Case Background
On
November 10, 2020, Gulf Power Company (Gulf or Company) filed a petition for a
limited proceeding seeking authority to implement an interim storm restoration
recovery charge to recover incremental storm restoration costs related to
Hurricane Sally. Gulf estimates a total of $206 million for incremental
restoration costs related to Hurricane Sally. In its petition, Gulf asserts
that prior to Hurricane Sally, Gulf’s Storm Reserve was fully depleted and in a
deficit position, primarily due to incremental costs incurred from Hurricane
Michael. Gulf filed its petition pursuant to the provisions of the Stipulation
and Settlement Agreement (SSA) approved by the Commission in Order No.
PSC-2017-0178-S-EI. Pursuant to Paragraph 7(a) of the SSA,
Gulf can recover storm costs, not exceeding $4.00/1,000 kilowatt hour (kWh) on
monthly residential customer bills, on an interim basis, beginning 60 days
following the filing of a petition for recovery. In addition, pursuant to
Paragraph 7(b), Gulf may petition the Commission to allow for a charge greater
than $4.00/1,000 kWh, or a period longer than 12 months, if costs exceed $100
million in a calendar year. In its petition, Gulf has requested an interim
storm restoration charge applicable to all rate classes, effective March 1,
2021. For residential customers, the proposed charge would be $3.00 on a 1,000
kWh bill. On December 16, 2020, Gulf agreed to waive the 60-day time frame set
forth in the SSA and requested that the Commission approve the storm
restoration recovery charge to become effective March 2, 2021.
The Office of
Public Counsel’s intervention in this docket was acknowledged in Order No.
PSC-2020-0484-PCO-EI, issued December 9, 2020.
The Commission
has jurisdiction over this matter pursuant to Sections 366.04, 366.05, 366.06,
and 366.076, Florida Statutes.
Discussion
of Issues
Issue 1:
Should the Commission authorize Gulf to implement an
interim storm restoration recovery charge?
Recommendation:
Yes. The Commission should authorize Gulf to
implement an interim storm restoration recovery charge, subject to refund. Once the total actual storm costs are known,
Gulf should be required to file documentation of the storm costs for Commission
review and true up of any excess or shortfall. (M. Andrews)
Staff Analysis:
As stated in the Case Background, Gulf filed its
petition for a limited proceeding seeking authority to implement an interim
storm restoration recovery charge applicable to all rate classes to recover an
estimated total of $206 million for incremental restoration costs related to
Hurricane Sally. In addition, the $206 million also includes $900,000 of interest
on the unamortized storm reserve balance. Also, Gulf’s Storm Reserve is fully
depleted, primarily due to the incremental costs incurred from Hurricane
Michael. Gulf has requested an interim
storm restoration recovery charge of 0.3 cents per kWh, which equates to $3.00
on a 1,000 kWh residential electric bill, effective March 2, 2020. As discussed
in Issue 2, the interim storm charge would vary by rate class. Gulf estimates
that the interim charge collected from all rate classes will yield
approximately $24 million per year. Gulf residential customer bills currently
reflect a monthly Hurricane Michael storm recovery charge of $8.00 on a 1,000
kWh to be in effect till September 2023.
The combination of the Hurricane Michael recovery charge and the Hurricane
Sally interim recovery charge sum to $11.00 on a 1,000 kWh residential electric
bill. Once Gulf has fully recovered the
Hurricane Michael storm costs, Gulf proposes to seek Commission authority to
increase the Hurricane Sally storm restoration recovery charge to $10.00 on a
1,000 kWh residential electric bill and for this level to remain in place until
the Hurricane Sally costs are fully recovered and the Storm Reserve is
replenished to approximately $41 million.
In its petition, Gulf asserts that it incurred total
retail recoverable costs of approximately $206 million as a result of Hurricane
Sally. Gulf represents that this amount was calculated in accordance with the
Incremental Cost and Capitalization Approach (ICCA) methodology prescribed in
Rule 25-6.0143, Florida Administrative Code (F.A.C.).
The approval of an interim storm restoration recovery
charge is preliminary in nature and is subject to refund pending a further
review once the total actual storm restoration costs are known. After the actual costs are reviewed for
reasonableness and prudence, and are compared to the actual amount recovered
through the interim storm restoration recovery charge, a determination will be
made whether any over/under recovery has occurred. The disposition of any over/under recovery,
and associated interest, would be considered by the Commission at a later date.
Based on a review of the information provided by Gulf in
its petition, staff recommends that the Commission authorize Gulf to implement
an interim storm restoration recovery charge, subject to refund. Once the total
actual storm costs are known, Gulf should be required to file documentation of
the storm costs for Commission review and true up of any excess or shortfall.
Issue 2:
Should the Commission
approve Gulf's proposed interim storm restoration recovery charge tariff as
shown in Attachment A to the recommendation?
Recommendation:
Yes. The Commission should approve Gulf's proposed
interim storm restoration recovery charge tariff as shown in Attachment A to
the recommendation. The proposed tariff should become effective March 2, 2021.
(Forrest)
Staff Analysis:
In its petition, Gulf proposed to begin applying the
interim storm restoration recovery charge to customer bills on March 2, 2021,
and to include the charge in the non-fuel energy surcharge on customer bills. In
support of its rate calculations, Gulf provided Exhibit 3 to the petition,
which illustrates the computation of the proposed interim storm restoration
recovery charge for each rate class. Gulf represented that it followed the
methodology for allocation of storm costs among rate classes consistent with
the cost of service study filed in its 2016 rate case in Docket No.
20160186-EI. Staff reviewed Gulf’s calculations and believes the allocation
methodology to be appropriate and reasonable.
Application of the allocation methodology for the
residential customer rate class results in a proposed interim storm recovery
charge of 0.3 cents per kWh, which equates to $3.00 on a 1,000 kWh residential
electric bill. The proposed interim charges for all rate classes are presented
in Original Sheet No. 6.25.1, which is included in Attachment A to this
recommendation.
Based on its review of the information provided by Gulf,
staff recommends the Commission approve Gulf's proposed interim storm
restoration recovery charge tariff as shown in Attachment A to the
recommendation. The proposed tariff should become effective March 2, 2021.
Issue 3:
What is the appropriate security to guarantee the
amount collected subject to refund through the interim storm restoration recovery
charge?
Recommendation:
The appropriate security to
guarantee the funds collected subject to refund is a corporate undertaking.
(Hightower, D. Buys)
Staff Analysis:
Staff recommends that all
funds collected subject to refund be secured by a corporate undertaking. The
criteria for a corporate undertaking include sufficient liquidity, ownership
equity, profitability, and interest coverage to guarantee any potential refund.
Staff reviewed Gulf’s financial statements to determine if the Utility can
support a corporate undertaking to guarantee the funds collected for recovery
of incremental storm restoration costs related to Hurricane Sally. Gulf’s 2019,
2018 and 2017 financial statements were used to determine the financial
condition of the Company. Gulf’s financial performance demonstrates adequate
levels of liquidity, ownership equity, profitability, and interest coverage to
guarantee the potential refund.
Staff believes Gulf has adequate resources to support a
corporate undertaking in the amount requested. Based on this analysis, staff
recommends that a corporate undertaking is acceptable. This brief financial
analysis is only appropriate for deciding if the Company can support a
corporate undertaking in the amount proposed and should not be considered a
finding regarding staff's position on other issues in this proceeding.
Issue 4:
Should this docket be closed?
Recommendation:
No. This docket should remain open pending final
reconciliation of actual recoverable Hurricane Sally storm costs with the
amount collected pursuant to the interim storm restoration recovery charge, and
the calculation of a refund or additional charge if warranted. (Trierweiler)
Staff Analysis:
No, this docket should remain open pending final
reconciliation of actual recoverable Hurricane Sally storm costs with the
amount collected pursuant to the interim storm restoration recovery charge, and
the calculation of a refund or additional charge if warranted.
