Case Background
On September 14,
2016, Suwannee Valley Electric Cooperative (SVEC) and Duke Energy Florida, LLC
(DEF) filed a joint petition for approval of an amended territorial agreement
(proposed agreement) in Columbia, Lafayette, Suwannee, and Hamilton Counties. The
proposed agreement is Attachment 1 to the petition, while the maps and written
descriptions delineating the area to be served by the proposed agreement are
provided in the petition as Exhibits A and D, respectively. Due to the volume
of the exhibits, they have not been attached to this recommendation.
The Commission
approved the existing territorial agreement between SVEC and DEF in 1995. The existing agreement was for a term of
20 years and ended March 14, 2015. Since then there have been two Commission-approved
extensions to allow the joint petitioners time to finalize negotiations. The
first extension expired March 14, 2016, and the second extended the agreement until
September 14, 2016. The joint petitioners have negotiated the
proposed agreement, which delineates their respective service boundaries in
Columbia, Lafayette, Suwannee, and Hamilton Counties, for a 20-year term. The
proposed agreement also consolidates an expired territorial agreement in
Hamilton County which was issued August 1990 and expired in August 2010. If approved, the agreement will result in
the transfer of 29 commercial customers and 102 residential customers from DEF
to SVEC. Additionally, the agreement will result in the transfer of 11
commercial customers and 57 residential customers from SVEC to DEF. The
transfers will be implemented when it is operationally feasible for both
parties to serve the total 199 impacted customers. The transfers will be
implemented no later than 36 months after the Commission’s approval. 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 the proposed territorial
agreement between SVEC and DEF?
Recommendation:
Yes. The proposed agreement is an extension of the existing
agreement set to expire in 2016, and consolidates the previously expired
agreement for Hamilton County. It is in the public interest and will enable
SVEC and DEF to better serve their current and future customers. (Whitchurch,
Guffey, Coston)
Staff
Analysis: Pursuant to Section 366.04(2)(d), F.S. and Rule
25-6.0440(2), Florida Administrative Code (F.A.C.), the Commission has
jurisdiction to approve territorial agreements between, and among, rural
electric cooperatives, municipal electric utilities, and investor-owned
utilities. Unless the Commission determines that the agreement will cause a
detriment to the public interest, the agreement should be approved.
Through the proposed agreement, the joint petitioners
desire to continue and consolidate two existing agreements and clarify the
territorial boundaries within Columbia, Lafayette, Suwannee, and Hamilton
Counties. This will allow the
petitioners to more reliably and economically serve customers. The proposed
agreement modifies the territorial boundaries to eliminate split parcels, which
results in the transfer of 199 customers between the utilities. Madison County
has been removed from this proposed agreement due to the fact that DEF does not
share any territorial boundaries with SVEC in the county.
The petitioners negotiated the proposed agreement for a
20-year term with the condition that after the expiration date, the agreement
will remain in effect until and unless either party provides a written notice at
least 12 months prior to termination. Pursuant to Section 1.9 of the proposed
agreement, the effective date of the agreement will be the date on which a
final Order is issued by the Commission, provided no timely protests are filed.
In accordance with Rule 25-6.0440(1)(d), F.A.C., the
petitioners state that the 199 impacted customers pursuant to the proposed
agreement were notified by mail of the transfer and provided a description of
the difference in rates between DEF and SVEC. As
of August 2016, the rate comparison for a non-demand commercial customer, using
1,500 kilowatt-hours, was $171.22 for DEF and $180.00 for SVEC. As of August
2016, the rate comparison for a residential customer, using 1,000 kilowatt-hours,
was $108.48 for DEF and $121.00 for SVEC. Both parties will apply any deposits
of the impacted customers to their last electric bill and will directly refund
any surplus. The joint petitioners expect that the customer transfers will be
completed within 36 months of the agreement’s effective date and will notify
the Commission in writing if additional time is needed.
After the notification of transfer and rate changes are
sent, customer feedback is encouraged and expected. With regard to this
proposed agreement, the petitioners state that SVEC has not received any
feedback, questions, or concerns from the customers and DEF has received
feedback from three customers. All three customers desired to remain with DEF
and raised concerns about reliability of service, higher rates, vegetation
management, and comparative restoration times with SVEC during Hurricane
Hermine. DEF has personally contacted all three customers and provided
information on how to submit comments to the Public Service Commission. The
Commission has received feedback from one customer on November 8, 2016. This
customer also cited reliability of service and higher rates as concerns with
the proposed agreement.
Section 3.4 (Compensation for Transferred Customers) of
the proposed agreement allows for the compensation of lost revenue due to the
transfer of customers. Compensation only applies to the number of customers
affected by modifications to the territorial boundaries, and the party losing
the customers will be compensated for the loss of revenue by the receiving
party. In total SVEC is estimated to pay DEF approximately $260,412 in lost
revenue and DEF is estimated to pay SVEC approximately $111,535. These
estimates are reasonable in light of current rates. However, the final
compensation amounts will depend on the approval date of this agreement. Compensation
is intended to be provided within 60 days of the provided invoice.
In accordance with section 3.5 (Compensation for
Transferred Facilities) of the proposed agreement, SVEC may elect to purchase
electric distribution facilities used exclusively for providing electric
service to the transferred customers. To determine the facilities’ value, DEF
will use a common engineering cost estimation methodology such as the Handy-Whitman
index. In response to staff’s data request, joint petitioners believe that the
net purchase of facilities to be transferred will not exceed $100,000. The
actual amount will depend on approval of this agreement.
The joint petitioners assert that the proposed agreement
will avoid duplication of services and wasteful expenditures and will protect
the public health and safety from potentially hazardous conditions. The joint
petitioners believe and represent that the Commission’s approval of the proposed
agreement is in the public interest.
Conclusion:
After review of the petition, the proposed agreement, and
responses to staff’s data request, staff believes that the proposed agreement
is in the public interest and will enable SVEC and DEF to better serve their
current and future customers. Merging the two prior agreements, clarifying
boundary lines, and removing Madison County from the language, allows the
proposed agreement to be used more efficiently and to better serve customers’
interests. The proposed agreement eliminates any potential uneconomic
duplication of facilities and will not cause a decrease in the reliability of
electric service. Despite concerns of cost and service issues raised by individual
customers, customers as a whole will benefit overall by these transfers. The
transfer of 199 customers helps avoid the duplication of services, maintain
lower rates, enhance safety and reliability, and reduce restoration times. As
such, staff recommends that the Commission should approve the proposed
territorial agreement between SVEC and DEF.
