Case Background
On March 1, 2023, Florida Power & Light
Company (FPL or Company), filed for a mid-course correction of its 2023 fuel
cost recovery charges (MCC Petition).[1] The Company last filed for a mid-course
correction of its fuel charges in January 2023. The January 2023 mid-course
correction was approved at the March 7, 2023 Commission Conference. Following
the January 2023 mid-course correction, the Company’s projected fuel-related
revenue requirement continued to shift downward. This projected cost shift prompted
the Company to file for a subsequent mid-course correction (instant petition) to
incorporate the reduction into customer rates.
Mid-Course
Corrections
Mid-course corrections are used by the
Florida Public Service Commission (Commission) between annual clause hearings
whenever costs deviate from revenue by a significant margin. Under Rule
25-6.0424, Florida Administrative Code (F.A.C.), which is commonly referred to
as the “mid-course correction rule,” a utility must notify the Commission
whenever it expects to experience an under- or over-recovery of certain service
costs greater than 10 percent. The notification of a 10 percent cost-to-revenue
variance shall include a petition for mid-course correction to the fuel cost
recovery or capacity cost recovery factors, or shall include an explanation of
why a mid-course correction is not practical. The mid-course correction rule
and its codified procedures are further discussed throughout this recommendation.
FPL’s
Petition
In its MCC Petition, the Company estimates
an approximate $494 million reduction of fuel-related costs for the 2023 period
relative to its previous estimate. FPL is proposing to apply approximately $379
million of this amount to the period May 2023 through December 2023, and the
remaining approximate $115 million to be included in its 2024 fuel cost
recovery factors. FPL states the purpose of implementing the cost reduction
over this period is to partially offset the bill impact associated with the
storm restoration costs approved for collection from April 2023 through March
2024 in Docket No. 20230017-EI.[2]
The Company is requesting that its revised
fuel cost recovery factors and associated tariff become effective beginning
with the May 2023 billing cycle. The proposed effective date is further
discussed in both Issues 1 and 2.
The Commission is vested with jurisdiction
over the subject matter of this proceeding by the provisions of 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 modify FPL’s
currently-approved fuel cost recovery factors for the purpose of incorporating
its projected 2023 fuel cost reduction?
Recommendation:
Yes. Staff recommends the Commission approve
adjustments to FPL’s fuel cost recovery factors for the purpose of
incorporating a portion of the Company’s projected 2023 fuel cost reduction. Accordingly,
FPL’s currently-approved 2023 fuel cost recovery factors should be reduced by $378,598,949.
(Zaslow, G. Kelley, Higgins)
Staff Analysis:
FPL
submitted its prior 2023 mid-course correction petition on January 23, 2023, for
the purposes of addressing its under-recovery of 2022 fuel costs. The Company’s
2022 net under-recovery of fuel costs was approximately $2.1 billion. Through
the January mid-course correction, FPL proposed to account for approximately
$937 million of its 2022 under-recovery in the current, or 2023 period and
defer approximately $1.2 billion for collection in 2024. The request also
included incorporating a reduction to FPL’s then-estimated 2023 fuel-related
costs in the amount of approximately $1.0 billion. The January mid-course
correction request was approved at the March 7, 2023 Commission Conference. The
Company subsequently updated its 2023 fuel cost projection. The results of this
update indicate FPL’s projected 2023 fuel-related costs are approximately $494
million lower than estimated in January 2023. This reduction is primarily due
to lower assumed prices for natural gas. The main factor influencing the
decline in natural gas prices in 2023 is mild winter weather across large parts
of the country resulting in lower natural gas consumption.[3]
The
Company developed its proposed mid-course correction amount using 11 months of
forecasted sales data (May 2023 through March 2024). The factors proposed in
this proceeding are currently contemplated to be charged for eight months in
2023. As is typical procedure, later this year newly developed
12-month-applicable factors will be proposed for authorization to begin with
the first billing cycle of January 2024.
Projected 2023 Fuel Cost Recovery
Position
FPL’s
estimated 2023 fuel-related costs have decreased substantially since the filing
of its previous mid-course correction in January 2023.[4]
More specifically, the Company now estimates a reduction to its 2023
fuel-related costs in the amount of $493,878,360. The Company proposes to apply
$378,598,949 of this amount to rates in 2023, and $115,279,411 to rates in 2024.[5]
The
primary factor driving the change in projected 2023 fuel costs is lower assumed
pricing for natural gas. More specifically, the underlying market-based natural
gas price data used for the previous or January mid-course correction was
sourced on January 3, 2023.[6] This
underlying data was used to produce an estimated average 2023 delivered natural
gas cost of $5.70 per million British thermal unit (MMBtu).[7]
However, as indicated in its MCC Petition, FPL now estimates its average cost
of delivered natural gas in 2023 will be $4.95 per MMBtu, representing a
decrease of (13.2) percent.[8] The
updated cost estimate was based on natural gas futures/prices sourced on
February 1, 2023, or roughly one month later than the previous estimate used to
set current rates.[9]
Mid-Course Percentage
Using the
values shown on Schedule E1-B of the MCC Petition and following the methodology
prescribed in Rule 25-6.0424(1)(a), F.A.C., the mid-course percentage is equal
to the estimated end-of-period total net true-up, including interest, divided
by the current period’s total actual and estimated jurisdictional fuel revenue
applicable to period, or ($707,462,276) / $3,829,271,573.[10]
This calculation results in a mid-course correction level of (18.5) percent at
December 31, 2023.
Fuel Factor
FPL’s
currently-approved annual levelized fuel factor beginning with the first April
2023 billing cycle is 3.957 cents per kilowatt-hour (kWh).[12]
The Company is requesting to decrease its currently-approved 2023 annual
levelized fuel factor beginning May 2023 to 3.526 cents per kWh, or by (10.9)
percent.
Bill Impacts
In Tables
1-1 and 1-2 below, staff displays the bill impacts of the mid-course correction
proposal to typical residential customers using 1,000 kWh of electricity a
month in FPL’s Peninsular and Northwest (former Gulf Power Company) service
territories. Following Tables 1-1 and 1-2, staff addresses the impact of the
proposed MCC on non-residential customers:
|
Table 1-1
|
|
FPL Peninsular Service
Territory
|
|
Monthly Residential
Billing Detail for the First 1,000 kWh
|
|
Invoice Component
|
Currently-Approved Charges
April 2023
($)
|
Proposed
Charges
Beginning
May
2023
($)
|
Difference
($)
|
Difference
(%)
|
|
Base Charge
|
$80.11
|
$80.11
|
$0.00
|
0.0%
|
|
Fuel Charge
|
36.56
|
32.24
|
(4.32)
|
(11.8%)
|
|
Conservation
Charge
|
1.22
|
1.22
|
0.00
|
0.0%
|
|
Capacity Charge
|
2.12
|
2.12
|
0.00
|
0.0%
|
|
Environmental
Charge
|
3.12
|
3.12
|
0.00
|
0.0%
|
|
Storm
Protection Plan Charge
|
3.82
|
3.82
|
0.00
|
0.0%
|
|
Storm
Restoration Surcharge
|
15.30
|
15.30
|
0.00
|
0.0%
|
|
Transition
Rider
|
(1.58)
|
(1.58)
|
0.00
|
0.0%
|
|
Gross Receipts
Tax and Regulatory Assessment Fee
|
3.71
|
3.60
|
(0.11)
|
(3.0%)
|
|
Total
|
$144.38
|
$139.95
|
($4.43)
|
(3.1%)
|
Source: Document No. 01638-2023.
FPL’s currently-approved total residential charge for the
first 1,000 kWh of usage for April 2023 is $144.38.[13]
If the Company’s mid-course correction proposal is approved, then the current
total residential charge for the first 1,000 kWh of usage beginning in May will
be $139.95, a decrease of approximately (3.1) percent. Concerning
non-residential customers, FPL reported that bill decreases based on average
levels of usage for small-sized commercial customers would range from
approximately (3.0) to (3.9) percent, (3.9) percent for medium-sized commercial
customers, (4.2) percent for large-sized commercial customers, and (6.8)
percent for industrial customers.[14]
|
Table 1-2
|
|
FPL Northwest Service
Territory
|
|
Monthly Residential
Billing Detail for the First 1,000 kWh
|
|
Invoice Component
|
Currently-Approved
Charges
April
2023
($)
|
Proposed
Charges
Beginning
May
2023
($)
|
Difference
($)
|
Difference
(%)
|
|
Base Charge
|
$80.11
|
$80.11
|
$0.00
|
0.0%
|
|
Fuel Charge
|
36.56
|
32.24
|
(4.32)
|
(11.8%)
|
|
Conservation
Charge
|
1.22
|
1.22
|
0.00
|
0.0%
|
|
Capacity Charge
|
2.12
|
2.12
|
0.00
|
0.0%
|
|
Environmental
Charge
|
3.12
|
3.12
|
0.00
|
0.0%
|
|
Storm Protection
Plan Charge
|
3.82
|
3.82
|
0.00
|
0.0%
|
|
Storm
Restoration Surcharge
|
15.30
|
15.30
|
0.00
|
0.0%
|
|
Transition
Rider
|
16.85
|
16.85
|
0.00
|
0.0%
|
|
Gross Receipts
Tax and Regulatory Assessment Fee
|
4.20
|
4.08
|
(0.12)
|
(2.9%)
|
|
Total
|
$163.30
|
$158.86
|
($4.44)
|
(2.7%)
|
Source:
Document No. 01638-2023.
FPL’s
currently-approved Northwest total residential charge for the first 1,000 kWh
of usage for April 2023 is $163.30.[15]
If the Company’s mid-course correction proposal is approved, the current total
Northwest residential charge for the first 1,000 kWh of usage beginning in May
will be $158.86, a decrease of approximately (2.7) percent. Concerning
non-residential customers, FPL reported that bill decreases based on average
levels of usage for small-sized commercial customers would range from
approximately (2.6) to (3.4) percent, (3.5) percent for medium-size commercial
customers, and (3.7) percent for large-size commercial customers. A figure
associated with an industrial class for the Northwest service territory was not
identified.[16]
Summary
FPL’s MCC
Petition indicates a need for its fuel recovery factors to be revised. As shown
in the MCC Petition, the Company’s projected 2023 fuel-related costs have been
reduced by $493,878,360. The Company proposes to account for $378,598,949 of
this fuel cost reduction in the current period and defer $115,279,411 into
2024. The revised fuel cost recovery factors associated with staff’s
recommendation are shown on Appendix A.
Conclusion
Staff recommends the
Commission approve adjustments to FPL’s fuel cost recovery factors for the
purpose of incorporating a portion of the Company’s projected 2023 fuel cost
reduction. Accordingly, FPL’s currently-approved 2023 fuel cost recovery factors
should be reduced by $378,598,949.
Issue 2:
If approved by the Commission, what is the
appropriate effective date for FPL’s revised fuel cost recovery factors?
Recommendation:
The fuel cost recovery factors, as shown on Appendix
A, should become effective with the first billing cycle of May 2023. (Hampson,
Brownless, Sandy)
Staff Analysis:
Over
the last 20 years in the Fuel Clause docket, the Commission has considered the
effective date of rates and charges of revised fuel cost recovery factors on a
case-by-case basis. The Commission has approved fuel cost recovery factor rate
decreases effective sooner than the next full billing cycle after the date of
the Commission’s vote with the range between the vote and the effective date
being from 25 to 2 days. The rationale for that action being that it was in the
customers’ best interests to implement the lower rate as soon as possible.[17]
In its MCC
Petition, FPL proposes to lower its 2023 fuel factors beginning with the first
billing cycle of May 2023. In the instant case, there are 27 days between the
Commission’s vote on April 4th and the beginning of FPL’s May 2023
billing cycle (May 1st).[18]
Concerning
advisement of the instant request, the Company has engaged in numerous outreach
efforts regarding the potential bill impacts of its proposal. Specifically, FPL
issued a press release on March 1, 2023, informing its customers of the
mid-course correction proposal. Further, on March 1, 2023, and subsequently on
March 7, 2023, the Company informed its customers of the future potential
adjustments related to the mid-course correction through a web-based billing
information portal titled “2023 Bills”. The Company also sent emails to
residential and small business customers on March 9, 2023, that included a
description of the mid-course correction proposal. The Company also plans to
separately contact numerous commercial, industrial, and governmental customers
to inform them of its proposal and the potential impact on their bills.[19]
Conclusion
Staff
recommends that the fuel cost recovery factors, as shown on Appendix A, become
effective with the first billing cycle of May 2023.
Issue 3:
Should this docket be closed?
Recommendation:
No. The 20230001-EI docket is an on-going proceeding
and should remain open. (Brownless, Sandy)
Staff Analysis:
The fuel docket is an on-going proceeding and should
remain open.
