Case Background
On January 23,
2023, Florida Power & Light Company (FPL) filed a Petition for limited
proceeding for recovery of incremental storm restoration costs related to
Hurricanes Ian and Nicole. The Commission granted FPL’s petition by Order No.
PSC-2023-0110-PCO-EI, issued March 3, 2023, and approved a consolidated interim
storm surcharge to cover restoration costs and to replenish the storm reserve.
The Commission ordered that this docket remain open pending final disposition (true-up)
of storm costs. Intervention by the Office of Public Counsel (OPC) was
acknowledged by Order No. PSC-2023-0081-FOF-EI.
On July 28, 2023,
FPL filed in this docket a petition for a temporary waiver of or variance from
Rule 25-6.0143(1)(g), Florida Administrative Code (F.A.C.) (Petition). Rule
25-6.0143, F.A.C., addresses electric utilities’ use of accumulated provision
accounts 228.1, 228.2, and 228.4. Paragraph 1(g) of Rule 25-6.0143 requires
that under the Incremental Cost and Capitalization Approach methodology for
determining the allowable costs to be charged to cover storm-related damages,
certain storm costs may be charged to Account 228.1 only after review and approval
by the Commission. Before the Commission makes this determination, the utility
may defer the costs if they were incurred prior to June 1 of the year following
the storm event.
Rule 25-6.0143(1)(g), F.A.C., further
requires that:
By
September 30 a utility must file a petition for the disposition of any costs
deferred prior to June 1 of the year following the storm event giving rise to
the deferred costs.
Hurricanes Ian and Nicole impacted FPL’s
service area in September and November 2022, respectively. Because the costs
for damage from those storms were incurred prior to June 1, 2023, FPL is
required by Rule 25-6.0143(1)(g) to file its petition and documentation concerning disposition of deferred storm
costs related to Hurricanes Ian and Nicole not later than September 30,
2023.
FPL is asking the Commission for a
temporary variance from or waiver of the September 30 filing requirement. FPL
asks that it be allowed until December 31, 2023, to file its petition and
supporting documentation.
Notice of FPL’s Petition was published in
the August 1, 2023, edition of the Florida
Administrative Register, Vol. 49, No. 148 as required by Section
120.542(6), Florida Statutes (F.S.). No one commented on the Petition within
the 14-day comment period provided by Rule 28-104.003, F.A.C. Staff issued one
data request, to which FPL filed responses on August 11, 2023. The Commission must
approve or deny the Petition by November 1, 2023, under Section 120.542(8),
F.S., or the Petition would be deemed approved.
The purpose of this recommendation is to
address only the request for waiver or variance. The Commission has
jurisdiction under Sections 120.542, 350.115, 366.04, 366.05, and 366.06, F.S
Discussion
of Issues
Issue 1:
Should the Commission grant Florida Power &
Light Company's Petition for a temporary waiver or variance from Rule
25-6.0143(1)(g), F.A.C.?
Recommendation:
Yes. The Commission should grant Florida Power &
Light Company’s Petition for a temporary variance or waiver of Rule
25-6.0143(1)(g), F.A.C., to allow FPL to file its petition and documentation supporting the review and true-up of the total actual incremental storm restoration costs related to Hurricanes Ian and Nicole no later than December 31, 2023. (Stiller,
Andrews)
Staff Analysis:
FPL is
requesting that the Commission grant it a temporary variance from or waiver of
Rule 25-6.0143(1)(g), F.A.C. Pursuant to this rule provision, as explained in
the Case Background, FPL is required to file its petition for disposition of
certain deferred costs by September 30, 2023.
Legal Standard for Rule Variances or
Waivers
Pursuant to
Section 120.542(2), F.S., the Commission is required to grant waivers and
variances from its rules “when the person subject to the rule demonstrates that
the purpose of the underlying statute will be or has been achieved by other
means by the person and when application of a rule would create a substantial
hardship or would violate principles of fairness.” A “substantial hardship” is
defined by statute as a “demonstrated economic, technological, legal, or other
type of hardship.”
Rule
25-6.0143, F.A.C., implements Section 350.115, F.S., which allows the
Commission to prescribe by rule uniform systems and classifications of accounts
for each type of regulated company and approve or establish adequate, fair, and
reasonable depreciation rates and charges. The rule also implements Section
366.04(2)(a), F.S., which gives the Commission power over electric utilities to
prescribe uniform systems and classifications of accounts.
FPL’s Petition
FPL stated
that application of Rule 25-6.0143(1)(g), F.A.C., to require the preparation
and filing of the petition and documentation supporting the review and true-up of the total actual incremental storm restoration costs related to Hurricanes Ian and Nicole no later than September 30, 2023, will
create a substantial hardship. FPL stated that Hurricane Ian was a powerful
Category 4 storm that impacted more than 2.1 million customers, with Hurricane
Nicole following soon thereafter as a Category 1 and impacting 480,000 customers.
FPL noted that it mobilized a workforce numbering in the tens of thousands to
restore service to these customers. In its petition for recovery of incremental
storm restoration costs in this docket, FPL initially estimated storm-related
costs for Hurricanes Ian and Nicole to be $1.3 billion and $175.8 million,
respectively. FPL stated that because of the large volume of invoices and
financial records corresponding to these storm-related costs, it “was not able
to finalize the internally approved storm restoration invoices until mid-2023.”
Also due to the magnitude of restoration costs related to
the damage caused by Hurricane Ian, FPL is required to engage an outside
auditor to complete an audit of its requested restoration costs prior to
submitting its petition for final disposition. Specifically, in a settlement
agreement approved by the Commission in 2019, FPL committed to “engage an
independent outside audit firm to conduct an audit of the Company's filed recoverable
storm costs of the first named tropical system named by the National Hurricane
Center for which claimed damages exceed $250 million.”
Hurricane Ian is that first named tropical system. FPL represented that because
it does not anticipate this audit being complete until November 2023, it cannot
comply with the September 30 deadline and the requirement to complete the
independent audit prior to filing for final disposition of storm restoration
costs.
FPL also argued that no anticipated party to the
proceedings and no customers will be prejudiced by granting its Petition for temporary
variance or waiver. Further, FPL alleged that the requested temporary variance
or waiver does not contravene the rule’s implementing statutes.
FPL represented
that OPC has no objection to the relief requested in the Petition for temporary
variance or waiver, and asks that the Commission expedite consideration of the
Petition and consider it at the September 2023 Commission Conference.
Purpose of the Underlying Statutes
Sections
350.115 and 366.04(2)(a), F.S., give the Commission power to prescribe by rule
uniform systems and classifications of accounts and to approve or establish
adequate, fair, and reasonable depreciation rates and charges for electric utilities.
The purpose of the September 30 filing date is to facilitate a timely review of
storm restoration costs and afford the Commission adequate oversight on the use
of Commission-approved storm reserves (Account 228.1). Often the initial
filings made pursuant to Rule 25-6.0143, F.A.C., reflect estimated costs used
to implement an interim cost recovery mechanism. As such, staff believes that
the purpose of Sections 350.115 and 366.04(2), F.S., will be unaffected by
granting the requested temporary variance or waiver.
Further, no
anticipated party to any proceedings and no customers will be prejudiced or
adversely affected by granting FPL’s Petition for temporary variance or waiver.
For these reasons, the purpose of the statutes will still be achieved as
required by Section 120.542, F.S., if FPL’s Petition for temporary variance or
waiver is granted.
Substantial Hardship
The facts
presented by FPL to demonstrate a substantial hardship focus on the volume of
work FPL needs to complete before filing its petition and supporting
documentation for final storm restoration cost disposition. The cost estimates
for restoration related to Hurricane Ian exceed by five times the threshold to
trigger an independent audit. The consumption of utility staff and management
time to take on this appreciable amount of work was increased by the addition
of restoration costs related to Hurricane Nicole. All of this internal work
needed to be completed before FPL could then turn to the task of an independent
audit. The audit, in turn, must be completed before FPL can then file for final
disposition.
The
Commission considered and granted a similar request for waiver or variance from
FPL in 2021. In that
docket, the enhanced workload arose from a rate case hearing that was proceeding
on a contemporaneous track as storm recovery. As noted in the order granting
FPL’s petition in that docket, the Commission has in the past granted petitions
for variance or waiver on the basis that application of a rule’s filing
deadline created substantial hardship because of utility staffing limitations
caused by the specific circumstances alleged in those petitions.[4] Under the
specific facts presented here, staff believes that FPL has demonstrated
substantial hardship under Section 120.542, F.S.
Conclusion
For the reasons
explained above, the Commission should grant FPL’s Petition for a temporary
variance or waiver of Rule 25-6.0143(1)(g), F.A.C., to allow FPL to file its
petition for certain deferred costs no later than December 31, 2023.
Issue 2:
Should this docket be closed?
Recommendation:
No. Disposition of this petition for a waiver or
variance serves only to extend the deadline for the Florida Power & Light Company
to submit its petition and documentation supporting the review and true-up of the total
actual incremental storm restoration costs related to Hurricanes Ian and
Nicole. This docket should remain open until that review is complete and the
Commission has approved the final disposition. If no person whose
substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the order, a consummating order
should be issued granting the petition and this docket should remain open.
(Stiller)
Staff Analysis:
No. Disposition of this petition for a waiver or
variance serves only to extend the deadline for the Florida Power & Light
Company to submit its petition and documentation supporting the review and
true-up of the total actual incremental storm restoration costs related to
Hurricanes Ian and Nicole. This docket should remain open until that review is
complete and the Commission has approved the final true-up. If no person
whose substantial interests are affected by the proposed agency action files a
protest within 21 days of the issuance of the order, a consummating order
should be issued granting the petition and this docket should remain open.
