Florida Senate - 2014                             CS for SB 1050
       
       
        
       By the Committee on Communications, Energy, and Public
       Utilities; and Senator Hays
       
       
       
       
       579-03541-14                                          20141050c1
    1                        A bill to be entitled                      
    2         An act relating to water and wastewater utility
    3         systems; creating s. 159.8105, F.S.; requiring the
    4         Division of Bond Finance of the State Board of
    5         Administration to review the allocation of private
    6         activity bonds to determine the availability of
    7         additional allocation or reallocation of bonds for
    8         water facilities or sewage facilities; amending s.
    9         367.022, F.S.; exempting from regulation by the
   10         Florida Public Service Commission a person who resells
   11         water service to certain tenants or residents up to a
   12         specified cost; amending s. 367.081, F.S.;
   13         establishing criteria for determining the quality of
   14         water and wastewater services provided by a utility;
   15         establishing a procedure to follow if the commission
   16         determines that a utility has failed to provide water
   17         and wastewater services that meet certain standards;
   18         requiring the commission to adopt rules that include
   19         fines; providing for recovery of costs prudently
   20         incurred by a utility to address certain findings of
   21         the commission or the Department of Environmental
   22         Protection; authorizing the creation of a utility
   23         reserve fund to establish rates for a utility;
   24         requiring the commission to adopt rules to govern such
   25         fund; providing for the automatic increase or decrease
   26         of approved rates under certain circumstances;
   27         establishing criteria for adjusted rates; specifying
   28         expense items that permit an automatic increase or
   29         decrease in utility rates; providing standards to
   30         allow the commission to establish, by rule, additional
   31         specified expense items that cause an automatic
   32         increase or decrease of utility rates; deleting
   33         certain requirements for approved utility rates that
   34         are automatically increased or decreased, upon notice
   35         to the commission; deleting a prohibition to conform
   36         to changes made by the act; authorizing a water
   37         utility to establish a surcharge or other mechanism to
   38         recover the prudently incurred fixed costs of certain
   39         system improvement projects approved by the
   40         commission; amending s. 367.0814, F.S.; conforming
   41         cross-references to changes made by the act; amending
   42         s. 403.8532, F.S.; authorizing the Department of
   43         Environmental Protection to make, or to request that
   44         the Florida Water Pollution Control Financing
   45         Corporation make loans, grants, and deposits to for
   46         profit privately owned or investor-owned water
   47         systems, and deleting current restrictions on such
   48         activities; providing an effective date.
   49          
   50  Be It Enacted by the Legislature of the State of Florida:
   51  
   52         Section 1. Section 159.8105, Florida Statutes, is created
   53  to read:
   54         159.8105 Allocation of bonds for water and wastewater
   55  infrastructure projects.—The division shall review the
   56  allocation of private activity bonds to determine the
   57  availability of additional allocation or reallocation of bonds
   58  for water facilities and sewage facilities.
   59         Section 2. Present subsections (9) through (12) of section
   60  367.022, Florida Statutes, are renumbered as subsections (10)
   61  through (13), respectively, and a new subsection (9) is added to
   62  that section, to read:
   63         367.022 Exemptions.—The following are not subject to
   64  regulation by the commission as a utility nor are they subject
   65  to the provisions of this chapter, except as expressly provided:
   66         (9) A person who resells water service to his or her
   67  tenants or to individually metered residents for a fee that does
   68  not exceed the actual purchase price plus:
   69         (a) Up to 9 percent of the actual purchase price; or
   70         (b) The actual cost of meter reading and billing.
   71         Section 3. Present subsections (7) and (8) of section
   72  367.081, Florida Statutes, are renumbered as subsections (8) and
   73  (9), respectively, subsections (2) and (4) and present
   74  subsection (7) of that section are amended, and a new subsection
   75  (7) is added to that section, to read:
   76         367.081 Rates; procedure for fixing and changing.—
   77         (2)(a)1. The commission shall, either upon request or upon
   78  its own motion, fix rates that which are just, reasonable,
   79  compensatory, and not unfairly discriminatory.
   80         1. In each every such proceeding, the commission shall
   81  consider the value and quality of the service and the cost of
   82  providing the service, which must shall include, but need not be
   83  limited to, debt interest; the requirements of the utility for
   84  working capital; maintenance, depreciation, tax, and operating
   85  expenses incurred in the operation of all property used and
   86  useful in the public service; and a fair return on the
   87  investment of the utility in property used and useful in the
   88  public service. However, the commission shall not allow the
   89  inclusion of contributions-in-aid-of-construction in the rate
   90  base of a any utility during a rate proceeding or, nor shall the
   91  commission impute prospective future contributions-in-aid-of
   92  construction against the utility’s investment in property used
   93  and useful in the public service.; and Accumulated depreciation
   94  on such contributions-in-aid-of-construction shall not be used
   95  to reduce the rate base, and nor shall depreciation on such
   96  contributed assets shall not be considered a cost of providing
   97  utility service.
   98         2. For purposes of such proceedings, the commission shall
   99  consider utility property, including land acquired or facilities
  100  constructed or to be constructed within a reasonable time in the
  101  future, up to not to exceed 24 months after the end of the
  102  historic base year used to set final rates unless a longer
  103  period is approved by the commission, to be used and useful in
  104  the public service, if:
  105         a. Such property is needed to serve current customers;
  106         b. Such property is needed to serve customers 5 years after
  107  the end of the test year used in the commission’s final order on
  108  a rate request as provided in subsection (6) at a growth rate
  109  for equivalent residential connections up to not to exceed 5
  110  percent per year; or
  111         c. Such property is needed to serve customers more than 5
  112  full years after the end of the test year used in the
  113  commission’s final order on a rate request as provided in
  114  subsection (6) only to the extent that the utility presents
  115  clear and convincing evidence to justify such consideration.
  116         3. In determining the value and quality of water service
  117  provided by a utility and whether such utility has satisfied its
  118  obligation to provide water service to its customers, the
  119  commission shall consider the extent to which the utility meets
  120  secondary drinking water standards regarding taste, odor, color,
  121  or corrosiveness adopted by the Department of Environmental
  122  Protection and the local government. In making its
  123  determination, the commission shall consider:
  124         a. Testimony and evidence provided by customers and the
  125  utility.
  126         b. Complaints that relate to the secondary drinking water
  127  standards which customers have filed during the past 5 years
  128  with the commission, the Department of Environmental Protection,
  129  the county health departments, or the applicable local
  130  government.
  131         c. The results of past tests required by the Department of
  132  Environmental Protection or county health departments which
  133  measure the utility’s compliance with the applicable secondary
  134  drinking water standards.
  135         d. The results of other tests, if deemed necessary by the
  136  commission.
  137         4. In determining the value and quality of wastewater
  138  service provided by a utility, the commission shall consider the
  139  extent to which the utility provides wastewater service to its
  140  customers which does not cause odor, noise, aerosol drift, or
  141  lighting that adversely affects customers. In making its
  142  determination, the commission shall consider:
  143         a. Testimony and evidence provided by customers and the
  144  utility.
  145         b. Complaints that relate to the alleged odor, noise,
  146  aerosol drift, or lighting problem which customers have filed
  147  during the past 5 years with any of the following:
  148         (I) The commission;
  149         (II) The Department of Environmental Protection;
  150         (III) The county health departments; or
  151         (IV) The local government.
  152         5. If the commission determines that a utility provides
  153  water service that does not meet the secondary water quality
  154  standards of the Department of Environmental Protection and the
  155  local government regarding taste, odor, color, or corrosiveness,
  156  or that a utility provides wastewater service that adversely
  157  affects customers due to odor, noise, aerosol drift, or
  158  lighting, the utility shall provide the commission with
  159  estimates of the costs and benefits of various solutions to the
  160  problems. The utility shall meet with its customers to discuss
  161  the costs and benefits of the various solutions and report to
  162  the commission the conclusions of the meetings. The commission
  163  shall adopt rules necessary to assess and enforce the utility’s
  164  compliance with this subparagraph. The rules shall prescribe
  165  penalties, including fines and reduction of return on equity of
  166  up to 100 basis points, if a utility fails to adequately address
  167  or offer solutions to the water or wastewater problems.
  168         6. A utility may recover its prudently incurred costs and
  169  expenses to resolve deficiencies found by the commission
  170  pursuant to this subsection or found by the Department of
  171  Environmental Protection in a proceeding under chapter 403,
  172  related to noncompliance with secondary drinking water standards
  173  regarding taste, odor, color, or corrosiveness, or concerning
  174  wastewater service issues related to odor, noise, aerosol drift,
  175  or lighting. Such costs shall be recoverable through a rate case
  176  filed pursuant to this section or through a separate proceeding
  177  initiated by petition of the utility. In its filing, the utility
  178  shall describe the activities and costs projected or incurred to
  179  resolve the deficiencies found by the commission or the
  180  department. Such costs may be a result of action agreed upon by
  181  the utility and the commission or the department or as a
  182  consequence of a consent order.
  183  
  184  Notwithstanding the provisions of this paragraph, the commission
  185  shall approve rates for service which allow a utility to recover
  186  from customers the full amount of environmental compliance
  187  costs. Such rates may not include charges for allowances for
  188  funds prudently invested or similar charges. For purposes of
  189  this requirement, the term “environmental compliance costs”
  190  includes all reasonable expenses and fair return on any prudent
  191  investment incurred by a utility in complying with the
  192  requirements or conditions contained in any permitting,
  193  enforcement, or similar decisions of the United States
  194  Environmental Protection Agency, the Department of Environmental
  195  Protection, a water management district, or any other
  196  governmental entity with similar regulatory jurisdiction.
  197         (b) In establishing initial rates for a utility, the
  198  commission may project the financial and operational data as set
  199  out in paragraph (a) to a point in time when the utility is
  200  expected to be operating at a reasonable level of capacity.
  201         (c) In establishing rates for a utility, the commission may
  202  authorize the creation of a utility reserve fund. The commission
  203  shall adopt rules to govern the fund, including, but not limited
  204  to, rules relating to expenses for which the fund may be used,
  205  segregation of reserve account funds, requirements for a capital
  206  improvement plan, and requirements for commission authorization
  207  before disbursements are made from the reserve fund.
  208         (4)(a) On or before March 31 of each year, the commission
  209  by order shall establish a price increase or decrease index for
  210  major categories of operating costs incurred by utilities
  211  subject to its jurisdiction reflecting the percentage of
  212  increase or decrease in such costs from the most recent 12-month
  213  historical data available. The commission by rule shall
  214  establish the procedure to be used in determining such indices
  215  and a procedure by which a utility, without further action by
  216  the commission, or the commission on its own motion, may
  217  implement an increase or decrease in its rates based upon the
  218  application of the indices to the amount of the major categories
  219  of operating costs incurred by the utility during the
  220  immediately preceding calendar year, except to the extent of any
  221  disallowances or adjustments for those expenses of that utility
  222  in its most recent rate proceeding before the commission. The
  223  rules shall provide that, upon a finding of good cause,
  224  including inadequate service, the commission may order a utility
  225  to refrain from implementing a rate increase hereunder unless
  226  implemented under a bond or corporate undertaking in the same
  227  manner as interim rates may be implemented under s. 367.082. A
  228  utility may not use this procedure between the official filing
  229  date of the rate proceeding and 1 year thereafter, unless the
  230  case is completed or terminated at an earlier date. A utility
  231  may not use this procedure to increase any operating cost for
  232  which an adjustment has been or could be made under paragraph
  233  (b), or to increase its rates by application of a price index
  234  other than the most recent price index authorized by the
  235  commission at the time of filing.
  236         (b) Upon verified notice to the commission 45 days before
  237  implementation of the increase or decrease, and without a
  238  hearing, the approved rates of a utility shall automatically
  239  increase or decrease. Such notice shall inform the commission
  240  that the utility’s costs for a specified expense item have
  241  changed.
  242         1. The new rates shall reflect, on an amortized or annual
  243  basis, as appropriate, the cost or amount of change in the cost
  244  of the specified expense item. The new rates may not reflect the
  245  costs of a specified expense item already included in the rates
  246  of a utility. Specified expense items eligible for automatic
  247  increase or decrease of a utility’s rates include, but are not
  248  limited to:
  249         a. The rates charged by a governmental authority or other
  250  water or wastewater utility regulated by the commission which
  251  provides utility service to the utility.
  252         b. The rates or fees that the utility is charged for
  253  electric power.
  254         c. The amount of ad valorem taxes assessed against the
  255  utility’s used and useful property.
  256         d. The fees charged by the Department of Environmental
  257  Protection in connection with the National Pollutant Discharge
  258  Elimination System permit program.
  259         e. The regulatory assessment fees imposed upon the utility
  260  by the commission.
  261         f. Costs incurred for water quality or wastewater quality
  262  testing required by the Department of Environmental Protection.
  263         g. The fees charged for wastewater sludge disposal.
  264         h. A loan service fee or loan origination fee associated
  265  with a loan related to an eligible project. The commission shall
  266  adopt rules governing the determination of eligible projects,
  267  which shall be limited to those projects associated with new
  268  infrastructure or improvements to existing infrastructure needed
  269  to achieve or maintain compliance with federal, state, and local
  270  governmental primary or secondary drinking water standards or
  271  wastewater treatment standards that relate to:
  272         (I) The provision of water or wastewater service for
  273  existing customers;
  274         (II) The remediation or prevention of a violation of
  275  federal, state, and local governmental primary or secondary
  276  health standards;
  277         (III) The replacement or upgrade of aging water or
  278  wastewater infrastructure if needed to achieve or maintain
  279  compliance with federal, state, and local governmental primary
  280  or secondary drinking water regulations; or
  281         (IV) Projects consistent with the most recent long-range
  282  plan of the utility on file with the commission. Eligible
  283  projects do not include projects primarily intended to serve
  284  future growth.
  285         i. Costs incurred for a tank inspection required by the
  286  Department of Environmental Protection or a local governmental
  287  authority.
  288         j. Operator and distribution license fees required by the
  289  Department of Environmental Protection or a local governmental
  290  authority.
  291         k. Water or wastewater operating permit fees charged by the
  292  Department of Environmental Protection or a local governmental
  293  authority.
  294         l. Consumptive or water use permit fees charged by a water
  295  management district.
  296         2. A utility may not use the procedure under this paragraph
  297  to increase or decrease its rates as a result of an increase or
  298  decrease in a specific expense item which occurred more than 12
  299  months before the filing by the utility.
  300         3. The commission may establish by rule additional specific
  301  expense items that cause an automatic increase or decrease in a
  302  utility’s rates as provided in this paragraph. To be eligible
  303  for such treatment, an additional expense item shall be imposed
  304  upon the utility by a federal, state, or local law, rule, order,
  305  or notice and shall be outside the control of the utility. If
  306  the commission exercises its authority to establish such rule,
  307  the commission shall, at least once every 5 years, review the
  308  rule and determine if each expense item should continue to be
  309  cause for the automatic increase or decrease of a utility’s
  310  rates, or if any additional items should become cause for the
  311  automatic increase or decrease of a utility’s rates as provided
  312  in this paragraph The approved rates of any utility which
  313  receives all or any portion of its utility service from a
  314  governmental authority or from a water or wastewater utility
  315  regulated by the commission and which redistributes that service
  316  to its utility customers shall be automatically increased or
  317  decreased without hearing, upon verified notice to the
  318  commission 45 days prior to its implementation of the increase
  319  or decrease that the rates charged by the governmental authority
  320  or other utility have changed. The approved rates of any utility
  321  which is subject to an increase or decrease in the rates or fees
  322  that it is charged for electric power, the amount of ad valorem
  323  taxes assessed against its used and useful property, the fees
  324  charged by the Department of Environmental Protection in
  325  connection with the National Pollutant Discharge Elimination
  326  System Program, or the regulatory assessment fees imposed upon
  327  it by the commission shall be increased or decreased by the
  328  utility, without action by the commission, upon verified notice
  329  to the commission 45 days prior to its implementation of the
  330  increase or decrease that the rates charged by the supplier of
  331  the electric power or the taxes imposed by the governmental
  332  authority, or the regulatory assessment fees imposed upon it by
  333  the commission have changed. The new rates authorized shall
  334  reflect the amount of the change of the ad valorem taxes or
  335  rates imposed upon the utility by the governmental authority,
  336  other utility, or supplier of electric power, or the regulatory
  337  assessment fees imposed upon it by the commission. The approved
  338  rates of any utility shall be automatically increased, without
  339  hearing, upon verified notice to the commission 45 days prior to
  340  implementation of the increase that costs have been incurred for
  341  water quality or wastewater quality testing required by the
  342  Department of Environmental Protection. The new rates authorized
  343  shall reflect, on an amortized basis, the cost of, or the amount
  344  of change in the cost of, required water quality or wastewater
  345  quality testing performed by laboratories approved by the
  346  Department of Environmental Protection for that purpose. The new
  347  rates, however, shall not reflect the costs of any required
  348  water quality or wastewater quality testing already included in
  349  a utility’s rates. A utility may not use this procedure to
  350  increase its rates as a result of water quality or wastewater
  351  quality testing or an increase in the cost of purchased water
  352  services, sewer services, or electric power or in assessed ad
  353  valorem taxes, which increase was initiated more than 12 months
  354  before the filing by the utility.
  355         4.The provisions of This subsection does do not prevent a
  356  utility from seeking a change in rates under pursuant to the
  357  provisions of subsection (2).
  358         (c) Before implementing a change in rates under this
  359  subsection, the utility must shall file an affirmation under
  360  oath as to the accuracy of the figures and calculations upon
  361  which the change in rates is based, stating that the change will
  362  not cause the utility to exceed the range of its last authorized
  363  rate of return on equity. A person who Whoever makes a false
  364  statement in the affirmation required under this subsection
  365  hereunder, which statement he or she does not believe to be true
  366  in regard to any material matter, commits is guilty of a felony
  367  of the third degree, punishable as provided in s. 775.082, s.
  368  775.083, or s. 775.084.
  369         (d) If, within 15 months after the filing of a utility’s
  370  annual report required by s. 367.121, the commission finds that
  371  the utility exceeded the range of its last authorized rate of
  372  return on equity after an adjustment in rates as authorized by
  373  this subsection was implemented within the year for which the
  374  report was filed or was implemented in the preceding year, the
  375  commission may order the utility to refund, with interest, the
  376  difference to the ratepayers and adjust rates accordingly. This
  377  provision does shall not be construed to require a bond or
  378  corporate undertaking not otherwise required.
  379         (e) Notwithstanding anything in this section herein to the
  380  contrary, a utility may not adjust its rates under this
  381  subsection more than two times in any 12-month period. For the
  382  purpose of this paragraph, a combined application or
  383  simultaneously filed applications that were filed under the
  384  provisions of paragraphs (a) and (b) are shall be considered one
  385  rate adjustment.
  386         (f) At least annually, the commission shall may regularly,
  387  not less often than once each year, establish by order a
  388  leverage formula or formulae that reasonably reflect the range
  389  of returns on common equity for an average water or wastewater
  390  utility and that which, for purposes of this section, are shall
  391  be used to calculate the last authorized rate of return on
  392  equity for a any utility which otherwise would not have an no
  393  established rate of return on equity. In any other proceeding in
  394  which an authorized rate of return on equity is to be
  395  established, a utility, in lieu of presenting evidence on its
  396  rate of return on common equity, may move the commission to
  397  adopt the range of rates of return on common equity which is
  398  that has been established under this paragraph.
  399         (7) A water utility may file tariffs establishing a
  400  surcharge, or other method for the automatic adjustment of its
  401  rates, which shall provide for recovery of the prudently
  402  incurred fixed costs consisting of depreciation and pretax
  403  returns of certain system improvement projects, as approved by
  404  the commission, which are completed and placed in service
  405  between base rate proceedings. Such projects shall be for the
  406  specific purpose of achieving compliance with secondary drinking
  407  water quality standards regarding taste, odor, color, or
  408  corrosiveness. With respect to each tariff filed, the commission
  409  shall prescribe the specific procedures to be followed in
  410  establishing the sliding scale or other automatic adjustment
  411  method.
  412         (8)(7) The commission shall determine the reasonableness of
  413  rate case expenses and shall disallow all rate case expenses
  414  determined to be unreasonable. A No rate case expense determined
  415  to be unreasonable may not shall be paid by a consumer. In
  416  determining the reasonable level of rate case expense, the
  417  commission shall consider the extent to which a utility has used
  418  utilized or failed to use utilize the provisions of paragraph
  419  (4)(a) or paragraph (4)(b) and such other criteria as it may
  420  establish by rule.
  421         Section 4. Subsection (3) of section 367.0814, Florida
  422  Statutes, is amended to read:
  423         367.0814 Staff assistance in changing rates and charges;
  424  interim rates.—
  425         (3) The provisions of s. 367.081(1), (2)(a), (2)(c), and
  426  (3), and (7) shall apply in determining the utility’s rates and
  427  charges.
  428         Section 5. Subsection (3) of section 403.8532, Florida
  429  Statutes, is amended to read:
  430         403.8532 Drinking water state revolving loan fund; use;
  431  rules.—
  432         (3) The department may make, or request that the
  433  corporation make, loans, grants, and deposits to community water
  434  systems, for-profit privately owned or investor-owned water
  435  systems, nonprofit transient noncommunity water systems, and
  436  nonprofit nontransient noncommunity water systems to assist them
  437  in planning, designing, and constructing public water systems,
  438  unless such public water systems are for-profit privately owned
  439  or investor-owned systems that regularly serve 1,500 service
  440  connections or more within a single certified or franchised
  441  area. However, a for-profit privately owned or investor-owned
  442  public water system that regularly serves 1,500 service
  443  connections or more within a single certified or franchised area
  444  may qualify for a loan only if the proposed project will result
  445  in the consolidation of two or more public water systems. The
  446  department may provide loan guarantees, purchase loan insurance,
  447  and refinance local debt through the issue of new loans for
  448  projects approved by the department. Public water systems may
  449  borrow funds made available pursuant to this section and may
  450  pledge any revenues or other adequate security available to them
  451  to repay any funds borrowed.
  452         (a) The department shall administer loans so that amounts
  453  credited to the Drinking Water Revolving Loan Trust Fund in any
  454  fiscal year are reserved for the following purposes:
  455         1. At least 15 percent for qualifying small public water
  456  systems.
  457         2. Up to 15 percent for qualifying financially
  458  disadvantaged communities.
  459         (b) If an insufficient number of the projects for which
  460  funds are reserved under this subsection have been submitted to
  461  the department at the time the funding priority list authorized
  462  under this section is adopted, the reservation of these funds no
  463  longer applies. The department may award the unreserved funds as
  464  otherwise provided in this section.
  465         Section 6. This act shall take effect July 1, 2014.