Case Background
On May 5, 2016,
Gulf Power Company (Gulf or Company) filed a letter notifying the Commission of
the change in status of Gulf’s ownership interest in the Plant Scherer Unit No.
3 (Scherer Unit 3) and the associated common facilities. In addition to notifying the Commission that
Plant Scherer is now dedicated to serving native load customers, Gulf
specifically requested that it may: 1) stop making adjustments to its monthly
Earning Surveillance Reports (ESRs) to remove Scherer Unit 3’s related
investment and expenses from the retail jurisdictional rate of return
calculation to the extent that it is not currently committed to off system
sales; and 2) reflect the Scherer Unit 3 as a native load serving resource in
all other regulatory filings with the Commission. The Company has been making
adjustments to remove Scherer Unit 3 from retail jurisdictional filings since
1990 pursuant to Order No. 23573. The
Office of Public Counsel filed a Notice of Intervention in this docket on July
21, 2016. Also, by letter dated July 27,
2016, the Sierra Club urged the Commission to deny the Company’s request or to
defer its decision on this item, citing what the Sierra Club believes are
substantive omissions in the Company’s request.
This
recommendation addresses the requested change in status for the Scherer Unit 3.
The Commission has jurisdiction over this matter pursuant to Section 366.04,
Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission approve Gulf's petition to
acknowledge the change in status of the Scherer Unit 3?
Recommendation:
No. Gulf’s
petition to include Scherer Unit 3 in retail jurisdictional rate base should be
fully vetted in a future regulatory proceeding.
In accordance with Order No. 23573, the Company should continue to make
adjustments to its monthly Earnings Surveillance Reports (ESRs), and all other
regulatory filings with the Commission, to remove Scherer Unit 3’s related
investment and expenses from the retail jurisdictional rate base. (Mouring, Lee)
Staff Analysis:
As stated in the case background, Gulf requested
that it may: 1) stop making adjustments to its monthly ESRs to remove Scherer
Unit 3’s related investment and expenses from the retail jurisdictional rate of
return calculation to the extent that it is not currently committed to off
system sales; and 2) reflect the Scherer Unit 3 as a native load serving
resource in all other regulatory filings with the Commission.
In its petition, the Company stated that the first of
three existing long-term off system sales contracts expired at the end of 2015,
releasing approximately 52 percent of Gulf’s ownership in Scherer Unit 3, and
an additional contract expiring in May 2016, releasing an additional 24 percent
of Gulf’s ownership in Scherer Unit 3 to be used in serving its native load
customers. The final long-term contract
is set to expire in December 2019, which will then enable Gulf to dedicate 100
percent of the capacity of its ownership in Scherer Unit 3 to serving its
native load customers.
Gulf also stated that its ownership interest in Scherer
Unit 3 has always been to ultimately serve its native load customers, and the
long-term off system sales contracts served to bridge the gap in time between
the commercial operation date of Scherer Unit 3 and the anticipated need of the
generation to serve native load customers. In its petition, the Company cites
two Commission Orders in
support of its assertion that its ownership interest in Scherer Unit 3 was
deemed prudent by the Commission in lieu of constructing new generating assets
at its Carryville site, and that it was always intended to serve native load
customers.
Staff agrees that the Commission has acknowledged in previous
Orders that the decision to not construct a new generating asset at the
Carryville site, and purchase an ownership interest in Scherer Unit 3 was found
to be reasonable. However, with the passage of time since those
Orders were issued, Gulf is situated differently from a generation
standpoint. Therefore, staff believes
that the inclusion of Scherer Unit 3 in retail jurisdictional rate base should
be fully vetted in a future regulatory proceeding. A formal hearing on this matter would afford
all parties an opportunity to fully litigate the matter. In accordance with Order No. 23573, the
Company should continue to make adjustments to its monthly ESRs, and all other
regulatory filings with the Commission, to remove Scherer Unit 3’s related
investment and expenses from the retail jurisdictional rate base. However, staff believes the Company may, at
its discretion, make adjustments to its monthly ESRs to include Scherer Unit 3
in the “Proforma Basis” balances, but the “FPSC Adjusted Basis” should continue
to remove Scherer Unit 3’s related investment and expenses.
Issue 2:
Should this docket be closed?
Recommendation:
If the Commission approves staff’s recommendation,
this docket should be closed. (Janjic)
Staff Analysis:
If the Commission approves staff’s recommendation,
this docket should be closed.
