DATE:	November 18, 2015
TO:	Office of Commission Clerk (Stauffer)
FROM:	Division of Economics (Higgins) Office of the General Counsel (Villafrate)
RE:	Docket No. 150208-EI – Petition for base rate reduction reflecting end of amortization period for retired plant, by Florida Power & Light Company.
AGENDA:	12/03/15 – Regular Agenda – Proposed Agency Action – Interested Persons May Participate
COMMISSIONERS ASSIGNED:			All Commissioners
PREHEARING OFFICER:			Brisé
CRITICAL DATES:			None
SPECIAL INSTRUCTIONS:			None

 

 Case Background

On September 18, 2015, Florida Power and Light Company (FPL or company) filed a petition to reduce its jurisdictional annual revenue requirement by $222,192 in accordance with the Nuclear Cost Recovery (NCR) process set forth in Section 366.93, Florida Statutes (F.S.). FPL states that this proposed revenue requirement reduction reflects the end of the Commission-authorized five-year amortization of the true-up of the final net book value of plant retired in 2009, as well as the  actual/estimated net book value of plant retired in 2010, associated with FPL’s Extended Power Uprate Project (EPU).^[1] The amortization for both of these costs began in March 2011. FPL is requesting to implement its revised annual revenue requirement on March 1, 2016. 

 

In 2006, the Florida Legislature adopted legislation, Section 366.93, F.S., encouraging the development of nuclear energy in the state. In that section, the Legislature directed the Commission to adopt rules providing for alternative cost recovery mechanisms that would encourage investor-owned electric utilities to invest in nuclear power plants. The Commission adopted Rule 25-6.0423, Florida Administrative Code (F.A.C.), which provides for an annual cost recovery proceeding to consider investor-owned utilities’ requests for cost recovery for nuclear plants.

 

By Order No. PSC-08-0021-FOF-EI,^[2] the Commission made an affirmative determination of need for FPL’s proposed EPU project to expand all four of its nuclear units: Turkey Point Units 3 and 4 and St. Lucie Units 1 and 2. Staff notes this work has been performed and all four EPU projects are complete.

 

Pursuant to Rule 25-6.0423(8)(e), F.A.C.,^[3] FPL requested to increase its base rates in 2009 to recover the costs of assets retired that same year because of the EPU Project. The Rule states:

 

The jurisdictional net book value of any existing generating plant that is retired as a result of operation of the power plant shall be recovered through an increase in base rate charges over a period not to exceed 5 years.  At the end of the recovery period, base rates shall be reduced by an amount equal to the increase associated with the recovery of the retired generating plant.

 

By Order No. PSC-10-0207-PAA-EI,^[4] the Commission authorized FPL to increase its base rates for recovering costs associated with the turbine gantry crane phase of the EPU project at St. Lucie Unit 2. This authorization and approval was subject to true-up and revision based on a final review of the associated expenditures in the Nuclear Cost Recovery Clause, Docket No. 100009-EI.

 

By Order No. PSC-11-0078-PAA-EI^[5] the Commission approved FPL’s request for a 5-year amortization to recover the net book value of retired plant related to the company’s EPU Project in the amount of $198,307 (jurisdictional). Order No. PSC-11-0078-PAA-EI also directed the company to include the true-up revision required by Order No. PSC-10-0207-PAA-EI. This true-up resulted in an additional increase to base rates of $48,335. Of this amount $23,885 related to recovery of retirement, removal, and salvage of plant equipment costs under Rule 25-6.0423(8)(e), F.A.C., was set for 5-year amortization. The combined amount of $198,307 and $23,885, or $222,192, began being amortized March 1, 2011.^[6] The company now requests authorization in the instant docket to reflect conclusion of the amortization by reducing its annual revenue requirement by $222,192.

 

The Commission has jurisdiction over these matters through several provisions of Chapter 366, F.S., including Sections 366.05 and 366.06, F.S.

Discussion of Issues

Issue 1: 

 Should the Commission approve FPL’s request to decrease its annual revenue requirement by $222,192 to reflect the conclusion of the 5-year asset amortization, which began in March 2011, for recovery of assets retired in 2009 and 2010 because of the company’s EPU project?

Recommendation: 

 Yes. The Commission should approve FPL’s request to decrease its annual revenue requirement by $222,192 to reflect the conclusion of the 5-year asset amortization, which began in March 2011, for recovery of assets retired in 2009 and 2010 because of the company’s EPU project. (Higgins)

Staff Analysis: 

 By Order No. PSC-11-0078-PAA-EI,^[7] the Commission approved FPL’s request to increase its base rates by $222,192 for the 5-year asset amortization, which began in March 2011, for recovery of assets retired in 2009 and 2010 because of the company’s EPU project. FPL’s petition in this docket requesting the Commission approve a decrease of its annual revenue requirement by $222,192 is consistent with that order.

 

Due to the pending conclusion of the 5-year amortization period, staff recommends the Commission approve FPL’s request to reduce its revenue requirement by $222,192. If approved, staff notes that FPL’s newly revised revenue requirement will not require any tariff revisions, or change in rates, due to the minimal decrease when appropriately allocated across all of FPL’s rate classes.[8] A summary of FPL’s proposed revised annual revenue requirement allocated across all rate classes is contained on Attachment B to its petition, which as previously mentioned lists no change in rates for all customer classes.

 

Conclusion

Staff recommends the Commission approve FPL’s request to decrease its annual revenue requirement by $222,192 to reflect the conclusion of the 5-year asset amortization, which began in March 2011, for recovery of assets retired in 2009 and 2010 because of the company’s EPU project.

Issue 2: 

 What is the effective date of FPL’s revised revenue requirement?

Recommendation: 

 If the Commission approves the staff recommendation in Issue 1, the revised revenue requirement for FPL should be implemented beginning March 1, 2016. (Higgins)

Staff Analysis: 

 By Order No. PSC-11-0078-PAA-EI^[9] the Commission approved FPL’s request to increase its base rates for a period of 5 years via amortization to recover the net book value of retiring plant related to the Company’s EPU Project. The 5-year amortization period began March 1, 2011. Under Commission rule,[10] the net book value of any existing generating plant that is retired shall be recovered through an increase in base rate charges over a period not to exceed 5 years. Staff notes that the five-year period from inception ends March 1, 2016, which is also the date FPL is requesting to implement its revised revenue requirement. Therefore, staff believes the appropriate date for FPL to revise its revenue requirement by $222,192 is March 1, 2016.

 

Conclusion

If the Commission approves the staff recommendation in Issue 1, the revised revenue requirement for FPL should be implemented beginning March 1, 2016.
Issue 3: 

 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. (Villafrate)

Staff Analysis: 

 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.