Discussion
of Issues
Issue 1:
Should the Commission grant the Petition to Initiate
Rulemaking to amend Rule 25-6.0426, F.A.C.?
Recommendation:
Yes, the Commission should grant the Petition to
Initiate Rulemaking to amend Rule 25-6.0426, F.A.C., in order to collect
information and evaluate whether the Commission should propose to adopt the
Petitioners’ suggested rule amendments at a later date. (Gervasi, Merryday,
Smith)
Staff Analysis:
Pursuant to Section 288.035(1), F.S., the Commission
“may authorize public utilities to recover reasonable economic development
expenses.” Section 288.035(2), F.S., limits such expenses to expenditures for:
(a) operational assistance, including the participation in trade shows and
prospecting missions with state and local entities; (b) assisting the state and
local governments in the design of strategic plans for economic development
activities; and (c) marketing
and research services, including assisting local governments in marketing
specific sites for business and industry development or recruitment, and
assisting local governments in responding to inquiries from business and
industry concerning the development of specific sites. Section 288.035(3), F.S., requires the
Commission to “adopt rules for the recovery of economic development expenses by
public utilities, including the sharing of expenses by shareholders.”
Rule 25-6.0426(3), F.A.C., limits each utility’s
recoverable economic development expenses to the greater of: (a) the amount
approved in each utility’s last rate case escalated for customer growth; or (b)
95 percent of the expenses incurred for the reporting period not to exceed the
lesser of 0.15 percent of gross annual revenues or $3 million.
Petition to Initiate Rulemaking
The Petitioners state that although Rule 25-6.0426,
F.A.C., is intended to promote economic development in Florida, it has come to
be unduly restrictive in its current form.
The $3 million expense cap set forth in Rule 25-6.0426(3), F.A.C., has
not changed since 1995 and, according to the Petitioners, for a large utility
such as FPL “this expense cap has had the practical consequence of limiting
FPL’s recoverable economic development expenses to a flat $3.0 million per year
in each and every year since the Rule’s inception over 20 years ago.”
The Petitioners further state that due to the flat $3
million cap contained in the rule, FPL’s economic development expenses have
been limited to approximately 0.00267 percent of gross annual revenues, as
opposed to 0.15 percent. The Petitioners claim that this severely limits, and
will increasingly limit, FPL’s ability to promote economic development in the
state. The rule currently limits the recoverability of TECO’s economic expenses
to approximately $2.9 million; however, the Petitioners assert that as the
company grows and revenues increase, the rule in its current form will prevent
the limit from keeping pace with the company’s growth. For GPC, the Petitioners
state that the limitation of recoverable economic development expenses
contained in the rule effectively imposes a cap of approximately $2.3 million.
According to the Petitioners, recognizing the effect of inflation, the impact
of their recoverable economic development expenses has been steadily eroded
since the establishment of the rule, and the buying power of the effective $3
million expense cap has decreased by approximately 65 percent.
The Petitioners suggest that Rule 25-6.0426(3)(b), F.A.C.,
should be revised to change the annual cap to the greater of 0.15 percent of
gross annual revenues, rather than the lesser of 0.15 percent of gross annual
revenues, or $3 million. For FPL, this
would immediately increase the eligible recoverable economic development
expense to approximately $16 million per year and also would allow that cap to
increase over time, to the extent that annual gross revenues increase to
reflect the effects of inflation. For
TECO and GPC, this change would increase eligible recoverable economic expense
to $3 million.
The Petitioners further suggest that the current
limitation to 0.15 percent of gross annual revenues should gradually increase
to 0.175 percent in 2020; to 0.2 percent in 2021; to 0.225 percent in 2022; and
to 0.25 percent in 2023 and beyond. These changes would gradually increase the
level of funding for promotion of economic development by 2023 to approximately
$26.7 million for FPL, $4.9 million for TECO, and $3.8 million for GPC. The
Petitioners assert that the rule changes would likewise increase the funding
available for economic development activities of all Florida electric investor-owned
utilities. The Petitioners state that expenditures for the promotion of
economic development have produced substantial benefits for the state that far
exceed the level of investment in the form of job creation, which contributes
new direct capital investment to the Florida economy. The Petitioners state
that modification of the rule will encourage utilities to intensify efforts to
promote new investment, which in turn will expand Florida’s economic base and
foster economic growth. A copy of the Petitioners’ suggested amendments to Rule
25-6.0426, F.A.C., is appended to this recommendation as Attachment A.
According to the Petitioners, the suggested rule changes
are not projected to have any adverse impacts to their general body of
ratepayers. The Petitioners contend that
customers will see no rate increase as a result of the suggested rule changes
between rate cases and that the revenue increases from new and expanding
businesses will allow for long-term fixed costs to be spread over a larger
customer base, thereby benefiting existing customers. The Petitioners further
contend that even in the unlikely event that increased promotion of economic
development fails to result in additional electric revenues, increasing
economic development costs to the requested levels would result only in very
small and gradual rate increases by 2023. According to the Petitioners, a
typical 1,000-kWh monthly residential bill would increase by $0.24 for FPL, by
$0.14 for GPC, and by $0.10 for TECO.
Statutory Authority and Conclusion
Pursuant to Section 120.54(7)(a), F.S., any person
regulated by an agency or having a substantial interest in an agency rule may
petition an agency to amend a rule. The
petition is required to specify the proposed rule and action requested. The Petition to Initiate Rulemaking meets those
requirements. Further, pursuant to Section 288.035, F.S., the Commission has the
authority to implement the rule amendments suggested by the Petitioners, if it
choses to do so as a result of the rulemaking process. Therefore, staff recommends that the
Commission grant the Petition.
Staff notes that a Commission decision to grant the
Petition merely begins the rulemaking process.
It does not mean that the Commission has proposed or adopted any rule
amendment. If the Commission approves staff’s recommendation, then a Notice of
Rule Development will be issued and a staff rule development workshop will be
held. This will allow all interested
persons to participate and discuss the potential rule amendment. It will also give staff an opportunity to
collect information that is needed to evaluate the proposed changes. Staff will return at a later date with a
recommendation for the Commission on whether to propose amendments to Rule
25-6.0426, F.A.C.
Issue 2:
Should this docket be closed?
Recommendation:
No. If the
Commission approves staff’s recommendation in Issue 1, this docket should
remain open to proceed with the rulemaking process. (Gervasi)
Staff Analysis:
If the Commission approves staff’s recommendation in
Issue 1 and initiates rulemaking on Rule 25-6.0426, F.A.C., this docket should
remain open to proceed with the rulemaking process, which would include a staff
rule development workshop.
25-6.0426 Recovery of Economic Development
Expenses.
(1)
Pursuant to Section 288.035, F.S., the Commission shall allow a public utility
to recover reasonable economic development expenses subject to the limitations
contained in subsections (3) and (4), provided that such expenses are prudently
incurred and are consistent with the criteria established in subsection (7).
(2)
Definitions.
(a)
“Economic Development” means those activities designed to improve the quality
of life for all Floridians by building an economy characterized by higher
personal income, better employment opportunities, and improved business access
to domestic and international markets.
(b)
“Economic development organization” means a state, local, or regional public or
private entity within Florida that engages in economic development activities,
such as city and county economic development organizations, chambers of
commerce, Enterprise Florida, the Florida Economic Development Council, and
World Trade Councils.
(c)
“Trade show” means an exhibition at which companies, organizations,
communities, or states advertise or display their products or services, in
which economic development organizations attend or participate to identify
potential industrial prospects, to provide information about the locational
advantages of Florida and its communities, or to promote the goods and services
of Florida companies.
(d)
“Prospecting mission” means a series of meetings with potential industrial
prospects at their business locations with the objectives of convincing the
prospect that Florida is a good place to do business and offers unique
opportunities for that particular business, and encouraging the prospect to
commit to a visit to Florida if a locational search is pending or in progress.
(e)
“Strategic plan” means a long-range guide for the economic development of a
community or state that focuses on broad priority issues, is growth-oriented,
is concerned with fundamental change, and is designed to develop and capitalize
on new opportunities.
(f)
“Recruitment” means active efforts to encourage specific companies to expand or
begin operations within Florida.
(3)
Prior to each utility’s next rate change enumerated in subsection (6), the
amounts reported for surveillance reports and earnings review calculations
shall be limited to the greater of:
(a)
The amount approved in each utility’s last rate case escalated for customer
growth since that time, or
(b)
95 percent of the expenses incurred for the reporting period so long as such
does not exceed the greater lesser of 0.15 percent of gross
annual revenues or $3 million. Beginning
on January 1, 2020, the amounts reported for surveillance reports and earnings
review calculations shall not exceed the greater of $3 million or 95 percent of
the following percentages of gross annual revenues: January 1, 2020 – 0.175
percent; January 1, 2021 – 0.2 percent; January 1, 2022 – 0.225 percent; and
January 1, 2023 and beyond – 0.25 percent.
(4)
At the time of each utility’s next rate case and for subsequent rate
proceedings enumerated in subsection (6) the Commission will determine the
level of sharing of prudent economic development costs and the future treatment
of these expenses for surveillance purposes.
(5)
Each utility shall report its total economic development expenses as a separate
line item on its income statement schedules filed with the earnings surveillance
report required by Rule 25-6.1352, F.A.C. Each utility shall make a line item
adjustment on its income statement schedule to remove the appropriate
percentage of economic development expenses incurred for the reported period
consistent with subsections (3) and (4).
(6)
Requests for changes relating to recovery of economic development expenses
shall be considered only in the context of a full revenue requirements rate
case or in a limited scope proceeding for the individual utility.
(7)
All financial support for economic development activities given by public
utilities to state and local governments and organizations shall be pursuant to
a prior written agreement. Recoverable economic development expenses shall be
limited to the following:
(a)
Expenditures for operational assistance, including:
1.
Planning, attending, and participating in trade shows;
2.
Planning, conducting, and participating in prospecting missions designed to
encourage the location in Florida of domestic and foreign companies;
3.
Providing financial support to economic development organizations to assist
with their economic development operations;
4.
Providing financial support to economic development programs or initiatives
identified or developed by Enterprise Florida, Inc.;
5.
Participating in joint economic development efforts, including public-private
partnerships, consortia, and multi-county regional initiatives;
6.
Participating in downtown revitalization and rural community developmental
programs.
7.
Supporting state and local efforts to promote small and minority-owned business
development efforts; and
8.
Supporting state and local efforts to promote business retention and expansion
activities.
(b)
Expenditures for assisting state and local governments in the design of
strategic plans for economic development activities, including:
1.
Making financial contributions to state and local governments to assist
strategic planning efforts; and
2.
Providing technical assistance, data, computer programming, and financial support
to state and local governments in the design and maintenance of information
systems used in strategic planning activities.
(c)
Expenditures of marketing and research services, including;
1.
Assisting state and local governments and economic development organizations in
marketing specific sites for business and industry development or recruitment;
2.
Assisting state and local governments and economic development organizations in
responding to inquiries from business and industry concerning the development
of specific sites within the utility’s service area;
3.
Providing technical assistance, data, computer programming, and financial
support to state and local governments in the design and maintenance of
geographic information systems, computer networks, and other systems used in
marketing and research activities;
4.
Providing financial support to economic development organizations to assist
with their research and marketing activities;
5.
Sponsoring publications, conducting direct mail campaigns, and providing
advertising support for state and local economic development efforts;
6.
Participating in cooperative marketing efforts with economic development
organizations;
7.
Helping state and local businesses identify suppliers, markets, and sources of
financial assistance;
8.
Helping economic development organizations identify specific industries and
companies for targeting and recruitment;
9.
Working with economic development organizations to identify businesses in need
of help for expansion, going out of business, or at risk of leaving the area;
10.
Providing site and facility selection assistance, including lists of commercial
or industrial sites, computer databases, toll-free telephone numbers, maps,
photographs, videos, and other activities in cooperation with economic
development organizations; and
11.
Supporting state and local efforts to promote exports of goods and services,
and other international business activities.
Rulemaking
Authority 288.035(3), 350.127(2) FS. Law Implemented 288.035 FS. History–New
7-17-95, Amended 6-2-98, 9-25-00.
