Discussion
of Issues
Issue 1:
Should the Commission approve Peoples’ proposed
CI/BSR Rider surcharges for the period January through December 2022?
Recommendation:
Yes, the Commission should approve Peoples’ proposed
CI/BSR Rider surcharges for the period January through December 2022. (Ward)
Staff Analysis:
The CI/BSR Rider charges have been in effect since
January 2013. Rider PPP charges have been in effect since 2017. In 2021,
Peoples’ cast iron and bare steel replacement activity focused in the areas of
Miami, Tampa, St. Petersburg, Orlando, Eustis, Jacksonville, Daytona, Avon
Park, and Ocala. In 2022, Peoples states it will focus on replacement projects
in Miami, Tampa, St. Petersburg, Orlando, Eustis, Jacksonville, Daytona, Avon
Park, and Ocala. The projected completion date for the CI/BSR replacement
program is 2022 for mains and services. The replacement of PPP is expected to
continue until 2028.
In Peoples’ 2020 rate case, the Commission approved a settlement
agreement between Peoples and the parties to the docket. As
part of this agreement, $23.6 million of the 2021 CI/BSR revenue requirement
related to Peoples’ Rider CI/BSR investments made through December 31, 2020
($200.7 million) was moved from recovery through the CI/BSR Rider to recovery
through base rates, effective January 1, 2021. The agreement also required
Peoples to record the difference between the actual December 31, 2020 Rider
CI/BSR net book value and the $200.7 million as an adjustment to the January 1,
2021 Rider CI/BSR net book value. This adjustment is a reduction of $2.2
million ($198.5 million - $200.7 million) and is reflected in the 2021 calculations.
Attachment A to this recommendation contains tables which
display the replacement progress and forecasts for CI/BSR Rider (Table 2) and
for PPP (Table 3). Additionally, Peoples provided Table 1 which consolidates
actual and projected CI/BSR and PPP miles replaced investment and revenue
requirements for each year of the replacement program.
True-ups by Year
Peoples' calculation for the 2022 revenue requirement and
surcharges includes a final true-up for 2020, an actual/estimated true-up for
2021, and projected costs for 2022. Pursuant to the 2012 order, the capital
expenditures for 2017 through 2019 exclude the first $1 million of facility
replacements each year because that amount is included in rate base. Peoples
has included depreciation expense savings as discussed in the 2012 order;
however, the utility has not identified any operations and maintenance savings.
Final True-up for 2020
Exhibit A of the petition shows that the revenues collected
for 2020 were $17,991,960 compared to a revenue requirement of $19,175,814,
resulting in an under-recovery of $1,183,854. The final 2019 under-recovery of
$3,382,549, 2020 under-recovery of $1,183,854, and interest associated with any
over- and under-recoveries, results in a final 2020 under-recovery of
$4,581,212.
Actual/Estimated 2021 True-up
In Exhibit B of the petition, Peoples provided actual
revenues for January through July and forecast revenues for August through
December of 2021, totaling $5,501,540, compared to an actual/estimated revenue
requirement of $1,263,467, resulting in an over-recovery of $4,238,073. The
final 2020 under-recovery of $4,581,212, 2021 over-recovery of $4,238,073, and
interest associated with any over- and under-recoveries, results in a total
2021 under-recovery of $344,870.
Projected 2022 Costs
Exhibit C of the petition shows Peoples projects
investment or capital expenditures of $27,291,015 for the replacement of cast
iron/bare steel infrastructure and PPP in 2022. As shown in Table 1 of
Attachment A of the recommendation, this consists of the CI/BSR infrastructure
investment of $6,866,249 and the PPP investment of $20,424,766. The return on
investment (which includes federal income taxes, regulatory assessment fees,
and bad debt), depreciation expense (less savings), and property tax expense
associated with that investment are $5,051,475. After adding the total 2021
under-recovery of $344,870, the total 2022 revenue requirement is $5,396,345.
Table 1-1 displays the 2022 revenue requirement calculation.
Table 1-1
2022 Revenue Requirement
|
2022 Projected Expenditures
|
$27,291,015
|
|
Return on Investment
|
$3,848,242
|
|
Depreciation Expense (less savings)
|
$653,667
|
|
Property Tax Expense
|
$549,565
|
|
2022 Revenue Requirement
|
$5,051,475
|
|
Plus 2021 Under-recovery
|
$344,870
|
|
Total 2022 Revenue Requirement
|
$5,396,345
|
Source: Page 1 of 3 in Exhibit C in petition (Docket No.
20210148-GU)
Proposed Surcharges
As established in the 2012 order, the total 2022 revenue
requirement is allocated to rate classes using the same methodology that was
used for the allocation of mains and services in the cost of service study used
in Peoples' most recent rate case. After calculating the percentage of total
plant costs attributed to each rate class, the respective percentages were
multiplied by the 2022 revenue requirement resulting in the revenue requirement
by rate class. Dividing each rate class's revenue requirement by projected
therm sales provides the rider surcharge for each rate class.
If the Commission approves this recommendation, the
proposed 2022 rider surcharge for residential customers is $.02014 per therm
(compared to the current surcharge of $.02188). The 2022 monthly bill impact
will be $.40 for a residential customer who uses 20 therms. The proposed tariff
page provided in the petition is Attachment B to this recommendation.
Conclusion
Staff reviewed Peoples’ filings and supporting
documentation and believes that the calculations are consistent with the
methodology approved in the 2012 order and are reasonable and accurate.
Therefore, staff recommends approval of Peoples’ proposed 2022 Rider CI/BSR
surcharges to be effective for the period January through December 2022.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If Issue 1 is approved and a protest is filed
within 21 days of the issuance of the order, the tariff should remain in
effect, with any revenues held subject to refund, pending resolution of the
protest. If no timely protest is filed, this docket should be closed upon the
issuance of a consummating order. (Osborn)
Staff Analysis:
Yes. If Issue 1 is approved and a protest is filed
within 21 days of the issuance of the order, the tariff should remain in
effect, with any revenues held subject to refund, pending resolution of the
protest. If no timely protest is filed, this docket should be closed upon the
issuance of a consummating order.
