Case Background
Tampa Electric
Company (TECO or Company) is an investor-owned public electric utility
servicing 810,000 customers in four counties in Florida. On October 24, 2023, TECO
filed a Petition for Variance from Rule 25-6.043(1)(a), Florida Administrative
Code (F.A.C.). According to TECO, it requires a variance from this Rule in
order to comply with the terms of Order No. PSC-2021-0423-S-EI (2021 Settlement
Agreement), by which the Commission approved the
unanimous stipulation and settlement agreement in TECO’s 2021 base rate
proceeding.
Rule 25-6.043(1), F.A.C., (MFR Rule) sets
forth the general filing instructions for investor-owned electric utilities’ minimum
filing requirements (MFRs) when submitting applications for changes in rates. The
MFR Rule, states, in pertinent part:
(a) The
petition under Sections 366.06 and 366.071, F.S., for adjustment of rates must
include or be accompanied by:
1.
The information required by Commission Form PSC/AFD/011-E (2/04), entitled
“Minimum Filing Requirements for Investor-Owned Electric Utilities” which is
incorporated into this rule by reference. The form may be obtained from the
Commission’s Division of Accounting and Finance.
Schedule E of the Minimum Filing
Requirements for Investor-Owned Utilities form (MFR Form) incorporated into the MFR Rule
requires utilities to provide a cost of service study with any application for adjustment of
rates. Specifically, the cost of service study required by the MFR Rule must
allocate production and transmission plant using the average of the twelve
monthly coincident peaks and 1/13th weighted average of demand. This method of
allocation is abbreviated as the 12CP and 1/13th method.
TECO seeks a variance from the 12CP and
1/13th method to instead use a four coincident peaks and full Minimum
Distribution System (4CP and MDS) method for the cost of service study submitted as
part of an anticipated rate case in 2024. Per TECO’s petition, the use of the
4CP and MDS method is driven by the 2021 Settlement Agreement:
The
parties have agreed . . . that the company will, for purposes of
meeting its initial burden of proof in complying with Rule 25-6.043, F.A.C., in
Tampa Electric’s next general rate base proceeding, file the cost of service
MFRs using the 4CP and full MDS methods for cost allocation.
TECO believes that this provision in the
2021 Settlement Agreement requires it to use the 4CP and MDS method in its next
base rate case and, significantly, that it is also prohibited from using an
alternative method, such as the 12CP and 1/13th method required by the MFR
Rule. Consequently, TECO filed the petition giving rise to this docket.
Pursuant to
Section 120.542(6), Florida Statutes (F.S.), a Notice of Variance or Waiver was
published in the November 16, 2023 edition of the Florida Administrative
Register. The time for filing comments, provided by Rule 28-104.003, F.A.C.,
expired on November 30, 2023.
In response to
TECO’s request, the Commission received 136 comments in opposition to TECO’s
petition and one joint notice of support from the signatories to the 2021
Settlement Agreement. These comments are discussed in Issue 1.
This
recommendation addresses TECO’s petition. Pursuant to Section 120.542(8), F.S.,
the Commission must grant or deny a request for variance within 90 days after
receipt of the original petition, the last item of timely requested additional
material, or the petitioner’s written request to finish processing the
petition. As such, the statutory deadline for this proceeding is January 24,
2024. The Commission has jurisdiction pursuant to Chapters 120 and 366, F.S.
Discussion
of Issues
Issue 1:
Should
the Commission grant TECO’s petition for variance from Rule 25-6.043(1)(a),
F.A.C.?
Recommendation:
No,
the Commission should deny TECO’s petition for variance from Rule
25-6.043(1)(a), F.A.C. (Thompson)
Staff Analysis:
Legal
Standard for Rule Variances and Waivers
Florida
law allows agencies to waive or provide other relief (variances) to persons
subject to regulation where the strict application of uniformly
applicable rule requirements leads to “unreasonable, unfair, and
unintended results in particular instances.” Section 120.542(1), F.S.
Variances and waivers shall be granted 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.
Section 120.542(2), F.S.
TECO’s
Petition
TECO
requests a variance of the MFR Rule to use a 4CP and full MDS cost of service
methodology when preparing the E Schedule MFRs in its next rate case, in lieu
of the 12 CP and 1/13th methodology specified in the MFR Rule. TECO contends
that the underlying purpose of the statute would not be affected by granting
the waiver. Further, TECO contends that requiring TECO to use the 12CP and
1/13th methodology specified in the MFR Rule in the MFRs of TECO’s next base
rate case would violate principles of fairness, because doing so would cause
the Company “to violate the terms of its approved 2021 rate case settlement
agreement.”
Purpose
of the Underlying Statute
The MFR
Rule primarily implements Section 366.06, F.S.,
which sets forth the Commission’s statutory obligation to approve rates that
are fair, just, and reasonable. Section 366.06, F.S., states, in pertinent
part, that “the commission shall consider the cost of providing service to the
class. . .; the consumption and load characteristics of the various
classes of customers; and public acceptance of rate structures.”
The MFR
Rule serves to provide the Commission a uniform method to consider the cost of
providing services to the customer classes as well as to look at the consumption
and load characteristics of those classes. TECO’s petition requests a variance
from the MFR Rule to provide an alternative method for the Commission to
consider the cost of providing service to the customer classes and to look at
the consumption and load characteristics of those classes. Since the statute
does not require a particular cost of service study, such as the 12CP and
1/13th method, the 4CP and MDS method would still allow the Commission to
fulfill its statutory obligation. Therefore, staff believes that the first
prong of the rule waiver test is met, which is that the purpose of the
underlying statute is still met if the MFR Rule is waived.
Substantial
Hardship and Principles of Fairness
The second
prong of the rule waiver test is met if strict application of the rule either
(1) creates a substantial hardship or (2) would violate the principles of
fairness. The utility may meet the second prong through either path and is not
required to show both. In its petition, TECO does not argue that application of
the MFR Rule creates a substantial hardship, but rather that application of the
MFR Rule would violate the principles of fairness.
“Principles
of fairness” are violated when the literal application of a rule affects a
particular person in a manner significantly different from the way it affects
other similarly situated persons who are subject to the rule. Section
120.542(2), F.S. TECO argues that it is uniquely affected because the 2021
Settlement Agreement – approved by an order from the Commission - requires it
to file a cost of service study that is inconsistent with the MFR Rule. Paragraph
6(d) of Attachment A to the 2021 Settlement Agreement lays out the cost of
service study requirements for TECO in its next general base rate proceeding:
This revenue attribution was
derived by application of the 4CP methodology for allocating production and
transmission plant costs and the use of the full Minimum Distribution System
(“MDS”) costing method for allocating distribution plant costs, as mitigated. The
Parties have agreed to the transitional revenue percentage allocations shown in
Exhibit K[,] with the further understanding that the company will, for purposes
of meeting its initial burden of proof in complying with Rule 25-6.043, F.A.C.,
in Tampa Electric Company’s next general base rate proceeding, file the
cost-of-service MFRs using the 4CP and full MDS methods for cost allocation. The
company further commits to base its filed revenue attribution among customer
classes in its next general base rate proceeding on full implementation of the
4CP and MDS methodologies, and in that initial filing to substantially and
materially improve the position of all above-parity customer classes toward
parity, such that costs are allocated and revenue is collected consistent with
4CP and full MDS methods. All Parties and affiliates of TECO (“Precluded
Parties”) will either not oppose, or will support, the 4CP and full MDS
implementation. If the 4CP or full MDS methodology is opposed in the next
general base rate case by an entity other than a Precluded Party, the Parties
will indicate that they continue to support or not oppose implementation of the
4CP and full MDS, but in response, may offer responsive information on
alternative cost-of-service methodologies and revenue allocation methodologies
solely on an alternative basis.
Staff does
not agree that TECO is affected in a manner significantly different from the
way the MFR Rule affects other similarly situated entities subject to the rule.
The MFR Form specifically contemplates multiple cost of service studies being
utilized:
Provide under separate cover a cost
of service study that allocates production and transmission plant using the
average of the twelve monthly coincident peaks and 1/13 weighted average demand
(12CP and 1/13th) method. In addition, if the company is proposing a
different cost allocation method, or if a different method was adopted in its
last rate case, provide cost of service studies using these methods as well.
All studies must be at both present and proposed rates. The cost of service
analysis must be done separately for each rate class.
(Emphasis
added). The MFR Form makes several more references to multiple cost of service
studies. Therefore, the MFR Rule allows for and, in fact, requires a utility to
provide a cost of service study with the 12CP and 1/13th method alongside any
other methodologies adopted in a prior rate case.
TECO
argues that the 2021 Settlement Agreement specifically prohibits TECO from
providing a cost of service study using any alternative method besides 4CP and
MDS. Staff disagrees. While the 2021 Settlement Agreement does bind TECO and
others in some ways, staff’s reading of this provision does not prohibit or
preclude TECO from filing the 12CP and 1/13th method alongside the 4CP and MDS
method. TECO can comply with both the MFR Rule and the 2021 Settlement
Agreement. Therefore, TECO is not being affected by the 2021 Settlement
Agreement in a manner significantly different from the way the MFR Rule affects
other similarly situated entities subject to the rule.
Comments
to TECO’s Petition
As of the
time of filing this recommendation, the Commission received 136 comments related
to TECO’s petition. Among them were 133 comments from customers, 2 comments
from Hillsborough County Commissioners, and 1 joint comment from Florida Rising
and the Florida League of United Latin American Citizens (LULAC). All 136
comments were in opposition to TECO’s request for variance.
Florida
Rising and LULAC claim that TECO’s petition does not meet the standard for
variance as it fails to demonstrate compliance with the purpose of the
underlying statute and fails to show that application of the statute would
present a substantial hardship to TECO or violate the principles of fairness.
Florida Rising and LULAC further claim that the Commission should reject the
petition as a matter of policy as it pertains to its impact on residential
customer bills.
As
previously discussed, staff agrees with Florida Rising and LULAC that TECO has
not shown a violation of the principles of fairness. However, staff believes
Florida Rising and LULAC’s other arguments lack merit. Specifically, the policy
considerations of impacts on residential customer bills are not an appropriate
means to grant or deny a petition for a rule waiver or variance. Staff notes
that Florida Rising and LULAC were not parties to TECO’s 2021 base rate
proceeding. However, parties of appropriate standing wishing to contest impacts
on residential customers’ bills will have an opportunity to intervene in TECO’s
next base rate proceeding.
The signatories
to the 2021 Settlement Agreement provided the following joint statement:
Consistent with Paragraph 16 of the
August 6, 2021 Stipulation and Settlement Agreement (“SSA”) adopted and
approved by the Commission in Order No. PSC-2021-04230S-E1 [sic], Docket Number 20220122-EI [sic], all parties to that docket
reaffirm and support the SSA in its entirety, as provided for in Paragraph
16(a).
Conclusion
The MFR
Rule specifically contemplates the use of multiple cost of service studies,
including cost of service studies adopted in a utility’s prior rate case. By
its plain language, the 2021 Settlement Agreement does not preclude TECO from
filing another cost of service study alongside the required 4CP and MDS study. Staff
believes that the 2021 Settlement Agreement and MFR Rule can and should be read
harmoniously, and that compliance with the former does not compel waiver of the
latter. Because TECO has failed to demonstrate how the application of the rule
would violate principles of fairness, staff recommends that TECO’s petition for
a rule variance should be denied.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. 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, this docket should be closed upon the issuance of a
consummating order. (Thompson)
Staff Analysis:
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, this docket should be closed upon the issuance of a
consummating order.
