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State of Florida
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Public Service Commission
Capital Circle Office Center ● 2540 Shumard
Oak Boulevard
Tallahassee, Florida 32399-0850
-M-E-M-O-R-A-N-D-U-M-
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DATE:
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February 23, 2023
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TO:
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Office of Commission Clerk (Teitzman)
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FROM:
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Division of Accounting and Finance (Snyder,
D. Buys, Norris)
Division of Economics
(Draper, Hampson)
Office of the General
Counsel (Brownless, Watrous)
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RE:
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Docket No. 20230020-EI – Petition for
limited proceeding for recovery of incremental storm restoration costs
related to Hurricanes Elsa, Eta, Isaias, Ian, Nicole, and Tropical Storm
Fred, by Duke Energy Florida, LLC.
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AGENDA:
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03/07/23 – Regular Agenda – Interested Persons May Participate
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Graham
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CRITICAL DATES:
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03/24/23 (60-Day Interim Deadline)
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SPECIAL INSTRUCTIONS:
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Case Background
On January 23,
2023, Duke Energy Florida, LLC (DEF or Company) filed a petition for a limited
proceeding seeking authority to implement an interim storm restoration recovery
charge to recover $442.1 million for the incremental restoration costs related
to Hurricanes Elsa, Eta, Ian, Isaias, and Nicole and Tropical Storm Fred, as
well as to replenish its storm reserve. This amount includes approximately $4.5
million in interest.
DEF
filed its petition pursuant to the provisions of the 2017 Second Revised and
Restated Settlement Agreement (2017 Settlement) approved by the Commission in
Order No. PSC-2017- 0451-AS-EU and the 2021 Settlement Agreement (2021
Settlement) approved by the Commission in Order No. PSC-2021-0202-AS-EI. Pursuant to Order No. PSC-2021-0425-FOF-EI
(2021 Rate Mitigation Agreement), DEF charged the remaining uncollected storm
restoration costs resulting from Hurricanes Eta and Isaias, estimated at $9.2
million, to the storm reserve, while reserving the right to collect the
remainder of the unrecovered storm cost balance at a later time. DEF also voluntarily agreed to forego
recovering costs related to Hurricane Elsa through a storm surcharge and
instead reserved the right to collect an estimated $15 to $18 million of storm
restoration costs at a later date. As a result of the 2021 Rate Mitigation
Agreement, DEF deferred collection of approximately $24.4 million in
storm-related costs. DEF is now seeking to recover those costs as part of its
petition. Pursuant to the 2017
Settlement and 2021 Settlement, the Company can recover storm costs, without a
cap on the level of charges on customer bills, on an interim basis beginning 60
days following the filing of a petition for recovery. DEF has proposed interim
storm restoration charges applicable to all rate classes over a 12-month
recovery period, effective with the first billing cycle of April 2023.
The
Commission has jurisdiction over this matter pursuant to Sections 366.04,
366.05, 366.06, and 366.076, Florida Statutes.
Discussion
of Issues
Issue 1:
Should the Commission authorize DEF to implement an
interim storm restoration recovery charge?
Recommendation:
Yes. The Commission should authorize DEF to
implement an interim storm restoration recovery charge, subject to refund. Once
the total actual storm costs are known, DEF should be required to file
documentation of the total storm costs for Commission review and true-up of any
excess or shortfall. (Snyder)
Staff Analysis:
DEF filed a petition for a limited proceeding
seeking authority to implement an interim storm restoration recovery charge to
recover $442.1 million for the incremental restoration costs related to Hurricanes
Elsa, Eta, Ian, Isaias, Nicole and Tropical Storm Fred, and to replenish its
storm reserve. In its petition, DEF requested to replenish the storm reserve to
$131.9 million.
The petition was filed pursuant to the provisions of the 2017
Settlement approved by the Commission in Order No. PSC-2017-0451-AS-EU and 2021
Settlement approved by the Commission in Order No. PSC-2021-0202-AS-EI. Storm
restoration costs for Eta, Elsa, Isaias, and Fred were incurred while the 2017
Settlement Agreement was in effect. Storm restoration costs for Ian and Nicole
were incurred during the term of the 2021 Settlement Agreement. The Storm Cost
Recovery provisions of the respective Settlement Agreements are identical. Pursuant
to Paragraph 38 of the 2017 Settlement and Paragraph 30c of the 2021 Settlement,
DEF can begin recovery of storm costs, without a cap, 60 days following the
filing of a petition for recovery. DEF has proposed an interim storm recovery
charge of $13.14 per 1,000 kilowatt-hours (kWh) on a residential customer bill
over a 12-month recovery period effective the first billing cycle of April 2023.
In its petition, DEF asserted that it incurred total
retail recoverable costs of approximately $442.1 million as a result of Hurricanes
Elsa, Eta, Ian, Isaias, and Nicole and Tropical Storm Fred, as well as to
replenish its storm reserve. 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 (F.A.C.).
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 DEF 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, DEF 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. DEF requested a 12-month collection period from April
2023 to March 2024 for Interim Storm Cost Recovery Charges of $442,074,721 related
to Hurricanes Elsa, Eta, Ian, Isaias, Nicole and Tropical Storm Fred. Staff
reviewed DEF’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. DEF’s financial
information indicates the Company’s liquidity is deficient, that is, that current
assets are less than current liabilities. However, the Company participates in
Duke Energy Corporation’s (DEF’s parent company) money pool and has access to
additional funds if needed. In addition, DEF’s ownership equity, profitability,
and interest coverage are sufficient to support a potential refund of $442
million. Moreover, it is improbable DEF will be required to refund the entire
requested amount.
Staff believes that DEF has adequate resources to support
a corporate undertaking in the amount requested. Therefore, staff recommends
that a corporate undertaking of $442 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 DEF's proposed interim storm restoration recovery charge
tariff as shown in Attachment A to this recommendation?
Recommendation: Yes.
The Commission should approve DEF’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 and ending the earlier of full recovery
or with the last billing cycle of March 2024, whichever occurs first. The
interim storm restoration recovery charge should be
subject to a final true-up. (Hampson)
Staff Analysis: DEF is seeking
approval of interim storm cost recovery surcharges associated with Hurricanes
Elsa, Eta, Isaias, Ian, Nicole, and Tropical Storm Fred as shown in proposed
Tariff Sheet Nos. 6.105 and 6.106 (Attachment A to this recommendation). The
surcharges would be applicable to all rate classes. Tariff Sheet No 6.105 indicates
the proposed interim storm cost recovery surcharges
and Tariff Sheet No. 6.106 defines the storm cost recovery surcharge.
DEF explained that it has allocated the storm cost
recovery amount to the rate classes consistent with the rate design approved in
the 2021 Settlement.[4] Staff
reviewed the storm cost recovery allocation and calculation of rates and it
appears that DEF has calculated rates in accordance with the 2021 Settlement,
using the most recent load research study and projected billing determinants
for the recovery period.
The interim storm restoration recovery charge calculations
are shown on pages 9 and 10 in Appendix A to DEF’s petition. For residential
customers, the surcharge would be 1.314 cents per kWh, which would equate to
$13.14 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 DEF’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 and ending the earlier of full recovery or with the last billing
cycle of March 2024, whichever occurs first. 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. (Brownless)
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.
