Case Background
On November 20, 2009, Florida Power & Light Company (FPL) filed a petition for approval of revised tariff sheets to implement a Stipulation and Settlement
Agreement (settlement agreement) in Docket Nos. 070231-EI, 080244-EI, and 080522-EI. Applicants for underground service pay a contribution-in-aid of
construction (CIAC) for the additional costs FPL incurs to provide underground
service. All three dockets pertain to the determination of the appropriate CIAC
for new underground installations and for conversions of existing overhead to
underground facilities. Rules 25-6.078 and 25-6.115, Florida Administrative
Code (F.A.C.), pertain to CIAC for new underground construction and conversion
of overhead facilities to underground facilities. FPL’s tariffs implements
these rules.
Both rules were amended in February 2007 in a rule-making docket that
addressed numerous issues related to storm hardening.
Specifically, the rules were revised to require that the cost estimates
used to develop the CIAC reflect two new requirements: (1) the requirements of
Rule 25-6.0342 F.A.C., Electric Infrastructure Storm Hardening; and (2) the
difference in the net present value of operational costs, if any, including
average historical storm restoration costs over the life of the facilities,
between underground and overhead systems. Prior to the rule amendments, the
CIAC was based on estimated work order costs and did not include the costs of
maintenance or storm restoration activities over time. The Commission amended
the rules to capture the longer-term costs and benefits of undergrounding.
Docket No. 070231-EI (new underground installations)
On April 2, 2007, FPL filed its underground residential distribution (URD) and underground commercial/industrial
distribution (UCD) tariffs pursuant to Rule 25-6.078, F.A.C.
This rule requires IOUs to file updated URD charges for Commission approval at
least every three years. The URD charges represent the additional costs FPL incurs to provide underground distribution service in new residential subdivisions in place
of overhead service. URD charges are calculated as the differentials between
the cost of installing underground facilities and the cost of installing overhead
service. The UCD tariff contains standard charges for new commercial
applicants who request underground distribution service in lieu of standard
overhead service.
By Order No. PSC-07-0835-TRF-EI, issued October 16, 2007, the Commission
approved the tariffs filed in Docket No. 070231-EI. However, on November 6, 2007, the Municipal Underground Utilities Consortium (MUUC) and the City
of Coconut Creek (Coconut Creek) filed their timely protest of that order and
request for formal proceeding. MUUC and Coconut Creek alleged in their protest
that FPL’s URD and UCD tariffs should be rejected because they did not comply
with Commission Rule 25-6.078, F.A.C., which became effective two months before
FPL’s April 2007 petition was filed. Also,
the City of South Daytona (South Daytona) was granted intervention by Order No.
PSC-08-0486-PCO-EI, issued August 1, 2008. Although the order approving the
tariffs was protested, the new tariff rates remained in effect and were
collected subject to refund. A formal hearing was scheduled for June 11-12,
2008, but the hearing was continued to allow FPL to file revised tariffs to
reflect the changes to Rule 25-6.078, F.A.C.
On April 1, 2008, FPL filed revised URD and UCD tariffs in
Docket No. 070231-EI, which FPL alleged reflected the changes in Rule 25-6.078,
F.A.C. By Order No. PSC-08-0774-TRF-EI, issued November 24, 2008, the
Commission approved the April 2008 tariffs. On December 15, 2008, MUUC and
Coconut Creek timely protested Order No. PSC-08-0774-TRF-EI, requesting this matter be set for a formal hearing, stating that FPL’s tariffs did not fully comply with the requirements of Rule 25-6.078, F.A.C. On December
16, 2008, South Daytona filed an untimely protest. The April 2008 tariffs
superseded the April 2007 tariffs and, pending resolution of the protests, the
April 2008 tariffs have remained in effect with any charges collected held
subject to refund.
On May 15, 2009, South Daytona, and on June 2, 2009, MUUC
and Coconut Creek, confirmed that they were withdrawing their objections to the
UCD tariffs approved in this docket. As a result, only the URD tariffs remained
in dispute.
Docket No. 080244-EI (underground conversion)
On April 30, 2008, FPL filed a petition requesting
approval of its underground conversion tariffs, in order to implement the
requirements of amended Rule 25-6.115, F.A.C.
On May 28, 2008, MUUC filed a petition to intervene, which
was granted by Order No. PSC-08-0460-PCO-EI, issued on July 17, 2008. On June
6, 2008, South Daytona filed a petition to intervene, which was granted by
Order No. PSC-08-0461-PCO-EI, issued on July 17, 2008.
By Order No. PSC-08-0780-TRF-EI, issued November 26, 2008, the Commission proposed to approve FPL’s underground conversion tariffs. On December 17, 2008, MUUC, Coconut Creek, the Town of Palm Beach (Palm Beach), and Town of Jupiter Inlet (Jupiter Inlet) timely protested Order
No. PSC-08-0780-TRF-EI, requesting this matter be set for a formal hearing. On
December 22, 2008, South Daytona filed an untimely protest. The underground
conversion tariffs approved by Order No. PSC-08-0780-TRF-EI remain in effect with any collections being held subject to refund.
Consolidation of Dockets Nos. 070231-EI and 080244-EI
By Order No. PSC-09-0114-PCO-EI, issued February 25, 2009, both dockets were consolidated and scheduled for a
formal administrative hearing on June 3-4, 2009, with all subsequent filings to
be filed in Docket No. 080244-EI.
Docket No. 080522-EI
On August 4, 2008,
MUUC, Palm Beach, Coconut Creek, and Jupiter Inlet Colony, filed a petition and
complaint (MUUC complaint) requesting that the Commission conduct a hearing to
determine the fair, just, and reasonable practices and charges by which FPL determines the CIAC to be paid by local government applicants who perform part or all of the
construction work to convert overhead to underground. The CIAC includes
charges for Direct Engineering, Supervision, and Support (DESS) costs
associated with the conversion work. The MUUC complaint disputed how FPL determines the reduction in DESS when the applicant performs some or all of the work required
for the conversion.
Further Proceedings
When the hearing for
the consolidated undergrounding dockets was convened on June 3, 2009, the
parties announced that they had reached philosophical agreement on a settlement
agreement which included all three dockets discussed above. The parties
requested that the hearing be held in abeyance until the parties could complete
the actions contemplated under the proposed settlement agreement. The parties
indicated they would formally submit the settlement agreement at a later date for
Commission approval.
On June 9, 2009, FPL submitted a settlement agreement. On August 19, 2009, Palm Beach and Jupiter Inlet filed
their resolutions approving the settlement agreement and their contingent
withdrawal of protests and complaints. Further, on August 26, 2009, Coconut
Creek filed its Notice of Filing Resolution Approving Settlement Agreement and
Contingent Withdrawal of Protests and Complaint. Finally, on October 22, 2009,
South Daytona filed its Motion for Withdrawal as an intervenor.
Based on the above, on
November 20, 2009, FPL filed appropriate tariff sheets consistent with the
settlement agreement. Upon review of the settlement agreement and the tariff
sheets, staff determined that it needed additional information, and, on
February 12, 2010, propounded its First Set of Interrogatories, consisting of
10 interrogatories, on FPL. FPL responded to those interrogatories on March 4,
2010.
This recommendation addresses the proposed settlement and
associated tariff sheets. The Commission has jurisdiction over this matter
pursuant to Sections 366.03, 366.04, 366.05, and 366.06, Florida Statutes.
Discussion
of Issues
Issue 1:
Should the Commission approve FPL's proposed settlement agreement in Docket Nos. 070231-EI, 080244-EI, and 080522-EI and associated Tariff Sheet Nos. 6.100, 6.300, and 9.725?
Recommendation:
Yes, the Commission should approved the proposed settlement
agreement and associated tariff sheets. The Commission should also accept the
report attached to the petition in this docket as satisfying the reporting
requirement of Order No. PSC-09-0755-TRF-EI. (Draper, Kummer)
Staff Analysis:
All parties to Dockets Nos. 070231-EI, 080244-EI, and 080522-EI have proffered the proposed settlement agreement (Attachment
A) as a complete resolution of all matters pending in the above three undergrounding
dockets. The settlement agreement will be in effect until January 1, 2013, and
the parties agreed not to raise any issues until then. The major elements
contained in the settlement agreement are as follows:
·
FPL’s Governmental Adjustment Factor (GAF) tariff will become a
permanent tariff.
·
The overhead versus underground non-storm operational cost
differential in the URD and the conversion tariffs is set at $0.
·
Direct Engineering, Supervision, and Support (DESS) costs associated
with applicant performed work is reduced by 20 percent.
GAF Tariff
FPL’s GAF tariff allows local governments a 25 percent
credit against the otherwise applicable CIAC for projects which convert
overhead facilities to underground. The 25 percent reduction in CIAC is based
on expected savings in storm restoration costs when large contiguous areas are
converted from overhead to underground service, and is designed to encourage
the installation of underground facilities by reducing the CIAC the customer is
required to pay FPL. The 25 percent reduction is based on FPL’s analysis of the 2004 and 2005 hurricane season. Based on the fewer interruptions
experienced by underground facilities than overhead facilities, converting
overhead to underground facilities in large communities is expected to reduce
the amount of infrastructure damage requiring repair, thereby reducing
restoration costs which are shared by all ratepayers. The proposed settlement
agreement includes two changes to the GAF tariff.
First, pursuant to
Section 5 of the proposed settlement agreement, FPL’s GAF tariff becomes a
permanent tariff. The GAF tariff was initially approved as a pilot program
with an annual renewal requirement, to review additional cost data justifying
the 25 percent discount.
The Commission has approved two extensions of the GAF tariff since the initial
approval of the tariff. Since the GAF tariff was approved in May 2007, there
have been no substantial storms impacting FPL’s service territory. Therefore, FPL has no additional data with which to update the quantification of storm restoration benefits
that it provided in support of the GAF tariff. Until additional storm
restoration data is available, there is no basis to revise the 25 percent
factor.
Second, the settlement agreement clarifies that the
applicant must demonstrate to FPL that the sum of the GAF waiver credit plus
any federal or state funds does not exceed the otherwise applicable CIAC. The
current GAF tariff is not available to projects for which any state or federal
funds are available to the applicant to cover any portion of the cost of
conversion. This prohibition inhibited local governments, who might
otherwise be eligible for state or federal grants for local infrastructure
improvements, from pursuing undergrounding projects. FPL stated that to
protect the general body of ratepayers, FPL wanted to ensure that the applicant
does not receive more than the cost due to FPL from the combination of other
funding sources and the GAF waiver credit.
Finally, the Commission in its approval of the most recent
GAF extension required FPL, at least 60 days prior to the current October 30,
2010, expiration date of the GAF tariff, to file a report with the Commission
providing an updated quantification of storm restoration benefits based on any
new storm-restoration data.
The report is attached to this recommendation as Attachment B. Staff
recommends that the Commission accept this report as fulfillment of the
requirement.
To support its petition to make the GAF tariff permanent, FPL stated that there have been no negative experiences with the GAF tariff since the Commission first approved it as a pilot program, and that it remains in the
public interest to promote local government-sponsored underground conversion
projects. Furthermore, FPL stated that approval of the GAF tariff as a
permanent tariff would remove uncertainty over the availability of the tariff.
As with all tariffs, the GAF tariff would still be subject to the Commission’s
continuing authority to conduct formal investigations and proceedings on those
tariffs on its own motion and any party may raise issues after January 1, 2013.
Underground versus Overhead Non-storm
Operational Cost Differential
As discussed in the case background, in Dockets Nos. 070231-EI and 080244-EI, the Commission approved FPL’s revised CIAC calculations to reflect
the net present value of operational costs for comparable overhead and
underground facilities. The data presented by FPL in its initial revised CIAC
calculations showed that underground facilities are more expensive to operate,
maintain, and repair than the overhead distribution system by $11,300 per
pole-line mile over the life of the facilities. Thus, the addition of the
non-storm operational cost differential in the CIAC calculation for conversions
and new installations resulted in an increase in the CIAC.
On April 14, 2009, the protestors filed testimony and
exhibits alleging that FPL understated the cost savings from underground
facilities, resulting in a higher than appropriate CIAC. The protesters presented
their own quantification of FPL’s non-storm operational cost differential in a
study attached to their testimony, which showed non-storm operational costs for
overhead to be more costly than for underground. The protestors concluded that
instead of an additional charge per pole-line mile, there should be a credit to
reflect the operational benefits of underground facilities, thus reducing the
underground CIAC.
The proposed settlement agreement sets the overhead versus
underground differential in the conversion and URD tariffs to zero. Paragraph
12 of the settlement agreement states that FPL will not seek to revise the settlement
agreement, including the non-storm operational cost differential, before
January 1, 2013. After that date, any party may request that the changes be re-evaluated
and adjusted if necessary.
To support the proposed settlement agreement, FPL stated in response to staff interrogatories that using a value of zero for the non-storm
operational cost differential represents a compromise between evidence that
would have been presented at hearing showing that by FPL’s calculation the
value should be positive and, by MUUC’s calculation, the value should be negative.
Paragraph 16 of the settlement agreement includes a provision that the
adjustment to operational costs discussed above will be applicable to all
applicants who applied for underground conversions under the GAF tariff on or after April 4, 2006, as provided for in Order No. PSC-06-0339-PCO-EI.
That order suspending the GAF tariff stated that “any such later-approved
discount for local government-sponsored conversion projects shall apply to
undergrounding contracts entered into with local governments on or after April
4, 2006.” In response to staff interrogatories concerning the settlement, FPL stated that 11 undergrounding projects would have refunds and the total estimated refund
amount is $150,000.
Undergrounding projects have continued during the pendency of these dockets.
As noted above, even if protested, once tariffs are approved, they remain in
effect. The tariffs approved in the initial URD tariff in Docket No. 070231-EI
and the conversion tariff in Docket No. 080244-EI
were applied to projects with the requirement that any charges would be held
subject to refund, pending resolution of the protest. FPL stated in response
to staff interrogatories that refunds under this provision would affect about
140 residential underground projects for a total refund amount of about $500,000.
Direct Engineering,
Supervision, and Support (DESS) costs
Rule 25-6.115(3), F.A.C., gives applicants the right to do all or part of
the construction and installation work for underground conversion projects
themselves, and receive a credit from FPL for the value of the work performed.
In Docket No. 080522-EI, the MUUC, Palm Beach, Coconut Creek, and Jupiter
Inlet alleged that FPL did not provide an appropriate percentage reduction in
the DESS costs associated with applicant performed work. In response to staff
interrogatories, FPL stated that the 20 percent reduction in the DESS costs
represents a negotiated compromise figure between FPL and the parties to the settlement
agreement as part of the settlement of all outstanding issues in the three
undergrounding dockets at issue. Based on the calculation for one specific
undergrounding project, FPL estimated the appropriate percentage reduction at
12 percent. On the other hand, MUUC argued that the appropriate adjustment was
in the range of 50 percent. Thus, FPL stated, the negotiated 20 percent
reduction is well within the reasonable range of values that could be
determined to be fair and reasonable, and reflective of the costs incurred and
saved by FPL where an applicant performs conversion work.
Conclusion
Staff believes that the settlement
agreement is a fair and reasonable resolution of the disputed issues in Dockets
Nos. 070231-EI, 080244-EI, and 080522-EI. Staff recommends that the Commission should approved the proposed settlement agreement and associated tariff
sheets. The Commission should also accept the report attached to the petition
in this docket as satisfying the report requirement of Order No. PSC-09-0755-TRF-EI.
Issue 2:
Should these dockets be closed?
Recommendation:
Yes. (Sayler, Jaeger)
Staff Analysis:
With the approval of Issue 1, there are no further
actions to be taken in these dockets, and upon the expiration of the time to
appeal, the dockets should be closed.
BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION
In re: Petition for Approval of Underground ) Docket
No. 080244-EI
Conversion Tariff Revisions. )
)
In re: Petition for approval of 2007 )
revisions to underground residential and ) Docket
No. 070231-EI
commercial distribution tariff, )
by Florida Power & Light Company. )
In Re: Petition and Complaint of the Municipal )
Underground Utilities Consortium for Relief ) Docket
No. 080522-EI
from Unfair Charges and Practices of Florida )
Power & Light Company )
Filed: June 4, 2009
__________________________________________)
STIPULATION AND SETTLEMENT AGREEMENT
WHEREAS, Florida Power & Light Company has
filed certain tariff revisions that are the subject of the above-styled Docket
No. 070231-EI and Docket No. 080244-EI, which have been approved by the Florida
Public Service Commission ("Commission") subject to the protests
thereof by the Municipal Underground Utilities Consortium, the Town of Palm
Beach, Florida, the City of Coconut Creek, Florida, and the Town of Jupiter
Inlet Colony, Florida, and the City of South Daytona, Florida, each of the
foregoing individually a "Party" and collectively the
"Parties," and
WHEREAS, the Municipal Underground Utilities
Consortium, the Town of Palm Beach, the City of Coconut Creek, and the Town of
Jupiter Inlet Colony have filed a petition and complaint with the Commission in
the above-styled Docket No. 080522-EI, asserting that FPL's treatment for
certain common engineering costs, in cases where a local government applicant
performs part or all of underground conversion work itself, results in unfair,
unjust, and unreasonable treatment of such applicants, and
WHEREAS, the Parties have conducted discovery
regarding the issues in the above-styled dockets, and
WHEREAS, the Parties have engaged in good-faith
negotiations toward resolving their disputes as to the issues raised in all
three of the above-styled dockets,
NOW, THEREFORE, in consideration of the covenants
contained herein and of the mutual benefits to be derived from the fulfillment
of those covenants, the Parties hereby agree and stipulate as follows:
1. This Stipulation and Settlement
Agreement ("Agreement") will become effective when the Commission's
approval of this Agreement has become final and no longer subject to challenge
or appeal under governing law. The Agreement is contingent upon the
Commission's approval of the Agreement, and of the actions contemplated herein,
in their entirety.
2. The Parties recognize
and acknowledge that the effectiveness of this Agreement is also contingent
upon the approvals of the respective governing bodies of the municipalities
that are Parties to this Agreement. Upon execution of the Agreement, the staff
and attorneys for the municipalities that are Parties to the Agreement will
move forward as quickly as practicable to place the Agreement before the
municipalities' governing bodies for their approval.
3. Upon the approval of the
municipalities' governing bodies, the MUUC and the respective municipal Parties
will file appropriate notices of withdrawals of their protests of the tariff
provisions in PSC Docket Nos. 070231-EI and 080244-EI, such withdrawals to be contingent upon the Commission's final approval of all of the actions
contemplated herein.
4. The MUUC, Palm Beach, Coconut Creek,
and Jupiter Inlet Colony will withdraw their complaint filed in PSC Docket No. 080522-EI, such withdrawal to be contingent upon the Commission's final approval
of all of the actions contemplated herein.
5. FPL will file a petition seeking the
Commission's approval of its Governmental Adjustment Factor tariff provisions
as permanent tariffs of FPL, i.e., not subject to any further mandatory
Commission review but remaining subject to the Commission's continuing
authority to conduct informal investigations and proceedings on those tariffs
on its own motion.
6. FPL will file proposed
tariff provisions with the Commission setting the estimated overhead vs.
underground operational cost differential on FPL's Tariff Sheet No. 6.300 to
zero, replacing the value of -$11,300 per pole line mile presently in that
tariff, and FPL will also file proposed revisions to FPL's Tariff Sheet No.
6.100 that will make the corresponding adjustments for the overhead vs.
underground operational cost differential to be reflected in FPL's URD tariffs.
7. FPL will file proposed
tariff provisions with the Commission replacing existing Section 1.e on its
Tariff Sheet No. 9.725, UNDERGROUND FACILITIES CONVERSION AGREEMENT –
GOVERNMENTAL ADJUSTMENT FACTOR WAIVER, with the following:
e. The Local
Government Applicant must demonstrate to the reasonable satisfaction of FPL that the sum of the GAF Waiver credit plus any federal or state funds that the Local
Government Applicant is able to use to support the Conversion does not exceed
the otherwise applicable CIAC as calculated before application of the GAF Waiver.
8. FPL will file proposed tariffs with
the Commission that will set FPL's charge for Direct Engineering, Supervision,
and Support costs applicable to any Applicant-performed work at 80% of the
value that would have applied if FPL performed this work.
9. The MUUC and the
municipalities that are Parties to this Agreement agree that they will not,
before January 1, 2013, directly or indirectly raise claims relative to the
"operational cost differential" between overhead and underground
facilities.
10. The MUUC and the municipalities that
are Parties to this Agreement agree that they will not, before January 1, 2013,
directly or indirectly seek an increase in the Governmental Adjustment Factor
waiver or credit, also known as the Avoided Storm Restoration Cost credit, for
underground conversion projects.
11. The MUUC and the municipalities that
are Parties to this Agreement agree that they will not, before January 1, 2013,
directly or indirectly raise any claims relative to the "contiguous
underground facilities" or relative to FPL's proposed "tiered" GAF/ASRC credits for underground installations.
12. FPL agrees that it will not, before
January 1, 2013, directly or indirectly seek to change any of the provisions
agreed to in this Stipulation and Settlement Agreement, including specifically,
not to seek to reduce the GAF or ASRC waiver or credit, nor to increase the
"operational cost differential" applicable in calculating CIACs for
underground conversion projects, nor to increase the amount that FPL collects as Direct Engineering, Supervision, and Support costs for Applicant-performed work
on underground conversion projects.
13. All Parties to this
Agreement acknowledge that nothing herein may be construed to prevent the
Commission from conducting any proceedings that the Commission may initiate
with regard to any of the tariff provisions and other matters that are the
subject of this Agreement. The Parties agree and acknowledge that, in the
event that the Commission or any other person initiates any proceedings
relative to the matters that are the subject to this Agreement, including any
matters with respect to which any Party or Parties have agreed not to initiate
proceedings, then all Parties are free to participate in such Commission
proceedings to protect their interests as they deem appropriate, and the
Parties will not be bound by or subject to the positions stated in this
Agreement.
14. The Parties will jointly move the
Commission to schedule all of the petitions and withdrawals described herein
for consideration at a single agenda conference, such that the Commission's
action will be effective as to all of the Parties' actions contemplated above
at the same time.
15. Nothing herein shall operate as a bar
to any Party seeking the Commission's action to enforce any provision of this
Agreement or of FPL's tariffs as they may be approved pursuant this Agreement.
16. For the avoidance of
doubt, the Parties agree that the adjustments reflected in this Agreement will
be applicable to all Applicants who applied for underground conversions under FPL's GAF tariff after April 4, 2006, as provided for in Commission Order No. PSC-06-0339-PCO -EI, issued on April 24, 2006.
17. The Parties further agree that the
adjustments to FPL's URD tariffs reflected in this Agreement will be applicable
to all underground service installations under those tariffs for which
applications were made on or after October 9, 2007, which was the effective
date of the initial URD tariffs pursuant to Commission Order No. PSC-07-0835-TRF-EI.
18. The Parties have agreed to the positions stated
in this Stipulation and Settlement Agreement solely for the purpose of
settlement, and accordingly, the Parties are not bound by or subject to the
positions stated herein in the event that the Agreement is not approved in its
entirety by the Commission.
