Case Background
From
March 25, 2020, through April 2, 2020, the four investor-owned utilities (IOUs)
in the State of Florida that generate their own electricity filed for
mid-course corrections of their currently-approved fuel costs/factors.[1] These mid-course correction petitions were
filed and are being addressed as part of the Florida Public Service
Commission’s (Commission) annual fuel and purchased power cost recovery (fuel
clause) docket.
Mid-Course Corrections
Mid-course corrections are part of the fuel
clause proceeding, and such corrections are used by the Commission between fuel
clause hearings whenever costs deviate from revenues by a significant margin.
Petitions for mid-course corrections to fuel factors are addressed by Rule 25-6.0424,
Florida Administrative Code (F.A.C.). Under this rule, a utility must notify
the Commission whenever it expects to experience an under-recovery or
over-recovery greater than 10 percent. Pursuant to Rule 25-6.0424, F.A.C., the
mid-course percentage is the estimated end-of-period total net true-up amount
divided by the current period’s total actual and estimated jurisdictional fuel
revenue applicable to period amount.
Mid-course corrections are considered preliminary procedural decisions,
and any over-recoveries or under-recoveries caused by or resulting from the
Commission-approved adjusted fuel factors may be included in the following
year’s fuel factors. In this instance, the proposed revisions to current
fuel cost recovery levels are being driven by a significant decline in the market-based
price for natural gas. Rule 25-6.0424(2), F.A.C., does not require an under-recovery
or over-recovery of 10 percent for the Commission to approve a mid-course
correction.
The monthly natural gas price at the time
2020 projections were filed in September 2019 was $2.56 per Million British
thermal units (MMBtu).
Four months later in January 2020, or in the first month when new rates of the
2020 clause cycle became effective, the monthly spot price was down 21 percent,
falling to $2.02 per MMBtu. The forward prices currently being quoted on The
New York Mercantile Exchange (NYMEX) for all months through the end of the
third-quarter 2020, remain below $2.20 per MMBtu (at Henry Hub) as of April l0,
2020. Staff
notes these quoted spot market prices are lower than the utility-specific
figures discussed later in the recommendation due to the addition of
transportation and other costs to the utility figures.
In
this proceeding,
the Commission is being asked to reduce the expected fuel and capacity costs to
customers. Specific treatment of the projected fuel mid-course correction over-recoveries
further described below varies by utility; however, all are requesting approval
of an accelerated method of flowing the projected over-recoveries of fuel and
capacity charges to their respective customers. The “lump sum” approach of flowing
the projected over-recoveries is meant to aid in counteracting the adverse
economic conditions resulting from the Coronavirus Disease 2019 (COVID-19)
global pandemic. Throughout this recommendation, staff may
refer to the mid-course correction dollars being flowed to customers in a
non-levelized manner as a “bill credit.” However, the proposed approaches
simply effectuate flowing all or a majority of the mid-course correction amounts
in one- or three-month timeframes, rather than the standard approach of spreading
the total amount over all remaining months in a period. In this instance, the
standard approach,
including normal noticing timeframes, would be to flow the total mid-course
correction amount ratably over the June through December time period.
Petitions
For
purposes of this recommendation, the individual petitions are being addressed as
Issues 1 through 4, in chronological order, by date when the Commission
received the utility’s filing.
On
March 25, 2020, Tampa Electric Company (Tampa Electric) filed its Petition
for Mid-Course Correction of its Fuel Cost Recovery Factors and Capacity Cost
Recovery Factors (Tampa Electric Petition). Through its petition, Tampa Electric is
seeking authorization to lower its currently-approved 2020 fuel and capacity
cost recovery factors from June through December 2020, as well as issue line
item bill credits in the months of June, July, and August 2020.
On
April 1, 2020, Florida Power & Light Company (FPL) filed its Mid-Course
Correction Petition (FPL Petition). FPL is seeking authorization to lower its
currently-approved 2020 fuel cost recovery factors for the month of May 2020.
FPL’s current level of actual and projected fuel cost recovery has not breached the 10 percent threshold; thus, the filing
was not prompted by the noticing requirement pursuant to Rule 25-6.0424(2), F.A.C.
However, FPL indicated that its proposed action is primarily intended to
help mitigate the adverse economic impacts of the COVID-19 pandemic.
On
April 2, 2020, Gulf Power Company (Gulf) filed its Mid-Course Correction
Petition (Gulf Petition). Gulf is seeking authorization to issue a
line item bill credit for the month of May 2020.
On
April 2, 2020, Duke Energy Florida, LLC (DEF) filed its Emergency Petition
for a Temporary Mid-Course Correction (DEF Petition). DEF is seeking authorization to lower its
currently-approved fuel cost recovery factors for the month of May 2020. DEF’s
current level of actual and projected fuel cost recovery has not breached the 10
percent threshold; thus, its filing was not prompted by the noticing
requirement pursuant to Rule 25-6.0424(2), F.A.C. As with FPL, DEF indicated in
its filing that the proposed action is in response to the adverse economic
impacts of the COVID-19 pandemic.
Effective Dates and Noticing
Requirement
FPL,
Gulf, and DEF have requested that the revised tariffs become effective to
essentially produce a one-time bill reduction in the month of May 2020. This
matter is scheduled to be voted on at the April 28, 2020 Special Agenda
Conference. Typically, effective dates are set a minimum of 30 days after a
vote modifying charges. This time limit is imposed in order to avoid having new
rates applied to energy consumed before the effective date of the Commission’s
action, i.e., the date of the vote. However, the Commission has also
implemented charges as a result of mid-course corrections in less than 30 days
when circumstances warrant. Further, the Florida Supreme Court has
recognized that the fuel clause proceeding “is a continuous proceeding and
operates to a utility’s benefit by eliminating regulatory lag.” In this instance, there can be no
prejudice to the customers because their total rate would be decreasing, not
increasing. Therefore, customers would receive the benefit of reduced fuel rates
as quickly as administratively possible.
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
approve Tampa Electric’s petition to reduce its currently-approved 2020 fuel
and capacity cost recovery factors for purposes of flowing to customers a
projected over-recovery of fuel and capacity charges during the period of June
through December 2020, and issue fuel-related bill credits in June, July, and
August 2020?
Recommendation:
Yes. Staff recommends the
Commission approve Tampa Electric’s petition to reduce its currently-approved
2020 fuel and capacity cost recovery factors for purposes of flowing to
customers a projected over-recovery of fuel and capacity charges during the
period of June through December 2020, and issue fuel-related bill credits
during June, July, and August 2020. The tariffs as shown on Attachment A should
be approved effective June 1, 2020. Staff should be given administrative
authority to approve the First Revised Tariff Sheet No. 6.023, effective
September 2020. (Higgins, Draper)
Staff Analysis:
On an annual basis, Tampa
Electric and other electric IOUs in Florida participate in a technical hearing
in this docket for the purposes of evaluating actual and projected fuel,
purchased power, and capacity-related costs of service. The most-recent hearing
took place on November 5, 2019. The Fuel Order issued from the 2019 hearing set
forth the fuel, purchased power, and capacity cost recovery factors that were implemented
by all IOUs in Florida effective with the first billing cycle of January 2020.
Tampa Electric’s petition includes both fuel and capacity mid-course correction
requests.
Tampa Electric has proposed to flow the total mid-course correction
amount through the combination of a fuel credit for the months June through
August 2020 (as shown in Attachment A, Tariff Sheet No. 6.023) and a reduction
to the currently-approved fuel and capacity factors for the period June through
December 2020 (as shown in Attachment A, Tariff Sheet No. 6.020). The fuel
credit will be shown as a separate line item on the bill. For a residential
customer using 1,000 kWh per
month, the proposed 3-month fuel credit is $18.40. The residential fuel rate
reduction associated with the remainder of the mid-course correction is $4.17
per 1,000 kWh (7 months, June through December). As proposed, the mid-course
correction amount related to capacity will be distributed normally over the
remaining 7-month period for a residential rate reduction of $0.22 per 1,000
kWh.
Mid-Course Correction - Fuel
With respect to the components of the mid-course correction calculation,
which in this case returns the total dollar amount used to calculate the
proposed rate reductions, Tampa Electric combined its final 2019 fuel over-recovery
of $35,821,098, with its 2020 actual and estimated fuel over-recovery of $94,867,488,
resulting in an estimated total over-recovery of $130,688,586. This is the
total amount requested be returned to customers in 2020. The fuel
mid-course correction position following the calculation methodology in Rule
25-6.0424(1)(a), F.A.C., is 22.3 percent.
The projected 2020 over-recovery of fuel charges is specifically
associated with a decline in actual and re-projected fuel costs. Tampa
Electric’s original estimation of natural gas costs for 2020 were formulated
based on May 2019 futures data. At that time, Tampa Electric projected the
average delivered cost of natural gas to be $3.68 per MMBtu. Tampa Electric now
projects, based on March 2020 data, the average 2020 cost of natural gas will
be $3.16 per MMBtu (reduction of 14 percent).
Mid-Course Correction - Capacity
As part of its request, Tampa Electric is proposing to reduce its 2020
capacity cost recovery factors by a projected 2020 over-recovery of $2,885,599.
Tampa Electric’s capacity mid-course correction position following the
calculation methodology in Rule 25-6.0424(1)(a), F.A.C., is 182 percent. Tampa
Electric stated the projected over-recovery was caused by the inclusion of two
Solar Base Rate Adjustment (SoBRA) true ups and additional firm power purchase
agreements (netted against the SoBRA true ups) in its revised capacity cost
estimate for 2020.
Tampa Electric, unlike with its fuel reduction, did not incorporate a
final 2019 capacity over-recovery of $111,228 in the mid-course adjustment as
it believes the amount is “de minimus” to the overall request. Tampa
Electric claimed it will return the $111,228 to customers in 2021, or through
the normal course of action during this fuel clause cycle. As proposed, the
mid-course correction related to capacity will be distributed over the June
through December time period. Staff agrees with this assessment concerning the
relative size of the 2019 capacity over-recovery as compared to the total
mid-course adjustment and believes Tampa Electric’s proposed treatment is
reasonable.
Bill Impacts
Table 1-1 below displays the bill
impact to a residential customer using 1,000 kilowatt-hours (kWh) of
electricity a month and further discusses the effects of Tampa Electric’s
request.
Tampa Electric’s current total
residential charge for 1,000 kWh of usage is $102.19. Effective with the June
2020 billing cycle and continuing through August, the proposed charge will be
$78.82, or a decrease of $23.37 (22.9 percent). The proposed June through
August line item bill credit is $18.40. Effective with the September 2020
billing cycle and continuing through December, the bill will be $97.69. The
June through December portion (i.e., amount not included in the monthly
credits) of the fuel mid-course correction reflects a reduction of $4.17 per
1,000 kWh. Concerning the non-residential classes, commercial, and industrial
customers can expect a reduction of 14 to 20 percent, depending on usage. Tampa
Electric stated that it will provide customers notice of the changes with its
June bills and on its website. The Company also filed the tariff (First Revised
6.023) for after the credit concludes post-August 2020. Staff requests
administrative authority to approve the First Revised Tariff Sheet No. 6.023,
effective September 2020. Further, Tampa Electric indicated in paragraph 20 of
its petition that it consulted with the Office of Public Counsel (OPC) about
its primary proposal (factors shown on Attachment A) and that the OPC is in
support of the proposal.
Alternative Treatment
If the Commission is not inclined to authorize the issuance of bill
credits for the months of June, July, and August 2020, Tampa Electric
has filed information detailing the return of the 2020 mid-course correction
amount through the normal levelized rate approach over the June through
December 2020 period. The associated tariff is not attached to this
recommendation, but has been filed and can readily be administered if the
Commission so desires.
Conclusion
Staff recommends the Commission approve Tampa Electric’s petition to reduce
its currently-approved 2020 fuel and capacity cost recovery factors for purposes
of flowing to customers a projected over-recovery of fuel and capacity charges
during the period of June through December 2020, and issue fuel-related bill
credits in the months of June, July, and August 2020. The tariffs as
shown on Attachment A should be approved effective June 1, 2020. Staff should
be given administrative authority to approve the First Revised Tariff Sheet No.
6.023, effective September 2020.
Issue
2: Should the Commission approve FPL’s
petition to reduce, for one month, its currently-approved 2020 fuel cost
recovery factors for purposes of flowing to customers a projected over-recovery
of 2020 fuel charges in the month of May 2020?
Recommendation:
Yes.
Staff recommends the Commission approve FPL’s petition to reduce, for one
month, its currently-approved 2020 fuel cost recovery factors for purposes of flowing
to customers a projected over-recovery of 2020 fuel charges in the month of May
2020. The tariffs as shown on Attachment B should be approved effective May 1,
2020. Staff should be given administrative authority to approve tariffs
effective June 1, 2020, as these reflect the fuel factors approved in Order No.
PSC-2019-0484-FOF-EI. (Higgins, Draper)
Staff Analysis:
Mid-Course Correction
FPL has proposed to address a
projected 2020 fuel over-recovery of $206,083,515 by reducing its fuel factors
in the month of May 2020. The projected 2020 over-recovery of fuel charges is specifically
associated with a decline in projected fuel costs. However, as mentioned in the
Case Background section of this recommendation, FPL’s fuel mid-course
correction position following the calculation methodology in Rule 25-6.0424(1)(a),
F.A.C., is 6.3 percent, which is under the 10 percent threshold prompting a noticing
requirement pursuant to the same rule. FPL’s original projection of natural gas
costs for 2020 was formulated near the end of July 2019. At that time, FPL
projected the average delivered cost of natural gas to be $4.06 per MMBtu. FPL
now projects, based on March 2020 data, the average 2020 cost of natural gas
will be $3.53 per MMBtu (reduction of 13 percent).
As noted, FPL’s re-projection of
2020 fuel costs returns an estimated over-recovery of $206.1 million.
Typically, at this point in a fuel clause cycle a utility would incorporate any
over- or under-recovery from the prior period (prior calendar year) into its
mid-course correction request. However, FPL has proposed to address its final
prior period true up amount, which is a net under-recovery of $51.6 million, as
part of its 2021 fuel cost recovery request. In support of the requested
treatment, FPL contends that by excluding the 2019 true up amount, it is
maximizing the effect of the May 2020 rate reduction. FPL’s requested approach
is, in principle, similar to Tampa Electric’s proposal relating to its 2019
capacity cost over-recovery discussed in Issue 1 (i.e. not incorporating a
prior period true up amount). Further, FPL cited Order No. PSC-2019-0109-PCO-EI
as precedent wherein the Commission authorized an electric utility to implement
a mid-course correction that excluded the prior year’s under-recovery amount.
As part of the mid-course
correction filing, FPL updated its projections for purchased power, qualifying
facilities, and economy purchases due to the updated fuel pricing and input assumptions.
Regarding capacity cost recovery, FPL did not propose any changes to its
currently-approved factors.
Bill Impacts
Table 2-1 below displays the bill
impact to a residential customer using 1,000 kWh of electricity a month and further
discusses the effects of FPL’s request.
FPL’s current total residential
charge for 1,000 kWh of usage for January through April 2020 is $96.04.
Effective May 2020, the Commission approved by Order No. PSC-2019-0484-FOF-EI
FPL’s 2020 SoBRA which would have increased the 1,000 kWh bill to $96.43.
Applying the proposed one-time fuel credit decreases the $96.43 bill to $73.36,
or a reduction of $23.07 in May (23.9 percent).
FPL requested that it be allowed
to return to the fuel adjustment factors approved by Order No.
PSC-2019-0484-FOF-EI following the one-time May reduction. Thus, if approved by
the Commission, effective with the June 2020 billing cycle, the residential
charge for 1,000 kWh will return to $96.43. Concerning non-residential
customers, FPL reports that typical bill reductions will range from
approximately 24 to 30 percent for commercial customers, and approximately 53
percent for industrial customers.
FPL’s proposed tariff is shown on
Attachment B to this recommendation. FPL stated that it has provided notice of
its request for a mid-course correction with its April customer bills, subject
to Commission approval.
Conclusion
Staff recommends the Commission approve FPL’s petition to reduce, for one
month, its currently-approved 2020 fuel cost recovery factors for purposes of flowing
to customers a projected over-recovery of fuel charges during the month of May
2020. The tariffs as shown on Attachment B should be approved effective
May 1, 2020. Staff should be given administrative authority to approve tariffs
effective June 1, 2020, as these reflect the fuel factors approved in Order No.
PSC-2019-0484-FOF-EI.
Issue 3:
Should the Commission
approve Gulf's petition to provide customers a fuel-related bill credit during
the month of May 2020?
Recommendation:
Yes. Staff recommends the
Commission approve Gulf's petition to provide customers a fuel-related bill
credit during the month of May 2020 for purposes of flowing to customers a
projected over-recovery of fuel costs. The tariff showing the fuel credit as
shown in Attachment C should be approved effective May 1, 2020. Staff should be
given administrative authority to approve the First Revised Tariff Sheet No.
6.34a effective June 1, 2020. (Higgins, Draper)
Staff Analysis:
Gulf participated in the
Commission’s most-recent fuel hearing which took place on November 5, 2019. The
Fuel Order issued from the 2019 hearing set forth Gulf’s fuel, purchased power,
and capacity-related cost recovery factors effective with the first billing
cycle of 2020.
Mid-Course Correction
With respect to the components of the mid-course correction calculation,
which returns the total dollar amount used to calculate the proposed reduction,
Gulf combined its final 2019 over-recovery
of $8,868,596 with its estimated
2020 over-recovery of $42,404,427,
resulting in a total estimated 2020 over-recovery of $51,273,023, or the total
mid-course correction amount proposed to be flowed to customers. Gulf’s fuel mid-course
correction position following the calculation methodology in Rule 25-6.0424,
F.A.C., is 14.7 percent.
The projected 2020 over-recovery of fuel
charges is specifically associated with a decline in projected fuel costs. Gulf’s
original projection of 2020 natural gas costs was formulated near the end of
July 2019. At that time, Gulf projected the average cost of natural gas to be
$3.39 per MMBtu. Gulf now projects, based on March 2020 data, the average 2020
cost of natural gas will be $2.57 per MMBtu (reduction of 24.2 percent).
Gulf proposed to flow its projected 2020 over-recovery of $51.3 million
to customers through a bill credit in the month of May 2020. As part of
the mid-course correction filing, Gulf updated its projections for purchased
power and economy purchases due to the updated fuel pricing and input
assumptions. Regarding capacity cost recovery, Gulf did not propose any changes
to its currently-approved factors.
Bill Impacts
Table 3-1 below displays the bill
impact to a residential customer using 1,000 kWh of electricity a month and further
discusses the effects of Gulf’s request.
Gulf’s current total residential
charge for 1,000 kWh of usage is $140.43. By applying the proposed one-month
fuel credit, the total bill lowers to $84.04, or a reduction of $56.39 (40.2
percent) for the month of May 2020. The proposed fuel credit is shown in
Attachment C, Original Sheet No. 6.34a, which is effective for the May 2020
billing cycle. Gulf also filed its First Revised Tariff Sheet No. 6.34a for
after the credit concludes post May 2020. Staff requests administrative
authority to approved the First Revised Tariff Sheet No. 6.34a effective June
2020. Concerning non-residential customers, Gulf reports that typical bill
reductions will range from approximately 40 to 54 percent for small commercial
customers, approximately 53 percent for medium commercial customers, and
approximately 56 percent for large commercial customers.
Gulf’s proposed tariff is shown on Attachment C to this recommendation. Gulf
stated that it has provided notice of this request for a mid-course correction
with its April customer bills, subject to Commission approval.
Conclusion
Staff recommends the
Commission approve Gulf's petition to provide customers a fuel-related bill
credit during the month of May 2020 for purposes of flowing to customers a
projected over-recovery of fuel costs. The tariff showing the fuel credit as
shown in Attachment C should be approved effective May 1, 2020. Staff should be
given administrative authority to approve the First Revised Tariff Sheet No.
6.34a effective June 1, 2020.
Issue 4:
Should the Commission
approve DEF’s petition to reduce, for one month, its currently-approved 2020 fuel
cost recovery factors for purposes of flowing to customers a projected
over-recovery of fuel charges in the month May 2020?
Recommendation:
Yes. Staff recommends the
Commission approve DEF’s petition to reduce, for one month, its
currently-approved 2020 fuel cost recovery factors for purposes of flowing to
customers a projected over-recovery of fuel charges during the month May 2020. The
tariffs as shown on Attachment D should be approved effective May 1, 2020.
Staff should be given administrative authority to approve tariffs effective
June 1, 2020, as these reflect the fuel factors approved in Order No.
PSC-2019-0484-FOF-EI. (Higgins, Draper)
Staff Analysis:
DEF participated in the
Commission’s most-recent fuel hearing which took place on November 5, 2019. The
Fuel Order issued from the 2019 hearing set forth DEF’s initial 2020 fuel,
purchased power, and capacity-related cost recovery factors effective with the
first billing cycle of 2020. DEF
implemented a previously-approved rate change effective April 2020.
The April rate adjustment is associated with the DeBary solar project going
into service. Although the April 2020 rates differ from the March rates shown
on Schedule E-10 of the DEF Petition, staff discusses its rate recommendation
from the April 2020 levels.
Mid-Course Correction
With respect to the components of the mid-course correction calculation,
which in this case returns the total dollar amount used to calculate the
proposed rate reductions, DEF
combined its total 2019 fuel under-recovery of $21,535,230, with its estimated 2020 fuel over-recovery
of $99,767,015, resulting in a
net mid-course correction amount of $78,231,785. This is total amount proposed
to be flowed to customers. DEF’s fuel mid-course correction position following
the calculation methodology in Rule 25-6.0424(1)(a) F.A.C., is 6.1 percent, which is under the 10
percent threshold prompting a noticing requirement pursuant
to the same rule.
The projected 2020 over-recovery of fuel charges is specifically
associated with a decline in projected fuel costs. DEF’s original projection of
its 2020 natural gas cost was formulated in June 2019. At that time, DEF
projected the average cost of natural gas to be $4.06 per MMBtu. DEF now
projects the average 2020 cost of natural gas will be $3.68 per MMBtu (or reduction
of 9.4 percent).
DEF has proposed to address its 2020 mid-course amount of approximately $78.2
million through reduced fuel cost recovery factors for the month of May 2020. DEF
stated it did not revise any of its planned power purchases but “will continue
to utilize power purchases when needed to economically and reliably support the
needs of the system.”
Further, DEF did not propose any changes to its currently-approved Capacity
Cost Recovery factors.
Bill Impacts
Table 4-1 below displays the rate
impact to a residential customer using 1,000 kWh of electricity a month and
further discusses the effects of DEF’s request.
DEF’s current total residential
charge for 1,000 kWh of usage is $129.74. By applying the proposed one-month
fuel rate decrease, the total charge lowers to $102.90, or a reduction of
$26.84 (20.7 percent) for the month of May 2020. DEF requested that it be
allowed to return to the rates approved by Order No. PSC-2019-0484-FOF-EI
following the one-time May reduction (from June through December 2020). Concerning
non-residential customers, DEF reports that typical bill reductions will range
from approximately 20 to 32 percent for commercial customers, and approximately
25 to 45 percent for industrial customers. DEF’s
proposed tariff is shown on Attachment D to this recommendation. DEF stated
that it will provide notice of the changes with the May billing statement and
on its website.
Conclusion
Staff recommends the Commission
approve DEF’s petition to reduce, for one month, its currently-approved 2020
fuel cost recovery factors for purposes of flowing to customers a projected
over-recovery of fuel charges in the month of May 2020. The tariffs as shown on
Attachment D should be approved effective May 1, 2020. Staff should be given
administrative authority to approve tariffs effective June 1, 2020, as these
reflect the fuel factors approved in Order No. PSC-2019-0484-FOF-EI.
Issue 5:
Should this docket be closed?
Recommendation:
No. The 20200001-EI docket is an on-going proceeding
and should remain open. (Brownless)
Staff Analysis:
The 20200001-EI (fuel clause) docket is an on-going proceeding
and should remain open.
