Florida Waterworks Ass'n v. Florida Public Service Com'n

• Decision Date: 15 July 1985
• Docket Number: AT-47,Nos. AT-46,s. AT-46
• Citation: 473 So.2d 237,10 Fla. L. Weekly 1719
• Parties: 10 Fla. L. Weekly 1719 FLORIDA WATERWORKS ASSOCIATION, et al., and Florida Home Builders Association, Appellants, v. FLORIDA PUBLIC SERVICE COMMISSION, Appellee.
• Court: Florida District Court of Appeals

Page 237

473 So.2d 237

10 Fla. L. Weekly 1719

FLORIDA WATERWORKS ASSOCIATION, et al., and Florida Home Builders Association, Appellants, v. FLORIDA PUBLIC SERVICE COMMISSION, Appellee.

Nos. AT-46, AT-47.

District Court of Appeal of Florida First District.

July 15, 1985.

Rehearing Denied Aug. 20, 1985.

Ben E. Girtman, of Madigan, Parker, Gatlin, Swedmark & Skelding, and Stephen W. Metz, Tallahassee, for appellants.

Bill Bilenky, Gen. Counsel, Susan F. Clark, Deputy Gen. Counsel and Gregory J. Krasovsky, Associate Gen. Counsel, Florida Public Service Com'n, Tallahassee, for appellee.

PER CURIAM.

Appellants appeal a hearing officer's final order upholding the validity of several proposed rules of the Public Service Commission relating to "contributions in aid of construction" (CIAC). ¹ We affirm.

On July 20, 1982, the Commission issued an order containing its proposed rules regarding service availability policies and charges. One of them, proposed rule 25-30.58, provides as follows:

Guidelines for designing service availability policy.

(1) A utility's service availability policy shall be designed in accordance with the following guidelines:

(a) The maximum amount of contributions-in-aid-of construction, net of amortization, should not exceed 75% 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; and

(b) The minimum amount of contributions-in-aid-of construction should not be less than the percentage of such facilities and plant that is represented by the water transmission and distribution and sewage collection systems.

(2) In any case where compliance with the guidelines of subsection (1) introduces unusual hardship or unreasonable difficulty, and the Commission, utility, or interested party shows that it is not in the best interests of the customers of the utility to require compliance, the Commission may exempt the utility from the guidelines.

Appellants challenge the validity of this and related rules on three grounds:

(1) The findings of the hearing officer upholding the validity of the rules are not supported by competent, substantial evidence;

(2) The Commission does not have statutory authority to adopt the rules; and

(3) These rules unconstitutionally confiscate a utility's property.

The Commission is given broad authority by section 367.101(1), Florida Statutes (1981), to set by rule "standards for service-availability charges and service-availability conditions." The Commission is also permitted by section 350.127(2), Florida Statutes (1981), to "adopt...rules reasonably necessary to implement any law which it administers." The rules can be held invalid only if there is no competent, substantial evidence supporting the hearing officer's determination that the term "service-availability charges" is virtually synonymous with the term "contributions-in-aid-of construction" (CIAC).

I.

We must first determine the applicable standard of review of a hearing officer's order sustaining the validity of a proposed rule in a proceeding under section 120.54(4), Florida Statutes (1981). The following statements of the Florida Supreme Court, although applied to rulemaking proceedings under section 120.54(3), are in our judgment equally applicable to review of orders entered pursuant to section 120.54(4):

We adopt as the proper standard of review one set forth by the First District Court of Appeal upon review of similar rulemaking:

Where the empowering provision of a statute states simply than [sic] an agency may 'make such rules and regulations as may be necessary to carry out the provisions of this Act,' the validity of the regulations promulgated thereunder will be sustained as long as they are reasonably related to the purposes of the enabling legislation, and are not arbitrary or capricious.

Agrico Chemical Co. v. State, Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1978), cert. denied, 376 So.2d 74 (Fla.1979); Florida Beverage Corp. v. Wynne, 306 So.2d 200 (Fla. 1st DCA 1975).

General Telephone Co. of Florida v. Florida Public Service Commission, 446 So.2d 1063, 1067 (Fla.1984) (emphasis supplied). This test, approved by the Florida Supreme Court, was applied in Agrico to an order arising from a proceeding involving, as here, a challenge to a proposed rule. Thus, the standard of review for determining the validity of adopted rules, as well as orders entered in section 120.54(4) proceedings, is identical: The reviewing court should sustain both if they can be considered reasonably related to the purposes of the enabling legislation and are not arbitrary or capricious. The deference owed to a regulatory agency in its interpretation of statutes that it is authorized to administer has been otherwise stated as follows:

Agencies are afforded wide discretion in the interpretation of a statute which it administers and will not be overturned on appeal unless clearly erroneous. Pan American World Airways, Inc. v. Florida Public Service Commission and Florida Power & Light Company, 427 So.2d 716, 719 (Fla.1983). The reviewing court will defer to any interpretation within the range of possible interpretation. Department of Health and Rehabilitative Services v. Wright, 439 So.2d 937 (Fla. 1st DCA 1983); Department of Administration v. Nelson, 424 So.2d 852 (Fla. 1st DCA 1982); State, Department of Health and Rehabilitative Services v. Framat Realty, Inc., 407 So.2d 238 (Fla. 1st DCA 1981).

Natelson v. Department of Insurance, 454 So.2d 31, 32 (Fla. 1st DCA 1984).

II.

We next determine if there is record support for the hearing officer's finding that the two terms in question, "CIAC" and "service availability charges," are synonymous. This finding depends simply on competent, substantial evidence, defined as " 'such evidence as will establish a substantial basis of fact from which the fact at issue can reasonably be inferred [or] ... such relevant evidence as a reasonable mind would accept as adequate to support a conclusion.' " Duval Utility Co. v. Florida Public Service Commission, 380 So.2d 1028, 1031 (Fla.1980) (quoting from De Groot v. Sheffield, 95 So.2d 912, 916 (Fla.1957)). Although there may be technical distinctions between the two terms, we conclude there is ample support in the record for a finding that the industry has recognized both to be the same for all practical purposes.

One recognized means of ascertaining whether there is record support for a rule adopted by the Commission is whether the agency has developed in prior ratemaking proceedings policy which is consistent with that later provided by rule. This method of proof is exemplified by General Telephone Co. of Florida v. Florida Public Service Commission, 446 So.2d 1063 (Fla.1984), in which one of the issues was whether the Commission could validly adopt a rule that reduced the income tax expense of a regulated utility in situations wherein the parent corporation of the subsidiary utility had invested in the equity of the subsidiary and both entities filed a consolidated income tax return. In upholding the validity of the rule against an attack that there was no record evidence supporting the rule, the court responded:

We find that the rule adopted by the PSC is neither arbitrary or capricious. The rule represents a valid implementation of a PSC policy choice regarding the treatment of a utility's income tax expense during ratemaking. Testimony put forth during the section 120.54(3) hearing shows that there is no single correct method of dealing with the income tax expense of a subsidiary-utility joining in the filing of a consolidated return. By choosing this particular method, the PSC is merely acting within the scope of its discretion. It is clear that this Court will not substitute its judgment for that of the PSC on a discretionary decision. Citizens of Florida v. Mayo, 357 So.2d 731 (Fla.1978). This particular policy choice finds ample support in the record, where it is shown that an income tax expense adjustment had been implemented in several past ratemaking cases in basically the same form as the rule now provides. In fact, this Court has instructed the PSC to apply this type of adjustment in a ratemaking case when the facts of the case were found to warrant such an adjustment. See Citizens of Florida v. Hawkins, 356 So.2d 254 (Fla.1978). We therefore find that appellant's evidentiary challenges to the rulemaking are without merit.

446 So.2d at 1067 (emphasis supplied).

Additionally, facts recited in related opinions reflect that industry custom recognizes the similarity in the two terms:

These consolidated cases bring to us two orders of the Public Service Commission which condition the right of two utilities to receive service availability charges (commonly known as 'connection charges,' or contributions in aid of construction) from their customers.

Duval Utility Co. v. Florida Public Service Commission, 380 So.2d at 1029. While the Duval Utility Co. case disapproved the Commission's order as lacking competent, substantial evidence, the opinion clearly did not disapprove the following statements from the Commission's order, disclosing the agency's policy of regarding service availability charges, for all practical effect, as CIAC:

We recognize that the customers (be it the developer who builds the service facility or the owner thereof), by payment to the utility of the service availability charges (CIAC) are 'purchasing' water and sewer utility service availability. However, CIAC is a contribution to the utility's capital and is so recognized by both State and Federal law. (See 1976 Tax Reform Act, 90 Stat. 1912). So long as the initial utility that receives the CIAC provides the service, the customer receives the benefit of his contributions in the form of lower rates because CIAC is deducted from the company rate base.

Id. at 1029-30. It would appear from the above portion of...