Discussion
of Issues
Issue 1:
Should the Commission establish an annual
depreciation rate applicable to energy storage equipment for FPL?
Recommendation:
Yes. Staff recommends that an annual depreciation
rate of 10 percent applicable to FPL’s energy storage equipment be approved.
(Higgins)
Staff Analysis:
As outlined in its petition, FPL does not currently
maintain a stand-alone classification, nor does it have a specifically-authorized
depreciation rate, for investments related to energy storage. The Company is
requesting authorization to record and depreciate energy storage-related
investments by plant function in Federal Energy Regulatory Commission (FERC)
Accounts; 348 - Energy Storage Equipment – Production, 351 - Energy Storage
Equipment – Transmission, and 363 - Energy Storage Equipment – Distribution.
These accounts were originally established by the FERC in 2013, by Order No.
784, with the primary purpose of accounting for energy storage investments based
on how specific assets are used in providing electric service.[4]
Requested Depreciation Parameters
The Company has requested Commission approval of a 10-year
average service life (ASL), and a zero percent net salvage level (NS), for
depreciating its energy storage equipment. An annual depreciation rate of 10
percent is computed by using these parameters.[5]
Industry-wide depreciation data and regulatory guidance regarding
energy storage equipment is limited. However, through data request responses, FPL
provided documentation detailing regulatory approvals of ASL and NS values
similar to its proposals that are applicable to other electric utilities
operating in the United States; namely, Consolidated Edison of New York (ConEd)
and Pacific Gas & Electric (PG&E).[6]
With respect to the ConEd decision, the New York Public Service Commission
authorized an ASL of either 10 or 15 years (depending on the specific project),
and a zero percent NS level.[7] The
California Public Utility Commission authorized an ASL of 15 years, and a zero
percent NS level applicable to PG&E’s energy storage equipment.[8]
Further supporting its request, FPL held consultations
with its engineering subject matter experts, as well as energy storage
equipment manufacturers, to arrive at the proposed 10-year ASL and zero percent
NS level. FPL contends its proposal is reasonable given the newness of the
technology and an industry-wide lack of available retirement and salvage data.
Given the fact that utility-scale energy storage equipment/technology
is in its infancy phase of development and application, staff believes the
Company, in proposing an ASL at the bottom-end of a 10- to 15-year range
represents a measured and reasonable approach in life estimation. Further, the
Commission will have future opportunities based on existing rules to evaluate FPL’s
depreciation data associated with useful lives and net salvage levels and to
order modifications as appropriate.[9] Staff also
believes the Company’s account classifications outlined in its petition, to
which any newly-established depreciation rate would apply, comport with recent accounting
guidance from the FERC.
Staff notes that any depreciation rate the Commission
finds appropriate will initially be used for accounting purposes only and will
have no impact on base rates during the term of the Company’s 2016 Settlement.
For the reasons outlined in this analysis, staff
recommends that an annual depreciation rate of 10 percent, applicable to FPL’s
newly-established Account 348 - Energy Storage Equipment – Production, Account 351
- Energy Storage Equipment – Transmission, and Account 363 - Energy Storage
Equipment – Distribution, be approved.
Issue 2:
If the Commission approves staff’s recommendation in
Issue 1, should any transfers of plant investments and associated book reserves
be authorized as part of this docket?
Recommendation:
Yes. Staff recommends the Commission authorize book
transfers from Account 362 - Station Equipment to Account 348 - Energy Storage Equipment – Production
and Account 363 - Energy Storage Equipment – Distribution in the aggregate amounts
detailed in Tables 2-2 and 2-3. (Higgins)
Staff Analysis:
FPL has requested the Commission authorize the
transfer of certain investment and corresponding reserve amounts related to
energy storage equipment presently on FPL’s books.[11]
These investments, which are listed in Table 2-1 below, are FPL’s Community
Storage facilities, Florida Bay Everglades National Park facilities, Miami Open
Tennis Stadium facilities, and South West facilities. These assets are
currently recorded to FERC Account 362 – Station Equipment, and are being
depreciated at the authorized rate of 1.9 percent for this account.
The energy storage equipment listed in Table 2-1 was
deployed as
part of the Company’s participation in the “White House Summit on Scaling
Renewable Energy and Storage.” The Summit, which was held in 2016, was
essentially for the purposes of exchanging ideas and exploring ways to “scale-up”
and/or “grid-scale” energy storage technologies. Staff notes the Commission has
previously reviewed a portion of these (Table 2-1) energy storage investments
in Docket No. 160021-EI, In re: Petition for rate increase by Florida Power
& Light Company.
FPL’s methodology for determining its proposed plant investment apportionments
from Account 362 - Station Equipment to Account 348 - Energy Storage Equipment
– Production and Account 363 - Energy Storage Equipment – Distribution, focused
on how the assets are utilized on the Company’s system. Specifically, if the
asset is used for peak shaving, it’s classified as a production investment and
recorded to account 348. If an asset is used for frequency response, it’s classified
as a transmission investment and recorded to account 351. Assets that provide
reliable energy back up can be classified as a distribution investment and
recorded to account 363. If an asset serves roles across multiple functions, it
is allocated on a percentage basis (by usage) accordingly.
Table 2-1 below shows the total amount of energy storage equipment
investments, as well as the associated depreciation reserves FPL currently has
recorded on its books.
|
Table
2-1
|
|
Account
362 -
Station Equipment
|
|
Energy
Storage Assets
|
Plant
Investment
(as of April 2017)
|
Depreciation
Reserve
(as of April 2017)
|
|
Community Storage Facilities
|
$500,254
|
$3,326
|
|
Florida Bay Everglades N. P.
|
$3,435,123
|
$25,477
|
|
Miami Open Tennis Stadium
|
$963,598
|
$3,814
|
|
South West
|
$6,080,404
|
$97,793
|
|
Total*
|
$10,979,379
|
$130,411
|
Source: FPL’s Response to Staff’s First Data Request, No. 5
- Supplemental
*May not add due to rounding
Tables 2-2 and 2-3 detail the apportionment of investments
being requested for transfer from Account 362 - Station Equipment (Table 2-1) to Account
348 -
Energy Storage Equipment – Production (Table 2-2) and Account 363 - Energy
Storage Equipment – Distribution (Table – 2-3).
|
Table
2-2
|
|
Account
348 -
Energy Storage Equipment – Production
|
|
Energy
Storage Assets
|
Plant
Investment
(as of April 2017)
|
Depreciation
Reserve
(as of April 2017)
|
|
Community Storage Facilities
|
$250,127
|
$1,663
|
|
Florida Bay Everglades N. P.
|
$1,717,562
|
$12,739
|
|
South West
|
$5,472,364
|
$88,014
|
|
Total*
|
$7,440,053
|
$102,415
|
Source: FPL’s Response to Staff’s First Data Request, No. 5
- Supplemental
*May not add due to rounding
|
Table
2-3
|
|
Account
363 -
Energy Storage Equipment – Distribution
|
|
Energy
Storage Assets
|
Plant
Investment
(as of April 2017)
|
Depreciation
Reserve
(as of April 2017)
|
|
Community Storage Facilities
|
$250,127
|
$1,663
|
|
Florida Bay Everglades N. P.
|
$1,717,562
|
$12,739
|
|
Miami Open Tennis Stadium
|
$963,598
|
$3,814
|
|
South West
|
$608,040
|
$9,779
|
|
Total*
|
$3,539,327
|
$27,995
|
Source: FPL’s Response to Staff’s First Data Request, No. 5
- Supplemental
*May not add due to rounding
Staff believes the transfer of plant and reserve balances
associated with energy storage equipment is appropriate if the Commission
establishes a new depreciation rate applicable to Account 348 - Energy Storage
Equipment – Production, Account 351 - Energy Storage Equipment – Transmission, and
Account 363 - Energy Storage Equipment – Distribution as recommended in Issue
1. These transfers would assist in ensuring that costs are assigned
appropriately to the function for which the equipment is being used, as well as
further refining cost recovery to the useful life patterns of the three energy
storage (equipment) property groups.
Staff recommends the Commission authorize book transfers
from Account 362 - Station Equipment to Account 348 - Energy Storage Equipment
– Production and Account 363 - Energy Storage Equipment – Distribution in the
aggregate amounts detailed in Tables 2-2 and 2-3.
Issue 3:
If a new depreciation rate for energy storage equipment
is authorized in Issue 1, what should be the effective date?
Recommendation:
Staff recommends that any newly-authorized
depreciation rate for energy storage equipment applicable to Account 348 -
Energy Storage Equipment – Production, Account 351 - Energy Storage Equipment –
Transmission, and Account 363 - Energy Storage Equipment – Distribution, become
effective upon the issuance of a final Commission Order in this docket.
(Higgins)
Staff Analysis:
If the Commission establishes a new depreciation
rate for FPL’s energy storage equipment, applicable to Accounts 348 - Energy
Storage Equipment – Production, Account 351 - Energy Storage Equipment –
Transmission, and Account 363 - Energy Storage Equipment – Distribution, the
effective date should be upon the issuance of a final Commission Order in this
docket.
Issue 4:
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. (Brownless)
Staff Analysis:
At the conclusion of the protest period, if no
protest is filed, this docket should be closed upon the issuance of a
consummating order.
