Case Background
On April 1,
2021, Tampa Electric Company (TECO or utility) filed a petition (original petition)
for approval of tariff modifications of its underground residential
distribution (URD) tariff. TECO’s
current URD tariffs were approved in Order No. PSC-2018-0319-TRF-EI.[1]
In TECO’s
original petition, the utility provided updated cost calculations and
supporting documentation for its low-density and high-density service lateral
differential cost, per Rule 25-6.078, Florida Administrative Code (F.A.C.).
These calculations take into account current labor and material costs and an
updated net present value (NPV) analysis, which includes the average historical
storm restoration costs, as allowed in subsection 4 of the rule. The utility’s
calculation determined that the per lot undergrounding differential for high-density
subdivisions is $0.00 and the per lot undergrounding differential for low-density
subdivisions is $370.29. In its original petition, TECO proposed to waive the
$370.29 per lot low-density subdivision charge, pursuant to Rule 25-6.078(10),
F.A.C., and continue to set the charge at $0.00.
Staff issued
three data requests on the original petition, for which responses were provided
on May 19, July 14, and August 2, 2021. In addition, on August 4, 2021, TECO
filed a revised response to question 3a in staff’s third data request. Staff
held a conference call with the utility on August 31, 2021. As a result of that
call, on September 15, 2021, the utility provided a supplement to its response
to staff’s first data request, question one. On September 30, 2021, TECO filed
a response to staff’s first supplemental data request.
On November 10,
2021, staff held a subsequent conference call with the utility. In response to
this call, the utility filed an amended petition on November 12, 2021,
modifying the utility’s requested low-density per lot differential. In the amended
petition, the utility removed its requested waiver of the $370.29 per lot charge,
pursuant to Rule 25-6-078(10), F.A.C., and proposed a low-density per lot
differential of $370.29, as supported by the calculations. The proposed tariffs
and charges associated with the amended petition are shown in legislative
format in Attachment A of the recommendation.
The Commission
suspended the proposed tariffs on May 4, 2021, pursuant to Section 366.06(3),
Florida Statutes (F.S.). On September 28, 2021, TECO waived the eight-month
requirement of Section 366.06(3), F.S. The Commission has jurisdiction over
this matter pursuant to Sections 366.03, 366.04, 366.05, and 366.06 F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve TECO’s underground
residential distribution tariffs and associated charges?
Recommendation:
Yes, the Commission should approve TECO’s
underground residential distribution tariffs and associated charges as filed in
the amended petition, effective thirty days after the Commission vote. (Forrest)
Staff Analysis:
Rule 25-6.078, F.A.C., (URD rule) defines electric investor-owned
utilities’ (IOU) responsibilities for filing updated URD tariffs. All electric IOUs
are required to file supporting data and analyses for URD tariffs at least once
every three years. The URD tariffs provide standard charges for underground
service in new residential subdivisions and represent the additional costs, if
any, the utility incurs to provide underground service in place of overhead
service. The cost of standard overhead construction is recovered through base
rates from all ratepayers. In lieu of overhead construction, customers have the
option of requesting underground facilities. Typically, the URD customer is the
developer of the subdivision.
In its amended petition, the utility resubmitted its cost
calculations and supporting documentation for its low-density and high-density
per lot service lateral cost differentials as filed in the original petition.
The utility’s calculation determined that the per lot undergrounding
differential for high-density subdivisions is $0.00 and the per lot
undergrounding differential for low-density subdivisions is $370.29. The
currently approved high- and low-density cost differentials are $0.00. While labor and material costs have fluctuated
since the 2018 filing, the main reason for the increase in the calculated low-density
differential is the decrease in the NPV operational cost analysis credit. A lower
URD differential charge is typically the result of the avoided storm
restoration costs, offsetting any higher labor and material costs associated
with underground construction.
Table 1-1 presents a comparison between the currently
approved and proposed URD differentials for the low-density and high-density
subdivision models. The differentials are shown as a per lot charge.
Table 1-1
Comparison of URD
Differential per Lot
|
|
Current
Differential
|
Proposed
Differential
|
|
Low-density
|
$0.00
|
$370.29
|
|
High-density
|
$0.00
|
$0.00
|
Source:
TECO’s amended Petition Filed on November 12, 2021.
As shown in Table 1-1 above, the differential has increased
for low-density subdivisions and has remained $0.00 for the high-density
subdivisions. Two primary factors impacted the calculation of TECO’s proposed
URD charges are discussed in greater detail below: (1) updated labor and
material costs and (2) calculation of operational costs.
Updated Labor and Material Costs
The installation costs of both underground and overhead
facilities include the labor and material costs to provide primary, secondary,
and service distribution lines as well as transformers. The costs of poles are
specific to overhead service while the costs of trenching and backfilling are
specific to underground service. Table 1-2 compares the currently approved per lot
2018 costs and the 2021 costs for underground and overhead labor and material
for the two subdivision models.
Table 1-2
Labor and Material Costs per
Lot
|
|
2018 Costs
|
2021 Costs
|
Difference
|
|
Low-density
|
|
|
|
|
Underground labor/material costs
|
$2,082
|
$2,441
|
$359
|
|
Overhead labor/material costs
|
$1,289
|
$1,429
|
$140
|
|
Per lot differential
|
$793
|
$1,013
|
$220
|
|
High-density
|
|
|
|
|
Underground labor/material costs
|
$1,597
|
$1,881
|
$284
|
|
Overhead labor/material costs.
|
$1,001
|
$1,122
|
$121
|
|
Per lot differential
|
$595
|
$760
|
$165
|
Source: TECO’s amended
petition filed on November 12, 2021.
As indicated in Table 1-2 above, the total labor and
material cost differentials increased for both model subdivisions. The utility
states that the reason for the increase is due to the Covid-19 pandemic’s
effect on the supply chain which caused reduced manufacturing capacity.
Updated Operational Costs
Rule 25-6.078(4), F.A.C., provides that the differences in
NPV of operational costs between overhead and underground systems, including
average historical storm restoration costs over the life of the facilities, be
included in the URD charge. Operational costs include operations and
maintenance (O&M) costs and capital costs. The inclusion of the operational
costs is intended to capture longer term costs and benefits of undergrounding.
In calculating the per lot cost differential between
overhead and underground, Rule 25-6.078(4), F.A.C., allows the utility to
calculate the NPV of operational costs to include the average historical storm
restoration costs over the life of underground and overhead systems, and take
into consideration any cost differential in its calculations. In recent URD filings, TECO has used a
three-year rolling historical average to calculate its NPV storm restoration
costs. In response to staff’s data request number two, the utility explained
that it used an updated computer-generated methodology to calculate storm
restoration costs. This methodology relies on long-term potential costs based
on hurricane simulations and is based on the testimony of TECO witness Steven
P. Harris in TECO’s recent rate case proceeding.
The Commission approved the use of this methodology in calculating the utility’s
storm reserve surplus in Docket No. 20210034-EI.
TECO explained that the study looks at likely outcomes over a long time period
based on historical storm data. The utility states that this methodology helps
to reduce the volatility in estimated, avoided storm restoration costs.
Table 1-3
NPV of Operational Costs
Differential per Lot
|
|
2018 Calculation
|
2021 Calculation
|
Difference
|
|
Low-density
|
|
|
|
|
Underground NPV- Operational Costs
|
$1,247
|
$1,254
|
$7
|
|
Overhead NPV- Operational Costs
|
$2,531
|
$1,897
|
$(634)
|
|
Per lot Differential
|
$(1,284)
|
$(642)
|
$642
|
|
High-density
|
|
|
|
|
Underground NPV- Operational Costs
|
$590
|
$584
|
$(6)
|
|
Overhead NPV- Operational Costs
|
$1,871
|
$1,408
|
$(463)
|
|
Per lot Differential
|
$(1,281)
|
$(825)
|
$456
|
Source: TECO’s amended petition filed on November 12, 2021.
Table 1-3 shows that the NPV of operational costs for
overhead service decreased in both low-density and high-density subdivision
models.
Other Proposed Tariff Changes
TECO’s proposed URD tariffs also include standard charges
for the installation and trenching to install underground service laterals from
overhead distribution, underground service laterals converted from existing
overhead service drops, and non-refundable deposits for cost estimates for the
conversion of existing overhead distribution facilities to underground
facilities. If a customer requests an underground service lateral, the tariff
includes a credit to the customer for avoiding a pole. The charges have been
updated to reflect current material and labor costs.
Conclusion
Staff has reviewed TECO’s proposed changes to its URD
tariffs and associated charges, the accompanying work papers, and responses to
staff’s data requests and discussions with the utility. Staff believes TECO’s
proposed URD tariffs and associated charges as filed in the amended petition
are reasonable and recommends approval of the tariffs shown in Attachment A.
These tariffs should become effective thirty days after the Commission vote.
Issue 2:
Should this docket be closed?
Recommendation:
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. (Stiller)
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.
