Discussion
of Issues
Issue 1:
Should the Commission authorize FPL to implement a
2017 Interim Storm Restoration Recovery Charge?
Recommendation:
Yes. The Commission should authorize FPL to
implement a 2017 Interim Storm Restoration Recovery Charge, subject to refund. Once
the total actual storm costs are known, FPL should be required to file
documentation of the storm costs for Commission review and true up of any
excess or shortfall. (Slemkewicz)
Staff Analysis:
As stated in the case background, FPL filed a
petition for a limited proceeding seeking authority to implement an interim
storm restoration recovery charge to recover a total of $318.5 million for the
incremental restoration costs related to Hurricane Matthew and to replenish its
storm reserve. The requested recovery of $318.5 million
represents net retail recoverable costs of approximately $200.7 million, plus
an additional $117.1 million to replenish the storm reserve to the balance that
existed on January 2, 2013. In addition, the $318.5 million includes interest
of $0.4 million and regulatory assessment fee expense of $0.2 million. The
petition was filed pursuant to the provisions of the RSSA approved by the
Commission in Order No. PSC-13-0023-S-EI.
Pursuant to Paragraph 5 of the RSSA, FPL can begin to recover storm costs, not
exceeding $4.00/1,000 kWh on monthly residential customer bills, on an interim
basis beginning sixty days following the filing of a petition for recovery. FPL
has requested an interim storm restoration recovery charge of $3.36 on a
monthly 1,000 kWh residential bill, effective for a 12-month period beginning
March 1, 2017.
In its petition, FPL asserts that it incurred total retail
recoverable costs of approximately $293.8 million as a result of Hurricane
Matthew. This amount was calculated in accordance with the Incremental Cost and
Capitalization Approach (ICCA) methodology prescribed in Rule 25-6.0143,
Florida Administrative Code (F.A.C.). The net retail recoverable costs of
$200.1 million were determined by reducing the $293.8 million total costs by
the pre-storm storm reserve balance of $93.1 million. Paragraph 5 of the RSSA
also allows FPL to request the replenishment of its storm reserve to the $117.1
million balance that existed on January 2, 2013, the implementation date of the
RSSA.
The approval of an interim storm restoration recovery
charge is preliminary in nature and is subject to refund pending a further
review once the total actual storm restoration costs are known. After the
actual costs are reviewed for prudence and reasonableness, and are compared to
the actual amount recovered through the interim storm restoration recovery
charge, a determination will be made whether any over/under recovery has
occurred. The disposition of any over/under recovery, and associated interest, would
be considered by the Commission at a later date.
Based on a review of the information provided by FPL in
its petition, staff recommends that the Commission authorize FPL to implement a
2017 Interim Storm Restoration Recovery Charge, subject to refund. Once the
total actual storm costs are known, FPL should be required to file
documentation of the storm costs for Commission review and true up of any
excess or shortfall.
Issue 2:
Should the Commission approve FPL's request to
establish a regulatory asset for the debit balance in Account 228.1,
Accumulated Provision for Property Insurance?
Recommendation:
No. The Commission should not approve FPL's request
to establish a regulatory asset for the debit balance in Account 228.1,
Accumulated Provision for Property Insurance? (Slemkewicz)
Staff Analysis:
In its petition, FPL asserts that it has maintained
the amount of eligible restoration costs that exceed the pre-storm balance of
the storm reserve as a debit in Account 228.1 as required by Rule
25-6.0143(1)(i), F.A.C. However, FPL has requested approval to establish a
regulatory asset to be recorded in Account 182.1, Extraordinary Property
Losses, and transfer the debit balance in Account 228.1 to Account 182.1,
effective March 1, 2017. FPL contends that this treatment would be consistent
with the storm cost recovery for the 2004 storm season approved by the
Commission in Order No. PSC-05-0937-FOF-EI.
When Order No. PSC-05-0937-FOF-EI was issued in 2005, Rule
25-6.0143, F.A.C., stated the following concerning Account 228.1:
(1) Account No. 228.1 Accumulated Provision for
Property Insurance.
(a) This account may be established to provide for
losses through accident, fire, flood, storms, nuclear accidents and similar
type hazards to the utility’s own property or property leased from others,
which is not covered by insurance. This account would also include provisions
for the deductible amounts contained in property loss insurance policies held
by the utility as well as retrospective premium assessments stemming from
nuclear accidents under various insurance programs covering nuclear generating
plants. A schedule of risks covered shall be maintained, giving a description
of the property involved, the character of risks covered and the accrual rates
used.
(b) Charges to this account shall be made for all
occurrences in accordance with the schedule of risks to be covered which are
not covered by insurance. Recoveries or reimbursements for losses charged to
this account shall be credited to the account.
Because the rule at that time did not specifically address
the treatment of debit balances in Account 228.1, it was necessary to establish
a regulatory asset to allow the deferral and subsequent amortization of the
storm reserve debit balance in Account 228.1.
In 2007, however, Rule 25-6.0143, F.A.C., was expanded
regarding Account 228.1. The extensive rule revisions included the
establishment of the ICCA methodology for determining the types of costs
eligible to be charged to the reserve. Rule 25-6.0143(1)(i), F.A.C., was also
established and states that:
If the charges to Account No. 228.1 exceed the account
balance, the excess shall be carried as a debit balance in Account No. 228.1
and no request for a deferral of the excess or for the establishment of a
regulatory asset is necessary.
The rule was specifically amended so that any debit
balance in Account 228.1 was automatically deferred for accounting purposes.
Therefore, a request for a deferral or the establishment of a regulatory asset was
no longer required or necessary.
Based on the specific provision in Rule 25-6.0143, F.A.C.,
regarding debit balances in Account 228.1, staff recommends that FPL’s request
to establish a regulatory asset for the debit balance in Account 228.1 be
denied.
Issue 3:
Should the Commission approve FPL’s proposed
Original Tariff Sheet No. 8.042 and Fifty-Sixth Revised Tariff Sheet No. 8.010
with an effective date of March 1, 2017?
Recommendation:
Yes, the Commission should approve FPL’s proposed
Original Tariff Sheet No. 8.042 and Fifty-Sixth Revised Tariff Sheet No. 8.010
as shown in Attachment A with an effective date of March 1, 2017. (Rome,
Draper)
Staff Analysis:
FPL proposed to commence the 12-month recovery period
for its interim storm restoration recovery charge on March 1, 2017 and to
include the charge in the non-fuel energy charge on customer bills. In support
of its proposed rate calculations, FPL provided Appendices C and D to the
petition.
Appendix C illustrated the computation of the proposed
interim storm restoration recovery charges for each rate class. FPL represented
that it followed the methodology for allocation of storm costs among rate
classes consistent with the method set forth in FPL’s storm financing order.
Specifically, FPL developed its proposed charges by rate class using the
following steps:
(1) Multiplying
the percent allocation of plant share by rate class as shown in the Cost of
Service MFR Schedule E-3a approved in Docket No. 120015-EI by
the percentage share of plant assets projected to be damaged,
(2) Multiplying
the allocation factors for each rate class as determined in Step (1) above by
the total amount of storm losses associated with Hurricane Matthew
($318,456,000), and
(3) Dividing
the results obtained in Step (2) above for each rate class by the projected
sales for each rate class during the 12-month recovery period to arrive at the
charges by rate class.
Staff replicated FPL’s calculations and believes the
allocation methodology to be reasonable. Most of the storm-related costs are
weighted to reflect damage to distribution and transmission assets (71 percent
and 20 percent, respectively) with a lesser proportion related to generation
and other plant assets.
Application of the allocation methodology for the
residential customer rate class results in a proposed interim storm restoration
recovery charge of 0.336 cents per kWh, which equates to $3.36 on a 1,000 kWh
residential bill. The proposed interim charges for all rate classes are
presented on Original Tariff Sheet No. 8.042 included in Appendix D to FPL’s
petition. Appendix D also includes Fifty-Sixth Revised Tariff Sheet No. 8.010
which reflects the appropriate addition of Sheet No. 8.042 to FPL’s Index of
Rate Schedules. Both tariff sheets are included in Attachment A.
Based on its review of the information provided by FPL,
staff recommends that the Commission approve FPL’s proposed Original Tariff
Sheet No. 8.042 and Fifty-Sixth Revised Tariff Sheet No. 8.010 as shown in
Attachment A with an effective date of March 1, 2017.
Issue 4:
What is the appropriate security to guarantee the
amount collected subject to refund through the 2017 Interim Storm Restoration
Recovery Charge?
Recommendation:
The appropriate security to guarantee the funds
collected subject to refund is a corporate undertaking. (Archer, D. Buys)
Staff Analysis:
Staff recommends that all funds collected subject to
refund be secured by a corporate undertaking. The criteria for a corporate
undertaking include sufficient liquidity, ownership equity, profitability, and
interest coverage to guarantee any potential refund. Staff reviewed the
financial statements to determine if FPL can support a corporate undertaking
for recovery of incremental storm restoration costs related to Hurricane
Matthew. FPL’s 2015, 2014 and 2013 financial statements were used to determine
the financial condition of the Company. FPL’s financial performance
demonstrates adequate levels of liquidity, ownership equity, profitability, and
interest coverage to guarantee the potential refund.
Staff believes FPL has adequate resources to support a
corporate undertaking in the amount requested. Based on this analysis, staff
recommends that a corporate undertaking of $318.5 million is acceptable. This
brief financial analysis is only appropriate for deciding if the Company can
support a corporate undertaking in the amount proposed and should not be
considered a finding regarding staff's position on other issues in this
proceeding.
Issue 5:
Should this docket be closed?
Recommendation:
No, this docket should remain open pending final
reconciliation of actual recoverable Hurricane Matthew storm costs with the
amount collected pursuant to the 2017 Interim Storm Restoration Recovery
Charge, and the calculation of a refund or additional charge if warranted. (Brownless)
Staff Analysis:
No, this docket should remain open pending final
reconciliation of actual recoverable Hurricane Matthew storm costs with the
amount collected pursuant to the 2017 Interim Storm Restoration Recovery
Charge, and the calculation of a refund or additional charge if warranted.
