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State of Florida |
Public Service Commission Capital Circle Office Center ● 2540 Shumard
Oak Boulevard -M-E-M-O-R-A-N-D-U-M- |
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DATE: |
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TO: |
Office of Commission Clerk (Teitzman) |
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FROM: |
Division of Economics (Prewett, Barrett) Office of the General Counsel (Bloom) |
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RE: |
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AGENDA: |
05/06/25 – Regular Agenda – Interested Persons May Participate |
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COMMISSIONERS ASSIGNED: |
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PREHEARING OFFICER: |
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SPECIAL INSTRUCTIONS: |
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On February 3, 2025, the Central Florida Electric Cooperative (CFEC) and Duke Energy Florida, LLC. (DEF) (collectively the joint petitioners, or utilities), filed a petition seeking Commission approval of a territorial agreement in Dixie, Gilchrist, Levy, Marion, and Alachua counties (2025 Territorial Agreement). The 2025 Territorial Agreement provides details on the boundary line changes and includes a total of 256 customer transfers (211 from CFEC to DEF and 45 from DEF to CFEC). In its petition, the joint petitioners provided sample customer notifications that were sent to each of the customers who are subject to being transferred. The letters were issued to comply with Rule 25-6.0440(1)(d), Florida Administrative Code (F.A.C.). The proposed Agreement, maps depicting the new territorial boundaries, written descriptions, and customer addresses are attached hereto as Attachment A.
Since 1992, CFEC and DEF have been parties to multiple territorial agreements. The territorial Agreement for Dixie and Gilchrist counties expired in 2007 and the territorial Agreement for Levy and Marion counties expired in 2014. The Commission approved those agreements by Order No. 25705, dated February 10, 1992[1] and Order No. PSC-05-0450-PAA-EU, dated September 7, 2005[2], respectively. In 2020, the joint petitioners began negotiations on the 2025 Territorial Agreement, which is intended to replace all prior expired agreements between the joint petitioners in these counties, as well as add an agreement for Alachua county. Although both of the above-referenced agreements expired, the parties have continued to meet their obligations under those agreements while negotiations for the 2025 Territorial Agreement were underway.[3]
As discussed in the staff recommendation, the negotiated 2025 Territorial Agreement, in part, is meant to allow for the orderly transfer of a portion of the inadvertently served customers and facilities that are consistent with currently-approved boundary lines. Other inadvertently served customers are not proposed to be transferred based on individual facts and circumstances, and in those cases, a redraw of the boundary is being proposed. Other boundary line changes address split parcels wherein the agreed-upon boundary changes were part of an equitable and operational process the joint petitioners underwent that do not include any customer transfers.
During the review process, staff issued two data requests to the joint petitioners, for which responses were received on March 10, 2025 and March 24, 2025. The proposed 2025 Territorial Agreement, if approved as filed, establishes the new territorial boundaries and assists the joint petitioners to identify necessary and appropriate asset and customer transfers. The Commission has jurisdiction over this matter pursuant to Section 366.04, Florida Statutes (F.S.).
Issue 1:
Should the Commission approve the proposed 2025 Territorial Agreement between CFEC and DEF in Dixie, Gilchrist, Levy, Marion, and Alachua counties, dated February 3, 2025?
Recommendation:
Yes, the Commission should approve the proposed 2025 Territorial Agreement between CFEC and DEF in Dixie, Gilchrist, Levy, Marion, and Alachua counties, as consistent with the Standards for Approval set forth in Rule 25-6.0440(2), F.A.C.. The proposed territorial Agreement, if approved, amends the respective boundary lines between these utilities that would allow the joint petitioners to gain further operational efficiencies and customer service improvements in their respective retail service areas. Also, the terms of the proposed Agreement, if approved, would allow the joint petitioners to avoid uneconomic duplication of service facilities, wasteful expenditures, and hazardous conditions. (Prewett)
Staff Analysis:
Pursuant to
Section 366.04(2)(d), F.S., and Rule 25-6.0440(2), (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.[4]
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.
Proposed 2025 Territorial Agreement
CFEC and DEF executed the proposed 2025 Territorial Agreement addressing common boundaries over a five-county area on February 3, 2025, to replace and supersede all prior expired agreements. Through the proposed 2025 Territorial Agreement, the joint petitioners seek to:
(1) Reduce or eliminate dangerous conditions;
(2) Transfer certain assets and customers over a future 36 month period to correct (reverse) inadvertent service connection errors that have taken place over the years; and
(3) Make minor boundary changes to allow the certain extra-territorial customers and related assets to remain with their current serving utility and to consolidate split parcels in order to more clearly delineate the respective service areas each utility serves.[5]
These combined objectives are expected to aid the utilities in eliminating circumstances that give rise to the uneconomic duplication of service facilities.[6]
Included in the 2025 Territorial Agreement are numerous maps depicting the new territorial boundaries, written descriptions of the territorial areas, terms for temporary service, methods for correcting inadvertent service errors, procedures for the transfer of customers and facilities, the method of compensation for transferred facilities, lists of extraterritorial addresses to be transferred, and a sample copy of the letters provided to customers that are subject to transfer.
Pursuant to Section 6.1, the proposed 2025 Territorial Agreement, if approved, would remain in effect for 20 years from the date the Commission issues its order approving the Agreement in its entirety and it is no longer subject to judicial review. Upon the expiration of the initial 20-year term, the Agreement would remain in effect in perpetuity unless either party provides written notice of termination at least 12 months prior to the termination of the Agreement in accordance with Section 8.3.
Proposed Boundary
Changes
The joint petitioners assert that the proposed boundary line changes are primarily needed to correct current and potentially future inadvertent service connections for both utilities. Additionally, the proposed boundary line changes, if approved, would reduce or eliminate dangerous conditions for both line workers and the public.[7] Other boundary line changes propose to correct various deficiencies the joint parties found while evaluating their respective boundaries, including proposed boundary line changes that would consolidate parcels that are currently split.[8]
Both CFEC and DEF acknowledge that their historical reliance on internal mapping systems, as well as human error and utility processes, resulted in each party inadvertently serving customers of the other party. The negotiated 2025 Territorial Agreement includes boundary line changes that acknowledge these inadvertent connections and addresses split parcels. Employing sophisticated geographic information systems (GIS) technology, the joint petitioners plan to update their maps should the Agreement be approved, which they claim will enhance their ability to prevent future inadvertent connections. The joint petitioners either have, or are planning to, improve processes and educate engineering and field personnel to address the issue.
In the February 3, 2025 filing, slightly more than half of maps provided by the joint petitioners (43 out of 84) were for split parcels or other changes that are unrelated to the proposed customer transfers.[9]
Proposed Customer
Transfers, Notifications, and Bills
The proposed customer transfers under the 2025 Territorial Agreement are a result of negotiations between the parties, with the intent of avoiding duplication of services and wasteful expenditures, as well as to best protect the public health and safety from potentially hazardous conditions. A total of 256 active customer accounts are proposed to be transferred, 211 from CFEF to DEF and 45 from DEF to CFEC.[10] Of the 256 total customer transfers, 221 are residential and distributed broadly across the five counties.
Exhibit
C of the proposed Territorial Agreement identifies the service addresses of the
CFEC customer accounts that are proposed to be transferred to DEF. Of the 211
customers transferring, 26 are commercial, 183 are residential, and 2 are Sales
to Public Authorities. CFEC stated that they estimate most of the inadvertent
services were established between 2010 and 2020.[11]
Exhibit B of the proposed Territorial Agreement identifies
the service addresses of the 45 active DEF customer accounts that are proposed
to be transferred to CFEC. Of the 45 customers transferring, 7 are commercial
and 38 are residential. DEF stated that they also estimate most of
the inadvertent services were established between 2010 and 2020.[12]
Both parties became aware of the number of inadvertent service connections around 2020 when they began their encroachment analysis for the new Territorial Agreement.[13] The utilities also stated that while there is no specific documentation of how the inadvertent service connections happened, some contributing conditions could be inadequacy of mapping resources, human error, or utility processes and practices.[14] Both utilities have developed plans going forward that should avoid inadvertent service connections and more clearly delineate their service territories. The joint petitioners stated that they currently use and share sophisticated GIS platforms, and if the proposed Agreement is approved, they will update their internal mapping systems to include the most accurate boundaries, and will educate and improve field personnel to avoid future inadvertent service connections.[15] Additionally, the 2025 Territorial Agreement includes a provision requiring the utilities to correct inadvertent service errors within 12 months of the error being discovered.[16]
The joint petitioners state that they will
not conduct any customer transfers until the Commission approves the joint
petition. Although the utilities have not developed any specific details
regarding the transfer of facilities, the joint petitioners state that upon the
Commission’s approval of the 2025 Territorial Agreement, the customer transfers
will be coordinated to take place over a 36-month period,[17]
with most, if not all, transfers taking place in years two and three.[18]
As required by Rule 25-6.0440(1)(d), F.A.C., the joint petitioners provided notification to the affected customers by letters dated June 2024. Regarding feedback from those letters, the joint parties stated they have received approximately 30 customer comments expressing dissatisfaction related to the proposed transfers, all of which were from customers transferring from CFEC to DEF. The joint petitioners also assert that at least 30 days prior to the actual transfer, the affected customers will receive a second notification of the transfer. The joint petitioners also state that no additional charges will be imposed on the customers that will be transferred.
Rule 25-6.0440(2)(d), F.A.C. also gives the Commission the discretion to address any other relevant concerns that are case-specific.[19] The CFEC customer comments cited above were, by and large, objections pertaining to rate increases associated with customer transfers. Based on the comparative bill information provided to customers by letter in June 2024, the average DEF bill exceeded the average CFEC bill at that time. The letters state that the residential monthly bill at 1,000 kwh was $157.47 for DEF customers and $129.86 for CFEC customers, a difference of $27.61, or about 18 percent. For a commercial class customer, the general service monthly bill at 1,500 kwh is $174.70 for DEF customers and $193.53 for CFEC’s customers, a difference of $18.84, or about 10 percent.
Staff Review
In its review, staff analyzed the proposed 2025
Territorial Agreement for compliance with each component of Rule 25-6.0440(2),
F.A.C. Regarding paragraph (2)(a), while staff does note that no purchase
price, construction cost estimates, or detailed engineering drawings were
presented to staff for review, the joint petitioners stated that each
party will do an engineering study in advance of any customer transfers[20]
and any facilities subject to transfer or purchase will be evaluated using the
agreed-to methodology.[21]
As indicated earlier, consistent with Rule 25-6.0440(2)(b), F.A.C., the Agreement is not expected to result in a decrease in reliability to existing or future customers. The joint petitioners’ have argued that the reliability of service to existing or future CFEC or DEF customers would not be decreased as a result of the proposed Agreement. In several areas, customers transferring to DEF would be closer geographically to the substation serving that load, which the joint petitioners assert would provide more consistent and reliable electric service. [22] Additionally, both utilities confirmed that the 2025 Territorial Agreement would help them gain further operational efficiencies and customer service improvements in their respective retail service areas.
Under the proposed 2025 Territorial Agreement, the joint petitioners have proposed to minimize existing or potential uneconomic duplication of facilities, as referenced in Rule 25-6.0440(2)(c), F.A.C. Each joint petitioner provided tables indicating why each customer is being transferred, as well as pictures showing crossing wires that are creating hazardous conditions and duplicative facilities.[23] The joint petitioners stated that the service area near Cross City, Florida (located in Dixie County) would have the greatest operational impact if the proposed 2025 Territorial Agreement is approved. This area, which is largely served by DEF, includes CFEC facilities that cross DEF facilities multiple times, thus presenting duplicative, inefficient, and dangerous conditions, which the joint petitioners, through the proposed 2025 Territorial Agreement, would seek to correct.[24] In accordance with Rule 25-6.0440(1)(d), F.A.C., staff believes the correction of such safety conditions is an important factor for the Commission represents a strong argument favoring approval of the 2025 Territorial Agreement .
Staff believes DEF and CFEC met its obligation of providing notification about the proposed change in service providers and rates to customers to be transferred, pursuant to Rule 25-6.0440(1)(d), F.A.C. The bill increase to the customers of CFEC that would be transferred to DEF, pending approval, appears significant, at least at the point in time when the notification letters were prepared. Staff acknowledges that rate differences for a future period cannot be conclusively known, and that actual rates at the time the customer transfers are completed could be quite different (higher or lower) than as indicated in the June 2024 notification letters that were used for compliance with Rule 25-6.0440(1)(d), F.A.C.
Although staff is cognizant of the rate impact on the customers, the Commission has consistently adhered to the principle set forth in Storey v. Mayo, 217 So. 2d 304, 307-308 (Fla. 1968), and reaffirmed in Lee County Electric Cooperative v. Marks, 501 So. 2d 585 (Fla. 1987), that no person has a right to compel service from a particular utility simply because he believes it to be to his advantage. The Court went on to say in Lee County that “larger policies are at stake than one customer's self-interest, and those policies must be enforced and safeguarded by the Florida Public Service. Commission.” Lee County Electric Cooperative, at 587.[25] In this instance, staff recommends no specific action be taken in regards the Commission’s consideration of the 2025 Territorial Agreement related to any future disparity of rates between the joint petitioners at the time of transfer.
A final consideration staff has identified that relates to assessing the 2025 Territorial Agreement is the historical condition of numerous inadvertent service connections. The joint petitioners stated that while neither of the parties have specific documentation as to the cause for the historical inadvertent service connections, they now utilize and share sophisticated GIS technology that clearly defines their territorial service areas down to the parcel level, which will allow each utility to easily identify in whose service territory a parcel is located.[26] They believe this will greatly reduce or eliminate instances of inadvertent connections. Staff believes the joint petitioners have proposed an effective plan for addressing historic inadvertent service connections via the proposed 2025 Territorial Agreement and that future inadvertent connections, along with hazardous situations and uneconomic duplication of services, can be expected to be significantly reduced on a going-forward basis.
Conclusion
Staff has thoroughly reviewed the 2025 Territorial Agreement. Based on the above analysis, staff believes the Commission should approve the proposed 2025 Territorial Agreement between CFEC and DEF in Dixie, Gilchrist, Levy, Marion, and Alachua counties, as consistent with the Standards for Approval set forth in Rule 25-6.0440(2), F.A.C. Staff believes the proposed territorial Agreement, if approved, amends the respective boundary lines between these utilities that would allow the joint petitioners to gain further operational efficiencies and customer service improvements in their respective retail service areas. Also, the terms of the proposed Agreement, if approved, would allow the joint petitioners to avoid uneconomic duplication of service facilities, wasteful expenditures, and hazardous conditions.
Issue 2:
Should this docket be closed?
Recommendation:
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.
[1] Order No. 25705, issued on February 10, 1992, in Docket No. 911046-EU, In re: Joint Petition for Approval of Territorial Agreement Between Central Florida Electric Cooperative, Inc. and Florida Power Corporation, in Gilchrist and Dixie Counties, Florida.
[2] Order No. PSC-05-0450-PAA-EU, issued on April 27, 2005, in Docket No. 041413-EU, In re: Joint Petition for Approval of Amended Territorial Agreement in Levy and Marion Counties by Central Florida Electric Cooperative, Inc. and Progress Energy Florida, Inc.
[3] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 10.b.
[4] Utilities
Commission of the City of New Smyrna Beach v. Florida Public Service Commission, 469 So. 2d 731(Fla. 1985).
[5] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, Nos. 1.a and 4.a.
[6] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 1.d.
[7] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 2 (The parties estimated that there are over 20 areas where facilities from both utilities cross over or under one another.).
[8] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 4.a.
[9] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 8.
[10] Document No. 00647-2025, Exhibits B and C of 2025 Territorial Agreement.
[11] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 5.a.
[12] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 5.b.
[13] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 5.c.
[14] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 5.e.
[15] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 5.e.
[16] Document No. 00647-2025, Section 2.5 of 2025 Territorial Agreement.
[17] Document No. 00647-2025, Section 3.1 of 2025 Territorial Agreement.
[18] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 4.b.
[19] AmeriSteel Corp. v. Clark, 691 So. 2d 473, 480 (Fla. 1997). (“[T]he Commission was fully apprised of AmeriSteel's corporate interest in obtaining lower electricity rates before deciding to approve the JEA–FPL agreement.”).
[20] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 1.a.
[21] Document No. 00647-2025, Section 3.4 of 2025 Territorial Agreement. The joint petitioners will use a cost calculator, such as the Handy Whitman index.
[22] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 1.c.
[23] Document No. 01442-2025, joint petitioners’ response to staff’s first data request, No. 1.b and Attachment 1.
[24] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 1.b.
[25] Order No. PSC-96-0755-FOF-EU, issued June 10, 1996, in Docket No. 19950307-EU, In re: Petition to resolve a territorial dispute with Florida Power & Light Company in St. Johns County, by Jacksonville Electric Authority.
[26] Document No. 02059-2025, joint petitioners’ response to staff’s second data request, No. 5.d and 5.f.