Discussion
of Issues
Issue 1:
Should the Commission approve Tampa Electric Company’s
application for authority to issue and/or sell securities for the calendar year
ending December 31, 2023?
Recommendation:
Yes. The amount of all equity and long-term debt
securities issued during calendar year 2023 should not exceed $1.5 billion, and
the maximum amount of short-term debt outstanding at any one time during
calendar year 2023 should not exceed $2.2 billion. (D. Buys)
Staff Analysis:
In its joint application with PGS to issue
securities during calendar year 2023, Tampa Electric stated that on January 1,
2023, the Company is planning to transfer the assets, liabilities, and equity
that have been recorded on the books of its PGS division into a separate
corporation called Peoples Gas System, Inc. The new company will be a wholly
owned subsidiary of a newly formed gas operations holding company, TECO Gas
Operations, Inc., which would be a subsidiary of TECO Energy, Inc.
Included in the liabilities transferred will be PGS’s
allocation of outstanding unsecured notes issued by Tampa Electric and
outstanding short-term borrowings that are planned to be converted into an
Intercompany Debt Agreement with Tampa Electric, with interest rates on each
allocation being maintained accordingly. During 2023, Tampa Electric will
provide additional short-term debt funding to PGS, Inc. through the
Intercompany Debt Agreement at Tampa Electric’s prevailing cost of short-term
debt borrowings. The Intercompany Debt Agreement will remain outstanding until
PGS, Inc. pays Tampa Electric all principal and interest due on the Intercompany
Debt Agreement. PGS, Inc. plans on paying off the debt associated with the
Intercompany Debt Agreement in 2023 by issuing its own long-term and short-term
debt. The initial obligation of PGS, Inc. under the Intercompany Debt Agreement
is expected to be approximately $800 million. The total amount of borrowing
available to PGS, Inc. under the Intercompany Debt Agreement will be
approximately $1.2 billion.
Tampa Electric requests the authority to issue, sell
and/or exchange equity securities and issue, sell, exchange and/or assume
long-term or short-term debt securities and/or to assume liabilities or
obligations as guarantor, endorser or surety during calendar year 2023. The
Company also seeks authority to enter into interest rate swaps or other
derivative instruments related to debt securities. Any exercise of the
requested authority will be for the benefit of the Tampa Electric or its
affiliate PGS, Inc. under the Intercompany Debt Agreement.
The amount of all equity and long-term debt securities
issued, sold, exchanged, or assumed and liabilities and obligations assumed or
guaranteed as guarantor, endorser, or surety should not exceed in the aggregate
$1.5 billion during the calendar year 2023, including any amounts issued to
retire existing long-term debt securities. The maximum amount of short-term
debt outstanding at any one time during calendar year 2023 will not exceed $2.2
billion.
In connection with this application, the Company confirms
that the capital raised pursuant to this application will be used in connection
with the activities of the Company’s regulated electric and gas divisions, or
its affiliate PGS, Inc. under the Intercompany Debt Agreement, and not the
unregulated activities of the utilities or their affiliates.
Staff has reviewed
Tampa Electric’s projected capital expenditures. Tampa Electric’s projected construction
budget for 2023 is $1.151 billion. The amount requested by the Company ($3.7 billion) exceeds its projected capital
expenditures ($1.151 billion in 2023). The additional amount requested
exceeding the projected capital budget expenditures allows for funding of the
Intercompany Debt Agreement with PGS, Inc. ($800 million) and financial
flexibility for unexpected events such as hurricanes, financial market
disruptions, and other unforeseen circumstances. Staff believes the requested
amounts are appropriate. Staff recommends Tampa Electric’s application for
authority to issue securities during calendar year 2023 be approved.
Issue 2:
Should the Commission approve Peoples Gas System,
Inc.’s application for authority to issue and/or sell securities for the
calendar year ending December 31, 2023.
Recommendation:
Yes. The amount of all equity and long-term debt securities issued
during calendar year 2023 should not exceed $1.4 billion, and the maximum
amount of short-term debt outstanding at any one time during calendar year 2023
should not exceed $1.2 billion. (D. Buys)
Staff Analysis:
As discussed in Issue 1, on January 1, 2023, PGS,
Inc., a new wholly owned subsidiary of TECO Energy, Inc., is planned to be
established and the assets, liabilities, and equity that have been recorded on
the books of PGS and reported in its Annual Report to the Florida Public
Service Commission and Earnings Surveillance Reports are planned to be legally
moved from Tampa Electric to the newly formed Peoples Gas System, Inc. During
2023, short-term debt funding will be provided to PGS, Inc. through an
Intercompany Debt Agreement at Tampa Electric’s prevailing cost of short-term
debt. The Intercompany Debt Agreement will remain outstanding until PGS, Inc.
pays Tampa Electric all principal and interest due on the Intercompany Debt
Agreement. PGS, Inc. plans on paying off the debt associated with the
Intercompany Debt Agreement in 2023 by issuing its own long-term and short-term
debt.
The initial obligation of PGS, Inc. under the Intercompany
Debt Agreement is expected to be approximately $800 million. PGS, Inc. intends
to access the third-party lending market during 2023 but cannot predict when
during 2023 it will do so. If necessary, PGS, Inc. may obtain temporary
short-term bank borrowings (used to retire the Intercompany Debt Agreement
principal and interest) that would be replaced with a combination of long-term
debt and short-term debt borrowings.
PGS, Inc., through Tampa Electric, requests the authority
to issue, sell, and/or exchange equity securities and issue, sell, exchange,
and/or assume long-term or short-term debt securities and/or to assume
liabilities or obligations as guarantor, endorser or surety during the period
covered by this Application. PGS, Inc. also requests authority to enter into
interest rate swaps or other derivative instruments related to debt securities.
Any exercise of the requested authority will be for the benefit of PGS, Inc.
In connection with this application, PGS, Inc. confirms
that the capital raised pursuant to this application will be used in connection
with the activities of PGS, Inc.’s regulated gas distribution services and not
the unregulated activities of the utility or its affiliates
The amount of equity (excluding equity moved from Tampa
Electric to the new Peoples Gas System, Inc. on January 1, 2023, as described
above) and long-term debt securities issued, sold, exchanged, or assumed and
liabilities and obligations assumed or guaranteed as guarantor, endorser, or
surety (excluding the initial obligation assumed by PGS, Inc. on January 1,
2023 under the Intercompany Debt Agreement of approximately $800 million) will
not exceed in the aggregate $1.4 billion during the period covered by this
Application (2023), including any amounts issued to retire the Intercompany
Debt Agreement with Tampa Electric and amounts needed for potential long-term
emergency funding. The maximum amount of short-term debt, as described above to
potentially retire the Intercompany Debt Agreement with Tampa Electric,
outstanding at any one time and to avail PGS, Inc. of short-term emergency funding
and other purposes, will not exceed $1.2 billion.
Staff has reviewed
PGS, Inc.’s request and its projected capital expenditures. PGS Inc.’s
projected construction budget for 2023 is $333 million. The amount requested by
the Company ($2.6 billion) exceeds its
projected capital expenditures ($333 million in 2023). The additional amount
requested exceeding the projected capital budget expenditures allows for the
repayment of the Intercompany Debt Agreement with Tampa Electric ($800 million)
and financial flexibility for unexpected events such as hurricanes, financial
market disruptions, and other unforeseen circumstances. Staff believes the
requested amounts are appropriate. Staff recommends PGS Inc.’s application for
authority to issue securities during calendar year 2023 be approved.
Issue 3:
Should this docket be closed?
Recommendation:
No. This docket should remain open to allow the
Companies time to file the required Consummation Reports. (Watrous)
Staff Analysis:
For monitoring purposes, this docket should remain
open until May 3, 2024, to allow the Companies time to file the required
Consummation Reports. Tampa Electric and Peoples Gas System, Inc. should be
required to file separate consummation reports within 90 days after the end of
calendar year 2023.
