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Agenda 06/13/2023 Item #17D (To update existing Water, Wastewater, Irrigation Quality Water and Wholesale Potable Water user rates and fees)17.D 06/13/2023 EXECUTIVE SUMMARY Recommendation that Board of County Commissioners, Ex-officio the Governing Board of the Collier County Water -Sewer District, adopt a Resolution repealing and replacing Schedules One and Two of Appendix A to Section Four of the Collier County Water -Sewer District Uniform Billing, Operating, and Regulatory Standards Ordinance No. 2001-73, as amended, increasing user rates for Water, Wastewater, Irrigation Quality Water, and Wholesale Potable Water User Rates by 7.07%, with effective date of July 1, 2023. 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). In accordance with the 2023 price index issued by the Florida Public Service Commission date December 27, 2022. CONSIDERATIONS: On September 14, 2021 (Agenda Item 17.E), 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 were as follows: Effective Date Water Wastewater IQ Combined 10/1/2021 2.9% 2.13° 2.9% 2.9% 10/112022 4.0% 5.0% 9.(Y% 4.7% 10/1/2023 4.0% 5.0% 9.0% 4.7% On May 23, 2022, (Agenda Item 1 LE) the Board directed the County Manager to advertise a Resolution for future consideration amending user rates increasing Water, Wastewater, Irrigation Quality Water, and Wholesale Potable Water user rates, and directed the County Manager to advertise a resolution to amend the rate schedules. Recent dramatic increases in inflation have resulted in the planned rate adjustments being insufficient to 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% 317% 25% 20% 15% 1D% 5% 0% Comparison of Cumulative Change in Utility Rates and Inflation 22.8% 2. FY21 FY22 FY23 FY24 est —*—Adopted Rates + Inflation CPI Packet Pg. 1880 17.D 06/13/2023 Examples of inflationary increases affecting District commodities, and capital replacement and rehabilitation costs include: • 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 price index 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 modestly improves 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 in the Collier County Water -Sewer District Operating Fund (408). GROWTH MANAGEMENT IMPACT: There is no growth management impact for this action. LEGAL CONSIDERATIONS: This item is approved as to form and legality and requires majority vote for Board approval. -SRT RECOMMENDATION: That the Board of County Commissioners, Ex-officio the Governing Board of the Collier County Water -Sewer District adopt a Resolution repealing and replacing Schedules One and Two of Appendix A to Packet Pg. 1881 17.D 06/13/2023 Section Four of Collier County Water -Sewer District Uniform Billing, Operating, and Regulatory Standards Ordinance No. 2001-73, as amended, increasing user rates for Water, Wastewater, Irrigation Quality Water, and Wholesale Potable Water User Rates by 7.07%, with an effective date of July 1, 2023. Prepared by: Joseph Bellone, Director - Utilities Finance ATTACHMENT(S) 1. Final Reso w Schedule 05.25.23 Final (PDF) 2. legal ad - agenda ID 25672 FINAL (PDF) 3. Public Service Commission Water and Wastewaster Utilities Price Index (PDF) Packet Pg. 1882 17.D 06/13/2023 COLLIER COUNTY Board of County Commissioners Item Number: 17.D Doc ID: 25672 Item Summary: Recommendation that Board of County Commissioners, Ex-ofiicio the Governing Board of the Collier County Water -Sewer District, adopt a Resolution repealing and replacing Schedules One and Two of Appendix A to Section Four of the Collier County Water -Sewer District Uniform Billing, Operating, and Regulatory Standards Ordinance No. 2001-73, as amended, increasing user rates for Water, Wastewater, Irrigation Quality Water, and Wholesale Potable Water User Rates by 7.07%, with effective date of July 1, 2023. Meeting Date: 06/13/2023 Prepared by: Title: Manager Corp Compliance and Continuous Improvement — Corporate Compliance and Continuous Improvement Name: Megan Gaillard 05/30/2023 6:33 PM Submitted by: Title: Department Head - Public Utilities — Public Utilities Department Name: George Yilmaz 05/30/2023 6:33 PM Approved By: Review: Public Utilities Department Andrew Youngblood Additional Reviewer Public Utilities Department Drew Cody Level 1 Division Reviewer County Attorney's Office Scott Teach Level 2 Attorney Review Public Utilities Department George Yilmaz Level 2 Division Administrator Review County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Corporate Compliance and Continuous Improvement Megan Gaillard Office of Management and Budget Debra Windsor Level 3 OMB Gatekeeper Review Office of Management and Budget Laura Zautcke Additional Reviewer County Manager's Office Amy Patterson Level 4 County Manager Review Board of County Commissioners Geoffrey Willig Meeting Pending Completed 06/01/2023 9:25 AM Completed 06/01/2023 9:33 AM Completed 06/05/2023 9:11 AM Completed 06/05/2023 4:01 PM Completed 06/05/2023 4:16 PM Additional Reviewer Completed 06/05/2023 5:06 PM Completed 06/06/2023 8:28 AM Completed 06/07/2023 10:11 AM Completed 06/07/2023 4:47 PM 06/13/2023 9:00 AM Packet Pg. 1883 17.D.1 RESOLUTION NO.2023- A RESOLUTION OF THE BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND EX OFFICIO THE GOVERNING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT, REPEALING AND REPLACING SCHEDULES ONE AND TWO OF APPENDIX A TO SECTION FOUR OF COLLIER COUNTY ORDINANCE NO. 2001-73, AS AMENDED, TITLED THE COLLIER COUNTY WATER -SEWER DISTRICT UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE; AMENDING PROPOSED RATES FOR WATER, WASTEWATER, IRRIGATION QUALITY WATER, AND WHOLESALE POTABLE WATER; WITH AN EFFECTIVE DATE OF JULY 1, 2023. WHEREAS, Collier County uses water and sewer user rates to recover system operation, maintenance, renewal, enhancement, replacement and debt service costs from system users within the boundaries of the Collier County Water -Sewer District (the "District"); and WHEREAS, on September 14, 2021, the District approved Resolution No. 2021-187 establishing a scheduled adjustment to the District's user rates to maintain alignment with increasing commodity and operation costs based upon the recommendation of the County's retained expert, Raftelis Financial Consultants, Inc., who at that time recommended that the: (1) existing water user rates be adjusted by implementing an increase of 2.9 percent effective October 1, 2021; 4.0 percent effective October 1, 2022; and, 4.0 percent effective October 1, 2023, for Fiscal Years 2022, 2023, and 2024, respectively; (2) existing wastewater user rates be adjusted by implementing an increase of 29 percent effective October 1, 2021; 5.0 percent effective October 1, 2022; and, 5.0 percent effective October 1, 2023, for Fiscal Years 2022, 2023, and 2024, respectively; (3) the existing Irrigation Quality (IQ) water user rates be adjusted by implementing an increase of 29 percent effective October 1, 2021; 9.0 percent effective October 1, 2022; and, 9.0 percent effective October 1, 2023, for Fiscal Years 2022, 2023, and 2024, respectively; and (4) the existing wholesale potable water user rates be adjusted by implementing an increase of 4.9 percent effective October 1, 2021; 4.9 percent effective October 1, 2022; and, 4.9 percent effective October 1, 2023, for Fiscal Years 2022, 2023, and 2024, respectively; and WHEREAS, Collier County approved, implemented, and has been adhering to the rate schedule adjustment established in Resolution No. 2021-187 but as a result of dramatic increases in inflation those previously planned rate adjustments have been insufficient to properly support the increasing cost of maintaining system -wide operations, maintenance, and required capital replacement and rehabilitation projects in the District; and Packet Pg. 1884 17.D.1 WHEREAS, examples of the inflationary increases impacting the District's operations include the following: (1) electricity increased by 15 percent and is anticipated to increase another 10.1 percent in FY 23, (2) chemicals necessary to produce water, treat wastewater, and treat irrigation quality water have increased between 10 percent and 150 percent, (3) critical utility -related meters, parts and devices have increased up to 25 percent, (4) the costs for labor and service -related repairs have increased by 20 percent, and (5) essential operating equipment costs have had costs increases in excess of 100 percent; and WHEREAS, the Florida Public Service Commission calculates an annual price index specifically for water and wastewater utilities that allows utilities such as the District to adjust its rates without a rate case, and the most recent annual price index issued by the Florida Public Service Commission on December 27, 2022, was calculated at 7.07 percent; and WHEREAS, County staff recommends the implementation of a 7.07 percent user rate increase effective July 1, 2023, with the understanding that the proposed rate increase to the existing Water, Wastewater, Irrigation Quality water, and Wholesale Water user rates for Schedules One (1) and Two (2) of Appendix A to section four of Collier County Ordinance No. 2001-73, as amended, is an interim rate adjustment subject to the completion of a current ongoing rate study that is anticipated to be completed in the late summer or fall of 2023, at which time a further adjustment of user rates may be warranted; and WHEREAS, the Board of County Commissioners finds that it is in the best interest of the health, safety, and welfare of the District's users to accept staff s recommendation to implement the Florida Public Service Commission's recent annual price index of 7.07 percent as a proposed user rate increase to the existing rates. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND EX OFFICIO THE GOVERNING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT, that: The Board of County Commissioners, after an advertised public hearing: 1. Accepts staffs recommendation for updated District -wide Water and Wastewater rates, Irrigation Quality Water rates, and Wholesale Water rates. Accordingly, the Board hereby approves the attached Schedules One and Two to Appendix A of Ordinance No. 2001-73, as amended, titled the Collier County Water -Sewer District Uniform Billing, Operating and Regulatory Standards Ordinance, which replaces the current Schedules One and Two, which are hereby repealed. The revised rates on the attached Schedules One and Two will take effect at 12:01 a.m. Saturday, July 1, 2023, until further repealed and revised. Packet Pg. 1885 17.D.1 2. Proclaims that the annual price indexing rate of 7.07 percent issued by the Florida Public Service Commission on December 27, 2022, provides a lawful and reasonable basis for the proposed adjustment of the District's Water and Wastewater rates, Irrigation Quality Water rates, and Wholesale Water rates. The implementation of this rate increase shall become effective as provided herein and those rates shall continue as established herein until otherwise further repealed and revised. THIS RESOLUTION ADOPTED after motion, second, and majority vote favoring adoption this day of dune 2023. ATTEST: CRYSTAL K. KINZEL, CLERK , Deputy Clerk Approved as to form and legality: Scott R. Teach, Deputy County Attorney BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND AS EX OFFICIO THE GOVER-KING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT Rick LoCastro, Chairman IL Packet Pg. 1886 17.D.1 1. WATER PUBLIC UTILITIES DIVISION COLLIER COUNTY WATER -SEWER DISTRICT UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE APPENDIX A- FEES, RATES AND CHARGES SCHEDULE I -DISTRICT-WIDE WATER RATES Page 1 of 3 Existing Monthly Rates Pranosed Monthly Rates [11 Effective Effective 10/01/2022 07/01/2023 WATER SERVICE BASE CHARGES (Residential, Multifamily, Commercial, and Irrigation -Only) Meter Size: 5/8" $ 25,78 $ 27.60 3/4" $ 25.78 $ 27.60 1„ $ 40.62 $ 43.49 1-1/4" $ 52.37 $ 56.07 1-1/2" $ 77.42 $ 82.89 2" $121.74 $ 130.35 3" $ 336.06 $ 359.82 411 $ 742.31 $ 794.79 6" $1,481,22 $ 1,585.94 8" $ 2,589.38 $ 2,772.45 10" $ 4,690.21 $ 5,021.81 12" $ 6,952.84 $ 7,444.41 VOLUMETRIC CHARGE PER 1,000 GALLONS [2] (Residential, Multifamily, Commercial, and Irrigation -Only) Block 1 $ 3.48 $ 3.73 Block 2 $ 5.25 $ 5.62 Block 3 $ 6.98 $ 7.47 Block 4 $ 8.71 $ 9.33 Block 5 $ 10.46 $ 11.20 Block 6 $ 13.93 $ 14,91 Wholesale Water Rate Per 1,000 Gallons (All Usage) $ 4.82 $ 5.16 EXISTING BLOCK RATE STRUCTURE (Residential, Multifamily, Commercial, and Irrigation -Only) Consumption Block (Thousands of Gallons) Meter Size: Block 1 Block 2 Block 3 Block 4 Block 5 Block 6 518" 0 to 5 6 to 10 11 to 20 21 to 30 31 to 50 Over 50 3/4" 0 to 5 6 to 10 11 to 20 21 to 30 31 to 50 Over 50 1,, 0 to 8 9 to 16 17 to 32 33 to 48 49 to 80 Over 80 1-1/4" 0 to 11 12 to 22 23 to 44 45 to 66 67 to 110 Over 110 1-1/2" 0 to 17 18 to 34 35 to 68 69 to 102 103 to 170 Over 170 2" 0 to 27 28 to 54 55 to 108 109 to 162 163 to 270 Over 270 3" 0 to 75 76 to 150 151 to 300 301 to 450 451 to 750 Over 750 4" 0 to 167 168 to 334 335 to 668 669 to 1,002 1,003 to 1,670 Over 1,670 6" 0 to 333 334 to 666 667 to 1,332 1,333 to 1,998 1,999 to 3,330 Over 3,330 8" 0 to 583 584 to 1,166 1,167 to 2,332 2,333 to 3,498 3,499 to 5,830 Over 5,830 10" 0 to 1,057 1,058 to 2,114 2,115 to 4,228 4,229 to 6,342 6,343 to 10,570 Over 10,570 12" 0 to 1,568 1,569 to 3,136 3,137 to 6,272 6,273 to 9,408 9,409 to 15,680 Over 15,680 Footnotes: [1] Proposed rates to become effective with service rendered on and after July 1st of fiscal year 2023. [2] All water is billed based on water consumption per block based on the size of meter in service. Packet Pg. 1887 17.D.1 PUBLIC UTILITIES DIVISION COLLIER COUNTY WATER -SEWER DISTRICT UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE APPENDIX A - FEES, RATES AND CHARGES SCHEDULE 1 - DISTRICT -WIDE WATER AND WASTEWATER RATES Page 2 of 3 2. WASTEWATER Existing Monthly Rates Proposed Monthly Rates [11 Effective Effective Description 10/1/2022 07/01/2023 WASTEWATER SERVICE BASE CHARGES (Residential, Multifamily, and Commercial) Meter Size: 5/8" $ 39.17 $ 41.94 3/4" $ 39.17 $ 41.94 1" $ 62,98 $ 67.43 1-1/4" $ 81.81 $ 87.59 1-1/2" $121.97 $ 130.59 2" $193.04 $ 206.69 3" $ 536,70 $ 574.64 4" $1,198.12 $ 1,272.12 6" $ 2,372.96 $ 2,540.73 $" $ 4,149.87 $ 4,443.27 10" $ 7,518.54 $ 8,050.10 12" $ 11,146.64 $ 11,934,71 VOLUMETRIC RATE PER 1,000 GALLONS (Residential, Multifamily, and Commercial) All Usage [2) $ 5.51 $ 5.90 Footnotes: [l I Proposed rates to become effective with service rendered on and after July 1 st of fiscal year 2023. [21 Monthly individually metered residential usage charges are capped at 15,000 gallons. CAO Packet Pg. 1888 17.D.1 PUBLIC UTILITIES DMSION COLLIER COUNTY WATER -SEWER DISTRICT UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE APPENDIX A- FEES, RATES AND CHARGES SCHEDULE 1 -DISTRICT-WIDE WATER AND WASTEWATER RATES Page3 of 3. Water Restriction Surcharge: Percent Reduction Goal Flow charge Rate Water Shortage Phase* In Overall Demand Ad'ustment Percentage, Phase 2 - Severe 30% 15% Phase 3 - Extreme 45% 30% Phase 4 - Critical 60% 40% * Per the South Florida Water Management District (SF WMD) Water Shortage Plan Pursuant to Chapter 40E-21 of the Florida Administrative Code (FAC) The surcharge will be applicable to the volume charge for all single family and multi -family residential accounts for all consumption greater than Block 2, to non-residential accounts for all consumption greater than Block 1, and to irrigation accounts only for consumption. The Block Structures are specified in Section One above. The surcharge is not assessed against the service base charge. The water restriction surcharge will start on the first billing cycle of the month following the imposition of the restrictions. The surcharge will cease on the first billing cycle of the month following the revocation or lining of the restrictions. Packet Pg. 1889 17.D.1 PUBLIC UTILITIES DIVISION COLLIER COUNTY WATER -SEWER DISTRICT UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE APPENDIX A- FEES, RATES AND CHARGES SCHEDULE 2 - IRRIGATION QUALITY WATER RATES Page 1 of I Existing Monthly Rates Proposed Monthly Rates [11 Effective Effective Description: 10/01/2022 07/01/2023 SERVICE BASE CHARGES Meter Size 5/8" $ 10.00 $ 10.71 3/4" $ 10.00 $ 10.71 1" $ 16.71 $ 17.$9 1-1/2" $ 33.31 $ 35.67 2" $ 53.32 $ 57.09 3" $ 150.07 $ 160.68 4" $ 333.45 $ 357.02 6" $ 667.02 $ 714.18 8" $ 1,167.26 $ 1,249.79 10" $ 2,115.60 $ 2,265.17 12" $ 3,137.00 $ 3,358.79 VOLUMETRIC CHARGE PER 1,000 GALLONS Customer Type: Bulk $ 0.58 $0.62 Pressurized $ 0.77 $0.82 Pressurized and Distributed $ 1.49 $1.60 Footnote: [I ] Proposed rates to become effective with service rendered on and after July 1 st of fiscal year 2023. CAO Packet Pg. 1890 1Sb7)m 17.D.2 8D 1 THURSDAY, JUNE 1, 2023 1 NAPLES DAILY NEWS NOTICE OF PUBLIC HEARING Notice is hereby given that a public hearing will be held by the Collier County Board of County Commissioners commencing at 9:00 a.m. on June 13, 2023, in the Board of County Commis- sioners meeting room, third floor, Collier Government Center, 3299 East Tamiami Trail, Naples, FL, to consider: A RESOLUTION OF THE BOARD OF COUNTY COMMISSIONERS OF COLLIER COUNTY, FLORIDA, AS THE GOVERNING BODY OF COLLIER COUNTY AND EX OFFICIO THE GOVERNING BOARD OF THE COLLIER COUNTY WATER SEWER DISTRICT, REPEALING AND REPLACING SCHEDULES ONE AND TWO OF APPENDIX A TO SECTION FOUR OF COLLIER COUNTY ORDINANCE NO. 2001- 73, AS AMENDED, TITLED THE COLLIER COUNTY WATER -SEW- ER DISTRICT UNIFORM BILLING, OPERATING AND REGULATORY STANDARDS ORDINANCE; AMENDING PROPOSED RATES FOR WATER, WASTEWATER, IRRIGATION QUALITY WATER, AND WHOLESALE. POTABLE WATER; WITH AN EFFECTIVE DATE OF JULY 1, 2023. A copy of the proposed Resolution is on file with the Clerk to the Board and is available for inspection. All interested parties are invited to attend and be heard. All persons wishing to speak on any agenda item must register with the County Manager prior to presentation of the agenda item to be addressed. Individual speakers will be limited to 3 minutes on any item. The selection of an individual to speak on behalf of an organization or group is encouraged. If recog- nized by the Chairman, a spokesperson for a group or organi- zation may be allotted 10 minutes to speak on an item. Writ- ten materials intended to be considered by the Board shall be submitted to the appropriate County staff a minimum of 7 days prior to the public hearing. All materials used in presenta- tions before the Board will become a permanent part of the re- cord. As part of an ongoing initiative to encourage public involve- ment, the public will have the opportunity to provide public comments remotely, as well as in person, during this proceed- ing: Individuals who would like to participate remotely should register through the link provided within the specific event/meeting entry on the Calendar of Events on the County website at www.coI[iercountyfl.gov/our-county/visitors/calend ar-of-events after the agenda is posted on the County website. Registration should be done in advance of the public meeting or any deadline specified within the public meeting notice. In- dividuals who register will receive an email in advance of the public hearing detailing how they can participate remotely in this meeting. Remote participation is provided as a courtesy and is at the user's risk. The County is not responsible for tech- nical issues. For additional information about the meeting, FIlease call Geoffrey Willig at 252-8369 or email to Geoffrey.Wi ig0colliercountyfl.gov. Any person who decides to appeal any decision of the Board will need a record of the proceedings pertaining thereto and therefore, may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is based. If you are a person with a disability who needs any accommo- dation in order to participate in this proceeding, you are enti- tled, at no cost to you, to the provision of certain assistance. Please contact the Collier County Facilities Management Divi- sion, located at 3335 Tamiami Trail East, Suite 101, Naples, FL 34112-5356, (239) 252-8380, at least two days prior to the meeting. Assisted listening devices for the hearing impaired are available in the Board of County Commissioners Office. BOARD OF COUNTY COMMISSIONERS COLLIER COUNTY, FLORIDA RICK LOCASTRO, CHAIRMAN CRYSTAL K. KINZEL, CLERK By: Merline Forgue, Deputy Clerk (SEAL) June 1, 2023 #5719167 M N O N ti (D :r L) d W d to R L) C O r R Q' r R Y m CT i d 3 (D U) N I, - CD LO N J Q Z LL N I` CD N a R C O a� R Packet Pg. 1891 17.D.3 STATE OF FLORIDA Commissioners: Andrew Giles Fay, Chairman Art Graham Gary F. Clark Mike La Rosa Gabriella Passidomo DIVISION of ACCOUNTING AND FINANCE ANDREW L. MAUREY DIRECTOR (850)413-6900 Public Service Commission February 17, 2023 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. Packet Pg. 1892 17.D.3 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 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. 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 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 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 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. Packet Pg. 1893 All Florida Public Service Commission Page 3 17.D.3 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. In addition, the Commission reminds water and wastewater utilities that the Utility Reserve Fund exists to help address concerns over deferred maintenance of critical infrastructure and delays in necessary repairs. The availability of the reserve funds may allow a utility to avoid or defer the 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. jjirecior Enclosures Packet Pg. 1894 FILED 12/27/2022 17.D.3 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. Packet Pg. 1895 17.D.3 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 Index (GNP) was used as the indexing factor for water and wastewater utilities. The Department of Commerce switched its emphasis from the GNP to the GDP as the primary measure of U.S. production. 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 its jurisdiction reflecting the percentage of increase or decrease in such costs from the most 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, 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. Packet Pg. 1896 17.D.3 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% Packet Pg. 1897 17.D.3 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 Packet Pg. 1898 17.D.3 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 percent. It is further 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 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 entire package shall also be available on our website. It is further 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. Packet Pg. 1899 17.D.3 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. Packet Pg. 1900