Case Background
Duke Energy
Florida, LLC’s (DEF) petition for a limited proceeding to approve its 2017
Second Revised and Restated Settlement Agreement (2017 Settlement) was approved
by the Florida Public Service Commission (Commission) on November 20, 2017, by
Order No. PSC-2017-0451-AS-EU. Paragraph 12 of the 2017 Settlement allows
DEF to implement an increase to base rates effective January 2019, and
paragraph 15 of the 2017 Settlement allows DEF to petition the Commission for
cost recovery of up to 350 megawatts (MW) of solar generation in 2019.
According to paragraph 15 of the 2017 Settlement, the cost of the solar
projects shall be reasonable and cost-effective.
On July 31,
2018, DEF filed a petition for a limited proceeding to approve its first solar
base rate adjustment, which includes both the Hamilton Solar Power Plant
(Hamilton Project) and the Columbia Solar Power Plant (Columbia Project). The
Hamilton Project is expected to go into service in late 2018 and the Columbia
Project is expected to go into service in early 2020. Each project has a rating
of 74.9 MW.
On August 24,
2018, DEF filed a petition, also in Docket No. 20180149-EI, for approval of
tariff changes to implement the 2019 base rate increase approved in the 2017
Settlement and the proposed base rate adjustment for the Hamilton Project. The
tariffs filed with this petition also include the base rate increase for the
second Citrus County Combined Cycle Power Block (Citrus Unit 2) which was
approved for inclusion in base rates by Order No. PSC-2018-0367-TRF-EI (Citrus
Order). The decisions to increase rates for the
Citrus Unit 2 and the step increase authorized by paragraph 12 of the 2017
Settlement Agreement are final. The recommendation below combines these
previously approved increases with the solar base rate adjustment increase for
administrative efficiency.
DEF requests
that the tariffs filed on August 24, 2018, go into effect with the first
billing cycle in January 2019; however, Duke acknowledges the tariff increases
for the Hamilton Project and Citrus Unit 2 are contingent on DEF placing the
units into service before the first billing cycle of January 2019. DEF has also
requested that the rates for the Hamilton Project be subject to refund to allow
the Commission to render a decision on the solar base rate adjustment petition.
A hearing for the Hamilton and Columbia Projects is currently scheduled to be
held in April 2019. A copy of the tariff to be approved is shown in Legislative
format appended to this recommendation as Attachment A.
This recommendation
addresses the tariffs DEF filed in its August 24, 2018, petition. DEF waived
the 60-day file and suspend provision of Section 366.06(3), Florida Statutes
(F.S.), until the October 30, 2018 Commission Conference. The Commission has
jurisdiction pursuant to Sections 366.06 and 366.076, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve DEF’s tariffs filed on
August 24, 2018?
Recommendation:
Yes. The Commission should approve DEF’s tariffs
filed on August 24, 2018, appended to this recommendation as Attachment A. The
tariffs should go into effect with the first billing cycle in January 2019. The
base rate increase associated with the Hamilton Project should be subject to
refund, pending the Commissions’ final determination regarding the Hamilton and
Columbia Projects following the April administrative hearing. If the in-service
date of the Hamilton Project is delayed, then the tariffs reflecting the
Hamilton Project should become effective, subject to refund, with the first
billing cycle after the Hamilton Project is placed in commercial service and the
Commission should provide staff authority to administratively approve the
tariffs at the appropriate time. If the in-service date of the Hamilton Project
and/or Citrus Unit 2 is delayed, DEF should notify staff of the delay(s) and
file revised tariffs, for administrative approval by staff, effective with the
first billing cycle of January 2019 to remove the portion of the base rate
increase associated with those units. (Draper, Guffey)
Staff Analysis:
On August 24, 2018, DEF filed a petition and
supplemental direct testimony of Marcia Olivier to support the calculations and
proposed tariffs to go into effect with the first billing cycle in January
2019. The proposed tariffs reflect three base rate increases: (1) the Hamilton
Project; (2) the base rate increase approved in the 2017 Settlement; and (3)
the base rate increase to reflect Citrus Unit 2 approved in the Citrus Order.
DEF explained that combining several rate increases into one tariff sheet
filing smooths out the rate impact to customers and avoids the potential
confusion of multiple tariff sheets. The three base rate changes are discussed
in more detail below.
Hamilton Project
The proposed Hamilton Project is a 74.9 MW solar facility
being constructed in Hamilton County and is at issue in the instant docket. DEF
states that the Hamilton Project is expected to be in-service in December 2018.
DEF requested to implement the base rate increase for the Hamilton Project with
the first billing cycle in January 2019, subject to refund, pending the final
Commission decision in this docket. DEF further stated that if the commercial
in-service date of the Hamilton Project is delayed, then the tariff should
become effective with the first billing cycle after the Hamilton Project is
placed in commercial service and the Commission should provide staff authority
to administratively approve the tariff sheets at the appropriate time.
The proposed annualized revenue requirement for the
Hamilton Project is $15.2 million. Exhibit MO-2 of the supplemental direct
testimony of Marcia Olivier shows the allocation of the $15.2 million revenue
requirement to all rate classes. The uniform percentage increase to all rate
classes is 0.69 percent. The residential base rate impact of the Hamilton
Project is $0.46 on a 1,000 kWh bill.
Base Rate Increase approved in 2017 Settlement
Paragraph 12(b) of the 2017 Settlement provides for a $67
million base rate increase effective with the first billing cycle in January
2019. Paragraph 12(c) of the 2017 Settlement provides that if the applicable
federal or state income tax rate for DEF changes, DEF will adjust the amount of
the base increase to reflect the new tax rate before the implementation of such
increase. DEF explained in the supplemental direct testimony of Marcia Oliver
that DEF recalculated the base rate increase, in accordance with the 2017
Settlement, to reflect the new lower federal income tax rate resulting from the
2017 Tax Cuts and Jobs Act. Staff reviewed the calculation of the revised base
rate increase and confirmed that DEF applied the tax changes in accordance with
the 2017 settlement. The revised base rate increase is $55.1 million. The
residential base rate impact of the 2017 Settlement is $1.84 on a 1,000 kWh
bill.
Citrus Unit 2 Increase approved in Citrus Unit
Order
The Citrus Order gave staff the administrative authority
to approve tariffs and associated charges that implement the Commission’s
approval regarding base rate inclusion of DEF’s Citrus Combined Cycle Project.
As stated above, DEF’s tariff sheets filed on August 24, 2018, also reflect the
Citrus Unit 2 increase. Citrus Unit 2 is scheduled to be placed in-service in
December 2018. As provided for in the Citrus Order, in the event that Citrus
Unit 2 is delayed, then the tariff should become effective with the first
billing cycle after Citrus Unit 2 is placed in commercial service and staff has
authority to administratively approve the tariff sheets at the appropriate
time. The residential base rate impact of Citrus Unit 2 is $2.25 on a 1,000 kWh
bill.
Conclusion
The impact on a residential 1,000 kWh bill of the three
base rate changes discussed above effective with the first billing cycle in
January 2019 is an increase of $4.55. Duke will notify its customers of the
rate changes in their December bills.
The Commission should approve DEF’s tariffs filed on
August 24, 2018, appended to this recommendation as Attachment A. The tariffs
should go into effect with the first billing cycle in January 2019. The base
rate increase associated with the Hamilton Project should be subject to refund,
pending the Commissions’ final determination regarding the Hamilton and
Columbia Projects following the April administrative hearing. If the in-service
date of the Hamilton Project is delayed, then the tariffs reflecting the
Hamilton Project should become effective, subject to refund, with the first
billing cycle after the Hamilton Project is placed in commercial service and the
Commission should provide staff authority to administratively approve the
tariffs at the appropriate time. If the in-service date of the Hamilton Project
and/or Citrus Unit 2 is delayed, DEF should notify staff of the delay(s) and
file revised tariffs, for administrative approval by staff, effective with the
first billing cycle of January 2019 to remove the portion of the base rate
increase reflected with those units.
Issue 2:
Should this docket be closed?
Recommendation:
No. The docket should remain open pending the
Commission’s final decision on DEF’s petition. (Crawford, Davis, Nieves)
Staff Analysis:
The docket should remain open pending the Commission’s
final decision on DEF’s petition for limited proceeding with respect to the
Hamilton and Columbia Projects.
