04-002250RX Ocean Properties, Ltd. vs. Public Service Commission Status: Closed DOAH Final Order on Friday, May 20, 2005.

Summary: The rule challenge is dismissed because it sought to attack the rule`s application instead of the rule`s facial invalidity.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OCEAN PROPERTIES, LTD., )

)

Petitioner, )

)

vs. ) Case No. 04 - 2250RX

)

PUBLIC SERVICE COMMISSION, )

)

Respondent, )

)

and )

)

FLORIDA POWER & LIGHT COMPANY, )

)

Intervenor. )

)

SUMMARY FINAL ORDER

This cause came on for consideration without a formal

hearing pursuant to Section 120.57(1)(h), Florida Statutes,

before Suzanne F. Hood, Administrative Law Judge with the

Division of Administ rative Hearings.

APPEARANCES

For Petitioner: Jon C. Moyle, Jr., Esquire

Moyle, Flanigan, Katz, Kollins,

R aymond and Sheehan, P.A.

118 North Gadsden Street

Tallahassee, Florida 32301

For Respondent: Richard C. Melson, Esquire

Florida Public Service Commission

2540 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0100

For Intervenors: Donna E. Blanton, Esquire

Radey Thomas Yon and Clark, P.A.

301 South Bronough Street, Suite 200

Tallahassee, Florida 32301

Kenneth F. Hoffman, Esqui re

Rutledge, Ecenia, Purnell and

Hoffman, P.A.

215 South Monroe Street, Suite 420

Post Office Box 551

Tallahassee, Florida 32302 - 0551

ST ATEMENT OF THE ISSUE

The issue is whether Florida Administrative Code

Rule 25 - 6.109(4)(a), constitutes an invalid exercise of

delegated legislative authority as defined in Sections

120.52(8)(b) and 120.52(8)(c), Florida Statutes.

PRELIMINARY STATEMENT

O n June 25, 2004, Petitioner Ocean Properties, Ltd. (Ocean

Properties) filed a Petition for Administrative Determination of

Invalidity of Existing Rule Pursuant to Section 120.56(3),

Florida Statutes, with the Division of Administrative Hearings

(DOAH). Th e petition alleges that Florida Administrative Code

Rule 25 - 6.109(4)(a) (interest rate rule) , is an invalid exercise

of delegated legislative authority.

Specifically, the petition alleges as follows: (a) the

Florida Public Service Commission (PSC/Commis sion) exceeded its

grant of rulemaking authority in adopting the interest rate

rule; and (b) that the interest rate rule enlarges, modifies, or

contravenes the specific provisions of law it is alleged to

implement.

In a Notice of Hearing dated July 1, 2 004, the undersigned

scheduled the hearing for July 14, 2004.

On July 6, 2004, Florida Power & Light Company (FPL) filed

a Petition for Leave to Intervene.

On July 8, 2004, Ocean Properties, PSC, and FPL filed a

Joint Motion to Hold Matter in Abeyance, n oting that "[t]he

issues of the amount of refunds, if any, owed by FPL to Ocean as

a result of alleged overcharges due to meter error and of what

interest rate applies to any such refunds are currently pending

before the Commission . . . . " The parties re quested that the

instant rule challenge proceeding be held in abeyance until PSC

could issue a final order pursuant to Sections 120.569 and

120.57(1), Florida Statutes.

On July 9, 2004, the undersigned issued two orders: (a)

Order Granting Continuance a nd Placing Case in Abeyance; and (b)

Order Granting Florida Power and Light Company's Petition for

Leave to Intervene.

The parties filed Status Reports on September 9, 2004, and

January 13, 2005. Based on the Status Reports, the undersigned

issued orders continuing the case in abeyance.

On March 1, 2005, Ocean Properties filed an unopposed

Status Report and Request to Remove Case from Abeyance. The

Status Report stated as follows in relevant part:

On February 1, 2005, the Florida Public

Service Commis sion considered the issue of

whether interest to be paid on monies due

customers, including Petitioner, should be

calculated pursuant to the statutory rate

set forth in Section 678.01 (sic), Florida

Statutes, or pursuant to Rule 25 - 6.109(4),

Florida Admini strative Code. The Commission

decided to apply Rule 25 - 6.109(4), the rule

that is the subject to Petitioner's pending,

abated rule challenge, to Petitioner and

other Customers. Accordingly, Petitioner

desires to move forward with its rule

challenge at th is time.

The parties agree that the issues to be

determined as framed by the Petitioner's

rule challenge are legal matters, and that a

hearing is not required. Thus, the parties

would ask that a schedule be established to

permit the filing of Proposed F inal Orders

addressing the issues raised in Petitioner's

Rule Challenge Petition which provides them

at least thirty (30) days to prepare and

file their respective Proposed Final Orders.

The undersigned issued an Order Granting Request for

Summary Proc eeding on March 3, 2005. The order advised the

parties that they had an opportunity to file Proposed Final

Orders on April 11, 2005.

On March 17, 2005, Progress Energy Florida, Inc.

(Progress), Tampa Electric Company (TECO), and Gulf Power

Company (Gulf) filed a joint Petition for Leave to Intervene.

The petition stated that Progress, TECO, and Gulf wished to file

one joint Proposed Final Order in conjunction with FPL. In an

Order dated March 22, 2005, the undersigned granted the

petition.

PSC filed a Request for Official Recognition of an FPL

tariff on March 28, 2005. On March 31, 2005, Intervenors filed

a Request for Official Recognition of four documents filed in

the case pending before PSC under Sections 120.569 and

120.57(1), Florida Statutes. Subsequently, Ocean Properties

filed objections to the recognition of the FPL tariff and to

three of the four documents referenced by Intervenors.

After a telephone conference on April 6, 2005, the

undersigned entered an Order, reserving ruling on the r equests

for official recognition. The Order provided the parties with

an opportunity to file stipulated facts.

On April 11, 2005, the parties filed their Stipulated

Preliminary Statement and Facts.

All citations hereinafter shall be to Florida Statu tes

(2004) unless otherwise specified.

FINDINGS OF FACT

1. Ocean Properties is one of FPL's commercial retail

electric customers.

2. FPL, Progress, TECO, and Gulf are public utilities and

electric utilities within the meaning of Section 366.02, Florida

Statutes. They are extensively regulated by PSC.

3. Ocean Properties has challenged Florida Administrative

Code Rule 25 - 6.109(4)(a), which provides as follows:

(4) Interest.

(a) In the case of refunds which the

Commission orders to be made w ith interest,

the average monthly interest rate until the

refund is posted to the customer's account

shall be based on the thirty (30) day

commercial paper rate for high grade,

unsecured notes sold through dealers by

major corporation in multiples of $1,00 0 as

regularly published in the Wall Street

Journal.

PSC adopted Florida Administrative Code Rule 25 - 6.109(4) in 1983

and has never amended it.

4. At the time that Ocean Properties filed the petition at

issue here, Ocean Properties was a party to a pro ceeding before

PSC concerning alleged inaccuracies in certain thermal demand

meters owned and installed by FPL. Ocean Properties and several

of FPL's other customers filed complaints with PSC, alleging

that that the meters over - registered their electric s ervice

demand and that they were overcharged for retail electric

service. The customers asked PSC to order FPL to refund the

overcharges.

5. On November 19, 2003, PSC issued a Proposed Agency

Action Order, ordering refunds for the overcharges and stating

that the interest rate rule would apply to determine the amount

of interest to be paid by FPL to the customers. Ocean

Properties, among others, challenged the Proposed Agency Action

Order in a Petition for Formal Administrative Hearing Pursuant

to Sectio ns 120.569 and 120.57(1), Florida Statutes.

6. On June 25, 2004, Ocean Properties filed its rule

challenge petition in the instant case.

7. In a letter dated July 6, 2004, PSC requested the

Bureau of Administrative Code to add Section 366.05(1), Flor ida

Statutes, as additional Specific Authority and Section 366.07,

Florida Statutes, as additional Law Implemented for the interest

rate rule.

8. On July 8, 2004, Ocean Properties, PSC, and FPL filed a

motion to place the instant case in abeyance, stating as follows

in relevant part:

In the event that Ocean chooses to

proceed with this rule challenge following

the issuance of a final order in Docket No.

030623 - EI, and also files with the

Commission a timely motion for

reconsideration of that final ord er, the

Commission will defer ruling on Ocean's

motion for reconsideration until after the

entry of a final order in this rule

challenge proceeding and FPL will not object

to such deferral. Without conceding its

relevance or potential effect, FPL agrees

t hat the Commission is entitled to consider

the final order in the rule challenge case

in resolving any such motion for

reconsideration. The Commission staff

agrees to address the potential effect of a

final order in the rule challenge case in

making its r ecommendation on the motion for

reconsideration.

By joining in this motion, none of the

parties waives any position or argument that

is otherwise available to it in this

proceeding, in Docket No. 030623 - EI, or on

appeal of the final order in either

p roceeding; provided, however, that if the

Commission's final order applies the

challenged rule to Ocean, and the challenged

rule is subsequently invalidated in [DOAH]

Case No. 04 - 2250RX, neither the Commission

nor FPL will assert on appeal that Ocean is

ne vertheless bound by the invalidated rule

based on the fact that the determination of

invalidity came after the Commission's final

order as opposed to having been issued in

July 2004.

9. On November 4, 2004, PSC conducted a formal

administrative hearing . During the hearing, Ocean Properties

argued, among other things, that Section 687.01, Florida

Statutes, which governs rates of interest in commercial

relationships when there is no contract, should apply to the

refunds. Ocean Properties argued that the statutory interest

rate should apply because Florida Administrative Code Rule

25 - 6.109(4)(a) is an invalid exercise of delegated legislative

authority.

10. Additionally, Ocean Properties argued to the PSC that

Kissimmee Utility Authority v. Better Pla stics, Ins. , 526 So. 2d

46 (Fla. 1988) should control. In that case, the Florida

Supreme Court decided that Section 687.01, Florida Statutes, is

applicable when calculating interest on utility overcharge

refunds. See Kissimmee Utility Authority v. Better Plastics,

Ins. , 526 So. 2d at 47.

11. In a Final Order Resolving Complaints dated

February 25, 2005, PSC ordered FPL to refund to its customers

the overcharges that resulted from use of the thermal demand

meters. PSC also ordered FPL to pay interest o n the amount

refunded based on the interest rate rule. PSC distinguished

Kissimmee Utility Authority as involving a municipal utility

that was not subject to PSC's broad ratemaking authority under

Chapter 366, Florida Statutes.

12. On March 14, 2005, Oce an Properties and other

customers filed a Motion for Reconsideration of PSC's Final

Order Resolving Complaints. The motion references the instant

case and asks the Commission to reconsider its decision

concerning the proper interest to be applied to the r efunds.

13. On March 21, 2005, FPL filed a Response in Opposition

to Customers' Motion for Reconsideration with PSC. The response

refers to FPL's current tariff that is titled "Florida Power &

Light Company, General Rules and Regulations for Electric

S ervice." The tariff referenced in the response is the official

and effective tariff on file with PSC.

14. In a letter dated March 24,2005, PSC requested the

Bureau of Administrative Code to add Section 366.04(1), Florida

Statutes, as additional Law Imp lemented for the interest rate

rule.

15. FPL's General Rules and Regulations for Electric

Service state as follows in pertinent part:

INTRODUCTION

These General Rules and Regulations are

a part of the Company's Tariff, covering the

terms and condi tions under which Electric

Service is supplied by the Company to the

Customer. They are supplementary to the

"Rules and Regulations Governing Electric

Service by Electric Utilities" issued by the

Florida Public Service Commission.

* * *

8.4 Meter Tests . The Company employs every

practicable means to maintain the commercial

accuracy of its meters. Meter tests, and

billing adjustments for inaccurate meters,

are in accordance with the methods and

procedure prescribed by the Florida Public

Service Commissi on.

16. Section 7 of FPL's General Rules and Regulations for

Electric Service relates to billing. It contains information

regarding the following: (a) billing periods; (b) residential

budget billing; and (c) non - residential (Pilot) budget billing.

T he billing provisions make no reference to "interest" of any

kind.

17. At the beginning of each individual rate schedule in

the tariff, the following language appears:

Service under this schedule is subject

to orders of governmental bodies having

j urisdiction and to the currently effective

"General Rules and Regulations for Electric

Service" on file with the Florida Public

Service Commission. In case of conflict

between any provision of this schedule and

said "General Rules and Regulations for

Elec tric service" the provision of this

schedule shall apply.

18. PSC's interest rate rule lists Sections 350.127(2) and

366.05(1), Florida Statutes, as specific authority, and the

following statutes as the laws implemented: Sections 366.03,

366.04(1), 366. 04(2)(f), 366.06(3), 366.07, and 366.071, Florida

Statutes.

19. As of the date that this Final Order was issued, Ocean

Properties' Motion for Reconsideration was still pending before

PSC.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has

jurisdiction over this case pursuant to Sections 120.56(1) and

120.56(3), Florida Statutes.

21. Petitioner has the burden to establish by a

preponderance of the evidence that the interest rate rule is an

invalid exercise of delegated legislative au thority.

See § 120.56(3)(a), Fla. Stat.

22. The first issue to be determined is whether Petitioner

has standing to challenge the validity of the interest rate

rule. Petitioner's burden in this regard is to show that it is

substantially affected by the interest rate rule.

See § 120.56(1). Fla. Stat. Petitioner must establish the

following: (a) a real and sufficiently immediate injury - in -

fact; and (b) that the alleged interest is arguably within the

zone of interest to be protected or regulated. Lanoue v.

Florida Department of Law Enforcement , 751, So. 2d 94, 96 - 97

(Fla. 1st DCA 1999).

23. PSC and FPL do not argue that Ocean Properties'

"substantial interest" is not within the zone of interest to be

protected or regulated. Instead, they assert that Ocean

Properties has failed to show "injury - in - fact."

24. Ocean Properties alleges in its petition that it will

suffer a direct, immediate injury - in - fact as follows: (a) PSC

applied the interest rate rule to determine the amount of

interest FPL will pa y on the refund due Petitioner; and (b)

interest calculated under the interest rate rule is less than

Petitioner would receive under Section 687.01, Florida Statutes.

25. Section 687.01, Florida Statutes, states as follows:

687.01 Rate of intere st in absence of

contract. -- In all cases where interest shall

accrue without a special contact for the

rate thereof, the rate is the rate provided

for in s. 55.03.

26. Section 55.03, Florida Statutes, provides for the

determination of the interest rate o n judgments and decrees

based on the average federal discount rate plus 500 basis points

for the preceding year.

27. Ocean Properties also relies upon Kissimmee Utility

Authority v. Better Plastics, Inc. , 526 So. 2d 46 (Fla. 1988)

for the proposition th at Section 687.01, Florida Statutes,

applies to determine the interest rate due to retail electric

utility customers on refunds of overcharges. In that case, the

Court stated as follows in pertinent part:

Even though rule 25 - 6.106(2) does not

specifi cally authorize the payment of

prejudgment interest as part of the

overcharge refund due a customer, we agree

with the district court that a regulated

public utility has the legal obligation to

pay interest on overcharge refunds. In

light of our decision in Argonaut , it is

unnecessary for the Public Service

Commission to specifically refer to

prejudgment interest in its rules to assure

utility customers are fully compensated in

the event of an overbilling.

* * *

. . . . Once liability has been determined

and the amount of damages set, it is merely

a ministerial duty to add the appropriate

amount of interest to the principal amount

of damages awarded. . . . Whether an award

of prejudgment interest is appropriate in

this case does not turn on the Authority' s

status as a regulated public utility. In

Florida once damages are liquidated,

prejudgment interest is considered an

element of those damages as a matter of law,

and the plaintiff is to be made whole from

the date of the loss.

***

. . . The amount of prejudgment interest to

be paid absent a controlling contractual

provision has been set by the legislature. 4

FN4. Section 687.01, Florida Statutes,

contains the statutory interest rate set by

the legislature that controls prejudgment

interest. . . .

2 8. PSC and FPL argue that the Kissimmee Utility Authority

case is distinguishable because it involved a civil proceeding

and a municipal utility that was not subject to PSC's broad

ratemaking authority. PSC and FPL also argue that Section

687.01, Florida Statutes, cannot provide Ocean Properties with

grounds to allege an "injury - in - fact" because there is a

contract between Ocean Properties and FPL that establishes the

applicable interest rate.

29. In support of their latter argument, PSC and FPL point

to Section 8.4 of the FPL tariff, which states that "billing

adjustments for inaccurate meters are in accordance with the

methods and procedure prescribed by the Florida Public Service

Commission." PSC and FPL rely on BellSouth Telecommunications

v. Jacob s , 834 So. 2d 855, 859 (Fla. 2002), for the proposition

that a validly filed tariff constitutes a "contract of carriage"

between Ocean Properties and FPL.

30. PSC's and FPL's arguments regarding Ocean Properties'

lack of standing are without merit for t wo reasons. First, if

the interest rate rule is facially invalid, there is no contract

pursuant to FPL's tariff that would prohibit the application of

Section 687.01, Florida Statutes.

31. Second, if the interest rate rule is invalid, Ocean

Properties would be entitled to interest pursuant Kissimmee

Utility Authority , 526 So. 2d at 47. It does not matter whether

the utility paying the interest on an overcharge is a municipal

utility involved in civil litigation or a public utility

involved in an admini strative proceeding. In either

circumstance, Section 687.01, Florida Statutes, applies if there

is no contract between the parties and if there is no valid

administrative rule providing otherwise. Accordingly,

Petitioner has standing to challenge the int erest rate rule.

32. The next issue is whether the petition should be

dismissed because Ocean Properties is attempting to bring an "as

applied" challenge to the interest rate rule. According to PSC

and FPL, the petition should be dismissed pursuant to Ha sper v.

Department of Administration , 459 So. 2d 400 (Fla. 1st DCA

1984)(the remedy for an alleged erroneous application of a rule

is a proceeding pursuant to Section 120.57, Florida Statutes,

not a rule challenge proceeding); and Beverly Health & Rehab.

S ervs., Inc. v. Agency for Health Care Admin. , 708 So. 2d 616

(Fla. 1st DCA 1998)(where the substance of a rule challenge is

to attack the application of a rule, dismissal of the petition

is appropriate).

33. Petitioner alleges that PSC has no statutory authority

"to establish an interest rate, or to 'pick and choose' which

interest rate - including that adopted in Rule 25 - 6.109(4)(a),

F.A.C. , - it will apply to determine the amount of interest due

on electric utility service overcharges." (Emphasis incl uded)

At the same time, Petitioner admits in a footnote to its petition

and in its Proposed Final Order that statutory authority exists

for the interest rate rule pursuant to Sections 366.06(3) and

366.071(2)(a), Florida Statutes. Specifically, the footn ote in

the petition states as follows:

At most, the statutes can be read to provide

authority to the PSC for interest rates

involved in rate refunds where rates have

gone into effect prior to a Commission order

[Section 366.06(3), F.S.], or interim rates

are involved [Section 366.071(2)(a), F.S.].

Other than these limited circumstances, the

statutes cited do not provide specific

statute authority to the PSC to establish

interest rates.

The interest rate rule lists Sections 366.06(3) and

366.071(2)(a), F lorida Statutes, as laws implemented.

34. Section 366.06(3), Florida Statutes, states as follows

in relevant part:

(3) Pending a final order by the

commission in any rate proceeding under this

section, the commission may withhold consent

to the op eration of all or any portion of

the new rate schedules, delivering to the

utility requesting such increase, within 60

days, a reason or written statement of good

cause for withholding its consent. . . . The

new rates or any portion not consented to

shall go into effect under bond or corporate

undertaking at the end of such period, but

the commission shall, by order, require such

public utility to keep accurate account in

detail of all amounts received by reason of

such increase, specifying by whom and in

w hose behalf such amounts were paid and,

upon completion of hearing and final

decision in such proceeding, shall by

further order require such public utility to

refund with interest at a fair rate, to be

determined by the commission in such manner

as it may direct , such portion of the

increased rate or charge as by its decision

shall be found not justified. (Emphasis

added)

35. Section 366.071(2)(a), Florida Statutes, states as

follows in pertinent part:

(2)(a) In a proceeding for an interim

incre ase in rates, the commission shall

authorize, within 60 days of the filing for

such relief, the collection of rates

sufficient to earn the minimum of the range

of rate of return calculated in accordance

with subparagraph (5)(b)2. The difference

between th e interim rates and the previously

authorized rates shall be collected under

bond or corporate undertaking subject to

refund with interest at a rate ordered by

the commission . (Emphasis added)

36. In Florida Power & Light Company v. Public Serv.

Comm'n , DOAH Case No. 99 - 4264RX (Final Order, November 3, 1999),

Administrative Law Judge Donald R. Alexander stated as follows:

. . . Hasper makes clear that FPL's "remedy

for an erroneous application of Rule [25 -

22.036(3)]" is a proceeding pursuant to

Sectio ns 120.569 and 120.57, Florida

Statutes, and if unsuccessful in that forum,

an appeal to the Supreme Court once final

agency action has been taken.

37. In this case, Petitioner alleges and argues that PSC

has no statutory authority to apply the intere st rate rule under

the narrow facts of this case, i.e. to the refund that FPL owes

Ocean Properties as a result of defective electric meters. The

gravamen of Petitioner's complaint is that PSC has used the

interest rate rule, which is authorized under lim ited

circumstances, in an erroneous way. This complaint is more

appropriately resolved in the Section 120.57(1), case pending

before PSC.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

ORDERED:

That the Petition for Admini strative Determination of

Invalidity of Existing Rule Pursuant to Section 120.56(3),

Florida Statutes, is dismissed .

DONE AND ORDERED this 20 th day of May, 2005, in

Tallahassee, Leon County, Florida.

S

SUZANNE F. H OOD

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Divisi on of Administrative Hearings

this 20 th day of May, 2005.

COPIES FURNISHED :

Jon C. Moyle, Jr., Esquire

Moyle, Flanigan, Katz, Kollins,

Raymond and Sheehan, P.A.

118 North Gadsden Street

Tallahassee, Florida 32301

Richard D. Melson, General Counsel

P ublic Service Commission

2540 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0850

Mary Andrews Bane, Executive Director

Public Service Commission

2540 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0850

Kenneth A. Hoffman, Esquire

Rutledge, Ecenia, Purnell & Hoffman, P.A.

Post Office Box 551

Tallahassee, Florida 32302 - 0551

Donna E. Blanton, Esquire

Radey, Thomas, Yon & Clark, P.A.

301 South Broungh Street, Suite 200

Tallahassee, Florida 32301

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the original Notice of Appeal with the agency Clerk of

the Division of Administrative Hearings and a copy, accompanied

by filing fees prescribed by law, with the District Court of

Appeal, First District, or with the District Court of Appeal in

the Appellate District where the party resides. The notice of

appeal must be filed within 30 days of rendition of the order to

be reviewed .