Discussion
of Issues
Issue 1:
Should the Commission approve FPUC’s, Chesapeake’s,
and Fort Meade’s proposed GRIP surcharges for the period January through
December 2022?
Recommendation:
Yes, the Commission should approve FPUC’s,
Chesapeake’s, and Fort Meade’s proposed GRIP surcharges for the period January
through December 2022. (Hampson)
Staff Analysis:
The GRIP surcharges have
been in place since January 2013 for FPUC and Chesapeake, while Fort Meade’s
surcharges were first implemented in January 2017. In response to staff’s data
request, FPUC stated that during 2021, replacement projects were completed in
Palm Beach, West Palm Beach, and Lantana. For 2021, Chesapeake completed
replacement projects in Winter Haven, Haines City, and Plant City. The
companies stated that they prioritize the potential replacement projects
focusing on areas of high consequence and areas more susceptible to corrosion.
Fort Meade completed its
replacement program in 2019 and Chesapeake competed its replacement program in
2021. As contemplated in the 2012 Order, FPUC will complete its remaining
replacement projects in Palm Beach, West Palm Beach, Boynton Beach, Delray
Beach, and Lake Worth by July 2022. Attachment
A provides an update of mains and services replaced and replacement forecasts.
FPUC’s True-ups by Year
FPUC’s calculation for the 2022 GRIP revenue requirement
and surcharges includes a final true-up for 2020, an actual/estimated true-up
for 2021, and projected costs for 2022. In its 2008 rate case, FPUC was authorized
to recover $747,727 of annual bare steel replacement expenses in base rates. Therefore,
the $747,727 recovered from base rates is excluded from the GRIP surcharge
calculation.
Final True-up for 2020
FPUC stated that the revenues collected through the GRIP
surcharges for 2020 were $9,369,115, compared to a revenue requirement of
$11,020,034, resulting in an under-recovery of $1,650,921. Therefore, the 2019
over-recovery of $1,965,077, the 2020 under-recovery of $1,650,921, and
interest of $11,962 associated with any over- and under-recoveries results in a
final 2020 over-recovery of $326,118.
Actual/Estimated 2021 True-ups
FPUC provided actual revenues for January through July
2021 and estimated revenues for August through December 2021, totaling $10,637,538,
compared to an actual/estimated revenue requirement for 2021 of $12,747,807,
resulting in an under-recovery of $2,110,269. Therefore, the 2020 over-recovery
of $326,118, the 2021 under-recovery of $2,110,269, and interest of $112
results in a total 2021 under-recovery of $1,784,263.
Projected 2022 Costs
FPUC expects capital expenditures of $5,294,520 for the
replacement of cast iron/bare steel infrastructure in 2022. This compares with
final 2020 expenditures of $18,862,373 and actual/estimated 2021 expenditures
of $21,618,655. The return on investment (which includes federal income taxes,
regulatory assessment fees, and bad debt), depreciation expense, and property
tax and customer notification expense associated with that investment are
$14,949,687. Subtracting the revenue requirement for bare steel replacement
included in base rates results in a 2022 revenue requirement of $14,201,960.
After including the total 2021 under-recovery of $1,784,263, the 2022 revenue
requirement is $15,986,222. Table 1-1 shows FPUC’s 2022 revenue requirement
calculation.
Table 1-1
FPUC 2022 Revenue
Requirement Calculation
|
2022 Projected Expenditures
|
$5,294,520
|
|
Return on Investment
|
$9,267,172
|
|
Depreciation Expense
|
3,043,810
|
|
Property Tax and Customer Notice Expense
|
2,638,705
|
|
2022 Revenue Requirement
|
$14,949,687
|
|
Less Revenue Requirement in Base Rates
|
-747,727
|
|
2022 GRIP Revenue Requirement
|
$14,201,960
|
|
Plus 2021 Under-recovery
|
+1,784,263
|
|
2022 Total Revenue Requirement
|
$15,986,222
|
|
|
|
Source: Witness Craig
Testimony Schedules C-2, Page 4, and D-1, Page 5
Chesapeake’s True-ups by Year
Chesapeake’s calculation for the 2022 GRIP revenue
requirement and surcharges includes a final true-up for 2020, an
actual/estimated true-up for 2021, and projected costs for 2022. Chesapeake
does not have a replacement recovery amount embedded in base rates.
Final True-up for 2020
Chesapeake stated that the revenues collected for 2020 were
$3,089,373, compared to a revenue requirement of $3,970,339, resulting in an
under-recovery of $880,966. The 2019 over-recovery of $599,886, 2020
under-recovery of $880,966 and $2,804 for interest associated with any over-
and under-recoveries results in a final 2020 under-recovery of $278,276.
Actual/Estimated 2021 True-up
Chesapeake provided actual GRIP revenues for January
through July 2021 and estimated revenues for August through December 2021,
totaling $4,218,111, compared to an actual/estimated revenue requirement of
$4,097,241, resulting in an over-recovery of $120,870. The 2020 under-recovery
of $278,276, 2021 over-recovery of $120,870, and interest of $97 associated
with any over- and under-recoveries results in a total 2021 under-recovery of $157,503.
Projected 2022 Costs
Chesapeake projects zero capital expenditures for the
replacement of cast iron/bare steel infrastructure in 2022, as the company
completed the replacement program in 2021. Therefore, the 2022 GRIP factors are
designed to only collect the remaining 2021 under-recovery of $157,503, and the
revenue requirement of $4,074,608 associated with the 2021 year-end total
investment. Table 1-2 shows Chesapeake’s 2022 revenue requirement calculation.
Table 1-2
Chesapeake 2022 Revenue
Requirement Calculation
|
2022 Projected Expenditures
|
$0
|
|
Return on Investment
|
$2,466,896
|
|
Depreciation Expense
|
873,132
|
|
Property Tax Expense
|
734,580
|
|
2022 Revenue Requirement
|
$4,074,608
|
|
Plus 2021 Under-recovery
|
+157,503
|
|
2022 Total Revenue Requirement
|
$4,232,110
|
Source: Witness Craig Testimony
Schedules C-2, Page 10, and D-1, Page 11
Fort Meade’s True-ups by Year
Fort Meade started its replacement program in 2016 and
first implemented GRIP surcharges in January 2020. Unlike FPUC and Chesapeake,
only bare steel services (and no mains) require replacement in Fort Meade.
Final True-up for 2020
Fort Meade stated that the revenues collected for 2020
were $31,904, compared to a revenue requirement of $25,486, resulting in an
over-recovery of $6,418. Adding the 2019 over-recovery of $1,972, the 2020
over-recovery of $6,418, and $37 for interest associated with any over- and
under-recoveries, the final 2020 over-recovery is $8,427.
Actual/Estimated 2021 True-up
Fort Meade provided actual GRIP revenues for January
through July 2021 and estimated revenues for August through December 2021
totaling $21,743, compared to an actual/estimated revenue requirement of
$24,363, resulting in an under-recovery of $2,620. Adding the 2020
over-recovery of $8,427, the 2021 under-recovery of $2,620, and interest of $2
associated with any over- and under-recoveries, the resulting total 2021 true-up
is an over-recovery of $5,808.
Projected 2022 Costs
Fort Meade projects zero capital expenditures for the
replacement of cast iron/bare steel infrastructure in 2022. Therefore, the 2022
GRIP factors are designed to only collect the remaining 2021 over-recovery of
$5,808 and the revenue requirement of $23,918 associated with the 2021 year-end
total investment. Table 1-3 shows Fort Meade’s 2022 revenue requirement
calculation.
Table 1-3
Fort Meade 2022 Revenue
Requirement Calculation
|
2022 Projected Expenditures
|
$0
|
|
Return on Investment
|
$13,766
|
|
Depreciation Expense
|
5,592
|
|
Property Tax Expense
|
4,560
|
|
2022 Revenue Requirement
|
$23,918
|
|
Less 2021 Over-recovery
|
-5,808
|
|
2022 Total Revenue Requirement
|
$ 18,109
|
Source: Witness
Craig Testimony Schedules C-2, Page 16, and D-1, Page 17
Proposed Surcharges for FPUC, Chesapeake, and
Fort Meade
As established in the 2012 order approving the GRIP
program, the total 2022 revenue requirement is allocated to the rate classes
using the same methodology used for the allocation of mains and services in the
cost of service study used in the utilities’ most recent rate case. The
respective percentages were multiplied by the 2022 revenue requirements and
divided by each rate class’ projected therm sales to provide the GRIP surcharge
for each rate class.
The proposed 2022 GRIP surcharge for FPUC’s residential
customers on the Residential Service (RS) schedule is $0.31642 per therm
(compared to the current surcharge of $0.22417 per therm). The monthly bill
impact is $6.33 for a residential customer using 20 therms per month. The
proposed FPUC GRIP surcharges are shown in Attachment B, Tariff Sheet No. 7.907.
The proposed 2022 GRIP surcharge for Chesapeake’s
residential customers on the FTS-1 schedule is $0.11405 per therm (compared to
the current surcharge of $0.11567). The monthly bill impact is $2.28 for a
residential customer using 20 therms per month. The proposed Chesapeake GRIP
surcharges are shown in Attachment B, Tariff Sheet Nos. 7.907 and 7.910.
The proposed 2022 GRIP surcharge for Fort Meade’s
residential customers on the RS schedule is $0.15245 per therm (compared to the
current surcharge of $0.16325). The monthly bill impact is $3.05 for a
residential customer using 20 therms per month. The proposed Fort Meade GRIP
surcharges are shown on Tariff Sheet No. 7.906 in Attachment B.
Conclusion
Staff believes the calculation of the 2022 GRIP surcharge
revenue requirements and the proposed GRIP surcharges for FPUC, Chesapeake, and
Fort Meade are reasonable and accurate. Staff recommends that the Commission
should approve FPUC’s, Chesapeake’s, and Fort Meade’s proposed GRIP surcharges
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 tariffs 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. (Sandy)
Staff Analysis:
If Issue 1 is approved and a protest is
filed within 21 days of the issuance of the order, the tariffs 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.
