Discussion
of Issues
Issue 1:
Should the Commission authorize SJNG to implement a
temporary storm cost recovery surcharge?
Recommendation:
Yes, the Commission should authorize SJNG to
implement a temporary storm cost recovery surcharge. Once the total actual
storm costs are known, SJNG should be required to file documentation of the
total storm costs for Commission review and true-up of any over/under recovery.
The disposition of any over/under recovery, and associated interest, will be
considered by the Commission at a later date. (M. Andrews, Mouring)
Staff Analysis:
As stated in the Case Background, SJNG filed a
petition for approval of a temporary storm cost recovery surcharge to recover
the incremental costs associated with Hurricane Michael. The Company’s total
requested recovery amount of $381,512 includes $321,012 in actual costs that
SJNG has determined to be incremental and $60,500 in projected costs. SJNG
asserts that this amount was calculated in accordance with the Incremental Cost
and Capitalization Approach (ICCA) methodology.
The approval of a temporary storm cost recovery surcharge
is preliminary in nature and is subject to refund pending further review once
the total actual storm restoration costs are known. After the actual costs are
reviewed for prudence and reasonableness, and are compared to the actual amount
recovered through the temporary storm cost recovery surcharge, a determination
will be made whether any over/under recovery has occurred. The disposition of
any over/under recovery, and associated interest, will be considered by the
Commission at a later date. Under Section 366.06, F.S., the Commission has
authority to allow for temporary storm cost recovery surcharges subject to
refund: “[P]ursuant to the authority granted by the ‘file and suspend’
provisions of Section 366.06(3), Florida Statutes, this Commission may
establish, prior to an evidentiary administrative hearing, rates subject to
refund outside of full base rate proceedings.”
After reviewing the information provided by SJNG in its
petition, staff recommends that the Commission authorize SJNG to implement a
temporary storm cost recovery surcharge subject to refund. Once the total
actual storm costs are known, SJNG should be required to file documentation of
the storm costs for Commission review and true-up of any over/under recovery.
Staff emphasizes that this recommendation is only for purposes of implementing temporary
storm cost recovery surcharges and is not a confirmation or endorsement of the
prudence of SJNG’s actual or projected costs. This recommendation only allows
SJNG to begin recovery on an interim basis. This interim recovery is subject to
refund following a hearing or formal proceeding where the veracity and prudence
of SJNG’s actual restoration costs can be fully vetted.
Issue 2:
Should the Commission approve SJNG’s proposed
Hurricane Michael temporary storm cost recovery tariff?
Recommendation:
Yes, the Commission should approve SJNG’s proposed
tariff as shown in Attachment A to the recommendation, effective May 1, 2020.
(Forrest)
Staff Analysis:
SJNG is seeking approval of
temporary storm cost recovery surcharges as shown in the second revised tariff
sheet No. 83 (Attachment A to this recommendation). The Company is requesting
the temporary surcharges to remain in effect for a period of 48 months,
starting May 1, 2020. Staff reviewed the surcharge factor calculation shown on
page 2 of Attachment B of the petition and believes the surcharges have been
calculated correctly and consistent with the methodology used to calculate the Company’s
Commission-approved Energy Conservation Cost Recovery factors.
SJNG has three residential rate
schedules, based on annual therm consumption. An RS-1 customer, using eight
therms per month, will see a bill increase of $1.68 per month. An RS-2
customer, using 18 therms per month, will see a bill increase of $2.28 per
month. Finally, a residential customer in the RS-3 class, with a monthly usage
of 32 therms, will see a bill increase of $3.10 per month. SJNG will notify its
customers of the proposed surcharges during the April billing cycle.
Staff recommends that the
Commission approve SJNG’s proposed Hurricane Michael temporary storm cost
recovery tariff, as shown in Attachment A to the recommendation, effective May
1, 2020.
Issue 3:
What is the appropriate security to guarantee the
amount collected subject to refund through the temporary storm cost recovery surcharge?
Recommendation:
The appropriate security to guarantee the funds
collected subject to refund is a corporate undertaking. (Cicchetti, D. Buys,
Richards)
Staff Analysis:
The Company
has requested a corporate undertaking to guarantee the amount collected through
the temporary storm cost recovery surcharges. The criteria for a corporate
undertaking include sufficient liquidity, ownership equity, profitability, and
interest coverage to guarantee any potential refund. Staff reviewed SJNG’s
2016, 2017 and 2018 annual reports filed with the Commission to determine the
financial condition of the Company. SJNG has experienced a decreasing Net
Income over the past three years, with a reported Net Income of $68,489 in 2018.
However, SJNG has $3,058,268 of equity out of a total capitalization of
$3,778,268 indicating an equity ratio of 80.9 percent. Also, SJNG’s relative
level of liquidity over the most recent three-year period is within acceptable
parameters and the Company’s interest coverage ratio is 4.0, which demonstrates
an ability to cover its interest obligations. Based on this analysis and the
totality of the circumstances, staff recommends that SJNG be allowed to secure
the amount collected through a corporate undertaking.
This brief financial
analysis is only appropriate for deciding if the Company can support a
corporate undertaking in the amount proposed and should not be considered a finding
regarding staff’s position on other issues in this proceeding.
Issue 4:
Should this docket be closed?
Recommendation:
No, this docket should remain open pending final
reconciliation of actual recoverable Hurricane Michael storm costs with the
amount collected pursuant to the temporary storm cost recovery surcharge. The
disposition of any over or under recovery, and associated interest, will be
considered by the Commission at a later date. (Stiller)
Staff Analysis:
No, this docket should remain open pending final
reconciliation of actual recoverable Hurricane Michael storm costs with the
amount collected pursuant to the temporary storm cost recovery surcharge. The
disposition of any over or under recovery, and associated interest, will be
considered by the Commission at a later date.
