Discussion
of Issues
Issue 1:
Should the Commission approve FPL's proposed URD
tariff and associated charges?
Recommendation:
Yes. The Commission should approve FPL’s proposed
URD tariffs and associated charges as shown in Attachment A, effective September
5, 2019. (Doherty)
Staff Analysis:
Rule 25-6.078, Florida Administrative Code (F.A.C.),
defines investor-owned utilities’ (IOU) responsibilities for filing updated URD
tariffs. FPL has filed the instant petition pursuant to subsection (3) of the
rule, which requires IOUs to file supporting data and analyses for URD tariffs
at least once every three years.
The URD tariffs provide charges for underground service in
new residential subdivisions and represent the additional costs, if any, the
utility incurs to provide underground service in place of overhead service. The
cost of standard overhead construction is recovered through base rates from all
ratepayers. In lieu of overhead construction, customers have the option of
requesting underground facilities. Any additional cost is paid by the customer
as contribution-in-aid-of construction (CIAC). Typically, the URD customer is
the developer of a subdivision.
Traditionally, three standard model subdivision designs
have been the basis upon which each IOU submits URD tariff changes for
Commission approval: low density, high density, and a high density subdivision
where dwelling units take service at ganged meter pedestals (groups of meters
at the same physical location). Examples of this last subdivision type include
mobile home and recreational vehicle parks. While actual construction may
differ from the model subdivisions, the model subdivisions are designed to
reflect average overhead and underground subdivisions.
Costs for underground construction have historically been
higher for standard overhead construction and the additional cost is paid by
the customer as a CIAC. In FPL’s 2016 underground differential tariff, the cost
differential was zero for ganged meters and some tiers of the low and high density
subdivisions. As shown on Table 1-1, FPL’s proposed URD differential charges
are now $0 for all three subdivision models. Therefore, the URD customer will
not be assessed a CIAC charge for requesting underground service in a new
residential subdivision. FPL explained that the decrease in the differentials,
for some subdivision tiers, is primarily attributable to changes in operational
costs as discussed in more detail in the section of the recommendation titled
operational costs.
Table 1-1 shows the current and proposed URD differentials
for the low density, high density, and ganged meter subdivisions.
Table 1-1
Comparison of Differential
Per Service Lateral
|
Types of
Subdivision
|
Number of Service Laterals in Subdivision
|
Current URD Differential
|
Proposed URD Differential
|
|
Low Density
|
Tier 1 – 200 or more
|
$0
|
$0
|
|
Tier 2 – 85 – 199
|
$183.35
|
$0
|
|
Tier 3 – less than 85
|
$266.35
|
$0
|
|
High Density
|
Tier 1 – 300 or more
|
$0
|
$0
|
|
Tier 2 – 100-299
|
$0
|
$0
|
|
Tier 3 – less than 100
|
$57.97
|
$0
|
|
Ganged Meter
|
All Tiers
|
$0
|
$0
|
Source: 2016 order and FPL’s 2019 filing
The calculations of the proposed URD charges include (1)
updated labor and material costs along with the associated loading factors and
(2) operational costs. These costs are discussed below.
Labor and Material Costs
The installation costs of both underground and overhead
facilities include the labor and material costs to provide primary, secondary,
and service distribution lines as well as transformers. The costs of poles are
specific to overhead service while the costs of trenching and backfilling are
specific to underground service. The utilities are required, by Rule 25-6.078(5)
F.A.C., to use current labor and material costs.
FPL explained that generally the majority of overhead and
underground material and labor costs have increased since 2016. With respect to
labor costs, the cost of underground labor increased at a higher rate than it
increased for overhead labor. FPL stated that contractual arrangements driven
by market conditions determine the labor rates for both FPL employees and
contractors.
Table 1-2 provides the labor and material differential, or
pre-operational, costs. As Table 1-2 shows, only the low density cost
differential of $210.53 is a positive number, indicating that underground
labor/material costs are higher than overhead labor/material costs for the low
density subdivision. For the high density and ganged meter subdivisions,
overhead labor/material costs are higher than underground labor/material costs.
Table 1-2
Labor and Material Costs
(Pre-operational Costs)
|
Low Density
|
2016 Costs
|
2019 Costs
|
Difference
|
|
Underground labor/material costs
|
$2,413.84
|
$2,558.39
|
$144.55
|
|
Overhead labor/material costs
|
$2,272.49
|
$2,347.86
|
$75.37
|
|
Per service lateral
differential
|
$141.35
|
$210.53
|
$69.18
|
|
High Density
|
|
|
|
|
Underground labor/material costs
|
$1,640.45
|
$1,767.54
|
$127.09
|
|
Overhead labor/material costs
|
$1,691.48
|
$1,773.71
|
$82.23
|
|
Per service lateral
differential
|
($51.03)
|
($6.17)
|
($44.86)
|
|
Ganged Meter
|
|
|
|
|
Underground labor/material costs
|
$1,051.82
|
$1,125.49
|
$73.67
|
|
Overhead labor/material costs
|
$1,344.17
|
$1,397.83
|
$53.66
|
|
Per service lateral
differential
|
($292.35)
|
($272.34)
|
($20.01)
|
Source: 2016 Order and FPL’s 2019 filing
Operational Costs
Rule 25-6.078, F.A.C., requires that the differences in
net present value of operational costs between overhead and underground
systems, including average historical storm restoration costs over the life of
the facilities, be included in the URD charge. The non-storm operational costs
represent the cost differential between maintaining and operating an
underground versus an overhead system over the life of the facilities. The
storm cost component represents storm restoration costs avoided when an area is
undergrounded, thereby reducing the cost to restore an overhead system. The
avoided storm cost is subtracted from pre-operational and non-storm operational
costs, thus reducing the URD differential charge. FPL’s methodology to
calculate the operational costs was approved in Order No. PSC-08-0774-TRF-EI
and remains the same in the instant docket.
Non-storm Operational Costs
FPL’s operational costs for an overhead system are higher
than the operational cost for an underground system, resulting in a negative number
as shown in Column B in Table 1-3. For the low density subdivision, for
example, the operational cost differential in 2016 was $208 (indicating that
underground operational costs were higher than overhead operational costs). As
shown in Table 1-3, the operational cost differential for the low density
subdivision is now -$2,103. FPL
explained that the primary reason for this change in operational cost is the
increase in overhead operational costs as a result of FPL’s increased capital
investments associated with its distribution storm hardening initiatives. The
utility used a 5-year average of historical operational costs (2014-2018) for
its calculations in this docket.
Storm Restoration Costs
FPL explained that the 2016 and 2017 hurricane season
significantly increased the avoided storm restoration cost impacts.
Specifically, FPL stated that the utility incorporated more than $1.5 billion
in overhead storm restoration costs for hurricanes Matthew, Hermine, and Irma. Therefore,
the amount representing avoided storm restoration costs increased significantly
from 2016.
Table 1-3 presents the pre-operational, non-storm
operational, and the avoided storm restoration cost differentials between
overhead and underground systems. The proposed differential is $0 when the
calculation results in a negative number.
Table 1-3
Components of the URD
Charges
|
Type of Subdivision
|
Number of Service
Laterals in Subdivision
|
Pre-Operational
Costs
(A)
|
Non-storm Operational
costs
(B)
|
Avoided Storm costs
(C)
|
Proposed URD
Differentials
(A)+(B)+(C)
|
|
Low Density
|
Tier 1 – 200 or more
|
$210.53
|
($2,103)
|
($827)
|
$0
|
|
Tier 2 – 85 – 199
|
($2,103)
|
($331)
|
$0
|
|
Tier 3 – less than 85
|
($2,103)
|
($165)
|
$0
|
|
High Density
|
Tier 1 – 300 or more
|
$0.00
|
($1,796)
|
($827)
|
$0
|
|
Tier 2 – 100 – 299
|
($1,796)
|
($331)
|
$0
|
|
Tier 3 – less than 100
|
($1,796)
|
($165)
|
$0
|
|
Ganged Meter
|
Tier 1 – 300 or more
|
$0.00
|
($1,796)
|
($827)
|
$0
|
|
Tier 2 – 100 – 299
|
($1,796)
|
($331)
|
$0
|
|
Tier 3 – less than 100
|
($1,796)
|
($165)
|
$0
|
Source: FPL’s 2019 Filing
Conclusion
Staff has reviewed FPL’s proposed URD tariffs and
associated charges, its accompanying work papers, and its responses to staff’s
data requests. Staff believes the proposed URD tariffs and associated charges
are reasonable and recommends approval. FPL requested that the tariffs be made
effective 30 days after the Commission vote. Staff recommends that the
Commission approve FPL’s proposed URD tariffs and associated charges, effective
September 5, 2019.
Issue 2:
Should the Commission approve FPL's proposed UCD
tariffs and associated charges?
Recommendation:
Yes. The Commission should approve FPL’s proposed
UCD tariffs and associated charges as shown in Attachment B, effective September
5, 2019. (Doherty)
Staff Analysis:
Utilities are not required to file UCD tariffs
pursuant to Rule 25-6.078, F.A.C.; however, as in prior URD petitions, FPL
included proposed UCD tariffs in its petition. The UCD tariffs apply to small
commercial or industrial customers (applicant) that request the installation of
underground electric distribution facilities for a new building. The requested
underground distribution facilities consist of underground service conductors,
placed in conduit, and associated equipment that is installed from overhead
feeder mains (or overhead termination point) to the designed point of delivery
(where the utility’s wires are connected to those of the customer).
The UCD charges represent the differential costs for
underground commercial facilities and their equivalent overhead design. The
calculations provided by FPL in its petition employ FPL’s standard engineering
design criteria and are based on actual 2018 labor and material costs. Unlike
the URD calculations, the UCD calculations do not include long term operational
and avoided storm restoration costs. In addition, the UCD tariffs provide
credits that apply if the applicant provides trenching, backfilling, or
installs FPL provided conduit or a concrete pad for a pad-mounted transformer.
FPL explained that including cost-based UCD charges in its
tariff provides clarity to customers and FPL’s field employees regarding the
costs for commercial underground distribution facilities.
Staff reviewed FPL’s supporting documentation for the UCD
charges and believes the charges are cost based and reasonable. FPL requested
that the tariffs be made effective 30 days after the Commission vote. Staff
recommends that the Commission approve FPL’s proposed UCD tariffs and associated
charges, effective September 5, 2019.
Issue 3:
Should this docket be closed?
Recommendation:
If a protest is filed within 21 days of the issuance
of the order, this tariff should remain in effect, with any revenues held
subject to refund, pending resolution of the protest. If no timely protest is
filed, this docket should be closed upon the issuance of a consummating order.
(Trierweiler)
Staff Analysis:
If a protest is filed within 21 days of the issuance
of the order, this tariff should remain in effect, with any revenues held
subject to refund, pending resolution of the protest. If no timely protest is
filed, this docket should be closed upon the issuance of a consummating order.
