Discussion
of Issues
Issue 1:
Should the Commission modify FPL’s currently-authorized
fuel cost recovery factors for the purpose of incorporating its projected 2023
fuel cost reduction?
Recommendation:
Yes. Staff recommends the Commission authorize
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-authorized 2023 fuel cost recovery factors should
be reduced by $256,094,786. (Zaslow, G. Kelley, Higgins)
Staff Analysis:
FPL
submitted its last mid-course correction petition on March 1, 2023, to address a
predicted over-recovery of 2023 fuel costs. At that time, the Company’s 2023
net over-recovery of fuel costs was approximately $494 million. FPL proposed to
account for approximately $379 million of the 2023 over-recovery during 2023 (specifically
May 2023 through December 2023), and defer the remaining approximate $115
million to be included in 2024.[3] 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. Due
to the corresponding change in 2023 interest expense by applying the fuel cost
recovery factors approved in Order No. PSC-2023-0122-PCO-EI, that balance now
amounts to approximately $109 million.
Following
its last mid-course correction, the Company has subsequently updated its 2023
fuel cost projection. FPL now projects its 2023 fuel-related costs are
approximately $359 million lower than estimated in February 2023. This
reduction is primarily due to lower assumed prices for natural gas. The main factors
influencing the decline in natural gas prices in 2023 are elevated quantities
of natural gas in storage and increased natural gas production compared to
previous years.[6]
The
Company developed its (instant) proposed mid-course correction factors using nine
months of forecasted sales data (July 2023 through March 2024). The factors
proposed in this proceeding are currently contemplated to be charged for six
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 since the filing of its previous
mid-course correction in March 2023.[7]
The Company now estimates a reduction to its 2023 fuel-related costs in the
amount of $358,764,356. The Company proposes to apply $256,094,786 of this
amount to rates in 2023, and $102,669,570 to rates in 2024.
The
primary factor driving the change in projected 2023 fuel costs is lower assumed
pricing for natural gas. The underlying market-based natural gas price data
used for the 2023 fuel cost projection was sourced on February 1, 2023.[9] This
underlying data was used to produce an estimated average 2023 delivered natural
gas cost of $4.95 per million British thermal unit (MMBtu).[10]
However, as noted above and indicated in its MCC Petition, FPL now estimates
its average cost of delivered natural gas in 2023 will be $4.38 per MMBtu,
representing a decrease of (11.5) percent.[11]
The updated cost estimate was based on natural gas futures/prices sourced on May
1, 2023, or roughly three months later than the previous estimate used to set
current rates.[12]
Staff
compared the June through December 2023 commodity-only, i.e., excluding
delivery cost, price projection for natural gas underlying the Company’s
mid-course correction filing with current market prices.[13]
Staff observes the arithmetic average of FPL’s commodity-only natural gas price
projection for the seven-month period June through December 2023 is $2.75 per
MMBtu.[14] As
previously indicated, FPL’s pricing information was sourced on May 1, 2023.
Using more current data, or information sourced on May 26, 2023, staff
calculates an average natural gas (commodity-only) price of $2.71 per MMBtu for
the same seven-month period. The results of this comparison indicate that
natural gas prices over the relevant timeframe have decreased since the
development of the MCC Petition. However, staff notes that natural gas prices
are continuously subject to market-influencing forces and therefore can be
volatile.
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 ($733,450,360) / $3,502,348,466.[15]
This calculation results in a mid-course correction level of (20.9) percent at
December 31, 2023.
Fuel Factor
FPL’s
currently-authorized annual levelized fuel factor is 3.526 cents per
kilowatt-hour (kWh).[17] The
Company is requesting to decrease its currently-approved 2023 annual levelized
fuel factor beginning July 2023 to 3.142 cents per kWh, or by (10.9) percent.
Bill Impacts
In Tables 1-1
and 1-2 below, staff displays the bill impacts of the mid-course correction
proposal to typical residential customers using 1,000 kWh of electricity a
month in FPL’s Peninsular and Northwest (former Gulf Power Company) service
territories. Following Tables 1-1 and 1-2, staff addresses the impact of the
proposed MCC on non-residential customers:
|
Table 1-1
FPL Peninsular Service
Territory
|
|
Monthly Residential
Billing Detail for the First 1,000 kWh
|
|
Invoice Component
|
Currently-Authorized Charges
June 2023
($)
|
Proposed
Charges
Beginning
July
2023
($)
|
Difference
($)
|
Difference
(%)
|
|
Base Charge
|
$80.11
|
$80.11
|
$0.00
|
0.0%
|
|
Fuel Charge
|
32.24
|
28.39
|
(3.85)
|
(11.9%)
|
|
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
|
3.60
|
3.50
|
(0.10)
|
(2.8%)
|
|
Total
|
$139.95
|
$136.00
|
($3.95)
|
(2.8%)
|
Source: Document No. 03296-2023.
FPL’s
currently-authorized total residential charge for the first 1,000 kWh of usage
for June 2023 is $139.95.[18] 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 July will be $136.00,
a decrease of approximately (2.8) percent. Concerning non-residential
customers, FPL reported that bill decreases based on average levels of usage
for small-sized commercial customers would range from approximately (2.8) to (3.6)
percent, (3.6) percent for medium-sized commercial customers, (3.9) percent for
large-sized commercial customers, and (6.4) percent for industrial customers.[19]
|
Table 1-2
FPL Northwest Service
Territory
|
|
Monthly Residential
Billing Detail for the First 1,000 kWh
|
|
Invoice Component
|
Currently-Authorized
Charges
June
2023
($)
|
Proposed
Charges
Beginning
July
2023
($)
|
Difference
($)
|
Difference
(%)
|
|
Base Charge
|
$80.11
|
$80.11
|
$0.00
|
0.0%
|
|
Fuel Charge
|
32.24
|
28.39
|
(3.85)
|
(11.9%)
|
|
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
|
4.08
|
3.98
|
(0.10)
|
(2.5%)
|
|
Total
|
$158.86
|
$154.91
|
($3.95)
|
(2.5%)
|
Source: Document
No. 03296-2023.
FPL’s
currently-authorized Northwest total residential charge for the first 1,000 kWh
of usage for June 2023 is $158.86.[20]
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 July
will be $154.91, a decrease of approximately (2.5) 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 (2.4) to (3.2) percent, and (3.2) percent for medium-size
commercial customers, and (3.4) percent for large-size commercial customers. A
figure associated with an industrial class for the Northwest service territory
was not identified.[21]
Summary
FPL’s MCC
Petition indicates a need for its fuel recovery factors to be revised. The
Company’s currently projected 2023 fuel-related costs have been reduced by $358,764,356.
The Company proposes to account for $256,094,786 of this fuel cost reduction in
the current period and defer $102,669,570 to 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-authorized 2023 fuel
cost recovery factors should be reduced by $256,094,786.
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 July 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 interest to implement the lower rate as soon as possible.[22]
In its MCC
Petition, FPL proposes to lower its 2023 fuel factors, beginning with the July
2023 billing cycle. In the instant case, there are 20 days between the
Commission’s vote on June 13, 2023, and the beginning of FPL’s July 2023
billing cycle (July 3, 2023).[23]
Concerning
advisement of the instant request, the Company has engaged in numerous outreach
efforts regarding the potential bill impacts of this proceeding. Specifically,
FPL issued a press release on May 19, 2023, informing its customers of the MCC
proposal. Also on May 19, the Company informed its customers of the potential
adjustments related to the mid-course correction through a web-based billing
information portal titled “2023 Bills.” The Company also notified major
business and governmental accounts/customers on May 22, 2023. General
notification, or “billing inserts,” began to be added to customer bills on May
22nd as well.[24]
Conclusion
Staff
recommends that the fuel cost recovery factors, as shown on Appendix A, become
effective with the first billing cycle of July 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.
