Bill Text: FL S1050 | 2014 | Regular Session | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Water and Wastewater Utility Systems
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Failed) 2014-05-02 - Died in Appropriations Subcommittee on Finance and Tax [S1050 Detail]
Download: Florida-2014-S1050-Introduced.html
Bill Title: Water and Wastewater Utility Systems
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Failed) 2014-05-02 - Died in Appropriations Subcommittee on Finance and Tax [S1050 Detail]
Download: Florida-2014-S1050-Introduced.html
Florida Senate - 2014 SB 1050 By Senator Hays 11-00226B-14 20141050__ 1 A bill to be entitled 2 An act relating to water and wastewater utility 3 systems; creating s. 159.810, 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 and wastewater infrastructure projects; amending 9 s. 212.08, F.S.; extending specified tax exemptions to 10 certain investor-owned water and wastewater utilities; 11 amending s. 367.022, F.S.; exempting from regulation 12 by the Florida Public Service Commission a person who 13 resells water service to certain tenants or residents 14 up to a specified cost; amending s. 367.081, F.S.; 15 establishing criteria for determining the quality of 16 water and wastewater services provided by a utility; 17 establishing a procedure for the commission to follow 18 if it determines that a utility has failed to provide 19 water and wastewater services that meet certain 20 standards; authorizing the commission to adopt rules 21 that include fines; authorizing the commission to 22 create a utility reserve fund to establish rates for a 23 utility; providing for the automatic increase or 24 decrease of approved rates under certain 25 circumstances; establishing criteria for adjusted 26 rates; specifying expense items that cause an 27 automatic increase or decrease in utility rates; 28 providing standards to allow the commission to 29 establish, by rule, additional specified expense items 30 that cause an automatic increase or decrease of 31 utility rates; deleting certain requirements for 32 approved utility rates that are automatically 33 increased or decreased, upon notice to the commission; 34 deleting a prohibition to conform to changes made by 35 the act; prohibiting the commission from awarding rate 36 case expense under certain circumstances; amending s. 37 367.0814, F.S.; describing the circumstances under 38 which the commission may award rate case expense to 39 cover attorney fees or fees for other outside 40 consultants; requiring the commission to adopt related 41 rules; amending s. 367.0816, F.S.; requiring the 42 commission to determine that the amount of rate case 43 expense is reasonable before the expense can be 44 apportioned for a certain period; providing 45 limitations on and rules for the amortized rate case 46 expense recovery; amending s. 403.8532, F.S.; allowing 47 the Department of Environmental Protection to make, or 48 to request that the Florida Water Pollution Control 49 Financing Corporation make, loans, grants, and 50 deposits to for-profit privately owned or investor 51 owned systems, and deleting current restrictions on 52 such activity; providing an effective date. 53 54 Be It Enacted by the Legislature of the State of Florida: 55 56 Section 1. Section 159.810, Florida Statutes, is created to 57 read: 58 159.810 Allocation of bonds for water and wastewater 59 infrastructure projects.—The division shall review the 60 allocation of private activity bonds to determine the 61 availability of additional allocation or reallocation of bonds 62 for water and wastewater infrastructure projects. 63 Section 2. Paragraph (kkk) is added to subsection (7) of 64 section 212.08, Florida Statutes, to read: 65 212.08 Sales, rental, use, consumption, distribution, and 66 storage tax; specified exemptions.—The sale at retail, the 67 rental, the use, the consumption, the distribution, and the 68 storage to be used or consumed in this state of the following 69 are hereby specifically exempt from the tax imposed by this 70 chapter. 71 (7) MISCELLANEOUS EXEMPTIONS.—Exemptions provided to any 72 entity by this chapter do not inure to any transaction that is 73 otherwise taxable under this chapter when payment is made by a 74 representative or employee of the entity by any means, 75 including, but not limited to, cash, check, or credit card, even 76 when that representative or employee is subsequently reimbursed 77 by the entity. In addition, exemptions provided to any entity by 78 this subsection do not inure to any transaction that is 79 otherwise taxable under this chapter unless the entity has 80 obtained a sales tax exemption certificate from the department 81 or the entity obtains or provides other documentation as 82 required by the department. Eligible purchases or leases made 83 with such a certificate must be in strict compliance with this 84 subsection and departmental rules, and aanyperson who makes an 85 exempt purchase with a certificate that is not in strict 86 compliance with this subsection and the rules is liable for and 87 shall pay the tax. The department may adopt rules to administer 88 this subsection. 89 (kkk) Investor-owned water and wastewater utilities.—Sales 90 or leases to an investor-owned water or wastewater utility owned 91 or operated by a Florida corporation are exempt from the tax 92 imposed by this chapter if the sole or primary function of the 93 corporation is to construct, maintain, or operate a water or 94 wastewater system in this state and if the goods or services 95 purchased or leased are used in this state. 96 Section 3. Present subsections (9) through (12) of section 97 367.022, Florida Statutes, are redesignated as subsections (10) 98 through (13), respectively, and a new subsection (9) is added to 99 that section, to read: 100 367.022 Exemptions.—The following are not subject to 101 regulation by the commission as a utility nor are they subject 102 to the provisions of this chapter, except as expressly provided: 103 (9) Any person who resells water service to his or her 104 tenants or to individually metered residents for a fee that does 105 not exceed the actual purchase price plus: 106 (a) Up to 9 percent of the actual purchase price; or 107 (b) The actual cost of meter reading and billing. 108 Section 4. Subsections (2), (4), and (7) of section 109 367.081, Florida Statutes, are amended to read: 110 367.081 Rates; procedure for fixing and changing.— 111 (2)(a)1.The commission shall,eitherupon request or upon 112 its own motion, fix rates thatwhichare just, reasonable, 113 compensatory, and not unfairly discriminatory. 114 1. In eacheverysuch proceeding, the commission shall 115 consider the value and quality of the service and the cost of 116 providing the service, which mustshallinclude, but need not be 117 limited to, debt interest; the requirements of the utility for 118 working capital; maintenance, depreciation, tax, and operating 119 expenses incurred in the operation of all property used and 120 useful in the public service; and a fair return on the 121 investment of the utility in property used and useful in the 122 public service. However, the commission shall not allow the 123 inclusion of contributions-in-aid-of-construction in the rate 124 base of aanyutility during a rate proceeding or,nor shall the125commissionimpute prospective future contributions-in-aid-of 126 construction against the utility’s investment in property used 127 and useful in the public service.; andAccumulated depreciation 128 on such contributions-in-aid-of-construction shall not be used 129 to reduce the rate base, andnor shalldepreciation on such 130 contributed assets shall not be considered a cost of providing 131 utility service. 132 2. For purposes of such proceedings, the commission shall 133 consider utility property, including land acquired or facilities 134 constructed or to be constructed within a reasonable time in the 135 future, up tonot to exceed24 months after the end of the 136 historic base year used to set final rates unless a longer 137 period is approved by the commission, to be used and useful in 138 the public service, if: 139 a. Such property is needed to serve current customers; 140 b. Such property is needed to serve customers 5 years after 141 the end of the test year used in the commission’s final order on 142 a rate request as provided in subsection (6) at a growth rate 143 for equivalent residential connections up tonot to exceed5 144 percent per year; or 145 c. Such property is needed to serve customers more than 5 146 full years after the end of the test year used in the 147 commission’s final order on a rate request as provided in 148 subsection (6) only to the extent that the utility presents 149 clear and convincing evidence to justify such consideration. 150 3. In determining the value and quality of water service 151 provided by a utility and whether such utility has satisfied its 152 obligation to provide water service to its customers, the 153 commission shall consider the extent to which the utility meets 154 secondary drinking water standards regarding taste, odor, color, 155 or corrosiveness which are established by the Department of 156 Environmental Protection and the local government. In making its 157 determination, the commission shall consider: 158 a. Testimony and evidence provided by customers and the 159 utility; 160 b. Complaints that relate to the secondary water standards 161 which customers have filed during the past 5 years with the 162 commission, the Department of Environmental Protection, the 163 county health departments, or the local government; 164 c. The results of past tests required by the Department of 165 Environmental Protection or county health departments which 166 measure the utility’s compliance with the applicable secondary 167 drinking water standards; and 168 d. The results of other tests, if deemed necessary by the 169 commission. 170 4. In determining the value and quality of wastewater 171 service provided by a utility, the commission shall consider the 172 extent to which the utility provides wastewater service to its 173 customers which does not cause odor, noise, aerosol drift, or 174 lighting that adversely affects customers. In making its 175 determination, the commission shall consider: 176 a. Testimony and evidence provided by customers and the 177 utility; and 178 b. All complaints related to the alleged odor, noise, 179 aerosol drift, or lighting problem which customers have filed 180 over the past 5 years with any of the following: 181 (I) The commission; 182 (II) The Department of Environmental Protection; 183 (III) The county health departments; or 184 (IV) The local government. 185 5. If the commission determines that a utility provides 186 water service that does not meet the secondary water quality 187 standards of the Department of Environmental Protection and the 188 local government regarding taste, odor, color, or corrosiveness, 189 or that a utility provides wastewater service that adversely 190 affects customers due to odor, noise, aerosol drift, or 191 lighting, the utility shall provide estimates of the costs and 192 benefits of various solutions to the problems. The utility must 193 meet with its customers to discuss the costs and benefits of the 194 various solutions and report to the commission the conclusions 195 of the meetings. The commission shall adopt rules necessary to 196 assess and enforce the utility’s compliance with this section. 197 The rules must prescribe penalties, including fines and 198 reduction of return on equity of up to 100 basis points, if a 199 utility fails to adequately address or offer solutions to the 200 water or wastewater problems. 201 202 Notwithstandingthe provisions ofthis paragraph, the commission 203 shall approve rates for service which allow a utility to recover 204 from customers the full amount of environmental compliance 205 costs. Such rates may not include charges for allowances for 206 funds prudently invested or similar charges. For purposes of 207 this requirement, the term “environmental compliance costs” 208 includes all reasonable expenses and fair return on any prudent 209 investment incurred by a utility in complying with the 210 requirements or conditions contained in any permitting, 211 enforcement, or similar decisions of the United States 212 Environmental Protection Agency, the Department of Environmental 213 Protection, a water management district, or any other 214 governmental entity with similar regulatory jurisdiction. 215 (b) In establishing initial rates for a utility, the 216 commission may project the financial and operational data as set 217 out in paragraph (a) to a point in time when the utility is 218 expected to be operating at a reasonable level of capacity. 219 (c) In establishing rates for a utility, the commission may 220 authorize the creation of a utility reserve fund. The commission 221 shall adopt rules to govern the fund, including, but not limited 222 to, rules relating to expenses for which the fund may be used, 223 segregation of reserve account funds, requirements for a capital 224 improvement plan, and requirements for commission authorization 225 before disbursements from the reserve fund. 226 (4)(a) On or before March 31 of each year, the commission 227 by order shall establish a price increase or decrease index for 228 major categories of operating costs incurred by utilities 229 subject to its jurisdiction reflecting the percentage of 230 increase or decrease in such costs from the most recent 12-month 231 historical data available. The commission by rule shall 232 establish the procedure to be used in determining such indices 233 and a procedure by which a utility, without further action by 234 the commission, or the commission on its own motion, may 235 implement an increase or decrease in its rates based upon the 236 application of the indices to the amount of the major categories 237 of operating costs incurred by the utility during the 238 immediately preceding calendar year, except to the extent of any 239 disallowances or adjustments for those expenses of that utility 240 in its most recent rate proceeding before the commission. The 241 rules shall provide that, upon a finding of good cause, 242 including inadequate service, the commission may order a utility 243 to refrain from implementing a rate increase hereunder unless 244 implemented under a bond or corporate undertaking in the same 245 manner as interim rates may be implemented under s. 367.082. A 246 utility may not use this procedure between the official filing 247 date of the rate proceeding and 1 year thereafter, unless the 248 case is completed or terminated at an earlier date. A utility 249 may not use this procedure to increase any operating cost for 250 which an adjustment has been or could be made under paragraph 251 (b), or to increase its rates by application of a price index 252 other than the most recent price index authorized by the 253 commission at the time of filing. 254 (b) Upon verified notice to the commission 45 days before 255 implementation of the increase or decrease, and without a 256 hearing, the approved rates of a utility must automatically 257 increase or decrease. Such notice must inform the commission 258 that the utility’s costs for a specified expense item have 259 changed. 260 1. The new rates must reflect, on an amortized or annual 261 basis, as appropriate, the cost or amount of change in the cost 262 of the specified expense item. The new rates may not reflect the 263 costs of a specified expense item already included in the rates 264 of a utility. Specified expense items eligible for automatic 265 increase or decrease of a utility’s rates include, but are not 266 limited 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 governing the determination of eligible projects, 285 which must be limited to those projects associated with new 286 infrastructure or improvements to existing infrastructure needed 287 to achieve or maintain compliance with federal, state, and local 288 governmental primary or secondary drinking water standards or 289 wastewater 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 the procedure under this paragraph 315 to increase or decrease its rates as a result of an increase or 316 decrease in a specific expense item which occurred more than 12 317 months before the filing by the utility. 318 3. The commission may establish by rule additional specific 319 expense items that cause an automatic increase or decrease in a 320 utility’s rates as provided in this paragraph. To be eligible 321 for such treatment, an additional expense item must be imposed 322 upon the utility by a local, state, or federal law, rule, order, 323 or notice and must be outside the control of the utility. If the 324 commission exercises its authority to establish such rule, the 325 commission must, at least once every 5 years, review the rule 326 and determine if each expense item should continue to be cause 327 for the automatic increase or decrease of a utility’s rates or 328 if any additional items should become cause for the automatic 329 increase or decrease of a utility’s rates as provided in this 330 paragraphThe approved rates of any utility which receives all331or any portion of its utility service from a governmental332authority or from a water or wastewater utility regulated by the333commission and which redistributes that service to its utility334customers shall be automatically increased or decreased without335hearing, upon verified notice to the commission 45 days prior to336its implementation of the increase or decrease that the rates337charged by the governmental authority or other utility have338changed.The approved rates of any utility which is subject to339an increase or decrease in the rates or fees that it is charged340for electric power, the amount of ad valorem taxes assessed341against its used and useful property, the fees charged by the342Department of Environmental Protection in connection with the343National Pollutant Discharge Elimination System Program, or the344regulatory assessment fees imposed upon it by the commission345shall be increased or decreased by the utility, without action346by the commission, upon verified notice to the commission 45347days prior to its implementation of the increase or decrease348that the rates charged by the supplier of the electric power or349the taxes imposed by the governmental authority, or the350regulatory assessment fees imposed upon it by the commission351have changed. The new rates authorized shall reflect the amount352of the change of the ad valorem taxes or rates imposed upon the353utility by the governmental authority, other utility, or354supplier of electric power, or the regulatory assessment fees355imposed upon it by the commission. The approved rates of any356utility shall be automatically increased, without hearing, upon357verified notice to the commission 45 days prior to358implementation of the increase that costs have been incurred for359water quality or wastewater quality testing required by the360Department of Environmental Protection. The new rates authorized361shall reflect, on an amortized basis, the cost of, or the amount362of change in the cost of, required water quality or wastewater363quality testing performed by laboratories approved by the364Department of Environmental Protection for that purpose. The new365rates, however, shall not reflect the costs of any required366water quality or wastewater quality testing already included in367a utility’s rates. A utility may not use this procedure to368increase its rates as a result of water quality or wastewater369quality testing or an increase in the cost of purchased water370services, sewer services, or electric power or in assessed ad371valorem taxes, which increase was initiated more than 12 months372before the filing by the utility.373 4.The provisions ofThis subsection doesdonot prevent a 374 utility from seeking a change in rates underpursuant to the375provisions ofsubsection (2). 376 (c) Before implementing a change in rates under this 377 subsection, the utility mustshallfile an affirmation under 378 oath as to the accuracy of the figures and calculations upon 379 which the change in rates is based, stating that the change will 380 not cause the utility to exceed the range of its last authorized 381 rate of return on equity. A person whoWhoevermakes a false 382 statement in the affirmation required under this subsection 383hereunder, which statement he or she does not believe to be true 384 in regard to any material matter, commitsis guilty ofa felony 385 of the third degree, punishable as provided in s. 775.082, s. 386 775.083, or s. 775.084. 387 (d) If, within 15 months after the filing of a utility’s 388 annual report required by s. 367.121, the commission finds that 389 the utility exceeded the range of its last authorized rate of 390 return on equity after an adjustment in rates as authorized by 391 this subsection was implemented within the year for which the 392 report was filed or was implemented in the preceding year, the 393 commission may order the utility to refund, with interest, the 394 difference to the ratepayers and adjust rates accordingly. This 395 provision doesshallnotbe construed torequire a bond or 396 corporate undertaking not otherwise required. 397 (e) Notwithstanding anything in this sectionhereinto the 398 contrary, a utility may not adjust its rates under this 399 subsection more than two times in any 12-month period. For the 400 purpose of this paragraph, a combined application or 401 simultaneously filed applications that were filed under the 402 provisions of paragraphs (a) and (b) areshall beconsidered one 403 rate adjustment. 404 (f) At least annually, the commission shallmay regularly,405not less often thanonce each year,establish by order a 406 leverage formula or formulae that reasonably reflect the range 407 of returns on common equity for an average water or wastewater 408 utility and which, for purposes of this section, areshall be409 used to calculate the last authorized rate of return on equity 410 for aanyutility which otherwise would not have anno411 established rate of return on equity. In any other proceeding in 412 which an authorized rate of return on equity is to be 413 established, a utility, in lieu of presenting evidence on its 414 rate of return on common equity, may move the commission to 415 adopt the range of rates of return on common equity which is 416that has beenestablished under this paragraph. 417 (7) The commission shall determine the reasonableness of 418 rate case expenses and shall disallow all rate case expenses 419 determined to be unreasonable. ANorate case expense determined 420 to be unreasonable may not beshall bepaid by a consumer. In 421 determining the reasonable level of rate case expense, the 422 commission shall consider the extent to which a utility has used 423utilizedor failed to useutilizethe provisions of paragraph 424 (4)(a) or paragraph (4)(b) and such other criteria as it may 425 establish by rule. In a rate case filed pursuant to this 426 section, the commission shall not award rate case expenses that 427 exceed the total rate increase approved by the commission 428 exclusive of any rate case expense. 429 Section 5. Subsection (3) of section 367.0814, Florida 430 Statutes, is amended to read: 431 367.0814 Staff assistance in changing rates and charges; 432 interim rates.— 433 (3) The provisions of s. 367.081(1), (2)(a), (2)(c),and434 (3), and (7)shallapply in determining the utility’s rates and 435 charges. However, the commission shall not award rate case 436 expense to cover fees for attorneys or other outside consultants 437 who are engaged for purposes of preparing or filing the case if 438 a utility receives staff assistance in changing rates and 439 charges pursuant to this section, unless the Office of Public 440 Counsel or interested parties have intervened. The commission 441 may award rate case expense for attorney fees or other outside 442 consultant fees if the fees are incurred for the purpose of 443 providing consulting or legal services to the utility after the 444 initial staff report is made available to customers and the 445 utility. If there is a protest or appeal by a party other than 446 the utility, the commission may award rate case expense to the 447 utility for attorney fees or other outside consultant fees for 448 costs incurred after the protest or appeal. The commission shall 449 adopt rules to administer this subsection. 450 Section 6. Section 367.0816, Florida Statutes, is amended 451 to read: 452 367.0816 Recovery of rate case expenses.— 453 (1) The amount of rate case expense determined to be 454 reasonable by the commission pursuant to s. 367.081the455provisions of this chapter to be recovered through a public456utilities rateshall be apportioned for recovery through the 457 utility’s rates over a period of 4 years. At the conclusion of 458 the recovery period, the rate of the public utility shall be 459 reduced immediately by the amount of rate case expense 460 previously included in rates. 461 (2) A utility may recover the 4-year amortized rate case 462 expense for only one rate case at any given time. If the 463 commission approves and a utility implements a rate change from 464 a subsequent rate case pursuant to this section, the utility 465 forfeits any unamortized rate case expense from a prior rate 466 case. The unamortized portion of rate case expense for a prior 467 case must be removed from rates before the implementation of an 468 additional amortized rate case expense for the most recent rate 469 proceeding. This limitation does not apply to the recovery of 470 rate case expense for a limited proceeding filed pursuant to s. 471 367.0822. 472 Section 7. Subsection (3) of section 403.8532, Florida 473 Statutes, is amended to read: 474 403.8532 Drinking water state revolving loan fund; use; 475 rules.— 476 (3) The department may make, or request that the 477 corporation make, loans, grants, and deposits to community water 478 systems, for-profit privately owned or investor-owned water 479 systems, nonprofit transient noncommunity water systems, and 480 nonprofit nontransient noncommunity water systems to assist them 481 in planning, designing, and constructing public water systems,482unless such public water systems are for-profit privately owned483or investor-owned systems that regularly serve 1,500 service484connections or more within a single certified or franchised485area.However, a for-profit privately owned or investor-owned486public water system that regularly serves 1,500 service487connections or more within a single certified or franchised area488may qualify for a loan only if the proposed project will result489in the consolidation of two or more public water systems.The 490 department may provide loan guarantees, purchase loan insurance, 491 and refinance local debt through the issue of new loans for 492 projects approved by the department. Public water systems may 493 borrow funds made available pursuant to this section and may 494 pledge any revenues or other adequate security available to them 495 to repay any funds borrowed. 496 (a) The department shall administer loans so that amounts 497 credited to the Drinking Water Revolving Loan Trust Fund in any 498 fiscal year are reserved for the following purposes: 499 1. At least 15 percent for qualifying small public water 500 systems. 501 2. Up to 15 percent for qualifying financially 502 disadvantaged communities. 503 (b) If an insufficient number of the projects for which 504 funds are reserved under this subsection have been submitted to 505 the department at the time the funding priority list authorized 506 under this section is adopted, the reservation of these funds no 507 longer applies. The department may award the unreserved funds as 508 otherwise provided in this section. 509 Section 8. This act shall take effect July 1, 2014.