectively.  Test year revenues are shown on Schedule Nos. 3-A and 3-B and adjustments are shown on Schedule No. 3-C.


Issue 7: 

 What is the appropriate amount of operating expense?

Recommendation

 The appropriate amount of operating expense for the Utility is $56,368 for water and $63,844 for wastewater. (Vogel, Golden)  

Staff Analysis

 Lake Placid recorded operating expense of $55,697 for water and $65,413 for wastewater for the test year ended December 31, 2012.  The test year O&M expenses have been reviewed, including invoices, canceled checks, and other supporting documentation.  Staff has made several adjustments to the Utility's operating expenses as summarized below.

 

Salaries and Wages – Employees (601/701) – Lake Placid recorded $6,253 for water salaries and $6,303 for wastewater salaries in these accounts.  Staff has increased water salaries by $1,078 and wastewater salaries by $1,087 to reflect the appropriate allocation of current annualized employee salaries, resulting in total salaries and wages – employees expense of $7,331 for water and $7,390 for wastewater.

 

In its April 22 letter, OPC noted that the Utility’s expenses include both contractual services and allocated salaries related to plant operations.  OPC expressed concern that allocated salaries may be duplicative of services provided by the contractual service vendors.  Staff has reviewed the work performed by the contractual plant operator, contractual meter reader, and salaried plant operators.  Based on this review, staff does not believe the work performed by the salaried plant operators duplicates work being provided by the contractual service vendors.

 

Under DEP standards, a plant operator is required to be on premises at the Lake Placid water and wastewater systems a minimum of five weekdays and one weekend day per week.[24]  Lake Placid’s contract operator is responsible for plant operation at the Lake Placid facilities on four weekdays and at least one weekend day per week, and is on call for emergency services 24 hours a day, 7 days a week.  Duties include general operation and maintenance of the water and wastewater plants, monthly testing, completing and submitting DEP reports, meeting with DEP inspectors, sludge hauling and testing, and performing emergency repairs and other utility services requested by the Utility.  Also, due to the distance of the service area from other UI facilities, all after hours, weekend, and emergency work is handled by the contract operator, whose offices are approximately a half hour from the Lake Placid water and wastewater plants.  The contract operator’s rate for additional work is $75 per hour.  However, the contract operator will often charge a reduced rate if the additional requested work can be completed while the contract operator is on site for other assigned duties.  Staff noted that during the test year, most additional non-emergency work performed by the contract operator was charged at an hourly rate of $45.

 

In addition, a second contractual service provider is responsible for monthly meter reading, and assists with other work as requested by the Utility, including work orders, turn offs, and meter variance reports.  The individual performing the meter reading services is also a plant operator and former Florida Rural Water Association circuit rider who is qualified to assist with plant operation and maintenance work if needed.  The contractual rates are $400 per month for meter reading and $20 per hour for additional requested work.

 

The Utility’s salaried plant operator and the contract operator coordinate their work schedules to comply with DEP coverage requirements.  The Utility’s salaried plant operator is responsible for operation of the plants on the day he visits, but his primary responsibilities include performing scheduled repairs and completing field work, such as work orders, service orders requested by customers, and investigating customer complaints.  UI has assigned two plant operators to assist at the Lake Placid facilities, one primary and one as a backup.  The primary salaried plant operator is double certified in water and wastewater operations, and currently serves as the plant operator at another UI water and wastewater utility located approximately an hour and a half away from the Lake Placid systems.  In the event he is unable to work at the Lake Placid systems in a given week, the second salaried plant operator attends in his place.  The backup operator is certified in water operations and also serves as the plant operator at another UI water utility located approximately two hours away from the Lake Placid systems.  During the test year, UI allocated 16.72 percent of the plant operator’s salary and 6.25 percent of the backup plant operator’s salary to Lake Placid, with the remainder being allocated to the utility systems where these individuals work the majority of their time.

 

The Utility implemented this approach approximately two years ago to try to improve maintenance at the plants and conduct repairs in a more routine manner.  Also, this approach provides redundancy in staffing to ensure that a UI operator is available to service the plants each week.  The Utility believes this approach has improved the quality of service based in part on feedback from the Utility’s compliance and safety manager who inspects the plants each year.

 

Staff has compared the confidential salary information for the UI employees with salary expense allocated to Lake Placid to the salary levels for comparable positions (if available) in the 2012 Water Utility Compensation Survey published by the American Water Works Association (AWWA Survey).  Staff’s review indicates that the UI test year salaries fall within reasonable ranges as provided by the AWWA Survey.  In addition, Commission audit staff verified the percentage allocations used by UI to allocate employee salaries and wages expense to Lake Placid.  Staff’s review indicates that the Utility’s efforts to reduce the outsourcing of routine repairs and field work compared to past periods have had a beneficial impact on the labor costs associated with that work when compared to the contractual service fees.  Therefore, staff believes no further adjustments are necessary to employee salaries and wages expense.  Staff recommends salaries and wages – employees expense for the test year of $7,331 for water and $7,390 for wastewater.

 

Employee Pensions and Benefits (604/704) – Lake Placid recorded pensions and benefits of $2,014 for water and $2,030 for wastewater for the test year.  Staff has decreased these accounts by $67 for water and $68 for wastewater to reflect the appropriate allocation of current annualized employee benefits.  Staff recommends employee pensions and benefits expense of $1,947 for water and $1,962 for wastewater.

 

Purchased Power (615/715) – Lake Placid recorded purchased power expense of $2,413 for water and $3,789 for wastewater for the test year.  Staff has decreased the water account by $45 to reflect a 1.85 percent reduction for unaccounted for water.  Staff recommends purchased power expense of $2,368 for water and $3,789 for wastewater.

 

Chemicals (618/718) – The Utility recorded chemicals expense of $832 for water and $839 for wastewater.  Lake Placid allocated chemicals expense to the water and wastewater operations based on ERCs.  Commission audit staff reviewed the chemicals expense based on direct deliveries to either the water or wastewater plant, and determined that the wastewater plant incurred higher chemicals expense than the water plant.  Accordingly, staff has decreased water by $499 and increased wastewater by $499 to reflect the appropriate chemicals expense based upon direct plant deliveries.  Also, staff has decreased chemical expense for water by $6 to reflect a 1.85 percent reduction for EUW.  Staff’s net adjustments are a $505 decrease to water and a $499 increase to wastewater.  Therefore, staff recommends chemicals expense of $327 and $1,338 for water and wastewater, respectively.

 

Contractual Services - Other (636/736) – Lake Placid recorded contractual services – other expense of $14,587 for water and $14,704 for wastewater.  The Utility allocated contractual services expense based on ERCs.  A review of the contractual services expense based on direct services performed at either the water or wastewater plant indicates that the wastewater plant received a higher amount of services than the water plant.  Therefore, staff has decreased water by $2,987 and increased wastewater by $2,987 to reflect the direct contractual services – other expense for each plant.  As discussed above, OPC expressed concerns about possible duplication of services between the contract vendors and UI plant operators.  Staff’s review indicates there is no duplication of services.  Staff’s audit indicates that UI has properly expensed, capitalized, or amortized various service charges from the contract vendors depending upon the nature of the charge.  Staff believes no further adjustment is necessary to the Utility’s direct contractual services – other expense.  In addition, as discussed in Issue 3, staff has decreased Lake Placid’s allocation of Phoenix Project computer maintenance expense by a total of $216 for water and $219 for wastewater.  Staff’s net adjustments are a $3,203 decrease to water and a $2,768 increase to wastewater.  The resulting amounts for contractual services – other expense are $11,384 for water and $17,472 for wastewater.

 

Transportation Expense (650/750) – Lake Placid recorded transportation expense of $792 for water and $798 for wastewater for the test year.  Based on audit staff’s supplemental workpapers, staff has decreased the water and wastewater accounts by $40 to reflect the appropriate allocation of transportation expense.[25]  As discussed above, OPC expressed concern about duplication of services between the contract vendors and UI plant operators, and suggested that the transportation expense allocated for the two plant operators should be removed.  During the test year, UI allocated 16.72 percent of the primary plant operator’s transportation expense and 6.25 percent of the backup plant operator’s transportation expense to Lake Placid to correspond to the salary allocations, with the remainder being allocated to the utility systems where they work the majority of their time.  Staff’s review indicates there is no duplication of services, and that it is appropriate to allow both the salary and transportation allocations for the two UI plant operators.  Therefore, staff recommends transportation expense for the test year of $752 for water and $758 for wastewater.


Regulatory Commission Expense (665/765) – Lake Placid recorded $5,000 for water and $5,040 for wastewater for regulatory commission expense in these accounts, which primarily represents rate case expense from the Utility’s 2009 SARC.[26]  The 4-year amortization of that rate case expense will end on February 22, 2015, at which time the rates will be reduced to remove that expense.  Regarding the current rate case, the Utility is required by Rule 25-22.0407, F.A.C., to provide notices of the customer meeting and notices of final rates in this case to its customers.  For postage, printing, and envelopes for these notices, staff has estimated $139 for the customer meeting and $90 for the final rates notice.  The Utility paid a $2,000 rate case filing fee ($1,000 for water and $1,000 for wastewater).  The Utility also provided invoices for legal fees of $12,802.  This work related to data requests, reviewing staff’s report and recommendation, and attending the customer meeting and agenda conference.  Staff reviewed the billing rates and hours for this expense.  Based on this review, this expense is appropriate. 

 

Pursuant to Section 367.0816, F.S., rate case expense is amortized over a 4-year period.  The total rate case expense including postage, notices, envelopes, legal fees, and filing fee is $15,031, which amortized over 4 years is $3,758.  Staff notes that total rate case expense is considerably less than the amounts approved in the Utility’s 2006 and 2009 rate cases, which was $70,620 and $39,943, respectively.  Staff has allocated the annual rate case expense to the water and wastewater systems based on ERCs.  The recommended annual amount of rate case expense is $1,872 for water and $1,886 for wastewater associated with the instant case.  When combined with existing rate case expense, the resulting balances for regulatory commission expense are $6,872 and $6,926 for water and wastewater, respectively.

 

Miscellaneous Expense (675/775) – The Utility recorded miscellaneous expense of $2,032 for water and $2,246 for wastewater for the test year, which was allocated to the water and wastewater operations based on ERCs.  Commission audit staff reviewed miscellaneous expenses based on direct services performed at the respective plants.  Accordingly, staff has increased water and decreased wastewater by $298 to reflect the appropriate miscellaneous expense based on direct services to the water and wastewater plants.  In addition, staff has decreased water and wastewater by $44 each to remove the Utility’s allocated share of non-utility miscellaneous expenses from the following subaccounts:  Account Nos. 5870 – Holiday Events/Picnics, 5875 – Kitchen Supplies, 5795 – Contributions, 6205 – Travel Entertainment, and 6207 – Travel Other.  This adjustment is consistent with staff’s recent recommendation in Docket No. 130212-WS regarding Cypress Lakes, a sister company.  Staff’s net adjustments to miscellaneous expense are an increase of $254 to water and a decrease of $342 to wastewater.  Staff recommends miscellaneous expense of $2,286 for water and $1,904 for wastewater.

Operation and Maintenance Expenses (O&M) Summary – Based on the above adjustments, O&M expense should be decreased by $655 for water and increased by $5,790 for wastewater.  Staff’s recommended adjustments to O&M expense are shown on Schedule Nos. 3-A through 3-E.


Depreciation Expense (Net of Amortization of CIAC) – The Utility recorded depreciation expense of $18,565 for water and $26,893 for wastewater during the test year.  Audit staff calculated a sample of depreciation expense using the prescribed rates set forth in Rule 25-30.140, F.A.C.   As discussed in Issue 4, staff decreased depreciation expense for wastewater by $275 to reflect the appropriate depreciation expense.[27]  In addition, staff decreased depreciation expense by $405 for water and $409 for wastewater to reflect the appropriate depreciation expense allocation for vehicles.  As discussed in Issue 3, staff decreased depreciation expense by a total of $373 for water and $391 for wastewater to reflect the appropriate Project Phoenix allocation.  In addition, staff decreased depreciation expense by $48 for water and $49 for wastewater to reflect the appropriate allocation of the Illinois and Florida Headquarters’ depreciation expense.  Finally, staff decreased depreciation expense by $7,481 for wastewater to reflect the non-U&U portion of the test year depreciation expense.  Staff’s net adjustments are decreases of $826 for water and $8,055 for wastewater, resulting in total depreciation expense of $17,739 for water and $18,838 for wastewater.  Staff recommends CIAC amortization expense of $7,906 and $10,210 for water and wastewater, respectively.  Therefore, staff recommends net depreciation expense of $9,833 and $8,628 for water and wastewater, respectively.

 

Taxes Other Than Income (TOTI) – Lake Placid recorded a TOTI balance of $6,717 for water and $6,771 for wastewater.  Lake Placid allocated the test year regulatory assessment fees (RAFs) to the water and wastewater systems based on ERCs for accounting purposes, but paid test year RAFs based on the direct revenues of each system.  Staff has decreased this account by $220 for water and increased it by $352 for wastewater to reflect the appropriate test year RAFs based on direct revenues.  Similarly, Lake Placid allocated test year property taxes based upon ERCs.  Staff has decreased water property taxes by $780 and increased wastewater property taxes by $780 to reflect the appropriate test year utility property taxes associated with each property.  Also, staff decreased this account by $38 each for both water and wastewater to reflect the appropriate allocation of payroll taxes.  Finally, staff decreased this account by $1,328 for wastewater to reflect the non-U&U portion of the test year utility property taxes. 

 

Staff’s net adjustments to test year TOTI are decreases of $1,038 and $234 for water and wastewater, respectively.  In addition, as discussed in Issue 8, revenues have been increased by $11,604 for water and decreased by $1,159 for wastewater to reflect the change in revenue required to cover expenses and allow the recommended return on investment.  As a result, TOTI should be increased by $522 for water and decreased by $52 for wastewater to reflect RAFs of 4.5 percent on the change in revenues.  Therefore, staff recommends TOTI of $6,201 and $6,485 for water and wastewater, respectively.

Income Tax – Lake Placid recorded income tax of $426 for water and $429 for wastewater.  Staff increased water and wastewater income taxes by $540 and $1,195, respectively, to reflect the appropriate test year income taxes.  The Utility is an 1120 C corporation and an income tax liability is anticipated in the future.  To recognize the Utility’s tax liability on a prospective basis, staff increased water income taxes by $2,129 and decreased wastewater income taxes by $213.  These adjustments result in income tax expense of $3,094 for water and $1,412 for wastewater.

Operating Expenses Summary – The application of staff=s recommended adjustments to Lake Placid’s test year operating expenses results in operating expenses of $56,368 for water and $63,844 for wastewater.  Operating expenses are shown on Schedule Nos. 3-A and 3-B.  The related adjustments are shown on Schedule Nos. 3-C, 3-D, and 3-E.

 


Issue 8: 

 What is the appropriate revenue requirement?

Recommendation

 The appropriate revenue requirement is $69,382 for water and $69,781 for wastewater, resulting in an annual increase of $11,604 for water (20.08 percent), and an annual decrease of $1,159 for wastewater (1.63 percent).  (Vogel, Golden)

Staff Analysis

 Lake Placid should be allowed an annual increase of $11,604 for water (20.08 percent) and an annual decrease of $1,159 for wastewater (1.63 percent).  This will allow the Utility the opportunity to recover its expenses and earn a 7.99 percent return on its investment.  The calculations are shown in Tables 8-1 and 8-2 for water and wastewater, respectively:

Table 8-1

Water Revenue Requirement

Adjusted Rate Base

 

$162,872

Rate of Return

 

x 7.99%

Return on Rate Base

 

$13,014 

Adjusted O&M Expense

 

37,240

Depreciation Expense (Net)

 

9,833

Taxes Other Than Income

 

6,201

Income Taxes

 

3,094

Revenue Requirement

 

$69,382

Less Adjusted Test Year Revenues

 

57,778

Annual Increase

 

$11,604

Percent Increase

 

20.08%

 


Table 8-2

Wastewater Revenue Requirement

Adjusted Rate Base

 

$74,297

Rate of Return

 

7.99%

Return on Rate Base

 

$5,937

Adjusted O&M Expense

 

47,320

Depreciation Expense (Net)

 

8,628

Taxes Other Than Income

 

6,485

Income Tax

 

1,412

Revenue Requirement

 

$69,781

Less Adjusted Test Year Revenues

 

$70,940

Annual Decrease

 

($1,159) 

Percent Decrease

 

(1.63%)

 

 


Issue 9: 

 What are the appropriate rate structures and rates for Lake Placid’s water and wastewater systems?

Recommendation

 The recommended rate structures and monthly water and wastewater rates are shown on Schedule Nos. 4-A through 4-D.  The Utility should file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates.  The approved rates should be effective for services rendered on or after the stamped approval date on the tariff sheets, pursuant to Rule 25-30.475(1), F.A.C.  In addition, the approved rates should not be implemented until staff has approved the proposed customer notice and the notice has been received by the customers.  The Utility should provide proof of the date notice was given within 10 days of the date of the notice.  (Roberts)

Staff Analysis

 

Water Rates

The Utility is located in Highlands County within the SWFWMD.  The Utility provides water service to approximately 105 residential customers, and 15 general service customers.  Approximately 39 percent of the residential customer bills during the test year had zero gallons, indicating a seasonal customer base.  The average residential water demand is 1,798 gallons per month.  The average residential water demand, excluding zero gallon bills, is 2,924 gallons per month.  Currently, Lake Placid’s water system rate structure consists of a base facility charge (BFC) and gallonage charge for both residential and general service customers. 

Staff performed an analysis of the Utility’s billing data in order to evaluate various BFC cost recovery percentages, usage blocks, and usage block rate factors for the residential rate class.  The goal of the evaluation was to select the rate design parameters that: (1) produce the recommended revenue requirement; (2) equitably distribute cost recovery among the utility’s customers; (3) establish the appropriate non-discretionary usage threshold for restricting repression, and (4) implement, where appropriate, water conserving rate structures consistent with Commission practice.

            Due to the customers’ low average monthly consumption and the seasonal nature of the customers, staff recommends that 54 percent of the water revenues should be generated from the BFC in order to ensure that the Utility will have sufficient cash flow to cover fixed costs.  The average number of persons per household served by the water system is three; therefore, based on the number of persons per household, 50 gallons per day per person, and the number of days per month, the non-discretionary usage is approximately 4,000 gallons per month.  However, because the average demand is low, the expected repression related to discretionary usage would be insignificant.  As a result, there is no need for a non-discretionary threshold or a repression adjustment.  Staff recommends a continuation of a traditional BFC and gallonage charge rate structure for both residential and general service customers.  Staff’s recommended rate structures and rates are shown on Schedule Nos. 4-A and 4-B.


Wastewater Rates

The Utility provides wastewater service to approximately 105 residential customers, 12 general service customers, a bulk service customer that serves 70 units at Deeann Estates, and 3 unmetered flat rate customers.  Currently, the residential rate structure for the wastewater system consists of a uniform BFC for all meter sizes and a gallonage charge with a 6,000 gallon cap.  General service customers are billed a BFC by meter size and a gallonage charge that is 1.2 times higher than the residential gallonage charge.  The bulk service customer, Deeann Estates, is billed a BFC based on 80 percent of the number of equivalent residential connections (ERCs) connected to the system.  Each unit is .6 ERC per Order No. PSC-07-0287-PAA-WS, issued on April 3, 2007.[28]  The gallonage charge for the bulk service customer is 80 percent of the general service gallonage charge.  The 3 unmetered residential wastewater customers are billed a flat rate.

Staff performed an analysis of the Utility’s billing data to evaluate various BFC cost recovery percentages and gallonage caps for the residential customers.  The goal of the evaluation was to select the rate design parameters that: (1) produce the recommended revenue requirement; (2) equitably distribute cost recovery among the Utility’s customers; and (3) implement a gallonage cap that considers the amount of water that may return to the wastewater system.

The recommended BFC recovers approximately 50 percent of the recommended revenue requirement, consistent with Commission practice.  Currently, the Utility has a gallonage cap for residential wastewater customers of 6,000 gallons.  Based on the billing data, staff believes the existing gallonage cap should continue at 6,000 gallons.  There is no cap for general service customers.  Furthermore, staff recommends the general service gallonage charge remain at 1.2 times greater than the residential gallonage charge. 

In prior cases, the Commission has found Deeann Estates’ rate structure should take into consideration that it owns its lift station, and the cost associated with the electrical pumping and maintenance of the lift station are the customer’s responsibility and not Lake Placid’s.[29]  As result, staff recommends the BFC for Deeann Estates continue to be based on 80 percent of the number of ERCs connected to the system.  The gallonage charge for the bulk service customer should be continued at 80 percent of the general service gallonage charge.  The 3 unmetered residential wastewater customers should continue a flat rate.  Staff’s recommended rate design and rates for the wastewater system are shown on Schedule Nos. 4-C and 4-D.

The 3 unmetered residential wastewater customers should continue a flat rate based on the average residential water demand of 1,794 gallons per month.  Staff’s recommended rate design for the wastewater system is shown on Schedule Nos. 4-C and 4-D.


Summary

            Based on the foregoing, staff recommends 54 percent of the water revenues be generated from the BFC.  A repression adjustment for residential customers is not warranted in this case.  The traditional BFC and gallonage charge rate structure should be approved for residential and general service customers. 

            Staff recommends that the residential wastewater customers’ rate structure consist of a BFC for all meter sizes, based on a 50 percent allocation of wastewater revenue from the BFC, with a cap of 6,000 gallons.  The general service wastewater customers should continue to be billed a BFC by meter size and a gallonage charge that is 1.2 times higher than the residential gallonage charge.  The bulk service customer should continue to be billed a BFC based on 80 percent of the number of ERCs actually connected to the system.  The bulk customer’s gallonage charge should be set at 80 percent of the general service gallonage charge.  The Utility should continue to bill the 3 unmetered residential wastewater customers a flat rate. 

The recommended rate structures and monthly water and wastewater rates are shown on Schedule Nos. 4-A through 4-D.  The Utility should file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates.  The approved rates should be effective for service rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), F.A.C.  In addition, the approved rates should not be implemented until staff has approved the proposed customer notice and the notice has been received by the customers.  The Utility should provide proof of the date notice was given within 10 days of the date of the notice.

 


Issue 10: 

 What are the appropriate initial customer deposits for Lake Placid?

Recommendation

 The appropriate initial customer deposits should be $60 and $50 for the residential 5/8” x 3/4” meter size for water and wastewater, respectively.  The initial customer deposits for all other residential meter sizes and all general service meter sizes should be two times the average estimated bill for water and wastewater service.  The approved customer deposits should be effective for services rendered or connections made on or after the stamped approval date on the tariff sheets, pursuant to Rule 25-30.475, F.A.C.  The Utility should be required to charge the approved charges until authorized to change them by the Commission in a subsequent proceeding.  (Roberts)

Staff Analysis

 Rule 25-30.311, F.A.C., contains the criteria for collecting, administering, and refunding customer deposits.  Customer deposits are designed to minimize the exposure of bad debt expense for the Utility and, ultimately, the general body of ratepayers.  Historically, the Commission has set initial customer deposits equal to two times the average estimated bill.[30]  Currently, the Utility’s existing initial deposits are $12 for both water and wastewater.  Based on staff’s recommended rates, the existing initial customer deposits are not sufficient to cover two months’ bills for water and wastewater, respectively.  Staff recommends the existing initial customer deposit be increased to reflect two times the average estimated bill for both water and wastewater to ensure that the cost of providing service is recovered from the cost causer.[31]

Staff recommends the appropriate initial customer deposits should be $60 and $50 for the residential 5/8” x 3/4” meter size for water and wastewater, respectively.  The initial customer deposits for all other residential meter sizes and all general service meter sizes should be two times the average estimated bill for water and wastewater.  The approved customer deposits should be effective for services rendered or connections made on or after the stamped approval date on the tariff sheets, pursuant to Rule 25-30.475, F.A.C.  The Utility should be required to charge the approved charges until authorized to change them by the Commission in a subsequent proceeding.

 


Issue 11: 

 Should Lake Placid’s request to implement a $5.25 late payment charge be approved?

Recommendation

 Yes.  Lake Placid’s request to implement a $5.25 late payment charge should be approved.  Lake Placid should be required to file a proposed customer notice to reflect the Commission-approved charge.  The approved charge should be effective for services rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), F.A.C.  In addition, the approved charge should not be implemented until staff has approved the proposed customer notice.  The Utility should provide proof of the date notice was given no less than ten days after the date of the notice. (Roberts)

Staff Analysis

 Section 367.091, F.S., authorizes the Commission to establish, increase, or change a rate or charge other than monthly rates or services availability charges.  The Utility is requesting a $5.25 late payment charge to recover the cost of supplies and labor associated with processing late payment notices. The Utility’s request for a late payment charge was accompanied by its reason for requesting the charge, as well as the cost justification required by Section 367.091, F.S.

            Approximately 3.33 percent of Lake Placid’s bills are delinquent on a monthly basis.  The Utility’s requested charge is based on an aggregate of all UI’s (the parent company) systems in Florida.  The late payment notices are processed by the same parent company staff for all systems in Florida.  The Utility indicated that it takes its parent company two hours per day for three days to process late payment notices.  The parent company employee’s salary is $39 per hour, which results in total labor cost of $234 (3 days x 2 hours x $39).  The parent company’s costs are allocated on a per equivalent residential connection basis.  The average allocation of the labor costs to the Florida systems is 1.94 percent, which results in $4.54 ($234 x 1.94%).  Staff believes the cost justification provided by the Utility is reasonable in support of the requested $5.25 late payment charge.  The cost basis for late payment charge, including labor, is shown below.

Table 11-1

Cost Basis for Late Payment Charge

Labor

 

$4.54

Printing

 

0.20

Postage

 

0.49

Total

 

$5.23

 


Based on staff’s research, since the late 1990s, the Commission has approved late payment charges ranging from $2.00 to $7.00.[32]  The purpose of this charge is not only to provide an incentive for customers to make timely payment, thereby reducing the number of delinquent accounts, but also to place the cost burden of processing delinquent accounts solely upon those who are cost causers.

 

Based on the above, staff recommends that Lake Placid’s request to implement a $5.25 late payment charge should be approved.  Lake Placid should be required to file a proposed customer notice to reflect the Commission-approved charge.  The approved charge should be effective for services rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), F.A.C.  In addition, the approved charge should not be implemented until staff has approved the proposed customer notice.  The Utility should provide proof of the date notice was given no less than ten days after the date of the notice.

 


Issue 12: 

 What is the appropriate amount by which rates should be reduced four years after the established effective date to reflect the removal of the amortized rate case expense as required by Section 367.0816, F.S.?

Recommendation

 The water and wastewater rates should be reduced as shown on Schedule Nos. 4-B and 4-D to remove rate case expense grossed-up for regulatory assessment fees and amortized over a four-year period.  The decrease in rates should become effective immediately following the expiration of the four-year rate case expense recovery period, pursuant to Section 367.0816, F.S.  Lake Placid should be required to file revised tariffs and a proposed customer notice setting forth the lower rates and the reason for the reduction no later than one month prior to the actual date of the required rate reduction.  If the Utility files this reduction in conjunction with a price index or pass-through rate adjustment, separate data should be filed for the price index and/or pass-through increase or decrease and the reduction in the rates due to the amortized rate case expense.  (Roberts, Vogel, Golden)

Staff Analysis

 Section 367.0816, F.S., requires that the rates be reduced immediately following the expiration of the four-year period by the amount of the rate case expense previously included in rates.  The reduction will reflect the removal of revenue associated with the amortization of rate case expense, the associated return in working capital, and the gross-up for RAFs.  The total reductions are $1,980 for water and $1,994 for wastewater.

 

            The water and wastewater rates should be reduced as shown on Schedule Nos. 4-B and 4-D to remove rate case expense grossed-up for regulatory assessment fees and amortized over a four-year period.  The decrease in rates should become effective immediately following the expiration of the four-year rate case expense recovery period, pursuant to Section 367.0816, F.S.  Lake Placid should be required to file revised tariffs and a proposed customer notice setting forth the lower rates and the reason for the reduction no later than one month prior to the actual date of the required rate reduction.  If the Utility files this reduction in conjunction with a price index or pass-through rate adjustment, separate data should be filed for the price index and/or pass-through increase or decrease and the reduction in the rates due to the amortized rate case expense.

 


Issue 13: 

 Should the recommended rates be approved for the Utility on a temporary basis, subject to refund with interest, in the event of a protest?

Recommendation

 Yes.  Pursuant to Section 367.0814(7), F.S., the recommended water rates and current wastewater rates should be approved for the Utility on a temporary basis, subject to refund with interest, in the event of a protest filed by a party other than the Utility.  Further, pursuant to Section 367.0814(6), F.S., continuation of the current wastewater rates should be approved for the Utility on a temporary basis, subject to refund with interest, in the event of a protest of the wastewater decrease by the Utility.  Lake Placid should file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates.  The approved rates should be effective for service rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), F.A.C.  In addition, the temporary rates should not be implemented until staff has approved the proposed notice, and the notice has been received by the customers.  Prior to implementation of any temporary rates, the Utility should provide appropriate security.  Staff recommends that a cumulative corporate undertaking of $58,133 is acceptable contingent upon receipt of the written guarantee of UI and written confirmation that the cumulative outstanding guarantees on behalf of UI-owned utilities in other states will not exceed $1.2 million (inclusive of all Florida utilities).  If the recommended water rates or current wastewater rates are approved on a temporary basis, the rates collected by the Utility should be subject to the refund provisions discussed below in the staff analysis.  In addition, after the temporary rates are in effect, pursuant to Rule 25-30.360(6), F.A.C., the Utility should file reports with the Commission’s Office of Commission Clerk no later than the 20th of each month indicating the monthly and total amount of money subject to refund at the end of the preceding month.  The report filed should also indicate the status of the security being used to guarantee repayment of any potential refund.  (Vogel, Golden)

Staff Analysis

 This recommendation proposes an increase in water rates and a decrease in wastewater rates.  A timely protest might delay what may be a justified rate increase resulting in an unrecoverable loss of revenue to the Utility.  Therefore, pursuant to Section 367.0814(7), F.S., in the event of a protest filed by a party other than the Utility, staff recommends that the recommended water rates and current wastewater rates be approved as temporary rates.  Further, pursuant to Section 367.0814(6) F.S., in the event of a protest of the wastewater decrease by the Utility, staff recommends that the current wastewater rates be approved as temporary rates.[33]  Lake Placid should file revised tariff sheets and a proposed customer notice to reflect the Commission-approved rates.  The approved rates should be effective for service rendered on or after the stamped approval date on the tariff sheet, pursuant to Rule 25-30.475(1), F.A.C.  In addition, the temporary rates should not be implemented until staff has approved the proposed notice, and the notice has been received by the customers.  The recommended water and current wastewater rates collected by the Utility should be subject to the refund provisions discussed below.

 

The Utility should be authorized to collect the temporary rates upon staff’s approval of an appropriate security for the potential refund and the proposed customer notice.  Security should be in the form of a corporate undertaking secured by UI in the amount of $8,511 in the event of a protest by a party other then the Utility, or $773 in the event of a protest of the wastewater decrease by the Utility.

 

Lake Placid is a wholly-owned subsidiary of UI, which provides all investor capital to its subsidiaries.  Based on the maximum amount subject to refund for the Utility, the incremental increase in UI’s corporate undertaking is $8,511.  The current cumulative corporate undertaking amount outstanding for other UI systems is $49,622.[34]  The new request will bring the cumulative amount outstanding to $58,133.

 

            The criteria for a corporate undertaking include sufficient liquidity, ownership equity, profitability, and interest coverage to guarantee any potential refund.  Staff reviewed UI’s 2010, 2011, and 2012 financial statements to determine if the Company can support a corporate undertaking on behalf of its subsidiary.  UI reported negative working capital in 2012.  However, in all other time periods, the Company achieved sufficient liquidity and interest coverage ratios.  In addition, UI reported adequate ownership equity over the three-year review period.  UI also reported net income in excess of $5 million a year in all periods.

 

            Staff believes UI has adequate resources to support a corporate undertaking in the amount requested.  Based on this analysis, staff recommends that a cumulative corporate undertaking of $58,133 is acceptable contingent upon receipt of the written guarantee of UI and written confirmation that the cumulative outstanding guarantees on behalf of UI-owned utilities in other states will not exceed $1.2 million (inclusive of all Florida utilities).

 

Pursuant to Rule 25-30.360(6), F.A.C., the Utility should file reports with the Commission’s Office of Commission Clerk no later than the 20th day of each month indicating the monthly and total revenue collected subject to refund.  The report filed should also indicate the status of the security being used to guarantee repayment of any potential refund.  Should a refund be required, the refund should be with interest and undertaken in accordance with Rule 25-30.360, F.A.C.  In no instance should maintenance and administrative costs associated with any refund be borne by the customers.  The costs are the responsibility of, and should be borne by, the Utility.

 


Issue 14: 

 Should the Utility be required to provide proof, within 90 days of an effective order finalizing this docket, that it has adjusted its books for all applicable National Association of Regulatory Commissioners Uniform System of Accounts (NARUC USOA) primary accounts associated with the Commission approved adjustments?

Recommendation

 Yes.  To ensure that the Utility adjusts its books in accordance with the Commission’s decision, Lake Placid should provide proof, within 90 days of the final order in this docket, that the adjustments for all applicable NARUC USOA primary accounts have been made.  (Vogel, Golden)

Staff Analysis

 To ensure that the Utility adjusts its books in accordance with the Commission’s decision, Lake Placid should provide proof, within 90 days of the final order in this docket, that the adjustments for all applicable NARUC USOA primary accounts have been made.


Issue 15: 

 Should this docket be closed?

Recommendation

 No.  If no person whose substantial interests are affected by the proposed agency action files a protest within 21 days of the issuance of the order, a consummating order should be issued.  The docket should remain open for staff’s verification that the revised tariff sheets and customer notice have been filed by the Utility and approved by staff.  Once these actions are complete, this docket should be closed administratively.  (Tan)

Staff Analysis

 If no person whose substantial interests are affected by the proposed agency action files a protest within 21 days of the issuance of the order, a consummating order should be issued.  The docket should remain open for staff’s verification that the revised tariff sheets and customer notice have been filed by the Utility and approved by staff.  Once these actions are complete, this docket should be closed administratively.

 


 


LAKE PLACID  UTILITIES, INC.

 SCHEDULE NO. 1-A

TEST YEAR ENDED  12/31/12

DOCKET NO. 130243-WS

SCHEDULE OF WATER RATE BASE

 

 

 

BALANCE

STAFF

BALANCE

 

PER

ADJUSTMENTS

PER

DESCRIPTION

UTILITY

TO UTIL. BAL.

STAFF

 

 

 

 

UTILITY PLANT IN SERVICE

$495,095

($9,366)

$485,729

 

 

 

 

LAND & LAND RIGHTS

2,796

0

2,796

 

 

 

 

NON-USED AND USEFUL COMPONENTS

0

0

0

 

 

 

 

CIAC

(235,199)

0

(235,199)

 

 

 

 

ACCUMULATED DEPRECIATION

(184,889)

15,082

(169,807)

 

 

 

 

AMORTIZATION OF CIAC

78,650

(3,953)

74,697

 

 

 

 

WORKING CAPITAL ALLOWANCE

0

4,655

4,655

 

 

 

 

WATER RATE BASE

$156,453

$6,419

$162,872

 

 

 

 

 


 


LAKE PLACID  UTILITIES, INC.

 SCHEDULE NO. 1-B

TEST YEAR ENDED  12/31/12

DOCKET NO. 130243-WS

SCHEDULE OF WASTEWATER RATE BASE

 

 

 

BALANCE

STAFF

BALANCE

 

PER

ADJUSTMENTS

PER

DESCRIPTION

UTILITY

TO UTIL. BAL.

STAFF

 

 

 

 

UTILITY PLANT IN SERVICE

$798,135

($5,528)

$792,607

 

 

 

 

LAND & LAND RIGHTS

21,665

0

21,665

 

 

 

 

NON-USED AND USEFUL COMPONENTS

0

(97,006)

(97,006)

 

 

 

 

CIAC

(335,881)

0

(335,881)

 

 

 

 

ACCUMULATED DEPRECIATION

(575,669)

111,860

(463,809)

 

 

 

 

AMORTIZATION OF CIAC

155,911

(5,105)

150,806

 

 

 

 

WORKING CAPITAL ALLOWANCE

0

5,915

5,915

 

 

 

 

WASTEWATER RATE BASE

$64,161

$10,136

$74,297

 

 

 

 

 

 


 

 

LAKE PLACID  UTILITIES, INC.                                                                               SCHEDULE NO. 1-C

 

TEST YEAR ENDED  12/31/12                                                                             DOCKET NO. 130243-WS

 

ADJUSTMENTS TO RATE BASE                                                                                             PAGE 1 OF 1

 

 

 

 

 

 

WATER

WASTEWATER

 

UTILITY PLANT IN SERVICE

 

 

1.

To reflect appropriate allocation of vehicles.

($3,367)

($3,394)

2.

To reflect appropriate Phoenix Project allocation per Order No. PSC-10-0407-PAA-SU and for 2010-2012 divestitures.

(1,325)

(1,478)

3.

To reflect appropriate allocation of Illinois and Florida Headquarters’ plant.

(560)

(564)

4.

To reflect an averaging adjustment.

(4,114)

(92)

 

     Total

($9,366)

($5,528)

 

 

 

 

 

NON-USED AND USEFUL PLANT

 

 

1.

To reflect non-U&U plant.

$0

($208,657)

2.

To reflect non-U&U accumulated depreciation.

0

111,651

 

     Total

$0

($97,006)

 

 

 

 

 

ACCUMULATED DEPRECIATION

 

 

1.

To reflect appropriate accumulated depreciation for Acct. No. 351.

$0

$92,884

2.

To reflect appropriate allocation of vehicles.

2,236

2,254

3.

To reflect appropriate Phoenix Project allocation per Order No. PSC-10-0407-PAA-SU and for 2010-2012 divestitures.

1,288

1,305

4.

To reflect appropriate allocation of Illinois and Florida Headquarters’ plant.

901

909

5.

To reflect an averaging adjustment.

10,657

14,507

 

     Total

$15,082

$111,860

 

 

 

 

 

AMORTIZATION OF CIAC

 

 

 

To reflect an averaging adjustment.

($3,953)

($5,105)

 

 

 

 

 

WORKING CAPITAL ALLOWANCE

 

 

 

To reflect 1/8 of test year O&M expenses.

$4,655

$5,915

 

 

 

 

 


 

 

LAKE PLACID UTILITIES, INC. 

 

          SCHEDULE NO. 2

 

TEST YEAR ENDED  12/31/12

 

 

 

 

                     DOCKET NO. 130243-WS

 

SCHEDULE OF CAPITAL STRUCTURE

 

 

 

 

 

 

 

 

 

 

BALANCE

PRO

 

 

 

 

 

 

 

SPECIFIC

BEFORE

RATA

BALANCE

PERCENT

 

 

 

 

PER

ADJUST-

PRO RATA

ADJUST-

PER

OF

 

WEIGHTED

 

CAPITAL COMPONENT

UTILITY

MENTS

ADJUSTMENTS

MENTS*

STAFF

TOTAL

COST

COST

 

 

 

 

 

 

 

 

 

 

1.

COMMON EQUITY

$170,132,500

$0

$170,132,500

($170,024,119)

$108,381

45.70%

10.45%

4.77%

 

 

 

 

 

 

 

 

 

 

2.

LONG-TERM DEBT

$180,000,000

$0

$180,000,000

($179,885,333)

$114,667

48.35%

6.64%

3.21%

3.

SHORT-TERM DEBT

250,000

0

250,0000

(249,841)

159

0.07%

0.00%

0.00%

 

TOTAL DEBT

$180,250,000

$0

$180,250,000

($180,135,174)

$114,826

51.23%

 

 

 

 

 

 

 

 

 

 

 

 

4.

CUSTOMER DEPOSITS

$770

$0

$770

 

$770

0.32%

2.00%

0.01%

 

 

 

 

 

 

 

 

 

 

5.

DEFERRED INCOME TAXES

($22,175)

$35,366

$13,191

 

$13,191

5.56%

0.00%

0.00%

 

 

 

 

 

 

 

 

 

 

6.

TOTAL

$350,361,095

$35,366

$350,396,461

($350,159,292)

$237,169

100.00%

19.09%

7.99%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RANGE OF REASONABLENESS

LOW

HIGH

 

 

 

 

 

    RETURN ON EQUITY

 

9.45%

11.45%

 

 

 

 

 

    OVERALL RATE OF RETURN

7.53%

8.45%

 

 

 

 

 

 

 

 

 

 

Note: Common equity, long-term debt, and short-term debt are actual for Lake Placid Utilities, Inc.’s parent company, UI,

and customer deposits and accumulated deferred income taxes are actual for Lake Placid Utilities, Inc.

 

 

 

 

 

 

 

 

 

 


 

 

LAKE PLACID UTILITIES, INC.

 

 

                              SCHEDULE NO. 3-A

 

TEST YEAR ENDED  12/31/12

 

 

 

                     DOCKET NO. 130243-WS

 

SCHEDULE OF WATER OPERATING INCOME

 

 

 

 

 

 

 

STAFF

ADJUST.

 

 

 

TEST YEAR

STAFF

ADJUSTED

FOR

REVENUE

 

 

PER UTILITY

ADJUSTMENTS

TEST YEAR

INCREASE

REQUIREMENT

 

 

 

 

 

 

 

     1.

OPERATING REVENUES              

$57,538

$240

$57,778

$11,604

$69,382

 

 

 

 

 

20.08%

 

 

OPERATING EXPENSES:

 

 

 

 

 

     2.

  OPERATION & MAINTENANCE

$37,895

($655)

$37,240

$0

$37,240

 

 

 

 

 

 

 

     3.

  DEPRECIATION (NET)

10,659

(826)

9,833

0

9,833

 

 

 

 

 

 

 

     4.

  AMORTIZATION

0

0

0

0

0

 

 

 

 

 

 

 

     5.

  TAXES OTHER THAN INCOME

6,717

(1,038)

5,679

522

6,201

 

 

 

 

 

 

 

     6.

  INCOME TAXES

426

540

966

2,129

3,094

 

 

 

 

 

 

 

     7.

TOTAL OPERATING EXPENSES   

$55,697

($1,980)

$53,717

$2,651

$56,368

 

 

 

 

 

 

 

     8.

OPERATING INCOME/(LOSS)       

$1,841

 

$4,061

 

$13,014

 

 

 

 

 

 

 

     9.

WATER RATE BASE          

$156,453

 

$162,872

 

$162,872

 

 

 

 

 

 

 

   10.

RATE OF RETURN

1.18%

 

2.49%

 

7.99%

 

 

 

 

 

 

 


 

 

LAKE PLACID UTILITIES, INC.

 

 

                              SCHEDULE NO. 3-B

 

TEST YEAR ENDED  12/31/12

 

 

 

                     DOCKET NO. 130243-WS

 

SCHEDULE OF WASTEWATER OPERATING INCOME

 

 

 

 

 

 

 

STAFF

ADJUST.

 

 

 

TEST YEAR

STAFF

ADJUSTED

FOR

REVENUE

 

 

PER UTILITY

ADJUSTMENTS

TEST YEAR

INCREASE

REQUIREMENT

 

 

 

 

 

 

 

     1.

OPERATING REVENUES              

$70,751

$189

$70,940

($1,159)

$69,781

 

 

 

 

 

(1.63%)

 

 

OPERATING EXPENSES:

 

 

 

 

 

     2.

  OPERATION & MAINTENANCE

$41,530  

$5,790

$47,320

$0

$47,320

 

 

 

 

 

 

 

     3.

  DEPRECIATION (NET)

16,683

(8,055)

8,628

0

8,628

 

 

 

 

 

 

 

     4.

  AMORTIZATION

0

0

0

0

 

 

 

 

 

 

 

     5.

  TAXES OTHER THAN INCOME

6,771

(234)

6,537

(52)

6,485

 

 

 

 

 

 

 

     6.

  INCOME TAXES

429

1,195

1,624

(213)

1,412

 

 

 

 

 

 

 

     7.

TOTAL OPERATING EXPENSES   

$65,413

($1,304)

$69,109

($265)

$63,844

 

 

 

 

 

 

 

     8.

OPERATING INCOME/(LOSS)       

$5,338

 

$6,831

 

$5,937

 

 

 

 

 

 

 

     9.

WASTEWATER RATE BASE          

$64,161

 

$74,297

 

$74,297

 

 

 

 

 

 

 

   10.

RATE OF RETURN

8.32%

 

9.19%

 

7.99%

 

 

 

 

 

 

 


 

 

 

LAKE PLACID UTILITIES, INC.                                                                                   Schedule No. 3-C

 

 

TEST YEAR ENDED  12/31/12                                                                        DOCKET NO. 130243-WS

 

 

ADJUSTMENTS TO OPERATING INCOME                                                                         Page 1 of 2

 

 

 

 

 

 

WATER

WASTEWATER

 

OPERATING REVENUES

 

 

       

To reflect the appropriate test year services revenues.

$240

$189 

 

 

 

 

 

OPERATION AND MAINTENANCE EXPENSES

 

 

           1.

Salaries and Wages - Employees (601/701)

 

 

 

a.  To reflect appropriate allocation of annualized salaries.

$1,078

$1,087

 

 

 

 

           2.

Employee Pensions and Benefits (604/704)

 

 

 

a.  To reflect appropriate allocation of annualized employee benefits.

($67)

($68)

 

 

 

 

           3.

Purchased Power (615)

 

 

 

a.  To reflect EUW adjustment.

($45)

$0

 

 

 

 

           4.

Chemicals (618/718)

 

 

 

a.  To reflect chemicals expense based on direct deliveries to each plant.

($499)

$499

 

b.  To reflect EUW adjustment.

(6)

0

 

          Subtotal

($505)

$499

 

 

 

 

           5.

Contractual Services - Other (636/736)

 

 

 

a.  To reflect appropriate contractual services expense based on direct  service performed at each plant.

 

($2,987)

$2,987

 

b.  To reflect Phoenix Project computer maintenance expense (5-year average).

(208)

(210)

 

c.  To reflect Phoenix Project computer maintenance expense adjustment  for pre-2010 and 2010-2012 divestitures.

(8)

(9)

 

        Subtotal

($3,203)

$2,768

 

 

 

 

           6.

Transportation Expense (650/750)

 

 

 

a.  To reflect appropriate transportation expense allocation.

($40)

($40)

 

 

 

 

           7.

Regulatory Commission Expense (665/765)

 

 

 

a.  To reflect 4-year amortization of rate case expense ($7,489/4 for water and $7,543/4 for wastewater).

$1,872

$1,886

 

 

 

 

           8.

Miscellaneous Expense (675/775)

 

 

 

a.  To reflect miscellaneous expense based on direct services to each plant.

$298

($298)

 

b.  To reflect appropriate allocation of miscellaneous expense.

(44)

(44)

 

        Subtotal

$254

($342)

 

 

 

 

 

 

 

 

 

TOTAL OPERATION & MAINTENANCE ADJUSTMENTS

($655)  

$5,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LAKE PLACID UTILITIES, INC.                                                                                   Schedule No. 3-C

 

 

TEST YEAR ENDED  12/31/12                                                                        DOCKET NO. 130243-WS

 

 

ADJUSTMENTS TO OPERATING INCOME                                                                         Page 2 of 2

 

 

 

 

 

 

WATER

WASTEWATER

 

 

 

 

 

DEPRECIATION EXPENSE

 

 

           1.

To reflect appropriate  depreciation expense for Acct. No. 351.

$0

($275)

           2.

To reflect depreciation expense allocation for vehicles.

(405)

(409)

           3.

To reflect Phoenix Project allocation per Order No. PSC-10-0407-PAA-SU and for 2010-2012 divestitures.

 

(373)

(391)

           4.

To reflect Illinois/Florida Headquarters’ depreciation expense allocation.

(48)

(49)

           5.

To reflect non-U&U depreciation expense.

0

(7,481)

 

     Total

($826)

($8,055)

 

 

 

 

 

 

 

 

 

TAXES OTHER THAN INCOME

 

 

           1.

To reflect the appropriate test year RAFs.

($220)

$352

           2.

To reflect appropriate test year utility property taxes.

(780)

780

           3.

To reflect appropriate allocation of payroll taxes.

(38)

(38)

           4.

To reflect non-U&U property taxes.

0

(1,328)

 

     Total

($1,038)

($234)

 

 

 

 

 

 

 

 

 

INCOME TAX

 

 

          

To reflect the appropriate test year income tax expense.

$540

$1,195

 

 

 

 

 

 

 

 

 


 

LAKE PLACID UTILITIES, INC.

 

SCHEDULE NO. 3-D

TEST YEAR ENDED  12/31/12

 

DOCKET NO. 130243-WS

ANALYSIS OF WATER OPERATION AND MAINTENANCE EXPENSE 

 

TOTAL

STAFF

TOTAL

 

PER

ADJUST-

PER

 

UTILITY

MENTS

STAFF

(601)  SALARIES AND WAGES - EMPLOYEES

$6,253

$1,078

$7,331

(603)  SALARIES AND WAGES - OFFICERS

761

0

761

(604)  EMPLOYEE PENSIONS AND BENEFITS

2,014

(67)

1,947

(610)  PURCHASED WATER

0

0

0

(615)  PURCHASED POWER

2,413

(45)

2,368

(616)  FUEL FOR POWER PRODUCTION

0

0

0

(618)  CHEMICALS

832

(505)

327

(620)  MATERIALS AND SUPPLIES

1,566

0

1,566

(630)  CONTRACTUAL SERVICES - BILLING

0

0

0

(631)  CONTRACTUAL SERVICES - PROFESSIONAL

253

0

253

(635)  CONTRACTUAL SERVICES - TESTING

0

0

0

(636)  CONTRACTUAL SERVICES - OTHER

14,587

(3,203)

11,384

(640)  RENTS

12

0

12

(650)  TRANSPORTATION EXPENSE

792

(40)

752

(655)  INSURANCE EXPENSE

1,039

0

1,039

(665)  REGULATORY COMMISSION EXPENSE

5,000

1,872

6,872

(670)  BAD DEBT EXPENSE

341

0

341

(675)  MISCELLANEOUS EXPENSE

2,032

254

2,286

 

 

 

 

 

$37,895

($655)

$37,240

 

 

 

 

 


 

LAKE PLACID UTILITIES, INC.

 

SCHEDULE NO. 3-E

TEST YEAR ENDED  12/31/12

 

DOCKET NO. 130243-WS

ANALYSIS OF WASTEWATER OPERATION AND MAINTENANCE EXPENSE 

 

TOTAL

STAFF

TOTAL

 

PER

ADJUST-

PER

 

UTILITY

MENTS

STAFF

(701)  SALARIES AND WAGES - EMPLOYEES

$6,303

$1,087

$7,390

(703)  SALARIES AND WAGES - OFFICERS

767

0

767

(704)  EMPLOYEE PENSIONS AND BENEFITS

2,030

(68)

1,962

(710)  PURCHASED SEWAGE TREATMENT

0

0

0

(711)  SLUDGE REMOVAL EXPENSE

1,848

0

1,848

(715)  PURCHASED POWER

3,789

0

3,789

(716)  FUEL FOR POWER PRODUCTION

0

0

0

(718)  CHEMICALS

839

499

1,338

(720)  MATERIALS AND SUPPLIES

1,507

0

1,507

(730)  CONTRACTUAL SERVICES - BILLING

0

0

0

(731)  CONTRACTUAL SERVICES - PROFESSIONAL

255

0

255

(735)  CONTRACTUAL SERVICES - TESTING

0

0

0

(736)  CONTRACTUAL SERVICES - OTHER

14,704

2,768

17,472

(740)  RENTS

12

0

12

(750)  TRANSPORTATION EXPENSE

798

(40)

758

(755)  INSURANCE EXPENSE

1,048

0

1,048

(765)  REGULATORY COMMISSION EXPENSE

5,040

1,886

6,926

(770)  BAD DEBT EXPENSE

344

0

344

(775)  MISCELLANEOUS EXPENSE

2,246

(342)

1,904

 

 

 

 

 

$41,530

$5,790

$47,320

 

 

 

 

 


 

LAKE PLACID UTILITIES, INC.                                                                     SCHEDULE NO. 4-A

TEST YEAR ENDED 12/31/12                                                                  DOCKET NO. 130243-WS

 

LAKE PLACID UTILITIES, INC.

STAFF’S RECOMMENDED AND ALTERNATIVE

WATER RATE STRUCTURES AND RATES 

Test Year Rate Structure and Rates

 

Recommended Rate Structure and Rates

BFC/ gallonage rate structure

BFC generated from current rates = 54%

 

BFC/ gallonage rate structure

BFC = 54%

BFC

$13.85

 

BFC

$16.58

Per 1,000 gallons (kgal)

$5.80

 

Per 1 kgal

$7.01

 

 

 

 

 

Typical Monthly Bills

 

Typical Monthly Bills

Consumption (kgals)

 

 

Consumption (kgals)

 

0

$13.85

 

0

$16.58

1

$19.65

 

1

$23.59

2

$25.45

 

2

$30.60

3

$31.25

 

3

$37.61

4

$37.05

 

4

$44.62

5

$42.85

 

5

$51.63

6

$48.65

 

6

$58.64

10

$71.85

 

10

$86.68

Alternative 1 Rate Structure and Rates

 

Alternative 2 Rate Structure and Rates

BFC/ gallonage rate structure

BFC = 60%

 

BFC/ gallonage rate structure

BFC =54%

BFC

$18.42

 

BFC

$16.58

Per 1 kgal

$6.10

 

0-4 kgals (non-discretionary)

$7.01

 

 

 

Over 4 kgals

$7.29

 

 

 

 

 

Typical Monthly Bills

 

Typical Monthly Bills

Consumption (kgals)

 

 

Consumption (kgals)

 

0

$18.42

 

0

$16.58

1

$24.52

 

1

$23.59

2

$30.62

 

2

$30.60

3

$36.72

 

3

$37.60

4

$42.82

 

4

$44.62

5

$48.92

 

5

$51.63

6

$55.02

 

6

$58.92

10

$79.42

 

10

$88.08


 

 

LAKE PLACID UTILITIES, INC.

 

 

SCHEDULE NO. 4-B

 

TEST YEAR ENDED 12/31/12

 

DOCKET NO. 130243-WS

 

MONTHLY WATER RATES

 

 

 

 

 

 

 

 

 

 

UTILITY

STAFF

4 YEAR

 

 

EXISTING

RECOMMENDED

RATE

 

 

RATES

RATES

REDUCTION

 

Residential and General Service

 

 

 

 

Base Facility Charge by Meter Size

 

 

 

 

5/8" x 3/4"

$13.85

$16.58

$0.48

 

3/4"

$20.78

$24.87

$0.71

 

1"

$34.63

$41.45

$1.19

 

1-1/2"

$69.26

$82.90

$2.38

 

2"

$110.81

$132.64

$3.81

 

3"

$221.63

$265.28

$7.61

 

4"

$346.30

$414.50

$11.90

 

6"

$692.60

$829.00

$23.79

 

 

 

 

 

 

Charge per 1,000 Gallons

$5.80

$7.01

$0.20

 

 

 

 

 

 

Typical Residential 5/8" x 3/4" Meter Bill Comparison

 

 

 

3,000 Gallons

$31.25

$37.61

 

 

6,000 Gallons

$48.65

$58.64

 

 

10,000 Gallons

$71.85

$86.68

 

 


 





LAKE PLACID UTILITIES, INC.                                                               SCHEDULE NO. 4-C

TEST YEAR ENDED 12/31/12                                                             DOCKET NO. 130243-WS

 

LAKE PLACID UTILITIES, INC.

STAFF’S RECOMMENDED AND ALTERNATIVE

WASTEWATER RATE STRUCTURES AND RATES 

Test Year Rate Structure and Rates

 

Recommended Rate Structure and Rates

Monthly BFC/uniform kgals charge

BFC generated from current rates = 50%

 

Monthly BFC/uniform kgals charge

BFC = 50%

BFC

$13.94

 

BFC

$13.11

per 1 kgal

$5.75

 

per 1 kgal

$5.96

(6 kgal cap)

 

(6 kgal cap)

 

 

 

Flat Rate

$27.72

 

Flat Rate

$23.80

Typical Monthly Bills

 

Typical Monthly Bills

Consumption (kgals)

 

 

Consumption (kgals)

 

0

$13.94

 

0

$13.11

1

$19.69

 

1

$19.07

2

$25.44

 

2

$25.03

3

$31.19

 

3

$30.99

4

$36.94

 

4

$36.95

5

$42.69

 

5

$42.91

6

$48.44

 

6

$48.87

10

$48.44

 

10

$48.87

Alternative 1 Rate Structure and Rates

 

Alternative 2 Rate Structure and Rates

Monthly BFC/uniform kgals charge

BFC = 60%

 

Monthly BFC/uniform kgals charge

BFC =50%

BFC

$15.74

 

BFC

$13.01

per 1 kgal

$4.77

 

per 1 kgal

$5.91

(6 kgal cap)

 

(6 kgal cap)

 

 

 

Flat Rate

$24.30

 

Flat Rate

$23.61

Typical Monthly Bills

 

Typical Monthly Bills

Consumption (kgals)

 

 

Consumption (kgals)

 

0

$15.74

 

0

$13.01

1

$20.51

 

1

$18.92

2

$25.28

 

2

$24.83

3

$30.05

 

3

$28.25

4

$34.82

 

4

$36.65

5

$39.59

 

5

$42.56

6

$44.36

 

6

$48.47

10

$44.36

 

10

$48.47


 

 

LAKE PLACID UTILITIES, INC.

 

 SCHEDULE NO. 4-D

 

TEST YEAR ENDED 12/31/12

 

DOCKET NO. 130243-WS

 

MONTHLY WASTEWATER RATES

 

 

 

 

 

 

 

 

 

 

UTILITY

STAFF

4 YEAR

 

 

EXISTING

RECOMMENDED

RATE

 

 

RATES

RATES

REDUCTION

 

Residential

 

 

 

 

Base Facility Charge - All Meter Sizes

$13.94

$13.11

$0.38

 

 

 

 

 

 

Charge per 1,000 Gallons- Residential*

 

 

 

 

*6,000 gallon cap

$5.75

$5.96

$0.17

 

 

 

 

 

 

Flat Rate

$27.72

$23.80

$0.68

 

 

 

 

 

 

General Service

 

 

 

 

Base Facility Charge by Meter Size

 

 

 

 

5/8" x 3/4"

$13.94

$13.11

$0.38

 

3/4"

$20.91

$19.67

$0.56

 

1"

$34.82

$32.78

$0.94

 

1-1/2"

$69.65

$65.55

$1.88

 

2"

$111.44

$104.88

$3.01

 

3"

$222.87

$209.76

$6.02

 

4"

$348.24

$327.75

$9.41

 

6"

$696.46

$655.50

$18.81

 

 

 

 

 

 

Charge per 1,000 Gallons - General Service

$6.90

$7.15

$0.21

 

 

 

 

 

 

Bulk Service

 

 

 

 

Deeann Estates

$474.62

$440.50

$12.64

 

 

 

 

 

 

Charge per 1,000 gallons

$5.52

$5.72

$0.16

 

 

 

 

 

 

Typical Residential 5/8" x 3/4" Meter Bill Comparison

 

 

 

 

3,000 Gallons

$31.19

$30.99

 

 

6,000 Gallons

$48.44

$48.87

 

 

10,000 Gallons

$48.44

$48.87

 

 

 



[1] See Order No. 12447, issued September 6, 1983, in Docket No. 830141-WS, In re: Application of Lake Placid Utilities for certificates to operate water and sewer systems in Highlands County, pursuant to Section 367.171, Florida Statutes.

[2] See Order No. PSC-93-1448-FOF-WS, issued October 4, 1993, in Docket No. 930570-WS, In re: Application for Transfer of Certificates Nos. 414-W and 347-S from Lake Placid Utilities to Lake Placid Utilities, Inc.

[3] See Order No. PSC-10-0489-FOF-WS, issued August 5, 2010, in Docket No. 100301-WS, In re: Application for amendment of Certificates 414-W and 347-S to extend water and wastewater service areas to include certain land in Highlands County by Lake Placid Utilities, Inc.

[4] Issued January 5, 2011, in Docket No. 090531-WS, In re: Application for staff-assisted rate case in Highlands County by Lake Placid Utilities, Inc.

[5] See Order No. PSC-11-0015-PAA-WS, issued on  January 5, 2011, in Docket No. 090531-WS, In re: Application for staff-assisted rate case in Highlands County by Lake Placid Utilities, Inc.

[6] See Docket Nos. 130212-WS, 120209-WS, 120076-SU, 120037-WS, 110257-WS, 110264-WS, 110153-SU, 100426-WS, 090531-WS, 090462-WS, 090402-WS, 090392-WS, 080250-SU, 080249-WS, 080248-SU, 080247-SU, 070695-WS, 070694-WS, and 070693-WS.

[7] See “Utilities, Inc. Audit of Affiliate Transactions,” Audit Control No. 13-296-4-2, Work Paper No. 22-5.6.1, in Docket No. 130212-WS, In re: Application for an Increase in Water and Wastewater Rates in Polk County by Cypress Lakes Utilities, Inc.

[8] See Order No. PSC-10-0585-PAA-WS, issued September 22, 2010, in Docket No. 090462-WS, In re:  Application for increase in water and wastewater rates in Marion, Orange, Pasco, Pinellas and Seminole Counties by Utilities, Inc. of Florida, p. 10.

[9] See Order No. PSC-10-0407-PAA-SU, issued on June 21, 2010, in Docket No. 090381-WS, In re: Application for increase in wastewater rates in Seminole County by Utilities Inc. of Longwood, p. 6.

[10] See Audit Control No. 13-296-4-2, in Docket No. 130212-WS.

[11] On May 23, 2012, Utilities, Inc. of Eagle Ridge, on behalf of its Florida-subsidiaries and pursuant to a stipulation and settlement agreement entered into with the Office of Public Counsel, filed a petition for the establishment of a generic docket to address the Commission’s treatment of the Phoenix Project costs.  This generic docket has been assigned Docket No. 120161-WS.

[12] See Order Nos. PSC-12-0206-PAA-WS, issued April 17, 2012, in Docket No. 110264-WS, In re: Application for increase in water and wastewater rates in Pasco County by Labrador Utilities, Inc., p. 12, and PSC-14-0025-PAA-WS, issued January 10, 2014, in Docket No. 120209-WS, In re: Application for increase in water and wastewater rates in Marion, Orange, Pasco, Pinellas, and Seminole Counties by Utilities, Inc. of Florida.

[13] See Order No. PSC-14-0025-PAA-WS, in Docket No. 120209-WS, p. 12.

[14] See Order Nos. PSC-12-0667-PAA-WS, issued December 26, 2012, in Docket No. 120667-WS, In re:  Application for increase in water and wastewater rates in Lake County by Utilities, Inc. of Pennbrooke; PSC-12-0206-PAA-WS, in Docket No. 110264-WS; and PSC-14-0025-PAA-WS, in Docket No. 120209-WS.

[15] See Order No. PSC-12-0346-FOF-SU, issued July 5, 2012, in Docket No. 110153-SU, In re: Application for increase in wastewater rates in Lee County by Utilities, Inc. of Eagle Ridge, pp. 2, 9.

[16] A regulatory asset typically involves a cost incurred by a regulated utility that would normally be expensed currently but for an action by the regulator or legislature to defer the cost as an asset to the balance sheet.  This allows a utility to amortize the regulatory asset over a period greater than one year.  For example, unamortized rate case expense in the water and wastewater industry is a regulatory asset.  Normally, the costs of a rate case would be expensed when incurred.  However, Section 367.0816, F.S., requires that water and wastewater utilities amortize rate case expense over a four-year period, thus creating a regulatory asset.  The Commission’s approval to defer entitled revenues and amortize the recovery of those revenues over a period greater than one year can also create a regulatory asset.

[17] An example of a regulatory liability would be the deferral of past overearnings to future periods.

[18] See Order Nos. PSC-13-0085-PAA-WS, issued February 14, 2013, in Docket No. 110257-WS, In re: Application for increase in water and wastewater rates in Seminole County by Sanlando Utilities Corporation; PSC-12-0667-PAA-WS, in Docket No. 120037-WS; and PSC-14-0025-PAA-WS, in Docket No. 120209-WS.

[19] Issued in Docket No. 090531-WS.

[20] See Audit Control No. 13-296-4-2, Supplemental Audit Workpapers.

[21] See Order Nos. PSC-07-0287-PAA-WS, issued on April 3, 2007, in Docket No. 060260-WS, In re: Application for increase in water and wastewater rates in Highlands County by Lake Placid Utilities, Inc., and PSC-11-0015-PAA-WS, issued in Docket No. 090531-WS.

[22] See “Auditor’s Report, Lake Placid Utilities, Inc. Staff-Assisted Rate Case,” Audit Control No. 13-201-2-1, Supplemental Audit Workpapers.

[23] See Order No. PSC-13-0241-PAA-WS, issued June 3, 2013, in Docket No. 130006-WS, In re: Water and wastewater industry annual reestablishment of authorized range of return on common equity for water and wastewater utilities pursuant to Section 367.081(4)(f), F.S.

[24] See Rule 62-699.310, F.A.C., Classification and Staffing of Domestic Wastewater or Water Treatment Plants and Water Distribution Systems.

[25] See Audit Control No. 13-296-4-2, Supplemental Audit Workpapers.

[26] See Order No. PSC-11-0015-PAA-WS, issued in Docket No. 090531-WS.

[27] See Audit Control No. 13-201-2-1, Supplemental Audit Workpapers.

[28] Issued in Docket No. 060260-WS.

[29] See Order Nos. PSC-11-0015-PAA-WS, issued in Docket No. 090531-WS, and PSC-07-0287-PAA-WS, issued in Docket No. 060260-WS.

[30] See Order Nos. PSC-03-1342-PAA-WS, issued November 24, 2003, in Docket No. 021228-WS, In re: Application for staff-assisted rate case in Brevard County by Service Management Systems, Inc.; and PSC-03-0845-PAA-WS, issued July 21, 2003, in Docket No. 021192-WS, In re: Application for staff-assisted rate case in Highlands County by Damon Utilities, Inc.

[31] See Order Nos. PSC-03-1119-PAA-SU, issued October 7, 2003, in Docket No. 030106-SU, In re: Application for staff-assisted rate case in Lee County by Environmental Protection Systems of Pine Island, Inc.; and PSC-96-1409-FOF-WU, issued November 20, 1996, in Docket No. 960716-WU, In Re: Application for transfer of Certificate No. 123-W in Lake County from Theodore S. Jansen d/b/a Ravenswood Water System to Crystal River Utilities, Inc.

[32] See Order Nos. PSC-01-2101-TRF-WS, issued October 22, 2001, in Docket No. 011122-WS, In re: Tariff filing to establish a late payment charge in Highlands County by Damon Utilities, Inc.; PSC-08-0255-PAA-WS, issued April 24, 2008, in Docket No. 070391-WS, In re:  Application for certificates to provide water and wastewater service in Sumter County by Orange Blossom Utilities, Inc.; PSC-09-0752-PAA-WU, issued November 16, 2009, in Docket No. 090185-WU, In re: Application for grandfather certificate to operate water utility in St. Johns County by Camachee Island Company, Inc. d/b/a Camachee Cove Yacht Harbor Utility.; PSC-10-0257-TRF-WU, issued April 26, 2010, in Docket No. 090429-WU, In re: Request for approval of imposition of miscellaneous service charges, delinquent payment charge and meter tampering charge in Lake County, by Pine Harbour Water Utilities, LLC.; and  PSC-11-0204-TRF-SU, issued April 25, 2011, in Docket No. 100413-SU, In re:  Request for approval of tariff amendment to include a late fee of $14.00 in Polk County by West Lakeland Wastewater.

[33] Section 367.0814(6), F.S., states, “The utility, in requesting staff assistance, shall agree to accept the final rates and charges approved by the Commission unless the final rates and charges produce less revenue than the existing rates and charges.”

[34] By Order No. PSC-13-0673-FOF-WS, the Commission approved an annual interim revenue increase of $85,052 for water for Cypress Lakes Utilities, Inc. which is also a wholly-owned subsidiary of UI.  Specifically, the Commission approved a corporate undertaking of $49,622 to secure the interim rate increase granted.