Discussion
of Issues
Issue 1:
Should the Commission propose the adoption of Rule
25-7.150, F.A.C., Natural Gas Facilities Relocation Cost Recovery Clause?
Recommendation:
Yes. The Commission should propose the adoption of
Rule 25-7.150, F.A.C., as set forth in Attachment A. The Commission should also
certify the rule as a minor violation rule. (Sapoznikoff, Hinton, Guffey)
Staff Analysis:
The purpose of this rulemaking is to adopt new Rule
25-7.150, F.A.C., to implement the requirements of Section 366.99, F.S. Staff
recommends that the Commission propose the adoption of Rule 25-7.150, F.A.C.,
as set forth in Attachment A. The rule establishes a cost recovery clause, the
NGFRCRC, as required by the statute. Each section of the rule as recommended by
staff is explained in detail below.
Subsection (1) – Requiring petitions to be
supported by certain testimony
This provision establishes that recovery under the NGFRCRC
must be supported by testimony that provides details of the facilities
relocation activities and associated costs.
OPC submitted comments requesting that the rule should explicitly
state that cost recovery is limited to relocation or reconstruction of existing
facilities, not new construction. Staff believes
that is not necessary. Section 366.99(1)(b), F.S., already defines “facilities
relocation” as “the physical moving, modification, or reconstruction of public
utility facilities to accommodate the requirements imposed by an authority.”
OPC also submitted comments requesting that utilities
should have to affirm that the petition does not seek any double recovery and
explain how the costs are not also included in base rates. A rule cannot
require an affirmation if an affirmation is not required by statute, and Section
366.99, F.S., contains no such requirement. Moreover, Section 366.99(1)(d),
F.S., already prohibits double recovery by excluding recovery through the
NGFRCRC of “any costs recovered through the public utility’s base rates,” so
this provision cannot be duplicated in the rule. Restating statutory language in
a rule is inappropriate pursuant to Section 120.545(1)(c), F.S.
OPC also wanted rule language indicating that neither it
nor the Commission should have to conduct discovery to ensure that there is no
double recovery. Staff does not believe this rule language should be included
because discovery is standard in litigation and staff does not believe this
rule should circumvent standard procedure. The statute imposes the requirement
that there be no double recovery and the burden is already on a utility seeking
cost recovery under the NGFRCRC to abide by that directive.
Subsection (2) – Setting forth what must be
attached to the petition
This section sets forth what information is required to be
submitted to the Commission in support of cost recovery via the NGFRCRC.
Paragraph (2)(a) – Requiring the notification
from the authority
The statute allows for cost recovery via the NGFRCRC when
a specified authority requires the relocation of gas facilities. This paragraph
requires the utility provide the actual notification from the authority
regarding a particular facilities relocation required by an underlying
relationship with the authority.
OPC suggested that the rule should define “authority” as FDOT
and local governmental entities. As Section 366.99(1)(a), F.S., already defines
authority, via reference to Section 337.401(1)(a), F.S., restating the
definition is not required and is inappropriate pursuant to Section
120.545(1)(c), F.S. The definition of authority in Section 337.401(1)(a), F.S.,
includes the Florida DOT and other governmental entities that have jurisdiction
over and control of public roads.
OPC also submitted comments requesting that the rule
explicitly state that cost recovery is limited to facilities relocation
required by FDOT or local governmental entities. Staff believes the Commission
should decline to incorporate this suggestion as Section 366.99(1)(a), F.S.,
already defines “facilities relocation” as being in response to “requirements
imposed by an authority” and Section 366.99(1)(d), F.S., already limits cost
recovery to costs “required by a mandate, a statute, a law, and ordinance, or
any agreement between the utility and an authority.” Accordingly, staff
believes the rule language is clear that cost recovery is only for relocation
projects required by FDOT or other governmental entities.
A comment from PGS requested that the rule address both
“identified” relocation projects and “anticipated” relocation projects, with
“identified” projects being those for which an authority has notified a utility
that “facilities relocation” is required and “anticipated” projects being those
projects that are not currently required, but are likely to be required, based
on FDOT’s five-year plan, long-term forecasts, and the company’s business
knowledge. While staff is cognizant that timing of relocation projects is often
unpredictable, staff believes including “anticipated” projects in cost recovery
is inappropriate. Section 366.99, F.S., explicitly limits cost recovery to
facilities relocation required by an
authority. Thus, staff believes the plain language of the statute excludes cost
recovery for “anticipated” projects that will not occur until some future time
and are not yet mandated.
Paragraph (2)(b) – Requiring a description of
the scope of the facilities relocation
This paragraph requires the utility to disclose the scope
of the facilities relocation to be undertaken per the requirements imposed by
the authority.
OPC submitted comments requiring a description not only of
the scope of facilities relocation, but also identification of the particular
projects and work to be performed. Section 366.99(3), F.S., limits the
Commission’s review to the prudence of costs already incurred and the
reasonableness of projected costs. Unlike other statutes requiring the
Commission to review and approves plans or determine need before costs may be
incurred, Section
366.99, F.S., contains no such grant of authority, and it is not the
Commission’s practice to micromanage how utilities perform their statutory
obligations.
PGS requested including the term “identified” to limit for
which projects the information was required. As the rule already only allows
for cost recovery for facilities relocation projects that would be considered
“identified” (declining to also allow PGS’s request to include “anticipated”
projects, as discussed above), there is no need to specify that only
“identified” projects are addressed in this paragraph.
Paragraph (2)(c) – Requiring an estimate of
associated costs
This paragraph requires the utility seeking cost recovery
through the NGFRCRC provide an estimate of the costs associated with the
relocation of the natural gas facilities. Comments from FPUC and FCG suggested adding
additional language to define costs to include “annual depreciation on the
cost, calculated at the public utility’s current approved depreciation rates,
and a return on the undepreciated balance of the costs at the public utility’s
weighted average cost of capital using the last approved return on equity.”
Staff does not believe that costs need to be defined in
the rule as Section 366.99(5), F.S., already states that costs include “annual
depreciation on the cost, calculated at the public utility’s current approved
depreciation rates, and a return on the undepreciated balance of the costs at
the public utility’s weighted average cost of capital using the last approved
return on equity, along with costs associated with reviewing plans provided by
the authority.” Restating the definition in the rule is not required and is
inappropriate pursuant to Section 120.545(1)(c), F.S.
Subsection (3) – Establishing procedure for review
of costs
This subsection directs how the statutorily mandated
review of incurred and proposed costs will occur and follows the Commission’s established
procedure for its other cost recovery clauses. The rule provides that an annual
hearing to address petitions for recovery of natural gas facilities relocation
costs will be held and will be limited to determining the reasonableness of
projected costs, the prudence of actual costs incurred by the utility, and to
cost recovery factors consistent with the requirements of this rule. The
process set forth in paragraphs (3)(a)-(e) is consistent with that of other
rules pertaining to cost recovery clauses.
Paragraph (3)(a) – Final True-Up for Previous
Year
FPUC and FCG submitted comments to include language clarifying
that the initial filing for cost recovery would include eligible projects
undertaken since July 1, 2024, the effective date of Section 366.99, F.S. Staff
believes such language is unnecessary. First, the Commission’s practice, per
rule making statutes, is for the rule to apply as of the effective date of the
authorizing statute. In addition, this clarification would only be pertinent to
petitions for cost recovery filed in 2025. As utilities are not mandated to
seek recovery under the NGFRCRC, an “initial filing” may not occur in 2025.
Paragraph (3)(b) – Estimated True-Up for
Current Year
PGS submitted comments seeking to clarify that the current
year true-up would be for costs that “have been, will be, and are projected to
be incurred.” The draft language addresses costs that “have been or will be
incurred” and is identical to language the Commission used in the rule
pertaining to the Storm Protection Plan cost recovery clause.
Staff believes the draft rule language is appropriate and the recommended
additions are unnecessary.
Paragraph (3)(c) – Projected Costs for
Subsequent Year
PGS submitted comments that would add language to include
both “identified” and “anticipated” costs, and to add language specifying what
would constitute the basis for costs of “anticipated” projects. As discussed
above (regarding paragraphs (2)(a) and (b)), staff believes the statute only
allows for cost recovery for what PGS calls “identified” projects—facilities
relocation which a utility is required to do per notification from an authority.
Accordingly, as expressed in the discussion of paragraphs (2)(a) and (b), staff
believes including “anticipated” projects in cost recovery is inappropriate.
Section 366.99, F.S., explicitly limits cost recovery to facilities relocation required by an authority. Thus, staff
believes the plain language of the statute excludes cost recovery for
“anticipated” projects that will not occur until some future time and are not
yet mandated.
Paragraph (3)(d) – True-Up Variances
Consistent with other cost recovery clauses, under the
recommended rule language, the utility must report observed true-up variances,
including sales forecasting variances, changes in the utility’s prices of
services and/or equipment, and changes in the scope of work relative to the estimates
provided in the petition. The utility must also provide explanations for
variances regarding the facilities relocation. None of the workshop
participants had any objection to or comment on this provision.
Paragraph (3)(e) – Proposed Natural Gas
Facilities Relocation Cost Recovery Factors
Consistent with other cost recovery clauses, the utility
must provide the calculations of its proposed factors and effective 12-month
billing period. None of the workshop participants had any objection to or
comment on this provision.
Subsection (4) – Setting forth accounting
treatment
Under the recommended rule language, natural gas
facilities relocation cost recovery clause true-up amounts will be afforded
deferred accounting treatment at the 30-day commercial paper rate. This
provision is in accord with the Commission’s other cost recovery clauses. None
of the workshop participants had any objection to or comment on this provision.
Subsection (5) – Subaccounts.
To ensure separation of costs subject to recovery through
the clause, staff recommends that the new rule require the utility filing for
cost recovery must maintain subaccounts for all items consistent with the
Uniform System of Accounts prescribed by this Commission pursuant to Rule 25-7.014,
F.A.C. None of the workshop participants had any objection to or comment on
this provision.
Subsection (6) – Option to include unrecovered
costs in a subsequent rate proceeding
Under staff’s recommended rule language, the NGFRCRC
allows utilities to initiate recovery of required costs with minimal regulatory
lag. However, as the relocation projects covered by this rule are likely large,
capital expenditures, subsection (6) provides the option for utilities to move
costs into base rates at a subsequent rate proceeding, and remove them from
on-going clause proceedings. None of the workshop participants had any
objection to or comment on this provision.
Comments Requesting to Add Language to Allow for
Filing of Mid-Course Corrections.
Due to the unpredictability of when an authority may
require natural gas facilities to be relocated and the variation in cycle times,
both PGS and FPUC/FCG submitted comments to add rule language allowing a
utility to seek a mid-course correction for costs that may vary significantly
over a 12-month period. Comments from PGS included language akin to the language
of Rule 25-6.0424, F.A.C., pertaining to a petition for mid-course correction
to the fuel cost recovery or capacity cost recovery factors. Under the language
suggested by PGS, a utility could request a mid-course correction if the
revised projected costs for the remainder of the period exceeded projected
revenues by more than ten percent, and had filing requirements identical to
that of Rule 25-6.0424, F.A.C. Comments from FPUC and FCG included language
that a utility be required to file for a mid-course correction should the
difference between projected expenses and projected revenues exceed 25 percent,
but allowing a utility to file a petition for a mid-course correction prior to
reaching the 25 percent threshold, if projected expenses exceed projected
revenues by ten percent or more.
Staff believes a mid-course correction provision is not
only unnecessary, but also is prohibited by Section 366.99, F.S. First, Section
366.99(3), F.S., directs the Commission to hold “an annual proceeding” (emphasis added), the plain meaning of which
indicates one proceeding each year. Holding additional proceedings to address
requested mid-course corrections would violate that language. In addition, the
provisions of Section 366.99, F.S., which allow utilities to seek cost recovery
at an annual proceeding, already significantly accelerate their ability to
recover eligible costs. Prior to Section 366.99, F.S., utilities could only
recover facilities relocation costs in base rate proceedings. Under Section
366.99, F.S., and this recommended new rule, utilities may seek to have required
relocation costs assessed annually under a process that accounts for changes
between projected, estimated, and actual costs.
Staff also notes that the rationale underlying the need
for a mid-course correction provision in the fuel cost recovery clause does not
apply to facilities relocation costs. The fuel clause has two components: fuel
cost recovery and capacity cost recovery, both of which may fluctuate
significantly during the year and both of which have such sufficient magnitude
that those fluctuations would cause dramatic over- or under-recovery. The costs
for facilities relocation projects are not of the same magnitude.
Minor Violation Rule Certification
Pursuant to Section 120.695, F.S., for each rule filed for
adoption, the agency head shall certify whether any part of the rule is
designated as a rule the violation of which would be a minor violation. Under Section
120.695(2)(b), F.S., a violation of a rule is minor if it does not result in
economic or physical harm to a person or adversely affect the public health,
safety, or welfare or create a significant threat of such harm. Rule 25-7.150,
F.A.C., should be listed as a minor violation rule by the Commission. This rule
is a minor violation rule because the violation of it would not result in
economic or physical harm to a person, cause an adverse effect on the public
health, safety, or welfare, or create a significant threat of such harm.
Therefore, for the purposes of filing the rule for adoption with the Department
of State, staff recommends that the Commission certify Rule 25-7.150, F.A.C.,
as a minor violation rule.
Statement of Estimated Regulatory Costs
Section 120.54(3)(b)1., F.S., encourages agencies to
prepare a Statement of Estimated Regulatory Costs (SERC) before the adoption,
amendment, or repeal of any rule. A SERC was prepared for this rulemaking and
is appended as Attachment B. As required by Section 120.541(2)(a)1., F.S., the
SERC analysis includes whether the rule is likely to have an adverse impact on
economic growth, private sector job creation or employment, or private sector
investment in excess of $1 million in the aggregate within five years after
implementation.
The SERC concludes that the rule will likely not directly
or indirectly increase regulatory costs in excess of $200,000 in the aggregate
in Florida within one year after implementation. Further, the SERC concludes
that the rule will not likely increase regulatory costs, including any
transactional costs, or have an adverse impact on business competitiveness,
productivity, or innovation, in excess of $1 million in the aggregate within
five years of implementation. Thus, pursuant to Section 120.541(3), F.S., the
rule do not require legislative ratification.
In addition, the SERC states that the rule would have no
adverse impact on small businesses, would have no implementation or enforcement
costs on the Commission or any other state or local government entity, and
would have no impact on small cities or small counties. The SERC states that
there will be no transactional costs likely to be incurred by individuals and
entities required to comply with the requirements. None of the impact/cost
criteria established in Section 120.541(2)(a), F.S., will be exceeded as a
result of the rule.
Conclusion
Based on the foregoing, staff recommends the Commission
should propose the adoption of Rule 25-7.150, F.A.C., as set forth in
Attachment A. Staff also recommends the Commission certify the rule as a minor
violation rule.
Issue 2:
Should the docket be closed?
Recommendation:
Yes. If no request for hearing is made or comments from
the Joint Administrative Procedures Committee (JAPC) are filed, and no proposal
for a lower cost regulatory alternative is submitted pursuant to Section
120.541(1)(a), F.S., the rule should be filed for adoption with the Department
of State, and the docket should be closed. (Sapoznikoff)
Staff Analysis:
If no request for hearing is made or comments from JAPC
are filed, and no proposal for a lower cost regulatory alternative is submitted
pursuant to Section 120.541(1)(a), F.S., the rule should be filed for adoption
with the Department of State, and the docket should be closed.
25-7.150 Natural Gas Facilities
Relocation Cost Recovery Clause.
(1) A utility may file a petition for
recovery of natural gas facilities relocation costs through the annual natural
gas facilities relocation cost recovery clause (NGFRCRC). The petition seeking
such cost recovery must be supported by testimony that provides details of the
facilities relocation activities and associated costs.
(2) As part of the
NGFRCRC or by a separate filing, a utility must seek a determination that
“natural gas facilities relocation costs” are eligible for recovery through the
NGFRCRC by providing the following information:
(a) The notification by the
authority requiring the facilities relocation per section 366.99(1), Florida
Statutes,
(b) A description of the scope
of the facilities relocation to be undertaken per the requirements imposed by
the authority, and
(c)
An estimate of the costs associated with the relocation of the natural gas
facilities.
(3)
Each year, pursuant to the order establishing procedure in the annual NGFRCRC,
a utility must submit the following:
(a)
Final True-Up for Previous Year. The final true-up of natural gas facilities
relocation cost recovery for a prior year must include revenue requirements
based on a comparison of actual costs for the prior year and previously filed
projected costs and revenue requirements for such prior year for each project
determined to be eligible by the Commission. The final true-up must also include
identification of each of the utility’s eligible facilities relocation projects
for which costs were incurred during the prior year, including a description of
the work actually performed during such prior year.
(b)
Estimated True-Up for Current Year. The actual/estimated true-up of natural gas
facilities relocation cost recovery must include revenue requirements based on
a comparison of current year actual/estimated costs and the previously-filed
projected costs and revenue requirements for such current year for each
eligible project. The actual/estimated true-up must also include identification
of each of the utility’s eligible facilities relocation projects for which
costs have been and will be incurred during the current year, including a
description of the work projected to be performed during such current year.
(c) Projected Costs
for Subsequent Year. The projected natural gas facilities relocation cost
recovery must include costs and revenue requirements for the subsequent year
for each eligible project. The projection filing must also include
identification of each of the utility’s eligible facilities relocation projects
for which costs will be incurred during the subsequent year, including a
description of the work projected to be performed during such year.
(d)
True-Up of Variances. The utility must report observed true-up variances,
including sales forecasting variances, changes in the utility’s prices of
services and/or equipment, and changes in the scope of work relative to the
estimates provided pursuant to paragraphs (2)(b) and (2)(c). The utility must
also provide explanations for variances regarding the facilities relocation.
(e)
Proposed Natural Gas Facilities Relocation Cost Recovery Factors. The utility
must provide the calculations of its proposed factors and effective 12-month
billing period.
(4)
Natural gas facilities relocation cost recovery clause true-up amounts will be
afforded deferred accounting treatment at the 30-day commercial paper rate.
(5)
Subaccounts. To ensure separation of costs subject to recovery through the
clause, the utility filing for cost recovery must maintain subaccounts for all
items consistent with the Uniform System of Accounts prescribed by this
Commission pursuant to Rule 25-7.014, F.A.C.
(6) Recovery of
costs under this rule does not preclude a utility from proposing inclusion of
unrecovered natural gas facilities relocation costs in base rates in a
subsequent rate proceeding. Recovery of costs under this rule does not preclude
inclusion of such costs in base rates in a subsequent rate proceeding, provided
that such costs are removed from the NGFRCRC.
Rulemaking
Authority 366.99, FS. Law Implemented 366.99, FS. History–New _____.
