25-30.433. Rate Case Proceedings

In a rate case proceeding, the following provisions apply: (1) The Commission in every rate case will make a determination of the quality of service provided by the utility by evaluating the quality of utility’s product (water) and the utility’s attempt to address customer satisfaction (water and wastewater). In making this determination, the Commission will consider: (a) The most recent chemical analyses for each water system as described in paragraph 25-30.437(3)(c), F.A.C.; (b) Any Department of Environmental Protection (DEP) and county health department citations, violations and provisions of consent orders that relate to quality of service; (c) Any DEP and county health department officials’ testimony concerning quality of service; (d) Any testimony, complaints and comments of the utility’s customers and others with knowledge of the utility’s quality of service; and (e) Any utility testimony and responses to the information provided in paragraphs (1)(a)-(d) above. (2) In order to ensure safe, efficient, and sufficient service to utility customers, the Commission will consider whether the infrastructure and operational conditions of the plant and facilities are in compliance with Rule 25-30.225, F.A.C. In making this determination, the Commission will consider: (a) Any testimony of DEP and county health department officials; (b) Inspections, including sanitary surveys for water systems and compliance evaluation inspections for wastewater systems, and citations, violations and consent orders issued to the utility; (c) Any testimony, complaints and comments of the utility’s customers and others with knowledge of the infrastructure and operational conditions of the utility’s plant and facilities; and (d) Any utility testimony and responses to the information provided in paragraphs (2)(a)-(c) above. (3) Working capital for Class A utilities must be calculated using the balance sheet approach. Working capital for Class B and C utilities must be calculated using the formula method (one-eighth of operation and maintenance expenses). (4) Used and useful debit deferred taxes must be offset against used and useful credit deferred taxes in the capital structure. Any resulting net debit deferred taxes must be included as a separate line item in the rate base calculation. Any resulting net credit deferred taxes must be included in the capital structure calculation. No other deferred debits must be considered in rate base when the formula method of working capital is used. (5) The averaging method used by the Commission to calculate rate base and cost of capital will be a 13-month average for Class A utilities and the simple beginning and end-of-year average for Class B and C utilities. (6) Non-used and useful adjustments will be applied to the applicable depreciation expense. Property tax expense on non-used and useful plant will not be allowed. (7) Charitable contributions will not be recovered through rates. (8) Income tax expense will not be allowed for subchapter S corporations, partnerships or sole proprietorships. (9) Non-recurring expenses will be amortized over a 5-year period unless a shorter or longer period of time can be justified. (10) The amortization period for forced abandonment or the prudent retirement, in accordance with the NARUC USOA, incorporated by reference in Rule 25-30.115, F.A.C., of plant assets prior to the end of their depreciable life will be calculated by taking the ratio of the net loss (original cost less accumulated depreciation and contributions-in-aid-of-construction (CIAC) plus accumulated amortization of CIAC plus any costs incurred to remove the asset less any salvage value) to the sum of the annual depreciation expense, net of amortization of CIAC, plus an amount equal to the rate of return that would have been allowed on the net invested plant that would have been included in rate base before the abandonment or retirement. This formula will be used unless the specific circumstances surrounding the abandonment or retirement demonstrate a more appropriate amortization period. (11) A utility is required to have the right of access and continued use of the land upon which the utility treatment facilities are located. Documentation of continued use must be in the form of a recorded warranty deed, recorded quit claim deed accompanied by title insurance, recorded lease (such as a 99-year lease), or recorded easement. (12) In establishing an authorized rate of return on common equity, a utility, in lieu of presenting evidence, may use the current leverage formula adopted by Commission order. The equity return established must be based on the equity leverage order in effect at the time the Commission decides the case. (13) Nonutility investment should be removed directly from equity when reconciling the capital structure to rate base unless the utility can show, through competent evidence, that to do otherwise would result in a more equitable determination of the cost of capital for regulatory purposes. (14) Interest expense to be included in the calculation of income tax expense must be the amount derived by multiplying the amount of the debt components of the reconciled capital structure times the average weighted cost of the respective debt components. Interest expense must include an amount for the parent debt adjustment in those cases covered by Rule 25-14.004, F.A.C. Interest must also be imputed on deferred investment tax credits in those cases covered by 26 CFR Part 1, s. 1.46-6(b)(2)(i), (3) and (4)(ii) (April 7, 2008), incorporated by reference herein and which may be accessed at https://flrules.org/Gateway/reference.asp?No=Ref-19640 and effective for property constructed or acquired on or after August 15, 1971.