Case Background
On September 5,
2017, Tampa Electric Company (TECO or Company) filed a petition requesting
approval of its Conservation Street and Outdoor Lighting Conversion Program
(the program), as a Demand Side Management (DSM) program. If approved, the
conversion program would allow the Company to convert all its actively billed
non-Light Emitting Diode (LED) lighting facilities to LED service over the next five years. The Company
also requested that the remaining unamortized costs in rate base of the non-LED
facilities be recovered through the Energy Conservation Cost Recovery (ECCR)
Clause. The Florida Public Service Commission (Commission) approved DSM goals
for TECO and its DSM plan, designed to achieve its DSM goals, on August 11,
2015.
TECO currently
provides tariffed outdoor lighting service utilizing three lighting
technologies: Metal Halide (MH), High-Pressure Sodium (HPS) and LED. LED
fixtures are currently the only lighting service provided for new customers
with both HPS and MH service closed to new business. However, customers who
were receiving service under HPS and MH were grandfathered in and continue to receive
service. Concurrent with filing its petition in this docket, TECO also filed a
petition to approve new LED lighting rates in Docket No. 20170198-EI (tariff
docket). In that petition TECO notes that currently the market demand for HPS
and MH lighting is declining. Additionally, federal regulations such as the Energy
Independence and Securities Act of 2014, which require higher level of energy
efficiency for new outdoor lighting, is also contributing to the decreased
demand for HPS and MH lighting. HPS and MH manufacturers are phasing out those
types of lighting rather than investing in products that are losing popularity.
TECO also reported that HPS and MH manufacturers/suppliers have informed the Company
that all MH products are cancelled as January 1, 2017, and that HPS will be
available until 2022. Due to their low production, HPS and MH fixtures and
parts costs are rising significantly.
The
objective of the new DSM program is to convert the current standard MH and HPS
street and outdoor luminaires to energy efficient LED luminaires, in order to
reduce the quantity of electricity consumed within the Company’s service area.
TECO has approximately 242,000 street and outdoor lighting luminaires in
operation, of which 209,821 are non-LED and are eligible for conversion under
the proposed conservation program.
Staff
held two informal meetings with the Company to discuss the proposed program. At
those meetings staff expressed its concerns regarding several aspects of the
proposed program. These concerns included: the requirement to participate, the
inclusion of program advertising costs, and the cost-effectiveness calculation.
Staff also gathered data via four staff data requests.
The Commission
has jurisdiction over this matter pursuant to Sections 366.80 through 366.85
and 403.519, Florida Statutes (F.S.), collectively known as the Florida Energy
Efficiency and Conservation Act (FEECA).
Discussion
of Issues
Issue 1:
Should the Commission approve TECO’s proposed
Conservation Street and Outdoor Lighting Conversion DSM program?
Recommendation:
Yes. While the program is not a typical demand side
management program, the conversion from Metal Halide and High-Pressure Sodium street
and outdoor luminaires to energy efficient Light Emitting Diode luminaires
advance the policy objectives of FEECA. As such, the proposed demand and annual
energy savings from the proposed program should not count towards TECO’s DSM
goals. The program is directly monitorable, yields measurable results, and is
marginally cost-effective. Program participation standards were submitted
concurrently with the program description. Staff has reviewed these standards
and recommends that they are sufficient. Staff recommends costs associated with
the program (estimated at $176 per fixture or $36,930,532, less any salvage
proceeds, as of December 2017), except advertising and notification costs, be
eligible for cost recovery through TECO’s Energy Conservation Cost Recovery
factor. (King, Ballinger)
Staff Analysis:
The criteria used to review the appropriateness of
DSM programs are: (1) whether the program advances the policy objectives of
FEECA and its implementing rules; (2) whether the program is directly
monitorable and yields measureable results; and (3) whether the program is
cost-effective. Staff
has reviewed TECO’s petition and believes it meets these criteria.
Program
Description
The Street
and Outdoor Lighting Conversion Program is designed to convert non-LED (MH and
HPS) street and outdoor lighting luminaires to eligible LED luminaires in a five-year
program. The goal is to install energy efficient LED street and outdoor
lighting technology to reduce energy consumption and reduce TECO’s winter peak demand.
TECO is seeking approval to recover the remaining unrecovered depreciation
costs for the MH and HPS luminaires that will be converted as part of the
program within the ECCR clause. The unamortized amount for eligible luminaires
is estimated at $36,930,532 or approximately $176 per fixture as of December
2017. The
Company intends to initiate the conversion process shortly after Commission approval.
TECO’s conversion
program is not a typical DSM program. While the program’s goal of reducing
energy consumption and demand is typical, and advances the policy objectives of
FEECA, other aspects of the program are not. These aspects are addressed below.
First, participation in other DSM
programs is voluntary with customers choosing to participate mainly due to
direct benefits. However, converting to LED lighting under this program does
not appear to be voluntary in staff’s view. Specifically, as discussed in detail
in the tariff docket petition, existing HPS and MH fixtures will be converted
in one of two ways. One, the existing HPS and MH fixtures that incur an outage
will be replaced with a new LED fixture rather than repaired. Two, in a planned
and coordinated manner, non-LED fixtures in geographic areas and circuits will
undergo a conversion utilizing dedicated crews until the entire service area
outdoor lighting fleet has been converted. TECO expects that 45 percent of the
existing HPS and MH infrastructure will be converted to LED through outage
restoration conversions and 55 percent converted using dedicated crews, during
the five-year period.
Second, unlike other DSM programs,
not all participants will see a reduction in bills. Information provided in the
tariff docket shows that out of the approximately 209,821 lighting units, 90 percent
are proposed to have no change in bills, five percent are proposed to have a
lower bill and five percent are proposed to have a slightly higher bill at the
start of the program.
Additionally, there are no monetary incentives (i.e., rebates) provided to end
use customers with this proposed program. TECO believes that the incentive
included with this program is to only capture the unrecovered cost that is
remaining on the non-LED luminaires eligible for replacement under this
proposed program. TECO
explained that the proposed tariffs were developed as the vehicle for implementing
the program. In the absence of the proposed conversion program, which provides cost
recovery for the unrecovered investment in existing lighting assets, the Company
would have contemplated different timing and sequencing for the conversion to
LED lighting, which would have resulted in tariffs that are different than
those proposed in this docket.
Third, cost recovery for this
type of lighting service is usually done as a base rate item rather than
recovered through the ECCR clause.
TECO’s 2017 Amended and Restated Stipulation and Settlement Agreement prohibits
increases in base rates except for under specific circumstances. As it related to new tariff filings,
paragraph 12 states:
New Tariffs. Nothing
in this 2017 Agreement shall prelude
Tampa Electric from filing and the Commission from approving any new or revised
tariff provisions or rate schedules requested by Tampa Electric, provided that
any such tariff request does not increase any existing base rate component of a
tariff or rate schedule, or any other charge imposed on customers during the
Term unless the application of such new or revised tariff, rate schedule, or
charge is optional to Tampa Electric's customers.
The Company notes that existing
or prospective new lighting customers may install their own lighting equipment should
they desire to do so. TECO also provided verification that the signatories
agreed that TECO could make a request as discussed in the instant docket.
In support
of recovery through the ECCR clause TECO notes that in Docket No. 800701-EG the
Company sought approval to convert approximately 85,000 street and lighting
area lighting fixtures from MH to HPS and sought cost recovery via the ECCR
clause. After a hearing, the Commission found that all reasonable and prudently
incurred unreimbursed expenditures associated with the program qualified for
conservation cost recovery.
Program
Costs/Cost Recovery
In its ECCR filings, the Company intends to file the
requested recovery amount of unamortized cost for MH and HPS luminaires that
have either been removed during the prior year and current year (i.e. true-ups)
or are expected to be removed through the projection year.
There are no administrative costs related to this program for which TECO is
seeking a rate adjustment. If approved, TECO will recover through ECCR factors the
unrecovered plant costs (estimated at $36,930,532 as of December, 2017), less
any salvage proceeds, based upon actual luminaire replacements performed each
month. Recovery of unamortized costs and associated communication expenditures
discussed below would begin with the new ECCR factors in 2019. The LED
luminaires being installed to replace the existing MH and HPS luminaires have
bar codes. The amount of LED luminaires installed each month will be counted
and reported. For each LED luminaire replaced, approximately $176 will be
accounted for against the remaining unrecovered plant balance. Based on TECO’s
projection, this conversion will have an estimated monthly residential rate
impact of 53.3 cents for the monthly usage of 1,200 kilowatt-hours during the
course of the program.
TECO further explained, in response to staff’s data
request, that the proposed amount for recovery would be adjusted in value at
the commencement of the conversion program and along the five-year life of the
conversion program so that only the remaining net book value would be recovered
in the ECCR factor. This updated net book value would be revised after the
program is approved in the annual filings associated with the ECCR clause. Under
normal depreciation accounting with no additions to the plant in service amounts,
the depreciation reserve balance is expected to increase over time resulting in
the net book value of plant in service declining. The accounting associated
with this program is intended to assure that at the end of the five-year
program the net book value of the MH and HPS luminaires is zero. What is being
proposed is that, as luminaires are retired from Account 101 on a monthly
basis, there will be a standard reserve adjustment net of salvage based on the
quantity removed. The removal cost of the existing MH and HPS luminaires will
be paid for out of the project costs and will not impact the ECCR factor.
The reserve adjustment will be trued up annually based on each year’s
conversion and associated depreciation expense, and will be filed in the ECCR
clause docket by the Company for information purposes.
In addition to the program costs noted above, the Company
plans to initiate separate communications and notifications regarding the
project to the communities and customers TECO serves. The cost of this
advertising will be approximately $50,000 per year during the five-year period
of the program. The
advertising/communication costs for this program was not included in the
cost-effectiveness test because the messaging would also include messaging for other
Commission approved DSM programs that the Company offers to customers.
Staff does not believe any
advertising or notification costs should be included for recovery for the
conversion program since customers are not deciding when to convert their
fixture. Moreover, the Company has stated that it has been approached by
numerous existing lighting service customers, including large municipalities,
requesting that the Company replace the existing MH and HPS street lighting
with LED streetlights. In fact, three cities have filed correspondence in the docket
supporting this program.
Cost-Effectiveness
Review
TECO provided a cost-effectiveness analysis of its
proposed program using the Participant Test, the Rate Impact Measure (RIM)
Test, and the Total Resource Cost (TRC) Test. The Participant Test analyzes the
cost and benefits from a program participant’s point of view. The RIM Test
ensures that all ratepayers will benefit from a proposed DSM program, not just
the program participants. The TRC Test measures the overall economic efficiency
of a DSM Program. The RIM and TRC tests take the ratio of benefit and cost,
with analysis involving assumptions used to estimate costs as well as benefits
such as cost savings associated with the avoided unit. An important aspect of
the review is the evaluation of these assumptions and factors that may change
the cost-benefit analysis significantly.
TECO asserted that the program is cost effective, with scores
of 1.05 for the RIM Test, 2.17 for the TRC Test, and a cumulative net benefit
in the amount of $61,884 in net present value. In response to staff’s data
request, TECO also provided a cost-effectiveness analysis that included all
five years of unamortized costs resulting in scores of 1.01 for the RIM Test, .70
for the TRC Test, and a cumulative net benefit in the amount of $24,492 in net
present value. Such
results suggest the program is marginally cost-effective.
FEECA
Policy Objectives/ Program Monitoring and Evaluation
FEECA
emphasizes reducing the growth rate of peak demand and reducing and controlling
the growth rates of electricity consumption. Due to the energy efficiency of
the new LED fixtures, TECO estimated a total winter peak demand savings of 29.7
megawatts and an annual energy savings of 127.9 gigawatt-hours as a result of
the conversion.
Demand and energy savings were
obtained using wattage data from each existing eligible non-LED lamps and the
proposed LED lamps that will be installed in its place. Operating hours were
estimated using the United States Naval Observatory tables for Tampa, Florida.
The analysis yielded the following expected savings per lamp conversion
performed:
Summer Demand: 0.000
kW
Winter Demand: 0.133
kW
Annual Energy: 576
kWh
TECO believes that because its
proposed program fully complies with the requirements of FEECA, it should be
allowed to report the demand reduction and annual energy savings along with its
current DSM goals. However, TECO agreed to meet its current DSM 2015-2024 goals
(as approved by the Commission) using the currently approved DSM Programs only.
TECO proposes that the demand and annual energy savings from the proposed conversion
program be reported as additional savings over and above the savings achieved
using the current approved DSM programs and that those additional savings would
not be utilized for any other purpose with regard to FEECA or FEECA goal
achievement. Staff
agrees, and would note that TECO is currently exceeding its current FEECA goals.
Customer Notification
TECO has prepared general correspondence including a news
release and letter describing the benefits of LED lighting and the conversion
program to existing lighting customers, door hangers for customers whose HPS or
MH fixture will be replaced with an LED fixture upon failure, and customers in
planned geographical areas will receive targeted communication directly before
the conversion begins. TECO stated that it has had communication with larger
volume lighting customers such as cities and counties about the planned
conversions. TECO also stated that customers whose bills will increase as
result of the conversion, will receive a letter from the Company and will
provide options for additional communications through email and phone.
Conclusion
While the program is not a
typical demand side management program, the conversion from Metal Halide and
High-Pressure Sodium street and outdoor luminaires to energy efficient Light
Emitting Diode luminaires advance the policy objectives of FEECA. As such, the
proposed demand and annual energy savings from the proposed program should not
count towards TECO’s DSM goals. The program is directly monitorable, yields
measurable results, and is marginally cost-effective. Program participation
standards were submitted concurrently with the program description. Staff has
reviewed these standards and recommends that they are sufficient. Staff
recommends costs associated with the program (estimated at $176 per fixture or $36,930,532,
less any salvage proceeds, as of December 2017), except advertising and
notification costs, be eligible for cost recovery through TECO’s Energy
Conservation Cost Recovery factor.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. This docket should be closed upon issuance of a
consummating order, unless a person whose substantial interests are affected by
the Commission’s decision files a protest within 21 days of the issuance of the
Commission’s Proposed Agency Action Order. (Trierweiler)
Staff Analysis:
This docket should be closed upon issuance of a
consummating order, unless a person whose substantial interests are affected by
the Commission’s decision files a protest within 21 days of the issuance of the
Commission’s Proposed Agency Action Order.
