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State of Florida
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Public Service Commission
Capital Circle Office Center ● 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE:
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August 22, 2025
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TO:
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Office of Commission Clerk (Teitzman)
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FROM:
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Division of Engineering (Ramirez-Abundez,
King, Ramos, Smith II)
Division of Economics
(Bruce, Sibley, Hudson)
Office of the General
Counsel (Imig, Augspurger)
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RE:
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Docket No. 20250023-WS – Application for
staff-assisted rate case in Polk County, by NC Real Estate Projects, LLC
d/b/a Grenelefe Utility.
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AGENDA:
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09/04/25 – Regular Agenda – Proposed Agency Action – Interested
Persons May Participate
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Graham
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CRITICAL DATES:
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None
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SPECIAL INSTRUCTIONS:
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None
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Case Background
NC Real Estate
Projects LLC d/b/a Grenelefe Utility (Grenelefe or utility) is a Class B water
and wastewater utility operating in Polk County. Grenelefe provides service to
approximately 1,200 water and wastewater customers. The utility’s service
territory is located within the Southwest Florida Water Management District (SWFWMD).
Grenelefe reported, in its 2024 Annual Report, net operating losses of $197,676
for water, and $397,410 for wastewater.
Certificate Nos.
589-W (water) and 507-S (wastewater) were transferred to the utility in Docket
No. 20220142-WS. Subsequently, on September 17, 2024,
Grenelefe filed an application with the Commission for an amendment of its
water and wastewater service territories. The Commission approved Grenelefe’s
certificate amendments on February 4, 2025, which included the addition of a new
development of approximately 1,080 customers. Grenelefe’s rates were last
established during a staff-assisted rate case (SARC) in 2011.
On January 10,
2025, Grenelefe filed an application for a SARC, with the official filing date
of this SARC established as February 4, 2025. The 12-month period ended October
31, 2024, was selected as the test year. In its application, the utility
requested interim service availability charges. However, Grenelefe did not
provide any proposed charges with its filing and withdrew its initial request
for interim service availability charges.[3] Service availability charges are one-time
cash contributions new customers or developers make to a utility prior to
connection with the utility’s water or wastewater facilities. The charges are
recorded as a contribution-in-aid-of-construction (CIAC) and are treated as an
offset to rate base, which allows the utility to recover a portion of its
investments, thereby reducing rates over time.
On March 10,
2025, the utility filed proposed service availability charges from estimates of
its pro forma plant additions it had received in December of 2024. Subsequently, on April 25, 2025, Grenelefe
updated its requested charges to reflect actual bid proposals for the pro forma
plant additions. Grenelefe expressed that time is of the
essence with getting the service availability charges approved. The utility
indicated that it is unable to obtain financing for the pro forma plant
additions without service availability charges in place.
During the process
of reviewing the service availability charges, staff and the utility engaged in
discussions about the methodology in which service availability charges are
calculated pursuant to Rule 25-30.580, Florida Administrative Code (F.A.C.). Staff
explained to the utility that in making the determination of the appropriate
service availability charges, it is Commission practice, pursuant to Rule
25-30.580, F.A.C., to use the total capacity in equivalent residential
connections (ERCs) for the treatment plant, transmission and distribution
lines, and collection lines. The utility disputes staff’s methododly and
interpretation of Rule 25-30.580, F.A.C., and asserts the charges should be
based on the remaining (future) ERCs in determining the appropriate charge.
While Grenelefe expressed that staff’s position would place the burden
on both existing and new customers through higher rates, staff believes that
the costs cannot be recovered by the homebuilders pursuant to the Rule and
Commission practice.
This recommendation
addresses the utility’s request for interim service availability charges. The
Commission has jurisdiction in this case pursuant to Sections 367.011, 367.101,
367.091, and 367.121, Florida Statutes (F.S.)
Discussion
of Issues
Issue 1:
Should Grenelefe's requested interim service
availability charges be approved?
Recommendation:
The interim service availability charges requested by
Grenelefe should not be approved. Staff recommends interim service availability
charges should be set as a plant capacity charge of $320 for water and $4,942
for wastewater. The utility should file a revised tariff sheet to reflect the
Commission-approved charges. The approved charges shall be effective for
connections made on or after the stamped approval date on the tariff sheet. In addition, the approved charges should not be implemented
until staff has approved the proposed customer notice and the notice has
been received by property owners who requested service beginning 12 months
prior to the establishment of this docket. The utility shall provide proof of
noticing within 10 days of rendering the approved notice. The approved plant
capacity charges should not be implemented until the required security has been
established and shall be held subject to refund, pending the Commission’s
decision regarding the appropriate pro forma plant additions. (Hudson)
Staff Analysis:
Grenelefe seeks interim service availability charges
pending the completion of its SARC. Historically, the utility’s water service
availability charges consisted of a meter installation charge of $65 and a
service line extension and tap-in charge at actual cost. As part of a
certificate transfer docket, Grenelefe was approved for an increase in its meter
installation charge to $600. There
have been no approved service availability charges for the wastewater system.
In the pending SARC, the utility provided cost estimates
for several pro forma plant additions for both the water and wastewater systems.
The requested pro forma additions are being reviewed for inclusion in the final
recommendation in the SARC. Therefore, the service availability charges are
subject to change. For the water system, the utility proposed to replace
meters, fire hydrants, valves, and the hydropneumatic tank; refurbish potable
wells; and convert irrigation non-potable wells to potable wells. For the
wastewater system, Grenelefe proposed modifications to the treatment plant and
refurbish lift stations. Based on the requested pro forma plant additions, the
utility proposed a service availability charge of $2,402 for water and $7,434
for wastewater. For both water and wastewater, Grenelefe’s proposed charges
contemplate the ERCs for recently approved housing developments in its
territory, whereas staff, as required by Rule 25-30.580, F.A.C., relied on the
design capacity of the facilities.
Rule 25-30.580, F.A.C., establishes guidelines for
designing service availability charges. Pursuant to the Rule, the maximum
amount of CIAC, net of amortization, should not exceed 75 percent of the total
original cost, net of accumulated depreciation, of the utility’s facilities and
plant when the facilities and plant are at their designed capacity. The minimum
amount of CIAC should not be less than the percentage of such facilities and
plant that is represented by the water transmission and distribution system and
sewage collection systems. Pursuant to the Rule, staff calculated the minimum contribution to
be 50.35 percent for water and 4.82 percent for wastewater.
The utility did not categorize its service availability
charge request (i.e., main extension or plant capacity charge). A main extension
charge is for the purpose of covering all or part of the utility’s capital
costs in extending its off-site water or wastewater facilities to provide
service to a specified property, whereas a plant capacity charge is for the
purpose of covering all or a part of a utility’s capital costs in construction
or expansion of treatment facilities. In a transfer of majority organizational
control docket in 2003, the utility did not have adequate books and records to
provide the CIAC balances. As result, in that docket, the Commission imputed,
per Rule 25-30.570, F.A.C., the cost of Grenelefe’s water transmission and
distribution lines and wastewater collection lines to reflect the appropriate CIAC. As
a result, the utility is unable to receive a main extension charge. Further, Grenelefe
did not propose any pro forma plant additions for lines in this SARC. Therefore,
staff has conducted an evaluation of Grenelefe’s request to determine whether a
plant capacity charge is appropriate.
Based on staff’s audit of Grenelefe’s rate base, and
before any additions for pro forma plant, the contribution level is 72 percent
for water and 78 percent for wastewater. To evaluate the request for service
availability charges, staff is using the preliminary rate base calculated for
the staff report dated August 22, 2025, which includes the requested pro forma
plant additions. With the pro forma additions, staff calculated the
contribution levels to be 4.83 percent for water and 1.62 percent for
wastewater.
Plant
Capacity Charge - Water
The water treatment
facilities have a capacity of 4,320,000 gallons per day (gpd), which equates to
a design capacity of 12,342 equivalent residential connections (ERCs) based on
an ERC of 350 gpd. Grenelefe indicated that it anticipates growth of 200 ERCs
per year, which would reflect the utility reaching design capacity in
approximately 55 years. Due to the length of time before the water system
reaches design capacity, staff believes it is unrealistic to set the charges at
complete design capacity. In a similar situation, the Commission determined that
a shortened period of 10 years was appropriate for calculating service
availability charges. A 10-year shortened period would result in Grenelefe
foreseeably connecting an additional 2,000 ERCs. As a result, staff recommends
that the total ERCs for calculating the appropriate plant capacity charge be
set at 3,408 (1,408 + 2,000).
In order
to determine the plant capacity charge, staff calculated the average cost per
ERC for the water treatment plant per Commission precedent. Staff
believes that using the average costs per ERC will result in reasonable service
availability charges. Staff used the total treatment plant cost of $1,089,900. Staff
then divided this amount by 3,408 (which represents total capacity, as
discussed above, in ERCs of the treatment plant). This calculation results in
an average plant capacity cost per ERC of approximately $320 ($1,089,900/3,408).
The corresponding plant capacity charge for “all others-per gallon/day” would
be $.91 ($320/350 gpd). Staff recommends a plant capacity charge of $320. The
plant capacity charge of $320, along with its prior approved meter installation
charge of $600, will allow Grenelefe to be at approximately 25 percent
contribution level in 10 years. Staff recognizes that the contribution level is
below the minimum, which is the cost of lines. However, as previously noted,
the cost of the lines was imputed.
Plant
Capacity Charge - Wastewater
The
wastewater treatment facilities have a capacity of 680,000 gpd, which equates
to a design capacity of 2,428 ERCs based on an ERC of 280 gpd. Based on the
utility’s growth projections of 200 ERCs per year, the wastewater system will
reach design capacity in approximately 10 years. In order to determine the
plant capacity charge, staff used the total wastewater treatment plant cost of
$16,300,000. Staff then divided this amount by 2,428, which represents the
total capacity in ERCs of the treatment plant. This calculation results in an
average plant capacity cost per ERC of approximately $6,713 ($16,300,000/2,428).
However, this charge would result in the wastewater system being over-contributed
at build out. Therefore, staff recommends a plant capacity charge of $4,942,
which would allow Grenelefe to be at a 75 percent contribution level at design
capacity. The corresponding plant capacity charge for “all others-per
gallon/day” would be $17.65 ($4,942/280 gpd).
Based on the above, the interim service availability
charges requested by Grenelefe should not be approved. Staff recommends interim
service availability charges should be set as a plant capacity charge of $320 for
water and $4,942 for wastewater. The utility should file a revised tariff sheet
to reflect the Commission-approved charges. The approved charges shall be
effective for connections made on or after the stamped approval date on the
tariff sheet. In addition, the approved charges
should not be implemented until staff has approved the proposed customer notice
and the notice has been received by property owners who requested service
beginning 12 months prior to the establishment of this docket. The utility
shall provide proof of noticing within 10 days of rendering the approved notice.
The approved plant capacity charges should not be implemented until the
required security has been established and shall be held subject to refund,
pending the Commission’s decision regarding the appropriate pro forma plant
additions.
Issue 2:
What is the appropriate security to guarantee the
interim increase?
Recommendation:
The utility should file an escrow agreement to
guarantee potential refunds of water and wastewater plant capacity charges
collected under interim conditions. Pursuant to Rule 25-30.360(7), F.A.C., the
utility shall provide a report by the 20th of each month indicating the monthly
and total revenue collected subject to refund. (Hudson)
Staff Analysis:
Pursuant to Section 367.082, F.S., the excess of
interim rates over previously authorized rate shall be collected under
guarantee subject to refund with interest. In past Commission practice for
service availability charges, the utility has been required to escrow all
service availability charges collected during the interim period. Grenelefe did
not have plant capacity charges prior to this request, therefore, staff
believes it is appropriate to require that the total amount of the plant capacity
charges collected during the interim period be placed in escrow.
The utility should be authorized to collect the interim
service availability charges after staff approves: the security for potential
refund, the copy of the proposed customer notice, and the revised tariff sheets.
The utility should establish an escrow agreement with an independent financial
institution. The following conditions should be part of the agreement:
1. The
Commission Clerk, or his or her designee, must be a signatory to the escrow
agreement.
2. No
monies in the escrow account may be withdrawn by the utility without the prior
written authorization of the Commission Clerk, or his or her designee.
3. The
escrow account shall be an interest bearing account.
4. If a
refund to the customers is required, all interest earned by the escrow account
shall be distributed to the customers.
5. If a
refund to the customers is not required, the interest earned by the escrow
account shall revert to the utility.
6. All
information on the escrow account shall be available from the holder of the
escrow account to a Commission representative at all times.
7. The
amount of revenue subject to refund shall be deposited in the escrow account
within seven days of receipt.
8. This
escrow account is established by the direction of the Florida Public Service
Commission for the purpose(s) set forth in its order requiring such account.
Pursuant to Cosentino v. Elson, 263 So. 2d 253 (Fla. 3d DCA 1972), escrow
accounts are not subject to garnishments.
9. The account
must specify by whom and on whose behalf such monies were paid.
In no instance should the maintenance and administrative
costs associated with the refund be borne by the customers. These costs are the
responsibility of, and should be borne by, the utility. Irrespective of the
form of security chosen by the utility, an account of all monies received as a
result of the rate increase should be maintained by the utility. If a refund is
ultimately required, it should be paid with interest calculated pursuant to
Rule 25-30.360(4), F.A.C.
After the plant capacity charges are in effect, pursuant
to Rule 25-30.360(6), F.A.C., the utility should file reports with the
Commission Clerk’s office no later than the 20th of every month indicating the
monthly and total amount of money subject to refund at the end of the preceding
month. The report filed should also indicate the status of the security being
used to guarantee repayment of any potential refund.
Issue 3:
Should this docket be closed?
Recommendation:
This docket should remain open pending final
resolution of SARC. (Imig, Augspurger)
Staff Analysis:
This docket should remain open pending final
resolution of SARC.