Discussion
of Issues
Issue 1:
Should the Commission authorize FPL to implement an
interim storm restoration recovery charge?
Recommendation:
Yes. The Commission should authorize FPL to
implement an interim storm restoration recovery charge, subject to refund. Once
the total actual storm costs are known, FPL should be required to file
documentation of the storm costs for Commission review and true up of any
excess or shortfall. (Andrews)
Staff Analysis:
As stated in the Case Background, FPL filed a
petition for a limited proceeding seeking authority to implement an interim
storm restoration recovery charge to recover an estimated total of $1.3 billion
for incremental restoration costs related to Hurricanes Ian and Nicole and to
replenish the storm reserve. In its petition, FPL requested to replenish the
storm reserve to the pre-storm level of $219.9 million.
The petition was filed pursuant to the provisions of the 2021
Settlement approved by the Commission in Order No. PSC-2021-0446-S-EI. Storm
restoration costs for Ian and Nicole were incurred during the term of the 2021
Settlement. Pursuant to Paragraph 10 of the 2021 Settlement, FPL can begin
recovery of storm costs 60 days following the filing of a petition for
recovery.
FPL also prepared an alternate storm charge calculation
seeking authority to implement an interim storm restoration recovery charge to
recover an estimated total of $1.5 billion which combines the incremental
restoration costs related to Hurricanes Ian and Nicole with the remaining
amounts to be collected for Hurricanes Michael, Sally, and Zeta, which have
been previously approved by the Commission for GPC, and to replenish the storm
reserve.
In its petition, FPL asserted that it incurred total
retail recoverable costs of approximately $1.5 billion as a result of
Hurricanes Michael, Sally, Zeta, Ian, and Nicole. The Company further asserted
that this amount was calculated in accordance with the Incremental Cost and
Capitalization Approach methodology prescribed in Rule 25-6.0143, Florida
Administrative Code.
The approval of an interim storm restoration recovery
charge is preliminary in nature and is subject to refund pending further review
once the total actual storm restoration costs are known. After the actual costs
are reviewed for prudence and reasonableness, and are compared to the actual
amount recovered through the interim storm restoration recovery charge, a
determination will be made whether any over/under recovery has occurred. The
disposition of any over/under recovery, and associated interest, will be
considered by the Commission at a later date.
Based on a review of the information provided by FPL in
its petition, staff recommends the Commission authorize the Company to
implement an interim storm restoration recovery charge subject to refund. Once
the total actual storm costs are known, FPL should be required to file
documentation of the storm costs for Commission review and true-up of any
excess or shortfall.
Issue 2:
What is the appropriate security to guarantee the
funds collected subject to refund through the interim storm restoration charge?
Recommendation:
The appropriate security to guarantee the funds
collected subject to refund is a corporate undertaking. (D. Buys)
Staff Analysis:
Staff recommends that all funds collected subject to
refund be secured by a corporate undertaking. The criteria for a corporate
undertaking include sufficient liquidity, ownership equity, profitability, and
interest coverage to guarantee any potential refund. FPL requested a 12-month
collection period from April 2023 through March 2024 for Interim Storm Cost
Recovery Charges of $1.5 billion related to Hurricanes Michael, Sally, Zeta,
Ian and Nicole. Staff reviewed FPL’s three most recent annual reports filed
with the Commission (2021, 2020, and 2019) to determine if the Company can
support a corporate undertaking to guarantee the funds collected for recovery
of incremental storm restoration costs related to the weather events. FPL’s
financial information demonstrates the Company has acceptable levels of
liquidity, ownership equity, profitability, and interest coverage to support a
potential refund of $1.5 billion. Moreover, it is improbable FPL will be
required to refund the entire requested amount.
Staff believes FPL has adequate resources to support a
corporate undertaking in the amount requested. Based on this analysis, staff
recommends that a corporate undertaking of $1.5 billion is acceptable. This
brief financial analysis is only appropriate for deciding if the Company can support
a corporate undertaking in the amount proposed and should not be considered a
finding regarding staff’s position on other issues in this proceeding.
Issue 3:
Should the Commission approve FPL's proposed interim
storm restoration recovery charge tariff?
Recommendation:
No. The Commission should deny FPL’s proposed
interim storm restoration recovery charge tariff sheet No. 8.030.7. The
Commission should approve FPL’s alternate storm charge calculation and
associated tariff sheet as shown in Attachment A to this recommendation,
effective with the first billing cycle of April 2023. Furthermore, effective
with the first billing cycle of April 2023, tariff sheet Nos. 8.030.4, 8.030.5,
and 8.030.6 should be cancelled, as shown in Attachment A to the
recommendation. The alternate storm charge calculation avoids significant
disparities in surcharges among customers of one, consolidated utility, reduces
regulatory lag and interest payments, and mitigates the potential for
overlapping storm recovery charges in the future. The interim storm restoration
recovery charge should be subject to a final true-up. (Hampson, Draper,
Stiller)
Staff Analysis:
FPL is seeking approval of interim storm cost
recovery surcharges associated with Hurricanes Ian and Nicole as shown in
proposed tariff sheet No. 8.030.7 (Appendix F to the petition). The surcharges
would be applicable to all rate classes and customers served by FPL including
customers previously served by Gulf Power Company (GPC or FPL’s Northwest
Florida).
Currently, bills for FPL’s Northwest Florida customers include
surcharges for Hurricanes Michael, which equates to $8 on the residential 1,000
kilowatt-hour (kWh) bill, and Sally ($3/1,000 kWh). The Hurricane Michael
surcharge went into effect in July 2019 and was approved to terminate in
October 2023. Once the Hurricane Michael surcharge terminates, the Commission
approved that the $3/1,000 kWh residential Hurricane Sally surcharge would
increase to $10/1,000 kWh. Once recovery of Hurricane Sally is complete in
October 2024, the Commission approved the recovery of Hurricane Zeta
($9.34/1,000 kWh) for the months of November and December 2024. These
hurricanes impacted GPC’s service territory prior to the merger of FPL and GPC.
Tariff sheet Nos. 8.030.4, 8.030.5, and 8.030.6 show the currently approved
surcharges for Michael, Sally, and Zeta, applicable to FPL’s Northwest Florida
customers. FPL indicated in its calculations in Appendix A of the petition that
the storm costs associated with the Hurricane Michael surcharge are expected to
be fully recovered by March 31, 2023.
For the reasons discussed below, staff is recommending
approval of FPL’s alternate storm charge calculation and associated tariff
sheets which were provided in Appendix H to the petition. The alternate storm
charge calculation combines the recovery of incremental storm costs associated
with Hurricanes Ian and Nicole with the remaining amounts to be collected for
Hurricanes Michael, Sally, and Zeta, which have previously been approved by the
Commission. Accordingly, the alternate proposal cancels the current Hurricanes
Michael, Sally, and Zeta tariff sheets effective April 2023, that are
applicable to FPL’s Northwest Florida customers only, and provides instead the
proposed “2022 consolidated interim storm restoration recovery” tariff sheet
No. 8.030.7 (alternate storm tariff). The alternate storm tariff, which staff
recommends the Commission approve, is designed to recover the incremental
storm-related costs related to Hurricanes Michael, Sally, Zeta, Ian, and Nicole
from all FPL customers.
The current storm surcharges for Sally and Zeta applicable
to FPL’s Northwest Florida customers were established in 2022 by Final Order of
the Commission following a disputed fact hearing. Testimony filed by FPL in 2021 in its rate
case indicated that FPL’s Northwest Florida legacy
storm restoration costs and surcharges associated with Hurricanes Michael and
Sally were to remain applicable to only those customers.
Final orders of the Commission are generally afforded administrative finality
and are not subject to subsequent modification. The
issue of maintaining the current surcharge in place for FPL’s Northwest Florida
customers only until full recovery was not specifically litigated or a material
issue in either the prior storm recovery or FPL rate case docket. Staff is not
persuaded that finality is attached to this issue. Moreover, administrative finality
does not apply where there has been a substantial change in circumstances or a
demonstrated public interest.
Staff believes both are present in this docket and, accordingly, the Commission
has the legal authority to unify the charges.
Hurricanes Ian and Nicole affected only FPL Peninsular customers,
i.e., customers served by FPL prior to the merger with GPC. The proposal to
apply the surcharge for this storm recovery to all current FPL customers,
including FPL’s Northwest Florida customers who were not impacted, is a
substantial change in circumstances from the prior approach of segregating
costs based on impacts. Staff believes that spreading costs evenly across customers
for all storms no matter the location of impacts is the appropriate reaction to
these changed circumstances.
The alternate storm charge calculations project a 12-month
recovery period (April 2023 through March 2024), subject to a final true-up.
Under the currently-approved recovery schedule, recovery of Hurricanes Sally
and Zeta costs are projected to be complete in December 2024. In response to
staff’s data request, FPL stated that this accelerated recovery of storm costs
would “benefit FPL and its general body of customers by reducing the amount of
interest recovered from customers and regulatory lag, while also mitigating the
potential for overlapping storm recovery charges in the future.”
As to whether the alternative is preferable, FPL stated in its response that it
“views both as being potentially appropriate options for storm cost recovery.”
FPL explained that it has allocated the storm cost
recovery amount to the rate classes consistent with the rate design approved in
the 2021 Settlement.
Staff reviewed the storm cost recovery allocation and calculation of rates, for
FPL’s proposal and the alternate calculations, and it appears that FPL has
calculated rates in accordance with the 2021 Settlement, using the most recent
load research study and projected billing determinants for the recovery period.
If approved by the Commission, the storm cost recovery surcharge would be
included in the non-fuel energy charge on customer bills, which FPL states is
consistent with its standard practice.
For residential customers, the staff-recommended alternate
surcharge would be 1.530 cents per kWh, which would equate to $15.30 on a 1,000
kWh residential bill. Under FPL’s proposed tariff, for residential customers,
the surcharge would be 1.384 cents per kWh, which would equate to $13.84 on a
1,000 kWh residential bill. Under FPL’s proposal, FPL’s Northwest Florida
customers would pay the proposed $13.84/1,000 kWh while continuing to pay the
approved Hurricanes Sally and Zeta surcharges. Staff notes that FPL’s Northwest
Florida customers will have paid for all the Hurricane Michael costs by March
31, 2023.
Under the alternate tariff, the FPL Peninsular customers would
pay a storm recovery surcharge that is $1.46 ($15.30-$13.84) higher than FPL’s
proposal on the 1,000 kWh bill for a 12-month period. However, FPL’s Northwest Florida
customers would save monthly between $11 (Hurricanes Michael and Sally
surcharges) to $9.34 (Hurricane Zeta surcharge) on the 1,000 kWh bill for a 21-month
period. Staff believes that the savings to FPL Northwest Florida customers, in
addition to the reasons discussed above, outweigh the incremental $1.46/1,000
kWh for the FPL Peninsular customers, when comparing the two storm recovery
options.
CONCLUSION
The Commission
should deny FPL’s proposed interim storm restoration recovery charge tariff No.
8.030.7. The Commission should approve FPL’s alternate storm charge calculation
and associated tariff sheet as shown in Attachment A to this recommendation,
effective with the first billing cycle of April 2023. Furthermore, effective
with the first billing cycle of April 2023, tariff sheet Nos. 8.030.4, 8.030.5,
and 8.030.6 would be cancelled, as shown in Attachment A to the recommendation.
The alternate storm charge calculation avoids significant disparities in
surcharges among customers of one, consolidated utility, reduces regulatory lag
and interest payments, and mitigates the potential for overlapping storm
recovery charges in the future. The interim storm restoration recovery charge
should be subject to a final true-up.
Issue 4:
Should this docket be closed?
Recommendation:
No. This docket should remain open pending final
reconciliation of actual recoverable storm costs with the amount collected
pursuant to the interim storm restoration recovery charge and the calculation
of a refund or additional charge if warranted. (Stiller)
Staff Analysis:
No, this docket should remain open pending final
reconciliation of actual recoverable storm costs with the amount collected
pursuant to the interim storm restoration recovery charge and the calculation
of a refund or additional charge if warranted.
