Case Background
On January 26, 2021, the Commission
entered a Final Order Approving Stipulation in this Docket. The Order approved Duke Energy Florida,
LLC’s (Duke) Clean Energy Connection (CEC) Program and associated tariffs as
set forth in the stipulation. Duke’s CEC Program is a voluntary community solar
program that allows participating customers to pay a subscription fee in
exchange for receiving bill credits related to the solar generation produced by
the CEC Program solar facilities. The League of United Latin American Citizens
of Florida (LULAC) timely appealed that Final Order to the Florida Supreme Court.
After full briefing and oral argument, the Court remanded this proceeding to
the Commission with the following guidance:
The [final]
order under review is inadequate to an extent that prevents us from deciding the
central issue that we have identified. To be clear, we express no position now
on the merits of LULAC’s challenge. But we believe it is necessary to remand
this case and afford the Commission an opportunity to enter a revised final
order that adequately explains the agency’s findings and reasoning. See §
120.68(6)(a)(1), Fla. Stat. (a reviewing court may “remand the case for further
agency proceedings”). Subject to any requirements imposed by law, the form of
the proceedings on remand will be up to the Commission, including the decision
whether to allow the parties to present additional evidence.
A copy of the Florida Supreme Court’s Order
is appended to this Recommendation as Attachment A.
The
“central issue” raised by LULAC and for which the Court has requested
additional findings and conclusions is whether the funding structure of the CEC
program results in a subsidy to the participants in violation of Section
366.03, Florida Statutes (F.S.). The Court identified the following specific
aspects of this issue for the Commission to address on remand:
[1] whether the Commission accepts LULAC’s
characterization of the program’s bill credit feature as a ‘subsidy,’ and if
so, [2] why the Commission nonetheless considers the program to have
established rates that are fair, reasonable, and not unduly preferential.
Appended
to this recommendation as Attachment B is a draft Revised Final Order setting
forth staff’s recommended additional findings, reasoning, and conclusions
regarding the CEC program, tariff, and stipulation based on the existing
record. Staff recommends that all aspects of the original Final Order remain
unchanged.
Discussion
of Issues
Issue 1:
Should the record be reopened?
Recommendation:
No. (Stiller)
Staff Analysis:
On June
8, 2022, staff conducted an informal conference with the parties to obtain
input regarding remand procedures. All parties agreed that the record need not
be re-opened and no further briefing was desired. Staff concurs with the
parties that it is not necessary to open the record to take additional evidence
or receive further written submissions from the parties. Staff recommends the
existing record is sufficient for the Commission to address the matters
identified by the Court.
Issue 2:
Should the Commission accept LULAC’s
characterization of the CEC program’s bill credit feature as a “subsidy,” and
if so, should the Commission nonetheless consider the program to have
established rates that are fair, reasonable, and not unduly preferential?
Recommendation:
Staff recommends that the Commission not accept
LULAC’s characterization of the CEC program’s bill credit feature as a
“subsidy.” Staff further recommends that
Commission find that the program has established rates that that are fair,
reasonable, and not unduly preferential. (Stiller)
Staff Analysis:
Staff’s full analysis for Commission consideration
is set forth in the attached draft Revised Final Order.
Issue 3:
Should this docket be closed?
Recommendation:
No. This docket should remain open pending
resolution of the appeal by the Florida Supreme Court. Once the Court has
disposed of the appeal, the docket should be closed administratively. (Stiller)
Staff Analysis:
Staff conferred with the Clerk’s Office at the
Florida Supreme Court regarding this matter and was informed that the prior
Final Order had not been vacated and that Supreme Court Docket Number SC21-303
remains open. Staff was informed that
the Revised Final Order is to be filed with the Florida Supreme Court in Docket
Number SC21-303. Accordingly, this
docket should remain in litigation status pending resolution of the appeal by
the Florida Supreme Court. Once the Court has disposed of the appeal, this
docket should be closed administratively.
BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION
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In
re: Petition for a limited proceeding to approve clean
energy connection program and tariff and stipulation, by Duke Energy Florida,
LLC.
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DOCKET NO. 20200176-EI
ORDER
NO.
ISSUED:
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The following Commissioners participated in the
disposition of this matter:
ANDREW GILES FAY,
Chairman
ART GRAHAM
GARY F. CLARK
MIKE LA ROSA
GABRIELLA PASSIDOMO
APPEARANCES:
DIANNE M.
TRIPLETT, ESQUIRE, 299 First Avenue North, St. Petersburg, Florida 33701 and
MATTHEW R. BERNIER, ESQUIRE, 106 E. College Avenue, Suite 800, Tallahassee,
Florida 32301
On
behalf of Duke Energy Florida, LLC (Duke or Company).
RICHARD GENTRY
and CHARLES REHWINKEL, ESQUIRES, 111 West Madison Street, Room 812,
Tallahassee, Florida 32399-1400
On
behalf of Office of Public Counsel (OPC).
Bradley Marshall and Jordan Luebkemann,
ESQUIRES, 111 S. Martin Luther King Jr. Blvd., Tallahassee, Florida 32301 and Dominique Burkhardt, ESQUIRE, 4500
Biscayne Blvd., Ste. 201, Miami, Florida 33137
On behalf of League of
United Latin American Citizens of Florida, a/k/a
LULAC
Florida Educational Fund, Inc. (LULAC).
STEPHANIE U.
EATON, ESQUIRE, 110 Oakwood Drive, Suite 500, Winston-Salem, North Carolina
27103 and DERRICK PRICE WILLIAMSON and BARRY A. NAUM, ESQUIRES, 1100 Bent Creek
Boulevard, Suite 101, Mechanicsburg, Pennsylvania 17050
On
behalf of Walmart Inc. (Walmart).
GEORGE CAVROS,
ESQUIRE, 120 E. Oakland Park Blvd., Suite 105, Oakland Park, Florida 33334
On
behalf of Southern Alliance for Clean Energy (SACE).
Katie Chiles Ottenweller, 838 Barton
Woods Road NE, Atlanta, Georgia 30307
On
behalf of Vote Solar (Vote Solar).
JON C. MOYLE,
JR. and KAREN PUTNAL, ESQUIRES, 118 North Gadsden Street, Tallahassee, Florida
32312
On behalf of
Florida Industrial Power Users Group (FIPUG).
SHAW STILLER
and JENNIFER CRAWFORD, ESQUIRES, Florida Public Service Commission, 2540
Shumard Oak Boulevard, Tallahassee, Florida 32399-0850
On
behalf of the Florida
Public Service Commission (Staff).
MARY ANNE
HELTON, ESQUIRE, Senior Attorney, Florida Public Service Commission, 2540
Shumard Oak Boulevard, Tallahassee, Florida 32399-0850
Advisor
to the Florida
Public Service Commission.
KEITH C.
HETRICK, ESQUIRE, General Counsel, Florida Public Service Commission, 2540
Shumard Oak Boulevard, Tallahassee, Florida 32399-0850
Florida
Public Service Commission General Counsel
REVISED FINAL ORDER
BY THE COMMISSION:
Background
On
January 26, 2021, we entered a Final Order Approving Stipulation in this
docket. The
Order approved Duke Energy Florida, LLC’s (Duke) Clean Energy Connection (CEC)
Program and associated tariffs as set forth in the stipulation. Duke’s CEC
Program is a voluntary community solar program that allows participating
customers to pay a subscription fee in exchange for receiving bill credits
related to the solar generation produced by the CEC Program solar facilities. The
League of United Latin American Citizens of Florida (LULAC) timely appealed
that Final Order to the Florida Supreme Court. After full briefing and oral
argument, the Court remanded this proceeding to us with the following guidance:
The [final] order under review is inadequate to an
extent that prevents us from deciding the central issue that we have identified.
To be clear, we express no position now on the merits of LULAC’s challenge. But
we believe it is necessary
to remand this case and afford the Commission an
opportunity to enter a revised final order that adequately explains the
agency’s findings and reasoning. See § 120.68(6)(a)(1), Fla. Stat. (a
reviewing court may “remand the case for further agency proceedings”). Subject
to any requirements imposed by law, the form of the proceedings on remand will be up to the
Commission, including the decision whether to allow the parties to present
additional evidence.
On June 8, 2022, Commission staff
conducted an informal conference with the parties to obtain input regarding
remand procedures. Staff has represented to us that the parties agreed that the
record need not be re-opened and no further briefing was desired. After
reviewing the existing record in light of the Court’s direction on remand, we
agree and conclude that it is not necessary to open the record to take
additional evidence or receive further written submissions from the parties.
The existing record is sufficient for us to address the matters identified by
the Court.
This Order contains additional
findings, reasoning, and conclusions regarding the CEC program, tariff, and
stipulation based on the existing record. All aspects of the original Final
Order remain unchanged.
Supplemental
Findings and Conclusions
The “central issue” raised by LULAC
and for which the Court has requested additional findings and conclusions is
whether the funding structure results in a subsidy to the participants in
violation of Section 366.03, Florida Statutes (F.S.). The Court identified the
following specific aspects of this issue for us to address on remand:
[1]
whether the Commission accepts LULAC’s characterization of the program’s bill
credit feature as a ‘subsidy,’ and if so, [2] why the Commission nonetheless
considers the program to have established rates that are fair, reasonable, and
not unduly preferential.
After a brief
discussion of the facets of the CEC program most relevant to this Revised
Order, we will specifically address and answer these questions.
The
Subscription Fee and Bill Credits
As characterized by LULAC, the
“subsidy” at issue on remand is the positive difference between the
subscription fees paid by participants and the bill credits they are projected
to receive over the life of the program, which amounts to $67.6 million in
present value. In other words, it is the bill credits of $67.6 million received
by subscription fee paying participants, and paid by the general body of
ratepayers, which LULAC characterizes as a subsidy.
The total
amount to be paid by program participants in subscription fees was calculated
as 104.9% of the fixed revenue requirement associated with constructing and
operating the
program’s solar
power plants, net of avoided generation and transmission capital, fixed costs,
and gas reservation charges. This total paid
by participants over the life of the program is projected to be $833.4 million,
which exceeds the fixed revenue requirement by $39.2 million. This excess
inures to the benefit of the general body of ratepayers, as the electricity
generated by the program’s solar power plants will be used to provide service
to all customers.
The bill credit was calculated to
ensure payback to each participant of the subscription fee at year seven. This timeframe is consistent with
SolarTogether, an existing Florida Power & Light Company solar program we
approved several years ago. Applying general principles from
SolarTogether and other community solar programs, Duke then calculated a flat
amount per kWh to be allocated as a bill credit, with that amount increasing
1.5% annually beginning in year four (first year of full production from all
ten solar plants), such that participants hit a break-even point of fees and
credits at year five and achieve full payback at year seven.
Importantly,
a non-low-income participant will receive bill credits that exceed the subscription
fee only after five years of continuous enrollment, and will realize full
payback only after seven years of continuous enrollment. A customer who exits
the program would start again at the year one credit level if they chose to
rejoin.
The estimated net benefit value of
the program’s solar power plants to Duke’s system is substantial. This value
consists of avoided or deferred capacity, and reduced fuel consumption,
purchased power, variable operating and maintenance, and conventional pollutant
and carbon emission costs. Duke calculated the total net benefit value of the
CEC program as $532.7 million cumulative present value revenue requirement (CPVRR).
The net amount of bill credits over
subscription fees represents 12.7% of this economic value. The remainder of the total economic value (87.3%)
will inure to the benefit of the general body of ratepayers. All of the
electricity from the ten solar plants will be on the grid that serves the
general body of ratepayers. The CEC program will result in the construction of
749 megawatts (MW) of clean energy that is expected to serve all of Duke’s
customers for at least thirty years. We
previously found and here affirm that this program is in the public interest.
The CEC
program bill credits are not properly characterized as a “subsidy”
The term “subsidy” is not defined in
Chapter 366, F.S., or its implementing rules.
LULAC did not argue in this proceeding that we apply a specific
definition of that term, and referred to the bill credits interchangeably in
written submissions as a “subsidy” and a “cross-subsidy.” Those terms are labels affixed by LULAC as
part of its argument that the CEC program’s funding structure violates Section
366.03, F.S. As set forth below, use of
the terms “subsidy” or “cross-subsidy” or characterizing bill credits as such are
not dispositive of whether the rates are lawful.
Turning to LULAC’s specific
allegations on this record and this Court’s first question, we do not accept
LULAC’s characterization of the program’s bill credit feature as a “subsidy”
because the bill credits do not neatly fit the mold of “subsidy.” The recipients of the bill credits are not
receiving a credit to construct solar facilities, which is the goal of the CEC
program. In fact, the very purpose of
the program is to provide a participation opportunity for those who desire to
support solar energy development but do not have the capability, physical
space, or desire to construct on-site solar.
Additionally, those who choose to participate are not the sole users or
beneficiaries of the electricity the solar plants will generate. Importantly, for the first five years of
their subscription, most participants will pay more cumulatively in
subscription fees than they receive in return, which is the antithesis of a
subsidy.
However, as we note below, these
utility-scale solar plants would not be constructed on the proposed timeline
were it not for the CEC program, and the customers would not be incentivized
economically to participate in the program but for the bill credits. Over the life of the program, participants
who remain continuously subscribed for more than five years will receive a
greater benefit as compared to non-participants, and thus the bill credits do
result in some degree of different treatment of participants and
non-participants by Duke, no matter the label assigned. However, the mere existence of disparate
treatment of participants and nonparticipants (whether or not labeled or
characterized as a subsidy) is not itself dispositive of the lawfulness of the
program. As previously noted, Chapter
366, Florida Statutes, does not mention, define, or even prohibit a “subsidy.” What
Section 366.03, F.S. expressly prohibits is “undue preference or
advantage.” Thus, whether or not we
accept LULAC’s characterization of the bill credit as a subsidy, the only
question we ultimately must answer is the second question the Court remanded:
Do the bill credits result in rates that are just, reasonable, fair, and not
unduly preferential?
The bill
credits do not create an undue preference and the resulting rates are fair,
reasonable, and just
Section
366.03, F.S., provides, in pertinent part: “No
public utility shall make or give any undue or unreasonable preference or
advantage to any person or locality, or subject the same to any undue or
unreasonable prejudice or disadvantage in any respect.” The CEC program, with the bill credit
feature, does not create an undue preference or rates that are unfair,
unreasonable, or unjust.
We first note that the CEC program
does not provide an undue preference to any existing class of customers. The program is required to have diverse
participants across numerous customer classes, including commercial and
industrial (65%), and residential, small business, and local government (35%).
These groups have differing service, load, and cost characteristics.
Accordingly,
any feature of the program (such as bill credits) that impacts participants
differently than non-participants impacts a diverse group of ratepayers, not
one class. The existence of one current
customer – whether Walmart or some other entity – with a substantially larger
allocation than the other commercial customers does not dilute this class
diversity. Notably, twenty-two of the thirty customers who are currently signed
on as participants are local governments, healthcare organizations, and
schools.
There is a rational basis to treat
participants differently. Early subscribers
to the program who have steady, relatively high electricity use are referred to
by Duke as “anchor customers.” Due to
these initial participants and their substantial subscription fees, a large
amount of solar not previously contemplated is not only being constructed, but
is on an accelerated schedule. The
entire 749 MW – 10 solar plants sized at 74.9 MW each – is projected to be in
service by the end of 2024. In the 2024/2025 timeframe when all ten are
projected to be operational, the CEC solar plants should produce approximately
4% of Duke’s net energy for load.
Of significant importance in our
analysis of the CEC program is that the benefits that are created by the 749 MW
of new generation are realized by the entire body of ratepayers. By virtue of
Duke constructing 749 MW of solar instead of relying on traditional fossil fuel
generation to meet future energy needs, all customers will experience savings
from avoided or deferred generation, reduced fuel costs, lower operating and
maintenance costs, and projected emissions cost savings from reductions in carbon
dioxide. Over the life of the program, operation of the 10 solar facilities is
projected to displace more than 51 MWh of fossil fired generation, decreasing
annual average use of natural gas by 11 billion cubic feet and coal consumption
by 7,000 tons.
The displaced generation is due, in
part, to the deferral of several combustion turbines for multiple years over
the thirty year planning period and the reduction in the total number of new
turbines by one (for years 2026-2034). Duke is also committing to evaluate no
later than in its 2023 Ten Year Site Plan the potential to defer or replace an
additional planned combustion turbine unit with solar plus storage facilities.
In addition to the direct benefits of reduced investment in fossil fired
generation, the deferral of additional traditional generation provides
necessary space for new and evolving technologies.
There is no record evidence that
Duke had existing plans to add 749 MW of solar power before being approached by
customers and subsequently proposing the CEC program. There is record evidence that Duke had
existing solar at that time, is capable of developing more, and had plans for
only limited expansion. The reasonable
inference from these facts is that the CEC program accelerated the timing and
amount of solar in Duke’s energy portfolio, and thereby brought expanded
benefits to the general body of ratepayers on an expedited schedule.
Duke did not simply grant some
benefit to the specific commercial customers who approached the utility. Duke broadened program participation by
creating separate participant allocations for local governments and low-income
residential customers. Duke further
included provisions to ensure low-income participants would never pay more in a
subscription fee than
they would
receive in bill credits, thereby allowing persons who may not otherwise have
the financial ability to participate in solar energy the opportunity to do so.
In sum, while we must generally ensure that one customer is not charged
a greater or lesser amount than another customer with like services under the
same or similar circumstances, we may allow different treatment among otherwise
like customers if there is a reasonable basis to differentiate established in
the record. Based on the facts summarized above, we find
that affording a modest preference to the various participants is appropriate
and not undue.
There
is no statutory or rule formula to determine whether a particular rate
structure is unduly preferential. The final determination of undue preference is
a factual determination vested to the discretion of this Commission to make
based on the record and the circumstances in any specific docket. “This
Court has consistently recognized the broad legislative grant of authority
which [chapter 366] confer[s] and the considerable license the Commission
enjoys as a result of this delegation.” Citizens of State v. Pub. Serv.
Comm’n, , 425 So. 2d 534,
540 (Fla. 1982). Our broad
discretion in this docket is also being exercised in the context of a
stipulation, to which the public interest test applies. Thus, we must
ultimately examine the stipulation as a whole and weigh all of its various
components – not solely the bill credit – to make that public interest
determination.
The
total amount of bill credits afforded the participants is a relatively small
percentage of the total net benefits flowing from the CEC program. This total is divided among a diverse group
of participants. A portion of the bill
credit is dedicated to ensuring that low-income residential customers never pay
more in subscription fees than they receive in bill credits. Another portion of
the total bill credit amount is distributed to participating local governments, healthcare
organizations, and schools. The remaining bill credits are distributed to the
various commercial customers. All of the remaining benefits flowing from the
solar generation are realized by the entire body of ratepayers. Given this
structure that allocates the overwhelming majority of benefits to the general
body of ratepayers and divides the remainder among a range of participants, the
bill credits do not create an undue preference, and the resulting rates are
fair, just, and reasonable.
Decision
Duke did not plan to construct 749 MW
of new solar generation before being approached by existing customers about a
new solar program. Using that request as
a catalyst, Duke engaged in further outreach and ultimately created a program
for diverse participation in utility-scale solar for the benefit of all
customers. These overall benefits
include fuel diversification and substantial new renewable energy, both of
which further the stated intent of the Legislature. When placed in this appropriate context, the
benefit afforded the participants by one feature of Duke’s CEC program does not
create an undue preference.
Having again carefully reviewed the entire record, we find that, taken as
a whole, the Stipulation establishes rates that are fair, just, and reasonable,
is supported by the record evidence, and is in the public interest, and we
hereby approve it.
Based on the
foregoing, it is
ORDERED that the Clerk shall file a
true and correct copy of this Revised Final Order with the Florida Supreme
Court in Case No. SC21-303. It is further
ORDERED that this docket shall
remain open pending resolution of the appeal by the Florida Supreme Court. Once
the Court has disposed of the appeal, the docket shall be closed
administratively.
By
ORDER of the Florida Public Service Commission this
day of ,
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ADAM J. TEITZMAN
Commission Clerk
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Florida Public Service Commission
2540 Shumard Oak Boulevard
Tallahassee, Florida 32399
(850) 413‑6770
www.floridapsc.com
Copies furnished:
A copy of this document is provided to the parties of record at the time
of issuance and, if applicable, interested persons.
SPS
As Duke Witness Borsch noted in his rebuttal
testimony, as fuel (natural gas and coal) prices rise, solar power provides
increased savings.
“Subsidies, and,
therefore, rate discrimination, are inherent in any rate design.” Order No.
PSC-04-0417-PAA-EI, issued April 22, 2004, in Docket No. 031135-EI, In
re: Petition for approval to implement consolidated fuel adjustment surcharge
by Florida Public Utilities Company.
We may approve the stipulation in this docket under
the public interest test only if it is consistent with this governing
statute. See Sierra Club v. Brown,
243 So. 3d 903, 909 (Fla. 2018).
See Fla. Power Corp. v. Mayo, 203
So. 2d 614, 615 (Fla. 1967) (utility must “sufficiently
identif[y] and distinguish[] a class of consumers to preclude an effective
attack based on discrimination or arbitrary preference”).
See Order No. PSC-15-0496-FOF-EI, issued
October 23, 2015, in Docket No. 15085-EI,
In
re: Complaint by Erika Alvarez, Jerry Buechler, & Richard C. Silvestri
Against Fla. Power & Light Co. (“No statute, Commission rule or Commission
Order prescribes a particular format or manner in which FPL, or any other
utility, is required to administer its solar rebate reservations. Moreover, our
practice has been not to micromanage the business decisions of regulated
companies, but to instead focus on the end-product goal.”).
See Pennsylvania Co v. United
States, 236 U.S. 351, 361, 35 S. Ct. 370,
373 (1915) (“what is such undue or unreasonable
preference or advantage is a question not of law, but of fact”).
