Discussion
of Issues
Issue 1:
Should Duke Energy Florida, LLC’s Motion for Stay
Pending Judicial Review be granted?
Recommendation:
Yes. DEF has
complied with the requirements of Rule 25-22.061(1), F.A.C., and should be
granted a stay of the provisions of Order No. PSC-2020-0368A-FOF-EI requiring a
refund of $16.1 million associated with the 2017 Bartow Unit 4 outage. As a condition of the stay, DEF should be
required to provide adequate security in the form of a corporate undertaking in
the amount of the refund plus interest as determined by Rule 25-6.109,
F.A.C. (Brownless, Higgins)
Staff Analysis:
Rule 25-22.061, F.A.C., states, in relevant part, as
follows:
25-22.061 Stay Pending Judicial
Review
(1) When the
order being appealed involves the refund
of moneys to customers or a decrease in rates charged to customers, the
Commission shall, upon motion filed
by the utility or company affected, grant a stay pending judicial
proceedings. The stay shall be conditioned upon the posting of good and sufficient bond, the posting of a corporate undertaking, or such other conditions as the Commission finds
appropriate to secure the revenues collected by the utility subject to
refund.
(2)
Except as provided in subsection (1), a party seeking to stay a final or
nonfinal order of the Commission pending judicial review may file a motion with
the Commission, which has authority to grant, modify, or deny such relief. A stay pending review granted pursuant to
this subsection may be conditioned upon the posting of a good and sufficient
bond or corporate undertaking, other conditions relevant to the order being
stayed, or both. In determining whether
to grant a stay, the Commission may, among other things, consider:
(a) Whether the petitioner has demonstrated
a likelihood of success on the merits on appeal;
(b) Whether the petitioner has demonstrated
a likelihood of sustaining irreparable harm if the stay is not granted; and,
(c) Whether the delay in implementing the
order will likely cause substantial harm or be contrary to the public interest
if the stay is granted.
. .
.
[Emphasis added.]
DEF’s Motion for Stay
In its Motion, DEF argues that it is entitled to an
automatic stay pursuant to the plain language of Rule 25-22.061(1), Florida
Administrative Code (F.A.C.). In support
of this position, DEF cites Order No. PSC-05-0144-PCO-WU, issued February 7,
2005, in Docket No. 010503-WU, In re:
Application for increase in water rates for Seven Springs System in Pasco
County by Aloha Utilities, Inc. (Aloha).
In Aloha, the utility’s
request for a rate increase was denied and a hearing
was held on Proposed Agency Action Order No.
PSC-04-0122-PAA-WU, which
addressed the amount of revenue collected under interim rates to be refunded to
customers. By Order No.
PSC-04-1050-FOF-WU, the
Commission ordered a refund to the utility’s customers in the amount of
$276,066, with interest. Aloha appealed
this order and filed a motion for stay pending judicial review under Rule
25-22.061(1)(a), F.A.C., the predecessor to Rule 25-22.061(1), F.A.C. In granting Aloha’s motion for stay, DEF
argues that the Commission quoted the
language of Rule 25-22.061(1)(a), F.A.C., and interpreted it as
automatically requiring that the Commission grant a stay when a refund was at
issue, as is the case here.
Alternatively, DEF argues that even if it is not entitled
to an automatic stay under Rule 25-22.061(1), F.A.C., it meets the criteria to
be granted a discretionary stay under the provisions of Rule 25-22.061(2),
F.A.C. DEF states that it is likely to
prevail on the merits of its appeal for the reasons stated in its Proposed
Recommended Order filed with DOAH on March 20, 2020,
and its Exceptions to the Recommended Order filed with the Commission on May
12, 2020. [Motion at ¶
7] Further, staying the implementation
of the refund, in DEF’s opinion, would not cause substantial harm or be
contrary to the public interest. [Motion
at ¶ 6] Finally, DEF argues that the public interest
favors rate stability and if it wins on appeal, it would be entitled to recover
the improperly refunded revenue from its customers creating a situation where
there would be a refund followed by recoupments. That is a situation, which according to DEF,
the automatic stay provision of Rule 25-22.061(1), F.A.C., was designed to
prevent. [Motion at ¶ 7]
Joint Movants’ Response
In opposition to DEF’s Motion, Joint Movants argue that
Rule 25-22.061, F.A.C., does not apply to charges approved by the Commission in
this docket, a docket that has a “self-correcting true-up mechanism.” [Response at p. 1] Joint Movants state that the “over/under
account”, also referred to as the “true-up balance” or “true-up variance”,
allows for DEF to record the $11.1 million in Bartow Unit 4 replacement fuel
costs for future recovery should its appeal be successful. [Response at p. 2] For that reason, according to Joint Movants,
the automatic stay is unnecessary, as this true-up mechanism protects the
utility and maintains the status quo during
the pendency of the appeal. [Id.]
Joint Movants further argue that
Rule 25-22.061, F.A.C., has never been applied to a case where there was a
self-correcting true-up mechanism in place, i.e., never applied to the fuel
clause docket. [Response at p. 3] Therefore, in Joint Movant’s opinion, DEF’s
reliance on the Aloha Utilities case
to support imposition of a mandatory stay is misplaced since that case did not
involve any type of self-correcting true-up mechanism. Further, Joint Movants cite GTE Florida Incorporated v. Clark (GTE), 668
So. 2d. 971, 972-73 (Fla. 1996), for the proposition that a utility can recover
its lawful expenses through the imposition of a surcharge after winning an appeal
of a Commission order denying those expenses without having to file for a stay
either at the appellate court or the Commission. [Response at p. 4]
Joint Movants also question the
mandatory nature of the application of Rule 25-22.061(1), F.A.C., stay
provisions to prohibit the return of money to customers if, as DEF argues, the
mandatory “shall” language in the rule requiring the posting a bond or
corporate undertaking if a stay is granted can be ignored due to the
self-correcting nature of the fuel clause.
[Response at p. 4] Joint Movants
regard this argument by DEF as an admission that Rule 25-22.061, F.A.C., should
not be applied to the fuel clause.
With regard to DEF’s contention
that it is entitled to relief under the discretionary provisions of Rule
25-22.061(2), F.A.C., Joint Movants argue that DEF has not demonstrated that it
is likely to prevail on the merits. DEF
has simply reiterated the same facts argued before both the administrative law
judge and the Commission. [Response at
p. 5] Further, OPC states that DEF has
not shown that it will suffer any harm if the stay is not granted. Again, OPC argues that no harm would be
suffered by DEF due to the self-correcting operation of the fuel clause.
Finally, with regard to the $5
million replacement power costs associated with the installation of pressure
plates on the Bartow Unit 4 steam turbine in September 2017, Joint Movants
argue that this fuel cost was never explicitly approved as prudent by the
Commission. The replacement power costs
were never recorded in the “over/under account” and were simply included in
2019 fuel costs and passed along to customers.
[Response at p. 3] Now that these
costs have been specifically found by the administrative law judge and the
Commission to be imprudent, Joint Movants contend that they should not be
subject to either an automatic or discretionary stay. [Id.]
Analysis and Conclusion
Section 120.52(16), F.S., defines
a “rule” as “each agency statement of general applicability that implements,
interprets, or prescribes law or policy or describes the procedure or practice
requirements of an agency ....” An
agency is “obligated to follow its own rules.” In applying or interpreting rules, the
starting point is the plain language of the rule. Courts will not imply a meaning or
limitation that the plain language of the rule does not supply.
Staff agrees with DEF that the
plain language of Rule 25-22.061(1), F.A.C., unambiguously states that if the
order being appealed requires the utility to make a refund, the Commission shall grant a motion for stay pending
appeal. Joint Movants do not question
that the administrative law judge ordered that DEF refund $16,116,782 without interest. Nor are the Joint Movants asking the
Commission to interpret a term used in the rule as the Commission has done in
previous cases. Joint Movants are asking that the Commission
find that the rule does not apply because of the nature of this docket, i.e.,
that the self-correcting nature of the fuel clause provides the same protection
to the utility as a stay. In essence,
Joint Movants want the Commission to limit the application of the rule to
instances in which no “self-correcting true-up mechanism” is at operation. However, there is no such limitation of
application stated in the rule itself.
DEF has met the requirements for an automatic stay under the provisions
of Rule 25-22.061(1): it has been ordered to refund moneys; it has filed an
appeal of the order requiring it to do so; and has filed a motion requesting a
stay pending judicial proceedings.
Joint Movants’ reliance on the GTE decision to justify limitation of
the rule is misplaced. The fact that the Commission has the authority to allow
surcharges to recoup revenues associated with a successful utility appeal does
not extinguish DEF’s ability to request and receive a stay under the provisions
of Rule 25-22.061(1), F.S. Rule
25-22.061, F.A.C., was enacted in October 1981 and contained identical language
in paragraph (1)(a) to that found in paragraph (1) cited above. Had the Commission interpreted the GTE decision as rendering the rule to be
redundant, it has had ample opportunity over the last 24 years to modify the
rule to reflect that understanding. No
such modification has been proposed by either the Commission or the Joint
Movants to date. Likewise, staff does
not find it persuasive that the rule has not been applied to the fuel clause in
the past. Utilities have the right to
decide on a case by case basis what remedy is the most appropriate for a
particular set of circumstances. Failure
to request a remedy does not mean that that remedy is not available.
Staff views the Joint Motion’s
request as a request to modify the provisions of Rule 25-22.061(1), F.A.C. Modification of a rule requires compliance
with the provisions of Section 120.54(3), F.S., and Rules 28-103.001-.006,
F.A.C., e.g., agency notice of intended action; statement of estimated
regulatory costs; a hearing, if requested by a substantially affected party;
and filing with the Secretary of State of the adopted rule. The Commission cannot unilaterally rewrite
its rules without following these procedures.
Having recommended that DEF has
met the requirements for an automatic stay pending appeal, the next question
concerns compliance with the second sentence of Rule 25-22.061(1), F.A.C.: “The
stay shall be conditioned upon the
posting of good and sufficient bond, the posting of a corporate undertaking, or
such other conditions as the Commission finds appropriate to secure the
revenues collected by the utility subject to refund.”(Emphasis added.) DEF argues that unlike the first sentence,
the last section of the second sentence “provides the Commission with a range
of options to secure the revenues necessary to make the refund if upheld on
appeal.” In this case, DEF argues that the method in
which a refund would be implemented in this docket, a reduction in fuel costs
in the refund year, makes posting a bond or corporate undertaking unnecessary. Joint Movants take the position that if the
mandatory language of the first sentence must be applied to the fuel clause,
the mandatory language of the second sentence must be applied as well.
The Commission has historically
required either the posting of a bond or corporate undertaking when granting a
stay pending appeal whether granted under the automatic provisions of Rule
25-22.061(1) or discretionary provisions of Rule 25-22.062(2), F.A.C. Therefore, staff recommends that DEF be
required to provide adequate security in the form of a corporate undertaking as
a condition of the stay. The amount to
be secured is $16.1 million plus interest as determined by Rule 25-6.109,
F.A.C. Duke Energy Corporation, the
parent of DEF, and DEF both have Standard & Poor’s bond ratings of
“A-.” In addition, the amount of the
potential refund is extremely modest relative to the financial resources
available to DEF. Therefore, staff
recommends that DEF has sufficient financial capability to support a corporate
undertaking of the amount required in this case.
As stated above, staff has
recommended that a stay be granted pursuant to the mandatory language used in
Rule 25-22.061(1), F.A.C., when refunds are at issue. However, DEF has also alleged that it could
also secure a stay under the discretionary provisions of Rule 25-22.061(2),
F.A.C. In regard to this assertion, the
staff agrees with the Joint Movants that DEF’s reliance on the same arguments
in its appeal that were previously rejected by both the administrative law
judge and the Commission do not support the conclusion that there is a
likelihood of success at the appellate level.
Nor has DEF demonstrated that it will sustain irreparable harm if the
stay in not granted. Based on these
facts, the staff would recommend that a stay pursuant to the discretionary
provisions of Rule 25-22.061(2), F.A.C., be denied.
Finally, the fact that the
Commission did not specifically vote to allow the de-rating replacement power
costs associated with the Bartow Unit 4 outage incurred from May 2017 until
September 2019 is irrelevant. The
testimony of witness Menendez is clear that DEF requested, and has recovered,
all fuel and replacement power costs incurred during this time period including
those associated with the de-rating of Bartow Unit 4. [T. 345-55]
Contrary to the Joint Movant’s assertion, the Commission has, in fact,
voted to allow the Bartow Unit 4 derating costs in the 2018 and 2019 fuel
clause dockets.
For these reasons, staff
recommends that the Commission find that DEF has complied with the requirements
of Rule 25-22.061(1), F.A.C., and should be granted a stay of the provisions of
Order No. PSC-2020-0368A-FOF-EI requiring a refund of $16.1 million associated
with the 2017 Bartow Unit 4 outage subject to the posting of a corporate
undertaking in the amount of $16.1 million plus interest as determined by Rule
25-6.109, F.A.C.
Issue 2:
Should this docket be closed?
Recommendation:
No. At this
time there are outstanding issues for DEF to be voted on in this docket at the
Special Agenda Conference set for December 15, 2020, which are contingent upon
the Commission’s vote on the Motion for Stay Pending Judicial Appeal at issue
here. (Brownless)
Staff Analysis:
All of DEF’s issues
identified in the Prehearing Order, Order No. PSC-2020-0415-PHO-EI, are still
outstanding and will be voted on at the Special Agenda Conference to be held on
December 15, 2020. The Commission’s decision whether to grant or
deny DEF’s Motion will impact its decision on outstanding Issue 1A: “What
action should be taken in response to Commission Order No. PSC-2020-0368[A]
regarding the Bartow Unit 4 February 2017 outage.” However, a vote will still be required at the
Special Agenda Conference on Issue 1A as well as the other outstanding
issues. Thus, staff recommends that this
docket remain open to resolve those issues.
