Case Background
On
April 2, 2020, Tampa Electric Company (TECO) and Sumter Electric Cooperative,
Inc. (SECO), collectively the joint petitioners, filed a petition seeking
Commission approval of a 15-year extension of the parties’ current Commission-approved
Territorial Agreement in Lake, Polk, and Sumter counties and approval of the
First Amendment to the Territorial Agreement (First Amendment).
In
1994, the Commission approved the joint petitioners’ Territorial Agreement in Order
No. PSC-1994-1397-FOF-EU (1994 Order). The current Territorial Agreement and map
depicting the current service areas of TECO and SECO are provided in Attachment
A to this recommendation. The proposed First Amendment to the Territorial
Agreement seeks to modify certain limited provisions of the Territorial Agreement
to comply with the 1994 Order, remove unnecessary language, and standardize depreciation
rates for facility transfers. The Amendment is provided in Attachment B to this
recommendation.
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 4,
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 extension of the
Territorial Agreement between TECO and SECO and approve the proposed First
Amendment to the Territorial Agreement?
Recommendation:
Yes, the Commission should approve the 15-year
extension of the Territorial Agreement between TECO and SECO and approve the
proposed First Amendment to the Territorial Agreement. The proposed extension
and First Amendment to the Territorial Agreement are in the public interest and
will avoid uneconomic duplication of facilities. (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.[2]
Territorial Agreement Extension
Section 5.1 of the Territorial
Agreement states it shall remain in effect for a period of 25 years, with the
option to be renewed for periods of 15 years, unless either party gives written
notice to terminate the agreement. Further, Section 5.1 and Article IV state
that each renewal of the Territorial Agreement requires prerequisite approval
of the Commission. The initial 25-year term of the Territorial Agreement ended
in December 2019. The joint petitioners desire for the Territorial Agreement to
extend for 15 years through December 2034, stating that the agreement has
worked well for both TECO and SECO and their ability to provide safe and
reliable electric service. The parties’ agreed upon desire to renew the
Territorial agreement for an additional 15 years is provided for in the First
Amendment.
The maps and legal descriptions
defining the boundaries of the Territorial Agreement remain the same and no
customers will be transferred or otherwise affected by the proposed extension
of the Territorial Agreement. As such, there are no customers to notify
regarding changes in service. Additionally, paragraph 7 of the petition states
that there is no reasonable likelihood the extension will decrease electric
service reliability.
First Amendment to the Territorial
Agreement
The joint petitioners have
proposed a First Amendment to the Territorial Agreement. The First Amendment
consists of four modifications to the Territorial Agreement. Two of the
modifications are results of the Commission’s decision in the 1994 Order. The
first modification addresses the language of Section 2.2 of the Territorial
Agreement. The current language required the filing of all interim service
agreements with the Commission. However, in paragraph 4 of the 1994 Order, the
Commission directed the joint petitioners to only file with the Commission interim
service agreements expected to last for more than one year. Interim service
could occur in an exceptional circumstance when a new customer due to economic
or engineering constraints could not be immediately served by the utility in
whose service territory the customer is located.
The second modification resulting
from the 1994 Order addresses the filing of annual reports to the Commission.
Currently, Section 4.1 of the Territorial Agreement states that the joint
petitioners would file annual reports to the Commission on the status of the Territorial
Agreement. However, in paragraph 5 of the 1994 Order, the Commission declined
to require the filing of annual reports.
As such, the joint petitioners removed this requirement in the proposed
First Amendment.
The third modification removes
Section 2.3 of the Territorial Agreement. Section 2.3 relates solely to SECO
and was meant to preserve its 503(c)(12) tax status. Paragraph 9, Subsection b,
of the petition states that SECO “does not have a significant concern that its
non-profit status would be jeopardized by the circumstances described in
Section 2.3.” Furthermore, SECO states that it has not included this language
in more recent territorial agreements.
The fourth modification is to
Section 2.4 of the Territorial Agreement which addresses depreciation rates to
be used in the calculation for any potential facilities or asset transfers.
This modification sets TECO’s depreciation rates as the standard to be used by
the joint petitioners. Additionally, the modification clarifies that
reintegration costs are to be included, where required by sound utility
practice. The joint petitioners explained that SECO is required to use a 30-year
depreciation schedule, while TECO’s Commission-approved depreciation rates vary
depending on the specific assets.
Therefore, using TECO’s rates ensures consistency with Commission Orders. The
joint petitioners state that establishing a single standard for depreciation
rates is a fair and reasonable approach.
Conclusion
After review of the joint
petition and the joint petitioners’ responses to Commission staff’s data
request, staff believes that the requested 15-year extension (December 2019
through December 2034) will enable TECO and SECO to avoid unnecessary
duplication of facilities and to serve their customers in an efficient manner. The
changes made in the First Amendment will bring the Territorial Agreement into
compliance with the 1994 Order, remove obsolete language, and provide a fair
and reasonable method for any future transfers of facilities.
As such, Commission staff recommends
that the Commission should approve the extension of the Territorial Agreement
between TECO and SECO and approve the proposed First Amendment to the
Territorial Agreement. The proposed extension and First Amendment to the
Territorial Agreement are in the public interest and will avoid uneconomic
duplication of facilities.
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. (Brownless)
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.
