§ 28-557. Declaration of policy concerning reclaimed water rates.

(a)

The board declares that the district shall endeavor, as a matter of public policy, to set a reclaimed water rate that is economically viable to existing and future reclaimed water customers and that recovers the district's reclaimed water costs.

(b)

The board recognizes, however, that reclaimed water rate design is a specialized area within rate-making because of the economic dynamics associated with that particular product. The existence of a near-perfect substitute product, potable water, differentiates reclaimed water rate methodology from classic water rate-making. Economic theory dictates that if a commodity of equivalent functional value exists, the customer's decision to purchase will be based on price. As potable water exists as a near-perfect substitute to reclaimed water, the district cannot set a price for reclaimed water equal to or higher than potable water if the customer has the discretion to choose between the two. Since most reclaimed water systems are retrofitted after potable water systems have been constructed, the reclaimed water systems' amortized cost frequently exceeds potable water costs. Consequently, the board recognizes that it is often not possible, as a practical matter, to recover the full cost associated with the construction of reclaimed water systems or the provision of reclaimed water services through reclaimed water rates.

(c)

The board further finds that its bond obligations preclude the district from providing free or discounted water without the revenue from such provision being made up from another source.

(d)

As a result, the board finds that the district's rate design process must appropriately allocate those reclaimed water costs not recoverable through reclaimed water rates back to the water and wastewater rates. This can be accomplished, in whole or in part, by determining, through reasonable estimation processes, the amount of avoided capital and operating costs in each system provided through the use of reclaimed water. For the water system, these avoided costs are represented by the reduced need for water resources development and the cost of additional capacity for water plants, transmission systems, and distribution systems. For the wastewater system, avoided costs are represented by the reduced use of disposal facilities.

(e)

Payment in lieu of franchise fees.

(1)

Pursuant to section F.S. § 337.401(1), the occupation of the rights-of-way owned by Hernando County and located in the unincorporated portion of Hernando County, Florida, by a utility for the purpose of constructing or maintaining or erecting or installing utility systems shall be subject to the payment of rent. "Payment in lieu of franchise fee" shall mean the rental charge to be paid by county-owned utilities that are presently occupying or are proposing to occupy rights-of-way owned by Hernando County.

(2)

The board may adopt, by resolution, a reclaimed water payment in lieu of franchise fee equal to an amount not to exceed four and one-half (4½) percent of the utility's current year's rate revenues as received from the sale or provision of services in the unincorporated areas of Hernando County, Florida, to residential, commercial, institutional, and industrial customers.

(Ord. No. 2014-18, § 7, 8-26-14; Ord. No. 2016-15, § 6, 8-9-16)