Florida Senate - 2013 SB 1386
By Senator Hays
11-00730B-13 20131386__
1 A bill to be entitled
2 An act relating to water and wastewater utility
3 systems; creating s. 159.810, F.S.; requiring that the
4 Division of Bond Finance of the State Board of
5 Administration review the allocation of private
6 activity bonds to determine the availability of
7 additional allocation or reallocation of bonds for
8 water and wastewater infrastructure projects; amending
9 s. 212.08, F.S.; extending tax exemptions to certain
10 investor-owned water and wastewater utilities;
11 amending s. 367.022, F.S.; exempting from regulation
12 by the Florida Public Service Commission any person
13 who resells water service to certain tenants or
14 residents up to a specified cost; amending s. 367.081,
15 F.S.; establishing criteria for the commission to
16 consider in determining the quality of water and
17 wastewater services provided by a utility;
18 establishing a procedure for the commission to follow
19 if it determines that a utility has failed to provide
20 water and wastewater services that meet certain
21 standards; authorizing rules adopted by the commission
22 to include fines; authorizing the commission to create
23 a utility reserve fund to establish rates for a
24 utility; providing reasons to automatically increase
25 or decrease approved rates of a utility; establishing
26 criteria for such adjusted rates; providing specified
27 expense items that are eligible for automatic increase
28 or decrease of utility rates; providing standards for
29 the commission to establish, by rule, additional
30 specific expense items that are eligible to
31 automatically increase or decrease utility rates;
32 deleting certain requirements for approved utility
33 rates that are automatically increased or decreased,
34 upon notice to the commission, because of an increase
35 or decrease in the fees imposed upon such utility;
36 deleting a prohibition on a utility from using such
37 procedure to increase its rates under certain
38 circumstances; prohibiting the commission from
39 awarding rate case expense under certain
40 circumstances; amending s. 367.0814, F.S.; describing
41 the circumstances under which the commission may and
42 may not award rate case expense to cover attorney fees
43 or fees for other outside consultants; providing that
44 the commission may adopt related rules; amending s.
45 367.0816, F.S.; requiring the commission to determine
46 that the amount of rate case expense is reasonable
47 before such rate case expense can be apportioned for a
48 4-year recovery period; providing limitations on and
49 rules for the 4-year amortized rate case expense
50 recovery; amending s. 403.8532, F.S.; allowing the
51 Department of Environmental Protection to make, or
52 request that the Florida Water Pollution Control
53 Financing Corporation make, loans, grants, and
54 deposits to for-profit privately owned or investor
55 owned systems, and deleting restrictions that provide
56 otherwise; providing an effective date.
57
58 Be It Enacted by the Legislature of the State of Florida:
59
60 Section 1. Section 159.810, Florida Statutes, is created to
61 read:
62 159.810 Allocation bonds for water and wastewater
63 infrastructure projects.—The division shall review the
64 allocation of private activity bonds to determine the
65 availability of additional allocation or reallocation of bonds
66 for water and wastewater infrastructure projects.
67 Section 2. Paragraph (kkk) is added to subsection (7) of
68 section 212.08, Florida Statutes, to read:
69 212.08 Sales, rental, use, consumption, distribution, and
70 storage tax; specified exemptions.—The sale at retail, the
71 rental, the use, the consumption, the distribution, and the
72 storage to be used or consumed in this state of the following
73 are hereby specifically exempt from the tax imposed by this
74 chapter.
75 (7) MISCELLANEOUS EXEMPTIONS.—Exemptions provided to any
76 entity by this chapter do not inure to any transaction that is
77 otherwise taxable under this chapter when payment is made by a
78 representative or employee of the entity by any means,
79 including, but not limited to, cash, check, or credit card, even
80 when that representative or employee is subsequently reimbursed
81 by the entity. In addition, exemptions provided to any entity by
82 this subsection do not inure to any transaction that is
83 otherwise taxable under this chapter unless the entity has
84 obtained a sales tax exemption certificate from the department
85 or the entity obtains or provides other documentation as
86 required by the department. Eligible purchases or leases made
87 with such a certificate must be in strict compliance with this
88 subsection and departmental rules, and any person who makes an
89 exempt purchase with a certificate that is not in strict
90 compliance with this subsection and the rules is liable for and
91 shall pay the tax. The department may adopt rules to administer
92 this subsection.
93 (kkk) Investor-owned water and wastewater utilities.—Sales
94 or leases to an investor-owned water or wastewater utility
95 operated by a Florida corporation are exempt from the tax
96 imposed by this chapter if the sole or primary function of the
97 corporation is to construct, maintain, or operate a water or
98 wastewater system in this state and if the goods or services
99 purchased or leased are used in this state.
100 Section 3. Present subsections (9) through (12) of section
101 367.022, Florida Statutes, are renumbered as subsections (10)
102 through (13), respectively, and a new subsection (9) is added to
103 that section, to read:
104 367.022 Exemptions.—The following are not subject to
105 regulation by the commission as a utility nor are they subject
106 to the provisions of this chapter, except as expressly provided:
107 (9) Any person who resells water service to his or her
108 tenants or to individually metered residents for a fee that does
109 not exceed the actual purchase price plus:
110 (a) Nine percent of the actual purchase price; or
111 (b) The actual cost of meter reading and billing.
112 Section 4. Subsections (2), (4), and (7) of section
113 367.081, Florida Statutes, are amended to read:
114 367.081 Rates; procedure for fixing and changing.—
115 (2)(a)1. The commission shall, either upon request or upon
116 its own motion, fix rates that which are just, reasonable,
117 compensatory, and not unfairly discriminatory. In every such
118 proceeding, the commission shall consider the value and quality
119 of the service and the cost of providing the service, which must
120 shall include, but need not be limited to, debt interest; the
121 requirements of the utility for working capital; maintenance,
122 depreciation, tax, and operating expenses incurred in the
123 operation of all property used and useful in the public service;
124 and a fair return on the investment of the utility in property
125 used and useful in the public service. However, the commission
126 may shall not allow the inclusion of contributions-in-aid-of
127 construction in the rate base of any utility during a rate
128 proceeding, nor shall the commission impute prospective future
129 contributions-in-aid-of-construction against the utility’s
130 investment in property used and useful in the public service;
131 and accumulated depreciation on such contributions-in-aid-of
132 construction may shall not be used to reduce the rate base, nor
133 shall depreciation on such contributed assets be considered a
134 cost of providing utility service.
135 2. For purposes of such proceedings, the commission shall
136 consider utility property, including land acquired or facilities
137 constructed or to be constructed within a reasonable time in the
138 future, not to exceed 24 months after the end of the historic
139 base year used to set final rates unless a longer period is
140 approved by the commission, to be used and useful in the public
141 service, if:
142 a. Such property is needed to serve current customers;
143 b. Such property is needed to serve customers 5 years after
144 the end of the test year used in the commission’s final order on
145 a rate request as provided in subsection (6) at a growth rate
146 for equivalent residential connections not to exceed 5 percent
147 per year; or
148 c. Such property is needed to serve customers more than 5
149 full years after the end of the test year used in the
150 commission’s final order on a rate request as provided in
151 subsection (6) only to the extent that the utility presents
152 clear and convincing evidence to justify such consideration.
153 3. In determining the value and quality of water service
154 provided by a utility and whether such utility has satisfied its
155 obligation to provide water service to its customers, the
156 commission must consider the extent to which the utility meets
157 secondary drinking water standards regarding the taste, odor,
158 color, or corrosiveness which are established by the Department
159 of Environmental Protection and the local government. The
160 commission must consider:
161 a. Testimony and evidence provided by customers and the
162 utility.
163 b. Complaints customers have filed over the past 5 years
164 with the commission, the Department of Environmental Protection,
165 the county health departments, or the local government which
166 relate to the taste, odor, color, or corrosiveness.
167 c. The results of past tests required by the Department of
168 Environmental Protection or county health departments which
169 measure the utility’s compliance with the applicable secondary
170 drinking water standards relating to the taste, odor, color, or
171 corrosiveness.
172 d. Other tests that the commission deems necessary.
173 4. In determining the value and quality of wastewater
174 service provided by a utility, the commission must consider the
175 extent to which the utility provides wastewater service to its
176 customers which does not cause odor, noise, aerosol drift, or
177 lighting that adversely affects customers. The commission must
178 consider:
179 a. Testimony and evidence provided by customers and the
180 utility.
181 b. Complaints customers have filed over the past 5 years
182 with the commission, the Department of Environmental Protection,
183 the county health departments, or the local government which
184 relate to the alleged odor, noise, aerosol drift, or lighting
185 problem.
186 5. If the commission determines that a utility provides
187 water service that does not meet the secondary water quality
188 standards of the Department of Environmental Protection and the
189 local government regarding taste, odor, color, or corrosiveness,
190 or that a utility provides wastewater service that adversely
191 affects customers due to odor, noise, aerosol drift, or
192 lighting, the utility must provide estimates of the costs and
193 benefits of various solutions to the problems. The utility must
194 meet with its customers to discuss the costs and benefits of the
195 various solutions and report to the commission the conclusions
196 of the meetings. The commission shall adopt rules to assess and
197 enforce as necessary the utility’s compliance with this section.
198 The rules must prescribe penalties, including fines and
199 reduction of return on equity of up to 100 basis points, if a
200 utility fails to adequately address or offer solutions to the
201 water or wastewater problems.
202
203 Notwithstanding the provisions of this paragraph, the commission
204 shall approve rates for service which allow a utility to recover
205 from customers the full amount of environmental compliance
206 costs. Such rates may not include charges for allowances for
207 funds prudently invested or similar charges. For purposes of
208 this requirement, the term “environmental compliance costs”
209 includes all reasonable expenses and fair return on any prudent
210 investment incurred by a utility in complying with the
211 requirements or conditions contained in any permitting,
212 enforcement, or similar decisions of the United States
213 Environmental Protection Agency, the Department of Environmental
214 Protection, a water management district, or any other
215 governmental entity with similar regulatory jurisdiction.
216 (b) In establishing initial rates for a utility, the
217 commission may project the financial and operational data as set
218 out in paragraph (a) to a point in time when the utility is
219 expected to be operating at a reasonable level of capacity.
220 (c) In establishing rates for a utility, the commission may
221 authorize the creation of a utility reserve fund. The commission
222 shall adopt rules to govern the fund, including, but not limited
223 to, rules relating to expenses for which the fund may be used,
224 segregation of reserve account funds, requirements for a capital
225 improvement plan, and requirements for commission authorization
226 before disbursements from the reserve fund.
227 (4)(a) On or before March 31 of each year, the commission
228 by order shall establish a price increase or decrease index for
229 major categories of operating costs incurred by utilities
230 subject to its jurisdiction reflecting the percentage of
231 increase or decrease in such costs from the most recent 12-month
232 historical data available. The commission by rule shall
233 establish the procedure to be used in determining such indices
234 and a procedure by which a utility, without further action by
235 the commission, or the commission on its own motion, may
236 implement an increase or decrease in its rates based upon the
237 application of the indices to the amount of the major categories
238 of operating costs incurred by the utility during the
239 immediately preceding calendar year, except to the extent of any
240 disallowances or adjustments for those expenses of that utility
241 in its most recent rate proceeding before the commission. The
242 rules shall provide that, upon a finding of good cause,
243 including inadequate service, the commission may order a utility
244 to refrain from implementing a rate increase hereunder unless
245 implemented under a bond or corporate undertaking in the same
246 manner as interim rates may be implemented under s. 367.082. A
247 utility may not use this procedure between the official filing
248 date of the rate proceeding and 1 year thereafter, unless the
249 case is completed or terminated at an earlier date. A utility
250 may not use this procedure to increase any operating cost for
251 which an adjustment has been or could be made under paragraph
252 (b), or to increase its rates by application of a price index
253 other than the most recent price index authorized by the
254 commission at the time of filing.
255 (b)1. The approved rates of a utility must automatically
256 increase or decrease, without hearing, upon verified notice to
257 the commission 45 days before implementation of the increase or
258 decrease, informing the commission that its costs for a
259 specified expense item have changed. The new rates authorized
260 must reflect, on an amortized or annual basis, as appropriate,
261 the cost or amount of change in the cost of the specified
262 expense item. The new rates may not reflect the costs of a
263 specified expense item already included in the rates of a
264 utility. Specified expense items eligible for automatic increase
265 or decrease of a utility’s rates include, but are not limited
266 to:
267 a. The rates charged by a governmental authority or other
268 water or wastewater utility regulated by the commission which
269 provides utility service to the utility.
270 b. The rates or fees that the utility is charged for
271 electric power.
272 c. The amount of ad valorem taxes assessed against the
273 utility’s used and useful property.
274 d. The fees charged by the Department of Environmental
275 Protection in connection with the National Pollutant Discharge
276 Elimination System Program permit.
277 e. The regulatory assessment fees imposed upon the utility
278 by the commission.
279 f. Costs incurred for water quality or wastewater quality
280 testing required by the Department of Environmental Protection.
281 g. The fees charged for wastewater sludge disposal.
282 h. A loan service fee or loan origination fee associated
283 with a loan related to an eligible project. The commission shall
284 adopt rules to determine eligible projects, which must be
285 limited to projects associated with new infrastructure or
286 improvements to existing infrastructure needed to achieve or
287 maintain compliance with federal, state, and local governmental
288 primary or secondary drinking water standards or wastewater
289 treatment standards that relate to:
290 (I) The provision of water or wastewater service for
291 existing customers;
292 (II) The violation or prevention of a violation of federal,
293 state, and local governmental primary or secondary health
294 standards;
295 (III) The replacement or upgrade of aging water or
296 wastewater infrastructure if needed to achieve or maintain
297 compliance with federal, state, and local governmental primary
298 or secondary regulations; or
299 (IV) Projects consistent with the most recent long-range
300 plan of the utility on file with the commission. Eligible
301 projects do not include projects primarily intended to serve
302 future growth.
303 i. Costs incurred for a tank inspection required by the
304 Department of Environmental Protection or a local governmental
305 authority.
306 j. Operator and distribution license fees required by the
307 Department of Environmental Protection or a local governmental
308 authority.
309 k. Water or wastewater operating permit fees charged by the
310 Department of Environmental Protection or a local governmental
311 authority.
312 l. Consumptive or water use permit fees charged by a water
313 management district.
314 2. A utility may not use this procedure to increase or
315 decrease its rates as a result of an increase or decrease in a
316 specific expense item for which a cost increase or decrease
317 occurred more than 12 months before the filing by the utility.
318 3. The commission may establish by rule additional specific
319 expense items that are eligible to automatically increase or
320 decrease a utility’s rates as provided in this paragraph. To be
321 eligible for such treatment, any additional expense items must
322 be imposed upon the utility by a local, state, or federal law,
323 rule, order, or notice, and must be outside the control of the
324 utility. If the commission exercises its authority to establish
325 such rule, at least once every 5 years the commission must
326 review the rule and determine if each expense item should
327 continue to be eligible for automatic increase or decrease of a
328 utility’s rates, or if any additional items should become
329 eligible for automatic increase or decrease of a utility’s rates
330 as provided in this paragraph The approved rates of any utility
331 which receives all or any portion of its utility service from a
332 governmental authority or from a water or wastewater utility
333 regulated by the commission and which redistributes that service
334 to its utility customers shall be automatically increased or
335 decreased without hearing, upon verified notice to the
336 commission 45 days prior to its implementation of the increase
337 or decrease that the rates charged by the governmental authority
338 or other utility have changed. The approved rates of any utility
339 which is subject to an increase or decrease in the rates or fees
340 that it is charged for electric power, the amount of ad valorem
341 taxes assessed against its used and useful property, the fees
342 charged by the Department of Environmental Protection in
343 connection with the National Pollutant Discharge Elimination
344 System Program, or the regulatory assessment fees imposed upon
345 it by the commission shall be increased or decreased by the
346 utility, without action by the commission, upon verified notice
347 to the commission 45 days prior to its implementation of the
348 increase or decrease that the rates charged by the supplier of
349 the electric power or the taxes imposed by the governmental
350 authority, or the regulatory assessment fees imposed upon it by
351 the commission have changed. The new rates authorized shall
352 reflect the amount of the change of the ad valorem taxes or
353 rates imposed upon the utility by the governmental authority,
354 other utility, or supplier of electric power, or the regulatory
355 assessment fees imposed upon it by the commission. The approved
356 rates of any utility shall be automatically increased, without
357 hearing, upon verified notice to the commission 45 days prior to
358 implementation of the increase that costs have been incurred for
359 water quality or wastewater quality testing required by the
360 Department of Environmental Protection. The new rates authorized
361 shall reflect, on an amortized basis, the cost of, or the amount
362 of change in the cost of, required water quality or wastewater
363 quality testing performed by laboratories approved by the
364 Department of Environmental Protection for that purpose. The new
365 rates, however, shall not reflect the costs of any required
366 water quality or wastewater quality testing already included in
367 a utility’s rates. A utility may not use this procedure to
368 increase its rates as a result of water quality or wastewater
369 quality testing or an increase in the cost of purchased water
370 services, sewer services, or electric power or in assessed ad
371 valorem taxes, which increase was initiated more than 12 months
372 before the filing by the utility.
373 4. The provisions of this subsection do not prevent a
374 utility from seeking a change in rates pursuant to the
375 provisions of subsection (2).
376 (c) Before implementing a change in rates under this
377 subsection, the utility shall file an affirmation under oath as
378 to the accuracy of the figures and calculations upon which the
379 change in rates is based, stating that the change will not cause
380 the utility to exceed the range of its last authorized rate of
381 return on equity. Whoever makes a false statement in the
382 affirmation required hereunder, which statement he or she does
383 not believe to be true in regard to any material matter, commits
384 is guilty of a felony of the third degree, punishable as
385 provided in s. 775.082, s. 775.083, or s. 775.084.
386 (d) If, within 15 months after the filing of a utility’s
387 annual report required by s. 367.121, the commission finds that
388 the utility exceeded the range of its last authorized rate of
389 return on equity after an adjustment in rates as authorized by
390 this subsection was implemented within the year for which the
391 report was filed or was implemented in the preceding year, the
392 commission may order the utility to refund, with interest, the
393 difference to the ratepayers and adjust rates accordingly. This
394 provision does shall not be construed to require a bond or
395 corporate undertaking not otherwise required.
396 (e) Notwithstanding anything herein to the contrary, a
397 utility may not adjust its rates under this subsection more than
398 two times in any 12-month period. For the purpose of this
399 paragraph, a combined application or simultaneously filed
400 applications that were filed under the provisions of paragraphs
401 (a) and (b) shall be considered one rate adjustment.
402 (f) The commission shall, at least may regularly, not less
403 often than once each year, establish by order a leverage formula
404 or formulae that reasonably reflect the range of returns on
405 common equity for an average water or wastewater utility and
406 which, for purposes of this section, shall be used to calculate
407 the last authorized rate of return on equity for any utility
408 which otherwise would have no established rate of return on
409 equity. In any other proceeding in which an authorized rate of
410 return on equity is to be established, a utility, in lieu of
411 presenting evidence on its rate of return on common equity, may
412 move the commission to adopt the range of rates of return on
413 common equity that has been established under this paragraph.
414 (7) The commission shall determine the reasonableness of
415 rate case expenses and shall disallow all rate case expenses
416 determined to be unreasonable. No rate case expense determined
417 to be unreasonable shall be paid by a consumer. In determining
418 the reasonable level of rate case expense the commission shall
419 consider the extent to which a utility has utilized or failed to
420 utilize the provisions of paragraph (4)(a) or paragraph (4)(b)
421 and such other criteria as it may establish by rule. The
422 commission may not award rate case expense that exceeds the
423 total rate increase approved by the commission, not including
424 any rate case expense, in a rate case filed pursuant to this
425 section.
426 Section 5. Subsection (3) of section 367.0814, Florida
427 Statutes, is amended to read:
428 367.0814 Staff assistance in changing rates and charges;
429 interim rates.—
430 (3) The provisions of s. 367.081(1), (2)(a), (2)(c), and
431 (3), and (7) shall apply in determining the utility’s rates and
432 charges. However, the commission may not award rate case expense
433 to cover fees for attorneys or other outside consultants who are
434 engaged for purposes of preparing or filing the case if a
435 utility receives staff assistance in changing rates and charges
436 pursuant to this section, unless the Office of Public Counsel or
437 interested parties have intervened. The commission may award
438 rate case expense for attorney fees or other outside consultant
439 fees if the fees are incurred for the purpose of providing
440 consulting or legal services to the utility after the initial
441 staff report is made available to customers and the utility. If
442 there is a protest or appeal by a party other than the utility,
443 the commission may award rate case expense to the utility for
444 attorney fees or other outside consultant fees for costs
445 incurred after the protest or appeal. The commission may adopt
446 rules to implement this subsection.
447 Section 6. Section 367.0816, Florida Statutes, is amended
448 to read:
449 367.0816 Recovery of rate case expenses.—
450 (1) The amount of rate case expense determined to be
451 reasonable by the commission pursuant to s. 367.081 the
452 provisions of this chapter to be recovered through a public
453 utilities rate shall be apportioned for recovery over a period
454 of 4 years. At the conclusion of the recovery period, the rate
455 of the public utility shall be reduced immediately by the amount
456 of rate case expense previously included in rates.
457 (2) A utility may recover the 4-year amortized rate case
458 expense for only one rate case at a time. If the commission
459 approves and a utility implements a rate change from a
460 subsequent rate case pursuant to this section, the utility
461 forfeits any unamortized rate case expense from a prior rate
462 case. The unamortized portion of rate case expense for a prior
463 case must be removed from rates before the implementation of an
464 additional amortized rate case expense for the most recent rate
465 proceeding. This limitation does not apply to the recovery of
466 rate case expense for a limited proceeding filed pursuant to s.
467 367.0822.
468 Section 7. Subsection (3) of section 403.8532, Florida
469 Statutes, is amended to read:
470 403.8532 Drinking water state revolving loan fund; use;
471 rules.—
472 (3) The department may make, or request that the
473 corporation make, loans, grants, and deposits to community water
474 systems, for-profit privately owned or investor-owned systems,
475 nonprofit transient noncommunity water systems, and nonprofit
476 nontransient noncommunity water systems to assist them in
477 planning, designing, and constructing public water systems,
478 unless such public water systems are for-profit privately owned
479 or investor-owned systems that regularly serve 1,500 service
480 connections or more within a single certified or franchised
481 area. However, a for-profit privately owned or investor-owned
482 public water system that regularly serves 1,500 service
483 connections or more within a single certified or franchised area
484 may qualify for a loan only if the proposed project will result
485 in the consolidation of two or more public water systems. The
486 department may provide loan guarantees, purchase loan insurance,
487 and refinance local debt through the issue of new loans for
488 projects approved by the department. Public water systems may
489 borrow funds made available pursuant to this section and may
490 pledge any revenues or other adequate security available to them
491 to repay any funds borrowed.
492 (a) The department shall administer loans so that amounts
493 credited to the Drinking Water Revolving Loan Trust Fund in any
494 fiscal year are reserved for the following purposes:
495 1. At least 15 percent for qualifying small public water
496 systems.
497 2. Up to 15 percent for qualifying financially
498 disadvantaged communities.
499 (b) If an insufficient number of the projects for which
500 funds are reserved under this subsection have been submitted to
501 the department at the time the funding priority list authorized
502 under this section is adopted, the reservation of these funds no
503 longer applies. The department may award the unreserved funds as
504 otherwise provided in this section.
505 Section 8. This act shall take effect July 1, 2013.