Discussion of Issues
Issue 1:
Should the Commission approve the proposed second amendment
for proposed modification to territorial agreement in Sumter County by SECO and
Bushnell, which transfers two parcels from Bushnell to SECO?
Recommendation:
Yes, the Commission should
approve the joint petition for proposed modification to territorial agreement
in Sumter County by SECO and Bushnell, which transfers two parcels from
Bushnell to SECO. The proposed second amendment would facilitate the provision
of economical and reliable electric service by SECO to the two residential customers in the transferred parcels thereby avoiding
potential uneconomic duplication of facilities. Should the utilities
find themselves in similar circumstances in the future, staff recommends the
parties should be required to promptly notify Commission staff and state how
the boundary is expected to change. The notification should also include the
date service was first connected and when a petition to modify the territorial
boundary will be filed. The petition, when filed, should contain sufficient
detail for staff and the Commission to fully understand the timing and
circumstances of the territorial modification. (Kaymak, Barrett, Dose)
Staff Analysis:
Pursuant to Section 366.04(2)(d), F.S.,
and Rule 25-6.0440(2), Florida Administrative Code (F.A.C.), the Commission has
jurisdiction to approve territorial agreements between and among rural electric
cooperatives, municipal electric utilities, and other electric utilities.
Unless the Commission determines that the agreement will cause a detriment to
the public interest, the agreement should be approved.
Proposed Territorial Agreement Changes
Bushnell
and SECO began territorial agreement discussions after service applications
were received for new single-family residential construction projects, one on each
parcel (Parcels N14-013 and N14-015) in Sumter County. Upon review and careful
consideration, the joint petitioners maintain that, although the two parcels
are in Bushnell’s current service territory, SECO could serve both parcels in a
more economical and timely manner.
The joint
participants indicate that, due to the two customers’ pressing need to have
their new homes connected to electric service, SECO established electric
service to them on or around July 12, 2023 (Parcel N14-013) and November 22,
2023 (Parcel N14-015). The joint participants did so under the terms of a
temporary service agreement until the time that the Commission could decide
whether to approve the second amendment.
The joint
petitioners note that Paragraph 5 of the second amendment (Meeting Customers
Needs) references the temporary service agreement that was signed by each
utility in order to facilitate providing immediate electric service for
construction needs on these parcels during the pendency of this matter at the
Commission. The
temporary service agreement was signed on June 23, 2023, and the joint
petitioners assert that the customers requesting service on each parcel were
notified by telephone that permanent service by SECO would be contingent upon
SECO and the City executing an agreement that would require Commission approval. The
joint petitioners state that negotiations for the second amendment took longer
than expected, and when concluded acknowledged that further delays were
encountered because approvals were needed from City and SECO officials before
the joint petitioners made their instant filing.
With the
Commission approval of the second amendment, the joint petitioners contend the
original Territorial Agreement otherwise remains in full effect with no other
changes. If approved, the second amendment as written would remain in effect
until and unless either Party provides written notice of termination.
Parcel N14-013
Parcel
N14-013 covers 5.64 acres, and electric service for this parcel is for a new
single-family residence. The joint petitioners assert that the nearest existing
Bushnell facilities to this parcel are approximately 1,100 feet due west, and
notes that those facilities are at capacity for maintaining optimum reliability
for existing customers that are served by that feeder.
The joint
petitioners stated that in order to serve Parcel N14-013 and/or the other
parcel (Parcel N14-015) identified in the petition, Bushnell would have to re-conductor
approximately 3,400 feet of primary service facilities. The cost to enhance the
primary service facilities as described is estimated by Bushnell to be no less
than $50,000, whether one or both customers are served.
The nearest
SECO service facilities are adjacent to Parcel N14-013. Because SECO already
has existing single phase underground primary facilities located along the east
property line, a minimal amount of construction activity was necessary for it
to serve the parcel. An underground pad-mounted transformer had to be
installed, plus approximately 155’ of secondary service wire had to be placed
in order to serve the new single-family home on Parcel N14-013. The estimated
cost of these facilities was $939.
Parcel N14-015
Parcel
N14-015 covers 2.32 acres, and electric service for this parcel is for a
newly-constructed single family residence with an outbuilding (a pole barn). The
joint petitioners assert that the nearest existing Bushnell facilities are
approximately 1,030 feet due west of Parcel N14-015, and note that the same capacity
concerns and construction requirements referenced for Parcel N14-013 are
applicable for this parcel as well.
In SECO’s service
territory, a single phase overhead primary facility is located just south of
the existing property line for Parcel N14-015. As such, the only construction
necessary for SECO to provide service to this parcel was the placement of
approximately 150’ of secondary underground service wire. The estimated cost of
this construction activity was $877.
Analysis
Rule 25-6.0440(2), F.A.C., addresses the standards the
Commission should consider for approving territorial agreements for electric
utilities. The Rule states:
(2) Standards for Approval. In approving
territorial agreements, the Commission may consider:
(a) The reasonableness of the purchase
price of any facilities being transferred;
(b) The reasonable likelihood that the
agreement, in and of itself, will not cause a decrease in the reliability of
electrical service to the existing or future ratepayers of any utility party to
the agreement;
(c) The reasonable likelihood that the
agreement will eliminate existing or potential uneconomic duplication of
facilities; and
(d) Any other factor the Commission finds
relevant in reaching a determination that the territorial agreement is in the
public interest.
In its review, staff considered each component of 25-6.0440(2),
F.A.C. Regarding paragraph (2)(a), staff notes that Bushnell agreed to transfer
the two parcels to SECO without compensation, which staff believes is reasonable
because no facilities are being transferred. Regarding
paragraph (2)(b), the joint petitioners’ have confirmed that the availability
and reliability of service to existing or future customers will not be
decreased for either petitioner. The joint petitioners verified that existing
electric facilities are adjacent to these parcels, but there are no electric facilities
inside either parcel. SECO has electric facilities with available capacity in
close proximity to Parcel N14-013 and also to Parcel N14-015, and can more
economically serve the two new single-family houses than Bushnell. Staff
believes Paragraph (2)(c) has been appropriately considered because, under the proposed second amendment, existing or potential uneconomic duplication
of facilities would not occur, because SECO facilities are very near the
parcels, which means SECO is better positioned to serve the lots economically
and efficiently. Staff believes paragraph (2)(d) gives the Commission the
flexibility to address any other relevant concerns that are case-specific. The
joint petitioners assert that there are none.
The joint
petitioners assert that SECO is better positioned than Bushnell to provide
cost-effective and reliable electric service to the two new residential
customers (one in each parcel). SECO
has existing facilities that have adequate capacity and are closer to both
parcels than Bushnell’s facilities. Staff agrees that SECO is better positioned
than Bushnell to serve both parcels from an economic point of view, as well as
from a reliability standpoint.
The joint petitioners state that the approval and
implementation of the second amendment will not impact either entities’ ability
to provide reliable electric service to current or future customers, consistent
with the standards set forth in Section 366.04, F.S., and Rule 25-6.0440(2),
F.A.C.
The joint petitioners assert that approval of the second amendment would be in
the public interest for several reasons. First, approval will eliminate the
uneconomic duplication of services. Second, approval will provide electric
service to the two transferred parcels in an efficient and cost-effective
manner, and third, approval will not necessitate the transfer of any customer
accounts or facilities between the joint petitioners. Staff agrees that the proposed
second amendment is in the public interest and SECO is better positioned than
Bushnell to serve both parcels.
Provision of Service
The joint
petitioners completed the transfer of the two parcels prior to filing the second
amendment to their territorial agreement, which is at issue in this docket. Paragraph
5 of the second amendment (Meeting Customers Needs) references the temporary
service agreement that was signed between SECO and the City. The full text of
Paragraph 5 states:
Meeting
Customer Needs. To timely meet the needs of the new customers, the Parties
have entered into this Second Amendment to modify the Territorial Boundary
Lines (see the detail reflected on Composite Exhibit A, Pages 15-17, which
indicates the two parcels being transferred to SECO from Bushnell) so that the
new customers will be within the SECO Territorial Area. Further, to meet the
immediate and temporary construction needs of the new customers, the Parties have
also entered into a temporary service agreement that would allow SECO to serve
the new customers until such time as the Commission can approve the Second
Amendment. (emphasis in original)
Section 366.04(2)(d), F.S.,
provides that in the exercise of its jurisdiction, the Commission has power
over electric utilities to approve territorial agreements between and among
rural electric cooperatives, municipal electric utilities, and other electric
utilities under its jurisdiction. The Commission has the exclusive and superior
statutory jurisdiction to determine electric utility service areas.
Without the Commission’s active supervision over territorial agreements, such
agreements between utilities run afoul of anticompetitive and antitrust law and
“can have no validity without the approval of this Commission.”
As stated by the Florida Supreme Court in City
of Homestead v. Beard, 600 So. 2d 450, 452 (Fla. 1992):
In City Gas Co. v. Peoples Gas System Inc.,
182 So. 2d 429, 433 (Fla.1965), this Court held that territorial agreements
between public utilities were not violative of antitrust law based on the
premise that “the public welfare does not need Ch. 542 for protection against
this kind of agreement....because the public interest is adequately protected
by an alternative arrangement under F.S. Ch. 366, F.S.A.” We further concluded
that the “agreement could result in monopolistic control over price,
production, or quality of service only by the sufferance of the commission” and
that its “statutory powers are more than sufficient to prevent any such outcome
if properly employed.” Id. at 435. In
Storey,[]
which upheld the PSC's approval of the instant agreement, this Court
“recognized the importance of the regulatory function as a substitute for
unrestrained competition” and commented that “a regulated or measurably
controlled monopoly is in the public interest.” 217 So. 2d at 307. Therefore,
our decisions exempting territorial agreements from antitrust legislation have
been premised on the existence of a statutory system of regulations governing
the public utilities that is sufficient to prevent any abuses arising from the
monopoly power created by the agreements.
SECO and Bushnell have been put
on prior notice by the Commission that any modification or termination of their
territorial boundaries, as addressed by the Commission’s orders, must first be
made by the Commission.
Staff recognizes that in certain limited circumstances, system efficiencies may
dictate that one utility should provide service to a customer in the other
utility’s service territory. Further, the timing of customer construction may
require a utility to provide service to the customer on an exigent basis,
before Commission approval can be secured. However, to ensure the Commission is
fulfilling its role of active supervision over electric territorial matters, it
is incumbent upon utilities, when finding themselves in such circumstances, to
promptly communicate with the Commission and to file for modification of their
territorial boundaries as soon as practicable. To do otherwise raises the
concern that utilities are operating outside the purview of the Commission’s
jurisdiction.
Staff believes the parties have
acknowledged the Commission’s jurisdiction by explicitly stating that the
temporary service agreement was ultimately subject to the Commission’s
approval. However, should the utilities find themselves in similar
circumstances in the future, staff recommends the parties should be required to
promptly notify Commission staff and state how the boundary is expected to
change. The notification should also include the date service was first
connected, and when a petition to modify the territorial boundary will be
filed. The petition, when filed, should contain sufficient detail for staff and
the Commission to fully understand the timing and circumstances of the
territorial modification.
Conclusion
Staff recommends the Commission
approve the joint petition for proposed modification to territorial agreement
in Sumter County by SECO and Bushnell, which transfers two parcels from
Bushnell to SECO. The proposed second amendment would facilitate the provision
of economical and reliable electric service by SECO to the two residential
customers in the transferred parcels, thereby avoiding potential uneconomic
duplication of facilities. Should the utilities find themselves in
similar circumstances in the future, staff recommends the parties should be
required to promptly notify Commission staff and state how the boundary is
expected to change. The notification should also include the date service was
first connected, and when a petition to modify the territorial boundary will be
filed. The petition, when filed, should contain sufficient detail for staff and
the Commission to fully understand the timing and circumstances of the
territorial modification.
Issue 2:
Should this docket be closed?
Recommendation:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a
Consummating Order. (Dose)
Staff Analysis:
If no protest is filed by a person whose substantial
interests are affected within 21 days of the issuance of the Order, this docket
should be closed upon the issuance of a Consummating Order.
