Case Background
On April 16, 2018,
Florida Power & Light Company (FPL)
filed a Petition for Mid-Course Corrections to its 2018 Capacity and
Environmental Cost Recovery Factors that reflect the impact of the Tax Cuts and
Jobs Act of 2017 (FPL Mid-Course Petition). The FPL Mid-Course Petition seeks
to reduce the respective 2018 capacity cost recovery factors that were approved
in Order No. PSC-2018-0105-PCO-EI,[1] and the environmental cost recovery
factors that were approved in Order No. PSC-2018-0100-FOF-EI.[2] Staff notes that the capacity cost
recovery portion of FPL’s Mid-Course
Petition will be addressed in Docket No. 20180001-EI, and environmental cost
recovery clause reduction will be addressed in Docket No. 20180007-EI.
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 in
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 or capacity factors may be included in the following year’s fuel or
capacity factors.
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 Mid-Course Petition
to correct its capacity cost recover factors and the associated tariff sheets?
Recommendation:
Yes. FPL’s
request for mid-course correction to its 2018 capacity cost recovery factors
and the associated tariff sheets should be approved. The recommended capacity cost
recovery factors are presented in Attachment A and the associated tariff sheets
are presented in Attachment B. The revised capacity cost recovery factors and
the associated tariff sheets should become effective with the July 2018 billing
cycle, which begins on July 1, 2018. The Commission should give staff
administrative authority to approve the tariff sheets implementing the approved
rate adjustments. (Barrett, Galloway, Draper, Guffey)
Staff Analysis:
Midcourse
Adjustment for Capacity Cost Recovery (CCR) Factors
FPL’s
currently authorized 2018 fuel and capacity amounts and factors are codified in
the First Mid-Course Order, which projected total capacity costs of
$282,109,414 for 2018. Because this projection of total capacity-related costs
was developed before the Tax Cuts and Jobs Act of 2017 lowered the federal
income tax rate for corporations from 35 percent to 21 percent, many of the
costs embedded in that total are now overstated. Federal income tax rate
amounts are included in the calculation of the capacity costs that have a
capital component, such as the Cedar Bay, Indiantown, and St. John River Power
Park Transactions, or the capital-related costs for Incremental Power Plant
Security, as shown in Schedule E12A/B of FPL’s Mid-Course Petition. When the
lower federal income tax amount is incorporated into the projected costs, the
revised total capacity costs for 2018 are $261,614,030. When the true-up
provision amounts are applied and final calculations are performed, the total
end-of-period balance reflects that FPL would over-recover its capacity costs
for 2018 by $12,071,089, or 4.61 percent.
If FPL’s Mid-Course Petition is granted, this amount would
be recovered through reduced capacity cost recovery factors for July–December
2018. For a residential customer using 1,000 kilowatt hours (kWh) of
electricity, the capacity portion of their bill will be reduced by $0.23. The
revised capacity cost recovery factors are reflected on Attachment A.
As noted previously, the FPL Mid-Course Petition also
seeks to reduce the respective 2018 environmental cost recovery factors, as
addressed in a recommendation filed in Docket No. 20180007-EI. A typical bill
comparison for a residential customer using 1,000 kWh of electricity is
presented in Attachment C showing all of the changes that would be implemented
in the July billing cycle, pending Commission approval.
Bill
Impact and Customer Notifications
Consistent
with the First Mid-Course Order, the current bill for a residential customer
using 1,000 kWh of electricity for the period March-December, 2018, is $99.37
per month, with a capacity cost recovery component of $2.57 per month. As
proposed, the capacity cost recovery component will be reduced by $0.23 per
month, to $2.34 per month. In addition, an environmental cost recovery clause
reduction of $0.36 per month is being addressed in Docket No. 20180007-EI, and
a small change is proposed for the storm bond charge.
The sum of those three changes results in a slight reduction to the Gross
Receipts Tax, as well. Pending the Commission’s approval in this matter and the
similar consideration in Docket No. 20180007-EI, the proposed bill for a
residential customer using 1,000 kWh of electricity for July-August, 2018, is
projected to be $98.87 per month, as shown and presented in Column 3 from Table
1 of Attachment C.
Staff believes
implementing reduced capacity 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.
In its May 30 2018, response to Commission
staff’s Second Data Request, Question No. 5, FPL stated that it will notify
customers with bill inserts 30 days in advance of the rates taking effect. In
addition, FPL stated the billing changes identified in the instant petition
will be addressed in the Company’s next quarterly newsletter (to be published
in July 2018). FPL’s website will include links to show the proposed rate
schedules for residential and business rate classes that are proposed to become
effective July 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.
If approved
by the Commission, this mid-course correction will result in lower capacity
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
July 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.[8] 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.[9] In this
instance, the interval between the Commission’s vote on this matter (June 5,
2018) and the proposed implementation date (expected to be July 1, 2018) is 25
days. Because this filing, if approved, results in a decrease to cost recovery
factors, staff believes the 25 day interval is sufficient.
Conclusion
Staff recommends the Commission approve FPL’s request for mid-course correction to its 2018
capacity cost recovery factors and the associated tariff sheets. The
recommended capacity cost recovery factors are presented in Attachment A and the
associated tariff sheets are presented in Attachment B. The revised capacity
cost recovery factors and the associated tariff sheets should become effective with
the July 2018 billing cycle, which begins on July 1, 2018. The Commission
should give staff administrative authority to approve the tariff sheets implementing
the approved rate adjustments.
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.
