Discussion
of Issues
Issue 1:
Should the Commission authorize TECO to implement an
interim storm restoration recovery charge?
Recommendation:
Yes. The Commission should authorize TECO to
implement an interim storm restoration recovery charge, subject to refund. Once
the total actual storm costs are known, TECO should be required to file
documentation of the total storm costs for Commission review and true-up of any
excess or shortfall. (Hinson)
Staff Analysis:
As stated in the Case Background, TECO filed a petition
to seek recovery of $131 million in incremental storm restoration costs for the
Storms as well as the replenishment of its storm reserve. In its petition, TECO
requested to replenish the storm reserve to $55.8 million.
The petition was filed pursuant to the provisions of the 2021
Settlement. Pursuant to paragraph 8(a) of the 2021 Settlement, TECO is
authorized to seek recovery of costs associated with any tropical storms named
by the National Hurricane Center. Recovery of storm costs will begin, on an
interim basis, 60 days following the filing of a petition for recovery.
In its petition, TECO asserted that it incurred
approximate recoverable costs in the amounts of $7,499,858 for Hurricane
Dorian; $1,874,575 for Hurricane Elsa; $119,216,291 for Hurricane Ian; $1,152,980
for Hurricane Nicole; $1,944 for Tropical Storm Alberto; $8,282 for Tropical
Storm Nestor; and $729,515 for Tropical Storm Eta. The remaining $397,518 is
for GPS software used to track vendor crews identified by TECO as ARCOS, implemented
pursuant to the 2019 Settlement Agreement under the provision of Future Process
Improvements. The
Company further asserted that all amounts were 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 or under recovery, and associated interest, will be
considered by the Commission at a later date.
Based on a review of the information provided by TECO in
its petition, staff recommends that the Commission authorize the Company to
implement an interim storm restoration recovery charge subject to refund. Once
the total actual storm costs are known, TECO 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
amount collected subject to refund through the interim storm restoration
recovery 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. TECO requested a 12-month
collection period from April 2023 through March 2024 for Interim Storm Cost
Recovery Charges of $130,881,964 related to the Storms, including the ARCOS
cost. Staff reviewed TECO’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 all the weather events. TECO’s financial
information demonstrates the Company has a deficient level of liquidity; that
is, current assets are less than current liabilities. However, the Company has
sufficient levels of ownership equity, profitability, and interest coverage to
support a potential refund of $131 million. TECO’s average net income for the
three years 2021, 2020, and 2019 is almost three times the requested corporate
undertaking amount ($352 million vs. $131 million). Moreover, it is improbable
TECO will be required to refund the entire requested amount.
Staff believes TECO has adequate resources to support a
corporate undertaking in the amount requested. Based on this analysis, staff
recommends that a corporate undertaking of $131 million 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 TECO's proposed
interim storm restoration recovery charge tariff as shown in Attachment A to
the recommendation?
Recommendation:
Yes. The Commission should approve TECO’s proposed interim
storm restoration recovery charge tariff, as shown in Attachment A to this
recommendation, effective with the first billing cycle of April 2023 through
March 2024. The Commission should also approve TECO’s other tariff revisions, as
provided in its petition, which refer to the proposed storm surcharge. The
interim storm restoration recovery charge should be subject to a final true-up.
(Hampson)
Staff Analysis:
TECO is seeking approval of interim storm cost
recovery surcharges associated with the Storms. The proposed interim storm cost
recovery surcharges are shown in proposed Tariff Sheet No. 6.024 (Attachment A
to this recommendation). The surcharges would be applicable to all rate
classes. The Company has also proposed changes to several other tariffs to
include references to the proposed interim storm cost recovery surcharge, as
well as a definition for the storm surcharge in its technical terms and
abbreviations section. These tariff modifications are included in Exhibit 6 (clean
version) and Exhibit 7 (legislative version) to TECO’s petition.
TECO 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 and
it appears that TECO has calculated rates in accordance with the 2021
Settlement, using projected billing determinants for the recovery period.
The interim storm restoration recovery charge calculations
are shown in Exhibit 5 to TECO’s petition. For residential customers, the
surcharge would be 1.022 cents per kilowatt-hour (kWh), which would equate to
$10.22 on a 1,000 kWh residential bill. If approved by the Commission, the
storm cost recovery surcharge would be included in the non-fuel energy charge
on customer bills.
CONCLUSION
Staff recommends that the Commission approve TECO’s
proposed interim storm restoration recovery charge tariff, as shown in
Attachment A to this recommendation, effective with the first billing cycle of
April 2023 through March 2024. The Commission should also approve TECO’s other
tariff revisions which refer to the proposed storm surcharge. Furthermore, 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. (Thompson, Sandy)
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.
