The FPL Petition
seeks three things: first to reduce the respective 2018 fuel cost recovery
factors approved in Order No. PSC-2018-0028-AS-EI;[1] second, to approve the capacity factors;
and third, to approve the revisions to FPL’s generating performance incentive
factor (GPIF) performance metrics. The requested approvals reflect the impact
of the Commission-approved St. John’s River Power Park (SJRPP) transaction,
pursuant to Order No. PSC-2017-0415-AS-EI.[2]
Mid-course
corrections are part of the fuel and purchased power cost recovery clause (fuel
clause) proceeding, and such corrections are used by the Commission between
fuel clause hearings whenever costs deviate from revenues by a significant
margin. Petitions for mid-course corrections to fuel factors are addressed by
Rule 25-6.0424, Florida Administrative Code (F.A.C.). Under this rule, a
utility must notify the Commission whenever it expects to experience an
under-recovery or over-recovery greater than 10 percent. Pursuant to Rule
25-6.0424, F.A.C., the mid-course percentage is the estimated end-of-period
total net true-up amount divided by the current period’s total actual and
estimated jurisdictional fuel revenue applicable to period amount.
Mid-course
corrections are considered preliminary procedural decisions, and any
over-recoveries or under-recoveries caused by or resulting from the Commission-approved
adjusted fuel factors may be included in the following year’s fuel factors.
If approved by
the Commission, this mid-course correction will result in lower cost recovery
factors for FPL’s customers. This mid-course correction was filed by FPL with
the intention of the proposed decrease in rates becoming effective March 1,
2018. Typically, effective dates are set a minimum of 30 days after a
Commission vote modifying the charges as the result of a mid-course correction.[3] This time limit is imposed in order to not
have new rates applied to energy consumed before the effective date of the
Commission’s action, i.e., the date of the vote. However, the Commission has
also implemented charges in less than 30 days when circumstances warrant.[4] In this instance, the interval between the
Commission’s vote on this matter (February 6, 2018) and the proposed
implementation date (expected to be March 1, 2018) is 22 days. Since this
filing, if approved, results in a decrease to rates, staff believes the 22 day
interval is sufficient.
The Commission’s
jurisdiction to consider fuel clause proceedings derives from the Commission’s
authority to set fair and reasonable rates, found in Section 366.05, Florida
Statutes.
Discussion
of Issues
Issue 1:
Should the Commission approve FPL's Petition for
mid-course correction to its fuel and capacity cost recover factors, associated
tariff sheets, and revised GPIF Targets and Ranges?
Recommendation:
Yes. FPL’s
request for mid-course correction to its 2018 fuel and capacity cost recovery
factors, associated tariff sheets, and revised 2018 GPIF Target and Ranges
should be approved. The recommended fuel and capacity cost recovery factors are
presented in Attachments A and B, respectively, and the revised 2018 GPIF
Targets and Ranges are presented in Attachment C. The associated tariff sheets are
presented in Attachment D. The revised fuel and cost recovery factors, the
associated tariff sheets, and the revised GPIF Target and Ranges should become
effective with the March 2018 billing cycle, which begins on March 1, 2018.
(Barrett, Galloway, Lee, Draper, Guffey)
Staff Analysis:
FPL’s projection testimony and schedules for 2018
were filed on August 24, 2017, which came before the Commission had considered
a separately-docketed matter to approve an arrangement to mitigate unfavorable
impacts stemming from its partial ownership of the St. Johns River Power Park
(SJRPP Transaction). The impact of the SJRPP Transaction was not reflected in
FPL’s calculations included in its projection testimony and schedules filed on
August 24, 2017. On September 25, 2017, the Commission approved FPL’s and OPC’s
stipulation and settlement resolving all issues concerning the SJRPP Transaction. Order
No. PSC-2018-FOF-EI,
approved the stipulation requiring FPL to file a mid-course correction to
reflect the impacts of the SJRPP Transaction no later than November 17, 2017,
and FPL did so.
Midcourse
Adjustment for Fuel Cost Recovery (FCR) Factors
FPL’s
currently authorized 2018 fuel factors were set by the Commission following the
October 25, 2017 fuel hearing, and codified in the 2017 Order. These factors
are based on FPL’s projected fuel costs for 2018, plus the true-up amounts from
2017. Given the timing of the Commission’s approval of the SJRPP Transaction, FPL
is requesting the current mid-course correction to reflect its 2018 cost
recovery factors. The Company notes, however, that its mid-course correction is
limited to only the impact of the SJRPP Transaction. The accounting treatment
approved in the SJRPP Order authorizes FPL to recover fuel-related costs
associated with the SJRPP Transaction through the fuel cost recovery (FCR)
clause.
The SJRPP Transaction closed and the plant was retired on
January 5, 2018. As a
result, purchased power payments and coal inventory balances will reflect
decreases. FPL states in its mid-course correction filing that “these decreases
are partially offset by an increase in natural gas consumption.” (FPL Petition,
page 4, paragraph 9)
The accounting changes result in a total variance from the
original 2018 projection filing of $22,933,601, or 7.99 percent. If FPL’s
Petition is granted, this amount would be recovered through reduced fuel and
capacity cost recovery factors for March–December 2018. The March-December 2018
FCR factor decreased from 2.630 cents per kWh to 2.606 cents per kWh, and
results in a reduction of $0.24 for a residential customer using 1,000 kWh of
electricity. The revised fuel cost recovery factors are reflected on Attachment
A.
Midcourse
Adjustment for Capacity Cost Recovery (CCR) Factors
Revision
of the GPIF Targets and Ranges for 2018
Consistent
with the discussion on the revised fuel cost projection, appropriate adjustments to FPL’s GPIF targets/ranges
for heat rate are needed due to the effects of the SJRPP transaction. The
revised GPIF targets and ranges for the 12 GPIF units provided in Appendix 4 of
FPL’s petition show a slightly lower average heat rate value, reflecting a
higher performance target. Availabilities of the GPIF units are not changed by
the SJRPP transaction, thus no revisions are needed for the GPIF targets/ranges
for equivalent availabilities. The revised 2018 GPIF Targets and Ranges are
reflected on Attachment C.
Bill
Impact and Customer Notifications
Consistent
with the 2017 Fuel Order, the bill for a residential customer using 1,000
kilowatt hours (kWh) of electricity for the period March-December, 2018, was
projected to be $99.75 per month, with a fuel cost recovery component of $22.97
per month, and a capacity cost recovery component of $2.81 per month. As
proposed, the fuel cost recovery component will be reduced by $0.24 per month,
and a similar reduction will be applicable to capacity cost recovery factors as
well. Both reductions are reflected in the typical bill comparison that is
presented in Table 1 of Attachment E.
Staff
believes implementing reduced fuel cost recovery factors is in the best
interests of FPL’s customers because the factors would be decreasing, and
customers would receive the benefit of reduced rates as quickly as
administratively possible.
At a noticed informal conference
between staff and interested parties held January 4, 2018, FPL stated that it
initially notified customers with bill inserts regarding this matter about the
time its Petition was filed. In the January 2018 bill, the Company sent
customers a quarterly newsletter that addressed the pending action in this
matter. Beginning in February, FPL’s website will include links to show the
proposed rate schedules for residential and business rate classes that are
proposed to become effective March 1, 2018. The Company stated that physical
restrictions on bill inserts limit the amount of detail that can be included in
such notifications, but noted its customers can access detailed billing
information from links on the Company’s website.
Conclusion
Staff recommends the Commission approve FPL’s request for mid-course correction to its 2018
fuel and capacity cost recovery factors, associated tariff sheets, and a revised
2018 GPIF Target and Ranges. The revised fuel and capacity cost recovery
factors and associated tariffs should become effective March 1, 2018. The
recommended fuel cost recovery factors are presented in Attachment A, the
capacity cost recovery factors are presented in Attachment B, the GPIF Targets
and Ranges are presented in Attachment C, the associated tariff sheets are
shown as Attachment D, and, finally, a typical bill comparison is presented in
Attachment E.
Issue 2:
Should this docket be closed?
Recommendation:
The fuel docket is on-going and should remain open.
(Brownless)
Staff Analysis:
The fuel docket is on-going and should remain open.
