Agenda 5/23/2023 Item #16C3 (Advertise and bring back a resolution to consider increasing Water, Wastewater, Irrigation Quality)16.C.3
05/23/2023
EXECUTIVE SUMMARY
Recommendation that the Board of County Commissioners, Ex-officio the Governing Board of the Collier
County Water -Sewer District direct the County Manager or her designee to advertise and bring back for a
public hearing a Resolution for future consideration increasing Water, Wastewater, Irrigation Quality
Water, and Wholesale Potable Water User Rates by 7.07% amending Schedules One and Two of Appendix
A to Section Four of Collier County Water -Sewer District Uniform Billing, Operating, and Regulatory
Standards Ordinance No. 2001-73, as amended, and provide the requisite 10-day notice to utility customers
per the Collier County Water Sewer District Special Act.
OBJECTIVE: To update existing Water, Wastewater, Irrigation Quality Water (IQ) and Wholesale Potable Water
user rates and fees for the Collier County Water -Sewer District (District) to ensure the revenues are sufficient to
recover system -wide operation, maintenance, and repair costs; fund capital improvement and rehabilitation
projects; make user fee debt service payments and meet rate covenants in accordance with the Special Act of the
Florida Legislature, Chapter 2003-353.
CONSIDERATIONS: On September 14, 2021 (Agenda Item ITE), the Board approved Resolution 2021-187
providing for scheduled adjustments to user rates to maintain alignment with increasing commodity and operational
costs. Based on the recommendations in the Fiscal Year (FY) 2021 User Rate and Fee Study (`21 Rate Study) the
approved user rate adjustments are as follows:
Effective Date Water Wastewater IQ Combined
101112021
2.9%
2.9%
2.9%
2.,3%
1011/2022
4.0%
5.0%
9.0%
4.7%
10/1/2073
4.0%
5.0%
9.0%
4.7%
Recent dramatic increases in inflation have resulted in the planned rate adjustments being insufficient to properly
support the increasing cost of system -wide operation, maintenance, and required capital replacement and
rehabilitation projects. Since Fiscal Year 2021 the Consumer Price Index (CPI) for the Miami -Fort Lauderdale -
West Palm Beach region has increased 17.5% and is expected to increase through Fiscal Year 2024 to
approximately 23%.
The graph below depicts the cumulative comparison between the adopted rate increases and CPI.
40%
35%
30%
25%
20%
15%
10%
5%
0%
Comparison of Cumulative Change in Utility
Rates and Inflation
22.8%
FY21 FY22 FY23 FY24 est
—*--Adopted Rates + hHationCH
Examples of inflationary increases affecting District commodities, and capital replacement and rehabilitation costs
include:
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05/23/2023
• Electricity increased by 15% and is anticipated to increase another 10.1% in FY 23
• Chemicals necessary to produce water, treat wastewater, and treat irrigation quality water have increased
between 10% and 150%.
• Utility parts including meters, backflow devices, and petroleum -based PVC pipe and fittings have increased
by 20% to 25%.
• Labor cost has increased by 20%.
• Critical operating equipment, such as utility trucks, cranes, forklifts, and pumps, in some cases, have had
cost increases of more than 100%.
• Capital project costs have increased by 30% or more.
Recommended Inflation Adjustment:
The strategy for closing the overall funding gap including created by inflation -driven commodity/operating and
capital cost increases includes:
• A mid-FY 23 commodity/inflation adjustment to user rates
• a formal rate study update to be presented to the Board
• a rate study derived adjustment for FY 24
• Board adopted rate adjustment strategy for FY 25 and FY 26
The Florida Public Service Commission calculates an annual price index specifically for water and wastewater
utilities. This price index allows water and wastewater utilities to adjust rates based on current specific expenses
without a rate case. On December 27, 2022, the Florida Public Service Commission issued the 2023 price index
calculated at 7.07%.
The recommended interim District user rate adjustment is 7.07%. This adjustment is modestly lower than the
Miami -Fort Lauderdale -West Palm Beach region CPI of 9.0% (April 2023) and is consistent with the Florida Public
Service Commission 2023 price index being adopted by other area utilities including Sarasota County. The
recommended adjustment will serve to offset a portion of the rate adjustment that will be identified by the rate
study currently underway and expected to be presented in late summer or fall.
The recommended user rate adjustment enables the District to address the increasing cost of operations and
maintenance. In addition, it protects operating margins allowing for the continuation of critical capital replacement
and rehabilitation projects as well as providing for financing of long-term capital facilities through the preservation
of a strong financial position that supports cost-effective access to credit markets and long-term financing rates at
the lowest cost for the utility.
FISCAL IMPACT: At the proposed rate increase of 7.07%, the potable water and sewer utility bill for the
average residential customer will increase by $7.77 per month, less than 26 cents per day, from $109.90 to $117.67.
The incremental user fee revenue generated by the rate increase will be approximately $1.1 million per month. This
revenue will provide a timely improvement to operating margins that support capital improvement and
rehabilitation projects, debt service coverage, and reserve funding critical to promoting the District's
creditworthiness.
GROWTH MANAGEMENT IMPACT: There is no growth management impact for this action.
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is approved as to form and
legality and requires majority vote for approval. -JAK
RECOMMENDATION: That the Board of County Commissioners, Ex-officio the Governing Board of the Collier
County Water -Sewer District direct the County Manager or her designee to advertise and bring back for a public
hearing a Resolution for future consideration increasing Water, Wastewater, Irrigation Quality Water, and
Wholesale Potable Water User Rates by 7.07% amending Schedules One and Two of Appendix A to Section Four
of Collier County Water -Sewer District Uniform Billing, Operating, and Regulatory Standards Ordinance No.
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05/23/2023
2001-73, as amended, and provide the requisite 10-day notice to utility customers per the Collier County Water
Sewer District Special Act.
Prepared by: Amy Patterson, County Manager and Chris Johnson, Director - Corporate Financial and
Management Services
ATTACHMENT(S)
1. Public Service Commission Water and Wastewaster Utilities Price Index (PDF)
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16.C.3
05/23/2023
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.C.3
Doc ID: 25571
Item Summary: Recommendation that the Board of County Commissioners, Ex-officio the Governing Board of
the Collier County Water -Sewer District direct the County Manager or her designee to advertise and bring back for
a public hearing a Resolution for future consideration increasing Water, Wastewater, Irrigation Quality Water, and
Wholesale Potable Water User Rates by 7.07% amending Schedules One and Two of Appendix A to Section Four
of Collier County Water -Sewer District Uniform Billing, Operating, and Regulatory Standards Ordinance No.
2001-73, as amended, and provide the requisite 10-day notice to utility customers per the Collier County Water
Sewer District Special Act.
Meeting Date: 05/23/2023
Prepared by:
Title: Management Analyst II — County Manager's Office
Name: Geoffrey Willig
05/17/2023 4:24 PM
Submitted by:
Title: Deputy County Manager — County Manager's Office
Name: Amy Patterson
05/17/2023 4:24 PM
Approved By:
Review:
County Attorney's Office Ed Finn
Office of Management and Budget Ed Finn
County Manager's Office Amy Patterson
Board of County Commissioners Geoffrey Willig
Level 3 County Attorney's Office Review
Level 3 OMB Gatekeeper Review
Level 4 County Manager Review
Meeting Pending
Skipped 05/17/2023 4:45 PM
Skipped 05/17/2023 4:46 PM
Completed 05/17/2023 4:54 PM
05/23/2023 9:00 AM
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STATE OF FLORIDA
Commissioners:
dE � _ DIVISION OF
Andrew Giles Fay, Chairman
ACCOUNTING AND FINANCE
= _ =
Art Graham
_ _ ANDP�EW L. MAUREY
DIREcTox
Gary F. Clark
T (850) 413-6900
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Mike La Rosa
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Gabriella Passidomo
Public
Service Commission
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February 17, 2023
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All Florida Public Service Commission
Regulated Water & Wastewater Utilities
Re: Docket No. 20220005-WS - 2023 Price Index
Dear Utility Owner:
Since March 31, 1981, pursuant to the guidelines established by Section 367.081(4)(a),
Florida Statutes (F.S.), and Rule 25-30.420, Florida Administrative Code (F.A.C.), the
Commission has established a price index increase or decrease for major categories of operating
costs. This process allows water and wastewater utilities to adjust rates based on current specific
expenses without applying for a rate case. The intent of this rule is to insure that inflationary
pressures are not detrimental to utility owners, and that any possible deflationary pressures are
not adverse to customers. By keeping up with index and pass -through adjustments, utility
operations can be maintained at a level sufficient to insure quality of service for the customers.
Pursuant to Order No. PSC-2022-0421-NOR-WS, Rule 25-30.420 F.A.C. has been
amended to allow the Commission's Division of Accounting and Finance to provide the
Proposed Agency Action order establishing the index for the year and the Price
Index Application to water and wastewater utilities by email. An electronic version of the
Price Index Application is also available on the Commission's webpage at
https://www.floridapsc.com/water-wastewater-filing-forms. Utilities may also contact
the Division of Accounting and Finance to request a hard copy of the application.
Pursuant to Rule 25-30.420(1)(a), F.A.C., all operation and maintenance expenses shall
be indexed with the exception of -
a) Pass -through items pursuant to Section 367.081(4)(b), F.S.;
b) Any amortization of rate case expense; and
c) Disallowances or adjustments made in an applicant's most recent rate proceeding.
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All Florida Public Service Commission
Regulated Water & Wastewater Utilities
February 17, 2023
Page 2
Please note that all sludge removal expense should now be removed from operation and
maintenance expenses for the purpose of indexing. Incremental increases in this category of
expense may now be recovered using a pass -through request.
Upon the filing of a request for an index and/or pass -through increase, staff will review the a
application and modify existing rates accordingly. If for no other reason than to keep up with
escalating costs, utilities throughout Florida should file for this rate relief on an annual basis. c
Utilities may apply for a 2023 Price Index anytime between April 1, 2023, through March 31,
2024 by mail or by emailing Applications@psc.state.fl.us. The attached package will answer v
questions regarding what the index and pass -through rate adjustments are, how to apply for an
adjustment, and what needs to be filed in order to meet the filing requirements. For your LO
convenience, the Commission -approved Price Index is reflected on Form PSC 1022,
attached. While the increase for any given year may be minor, (see chart below), the long -run X
effect of keeping current with rising costs can be substantial.
Year
Annual
Commission
Approved Index
Year
Annual
Commission
Approved Index
1998
2.10%
2011
1.18%
1999
1.21 %
2012
2.41 %
2000
1.36%
2013
1.63%
2001
2.50%
2014
1.41 %
2002
2.33%
2015
1.57%
2003
1.31%
2016
1.29%
2004
1.60%
2017
1.51 %
2005
2.17%
2018
1.76%
2006
2.74%
2019
2.36%
2007
3.09%
2020
1.79%
2008
2.39%
2021
1.17%
2009
2.55%
2022
4.53%
2010
0.56%
2023
7.07%
Please be aware that pursuant to Section 837.06, F.S., whoever knowingly makes a false
statement in writing with the intent to mislead a public servant in the performance of his or her
official duty shall be guilty of a misdemeanor of the second degree. Our staff is available at (850)
413-6900 should you need assistance with your filing. If you have any questions, please do not
hesitate to call.
Moreover, additional rate relief mechanisms are available to water and wastewater utilities as
alternatives to full rate cases. Water and wastewater utilities whose total gross annual operating
revenues are $300,000 or less for water service or $300,000 or less for wastewater service, or
$600,000 or less on a combined basis, may petition the Commission for staff assistance in
alternative rate setting. Please refer to Rule 25-30.456, F.A.C., for additional details.
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16.C.3.a
All Florida Public Service Commission Page
Regulated Water & Wastewater
Utilities February 17, 2022
Furthermore, water utilities whose total gross annual operating revenues are $300,000 or less for
water service and wastewater utilities whose total gross annual operating revenues are $300,000
or less for wastewater service may file an application for a limited alternative rate increase of up
to 20 percent applied to metered or flat recurring rates of all classes of service. Please refer to
Rule 25-30.457, F.A.C., for additional details.cc
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In addition, the Commission reminds water and wastewater utilities that the Utility Reserve Fund
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exists to help address concerns over deferred maintenance of critical infrastructure and delays in
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necessary repairs. The availability of the reserve funds may allow a utility to avoid or defer the
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need for a future rate case, the expenses of which are ultimately borne by customers. Please refer
to Rule 25-30.444, F.A.C., for additional details.
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Enclosures
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FILED 12/27/2022 16.C.3.a
DOCUMENT NO. 12287-
FPSC - COMMISSION CLERK
BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION
In re: Annual reestablishment of price increase DOCKET NO. 20220005-WS
or decrease index of major categories of ORDER NO. PSC-2022-0438-PAA-WS
operating costs incurred by water and ISSUED: December 27, 2022
wastewater utilities pursuant to Section
367.081(4)(a), F.S.
The following Commissioners participated in the disposition of this matter:
ANDREW GILES FAY, Chairman
ART GRAHAM
GARY F. CLARK
MIKE LA ROSA
GABRIELLA PASSIDOMO
NOTICE OF PROPOSED AGENCY ACTION
ORDER ESTABLISHING 2023 PRICE INDEX FOR
WATER AND WASTEWATER UTILITIES
BY THE COMMISSION:
NOTICE is hereby given by the Florida Public Service Commission that the action
discussed herein is preliminary in nature and will become final unless a person whose interests
are substantially affected files a petition for a formal proceeding, pursuant to Rule 25-22.029,
Florida Administrative Code (F.A.C.).
Back-2ronnd
Since March 31, 1981, pursuant to the guidelines established by Section 367.081(4)(a),
Florida Statutes (F.S.), and Rule 25-30.420, F.A.C., we have established a price index increase or
decrease for major categories of operating costs on or before March 31 of each year. This
process allows water and wastewater utilities to adjust rates based on current specific expenses
without applying for a rate case.
We calculated the 2023 price index by comparing the Gross Domestic Product Implicit
Price Deflator Index for the fiscal year ended September 30, 2022. This same procedure has been
used each year since 1995 to calculate the price index. The U.S. Department of Commerce,
Bureau of Economic Analysis, released its most recent third quarter figures on October 27, 2022.
Since March 31, 1981, we have received and processed approximately 3,948 index and
pass -through applications. We have jurisdiction over this matter pursuant to Section 367.081,
F.S.
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ORDER NO. PSC-2022-0438-PAA-WS
DOCKET NO. 20220005-WS
PAGE 2
I. Price Level Adjustment Index
In 1993, the Gross Domestic Product Implicit Price Deflator Index (GDP) was
established as the appropriate measure for determining the water and wastewater price index. At
the same time, the convention of using a four quarter fiscal year comparison was also established
and this practice has been used every year since then.' The GDP is prepared by the U.S.
Department of Commerce. Prior to that time, the Gross National Product Implicit Price Deflator N
Index (GNP) was used as the indexing factor for water and wastewater utilities. The Department v
of Commerce switched its emphasis from the GNP to the GDP as the primary measure of U.S. c�
production.
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Pursuant to Section 367.081(4)(a), F.S., this Commission, by order, shall establish a price
increase or decrease index for major categories of operating costs incurred by utilities subject to X
its jurisdiction reflecting the percentage of increase or decrease in such costs from the most c
recent 12-month historical data available. Since 1995, the price index adjustment has been
determined by comparing the change in the average GDP for the year ending September 30, a
instead of the original December 31, in order to more easily meet the statutory deadline.'
In Order No. PSC-2021-0463-PAA-WS, issued December 17, 2021, in Docket No.
20210005-WS, we, in keeping with the practice started in 1993, reiterated the alternatives which
could be used to calculate the indexing of utility revenues. Past concerns expressed by utilities,
as summarized from utility input in previous hearings, are:
1) Inflation should be a major factor in determining the index;
2) Nationally published indices should be vital to this determination;
3) Major categories of expenses are labor, chemicals, materials and supplies,
maintenance, transportation, and treatment expense;
4) An area wage survey, Dodge Building Cost Index, Consumer Price Index, and the
GDP should be considered;
5) A broad measure index should be used; and
6) The index procedure should be easy to administer.
Based upon these concerns, we have previously explored the following alternatives:
1) Survey of Regulated Water and Wastewater Utilities;
'Order No. PSC-1993-0195-FOF-WS, issued February 9, 1993, in Docket No. 19930005-WS, In re: Annual
reestablishment of price increase or decrease index of major categories of operating costs incurred by water and
wastewater utilities pursuant to Section 367.081(4)(a), F.S.
'Order No. PSC-1995-0202-FOF-WS, issued February 10, 1995, in Docket No. 19950005-WS, In re: Annual
reestablishment of price increase or decrease index of major categories of operating costs incurred by water and
wastewater utilities pursuant to Section 367.081(4)(a), F.S.
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ORDER NO. PSC-2022-0438-PAA-WS
DOCKET NO. 20220005-WS
PAGE 3
2) Consumer Price Index;
3) Florida Price Level Index;
4) Producer Price Index — previously the Wholesale Price Index; and
5) GDP (replacing the GNP).
Over the years, we rejected using the Survey of Regulated Water and Wastewater
Utilities because using the results of a survey would allow utilities to pass on to customers all
cost increases, thereby reducing the incentives of promoting efficiency and productivity. We
have also rejected using the Consumer Price Index and the Florida Price Level Index because of
their limited degree of applicability to the water and wastewater industry. Both of these price
indices are based upon comparing the advance in prices of a limited number of general goods
and, therefore, have limited application to water and wastewater utilities.
The Producer Price Index (PPI) is a family of indices that measure the average change
over time in selling prices received by domestic producers of goods and services. We rejected
using PPI because it measures price change from the perspective of the seller, not the purchaser.
The bases for these indices have not changed, and the conclusions reached in Order No. PSC-
2021-0463-PAA-WS continue to apply in this case. Since 1993, we have found that the GDP has
a greater degree of applicability to the water and wastewater industry. Therefore, we will
continue to use the GDP to calculate water and wastewater price level adjustments. We will
calculate the 2023 Price Index by using a fiscal year, four quarter comparison of the Implicit
Price Deflator Index ending with the third quarter of 2022.
The following table provides a historical perspective of the annual price index:
Table 1
Historical Analysis of the Annual Price Index for Water and Wastewater Utilities
Year
Commission
Approved Index
Year
Commission
Approved Index
2011
1.18%
2017
1.51%
2012
2.41 %
2018
1.76%
2013
1.63%
2019
2.36%
2014
1.41%
2020
1 1.79%
2015
1.57%
2021
1.17%
2016
1.29%
2022
4.53%
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ORDER NO. PSC-2022-0438-PAA-WS
DOCKET NO. 20220005-WS
PAGE 4
The following table shows the historical participation in the index and/or pass -through programs:
Table 2
Percentage of Jurisdictional Water and Wastewater Utilities Filing for Indexes and
Pass-Throughs
Year
Percentage
Year
Percentage
2011
43%
2017
37%
2012
30%
2018
42%
2013
41%
2019
60%
2014
39%
2020
43%
2015
49%
2021
52%
2016
38%
2022
57%
II. Rate for the 2023 Price Index
The U.S. Department of Commerce, Bureau of Economic Analysis, released the most
recent third quarter 2022 figures on October 27, 2022. Consistent with our establishment of the
2022 Price Index last year, we are using the third quarter amounts to calculate the 2023 Price
Index. Using the third quarter amounts allows time for a hearing if there is a protest, in order for
us to establish the 2023 Price Index by March 31, 2023, in accordance with Section
367.081(4)(a), F.S. The percentage change in the GDP using the fiscal year comparison ending
with the third quarter is 7.07 percent. This number was calculated as follows.
GDP Index for the fiscal year ended 9/30/22 128.177
GDP Index for the fiscal year ended 9/30/21 119.712
Difference 8.465
Divided by 9/30/21 GDP Index 119.712
2023 Price Index 7.07%
III. Notice of Indexing Requirements
The package in Attachment 1 shall be sent to every regulated water and wastewater utility
after the expiration of the proposed agency action (PAA) protest period, along with a copy of the
PAA order once final. The entire package shall also be made available on our website.
In an effort to increase the number of water and wastewater utilities taking advantage of
the annual price index and pass -through programs, Attachment 2 from the Director of the
Division of Accounting and Finance shall be included with the PAA Order in order to explain the
purpose of the index and pass -through applications and to communicate that Commission staff is
available to assist them.
Based on the foregoing, it is
ORDERED by the Florida Public Service Commission that the Gross Domestic Product
Implicit Price Deflator Index shall be used in calculating price level adjustments. We calculate
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ORDER NO. PSC-2022-0438-PAA-WS
DOCKET NO. 20220005-WS
PAGE 5
the 2023 Price Index by using a fiscal year, four quarter comparison of the Implicit Price
Deflator Index ending with the third quarter of 2022. It is further
ORDERED that the 2023 Price Index for water and wastewater utilities shall be 7.07 a
percent. It is further
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ORDERED that the Division of Accounting and Finance shall, after the expiration of the
Proposed Agency Action protest period, send each regulated water and wastewater utility a copy v
of the PAA order establishing the index containing the information presented in Attachment 1
along with a cover letter from the Director of the Division of Accounting and Finance. The entireLO
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package shall also be available on our website. It is further PNL
ORDERED that, upon expiration of the 14-day protest period, if a timely protest is not
received, the decision shall become final and effective upon the issuance of a Consummating
Order. Any party filing a protest shall be required to prefile testimony with the protest. However,
this docket shall remain open through the end of the year and be closed upon the establishment
of the new docket in January, 2023.
MRT
By ORDER of the Florida Public Service Commission this 27th day of December, 2022.
ell -
AD J. T TZMAN
Com tssion Jerk
Florida Public Service Commission
2540 Shumard Oak Boulevard
Tallahassee, Florida 32399
(850)413-6770
www.floridapsc.com
Copies furnished: A copy of this document is
provided to the parties of record at the time of
issuance and, if applicable, interested persons.
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ORDER NO. PSC-2022-0438-PAA-WS
DOCKET NO. 20220005-WS
PAGE 6
NOTICE OF FURTHER PROCEEDINGS OR JUDICIAL REVIEW
The Florida Public Service Commission is required by Section 120.569(1), Florida
Statutes, to notify parties of any administrative hearing that is available under Section 120.57,
Florida Statutes, as well as the procedures and time limits that apply. This notice should not be
construed to mean all requests for an administrative hearing will be granted or result in the relief
sought.
Mediation may be available on a case -by -case basis. If mediation is conducted, it does
not affect a substantially interested person's right to a hearing.
The action proposed herein is preliminary in nature. Any person whose substantial
interests are affected by the action proposed by this order may file a petition for a formal
proceeding, in the form provided by Rule 28-106.201, Florida Administrative Code. This petition
must be received by the Office of Commission Clerk, 2540 Shumard Oak Boulevard,
Tallahassee, Florida 32399-0850, by the close of business on January 10, 2023.
In the absence of such a petition, this order shall become final and effective upon the
issuance of a Consummating Order.
Any objection or protest filed in this/these docket(s) before the issuance date of this order
is considered abandoned unless it satisfies the foregoing conditions and is renewed within the
specified protest period.
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