Case Background
On December 6,
2019, Tampa Electric Company (TECO or Company) filed a request for approval of
a new depreciation classification and depreciation rate for the accounting of
its energy storage equipment (Petition). The Company’s request is in accordance
with Rule 25-6.0436(3)(b), Florida Administrative Code (F.A.C.), which requires
that: “[u]pon establishing a new account or subaccount classification, each
utility shall request Commission approval of a depreciation rate for the new
plant category.”
Pursuant to Rule
25-6.0436(3)(a), F.A.C., electric utilities are required to maintain
depreciation rates and accumulated depreciation reserves in accounts or
subaccounts in accordance with the Uniform System of Accounts for Public
Utilities and Licensees, as found in the Code of Federal Regulations, which is
incorporated by reference in Rule 25-6.014(1), F.A.C.[1]
In its annual
Ten Year Site Plan filed with the Commission on April 1, 2019, the Company
stated its intention to implement a 12.6 megawatt (MW) lithium-ion energy
storage system adjacent to the Big Bend Solar site at Big Bend Station. On January 13, 2020, TECO filed its
response to Staff’s First Data Request. In that response, the Company stated
that installation of the Big Bend Battery Project began in 2019 and TECO placed
the project into service in January of 2020.
Currently, the
Company does not have an authorized depreciation rate for the types of
equipment required for the Big Bend Battery Project or any other energy storage
endeavors.
In 2017 and 2020,
the Commission approved similar petitions filed by Florida Power & Light Company
(FPL) and Duke Energy Florida, LLC (DEF), respectively, for approval of a new
depreciation class and rate for energy storage equipment. In those dockets, the
Commission allowed a 10 percent depreciation rate and zero net salvage for
similar equipment.
Staff is not
aware of any public comments or concerns on this matter.
The Commission
has jurisdiction in this matter pursuant to Sections 366.04, 366.05, and
366.06, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission establish an annual
depreciation rate applicable to energy storage equipment for TECO?
Recommendation:
Yes. Staff recommends that the Commission approve an
annual depreciation rate of 10 percent, and a zero percent net salvage level,
applicable to TECO’s energy storage equipment. (Smith II)
Staff Analysis:
As outlined in its petition, TECO does not currently
maintain a stand-alone Federal Energy Regulatory Commission (FERC) account
classification, nor does it have a specifically-authorized depreciation rate,
for investments related to energy storage. The Company is requesting
authorization to record and depreciate energy storage-related investments by
plant function as defined in FERC Accounts; 348 - Energy Storage Equipment – Production,
351 - Energy Storage Equipment – Transmission, and 363 - Energy Storage
Equipment – Distribution. These accounts were originally established by the
FERC in 2013, by Order No. 784, with the primary purpose of accounting for
energy storage investments based on how specific assets are used in providing
electric service.[5]
Requested Depreciation Parameters
In its Petition, the Company requests Commission approval
of a 10-year average service life (ASL), and a zero percent net salvage level (NS),
for depreciating its energy storage equipment. An annual depreciation rate of
10 percent is computed by using these parameters.[6]
Industry-wide depreciation data and regulatory guidance
regarding energy storage equipment is limited. In its petition, TECO referenced
both the 2017 FPL and 2019 DEF petitions for similar authority to establish an
annual depreciation rate for energy storage equipment. In
those 2017 FPL and 2019 DEF petitions, the utilities requested a 10 percent
depreciation rate and a zero percent NS level. The Commission approved these
petitions.
To support its proposed parameters, TECO explained that
the Company held consultations with its engineering subject matter experts and
industry peers, including FPL and DEF, to arrive at its proposed 10-year ASL and
zero percent NS parameters.
Given that utility-scale energy storage equipment/technology
is relatively new, staff believes the Company’s proposed ASL represents a
measured and reasonable approach in life estimation. TECO asserts in its
Petition that its request is for accounting purposes only, and will have no
impact on base rates during the term of the 2017 Settlement Agreement.
Staff agrees with this assertion regarding impact.
Further, based on existing rules, the Commission will have
future opportunities to evaluate TECO’s depreciation data associated with useful
lives and net salvage levels and to order modifications as appropriate.[11] Staff also
believes that the Company’s account classifications outlined in its petition,
to which any newly-established depreciation rate would apply, are consistent
with recent accounting guidance from the FERC.
For the reasons outlined in this analysis, staff
recommends that the Commission approve an annual depreciation rate of 10
percent, and a zero percent net salvage level, applicable to TECO’s
newly-established Account 348 - Energy Storage Equipment – Production, Account 351
- Energy Storage Equipment – Transmission, and Account 363 - Energy Storage
Equipment – Distribution.
Issue 2:
If the Commission approves staff’s recommendation in
Issue 1, should any transfers of plant investments and associated book reserves
be authorized as part of this docket?
Recommendation:
Yes. Staff recommends the Commission authorize book
transfers from Account 362 - Station Equipment to Account 348 - Energy Storage Equipment – Production,
351 - Energy Storage Equipment – Transmission, and Account 363 - Energy Storage
Equipment – Distribution. (Smith II)
Staff Analysis:
TECO has requested the Commission authorize the
transfer of certain investments and corresponding reserve amounts related to
energy storage equipment presently on TECO’s books.[13]
These assets are currently recorded to FERC Account 362 – Station Equipment,
and are being depreciated at the authorized rate of 2.4 percent for this
account.
In response to Staff’s First Data Request No. 5, TECO stated the
following:
Effective in February 2020, the Big Bend Battery Storage Project plant
in service and accumulated depreciation will be recorded in FERC Account 362 –
Station Equipment with a depreciation rate of 2.4%. The amounts to transfer
will depend on timing of the approval for energy storage depreciation rates.
Once approved, the project amounts should be moved from FERC Account 362 to
FERC Account 348 Energy Storage Equipment – Production, FERC Account 351 Energy
Storage Equipment – Transmission, FERC Account 363 Energy Storage Equipment –
Distribution, as appropriate depending on the use of the asset.
Staff believes the transfer of
plant and reserve balances associated with energy storage equipment would be appropriate
if the Commission establishes a new depreciation rate applicable to Account 348
- Energy Storage Equipment – Production, Account 351 - Energy Storage Equipment
– Transmission, and Account 363 - Energy Storage Equipment – Distribution as
recommended in Issue 1. These transfers would assist in ensuring that costs are
assigned appropriately to the function for which the equipment is being used,
as well as further refining cost recovery to the useful life patterns of the
three energy storage (equipment) property groups.
TECO’s methodology for determining its proposed plant investment
apportionments focuses on how the assets are utilized on the Company’s system.
Specifically, if the asset is used for peak shaving, it’s classified as a
production investment and recorded to Account 348. If an asset is used for
frequency response, it’s classified as a transmission investment and recorded
to Account 351. Assets that provide reliable energy back-up can be classified
as a distribution investment and recorded to Account 363. If an asset serves
roles across multiple functions, it is allocated on a percentage basis (by
usage) accordingly. Staff agrees with
this methodology.
Therefore, if the Commission approves staff’s
recommendation in Issue 1, staff recommends the Commission authorize TECO to
record book transfers from Account 362 - Station Equipment to Account 348 -
Energy Storage Equipment – Production, 351 - Energy Storage Equipment –
Transmission, and Account 363 - Energy Storage Equipment – Distribution.
Issue 3:
If a new depreciation rate for energy storage
equipment is authorized in Issue 1, what should be the effective date?
Recommendation:
Staff recommends that any newly-authorized
depreciation rate for energy storage equipment applicable to Account 348 -
Energy Storage Equipment – Production, Account 351 - Energy Storage Equipment –
Transmission, and Account 363 - Energy Storage Equipment – Distribution, become
effective upon the issuance of a final Order in this docket. (Smith II)
Staff Analysis:
If the Commission establishes a new depreciation
rate for TECO’s energy storage equipment, applicable to Accounts 348 - Energy
Storage Equipment – Production, Account 351 - Energy Storage Equipment –
Transmission, and Account 363 - Energy Storage Equipment – Distribution, the
effective date should be upon the issuance of a final Order in this docket.
Issue 4:
Should this docket be closed?
Recommendation:
If no protest to this proposed agency action is
filed by a substantially affected person within 21 days of the issuance of the
order, a consummating order should be issued the docket should be closed. (Schrader)
Staff Analysis:
If no protest to this proposed agency action is
filed by a substantially affected person within 21 days of the issuance of the
order, a consummating order should be issued the docket should be closed.
