Case Background
On January 28,
2019, the Commission approved an amended territorial agreement (agreement)
between Peace River Electric Cooperative (PRECO or utility) and Duke Energy
Florida, LLC (DEF) in Hardee, Highlands, Polk, and Osceola Counties. Through the agreement, PRECO and DEF (the
petitioners) revised the service boundaries to serve customers more reliably
and economically. Under the agreement, approximately 2,750 customers in Hardee
County and a small area in southern Polk County will be transferred from DEF to
PRECO. The petitioners stated that transferring customers from DEF to PRECO
will eliminate duplication of services, create operational efficiencies for
both utilities, and ensure customers continue to receive safe and reliable
service. PRECO notified its customers that the
transfer of customers from DEF to PRECO is scheduled to begin on August 1,
2019.
On
June 26, 2019, PRECO filed in Docket No. 20190000-OT, the Commission’s
undocketed matters, tariffs applicable to the customers that were previously
served by DEF. The tariffs were designed to allow the
transferred customers to be billed by PRECO the current DEF rates, if
beneficial to the customer, for a period up to five years. Based on discussions
with staff, PRECO filed revised tariffs on July 12, 2019, that included a
three-year transition period (instead of five years as originally proposed by
PRECO). On July 23, 2019, the PRECO board of directors approved the proposed
tariffs contingent on final approval by the Commission.
The
Commission’s jurisdiction over rural electric cooperatives can be found in
Section 366.04(2), Florida Statutes (F.S.). The Commission does not have
jurisdiction over the total revenues of a rural electric cooperative; however,
the Commission has jurisdiction over territorial agreements and rate structure.
Rule 25-9.051(7), Florida Administrative Code (F.A.C.), defines rate structure
as the classification system used in justifying different rates between various
customer classes.
The
Commission’s Administrative Procedures Manual (APM) provides guidance for
administrative approval by staff for filings made by rural electric cooperatives.
The APM states that certain filings cannot be administratively approved by
staff. Specifically, APM 2.07.C.5.a(5) provides that a filing by a rural
electric cooperative that contains new pricing concepts shall be brought before
the Commission. Typically, in territorial agreements, transferred customers start
paying the rates and charges of the utility they are being transferred to with
their first bill under their new provider. Staff believes that PRECO’s proposal
to allow the transferred customers to stay on the DEF rates for a transition
period constitutes a new pricing concept. Therefore, staff opened the instant
docket.
This
recommendation addresses PRECO’s proposed temporary tariffs as filed on July
12, 2019, and the tariffs are shown in Attachment A to the recommendation. The
Commission has jurisdiction pursuant to Section 366.04(2), F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve PRECO's request to
establish temporary tariffs for customers previously served by DEF?
Recommendation:
Yes, PRECO’s temporary tariffs as shown in
Attachment A to the recommendation should be approved. The proposed temporary
tariffs are designed to help transition customers and are not unduly
discriminatory under Rule 29-9.053(1)(d), F.A.C. At the end of the 3-year
transition period (August 1, 2022) PRECO should withdraw the temporary tariffs.
(Draper, Guffey)
Staff Analysis:
The temporary tariffs are applicable to the residential
and commercial customers previously served by DEF and that were transferred from
DEF to PRECO pursuant to the agreement approved in Order No.
PSC-2019-0048-PAA-EU. The tariffs are available for three years (August 1, 2019
through August 1, 2022). Pursuant to the temporary tariffs, the transferred customers
will have the option to stay on the DEF rate, or switch to the applicable PRECO
rates at any time after the transfer, if it is advantageous for them to do so. However,
the customer cannot switch back to the DEF rate after electing the PRECO rate. PRECO
states that based on billing data on the acquired customers, PRECO will work
with the new customers to determine if they are better off on the DEF or the
PRECO rates. After the three-year period, all transferred customers will take
service under the PRECO rates. PRECO does not intend to adjust the rates
contained in the temporary tariffs to reflect changes in DEF’s rates.
PRECO explained that it will start transferring customers
on or around August 1, 2019 and continue until the process is complete in early
2020. Based on current active customer counts, PRECO expects to transfer 2,745
customers (2,353 residential and 392 commercial customers). As of July 2019,
the residential 1,000 kilowatt-hour (kWh) bill for a PRECO customer is $124.06
and $125.36 for a DEF customer (calculations do not include Gross Receipts
Taxes).
While the difference between PRECO and DEF customers for
the residential 1,000 kWh bill is less than one percent, depending on usage,
residential customers would see varying bill impacts as a result of the
difference in rate design between PRECO and DEF. Specifically, DEF’s
residential customer charge is $9.66, while PRECO’s residential customer charge
is $26.50. The customer charge is a fixed monthly charge and does not vary
based on usage. On the other hand, PRECO’s energy charge, which is billed based
on kWh usage, is lower than DEF’s energy charge. Therefore, residential
customers that use approximately less than 900 kWhs per month would experience
lower bills under the current DEF rates; residential customers that use more
than approximately 900 kWhs per month would experience lower bills under the
current PRECO rates.
Regarding the commercial customers being transferred from
DEF to PRECO, the utility explained that Duke’s commercial rate schedules
differ with respect to applicability. For example, DEF offers a General Service
Time of Use rate, while PRECO does not. PRECO explained that once it has billing
information on the transferred commercial customers, the utility will be able
to determine which commercial PRECO rate schedule the customer would qualify
for and whether it would be advantageous for the customer to choose a PRECO
rate or remain on the temporary tariff that contains the DEF rates.
To support the temporary tariffs, PRECO explained that the
utility is committed to make the transfer for the acquired customers as easy as
possible. PRECO further states that the temporary, or transitional rates, are
of limited duration and are not unduly discriminatory under Rule
29-9.053(1)(d), F.A.C.
Staff recognizes PRECO’s desire to help customers
transition from DEF to PRECO and to reduce any rate shock. However, PRECO
should be cautioned if in enters into another territorial agreement where it
seeks to offer temporary rates, the proposed territorial agreement should
address the utility’s plans to offer temporary rates for any transferred
customers.
The petition for
the territorial agreement, in accordance with Rule 25-6.0440(1)(d), F.A.C.,
stated that the impacted customers were notified by mail of the transfer and
provided a description of the differences in rates between DEF and PRECO.[4]
Additionally, PRECO stated it held an open house in Wauchula on August 14,
2018, for customers affected by the proposed transfers. However, none of the
information included in the petition for approval of the territorial agreement
indicated that the transferred customers would have the option to continue
being billed the DEF rates for a transition period. Staff is also not aware of
a prior Commission-approved territorial agreement that provides for transferred
customers to remain on another utility’s rates.
Conclusion
Based on the information provided by PRECO, staff believes
that the proposed temporary tariffs are designed to help transition customers
and are not unduly discriminatory under Rule 29-9.053(1)(d), F.A.C; therefore,
staff recommends approval. At the end of
the 3-year period (August 1, 2022) PRECO should withdraw the temporary tariffs.
Issue 2:
Should this docket be closed?
Recommendation:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order. (Crawford)
Staff Analysis:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order.
