DATE:	October 11, 2013
TO:	Office of Commission Clerk (Cole)
FROM:	Division of Accounting and Finance (Lester, Mouring, Prestwood) Office of the General Counsel (Young)
RE:	Docket No. 130233-EI – Petition for approval of stipulation and settlement agreement reducing amount of approved regulatory asset between Florida Public Utilities Company and the Office of Public Counsel.
AGENDA:	10/24/13 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Administrative
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None
FILE NAME AND LOCATION:			S:\PSC\AFD\WP\130233.RCM.DOC

 

 Case Background

On August 30, 2013, Florida Public Utilities Company (FPUC) filed a petition with the Commission seeking approval of a stipulation and settlement (settlement) with the Office of Public Counsel (OPC).  The settlement proposes to reduce a regulatory asset established by Commission Order No. PSC-12-0600-PAA-EI.  The regulatory asset was established to account for costs associated with litigation that arose between FPUC and the City of Marianna (City).  That litigation involved Time of Use rates established in Docket No. 100459-EI[1], an amendment to FPUC’s power supply agreement with Gulf Power Company (Gulf) considered in Docket No. 110041-EI[2], and civil litigation with the City.   Order No. PSC-12-0600-PAA-EI established a regulatory asset for these costs with amortization over five years.[3] 

 FPUC buys all its power for its Northwest Division from Gulf.  In 2006, FPUC and Gulf negotiated a long-term power supply agreement, which was approved by the Commission by Order No. PSC-07-0476-PAA-EI.[4]  FPUC negotiated an amendment to this agreement in 2011 that lowed its capacity payments.  The Commission approved that amended agreement by Order No. PSC-11-0269-PAA-EI.[5]  While the litigation between FPUC and the City was ongoing, Gulf reverted to charging FPUC for power based on the original power supply agreement.  In March 2013, FPUC and the City of Marianna reached a settlement resolving all litigation.  With the litigation between FPUC and the City resolved, Gulf began charging the lower capacity payments based on the amended agreement and refunded to FPUC the difference between the higher capacity payments from the original agreement and the lower capacity payments.  The Commission has jurisdiction pursuant to Sections 366.04, 366.06, and 366.07, F.S.

Discussion of Issues

Issue 1: 

 Should the Commission approve the proposed Stipulation and Settlement Agreement?

Recommendation: 

 Yes.  The proposed Stipulation and Settlement Agreement is in the public interest and should be approved.  (Mouring, Lester)

Staff Analysis: 

 FPUC and the OPC have proffered the proposed Settlement Agreement (Attached as Exhibit A) to address the disposition of the litigation costs accrued as a result of the lengthy dispute between FPUC and the City of Marianna.  The proposed Settlement Agreement provides that the refund credit received by FPUC from Gulf be applied to the regulatory asset created in Docket No. 120227-EI,[6] which consists of the accrued litigation costs.  Under the terms of the Settlement Agreement, the net remaining balance of the regulatory asset would be amortized over a 5-year period starting in January 2013, consistent with Order No. PSC-12-0600-PAA-EI.[7]  The total net remaining regulatory asset is approximately $100,000.[8]

On May 7, 2013, a meeting was held with staff, the OPC and FPUC to discuss this issue.  At the meeting, OPC voiced concerns about FPUC’s proposal to recover the regulatory asset through the Fuel Clause.  Specifically, OPC believes these costs should be recovered through base rates, and not through the Fuel Clause, based on its assertion that the contended power supply agreement did not result in fuel savings, but rather reduced capacity payments.  Subsequent to this meeting, FPUC and OPC met on several occasions to discuss this issue and on August 30, 2013, the Company filed the proposed Settlement Agreement.  Since the litigation costs are specific to the Northwest Division, and the litigation affected the power supply agreement between FPUC and Gulf, staff believes reducing the regulatory asset by the amount of the refund credit is appropriate.  Staff believes that approval of the proposed Settlement Agreement is in the public interest as it provides a timely resolution of the Gulf refund credit, as well as the regulatory asset, and thus alleviates the need for additional costs of litigating these issues in the future.  Although staff believes that recovery of the accrued litigation costs and the refund credit through the Fuel Clause would be appropriate,[9] given the de minimis amount of the net remaining regulatory asset resulting from the offset of accrued litigation costs by the refund credit, staff believes that the treatment proposed in the Settlement Agreement is reasonable.  Thus, staff recommends approval of the proposed Settlement Agreement.  Approval of the proposed Settlement Agreement will have no impact on base rates unless recovery of the remaining balance is sought through a future base rate proceeding.  Further, the Company’s fuel factors for 2013 and 2014 will not be affected.

Issue 2: 

 Should this docket be closed?

Recommendation: 

 If no person whose substantial interests are affected by the proposed agency action files a protest within 21 days of the issuance of the order, this docket should be closed upon the issuance of a consummating order.  (Young)

Staff Analysis: 

 At the conclusion of the protest period, if no protest is filed this docket should be closed upon the issuance of a consummating order.