Case Background
On April 16, 2018,
Florida Power & Light Company (FPL or Company) filed a Petition for
Mid-Course Corrections to its 2018 Environmental Cost Recovery Clause (ECRC) factors that reflect the impact of the Tax
Cuts and Jobs Act of 2017 (Mid-Course Petition). By its Mid-Course Petition, FPL
seeks to reduce the 2018 ECRC factors that were approved in Order No. PSC-2018-0100-FOF-EI.[2]
Mid-course
corrections are rare in the ECRC docket and are more typical in the fuel
docket. Mid-course corrections are considered preliminary procedural decisions,
and any over-recoveries or under-recoveries resulting from the approval by the Florida
Public Service Commission (Commission) may be adjusted in the following year
proceeding.
The Tax Cuts and
Jobs Act of 2017 (Tax Act) was signed into law on December 22, 2017, about four
months after FPL filed its projection testimony and cost recovery schedules for
2018. In addition to filing its Mid-Course Petition in Docket No. 20180007-EI,
FPL filed similar petitions in Docket No. 20180001-EI, the Fuel and Capacity
Cost Recovery Clause docket, and in Docket No. 20180046-EI, Consideration of
the tax impacts associated with Tax Cuts and Jobs Act of 2017 for FPL.
The Commission
has jurisdiction over this matter pursuant to Section 366.05 and 366.8255,
Florida Statutes. (F.S.)
Discussion
of Issues
Issue 1:
Should the Commission approve FPL’s Mid-Course Petition
to correct its 2018 ECRC factors and associated tariff sheets?
Recommendation:
Yes. Staff recommends approval of FPL’s Mid-Course Petition
which was filed to address a federal tax reduction. Approval will allow for a
reduction in the ECRC factors and will decrease customer bills. The revised
factors and associated tariffs should become effective July 1, 2018. (Mtenga)
Staff Analysis:
The projected ECRC costs for 2018 were developed
before the Tax Act was signed into law. The Tax Act will have the effect of
lowering the federal income tax rate for corporations from 35 percent to 21 percent;
therefore, some of the costs embedded into the total projected ECRC costs for
2018 are overstated. Federal income tax amounts are included in the calculation
of the costs that have a capital component. Adjustments for tax impacts on revenue
requirements recovered through the ECRC will change the currently approved
factors. The impact of the Tax Act on FPL’s ECRC cost projections result in an
over-recovery of approximately $19.1 million or 9.2 percent. Approval of FPL’s Mid-Course
Petition will result in a reduction to the typical 1,000 kWh monthly
residential customer bill of $0.36. The revised tariffs are included as
Attachment A. In its May 10, 2018, response to staff’s second set of
interrogatories No. 19, FPL indicated that the Company will include a short
bill insert on all customer bills 30 days in advance of the rates taking
effect, and will provide updated rate schedules on its website.
FPL’s Mid-Course Petition was filed with the intention of
the proposed decrease in rates becoming effective July 1, 2018. Typically,
effective dates are set at 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. 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 (June 5,
2018), and the proposed implementation date (expected to be July 1, 2018) is 25
days. Since this filing, if approved, results in a decrease to cost recovery
factors, staff recommends that the 25 day interval is sufficient.
Staff recommends
approval of FPL’s Mid-Course Petition which was filed to address a federal tax
reduction. Approval will allow for a reduction in the ECRC factors and will
decrease customer bills. The revised factors and associated tariffs should
become effective July 1, 2018.
Issue 2:
Should this docket be closed?
Recommendation:
No. The ECRC docket is on-going and should remain
open. (Murphy)
Staff Analysis:
The ECRC docket is on-going and should remain open.
