Case Background
On January 23,
2023, Tampa Electric Company’s (TECO or Company) filed a petition for a limited
proceeding seeking authority to implement a storm restoration recovery charge
to recover $130.9 million for the incremental restoration costs related to
Tropical Storms Alberto, Nestor, and Eta, and Hurricanes Dorian, Elsa, Ian, and
Nicole (Collectively, "the storms"), the implementation of the GPS
software ARCOS, as well as the replenishment of its storm reserve. Included in
the $130.9 million is interest charged for Hurricanes Ian and Nicole. TECO
filed its petition pursuant to the provisions of the 2021 Stipulation and
Settlement Agreement (2021 Settlement).
By order issued
March 27, 2023, the Commission approved TECO’s tariff revisions and an interim
storm restoration recovery charge, effective with the first billing cycle of
April 2023 through March 2024, subject to a final true-up.
On August 16,
2023 the Company filed a supplemental petition requesting an amended interim
storm surcharge to reflect an increase of $3.6 million in incremental storm
costs, for a total of $134.5 million, based on updated actual and accrued costs.
TECO also requested to modify the 12-month recovery period approved by the
Commission, to extend cost recovery through the last billing cycle of December
2024. The current recovery period approved in Order No. PSC-2023-0116-PCO-EI
was for the period April 2023 through the last billing cycle of March 2024.
On September 29,
2023, TECO filed a petition for approval of final/actual storm restoration
costs and the associated true-up process related to the Storms. A formal
evidentiary hearing has been scheduled for May 1-2, 2024.
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 TECO to implement an
amended interim storm restoration recovery charge and modified recovery period?
Recommendation:
Yes. The Commission should authorize TECO to
implement an amended interim storm restoration recovery charge, subject to
refund, and modified recovery period. 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. (Mason)
Staff Analysis:
As stated in the Case Background, TECO filed a
supplemental petition requesting an amended interim storm surcharge to reflect
an increase of $3.6 million in incremental storm costs, for a total of $134.5
million, based on updated actual and accrued costs. TECO also requested to
modify the 12-month recovery period approved by the Commission, to extend cost
recovery through the last billing cycle of December 2024.
The initial interim petition was filed pursuant to the
provisions of the 2021 Settlement. Pursuant to Section II.B of the Process
Improvements portion of the 2019 Storm Cost Settlement Agreement, the Company
commissioned an external audit to review the incremental storm restoration
costs for Hurricane Ian. In its amended petition, TECO asserted that the total,
actual incremental storm restoration costs for Hurricane Ian were $120,851,632,
an increase of $1,635,341, as affirmed by the PricewaterhouseCoopers audit.
The Company also received additional invoices through July
31, 2023, for a total of $122,727,694 million in costs associated with
Hurricane Ian. TECO additionally updated its final costs for Hurricane Nicole,
which results in an increase of $78,753. All other costs remained the same. The
Company’s updated costs result in a total increase of $3.6 million in
incremental storm costs, for a total of $134.5 million. TECO requested a
modified recovery period to spread cost recovery for the remaining unrecovered
incremental storms costs over an additional nine months to reduce the impact of
the increase on monthly customer bills.
Pursuant to Paragraph 8b of the 2021 Settlement, the
Company may petition the Commission to increase the initial 12-month recovery
at rates greater than $4.00 per 1,000 kWh if the total costs are in excess of
$100 million in a given calendar year, inclusive of the amount needed to
replenish the storm reserve. Based on the total recovery requested in its
initial petition, $130.9 million or $10.22 per 1,000 kWh, TECO met the
threshold for requesting a recovery period longer than the 12 months it
initially petitioned. The amended interim storm surcharge falls below $4.00 per
1,000 kWh, but that is a function of spreading the remaining total costs, which
increased from the initial petition, over an additional 9 months.
The approval of an interim storm restoration recovery
charge is preliminary in nature and is subject to refund pending further review
of the Company’s total actual storm restoration costs reflected in its petition
filed on September 29, 2023. 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 supplemental petition, the Commission should authorize TECO to implement an
amended interim storm restoration recovery charge, subject to refund, and
modified recovery period. This would enable the interim storm surcharge
originally approved by Order No. PSC-2023-0116-PCO-EI to reflect the known and
measurable changes identified by the Company and modify the recovery period to
spread the cost recovery over a longer period. 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 should be made whether any over/under recovery has occurred. The
disposition of any over or under recovery, and associated interest, should be
considered by the Commission at a later date.
Issue 2:
What is
the appropriate security to guarantee the amount collected subject to refund
through the amended interim storm restoration recovery charge?
Recommendation:
The appropriate security to guarantee the funds
collected subject to refund is a corporate undertaking. (McGowan)
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 modified
12-month collection period from January 2024 through December 2024 for Interim
Storm Cost Recovery Charges of $134,471,119 related to the Storms, including
the ARCOS cost. Staff reviewed TECO’s three most recent annual reports filed
with the Commission (2022, 2021, and 2020) 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 deficient levels 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 $134.5 million. TECO’s
average net income for the three years 2022, 2021, and 2020 is almost three times
the requested corporate undertaking amount ($399.6 million vs. $134.5 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 $134.5 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
amended interim storm restoration recovery charge tariff as shown in Attachment
A to the recommendation?
Recommendation:
Yes. The Commission should approve TECO’s proposal
to revise the storm surcharge factors and associated tariff, as shown in
Attachment A to this recommendation. The tariff should become effective the
first billing cycle of January 2024 and conclude with the last billing cycle of
December 2024. The proposed storm surcharge factors should be subject to final
true-up once the final total actual storm-related costs are known and filed.
(Hampson)
Staff Analysis:
TECO has proposed to decrease the currently
effective storm surcharge factors, as discussed in Issue 1. In paragraph 15 of
the petition, TECO stated that the updated surcharges were developed using the
cost-of-service allocation methodology approved in the Company’s most recent
rate case. Staff has reviewed the
allocation to rate classes and believes that the allocations provided on Exh 2,
page 4 of 5, of the petition are consistent with those approved in TECO’s most
recent rate case. Furthermore, staff has reviewed the derivation of the
surcharges provided on Exh 2, page 5 of 5, of the petition. Staff believes that
the surcharges have been calculated correctly, using projected kilowatt hour
(kWh) sales for January through December 2024.
The proposed storm surcharge factors are shown on First
Revised Tariff Sheet No. 6.024. For
residential customers the proposed surcharge would be 0.219 cents per kWh,
which equates to a total surcharge of $2.19 for a 1,000 kWh monthly bill. The
current surcharge is 1.022 cents per kWh, which equates to a total surcharge of
$10.22 for a 1,000 kWh monthly bill. The proposed storm surcharge factors would
be included in the non-fuel energy charge on customer bills.
Staff recommends that the Commission should approve TECO’s
proposal to revise the storm surcharge factors and associated tariff, as shown
in Attachment A to this recommendation. The tariff should become effective the
first billing cycle of January 2024 and conclude with the last billing cycle of
December 2024. The interim storm restoration surcharge factors should be
subject to final true-up once the final total actual storm-related costs are
known and filed.
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. (M. Thompson)
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.
