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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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November 21, 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 (Gatlin,
D. Buys, Norris)
Division of Economics
(Draper, Hampson, Hudson, Kelley)
Office of the General
Counsel (Brownless, Watrous)
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RE:
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Docket No. 20230116-EI – Petition for
limited proceeding for recovery of incremental storm restoration costs
related to Hurricane Idalia, by Duke Energy Florida, LLC.
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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12/05/23 – 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 and Passidomo
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CRITICAL DATES:
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None
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SPECIAL INSTRUCTIONS:
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None
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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 recover $442.1 million for the incremental
storm restoration costs related to Hurricanes Elsa, Eta, Ian, Isaias, and
Nicole and Tropical Storm Fred (the “Storms”), as well as replenish its storm
reserve. This amount includes approximately $4.5
million in interest. DEF filed its petition pursuant to the provisions of the
2021 Settlement Agreement (2021 Settlement) approved by Order No.
PSC-2021-0202-AS-EI. By Order No. PSC-2023-0111-PCO-EI, issued March 23, 2023,
in Docket No. 20230020-EI, the Commission granted DEF’s request to recover these
costs through an interim storm restoration recovery surcharge. The interim
surcharges, made subject to true-up, was made 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.
On September 29,
2023, DEF filed its petition for approval of actual costs related to the
Storms, in the amount of $431.4 million, an approximate reduction of $10.7
million. DEF also requested to continue the storm restoration charge through
the end of March 2024, as initially approved in Order No. PSC-2023-0111-PCO-EI.
The disposition of any over- or under- recovery will be handled through the
capacity cost recovery clause at a future date. Docket No. 20230020-EI has been
set for hearing on May 21-22, 2023, by Order No. PSC-2023-0333-PCO-EI, issued
November 2, 2023.
On October 16,
2023, the Company filed a petition for a limited proceeding in Docket No.
20230116-EI seeking authority to implement an interim storm restoration
recovery surcharge to recover approximately $166.1 million in incremental storm
restoration costs, replenishment of the storm reserve, and interest related to
Hurricane Idalia, to begin with the first billing cycle of January 2024 through
December 31, 2024, subject to final true-up. The Company requested approval to
include and spread the recovery of the remaining interim incremental storm
restoration costs for the Storms in the surcharge for Hurricane Idalia, thus
amending the currently approved surcharge. The $166.1 million includes $73.9
million related to the uncollected restoration costs from the Storms and $91.9
million related to Hurricane Idalia. DEF’s request would also modify the
12-month recovery period of incremental restoration costs to be collected for
the storms.
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
amended interim storm restoration recovery charge?
Recommendation:
Yes. The Commission should authorize DEF to
implement an amended interim storm restoration recovery charge, subject to
refund, and a 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. (Gatlin)
Staff Analysis:
As stated in the Case Background, DEF filed a
petition requesting an amended interim storm surcharge in Docket No.
20230116-EI to reflect an estimated total of $166.1 million in incremental
storm restoration costs from the Storms and Hurricane Idalia, including
interest, and replenishment of the storm reserve, beginning with the first
billing cycle of January 2024 through December 2024, subject to true-up. DEF’s
request would also modify the 12-month recovery period of the remaining
incremental restoration costs previously approved for the Storms, as approved
in Docket No. 20230020-EI.
The interim petition for Docket No. 20230116-EI was filed
pursuant to the provisions of the 2021 Settlement approved by Commission Order
No. PSC-2021-0202-AS-EI.
Pursuant to 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 requested an amended interim storm recovery charge of $5.09
per 1,000 kilowatt-hours (kWh) on a residential customer bill over a 12-month
recovery period beginning with the first billing cycle of January 2024.
The Company requested to combine the estimated recovery
amount of $91.9 million from Hurricane Idalia with the remaining uncollected
amount of $73.9 million from the Storms, for a total recovery amount of
approximately $166.1 million. DEF also requested a modified recovery period to
spread cost recovery for the remaining uncollected incremental storms costs
over an additional nine months to reduce the impact of the increase due to the
recovery of Hurricane Idalia storm costs. The Company stated that this will
result in a rate reduction and will assist in rate stability.
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. Staff recommends
amending the interim storm surcharge to reflect the known and measurable changes
by the Company and modifying the recovery period to spread the cost recovery
over a longer period.
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. (Ferrer)
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, equity ownership, profitability, and interest coverage to guarantee
any potential refund. DEF requested a 12-month collection period from January
2024 to December 2024 for Interim Storm Cost Recovery Charges of $166.1 million
related to Hurricanes Idalia, Elsa, Eta, Ian, Isaias, Nicole, and Tropical
Storm Fred. Staff reviewed DEF’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. DEF’s
financial information indicates the Company’s liquidity is deficient, that is,
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 equity ownership,
profitability, and interest coverage are sufficient to support a potential
refund of $166.1 million. DEF’s net income is 4.65 times the requested amount
held subject to refund and it is improbable DEF will be required to refund the entire
requested amount.
Accordingly,
staff believes DEF has adequate resources to support a corporate undertaking in
the amount requested. Based on this analysis, staff recommends that a corporate
undertaking of $166.1 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 amended
interim storm restoration recovery charge tariff as shown in Attachment A to
the recommendation?
Recommendation:
Yes. The Commission should approve DEF’s proposal to
revise the interim storm restoration surcharges. Furthermore, the Commission
should give staff administrative authority to approve DEF’s revised tariff
sheet No. 6.105, which would provide the Commission-approved storm surcharges
and other cost recovery factors. The tariff should become effective the first
billing cycle of January 2024. The interim storm restoration surcharges should
be subject to final true-up once the final total actual storm-related costs are
known and filed. (Hampson)
Staff Analysis:
DEF has proposed to decrease the currently
effective interim storm restoration surcharges as approved in Docket No.
20230020-EI, based on the Company’s recalculation of storm costs to include
Hurricane Idalia and modify its recovery period through December 31, 2024, as
discussed in Issue 1. In paragraph 18 of the petition, DEF states that the
estimated storm recovery amount was allocated to the rate classes consistent
with the rate design method approved in the 2021 Settlement. Staff has reviewed the allocation to rate
classes and believes that the allocations provided in Appendix A, pages 5 and 6
to the petition are consistent with those approved in DEF’s 2021 Settlement.
Furthermore, staff has reviewed the derivation of the surcharges provided in
Appendix A to the petition. Staff agrees that the surcharges have been
calculated correctly, using projected kilowatt hour (kWh) sales for January
through December 2024. The proposed interim storm restoration recovery factors
should remain in effect until a final true-up is approved by the Commission.
The proposed interim storm restoration surcharges are
shown on page 6 of Appendix A to the petition. For residential customers, the
proposed surcharge would be 0.509 cents per kWh, which equates to a total
surcharge of $5.09 for a 1,000 kWh monthly bill. The current surcharge is 1.314
cents per kWh, which equates to a total surcharge of $13.14 for a 1,000 kWh
monthly bill. The storm cost recovery surcharge would be included in the
non-fuel energy charge on customer bills.
Staff recommends that the Commission should approve DEF’s
proposal to revise the interim storm restoration surcharges. Furthermore, the
Commission should give staff administrative authority to approve DEF’s revised
tariff sheet No. 6.105, which would provide the Commission-approved storm
surcharges and other cost recovery factors. The tariff should become effective
the first billing cycle of January 2024. The interim storm restoration
surcharges should be subject to final true-up once the final total actual
storm-related costs are known and filed
Issue 4:
Should these dockets be closed?
Recommendation:
No. Docket No. 20230020-EI should remain open to
conduct the administrative hearing scheduled for that docket. Docket No.
20230116-EI 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. Docket No. 20230020 should remain open to
conduct the administrative hearing scheduled for that docket. Docket No.
20230116-EI 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.