Florida PSC Issues Notice of Proposed Agency Action Involving Tampa Electric

TALLAHASSEE, Florida, Nov. 17 (TNSsro) -- The Florida Public Service Commission issued the following notice of proposed agency action (DOCKET NO. 20220162-EI; ORDER NO. PSC-2022-0394-PAA-EI) on Nov. 16, 2022:

* * *

In re: Request for approval of change in rate used to account for allowance for funds used during construction (AFUDC) from 5.98% to 6.09%, effective July 1, 2022, by Tampa Electric Company.

The following Commissioners participated in the disposition of this matter:

ANDREW GILES FAY, Chairman

ART GRAHAM

GARY F. CLARK

MIKE LAROSA

GABRIELLA PASSIDOMO

NOTICE OF PROPOSED AGENCY ACTION

ORDER APPROVING CHANGE IN RATE FOR ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION

BY THE COMMISSION:

NOTICE is hereby given by the Florida Public Service Commission that the action discussed herein is preliminary in nature and will become final unless a person whose interests are substantially affected files a petition for a formal proceeding, pursuant to Rule 25-22.029, Florida Administrative Code (F.A.C.).

Background

Tampa Electric Company's (Tampa Electric or Company) current Allowance for Funds Used During Construction (AFUDC) rate of 5.98 percent was approved by Order No. PSC-20220245-PAA-EI, issued June 27, 2022./1 On September 12, 2022, we issued Order No. PSC-2022-0322-FOF-EI approving Tampa Electric's petition for a limited proceeding to implement the return on equity (ROE) trigger provision in Section 2(b) of the 2021 Rate Case Settlement. The ROE trigger provision increased the Company's currently authorized ROE of 9.95 percent by 25 basis points to 10.20 percent, effective July 1, 2022./2 On September 22, 2022, Tampa Electric filed a petition for approval to change its AFUDC rate from 5. 98 percent to 6.07 percent, effective July 1, 2022. As required by Rule 25-6.0141(5), F.A.C., Tampa Electric filed with its petition Schedules A, B, and C identifying the capital structure, capital structure adjustments, and the methodology used to calculate the monthly AFUDC rate. We have jurisdiction over this matter pursuant to Chapter 366, Florida Statutes (F.S.), including Sections 366.04, 366.05, and 366.06, F.S.

Decision

I. AFUDC Rate

Tampa Electric requested an increase in its AFUDC rate from 5.98 percent to 6.07 percent. Rule 25-6.0141(3), F.A.C., Allowance for Funds Used During Construction, provides the following guidance:

(3) The applicable AFUDC rate will be determined as follows:

(a) The most recent 13-month average embedded cost of capital, except as noted below, will be derived using all sources of capital and adjusted using adjustments consistent with those used by the Commission in the utility's last rate case.

(b) The cost rates for the components in the capital structure will be the midpoint of the last allowed return on common equity, the most recent 13-month average cost of short-term debt and customer deposits, and a zero cost rate for deferred taxes and all investment tax credits. The cost of long-term debt and preferred stock will be based on end of period cost. The annual percentage rate must be calculated to two decimal places.

In support of its requested AFUDC rate of 6.07 percent, Tampa Electric provided its calculations and capital structure in Schedules A and B attached to its request. We reviewed the schedules and determined that the proposed rate was calculated in accordance with Rule 256.0141(3), F.A.C. The requested increase in the AFUDC rate is due principally to an increase of 10 basis points in the weighted cost of common equity, offset slightly by a decrease of 1 basis points in the weighted cost of long-term and short-term debt. In its calculation, the Company appropriately used the mid-point return on equity of 10.20 percent, which was approved by us in Order No. PSC-2022-0322-FOF-EI./3

II. Appropriate Monthly Compounding Rate

Tampa Electric requested a monthly compounding rate of 0.004923 to achieve an annual AFUDC rate of 6.07 percent. In support of the requested monthly compounding rate of 0.004923, the Company provided its calculations in Schedule C attached to its request. Rule 256.0141(4), F.A.C., provides a formula for discounting the annual AFUDC rate to reflect monthly compounding. The rule also requires that the monthly compounding rate be calculated to six decimal places.

We reviewed the Company's calculations and determined that they comply with the requirements of Rule 25-6.0141(4), F.A.C. Therefore, we find that a monthly compounding AFUDC rate of 0.004923 shall be approved.

III. Effective Date

Tampa Electric's proposed AFUDC rate was calculated using a 13-month average capital structure for the period ended June 30, 2022. Rule 25-6.0141(6), F.A.C., provides that:

No utility may charge or change its AFUDC rate without prior Commission approval. The new AFUDC rate will be effective the month following the end of the 12-month period used to establish that rate and may not be retroactively applied to a previous fiscal year unless authorized by the Commission.

The Company's requested effective date of July 1, 2022, complies with the requirement that the effective date does not precede the period used to calculate the rate, and therefore shall be approved.

Based on the foregoing, it is

ORDERED that Tampa Electric Company's AFUDC rate shall be increased from 5.98 percent to 6.07 percent for the reasons set forth herein. It is further

ORDERED that Tampa Electric Company's monthly compounding rate shall be changed to 0.004923. It is further

ORDERED that Tampa Electric Company's revised AFUDC rate shall be effective July 1, 2022, for all purposes. It is further

ORDERED that the provisions of this Order, issued as proposed agency action, shall become final and effective upon the issuance of a Consummating Order unless an appropriate petition, in the form provided by Rule 28-106.201, Florida Administrative Code, is received by the Commission Clerk, 2540 Shumard Oak Boulevard, Tallahassee, Florida 32399-0850, by the close of business on the date set forth in the "Notice of Further Proceedings" attached hereto. It is further

ORDERED that in the event this Order becomes final, this docket shall be closed.

By ORDER of the Florida Public Service Commission this 16th day of November. 2022.

ADAM J. TEITZMAN, Commission Clerk

Florida Public Service Commission

2540 Shumard Oak Boulevard

Tallahassee. Florida 32399

(850) 413-6770

www.floridapsc.com

* * *

Footnotes:

1/ Order No. PSC-2022-0245-PAA-EI, issued June 27, 2022, in Docket No. 20220076-EI, In re: Request for approval of change in rate used during construction (AFUDC) from 6.46% to 5.97%, effective January 1, 2022, by Tampa Electric Company.

2/ Order No. PSC-2022-0322-FOF-EI, issued September 12 , 2022, in Docket No. 20220122-EI, In re: Petition for limited proceeding rate increase to implement return on equity provisions in 2021 agreement, by Tampa Electric Company.

3/ Order No. PSC-2022-0322-FOF-EI, issued September 12, 2022, in Docket No. 20220122-EI, In re: Petition for limited proceeding rate increase to implement return on equity provisions in 2021 agreement, by Tampa Electric Company.

* * *

Original text here: http://www.floridapsc.com/library/filings/2022/11373-2022/11373-2022.pdf