
    In re APPLICATION OF NORTH PALM BEACH UTILITIES, Inc.
    No. 6654-WS.
    Florida Public Utilities Commission.
    March 13, 1963.
    Starr W. Horton and H. A. Ross, both of Miami, for the petitioner.
    C. Robert Burns, Palm Beach, for the Village of North Palm Beach, protestant.
    James L. Graham, Jr., Assistant General Counsel, for the commission staff and the public generally.
    
      Chairman EDWIN L. MASON, Commissioners JERRY W. CARTER and WILBUR C. KING each participated in the disposition of this matter.
   BY THE COMMISSION,

The entire record herein, including the amended application and the testimony adduced at the public hearings, has been examined by the full commission. After due consideration, the commission now enters its order in this cause.

By its application filed in this proceeding, North Palm Beach Utilities, Inc. proposes to improve its annual gross revenue situation so as to eliminate a claimed loss during 1961 of $2,615.44, a figure arrived at by comparing a claimed 1961 gross revenue of $244,934.46 to claimed expenses of $247,549.90. Under its proposed rate increase the company contends that it will realize a gross annual revenue of $250,499 from its water operation and $111,580 from its sewer operation or a total of $362,079. By its calculation this increase would allow it a net operating income of $6,020 for sewer operations and $26,722 for water operations.

We by no means agree that this is the result that would be obtained were the proposed increases granted. We are convinced from the record before us that the rate increase proposed by the company for its sewer operations would produce annually a net operating income of $35,871, as opposed to the $6,020 expected by the company. For its water division the net would be $53,058, as opposed to the $26,722 expected by the company.

While this disparity is relatively large, it may in this case be viewed with less than the degree of alarm that would ordinarily be expected when it is considered that, using our greatly increased net income figures, the combined rate of return computed on consolidated rate bases, revenues, and expenses is only 3.46%. To be more specific, we here set forth for comparison the figures and the rate of return derived from them, as contended by the company and as found by the commission to be correct.

WATER OPERATION

Per Per Commission Company

$ 1,286,568 1. Rate Base $ 1,376,954

2. Net Operating Income 26,722 53,058

3. Rate of Return 1.94% 4.12%

SEWER OPERATION

Per Company Per Commission

1. Rate Base $ 1,262,378 $ 1,192,953

2. Net Operating Income 6,020 35,871

3. Rate of Return .48% 3.01%

We trust it is not necessary to remark that this commission is not accustomed to encountering such gross differences between what a utility claims its position to be in a rate case and what the commission finds it to be after applying rate-making formulas and procedures which it has traditionally honored and which are generally recognized throughout this country. Certainly, if such differences were encountered under more usual circumstances, where a company attempts to increase its rate of return by fractions of one per cent, such differences would require the exact opposite of the conclusion reached here and would subject the company to justifiable criticism for presuming that it had any reasonable basis for succeeding in its efforts to secure approval for any proposed rate increase. We do not consider ourselves unreasonable in expecting utilities subject to our jurisdiction to know and apply in proceedings before us the practices and procedures which have been historically considered acceptable, unless, of course, they seriously intend to contest the validity of one or more of such practices.

Here, however, there is an unusual situation in that the company is involved in its first rate proceeding under a fairly new law and, further, in that the differences we have encountered áre not of great importance due to the fact that the company’s application, even when considered from the point of view most unfavorable to its validity, must still be granted since such action will not permit a rate of return which we considered to be in excess of a fair and reasonable return. Since we must under these circumstances allow the requested rate increases, there is little to be gained by our detailing the manner in which we differ in our approach to this case from the approach of the company. It will be sufficient to state that we intend to establish no precedent by our failure to disapprove specifically the figures of the company which were arrived at through application of processes that are not in conformity with those traditionally found acceptable. We will, therefore, only set forth the figures which we have approved, as a guide to the company, trusting that through our staff’s cross-examination of the company’s witnesses, and through the several off-the-record conferences before and during the hearings, the company has been well apprised of the procedures we have applied in arriving at such figures.

For the company’s water operation we have already stated a rate base figure which we approve of $1,286,568. This figure is some $90,000 less than that presented by the company. The gross operating revenue which we find that the company may expect under the proposed increase in rates is $244,263 which when compared to operating expenses of $191,205 will produce the net operating income figure already mentioned of $53,058.

With regard to the sewer operation, we have approved a rate base figure of $1,192,953 which is some $70,000 less than the company’s figure. The gross operating revenue that the company may expect from its sewer operations under the increased rates is $112,342 which, when compared to operating expenses of $76,-471, will produce a net figure of $35,871.

For both divisions we have attached a schedule showing the amount of the adjustments we have made to the company’s rate base and operating figures to arrive at the totals mentioned in the preceding paragraphs.

In consideration of the foregoing, it is therefore ordered that the amended application filed herein be and the same is hereby granted to the extent that North Palm Beach Utilities, Inc. is authorized to put into effect increases in rates and charges which will generate a gross operating revenue on an annual basis as herein computed of $244,263 for its water operation and $112,342 for its sewer operation.

It is further ordered that such increases shall become effective with regard to service rendered on and after the 31st day following the date hereof, provided there have been filed and approved within such period the necessary tariff amendments, otherwise not until such approval is forthcoming.

It is further ordered that the motion to dismiss filed herein on behalf of the Village of North Palm Beach be and the same is hereby denied.

WATER-RATE BASE

Per Company Adjustments Per Commission

Utility Plant in Service $1,689,968 $(78,453) $1,611,517

Cash Working Capital 15,254 15,254

Materials and Supplies 740 740

Sub-Total $1,689,968 $(62,459) $1,627,511

Deductions:

Reserve for Depreciation $ 152,554 $ 152,554

Income Tax Lag 7,842 7,842

Customer Deposits 20,087 20,087

Total Deductions $ 313,014 $ 27,929 $ 340,943

Rate Base $1,376,954 $(90,388) $1,286,566

-NET OPERATING INCOME WATER -

Operating Revenue:

Water Sales $ 224,653 $ $ 224,653

Meter Connections 25,846 ( 6,236) 19,610

Total Revenue $ 250,499 $( 6,236) $ 244,263

Operating Expenses:

Operation Expenses $ 106,770 $ $ 106,770

Maintenance Expenses 15,265 15,265

Depreciation Expense 42,430 42,430

Taxes Other than Inc. Tax 11,056 11,056

Income Taxes 17,489 ( 1,805) 15,684

Interest Expense 30,767 (30,767) -0-

Total Expenses $ 223,777 $(32,572) $ 191,205

Net Operating Income $ 26,722 $ 26,336 $ 53,058

SEWER —RATE BASE

$1,556,920 $(58,942) Utility Plant in Service $1,497,978

3,515 Cash Working Capital 3,515

740 Materials and Supplies 740

$(54,687) Sub-Total $1,556,920 $1,502,233

Deductions:

Reserve for Depreciation $ 132,793 $ 132,793

Contrib. in Aid of Con. 161,749 161,749

2,128 Income Tax Lag 2,128

12,610 Customer Deposits 12,610

$ 14,738 Total Deductions $ 294,542 $ 309,280

$(69,425) Rate Base $1,262,378 $1,192,953

- NET OPERATING INCOME SEWER -

Operating Income:

Sewer Service $ 109,884 $ 1,148 $ 111,032

Connection Charges 1,696 (386) 1,310

Total Revenue $ 111,580 $ 762 $ 112,342

Operating Expenses:

Operation Expenses $ 21,903 $ 21,903

Maintenance Expenses 6,215 6,215

Depreciation Expenses 35,960 35,960

Taxes other than Inc. Tax 8,136 8,136

Income Tax 2,579 1,678 4,257

Interest Expenses 30,767 (30,767) -0-

Total Expenses $ 105,560 $(29,089) $ 76,471

Net Operating Income $ 6,020 $ 29,851 $ 35,871  