Discussion
of Issues
Issue 1:
Should the Commission approve FPL's petition for
determination under Rule 25-6.115, F.A.C., and approval of associated revised
tariff Sheet No. 6.300?
Recommendation:
Yes. The Commission should approve FPL's petition
for determination under Rule 25-6.115, F.A.C., and approval of associated
revised tariff Sheet No. 6.300 (Draper, Guffey, Buys)
Staff Analysis:
FPL is requesting to exclude from the calculation of
an underground conversion applicant’s CIAC certain costs associated with
existing non-storm hardened overhead facilities and that the Commission
determine that there are quantifiable benefits to the general body of
ratepayers from the exclusion of the cost from the CIAC calculation for
underground conversion. FPL also seeks approval of its revised tariff Sheet No.
6.300 to reflect the revised CIAC calculation. FPL’s petition is discussed in
more detail below.
Current CIAC Calculation
Rule 25-6.115, F.A.C., and FPL’s tariff Sheet No. 6.300
provide the terms under which applicants are to pay CIAC for the conversion of
existing overhead distribution facilities to underground. The CIAC is intended
to cover the incremental costs FPL incurs resulting from a conversion, over and
above the cost of serving the conversion area with overhead facilities. Overhead
service is paid by all customers through base rates. In lieu of overhead
service, customers have the option of requesting to convert existing overhead
to underground facilities. Typically, municipalities request a conversion from
overhead to underground facilities. The CIAC paid by an applicant is to ensure
that the general body of ratepayers do not bear any costs associated with the
conversion.
The formula to calculate CIAC is defined in Rule
25-6.115(8), F.A.C., and in FPL’s Tariff Section 12.1 of Sheet No. 6.300. One
component of the CIAC calculation, stated in paragraph (8)(b) of the rule,
requires FPL to include the estimated remaining net book value of the existing
facilities to be removed less the estimated net salvage value of the facilities
to be removed (existing facilities cost).
Paragraph (12) of Rule 25-6.115, F.A.C., allows a utility
to waive all or any portion of the cost for providing underground facilities.
If the utility waives any charge, the utility is required to reduce net plant
in service unless the Commission determines that there is a quantifiable
benefit to the general body of ratepayers commensurate with the waived charge.
Storm Hardening Plan
Rule 25-6.0342, F.A.C., requires each investor-owned
utility to file a comprehensive storm hardening plan at least every
three years, for Commission review and approval. As discussed in
FPL’s 2016-2018 Storm Hardening Plan,
FPL is currently projecting that it will complete the storm hardening of
its remaining overhead distribution feeders by end of year 2022. FPL’s
2016-2018 Storm Hardening Plan was approved by the Commission as part of FPL’s
2016 rate case settlement and stipulation. Under
FPL’s storm hardening plan, existing, non-hardened overhead facilities will be
removed and replaced with hardened overhead facilities. FPL’s next storm
hardening plan is expected to be filed in 2019.
FPL’s Proposal
To support its petition, FPL explained that currently
several municipalities are considering or are moving forward with plans to
convert existing non-hardened overhead facilities to underground facilities. These
existing non-hardened overhead facilities, however, will be removed over the
next five to six years consistent with FPL’s storm hardening plan discussed
above. Therefore, prospective applicants wishing to convert non-hardened
overhead facilities to underground within the near future would pay CIAC that
covers the cost of removing facilities that are already expected to be removed
under FPL’s storm hardening plan. FPL’s storm hardening costs are recovered
from the general body of ratepayers through base rates.
Therefore, FPL requests that it be allowed to exclude the cost
of the existing facilities from the CIAC calculation for underground
conversions of existing non-hardened overhead facilities. As shown in
Attachment A to the recommendation, FPL’s proposed revisions to tariff Sheet
No. 6.300 contemplate that elements 2, 3, and 5 of the CIAC formula be excluded
from the CIAC calculation for an applicant that intends to convert non-hardened
overhead facilities to underground. Specifically, the elements to be excluded
are: 2) the estimated cost to remove the existing overhead facilities, 3) the
net book value of the existing overhead facilities, and 5) the estimated
salvage value of the existing overhead facilities to be removed.
In addition, FPL requests that the Commission determine
that there are quantifiable benefits to the general body of ratepayers from the
exclusion of the existing non-storm hardened facilities cost from the CIAC
calculation for the underground conversions. This Commission determination
would allow FPL pursuant to Rule 25-6.115(12), F.A.C., to treat these existing facilities
costs as net plant in service costs that can be recovered from all customers,
just as they would if FPL implemented overhead hardening of the subject feeder
facilities.
FPL’s response to staff’s first data request states that the
municipalities of Palm Beach, Longboat Key, Palm Beach Shores, Key Biscayne,
Sunny Isles Beach, and Fort Lauderdale are currently in discussion with FPL
regarding potential overhead to underground conversion projects. FPL estimated
that under the current CIAC formula, these six municipalities would pay a total
CIAC amount of approximately $64.6 million. Under FPL’s proposed CIAC
calculation that excludes the existing facilities cost, the estimated CIAC
amount would be $50.4 million, for a total CIAC difference of $14.2 million.
FPL listed in its petition four benefits of excluding the
existing facilities cost from the calculation of CIAC for underground
conversions of the existing non-hardened overhead facilities, that otherwise
would be subject to hardening. First, FPL asserts that such underground conversions
will not result in additional costs for the general body of ratepayers because
the existing facilities cost would be borne by the general body of ratepayers
as a result of FPL’s storm hardening activities. Second, FPL asserts that
underground distribution facilities tend to be even more storm resilient than
hardened overhead facilities. Thus the underground conversion will reduce the
need for storm restoration work in the converted area and make restoration crew
resources available to help more quickly in other parts of FPL’s service
territory. Third, FPL states that reliability will improve, as underground
facilities have historically provided better reliability than overhead
facilities. Finally, the company asserts that excluding the existing facilities
cost from the CIAC calculation will reduce the cost of conversion, thereby
incentivizing such conversions.
Analysis
Staff agrees with FPL that as a result of its approved storm
hardening plan for the remaining distribution feeders, the existing non-hardened
facilities cost would have been incurred and borne by the general body of
ratepayers under FPL’s current base rates as approved in FPL’s 2016 rate case
settlement. The term
of the rate case settlement is January 1, 2017 through December 31, 2020.
FPL asserts that underground facilities tend to be more
storm resilient and provide better overall day-to-day reliability when compared
to overhead faculties. In response to a staff data request, FPL explained that in
2016, during Hurricane Matthew, only 2.2 percent of FPL’s underground
facilities experienced outages, while 9.4 percent of hardened overhead
facilities experienced outages and 13.8 percent of non-hardened overhead
facilities experienced outages.
FPL also provided reliability data for the five reliability indices for the
regions/management areas that had overhead to underground conversion projects.
The data provided by FPL supports the company’s assertion that day-to-day
reliability improves with underground facilities. However,
FPL also acknowledged that locating the cause/failure of an overhead outage and
the repair/replacement of overhead facilities is generally less difficult and
less time consuming than it is for underground. Therefore, in some instances,
the duration of an outage may be longer as a result of underground facilities.
The Commission has previously recognized the benefits of
undergrounding. In 2007, Rule 25-6.115, F.A.C., was amended to include in the
CIAC calculation the cost of maintenance and storm restoration activities over
time to capture the longer-term costs and benefits of undergrounding. Prior to
this rule amendment, the CIAC was based on estimated work order cost only.
Furthermore, the Commission approved a Governmental
Adjustment Factor (GAF) tariff that allows local governments a 25 percent
credit against the otherwise applicable CIAC for projects which convert
overhead facilities to underground. The 25 percent reduction in CIAC is based
on expected savings in storm restoration costs when large contiguous areas are
converted from overhead to underground and is designed to encourage the
installation of underground facilities by reducing the CIAC the customer is
required to pay FPL. The GAF tariff was approved as a pilot in May 2007 and
became a permanent tariff in April 2010. The
six municipalities that are currently in discussion with FPL regarding a
conversion project all qualify for the GAF Waiver of 25 percent and the GAF
waiver amounts have been reflected in the provided estimated CIAC amounts.
Conclusion
Based on the discussion above, staff recommends approval
of FPL’s proposed revision to tariff Sheet No. 6.300 and FPL’s request to
include the waived existing facilities cost in net plant in service. If the
proposed tariff revision is approved, FPL will inform the future potential
underground conversion customers of the availability of additional credits. The
company states that it has already informed the municipalities currently
considering conversion projects of this possibility.
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 tariff should not go into effect
pending resolution of the protest. If no timely protest is filed, this docket should
be closed and the tariff should become effective upon the issuance of a
consummating order. (Brownless)
Staff Analysis:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the tariff should not go into effect pending
resolution of the protest. If no timely protest is filed, this docket should be
closed and the tariff should become effective upon the issuance of a
consummating order.
FifthSixth Revised
Sheet No. 6.300
FLORIDA POWER & LIGHT COMPANY Cancels FourthFifth Revised Sheet No. 6.300
INSTALLATION OF UNDERGROUND ELECTRIC DISTRIBUTION FACILITIES FOR THE CONVERSION
OF OVERHEAD ELECTRIC DISTRIBUTION FACILITIES
SECTION 12.1 DEFINITIONS
APPLICANT - Any person, corporation, or entity capable of complying
with the requirements of this tariff that has made a written request
for underground electric distribution facilities in accordance with this
tariff.
CONVERSION - Any installation of underground electric
distribution facilities where the underground facilities will be substituted for existing overhead electric distribution facilities, including relocations.
CONTRIBUTION-IN-AID-OF-CONSTRUCTION (CIAC) – The CIAC to be paid by an Applicant
under this tariff section shall be the result of the following formula:
CIAC
=
1) The
estimated cost to install the requested underground facilities;
+ 2) The
estimated cost to remove the existing overhead facilities; a
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+
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3)
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The net book value of the existing
overhead facilities; a
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-
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4)
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The estimated cost that would be
incurred to install new overhead facilities, in lieu of underground, to
replace the
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-
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5)
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existing overhead facilities (the
“Hypothetical Overhead Facilities”);
The estimated salvage value of the
existing overhead facilities to be removed;
a
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+
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6)
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The 30-year
net present value of the estimated non-storm
underground v. overhead operational costs differential,
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-
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7)
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The 30-year
net present value of the estimated average Avoided Storm Restoration Costs
(“ASRC”) calculated as a
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percentage of the sum of lines 1)
through 6). Simplified eligibility
criteria for each ASRC Tier are summarized
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below.
Applicants must enter into an Underground Facilities Conversion
Agreement with the Company
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which provides full details on terms,
conditions and compliance requirements.
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Tier Percentage Pole-Line Miles Customer Conversions Completion
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1 * 25% 3
or more 100% 3 phases
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2 10% 1 to
<3 100% 3
phases
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3 5% <
1 n/a n/a
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* The GAF
Waiver will apply in lieu of Tier 1 ASRC for eligible conversions by Local
Government Applicants.
a In calculating the Applicant’s CIAC, elements 2, 3, and 5 of the CIAC formula above are to be excluded from CIAC due from
an applicant who submits
an application providing a binding
notification that said applicant intends to convert existing non-hardened
overhead feeder facilities to underground feeder
facilities.
GAF
Waiver
For Applicants entering
into an Underground Facilities
Conversion Agreement
– Governmental Adjustment
Factor Waiver with the Company,
the otherwise applicable
CIAC amount, as calculated above, shall be reduced by the GAF Waiver.
The amount
of the GAF Waiver shall be calculated as follows:
GAF Waiver =
25%
x the otherwise applicable CIAC;
+ 75% x the ASRC (avoids
double-counting the ASRC
embedded in the otherwise applicable CIAC.)
If the Applicant
elects to construct and install all or part of the underground facilities, then for purposes of calculating the ASRC or the GAF Waiver amount only, the otherwise
applicable CIAC shall be adjusted to
add FPL’s
estimated cost for the Applicant-
performed work. In addition, the Direct Engineering, Supervision, and Support (DESS) costs associated with this Applicant- performed work will
be reduced by 20% from the amount
that would have applied if FPL performed this work.
DISTRIBUTION SYSTEM - Electric service
facilities consisting of primary and secondary
conductors, service drops, service
laterals, conduits, transformers and necessary accessories and
appurtenances for the furnishing of electric power at utilization voltage.
SERVICE
FACILITIES - The entire length of conductors
between the distribution source, including any conduit and or risers at a pole or other
structure or from transformers, from which only one point of service
will result, and the first point of connection to the service
entrance conductors at a weatherhead, in a terminal, or meter box outside the
building wall; the terminal or meter box; and the meter.
(Continued on Sheet No.
6.301)
Issued by: S. E. Romig, Director, Rates and Tariffs
Effective: March 24, 2015
