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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 25, 2021
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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 Accounting and Finance (Snyder,
D. Buys, Mathis, Mouring)
Division of Economics (Coston,
Ward)
Office of the General
Counsel (Lherisson, Crawford, Osborn)
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RE:
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Docket No. 20210097-EI – Petition for limited
proceeding for recovery of incremental storm restoration costs related to
Hurricanes Eta and Isaias, by Duke Energy Florida, LLC.
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AGENDA:
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07/08/21 – Regular Agenda – 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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Graham
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CRITICAL DATES:
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07/13/2021 (60 Days After Filing Date)
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SPECIAL INSTRUCTIONS:
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None
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Case Background
On May 14, 2021,
Duke Energy Florida, LLC (DEF or Company) filed a petition for a limited proceeding
seeking authority to implement an interim storm restoration recovery charge to
recover $16.7 million for the incremental restoration costs related to
Hurricanes Eta and Isaias. In its petition, DEF asserted that as a result of
Hurricanes Eta and Isaias, it incurred total retail recoverable costs of approximately
$20.1 million. DEF has proposed to reduce this amount by $3.4 million to offset
the over-recovery of storm restoration costs collected through a
Commission-approved storm recovery charge related to Hurricane Dorian and
Tropical Storm Nestor. As a result, the Company’s proposed net
recoverable cost is $16.7 million. This amount includes approximately $8,100 in
interest.
DEF filed its
petition pursuant to the provisions of the 2017 Second Revised and Restated
Settlement Agreement (2017 Settlement) approved by the Commission in Order No.
PSC-2017-0451-AS-EU. Pursuant to the 2017 Settlement, the
Company can recover storm costs, without a cap on the level of charges on
customer bills, on an interim basis beginning 60 days following the filing of a
petition for recovery. DEF has proposed interim storm restoration charges
applicable to all rate classes over a 12-month recovery period, effective with
the first billing cycle of August 2021. For residential customers, the proposed
interim storm recovery charge would be $0.55 on a 1,000 kilowatt hour (kWh) on
a residential customer bill.
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 DEF to implement an interim
storm restoration recovery charge?
Recommendation:
Yes, the Commission
should authorize DEF to implement an interim storm restoration recovery charge.
Once the total actual storm costs are known, DEF should be required to file
documentation of the total storm costs for Commission review and true-up of any
excess or shortfall. (Snyder)
Staff Analysis:
As stated in the
Case Background, DEF filed a petition for a limited proceeding seeking
authority to implement an interim storm restoration recovery charge to recover $16.7
million for the incremental restoration costs related to Hurricanes Eta and
Isaias. The petition was filed pursuant to the provisions of the 2017
Settlement approved by the Commission in Order No. PSC-2017-0451-AS-EU.
Pursuant to Paragraph 38 of the 2017 Settlement, DEF can begin recovery of
storm costs, without a cap, 60 days following the filing of a petition for
recovery. DEF has proposed an interim storm recovery charge of $0.55 per 1,000
kWh on a residential customer bill over
a 12-month recovery period effective the first billing cycle of August
2021.
In its petition, DEF asserts that it incurred total retail
recoverable costs of approximately $20.1 million as a result of Hurricanes Eta
and Isaias. The Company further asserts 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 net retail recoverable costs of $16.7 million were determined by reducing
the $20.1 million total recoverable costs by the over-recovery of $3.4 million
from the storm recovery charge for Hurricane Dorian and Tropical storm Nestor.
The approval of an interim storm restoration recovery
charge is preliminary in nature and is subject to refund pending further review
once the total actual storm restoration costs are known. After the actual costs
are reviewed for prudence and reasonableness, 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 DEF in
its petition, staff recommends that the Commission authorize the Company to
implement an interim storm restoration recovery charge subject to refund. Once
the total actual storm costs are known, DEF should be required to file
documentation of the storm costs for Commission review and true-up of any
excess or shortfall. Staff emphasizes that this recommendation is only for
interim recovery charges and is not a confirmation or endorsement of the prudence
of the Company’s forecasted costs and plans. This recommendation only allows
DEF to begin recovery on an interim basis in accordance with the 2017
Settlement. This interim recovery is subject to refund following a hearing or
formal proceeding where the veracity and prudence of DEF’s actual restoration
costs can be fully vetted.
Issue 2:
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. (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. DEF requested a 12-month collection period from August
2021 to July 2022 for interim storm cost recovery charges of $16.718 million
related to Hurricanes Eta and Isaias. Staff reviewed DEF’s three most recent
annual reports filed with the Commission (2019, 2018, and 2017) to determine if
the Company can support a corporate undertaking to guarantee the funds
collected for recovery of incremental storm restoration costs related to
Hurricanes Eta and Isaias. DEF’s financial performance demonstrates the Company
has adequate levels of liquidity, ownership equity, profitability, and interest
coverage to cover a potential refund. Moreover, the Company participates in
Duke Energy Corporation’s (DEF’s parent company) money pool and has access to
additional funds if needed.
Staff
believes DEF has adequate resources to support a corporate undertaking in the
amount requested. Based on this analysis, staff recommends that a corporate
undertaking of $16.718 million 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 3:
Should
the Commission approve DEF's proposed interim storm restoration recovery charge
tariff as shown in Attachment A to this recommendation?
Recommendation:
Yes.
The Commission should approve DEF's proposed interim storm restoration recovery
charge tariff as shown in Attachment A to this recommendation. The proposed
tariff should become effective with the first billing
cycle of August 2021. (Ward)
Staff Analysis:
In
its petition, DEF proposed to begin applying the
interim storm restoration recovery charge to customer bills effective with the
first billing cycle of August 2021, and to include the charge in the non-fuel
energy charge. The Company represented that it followed the methodology
for allocation of storm costs among rate classes consistent with the rate design
method approved in the 2017 Settlement. Staff reviewed DEF’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 0.055 cents per kWh, which
equates to $0.55 on a 1,000 kWh residential electric bill. If approved, the
Company will notice customers of the pending charge with the July billing
cycle. The proposed interim charges for all rate classes are presented in
Revised Sheet No. 6.105, which is included in Attachment A to this
recommendation.
Based on its review of the information provided by DEF,
staff recommends the Commission approve the Company's proposed interim storm
restoration recovery charge tariff as shown in Attachment A to this
recommendation. The proposed tariff should become effective with the first billing cycle of August 2021.
