Case Background
Tampa
Electric Company’s (Tampa Electric or Company) current Allowance for Funds Used
During Construction (AFUDC) rate of 5.98 percent was approved by Order No. PSC-2022-0245-PAA-EI,
issued June 27, 2022. On September 12, 2022, the Commission
issued Order No. PSC-2022-0322-FOF-EI approving Tampa Electric’s petition for a
limited proceeding to implement the return on equity (ROE) trigger provision in
Section 2(b) of the 2021 Rate Case Settlement. The ROE trigger provision
increased the Company’s currently authorized ROE of 9.95 percent by 25 basis
points to 10.20 percent, effective July 1, 2022. On September 22, 2022, Tampa Electric
filed a petition for approval to change its AFUDC rate from 5.98 percent to
6.07 percent, effective July 1, 2022. As required by Rule 25-6.0141(5), Florida
Administrative Code (F.A.C.), Tampa Electric filed with its petition Schedules
A, B, and C identifying the capital structure, capital structure adjustments,
and the methodology used to calculate the monthly AFUDC rate. The Commission
has jurisdiction over this matter pursuant to Chapter 366, Florida Statutes
(F.S.), including Sections 366.04, 366.05, and 366.06, F.S.
Discussion
of Issues
Issue 1:
Should the Commission approve Tampa Electric's
request to increase its AFUDC rate from 5.98 percent to 6.07 percent?
Recommendation:
Yes. The appropriate AFUDC rate for Tampa Electric is
6.07 percent based on a 13-month average capital structure for the period ended
June 30, 2022.
Staff Analysis:
Tampa Electric requested an increase in its AFUDC
rate from 5.98 percent to 6.07 percent. Rule 25-6.0141(3), F.A.C., Allowance
for Funds Used During Construction, provides the following guidance:
(3) The applicable AFUDC rate will be determined as
follows:
(a) The most recent 13-month average embedded cost of
capital, except as noted below, will be derived using all sources of capital
and adjusted using adjustments consistent with those used by the Commission in
the utility’s last rate case.
(b) The cost rates for the components in the capital
structure will be the midpoint of the last allowed return on common equity, the
most recent 13-month average cost of short-term debt and customer deposits, and
a zero cost rate for deferred taxes and all investment tax credits. The cost of
long-term debt and preferred stock will be based on end of period cost. The
annual percentage rate must be calculated to two decimal places.
In support of its requested AFUDC rate of 6.07 percent,
Tampa Electric provided its calculations and capital structure in Schedules A
and B attached to its request. Staff reviewed the schedules and determined that
the proposed rate was calculated in accordance with Rule 25-6.0141(3), F.A.C. The
requested increase in the AFUDC rate is due principally to an increase of 10
basis points in the weighted cost of common equity, offset slightly by a
decrease of 1 basis points in the weighted cost of long-term and short-term
debt. In its calculation, the Company appropriately used the mid-point return
on equity of 10.20 percent, which was approved by the Commission in Order No.
PSC-2022-0322-FOF-EI.
Issue 2:
What is the appropriate monthly compounding rate to
achieve the requested 6.07 percent annual AFUDC rate?
Recommendation:
The appropriate monthly compounding rate to achieve
an annual AFUDC rate of 6.07 percent is 0.004923. (D. Buys)
Staff Analysis:
Tampa Electric requested a monthly compounding rate
of 0.004923 to achieve an annual AFUDC rate of 6.07 percent. In support of the
requested monthly compounding rate of 0.004923, the Company provided its
calculations in Schedule C attached to its request. Rule 25-6.0141(4), F.A.C.,
provides a formula for discounting the annual AFUDC rate to reflect monthly
compounding. The rule also requires that the monthly compounding rate be
calculated to six decimal places.
Staff reviewed the Company’s calculations and determined
that they comply with the requirements of Rule 25-6.0141(4), F.A.C. Therefore,
staff recommends that a monthly compounding AFUDC rate of 0.004923 be approved.
Issue 3:
Should the Commission approve Tampa Electric's
requested effective date of July 1, 2022, for implementing the revised AFUDC
rate?
Recommendation:
Yes. The revised AFUDC rate should be effective July
1, 2022, for all purposes. (D. Buys)
Staff Analysis:
Tampa Electric’s
proposed AFUDC rate was calculated using a 13-month average capital structure
for the period ended June 30, 2022. Rule 25-6.0141(6), F.A.C., provides that:
No utility may charge or change its AFUDC rate without
prior Commission approval. The new AFUDC rate will be effective the month
following the end of the 12-month period used to establish that rate and may
not be retroactively applied to a previous fiscal year unless authorized by the
Commission.
The Company’s requested effective date of July 1, 2022,
complies with the requirement that the effective date does not precede the
period used to calculate the rate, and therefore should be approved.
Issue 4:
Should this docket be closed?
Recommendation:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order. (Dose)
Staff Analysis:
If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order.
