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DATE:

April 2, 2015

TO:

Office of Commission Clerk (Stauffer)

FROM:

Division of Accounting and Finance (Norris, Fletcher)

Division of Economics (Ortega, Hudson)

Office of the General Counsel (Barrera)

RE:

Docket No. 150069-WS – Settlement proposal for possible overearnings by Southlake Utilities, Inc. in Lake County.

AGENDA:

04/16/15Regular Agenda – Proposed Agency Action – Interested Persons May Participate

COMMISSIONERS ASSIGNED:

All Commissioners

PREHEARING OFFICER:

Administrative

CRITICAL DATES:

None

SPECIAL INSTRUCTIONS:

None

 

Case Background

Southlake Utilities, Inc. (Southlake or Utility) is a Class B utility providing water and wastewater service to approximately 2,800 water and 2,664 wastewater customers in Lake County.  Water and wastewater rates were last established for this utility in 2008.[1]

Staff’s review of the 2012 Annual Report for Southlake, filed April 25, 2013, revealed possible overearnings.  On November 1, 2013, the Commission approved a pass-through and 4-year rate reduction adjustment, which represented a $34,497-revenue decrease for each system.    Subsequently, staff engaged in discussions with the Utility regarding these possible overearnings.  Since those initial discussions, staff completed its earnings analysis based on the Utility’s numerous responses to data requests, as well as Southlake’s 2013 Annual Report, filed April 25, 2014.  During staff’s earnings’ analysis, the Office of Public Counsel participated in informal meetings regarding the Utility’s possible overearnings.  In a letter dated February 25, 2015, Southlake proposed a settlement offer to address the possible overearnings.  Southlake proposed to refund total possible overearnings in the amount of $233,076 for water and $8,387 for wastewater.  Further, the Utility also proposed to reduce rates by 21.47 percent for water and 0.73 percent for wastewater.  The Utility’s proposed settlement is attached to this recommendation as Attachment A.

The purpose of this recommendation is to present the settlement proposal to the Commission for approval.  The Commission has jurisdiction pursuant to Sections 367.081, 367.082, and 367.121, Florida Statutes.

 


Discussion of Issues

Issue 1

 Should the Commission accept the settlement offer proposed by Southlake Utilities, Inc.?

Recommendation

 Yes.  Pursuant to the settlement proposal, Southlake will make an across-the-board rate reduction of $233,076 or 21.47 percent of total revenues for water and $8,387 or 0.73 percent for wastewater, as well as a refund of $233,076 for water and $8,387 for wastewater over a 6-month period in 2015.  The Utility should file a proposed customer notice reflecting the Commission's decision within 15 days of the Commission vote.  The approved rates should be effective for service rendered on or after the stamped approval date of the tariff, pursuant to Rule 25-30.475(1), Florida Administrative Code (F.A.C.), after staff has verified that the proposed customer notice is adequate and this notice has been provided to the customer.  The Utility should provide proof that the customers have received notice within 10 days after the date of the notice.   (Norris, Ortega)

Staff Analysis

 Staff’s  review of Southlake’s 2012 Annual Report, filed April 25, 2013, revealed possible overearnings.   As a result, staff sent data requests to the Utility to obtain the data necessary to make a better evaluation of the Utility’s financial position, to evaluate the likelihood of continued overearnings, and to examine the level of revenues necessary to support ongoing utility operations.  Staff’s analysis also incorporated the Utility’s needs for continuing capital improvements and operating expenses.  

Based on staff’s final analysis,[2] Southlake proposed a settlement to address possible ovearnings by letter dated February 25, 2015.  Specifically, the Utility agreed to make an across-the-board rate reduction of $233,076 or 21.47 percent of total revenues for water and $8,387 or 0.73 percent for wastewater.  Further, the Utility stated it will make a refund of $233,076 for water and $8,387 for wastewater over a 6-month period in 2015.

Table 1

Determination of Rate Reduction and Refund

 

 

Water

Wastewater

 

 

Possible Overearnings

$233,076

$8,387

 

 

 

 

 

 

 

Proposed Rate Reduction

($233,076)

($8,387)

 

 

Proposed Rate Reduction %

(21.47%)

(0.73%)

 

 

 

 

 

 

 

Proposed Refund

$233,076

$8,387

 

 

 

 

 

 

 

Since the Utility’s last rate case, the Utility has experienced significant customer growth which staff believes has contributed to the overearnings.  Staff believes that Southlake’s proposed settlement is a reasonable resolution because it will address the possible overearnings on a prospective basis.  Further, staff believes that it is in the public interest for the Commission to approve the settlement proposal because this settlement offer promotes administrative efficiency, avoiding the time and expense of a formal earnings investigation.

            In keeping with the Commission’s long-standing practice of encouraging parties to settle contested proceedings,[3] staff recommends that the Commission approve the settlement proposal.  Staff notes that this recommendation is consistent with other Commission decisions regarding possible overearnings.[4] 

Schedule Nos. 1-A and 1-B reflect the Utility’s existing rates and staff's recommended rates per the Utility's settlement proposal.  Staff will continue to monitor the earnings of the Utility, and if any subsequent overearnings are identified, staff may open a formal earnings investigation.

Staff also recommends that within 15 days of the Commission vote, the Utility should file a proposed customer notice and revised tariff sheets which are consistent with the Commission's decision.  The approved rates should be effective for service rendered on or after the stamped approval date of the tariff, pursuant to Rule 25-30.475(1), F.A.C., after staff has verified that the proposed customer notice is adequate and the notice has been provided to the customers.  Southlake should provide proof that the customers have received notice within 10 days after the date of the notice.

 


Issue 2

 Should this docket be closed?

Recommendation

 No.  If no timely protest is received from a substantially affected person upon expiration of the protest period, the PAA Order will become final upon the issuance of a Consummating Order.  However, this docket should remain open to allow staff to verify completion of the refund discussed in Issue 1 and to verify that the revised tariff sheets and customer notice have been filed by the Utility and approved by staff.  Once staff has verified that the refunds have been made in accordance with Rule 25-30.360, F.A.C., the docket should be closed administratively.  (Barrera, Norris)

Staff Analysis

 If no timely protest is received from a substantially affected person upon expiration of the protest period, the PAA Order will become final upon the issuance of a Consummating Order.  However, this docket should remain open to allow staff to verify completion of the refund discussed in Issue 1 and to verify that the revised tariff sheets and customer notice have been filed by the Utility and approved by staff.  Once staff has verified that the refunds have been made in accordance with Rule 25-30.360, F.A.C., the docket should be closed administratively.



 



 

SOUTHLAKE UTILITIES, INC.

 SCHEDULE NO. 1-A

 

TEST YEAR ENDED DECEMBER 31, 2013

DOCKET NO. 150069-WS

 

MONTHLY WATER RATES

 

 

UTILITY

STAFF

 

EXISTING

RECOMMENDED

 

RATES

RATES

 

 

 

Residential, General, and Bulk Service

 

 

Base Facility Charge by Meter Size

 

 

5/8" x 3/4"

$8.72

$6.83

 

1"

$21.81

$17.08

 

1 1/2"

$43.63

$34.15

 

2"

$69.81

$54.64

 

3"

$139.63

$109.28

 

4"

$218.16

$170.75

 

6"

$436.31

$341.50

 

 

 

Charge per 1,000 gallons - Residential

 

 

0-10,000 Gallons

$0.98

$0.77

 

10,001 - 20,000 gallons

$1.47

$1.15

 

Over 20,000 Gallons

$1.97

$1.54

 

 

 

Charge per 1,000 gallons - General and Bulk

$1.29

$1.01

 

 

 

Fire Protection Service

 

 

Base Facility Charge by Meter Size

 

 

1 1/2"

$3.63

$2.85

 

2"

$5.82

$4.55

 

3"

$11.63

$9.11

 

4"

$18.18

$14.23

 

6"

$36.37

$28.46

 

8"

$58.18

$45.53

 

10"

$80.00

$65.45

 

 

 

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

 

 

3,000 Gallons

$11.66

$9.14

 

5,000 Gallons

$13.62

$10.68

 

10,000 Gallons

$18.52

$14.53

 

 

 

 


 

SOUTHLAKE UTILITIES, INC.

 SCHEDULE NO. 1-B

 

TEST YEAR ENDED DECEMBER 31, 2013

DOCKET NO. 150069-WS

 

MONTHLY WASTEWATER RATES

 

 

UTILITY

STAFF

 

EXISTING

RECOMMENDED

 

RATES

RATES

 

 

 

Residential Service

 

 

Base Facility Charge - All Meter Sizes

$14.45

$14.34

 

 

 

Charge per 1,000 gallons - Residential

$1.35

$1.34

 

*10,000 gallon cap

 

 

 

 

 

 

General and Bulk Service

 

 

Base Facility Charge by Meter Size

 

 

5/8 x 3/4"

$14.45

$14.34

 

1"

$36.12

$35.85

 

1 1/2"

$72.23

$71.70

 

2"

$115.56

$114.72

 

3"

$231.12

$229.44

 

4"

$361.12

$358.50

 

6"

$722.25

$717.00

 

 

 

Charge per 1,000 Gallons - General and Bulk Service

$1.62

$1.61

 

 

 

 

 

 

 

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

 

 

3,000 Gallons

$18.50

$18.36

 

5,000 Gallons

$21.20

$21.04

 

10,000 Gallons

$27.95

$27.74

 

 

 

 

 



[1] See Order No. PSC-09-0623-PAA-WS, issued September 15, 2009, in Docket No. 080597-WS, In re: Application for increase in water and wastewater rates in Lake County by Southlake Utilities, Inc.

[2] Document No. 01253-15, in Docket No. 150069-WS.

[3] See Order Nos. PSC-09-0711-AS-WS, issued October 26, 2009, in Docket No. 080249-WS, In re: Application for increase in water and wastewater rates in Pasco County by Labrador  Utilities, Inc.; PSC-08-0640-AS-WU, issued October 3, 2008, in Docket No. 070601-WU, In re: Application for staff-assisted rate case in Pasco County by Orangeland Water Supply; and PSC-07-0534-AS-WS, issued June 26, 2007, in Docket No. 060261-WS, In re: Application for increase in water and wastewater rates in Lake County by Utilities, Inc. of Pennbrooke.

[4] See Order Nos. PSC-11-0012-PAA-SU, issued January 4, 2011, in Docket No. 100446-SU, In re: Settlement proposal for possible overearnings by Tierra Verde Utilities, Inc. in Pinellas County; PSC-10-0680-PAA-SU, issued November 15, 2010 in Docket No. 100379-SU, In re: Settlement proposal for possible overearnings by Mid-County Services, Inc. in Pinellas County; and PSC-05-0956-PAA-SU, issued October 7, 2005, in Docket No. 050540-SU, In re: Settlement offer for possible overearnings in Marion County by BFF Corp.