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 2023?
Recommendation:
If the Commission has not yet made a decision in the
2022 rate case prior to December 1, 2022, then the GRIP surcharges as shown in
Attachment C to the recommendation should go into effect for the period January
through December 2023, and the surcharges in Attachment B should be denied. If the Commission approves in the 2022 rate
case the Companies’ proposals to roll the GRIP investment into rate base prior
to December 1, 2022, then the Commission should approve FPUC’s, Chesapeake’s,
and Fort Meade’s proposed GRIP surcharges for the period January through
December 2023, as shown in Attachment B to the recommendation, and the
surcharges shown in Attachment C should be denied.
If the Commission approves to consolidate the rate classes
in the 2022 rate case, within 10 business days after the Commission vote in the
2022 rate case docket, the Companies should recalculate the GRIP surcharges for
the consolidated rate classes. The revised GRIP surcharges should be submitted
for staff’s administrative approval and should be effective concurrent with any
revised Commission-approved base rates in the rate case docket. (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. Fort Meade completed its replacement program in
2019 and Chesapeake completed its replacement program in 2021. FPUC completed replacement
projects in 2022 in areas including the City of Boynton Beach, the City of West
Palm Beach, and the City of Lantana. FPUC
has approximately 0.5 miles of pipeline to replace in 2023, due to some permit
delays. The
Companies stated that they prioritized the replacement projects focusing on
areas of high consequence and areas more susceptible to corrosion. Attachment A
to the recommendation provides an update of mains and services replaced through
2022 and replacement forecasts for 2023.
FPUC’s True-ups by Year
FPUC’s calculation for the 2023 GRIP revenue requirement
and surcharges includes a final true-up for 2021, an actual/estimated true-up
for 2022, and projected costs for 2023. 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 true-up
calculations for 2021 and 2022.
Final True-up for 2021
FPUC stated that the revenues collected through the GRIP
surcharges for 2021 were $10,676,905, compared to a revenue requirement of $12,789,617,
resulting in an under-recovery of $2,112,712. Therefore, the 2020 over-recovery
of $326,121, the 2021 under-recovery of $2,112,712, and interest of $160
associated with any over- and under-recoveries results in a final 2021 under-recovery
of $1,786,751.
Actual/Estimated 2022 True-ups
FPUC provided actual revenues for January through July
2022 and estimated revenues for August through December 2022, totaling $16,474,089,
compared to an actual/estimated revenue requirement for 2022 of $15,431,274,
resulting in an over-recovery of $1,042,817. Therefore, the 2021 under-recovery
of $1,786,751, the 2022 over-recovery of $1,042,817, and interest of $9,859
results in a total 2022 under-recovery of $753,793.
Projected 2023 Costs
FPUC projects zero capital expenditures for the
replacement of cast iron/bare steel infrastructure in 2023. FPUC
moved $153,684,138 of total qualified investment into rate base in the rate
case docket. That amount represents the total investment projected at the time
of the rate case filing in May 2022. For the GRIP filing in September 2022,
FPUC had additional months of actual investment costs and an updated investment
amount of $159,599,228, leaving $5,915,090 ($159,599,228 - $153,684,138) to be
recovered through the 2023 GRIP factors as shown in Attachment B to the
recommendation.
The return on investment (which includes federal income
taxes, regulatory assessment fees, and bad debt), depreciation expense, and
property tax associated with the $5,915,090 investment, after subtracting accumulated
depreciation, is $366,128. After including the total 2022 under-recovery of $753,793,
the 2023 revenue requirement is $1,119,921. Table 1-1 shows FPUC’s 2023 revenue
requirement calculation.
Table 1-1
FPUC 2023 Revenue
Requirement Calculation
|
2023 Projected Expenditures
|
$0
|
|
Return on Investment
|
$187,999
|
|
Depreciation Expense
|
126,275
|
|
Property Tax Expense
|
51,855
|
|
2023 GRIP Revenue Requirement
|
$366,128
|
|
Plus 2022 Under-recovery
|
+753,793
|
|
2023 Total Revenue Requirement
|
$1,119,921
|
|
|
|
Source: Witness Waruszewski
Testimony Schedules C-2, Page 4, and D-1, Page 5
Chesapeake’s True-ups by Year
Chesapeake’s calculation for the 2023 GRIP revenue
requirement and surcharges includes a final true-up for 2021, an
actual/estimated true-up for 2022, and projected costs for 2023. Chesapeake
does not have a replacement recovery amount embedded in base rates.
Final True-up for 2021
Chesapeake stated that the revenues collected for 2021
were $4,067,038, compared to a revenue requirement of $4,102,754, resulting in
an under-recovery of $35,715. The 2020 under-recovery of $278,276, 2021
under-recovery of $35,715 and $124 for interest associated with any over- and
under-recoveries results in a final 2021 under-recovery of $314,115.
Actual/Estimated 2022 True-up
Chesapeake provided actual GRIP revenues for January
through July 2022 and estimated revenues for August through December 2022,
totaling $3,789,938, compared to an actual/estimated revenue requirement of $4,309,484,
resulting in an under-recovery of $519,544. The 2021 under-recovery of $314,115,
2022 under-recovery of $519,544, and interest of $8,855 associated with any
over- and under-recoveries results in a total 2022 under-recovery of $842,515.
Projected 2023 Costs
Chesapeake projects zero capital expenditures for the
replacement of cast iron/bare steel infrastructure in 2023, as the company
completed the replacement program in 2021. Chesapeake moved $41,948,432 of
total qualified investment into rate base in the rate case docket. That amount
represents the total investment projected at the time of the rate case filing
in May 2022. For the GRIP filing in September 2022, Chesapeake had additional
months of actual investment costs and an updated investment amount of $41,872,674,
leaving ($75,758) ($41,948,432 - $41,872,674) as a credit to the 2023 GRIP
factors, as shown in Attachment B to the recommendation.
The return on investment (which includes federal income
taxes, regulatory assessment fees, and bad debt), depreciation expense, and
property tax associated with the ($75,758) investment, after subtracting accumulated
depreciation, is ($48,807). The 2023 GRIP factors for Chesapeake are designed
to collect the remaining 2022 under-recovery of $842,515 and the revenue
requirement of ($48,807) associated with the 2022 investment. Table 1-2 shows
Chesapeake’s 2023 revenue requirement calculation.
Table 1-2
Chesapeake 2023 Revenue
Requirement Calculation
|
2023 Projected Expenditures
|
$0
|
|
Return on Investment
|
($37,095)
|
|
Depreciation Expense
|
(1,560)
|
|
Property Tax Expense
|
(10,152)
|
|
2023 Revenue Requirement
|
($48,807)
|
|
Plus 2022 Under-recovery
|
+842,515
|
|
2023 Total Revenue Requirement
|
$793,707
|
Source: Witness Waruszewski
Testimony Schedules C-2, Page 10, and D-1, Page 11
Fort Meade’s True-ups by Year
Fort Meade finished its replacement program in 2019.
Unlike FPUC and Chesapeake, only bare steel services (and no mains) required replacement
in Fort Meade.
Final True-up for 2021
Fort Meade stated that the revenues collected for 2021 were
$26,629, compared to a revenue requirement of $24,363, resulting in an
over-recovery of $2,266. Adding the 2020 over-recovery of $8,427, the 2021 over-recovery
of $2,266, and $3 for interest associated with any over- and under-recoveries,
the final 2021 over-recovery is $10,696.
Actual/Estimated 2022 True-up
Fort Meade provided actual GRIP revenues for January
through July 2022 and estimated revenues for August through December 2022
totaling $26,501, compared to an actual/estimated revenue requirement of
$24,881, resulting in an over-recovery of $1,619. Adding the 2021 over-recovery
of $10,696, the 2022 over-recovery of $1,619, and interest of $212 associated
with any over- and under-recoveries, the resulting total 2022 true-up is an
over-recovery of $12,527.
Projected 2023 Costs
Fort Meade projects zero capital expenditures for the
replacement of cast iron/bare steel infrastructure in 2023, as the company
completed the replacement program in 2019. Fort Meade’s total investment of
$253,934 has been moved into rate base in the rate case docket, with no rate
base balance remaining to be recovered through the 2023 GRIP factors. Therefore,
the 2023 GRIP factors, as shown in Attachment B to the recommendation, will be
a credit on customers’ bills and are designed to refund the remaining 2022
over-recovery of $12,527.
Proposed Surcharges for FPUC, Chesapeake, and
Fort Meade
As established in the 2012 Order approving the GRIP
program, the total 2023 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 2023 revenue requirements and
divided by each rate class’ projected therm sales to provide the GRIP surcharge
for each rate class.
The proposed 2023 GRIP surcharge for FPUC’s residential
customers on the Residential Service (RS) schedule is $0.02166 per therm
(compared to the current surcharge of $0.31642 per therm). The monthly bill
impact is $0.43 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 2023 GRIP surcharge for Chesapeake’s
residential customers on the FTS-1 schedule is $0.01970 per therm (compared to
the current surcharge of $0.11405). The monthly bill impact is $0.39 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 2023 GRIP surcharge for Fort Meade’s residential
customers on the RS schedule is ($0.12822) per therm (compared to the current
surcharge of $0.15245). The monthly bill impact is a credit of $2.56 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
If the Commission has not yet made a decision in the 2022
rate case prior to December 1, 2022, then the GRIP surcharges as shown in
Attachment C to the recommendation should go into effect for the period January
through December 2023, and the surcharges shown in Attachment B should be
denied. If the Commission approves in
the 2022 rate case the Companies’ proposals to roll the GRIP investment into
rate base prior to December 1, 2022, then the Commission should approve FPUC’s,
Chesapeake’s, and Fort Meade’s proposed GRIP surcharges for the period January
through December 2023, as shown in Attachment B to the recommendation, and the
surcharges shown in Attachment C should be denied.
If the Commission approves to consolidate the rate classes
in the 2022 rate case, within 10 business days after the Commission vote in the
2022 rate case docket, the Companies should recalculate the GRIP surcharges for
the consolidated rate classes. The revised GRIP surcharges should be submitted
for staff’s administrative approval and should be effective concurrent with any
revised Commission-approved base rates in the rate case docket.
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 approved 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. (Dose)
Staff Analysis:
If Issue 1 is approved and a protest is filed within
21 days of the issuance of the order, the approved 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.
