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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, 2024
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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 Engineering (Thompson, Davis,
Ellis, King, Sanchez, Wooten) TB
Office of the General
Counsel (Imig, Harper, Rubottom) AEH
Division of Accounting & Finance (Cicchetti) ALM
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RE:
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Docket No. 20240012-EG – Commission review
of numeric conservation goals (Florida Power & Light Company).
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AGENDA:
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12/03/24 – Regular Agenda – Post-Hearing Decision –
Participation is Limited to Commissioners and Staff
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COMMISSIONERS ASSIGNED:
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All Commissioners
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PREHEARING OFFICER:
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Graham
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CRITICAL DATES:
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01/01/25 – Pursuant to section 366.82(6), F.S., the
Commission must review conservation goals at least every five years. New
conservation goals must be set by January 1, 2025.
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SPECIAL INSTRUCTIONS:
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None
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Background
Pursuant to the
Florida Energy Efficiency and Conservation Act (FEECA), the Commission must adopt appropriate goals
to increase the efficiency of energy consumption, reduce and control the growth
rates of electric consumption and weather-sensitive peak demand, increase the
conservation of expensive resources, and encourage development of demand-side
renewable energy resources.
The Commission
implements FEECA for electric utilities through Rule 25-17.0021, Florida
Administrative Code (F.A.C.) Pursuant to that rule, the Commission establishes
annual kilowatt (KW) and kilowatt-hour (KWh) goals for Residential and Commercial/Industrial
customer classes.[2] The goals are based on (1) an assessment
of the technical potential of available conservation and efficiency measures,
and (2) an estimate of the total cost-effective KW and KWh savings reasonably
achievable through demand-side management (DSM) programs in each utility’s
service area over a ten-year period.[3] The goals are annual targets for
conservation, with KW goals relating to seasonal—summer and winter—demand
savings, and annual KWh goals relating to annual energy savings. Pursuant to
section 366.82(6), F.S., the Commission must review the goals of each utility
subject to FEECA at least every five years. Goals were last established for
Florida Power & Light Company (FPL) in 2019 by Order No.
PSC-2019-0509-FOF-EG.[4] Therefore, new goals must be established
for FPL by January 1, 2025.
On January 5,
2024, this docket was established to review and adopt conservation goals for FPL.
By the Order Consolidating Dockets and Establishing Procedure, Order No.
PSC-2024-0022-PCO-EG, issued January 23, 2024, the dockets were consolidated
for purposes of hearing, a tentative list of issues was set forth, and
controlling dates were established. On April 2, 2024, FPL filed its petition
for approval of numeric conservation goals, along with supporting testimony and
exhibits. At an informal meeting between parties and
Commission staff on June 27, 2024, additional issues were identified, and the
final issue list was set for hearing by the Prehearing Order, Order No.
PSC-2024-0293-PHO-EG, issued August 2, 2024. On August 5, 2024, joint stipulations
were filed that fully resolved all disputed issues, as set forth on pages 3-4
of Attachment A.[6]
Pursuant to
Notice, and in accordance with Rule 28-106.209, F.A.C., the Commission held an
evidentiary hearing on August 8, 2024, at which it considered whether to accept
the stipulations. By a bench vote, the Commission approved stipulations on
Issues 1-9 and 11-14 and, with respect to Issue 10, allowed FPL to file a
post-hearing brief.
This
recommendation addresses the remaining Issue 10, which deals with FPL’s
proposed heating, ventilation, and air conditioning (HVAC) on-bill tariff
option (“HVAC On-Bill”), an expansion to the company’s existing On Call®
DSM program (“On Call®”). Specifically, Issue 10 states:
Is FPL’s
proposed HVAC On-Bill option for its existing Residential On-Call program with
its associated HVAC Services Agreement (proposed Tariff sheets 9.858 through
9.866) a regulated activity within the jurisdiction of the Commission? If not,
should the savings associated with FPL’s HVAC On-Bill option and HVAC Services
Agreement be removed from its conservation goals?
The ultimate issue
to be determined is whether the estimated savings associated with FPL’s
proposed HVAC On-Bill option should be counted toward establishing FPL’s
conservation goals. If the HVAC On-Bill option is not within the Commission’s
jurisdiction, the associated savings should be removed from FPL’s proposed
goals.
As a fallout to
the Commission’s decision on Issue 10, Issue 12, which deals with what goals
should be established for FPL, must be revisited. The Commission has
jurisdiction over this matter pursuant to sections 366.80 through 366.82, F.S.
Undisputed Facts in the Record
Existing HVAC Programs for FPL Customers
FPL currently
offers several DSM programs for residential customers as part of its FEECA
plan. For example, FPL offers a “Residential HVAC Program” that provides
customers a rebate for installing a high-efficiency HVAC system. (EXH 152) FPL customers can also participate in the
“Residential Load Management (On Call®)” program (“On Call®”),
a demand response program that provides participating customers with bill
credits in exchange for granting FPL the right to periodically control
customer-owned HVAC, water heating, and pool pump appliances. (TR 120-21; EXH
152) Additionally, FPL’s unregulated affiliate
company, FPL Energy Services (“FPLES”), offers HVAC financing options to
customers inside and outside FPL’s service territory. For example, FPLES offers
a traditional HVAC financing arrangement under which ownership would transfer
to the customer upon installation of the HVAC unit. (EXH 154, MPN E289) FPLES
also offers a “Stress Free AC” program, an HVAC leasing option under which
FPLES retains ownership of the HVAC unit and provides ongoing maintenance
services for the unit. (EXH 154, MPN E289; EXH 228, MPN E4149-51)
FPL’s Proposed HVAC On-Bill Option
In Issue 10, FPL
is requesting the Commission include in its conservation goals the estimated
savings associated with the HVAC On-Bill option, a new DSM measure proposed by
FPL as an expansion of its existing On Call® program. The proposed
HVAC On-Bill option would allow customers to acquire a new
HVAC unit through a separate tariff agreement and, after making all payments
required by the agreement, to take ownership of the unit. (TR 121) FPL would
offer participating customers the option of a 10-, 12-, or 15-year term,
dependent on the life of the particular HVAC’s warranty. (EXH 151, MPN E149) Under
the HVAC On-Bill option, FPL would own and maintain the HVAC unit for the
duration of the term, and the monthly charge would cover the capital cost of
the HVAC equipment plus all maintenance and repairs of the unit for the
duration of the agreement. Additionally, participating customers would be
required to remain subject to FPL’s On Call® load management program
for the duration of the HVAC On-Bill term—a minimum of 10 years. (EXH 156)
What is unique
about FPL’s proposed HVAC On-Bill option compared to its other HVAC financing
and service offerings discussed above is that the On-Bill option would combine
into a single DSM measure two distinct activities: (1) the provision of a new
HVAC unit (installation, maintenance, title transfer, etc.); and (2) the
provision of load management services (HVAC load control device, management,
and load control credits). (FPL BR 11) Participating customers would receive a
new HVAC unit as well as the load management equipment. Also unlike FPL’s other
DSM programs, HVAC On-Bill option does not require that the new HVAC unit
replace an older, less efficient unit, nor does it require that the new unit
exceed minimum appliance efficiency standards. (EXH 154, MPN E238)
As proposed, the
HVAC On-Bill option would require a participating customer to make levelized,
monthly payments over the term of the 10-15 year agreement that cover three
main categories of projected program costs:
1.
Capital Cost: HVAC and load control equipment and
installation, information technology and billing system architecture;
2.
Operations and Maintenance Expense: ongoing maintenance
and labor, information technology support, customer service and billing
support; and
3.
Load Management Credit: reduction in the total cost to
be collected in exchange for the right to control the HVAC units during peak
periods.
(FPL BR 14)
The capital
costs would include a return on FPL’s investment through a return on
unrecovered investment using the Commission-approved weighted average cost of
capital and a return of capital through depreciation expense. (EXH 151, MPN
E151) FPL estimates that for a minimum efficiency HVAC unit costing FPL $8,000,
a participant would pay a total of approximately $19,400, or 240% of the unit’s
original cost, over the term of their HVAC On-Bill agreement. (EXH 154, MPN
E290)
All costs
associated with the HVAC On-Bill option, including those identified above,
would initially be recovered from the general body of ratepayers through the
Energy Conservation Cost Recovery (“ECCR”) clause. (FPL BR 14; TR 122) The program revenues received from
participating customers would also flow through the ECCR clause in order to
offset the program expense. (EXH 151, MPN E151) The HVAC On-Bill option is
designed so that the monthly payments received from a participant would
eventually cover all costs of that agreement and fully reimburse the general
body of ratepayers. Even if the agreement is terminated early, the participant
would be required to pay a “Termination Fee” that includes the unrecovered
capital costs and any advance payment of monthly load management credits. (EXH
156; EXH 151, MPN E154) However, FPL clarified
that in the event of any under- or over-recovery of program expenses associated
with a single participant’s agreement, “FPL will adjust pricing for new program
participants” to help ensure that under-recovered costs are recovered from
program participants and not from the general body of ratepayers.” (EXH 154,
MPN E237-38)
The HVAC On-Bill
agreement provides that FPL would retain title and ownership of the HVAC unit
during the term of the agreement until a participant elects to take title to
the HVAC unit from FPL after making all the payments required by the agreement.
(EXH 156; EXH 151, MPN E154) The participant could
also pursue a “Customer Purchase Option” in the case of early termination,
under which they would take title from FPL upon payment of the Termination Fee.
(EXH 156) FPL expects that the majority of HVAC
On-Bill agreements would result in transfer of title and ownership to the HVAC
unit from FPL to the customer once the service agreement terms are completed.
(EXH 228, MPN E4218)
Discussion of Issues
Issue 10:
Is FPL’s proposed HVAC On-Bill option for its
existing Residential On-Call program with its associated HVAC Services
Agreement (proposed Tariff sheets 9.858 through 9.866) a regulated activity
within the jurisdiction of the Commission? If not, should the savings
associated with FPL’s HVAC On-Bill option and HVAC Services Agreement be
removed from its conservation goals?
Recommendation:
No, FPL’s proposed HVAC On-Bill option is not within
the jurisdiction of the Commission because it appears to include the sale of HVAC
units as defined by Florida law. Additionally, the program would consider
profit and loss from such sales in rates charged to customers, and appears to
mix non-jurisdictional appliance sales with jurisdictional FEECA investments
for ratemaking purposes, which Chapter 366, F.S., appears not to allow. Further,
staff recommends that the proposed stipulation offered by FPL does not answer
the question at issue. As such, staff recommends that the Commission not
approve the proposed stipulation language, and recommends that the savings
associated with the HVAC On-Bill option and HVAC Services Agreement be removed
from FPL’s conservation goals. (Rubottom, Thompson)
Staff
Analysis:
Summary of Staff’s Analysis
While staff agrees with the parties to the extent that
FPL’s proposed HVAC On-Bill option would allow
customers to access new HVAC equipment in a way that passes the Commission’s
cost-effectiveness tests, staff disagrees that the measure should be
included in FPL’s proposed DSM goals for the following reasons, which are
discussed more fully below:
·
Section 672.106(1), F.S., defines a “sale” as
“the passing of title from the seller to the buyer for a price.” FPL’s
provision of a new HVAC unit under the HVAC On-Bill option appears to meet that
definition because FPL would transfer title to the HVAC unit from FPL to the
participating customer in exchange for fulfillment of all payment obligations.
·
Section 366.05(2), F.S., provides that “[n]o
profit or loss shall be taken into consideration by the commission from the
sale of [appliances] in arriving at any rate to be charged for service by any
public utility.” The HVAC On-Bill option appears to consider profit or loss
from the sale of HVAC units in rates charged for service, because both the
participants and the general body of ratepayers would pay (1) a return on
equity on the capital cost of the HVAC units; and (2) any potential under- or
over-recovery of the original cost of units from prior agreements.
·
Florida law requires the Commission to ensure
that a utility’s ratepayers do not subsidize non-jurisdictional activity. See Sections 366.04(1), 366.05(9),
366.093(1), F.S. The Commission has long considered the sale of appliances to
be a non-utility activity, describing it as “non-jurisdictional” or
“non-utility investment.” Thus, the HVAC On-Bill’s mixing of non-jurisdictional
HVAC sales with jurisdictional FEECA load control investments appears to be
contrary to Florida law and Commission practice.
For these reasons, as discussed in more detail below, staff
recommends the Commission find that the HVAC On-Bill option is not within the
jurisdiction of the Commission and remove the savings associated with the HVAC
On-Bill option from FPL’s conservation goals.
Preliminary Matters
Prior to addressing the substance of the HVAC On-Bill
option and the merits of FPL’s argument, there are several preliminary matters
raised by FPL that relate to the procedural posture of the case.
Due
Process
FPL suggests in its post-hearing brief, although it did
not do so at the hearing, that due process concerns are raised by the fact that
the Commission asked it to file a post-hearing brief to support its position on
Issue 10 when all other parties have stipulated the issue. FPL states that
staff did not file testimony or take a position on the issue, and that FPL
“must try to anticipate and preemptively address a staff recommendation . . .
that will be issued after FPL files its post-hearing brief.” (FPL BR 8)
(emphasis in original)
Staff submits that the Commission’s action did not raise
any due process concerns for the following reasons:
·
The circumstances of this case are no different
from any other case before the Commission. Because the utility bears the burden
of proof, the substance of staff’s recommendation depends upon the evidence and
arguments the utility presents to the Commission. Staff is not required to take
a position on the issues in order to make a recommendation to the Commission
once all evidence has been collected and reviewed.
·
As the Florida Supreme Court has stated, “[t]he
fundamental requirements of due process are satisfied by reasonable notice and
a reasonable opportunity to be heard.” Citizens
v. Fla. Pub. Serv. Comm’n, 146
So. 3d 1143, 1154 (Fla. 2014) (quoting Fla.
Pub. Serv. Comm'n v. Triple “A” Enters., Inc., 387 So. 2d 940, 943 (Fla. 1980)).
Far from being denied due process, the Commission afforded FPL an additional
opportunity to be heard and meet its burden of proof by filing a post-hearing
brief in support of its position.
·
Issue 10 was identified and added to the
preliminary issue list on June 27, 2024, at the informal meeting between FPL,
Commission staff, and other parties, and staff conducted extensive discovery on
the issue. Moreover, at the hearing, the Commission extracted Issue 10 from the
other, stipulated issues so FPL could have an additional opportunity to address
those concerns.
Because FPL was given reasonable notice and an opportunity
to be heard, and has not been prejudiced in any way, the Commission did not err
when it asked FPL to file a brief on Issue 10 before it received staff’s
recommendation. As such, there is no due process concern with how the
Commission chose to address Issue 10.
Appropriate
Standard of Review
FPL also asks the Commission to consider its position on
Issue 10 as part of a comprehensive “settlement” of its goalsetting case, in
light of the fact that it reached stipulations on all issues with the
intervening parties. (FPL BR 4) FPL requests the Commission to apply the
standard of review applicable to rate case settlements and consider whether the
agreement, taken as a whole, is in the “public interest.” Id. (citing Floridians
Against Increased Rates v. Clark, 371 So. 3d 905, 910 (Fla. 2023)).
Staff disagrees with FPL’s conclusion that the Commission
is precluded from considering and deciding Issue 10 separately and distinctly
from other stipulated issues already approved by the Commission. The
Commission’s practice is to treat a stipulation as a proposed resolution of a
distinct issue in a case, and a proposed settlement agreement as resolving the
case as a whole.
Additionally, at the hearing, rather than taking one vote
to approve the parties’ agreement as a whole, as it would have done with a
settlement agreement, the Commission voted to resolve distinct issues,
approving the stipulated positions on Issues 1-9 and 11-14 but not Issue 10.
(TR 20) At that time, FPL did not refer to the stipulations as a “settlement,”
and it did not oppose staff’s recommendation to allow parties to file
post-hearing briefs on Issue 10.
Because the parties filed stipulations rather than a
settlement agreement, and because the Commission explicitly treated Issue 10 as
separate and distinct from the other stipulated issues, staff recommends that
the Commission make factual and legal findings as necessary to resolve Issue
10.
The
Proposed Stipulation on Issue 10 Does Not Answer the Question at Issue
Because the question of whether FPL’s proposed
conservation goals are appropriate depends in part on whether FPL’s potential
programs are within the Commission’s jurisdiction, Issue 10 asks whether FPL’s
HVAC On-Bill option is an activity within the jurisdiction of the Commission.
However, the proposed stipulation on Issue 10 does not answer that question.
The parties’ stipulation on Issue 10 states:
The Parties stipulate and agree that the record
supports a Commission finding that FPL’s proposed HVAC On-Bill option expands
the existing On Call® load-management program to allow greater customer access
to new energy-saving HVAC equipment in a way that also passes the RIM cost
effectiveness test, and should be included in FPL’s proposed DSM Goals.
While this language includes proposed findings of fact
relevant to determining whether the HVAC On-Bill option would be effective in
furthering the objectives of FEECA, it does not address whether the DSM measure
is within the jurisdiction of the Commission.
Therefore, because the stipulation does not answer the question at issue, staff
recommends that the Commission not approve the proposed stipulation language.
Nevertheless, FPL presented arguments in its post-hearing
brief that addressed Issue 10. Therefore, this recommendation will provide
staff’s analysis and recommendation on the merits of Issue 10, addressing as
necessary the evidence and arguments presented by FPL.
Staff’s Analysis
Pursuant to section 366.82(2), F.S., the Commission must
evaluate whether the goals requested by FPL are appropriate. Issue 10 addresses
whether the HVAC On-Bill option is within the jurisdiction of the Commission as
required by FEECA, and, as a fall out question, whether the estimated savings associated
with the program are appropriate to include in FPL’s conservation goals.
1. Defining the Proposed Activity: The HVAC
On-Bill Option Includes the Sale of HVAC Units.
In order to
determine whether the HVAC On-Bill option is within the Commission’s
jurisdiction, the Commission must examine the nature of the activity involved
in the measure, not merely FPL’s characterization of the activity. See, e.g., Florida Power & Light Co. v. Albert Litter Studios, Inc., 896
So. 2d 891, 893 (Fla. 1st DCA 2005) (stating that “it is the nature of the
relief sought, not the language of the complaint, that ultimately determines
which tribunal has jurisdiction over the claim”).
FPL’s
proposed HVAC On-Bill option would combine into a single DSM measure two
distinct categories of activity: (1) the provision of a new HVAC unit
(installation, maintenance, title transfer, etc.); and (2) load management
services (HVAC load control device, management, and load control credits).
(FPL BR at 11) There is no question that the load control aspect of HVAC
On-Bill is within the Commission’s jurisdiction, as it is explicitly authorized
under FEECA and is in fact already available to customers through FPL’s existing
On Call® program. See Section
366.82(7), F.S.; (EXH 228, MPN E4133) However, the HVAC-related aspect of the
measure is, as characterized by FPL, “innovative” for a utility conservation plan
under FEECA. (TR 121; EXH 228, MPN E4134[19])
Staff’s
understanding of the legal nature of the HVAC services offered under the HVAC
On-Bill option differs from that of FPL, leading to opposite conclusions on the
question of whether the program is within the Commission’s jurisdiction.
Section 672.106(1), F.S., defines the term “sale” as “the
passing of title from the seller to the buyer for a price.” The
HVAC On-Bill option agreement provides that:
·
The participating customer would pay FPL an
agreed-upon monthly price for the term of the agreement. (TR 121; EXH 156)
·
Upon payment of all obligations required by the
agreement, a participant would have the right to take title to the HVAC unit
from FPL. (EXH 151, MPN E154; EXH 156)
Put simply, the HVAC On-Bill tariff allows the participant
to take title to the HVAC unit upon making all required payments. Therefore,
because the transaction includes FPL passing the HVAC unit title to customers
in exchange for a price, the transaction appears to meet the definition of a
“sale” under section 672.106(1), F.S.
In discovery, FPL agreed that if a participant exercises
the “Customer Purchase Option” under the HVAC Services Agreement, “title to the
HVAC unit passes from FPL to the participant in exchange for . . . the ‘purchase
option price.’” (EXH 154, MPN E284) Thus,
FPL seemingly agreed with staff that under certain scenarios, its conduct
pursuant to the HVAC Services Agreement meets the definition of a “sale” as
defined by section 366.05(2), F.S.
However, FPL suggests in its post-hearing brief that its
provision of HVAC units is not a sale because title to the HVAC unit would not
pass to the participant at the time the HVAC unit is delivered. (FPL BR 18) FPL
relies upon section 672.401(2), F.S., which provides that “[u]nless otherwise
explicitly agreed title passes to the buyer at the time and place at which the
seller completes her or his performance with reference to the physical delivery
of the goods.” Staff disagrees that the mere separation in time of the distinct
acts of HVAC installation and title transfer render the transaction not a sale.
Section 672.401(1), F.S., specifies that “under
a contract for sale, . . . title to goods passes from the seller to the
buyer in any manner and on any conditions explicitly agreed on by the parties.”
(emphasis added) Thus, the timing of title transfer within a contract does not
appear to have any bearing on the existence or validity of a contract for sale.
In other words, a transaction is still a
sale when the contract provides that seller reserves title to the goods
until certain conditions are met by the buyer. See, e.g., Suburbia Fed. Sav.
and Loan Ass’n v. Bel-Air Conditioning Co., 385 So. 2d 1151, 1152-53 (Fla.
4th DCA 1980) (construing a “contract for the sale of air conditioning
equipment” and holding that a provision conditioning title transfer upon
seller’s “payment of the entire purchase price” created a “security interest”
under Florida law). The inclusion of contract provisions requiring that customer
payments must occur prior to FPL passing the HVAC title to the customer appear
to be nothing more than a condition precedent within the underlying contract
for sale under Florida law.
FPL also offers a variation on the above argument,
suggesting that there is no sale under the HVAC On-Bill option because title to
the HVAC unit would not transfer until “the end of the contract term,” after
the participant had fulfilled all obligations under the agreement. (FPL BR 19)
FPL states that the participant’s option to take title to the HVAC “is a future
option” that is “not operative until the expiration, assignment, or early
termination of the agreement.” (FPL BR 20) However, the provisions in the HVAC
On-Bill agreement itself would obligate FPL to transfer the title upon certain
conditions. Thus, the agreement between FPL and the participant remains intact
from start to finish, and does not “expire” until after FPL discharges its
duties thereunder by transferring the HVAC title to the participant.
Finally, FPL argues that under Generally Accepted
Accounting Principles (“GAAP”), the HVAC On-Bill option is a “service
contract,” rather than a sale or a lease, because FPL would “use and maintain
the asset to deliver service to the customer while retaining control of that
asset.” (FPL BR 20) However, FPL’s argument does not refute the fact that under
the HVAC On-Bill option’s “Optional HVAC Services Agreement” tariff, title to
the HVAC unit would eventually pass to the participating customer in exchange
for a price. See (EXH 156) Therefore,
even if the agreement is considered a service contract under GAAP, the
transaction still appears to include the sale of HVAC units under Florida law.
2. Section 366.05(2), F.S., and the HVAC On-Bill
Option
Florida law requires that if a public utility engaged in providing
ordinary public utility services also engages in the sale of appliances or
other merchandise, certain restrictions apply. Section 366.05(2), F.S.,
provides:
Every public utility, as defined in s. 366.02, which
in addition to the production, transmission, delivery or furnishing of heat,
light, or power also sells appliances or other merchandise shall keep separate
and individual accounts for the sale and profit deriving from such sales. No profit or loss shall be taken into
consideration by the commission from the sale of such items in arriving at any rate to be charged for
service by any public utility. (emphasis added)
As the Commission has previously stated, section
366.05(2), F.S., does not ban the sale of appliances by public utilities, but
rather, “instructs public utilities which also sell appliances on the proper
and separate accounting for such sales.” Order No. 24570-EI, issued May 22,
1991.
There is no question that FPL is a public utility as
defined by section 366.02(8), F.S., that supplies electric power to the public
in Florida. As discussed above, FPL’s conduct under the HVAC On-Bill option appears
to include a “sale” as defined by Section 672.106(1), F.S. As such, if any of
the rates FPL proposes to charge customers under the program would take into
consideration any profit or loss from the sale of HVAC units, section
366.05(2), F.S., would appear to prohibit the HVAC On-Bill option.
In utility regulation, a return on equity is the amount
collected above all costs and thus is, in essence, the utility’s “profit.”
Additionally, if FPL recovers more or less than the original cost of an HVAC unit,
that over- or under- recovery would constitute profit or loss, respectively.
Under the HVAC On-Bill option, FPL would recover a rate of
return, including a return on equity, from both the participant, through the
monthly program service charge, and from the general body of ratepayers,
through the ECCR clause charge. (TR 122; EXH 151, MPN E151;
EXH 154, MPN E290;
EXH 228, MPN E4161-63, E4187) Additionally,
FPL would recover any potential over- or under-recovery on an individual HVAC
On-Bill agreement by “adjust[ing] pricing
for new program participants,” and would collect the adjusted payments in
both participant charges and ECCR charges. (TR 122; EXH 154, MPN E237-38) In
other words, under the HVAC On-Bill option as proposed, FPL would calculate
four separate customer charges that would account for profit and loss from the
sale of HVAC units: (1) the monthly payments of each participant would include a
return on equity on their HVAC unit; (2) the ECCR charge collected from the general
body of ratepayers would include a return on equity on all HVAC units; (3) the
monthly payments of future participants would be adjusted for over- or
under-recovery from prior agreements; and (4) ECCR charges of the future
general body of ratepayers would account for over- or under-recovery from prior
agreements. As such, the plain language of section 366.05(2), F.S., appears to
prohibit the HVAC On-Bill option.
FPL suggests that even if the HVAC On-Bill option includes
a “sale,” it does not implicate section 366.05(2), F.S., because “there is no
profit or loss to recognize when
ownership transfers to the participant since all costs will be recovered
from the participant during the term of
the agreement.” (FPL BR 21) (emphasis added) Staff disagrees. FPL’s
argument hinges on the notion that there is no recognized profit and loss
throughout the course of the agreement. Yet, as discussed above, the revenue
requirement collected from both the general body of ratepayers and from participants
during the course of the agreement would recover more than the original cost of
the HVAC unit, including a return (profit) on the capital cost of the HVAC unit
as well as any potential over- or under-recovery from past participants, as
discussed above. FPL’s argument does not nullify the fact that, as proposed by
FPL, the program accounts for profit and loss in rates charged to customers.
FPL also argues that the HVAC On-Bill option is similar to
other, Commission-approved utility programs that provide equipment to customers
and recovers the capital costs through rates. (FPL BR 22-23) However, each of FPL’s
examples involve equipment that is directly used in the production or delivery
of electricity or natural gas and thus appears to be expressly allowable under
section 366.05(2), F.S. Section
366.05(2), F.S., provides that its restrictions on accounting for profit and
loss on appliance sales apply to a utility that “in addition to the production, transmission, delivery or furnishing of
heat, light, or power, also sells appliances or other merchandise.”
(emphasis added) Thus, by its own terms, the statute appears not to apply to the
type of equipment involved in the Commission-approved utility programs
identified by FPL. By contrast, the HVAC units at issue in the HVAC On-Bill
option do not serve to produce or supply energy, and thus do not fall into the
category of equipment section 366.05(2), F.S., appears to expressly allow.
3. FEECA In Relation to Other Provisions of Chapter
366, F.S.
FPL argues
that because the HVAC On-Bill option is proposed as a FEECA program, “there is
no need to look beyond FEECA” to consider section 366.05(2), F.S., or the
broader context of Chapter 366. (FPL BR 6, 17-18) FPL argues that “DSM measures
and programs that satisfy the requirements of FEECA are, and logically must be,
regulated utility activities,” and that “if the Commission finds a DSM measure
or program is appropriate under FEECA, it becomes a regulated activity under
the Commission’s jurisdiction upon its approval.” (FPL BR 9) Staff disagrees.
It is a
well-established principle of statutory construction and interpretation that
related statutes should be interpreted together, as though they were one law.
As the Florida Supreme Court has stated, “the doctrine of in pari materia requires that statutes relating to the same subject
or object be construed together to harmonize the statutes and to give effect to
the Legislature’s intent.” Sierra Club v.
Brown, 243 So. 3d 903, 911 n.8 (Fla. 2018). Therefore, FEECA cannot be
interpreted in isolation from the rest of Chapter 366, F.S.
The HVAC
On-Bill option appears to conflict with not only section 366.05(2), as
discussed above, but also other provisions of Chapter 366, F.S. In fact, section
366.05(2), F.S., is just one of several provisions in Chapter 366, F.S.,
emphasizing that a utility’s ratepayers should not be required to subsidize
non-jurisdictional activity. For example, the Commission is granted the power
to “require such reports or other data necessary to ensure that a utility’s
ratepayers do not subsidize nonutility activities.” Section 366.05(9), F.S.; see also Section 366.093(1), F.S.
(requiring that the Commission shall have access to “such records necessary to
ensure that a utility’s ratepayers do not subsidize nonutility activities”).
Additionally, the Commission may deny a utility’s request to issue or sell a
security if the security is for “nonutility purposes,” and the Commission is
required to deny the issuance or sale of a security if the utility’s “ability
to provide reasonable service at reasonable rates is jeopardized.” Section
366.04(1), F.S.
FPL argues
that the HVAC On-Bill is authorized by FEECA because the distinct activities of
HVAC-related services and load control are “inextricably intertwined as a
single service offering.” (FPL BR 11) Staff disagrees that the act of
“bundling” certain distinct, non-jurisdictional services with jurisdictional
services somehow makes the otherwise distinct, non-jurisdictional services
jurisdictional.
Although
load control is clearly jurisdictional under FEECA, the Commission has long
considered the sale of appliances to be a non-utility activity, describing it
as “non-jurisdictional” or “non-utility investment,” and removing such
investments from common equity in utility base rate cases. See Order No. PSC-99-1047-PAA-EI, issued May 24, 1999, in Docket
Nos. 990250-EI and 990244-EI;
Order No. 5688, issued April 2, 1973, in Docket No. 72344-GU;
Order No. 23573, issued Oct. 3, 1990, in Docket No. 891345-EI. Additionally,
Florida law does not appear to grant the Commission power to regulate
non-jurisdictional activity merely because a utility and a customer agree to
bundle it together with a jurisdictional activity. See United Tel. Co. of Fla. v. Pub. Serv. Comm’n, 496 So. 2d 116,
118 (Fla. 1986) (stating that “[p]arties to a contract . . . can never confer
jurisdiction”). In light of the broader context of Chapter 366, F.S., the
doctrine of in pari materia suggests
that the jurisdictional activity of load control be separated from the
non-utility activity of HVAC sales for purposes of Commission jurisdiction and
ratemaking. If the two activities are by design “inextricably intertwined” into
one program, as FPL characterizes the HVAC On-Bill option, then the provisions
of Chapter 366, F.S., cited above appear to require the Commission, at a
minimum, to ensure that ratepayers are not required to subsidize the non-utility
activity through their rates. See Sections
366.05(2), (9), 366.093(1), F.S.
FPL also argues
that the HVAC On-Bill option is within the jurisdiction of the Commission under
Chapter 366, F.S., because it involves the generation of electricity, claiming
that “the HVAC On-Bill option specifically involves the generation of
electricity, as both the load control and avoided cost benefits from this
program are factored into FPL’s integrated resource plan.” (FPL BR 12) However,
staff disagrees for two reasons. First, staff suggests that an HVAC unit consumes energy rather than generates
it. Second, while Florida law specifically considers conservation activity an alternative to or avoidance of generation
for resource planning purposes, there is no persuasive basis for concluding
that conservation activity falls under the category of “generation” for
purposes of determining the Commission’s jurisdiction. See Section 403.519, F.S.
It is
staff’s view that Florida law requires the Commission to consider FEECA as part
of Chapter 366, F.S., and not as an isolated exception to it. The broader
context of Chapter 366, F.S., taken as a whole, appears to prohibit utilities
from mixing jurisdictional activity, such as FEECA conservation investments, with
non-jurisdictional investments such as appliance sales, for ratemaking purposes.
As proposed, the HVAC On-Bill option appears to conflict with this statutory
directive.
4. Conclusion
As discussed above, staff’s view is that FPL’s proposed
HVAC On-Bill option is not within the jurisdiction of the Commission because it
appears to include the sale of HVAC units as defined by Florida law and would
consider profit and loss from such sales in rates charged to customers. It is
also staff’s view that FEECA does not override the rest of Chapter 366, F.S.
Thus, Florida law appears to not allow non-jurisdictional appliance sales to be
bundled with jurisdictional FEECA investments for ratemaking purposes. As such,
staff recommends that the Commission find the HVAC On-Bill option is not a
regulated activity within the jurisdiction of the Commission, and that the
estimated savings associated with the measure be removed from FPL’s
conservation goals.
Issue 12:
What residential and commercial/industrial summer
and winter megawatt (MW) and annual Gigawatt-hour (GWh) goals should be
established for the period 2025-2034?
Recommendation:
If the Commission approves staff’s recommendation on
Issue 10, then the Commission should approve conservation goals for FPL as
shown in Table 12-1. However, if the Commission does not approve staff’s
recommendation on Issue 10, no further decision is necessary on Issue 12 due to
the stipulated goals already approved by the Commission at the hearing.
Staff Analysis:
If the Commission approves staff’s recommendation
on Issue 10, then the Commission should approve conservation goals for FPL as
shown in Table 12-1. In doing so, the Commission would modify the goals
approved for FPL by bench vote at the August 8, 2024, hearing to remove the
savings associated with FPL’s HVAC On-Bill option and HVAC Services Agreement
in accordance with the decision on Issue 10. However, if the Commission does
not approve staff’s recommendation on Issue 10, no further decision is
necessary on Issue 12 due to the stipulated goals already approved by the
Commission at the hearing, shown in Table 12-2.
Table 12-1
FPL’s Annual Residential
Conservation Goals Without HVAC On-Bill
|
Year
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
2031
|
2032
|
2033
|
2034
|
Total
|
|
Summer
(MW)
|
29.22
|
28.99
|
28.81
|
28.61
|
28.49
|
29.01
|
28.94
|
28.88
|
28.84
|
28.81
|
288.60
|
|
Winter
(MW)
|
20.64
|
20.75
|
20.87
|
20.97
|
21.10
|
21.41
|
21.54
|
21.68
|
21.81
|
21.95
|
212.72
|
|
Annual
(GWh)
|
51.68
|
50.82
|
50.07
|
48.94
|
48.37
|
49.20
|
48.78
|
48.42
|
48.12
|
47.86
|
492.26
|
Source: EXH 5, MPN C1-155; DN 08228-2024.[35]
Table 12-2
FPL’s Annual Residential
Conservation Goals With HVAC On-Bill
|
Year
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
2031
|
2032
|
2033
|
2034
|
Total
|
|
Summer
(MW)
|
29.82
|
30.00
|
30.32
|
30.27
|
30.32
|
31.02
|
31.15
|
31.32
|
31.52
|
31.76
|
307.50
|
|
Winter
(MW)
|
21.79
|
22.66
|
23.74
|
24.12
|
24.57
|
25.22
|
25.74
|
26.30
|
26.89
|
27.53
|
248.54
|
|
Annual
(GWh)
|
51.68
|
50.82
|
50.07
|
48.94
|
48.37
|
49.20
|
48.78
|
48.42
|
48.12
|
47.86
|
492.26
|
Source: DN 08228-2024.
Issue 14:
Should this docket be closed?
Recommendation:
Yes. If no party files a timely request for
rehearing or an appeal, the docket should be closed. Within 90 days of issuance
of the final order, FPL should file a demand-side management plan designed to
meet the Utility’s approved conservation goals.
Staff Analysis:
If no party files a timely request for rehearing or
an appeal, the docket should be closed. Within 90 days of issuance of the final
order, FPL should file a demand-side management plan designed to meet the
Utility’s approved conservation goals. See
Section 366.82(7), F.S.; Rule 25-17.0021(4), F.A.C.
