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State of Florida
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Public Service Commission
Capital Circle Office Center ● 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE:
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June 24, 2020
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TO:
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Office of Commission Clerk (Teitzman)
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FROM:
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Division of Economics (Hampson, Guffey)
Office of the General
Counsel (Trierweiler)
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RE:
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Docket No. 20200106-EU – Joint petition to
approve territorial agreement in Sumter, Lake, Marion, Levy, and Citrus Counties,
by Sumter Electric Cooperative, Inc. and Duke Energy Florida, LLC.
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AGENDA:
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07/07/20 – Regular Agenda – Proposed Agency Action – Interested
Persons May Participate
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Fay
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CRITICAL DATES:
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None
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SPECIAL INSTRUCTIONS:
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None
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Case Background
On
March 27, 2020, Sumter Electric Cooperative, Inc. (SECO) and Duke Energy
Florida, LLC (DEF), collectively the joint petitioners, filed a petition seeking
Commission approval of a Territorial Agreement (Agreement) delineating their
respective service boundaries in Sumter, Lake, Marion, Levy, and Citrus
counties. The proposed Agreement is shown in Attachment A and composite maps
depicting the proposed service territories in Sumter, Lake, Marion, Levy, and
Citrus counties are shown in Attachment B to this recommendation. The detailed,
complete set of maps delineating the service territories and the written
descriptions are contained in the joint petition as Exhibits A and B,
respectively. Due to their voluminous nature, the detailed maps and written descriptions
are not attached to this recommendation.
In April 2009, the Commission approved the
current territorial agreement by Order No. PSC-09-0276-PAA-EU.
In the instant docket, the joint petitioners seek to gain further
operational efficiencies and customer improvements in their respective retail
service territories by requesting to replace the current territorial agreement
with an amended Agreement dated March 27, 2020. The proposed Agreement includes
the transfer of 546 DEF customers to SECO and 49 SECO customers to DEF.
During the
review of this joint petition, staff issued one data request to the joint
petitioners on April 21, 2020, for which responses were received on May 5,
2020. The Commission has jurisdiction over this matter pursuant to Section
366.04, Florida Statutes (F.S.).
Discussion
of Issues
Issue 1:
Should the Commission approve the proposed
Territorial Agreement between SECO and DEF in Sumter, Lake, Marion, Levy, and
Citrus counties?
Recommendation:
Yes, the Commission should approve the proposed
Territorial Agreement between SECO and DEF in Sumter, Lake, Marion, Levy, and
Citrus counties. The proposed Territorial Agreement will not cause a detriment
to the public interest and will enable SECO and DEF to avoid duplication of
facilities and to serve their customers in an efficient manner. (Hampson,
Guffey)
Staff Analysis:
Pursuant to Section
366.04(2)(d), F.S., and Rule 25-6.0440, Florida Administrative Code (F.A.C.),
the Commission has the jurisdiction to approve territorial agreements between
and among rural electric cooperatives, municipal electric utilities, and other
electric utilities. Unless the Commission determines that the agreement will
cause a detriment to the public interest, the agreement should be approved.
Proposed 2020 Territorial Agreement
The joint petitioners stated they
have agreed to replace the current territorial agreement with the proposed Agreement
executed on March 27, 2020. The intent of the proposed Agreement is to further prevent
duplication of facilities, correct encroachments, and have one service provider
in residential developments when feasible. The joint petitioners stated that avoiding
duplication of services enhances aesthetics, safety and reliability, and
reduces restoration times and safety concerns during storm events. As such, the
joint petitioners believe that these changes will allow for further operational
efficiencies and customer service improvements in their respective retail
service territories in Sumter, Lake, Marion, Levy, and Citrus counties.
Pursuant to Section 6.1 of the proposed Agreement, the term
of the Agreement is 20 years from the effective date. After the expiration of
the first 20-year term, the Agreement will remain in effect unless either party
provides written notice of termination at least 12 months prior to the
termination of the agreement. The effective date of the Agreement would
be the date on which the Commission issues a final order granting approval of
this proposed Agreement in its entirety and it is no longer subject to judicial
review.
In addition, any modification to the proposed Agreement would be submitted to
the Commission for approval.
Customer and Asset Transfer
Paragraph 5 of the petition states
that 546 DEF customers (443 residential and 103 commercial) will be transferred
to SECO; and 49 SECO customers (20 residential, 28 commercial, and 1
industrial) will be transferred to DEF. In response to staff’s first data
request, the joint petitioners stated that 379 of the residential accounts to
be transferred from DEF to SECO are in an apartment complex and are expected to
be transferred in the first year after the Agreement is approved by the
Commission. SECO intends to transfer all other remaining customers within three
years and DEF will transfer the 49 customers in six phases within 36 months. Pursuant
to Sections 3.1 and 3.5 of the proposed Agreement, the joint petitioners will
file, annually in March, a written report with the Commission on the status of
the transfer of customers.
The joint petitioners agree that
no lost revenue or going concern value shall be paid for the transfer of
customers. Upon the transfer of customers between the utilities, the receiving utility
may elect to purchase the facilities of the transferring utility that relate to
providing electric service to the impacted customers. If service facilities are
transferred, the proposed Territorial Agreement contains provisions for the
value of the facilities based upon the replacement cost (new), less
depreciation. The joint petitioners intend to undertake a valuation process of
facilities using a common engineering cost estimation methodology such as the
Handy-Whitman Index. The
joint petitioners stated that valuing the facilities is time-consuming and
often takes at least one year to complete. If there are facilities of one utility
located in the service area of the other utility which are not subject to
transfer or removal as a result of the proposed agreement, those facilities
shall be operated and maintained in such a manner as to minimize any
interference with the operations of the other utility.
Customer Notification
Pursuant to Rule 25-6.0440(1)(d),
F.A.C., both SECO and DEF provided written notification to customers that will
be transferred pursuant to the proposed Territorial Agreement. These letters
included sample rate comparisons between SECO and DEF, as well as information
regarding refunds of deposits. As of February 2020, the rate comparison for
customers using 1,000 kilowatt-hours was $123.99 for DEF and $119.89 for SECO. The
customer notifications are included as Exhibit E to the joint petition.
The joint petition stated that
two SECO customers object to being transferred to DEF and that these customers communicated
to the joint petitioners that they would contact the Commission directly after
the petition was filed. As of the filing of the recommendation, the Commission received
correspondence from one SECO customer objecting to the transfer to DEF. Based
on information provided by neighbors, the SECO customer expressed concerns
about DEF’s vegetation management practices and the poor maintenance of overhead
facilities. The customer included pictures of DEF power lines in trees. The
customer also stated that they currently have an underground service drop, that
they paid for, and do not wish additional overhead poles to receive power. Staff
inquired in its data request regarding DEF’s tree trimming practices in the
area identified by the customer. The joint response stated that the overhead
facilities identified by the customer are owned by DEF and that the facilities are
scheduled for trimming in the second quarter of 2020. In
addition, DEF confirmed the customer, when transferred, would continue to be
served through their current underground service drop. Staff provided a written
response to the customer and filed a copy in the instant docket.
Conclusion
The joint petitioners state that they have worked
collaboratively to structure the proposed amendments to their territorial
agreement and that it furthers the goals of avoiding duplication of service and
enables each to achieve operational efficiency. After review of the joint
petition, the proposed Territorial Agreement, and the petitioners’ joint
responses to staff’s data request, staff believes the amended Territorial
Agreement will not cause a detriment to the public interest, will eliminate any
potential uneconomic duplication of facilities and will not cause a decrease in
reliability of electric service to the customer.
Staff recommends that the Commission approve the proposed
Territorial Agreement between SECO and DEF in Sumter, Lake, Marion, Levy, and
Citrus counties. The proposed Territorial Agreement will not cause a detriment
to the public interest and will enable SECO and DEF to avoid duplication of
facilities and to serve their customers in an efficient manner.
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 the Consummating Order. (Trierweiler)
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 the Consummating Order.
