Discussion
of Issues
Issue 1:
Should the Commission approve Peoples' proposed
rider surcharges for 2017?
Recommendation:
Yes. The Commission should approve Peoples’ proposed
2017 rider surcharges for each rate class commencing with bills rendered for
meter readings taken on and after January 1, 2017. (Ollila)
Staff Analysis:
The rider surcharges have been in effect since
January 2013. Peoples’ replacement program continues to identify and target the
replacement pipelines in the Company’s more urban and high consequence areas.
Peoples uses a risk-based prioritization to determine the replacement order,
which is primarily identified by the Distribution Integrity Management Program
(DIMP). Other factors considered include leak incident rates, the pressure
under which the pipeline is operating, areas of significant construction, and
the pipeline’s age. In response to a staff data request, Peoples stated that
its 2016 replacement activity has been in Ocala, Sarasota, Daytona,
Jacksonville, Eustis, Orlando, St. Petersburg, Miami, and Tampa, with the
larger concentration of replacements in the Orlando, Tampa, and St. Petersburg
areas.
Attachment 1 displays Peoples’ pipe replacement progress,
both actual and forecasted. Staff notes that in prior years this table was
based on plant accounting records. Peoples determined that reporting
replacement numbers from its Geographical Information System (GIS) provides
more current information than the plant accounting records, since there is a
lag associated with plant accounting records. The table in Attachment 1 uses
GIS reporting numbers.
Audit
The 2015 order required staff to work with the Office of
Public Counsel (OPC) and Peoples to conduct an audit of the rider program.
Staff asked for input from OPC for the audit service request, which OPC
provided. The audit was designed to ensure that costs were properly stated,
recoverable through the surcharge, and incremental to base rates where
appropriate. The final audit report was issued on August 31, 2016, and filed in
Docket No. 150203-GU; no audit exceptions were noted.
Savings
The 2012 order stated that Peoples agreed to identify and
report any operations and maintenance (O&M) and depreciation savings in its
annual petition, beginning in the second year. In this filing, Peoples reported
depreciation expense savings for 2015 ($153,747), 2016 ($109,580), and 2017
($108,000). Peoples stated in response to a staff data request that no O&M
savings have been identified since the filing of the 2015 docket.
One-time Credit
Order No. PSC-16-0205-AS-GU required Peoples to add a
one-time credit of $2,000,000 to customers subject to the rider and to clearly
identify the inclusion of the $2,000,000 one-time credit in its rider petition. Peoples
has complied with that order.
True-ups by Year
Peoples’ calculations for the 2017 revenue requirement and
surcharges include a final true-up for 2015, an actual/estimated true-up for
2016, and projected costs for 2017.
Final True-up for 2015
Peoples stated that the revenues for 2015 were $3,463,088,
compared to a revenue requirement of $3,537,028. The resulting under-recovery
is $73,941. After adding interest of $253 and the final 2014 over-recovery of $36,203
and subtracting the 2015 over-recovery amount ($61,277) that was already
collected in the 2015 surcharges, the final 2015 true-up is an under-recovery
of $98,762.
Actual/Estimated 2016 True-up
Peoples provided actual revenues for January through July
and forecast revenues for August through
December, totaling $5,684,028. The actual/estimated revenue requirement for
2016 is $5,127,130 and includes a return on investment, depreciation expense
(less savings), and property tax expense. The forecast over-recovery for 2016
is $556,899. After adding interest of $5,082, subtracting the final 2015
under-recovery of $98,762, and subtracting the 2015 over-recovery amount
($273,526) that was already collected in the 2016 surcharges, the total 2015
true-up is an over-recovery of $189,693. Pursuant to Order No.
PSC-16-0205-AS-GU, Peoples added a one-time credit of $2,000,000, for a total
2016 over-recovery of $2,189,693.
Projected 2017 Costs
Peoples projects capital expenditures of $10,875,000 for
the replacement of cast iron/bare steel infrastructure in 2017. This compares
with final 2015 expenditures of $11,361,478 and actual/estimated 2016
expenditures of $12,385,955. After subtracting the total 2016 over-recovery of
$2,189,693, the 2017 revenue requirement is $4,596,953. Table 1-1 displays the true-up
calculation.
Table 1-1
True-up Calculation for 2017
|
2017 Projected Replacements
|
$10,875,000
|
|
Return on Investment
|
$4,512,722
|
|
Depreciation Expense (less savings)
|
$1,503,918
|
|
Property Tax Expense
|
$770,007
|
|
2017 Revenue Requirement
|
$6,786,646
|
|
Less 2016 True-up
|
($2,189,693)
|
|
Total 2017 Revenue Requirement
|
$4,596,953
|
Source:
Exhibit C, page 1, of the Petition,
Proposed Surcharge
As established in the 2012 order, the total 2017 revenue
requirement is allocated to rate classes using the same methodology that was
used for the allocation of mains and services in the cost of service study used
in Peoples’ most recent rate case. After calculating the percentage of total
plant costs attributed to each rate class, the respective percentages were multiplied
by the 2017 revenue requirement resulting in the revenue requirement by rate
class. Dividing each rate class’s revenue requirement by projected therm sales
provides the rider surcharge for each rate class.
The proposed 2017 rider surcharge for residential customer
is $0.02309 per therm (compared to the current surcharge of $0.02137 per
therm). The monthly bill impact is $0.46 beginning January 1, 2017 for a
residential customer who uses 20 therms. The proposed tariff page is provided
in Attachment 2.
Conclusion
Staff believes the calculation of the 2017 rider revenue
requirement and the proposed rider surcharge for each rate class is reasonable
and accurate. Therefore, staff recommends approval of Peoples’ proposed 2017
rider surcharge for each rate class commencing with bills rendered for meter
readings taken on and after January 1, 2017.
Issue 2:
Should this docket be closed?
Recommendation:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariffs should remain in effect, with
any revenues held subject to refund, pending resolution of the protest. If no
timely protest is filed, this docket should be closed upon the issuance of a consummating order.
(Trierweiler)
Staff Analysis:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariffs should remain in effect, with
any revenues held subject to refund, pending resolution of the protest. If no
timely protest is filed, this docket should be closed upon the issuance of a
consummating order.
