Citizens of the State of Florida v. Art Graham, etc. , 213 So. 3d 703 ( 2017 )

Supreme Court of Florida
____________
No. SC16-141
____________
CITIZENS OF THE STATE OF FLORIDA,
Appellant,
vs.
ART GRAHAM, etc., et al.,
Appellees.
[March 16, 2017]
LEWIS, J.
This case is before the Court on appeal from a decision of the Florida Public
Service Commission relating to the rates or service of a public utility providing
electric service. We have jurisdiction. See art. V, § 3(b)(2), Fla. Const.
FACTUAL AND PROCEDURAL BACKGROUND
Florida Public Utilities Company (FPUC) is an investor-owned electric
utility located in Fernandina Beach, Florida. FPUC does not generate its own
electricity, but instead relies solely on wholesale purchase power agreements with
other electric utilities.
Our discussion begins on August 29, 2014, when FPUC entered into a
settlement agreement with the Office of Public Counsel (OPC) in resolution of its
then pending petition for an increase in base rates. In re Application for Rate
Increase by Fla. Pub. Utils. Co. (Settlement Agreement Order), Order No. PSC-14-
0517-S-EI, at 1, 2014 WL 4960917 (Fla. P.S.C. Sept. 29, 2014). Section I of the
settlement agreement prohibits FPUC from increasing its base rates thereafter until
at least December 31, 2016.1 Further coloring that prohibition, Section VI of the
settlement agreement, entitled “Other Cost Recovery,” specifically delineated what
costs FPUC might seek recovery of through other mechanisms, such as the
Commission’s fuel clause proceedings:
Nothing in this agreement shall preclude the Company from
requesting the Commission to approve the recovery of costs that are:
1. The relevant provision provides in pertinent part:
I. Term
a. This Agreement will take effect upon Commission approval
and shall be implemented on the date of the meter reading for the first
billing cycle of November 2014 (“Implementation Date”) and
continue at least until the last billing cycle of December 2016. The
base rates, charges and related tariff term sheet terms and conditions
established as a result of this Agreement will continue beyond
December 2016 unless and until changed by Commission Order. The
period from the Implementation Date through the last billing cycle in
December 2016 may be referred to herein as the “Minimum Term”.
b. The Parties agree that no increase or reduction in base rates
shall be sought by the Parties during the Minimum Term unless other
terms of this Agreement allow.
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(a) of a type which traditionally and historically would be, have been,
or are presently recovered through cost recovery clauses or
surcharges, or (b) incremental costs not currently recovered in base
rates which the Legislature or Commission determines are clause
recoverable subsequent to the approval of this settlement. Except as
provided in this Agreement, it is the intent of the Parties in this
Paragraph VI that FPUC not be allowed to recover through cost
recovery clauses increases in the magnitude of costs, incurred after
implementation of the new base rates, of types or categories
(including but not limited to, for example, investment in and
maintenance of transmission assets) that have been traditionally and
historically recovered through FPUC’s base rates.
In re Application for Rate Increase by Fla. Pub. Utils. Co., Docket No. 140025-EI,
Document No. 04856-14 (Aug. 29, 2014) (emphasis added). On September 29,
2014, this settlement agreement was unanimously approved by the Commission.
See generally Settlement Agreement Order, No. PSC-14-0517-S-EI, at 1, 2014 WL
4960917 (“Having reviewed the Settlement and the pleadings, and heard argument
of counsel, we find that the Settlement is in the best interests of FPUC’s ratepayers
and hereby approve it.”). Further, the Commission’s Order incorporated by
reference the entire settlement agreement and thereby adopted its terms as its
policy. Id. at 3.
About one year later, on September 1, 2015, FPUC petitioned the
Commission for approval of its fuel adjustment and purchased power cost recovery
factors for the period of January 2016 through December 2016. In pertinent part,
and contrary to the settlement agreement, FPUC’s petition sought to recover costs
associated with constructing a new interconnection with Florida Power & Light
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Company (FPL). Specifically, FPUC sought to initially recover $107,333 in
depreciation expense, taxes other than income taxes, and a return on investment
associated with the $3.5 million dollar cost of its interconnection project.
According to FPUC’s petition, the FPL interconnection “will result in [FPUC]
being better situated in terms of negotiating a new power purchase agreement for
[its] Northeast Division to follow [its] current agreement.” Indeed, at the time,
FPUC had a purchased power agreement with which it purchased power
exclusively from Jacksonville Electric Authority (JEA) to serve its Northeast
Division, which encompasses its customers on Amelia Island. FPUC’s agreement
with JEA is set to expire on December 31, 2017. Thus, with construction of the
FPL interconnection, FPUC asserts that it will increase its potential providers from
one to two, and presumably give it a basis to negotiate a more favorable price for
its purchased power, the savings from which will be passed on to its customers in
the form of lower rates.
Despite the stated altruistic intentions of this proposed project, the OPC
objected to FPUC’s petition. In relevant part, the OPC asserted that the costs
associated with the FPL interconnection were among the types of costs barred by
the provisions of the settlement agreement quoted above. Likewise, the
Commission’s staff prepared a memorandum in which it recommended that
FPUC’s petition be denied due to the settlement agreement’s provisions. During a
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subsequent hearing, a commissioner questioned staff about the settlement
agreement’s effect and suggested it prohibited FPUC’s request. Nevertheless, the
Commission ultimately voted to reject the staff’s recommendation and approved
the recovery of the entire FPL interconnection costs, contrary to the terms of the
settlement agreement. The dissent simply ignores this information and materials
submitted by the Commission’s own staff and OPC.
Despite the prior objections and discussions concerning the settlement
agreement’s application to the FPL interconnection, such consideration and
analysis were conspicuously missing from the Commission’s order with regard to
the FPL interconnection costs. In re Fuel & Purchased Power Cost Recovery
Clause with Generating Performance Incentive Factor (Order Below), No. PSC-15-
0586-F0F-EI, at 11-15, 2015 WL 9450334 (Fla. P.S.C. Dec. 23, 2015).
Specifically, the order only addressed and analyzed the settlement agreement’s
effect on the entirely separate issue of FPUC’s ability to recover legal and
consulting fees associated with the project, not the entire construction costs. Id. at
13-14. This factor is also ignored by the dissent. Instead, the only analysis offered
by the Commission that related to construction of the transmission interconnection
centered on the reliability enhancements and the potential savings to customers:
All parties agree that the proposed interconnection with FPL
will result in improved system reliability for Amelia Island. Nor is
there disagreement that interconnection with FPL will offer wholesale
power purchase options not currently available to FPUC when its
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wholesale power agreement with JEA expires in December 2016.[2]
The disagreement rests with the OPC’s conclusion that [Commission]
Order No. 14546 prohibits cost recovery until cost savings are
received by ratepayers. We do not read Order No. 14546 that
restrictively.
Therefore, we find that the interconnection with FPL and the
consulting and legal fees associated with the development and
enactment of projects designed to reduce fuel rates to FPUC’s
customers, costs associated with the development and negotiations of
power supply contracts, and costs to consultants engaged in
performing due diligence in review and analysis of the Renewable
Energy Agreement between FPUC and Rayonier shall be recovered
through the fuel cost recovery clause.
Id. at 15.
Left without an explanation as to why FPUC’s petition was approved over
its objections without consideration and application of the terms of the settlement
agreement, the OPC has now appealed the Commission’s order. This review
follows.
ANALYSIS
When reviewing an order of the Commission, this Court affords great
deference to the Commission’s findings. S. All. for Clean Energy v. Graham, 113
So. 3d 742, 752 (Fla. 2013) (noting that this Court has repeatedly held that “[t]he
Commission’s orders, and concomitant interpretations of statutes and legislative
2. As noted previously, the record indicates that FPUC’s wholesale power
purchase agreement with JEA actually expires in December 2017. This appears to
be a scrivener’s error in the Commission’s order.
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policies that it is charged with enforcing, are entitled to great deference” (quoting
Crist v. Jaber, 908 So. 2d 426, 430 (Fla. 2005))). “Commission orders come to this
Court clothed with the presumption that they are reasonable and just.” W. Fla.
Elec. Coop. Ass’n, Inc. v. Jacobs, 887 So. 2d 1200, 1204 (Fla. 2004) (citing Gulf
Coast Elec. Coop., Inc. v. Johnson, 727 So. 2d 259, 262 (Fla. 1999)). Moreover,
“[t]o overcome these presumptions, a party challenging an order of the
Commission on appeal has the burden of showing a departure from the essential
requirements of law and the legislation controlling the issue, or that the findings of
the Commission are not supported by competent, substantial evidence.” S. All. for
Clean Energy, 113 So. 3d at 752 (citing Jacobs, 887 So. 2d at 1204).
In this case, the OPC contends that the Commission departed from the
essential requirements of law by failing to explain why it did not consider and
apply the settlement agreement. Furthermore, the OPC contends that the
settlement agreement bars FPUC’s petition in this case. We agree with the OPC on
both contentions.
As an initial matter, however, FPUC and the Commission contend that the
issue of the settlement agreement was waived and not properly before the
Commission. We find these contentions to be meritless at best. Not even the
dissent attempts to support this meritless position. It is glaringly obvious that the
settlement agreement was adequately presented to the Commission.
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First, the OPC properly raised the issue in its prehearing statement prior to
the Commission’s waiver deadline:
Recovery of costs associated with transmission lines are not fossil-
fuel-related costs. Transmission costs are traditionally and
historically recovered through base rates, not the fuel clause.
Additionally, FPUC’s request to recover these costs in the fuel clause
violates the Company’s rate case stipulation pursuant to Order PSC-
14-0517-S-EI. Further, FPUC’s argument that the transmission costs
should be recovered as 2016 fuel costs should be rejected as the
opportunity for potential “fuel savings” will not occur in 2016 because
the current Purchase Power Agreement . . . does not expire until 2017
and this plant will not go into service until the end of 2017.
(Emphasis added.) Second, following a hearing in which one of the FPUC
witnesses discussed the settlement agreement during cross-examination, the
Commission staff prepared a detailed analysis in which it reasoned that OPC’s
objection was correct and recommended denying FPUC’s request:
Finally, FPUC has argued that the FPL interconnection is not
prohibited by the settlement agreement because it will allow FPUC to
reduce the price of its wholesale purchased power. For FPUC
reducing the price of purchased power is the equivalent of reducing
the price of fossil fuels for the other IOUs. FPUC argues that Order
No. 14546 applies to purchased power as well as fossil fuels and
should be used here to allow recovery of the FPL interconnection
costs. FPUC dismisses the plain language of Section VI of the
settlement agreement which does not allow recovery of “investment in
and maintenance of transmission assets that have been traditionally
and historically recovered through FPUC’s base rates” on two
rationales. First, Exhibit A to the settlement agreement entitled
“Planned Capital Improvements” covering the period 2016-2019 does
not list the FPL interconnection project. Second, the prohibition
against recovery of transmission projects in the settlement agreement
applies only to “investment in, or maintenance of, existing
transmission.”
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Staff agrees with FPUC that if the provisions of Order No.
14546 are not applied to purchased power, there is very little guidance
as to what is recoverable in terms of purchased power through the fuel
clause. Certainly, this is the first instance in which FPUC, the only
non-generating electric utility in the state, has requested recovery of a
transmission asset through the fuel clause. However, staff does not
agree that the explicit terms of the settlement agreement should be
dismissed summarily.
The settlement agreement does not state that the prohibition
against recovery of transmission costs through the fuel clause is
limited to the projects listed on Exhibit A. In its joint motion with
OPC for approval of stipulation and settlement, FPUC stated that
“FPUC will use all reasonable infrastructure projects, consistent with
those outlined in demonstrative Exhibit A, attached to the Agreement,
in order to maintain the reliability of its electrical system.” The joint
motion also reiterated that “The Company may continue to seek
recovery of costs through recovery clauses, but cannot seek recovery
of costs that the Company has traditionally and historically recovered
through base rates.” Given the language in its motion, the fact that the
FPL interconnection was not included on Exhibit A does not support
the conclusion that its costs are exempt from the settlement
agreement’s specific prohibition against the recovery of transmission
costs through the fuel clause. Nor does the motion’s or the settlement
agreement’s prohibition against recovery through the fuel clause
contain any language limiting prohibited transmission projects to
existing projects. FPUC has cited no specific provision of the
settlement agreement to support this contention nor is there any
testimony or record evidence to support it.
Witness Cutshaw agreed that transmission rate base costs were
normally recovered through base rates and that the proposed FPL
interconnection was part of a transmission asset. While there may be
potential savings associated with the project, the plain language of the
settlement agreement prohibiting recovery of capital costs of
transmission projects does not support recovery of these costs through
the fuel adjustment clause.
(footnotes omitted) (record citations omitted).
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Finally, the settlement agreement and the staff’s analysis occupied nearly the
entirety of the Commission’s deliberations concerning FPUC’s request:
Commissioner Edgar: Thank you, Mr. Chairman.
Looking at 4A and 4B, both together and separately, I find 4A
in particular to be, once again, maybe one of those issues where we’re
in a bit of a box due to the hearing process. Not a complaint but just
kind of, you know, the process is what the process is required to be.
From the record evidence what we have in 4A before us is cost
recovery for a project by FPUC that is—the testimony says will be an
improvement to the transmission for that small transmission and
distribution utility, that will reduce the price of wholesale purchased
power, that it will save fuel costs, and that it is in the public interest.
That is my understanding of the testimony. If anybody disagrees, I
certainly am open to discussing that. But yet it is being
recommended, and I understand the reasons why, for not recovery for
costs through the fuel clause even though, again, the project is
intended to have fuel savings.
There is the complicating factor of the settlement agreement in
the last rate case that we approved, and I do believe that the settlement
agreement was in the public interest as we voted at that time. But,
Commissioners, I would just ask if there are thoughts or if there are
discussions about the staff recommendation on this item.
Chairman Graham: That question was to staff?
Commissioner Edgar: No, it was to my colleagues.
Chairman Graham: Commissioner Brown.
Commissioner Brown: Well, I—thank you, Mr. Chairman. I
looked at this issue. I actually highlighted this one specifically
because I remember the testimony of the witness, and it was an
important project, an integral project. Unfortunately the utility is
hamstrung, hamstrung by the settlement agreement, which I believe
reads that specifically this type of cost recovery is not allowed under
clauses and it cites investment and maintenance of transmission
assets.
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Staff, that settlement agreement is part of the record, and what
is the expiration date of that agreement?
Ms. Brownless: The minimum term of the settlement
agreement ends on December 31st, 2017.
Commissioner Brown: 2017.
Ms. Brownless: 2016. I’m sorry.
Commissioner Brown: 2016. So could the utility file
testimony in the next year’s fuel docket to recover costs associated
with this item?
Ms. Brownless: Yes, ma’am.
Commissioner Brown: Okay. And not be prohibited under the
settlement agreement?
Ms. Brownless: Yes.
Commissioner Brown: Okay. Those are really my only
thoughts.
Chairman Graham: Okay. I would still entertain a motion.
Commissioner Edgar.
Commissioner Edgar: Thank you, Mr. Chairman.
Then I would move that we disagree with—reject the staff
recommendation on Item 4 and approve recovery of the costs for the
interconnection between FPL’s substation in FPUC’s northeast
division through the fuel recovery clause. That’s my motion. My
thinking on that is I do believe that it will have cost savings in fuel for
the customers moving forward.
Chairman Graham: Okay. We have the Edgar 2 motion moved
and seconded. Is there any further discussion on that motion? Seeing
none, all in favor, say aye. Any opposed? All say aye.
(Vote taken.)
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Thank you. All opposed? Any opposed? Seeing none, you
have approved that motion.
(Emphasis added.)
Therefore, we cannot see how this issue was not properly raised before the
Commission. Accordingly, to the extent the Commission held the issue waived,
we reverse.
Turning to the merits, we hold that the Commission departed from the
essential requirements of law by failing to adequately address application of the
settlement agreement to the FPL transmission interconnection costs.
Section 120.68(1)(a), Florida Statutes, provides: “A party who is adversely
affected by final agency action is entitled to judicial review.” § 120.68(1)(a), Fla.
Stat. (2016). “ ‘Agency action’ means the whole or part of a rule or order, or the
equivalent, or the denial of a petition to adopt a rule or issue an order. The term
also includes any denial of a request made under s. 120.54(7).” § 120.52(2), Fla.
Stat. (2016). Guiding judicial review in this context, section 120.68(7) provides in
part:
(7) The court shall remand a case to the agency for further
proceedings consistent with the court’s decision or set aside agency
action, as appropriate, when it finds that:
....
(d) The agency has erroneously interpreted a provision of law
and a correct interpretation compels a particular action; or
(e) The agency’s exercise of discretion was:
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1. Outside the range of discretion delegated to the agency by
law;
2. Inconsistent with agency rule;
3. Inconsistent with officially stated agency policy or a prior
agency practice, if deviation therefrom is not explained by the agency;
or
4. Otherwise in violation of a constitutional or statutory
provision;
but the court shall not substitute its judgment for that of the agency on
an issue of discretion.
§ 120.68(7), Fla. Stat.
These provisions ensure that agency action is the product of due process
rather than arbitrary and uneven in its application, as well as in reviewable form for
courts to enforce that due process. In the heavily referenced case of McDonald v.
Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977),3 the First
District Court of Appeal carefully articulated the principles that require agency
action to be set aside when insufficiently explained:
Section 120.57 requires agency explanation of its discretionary action
affecting a party’s substantial interests, and Section 120.68 subjects
that explanation to judicial review.
Section 120.57 proceedings, in which the agency’s nonrule
policy is fair game for a party’s challenge both in the public and in his
private interest, concludes [sic] by a final agency order which
explicates “policy within the agency’s exercise of delegated
discretion,” explains any deviation from “an agency rule, an officially
3. Superseded on other grounds by statute, § 120.54(1)(a), Fla. Stat. (Supp.
1996), as recognized in Dep’t. of Highway Safety & Motor Vehicles v. Schluter,
705 So. 2d 81 (Fla. 1st DCA 1997).
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stated policy, or a prior agency practice,” and, in a “licensing”
proceeding such as this one, “state[s] with particularity the grounds or
basis for the issuance or denial” of the license. Sections 120.57(1)(b)
9, 120.57(2)(a) 1 and 2, 120.60(2), 120.68.
Judicial review proceedings under Section 120.68 similarly
press for crystalization [sic] of agency discretion. The court’s
responsibility is to allow the agency full statutory range for its
putative expertise and specialized experience. But, to the extent that
agency action depends on nonrule policy, Section 120.68 requires its
exposition as a credential of that expertise and experience.
[D]isplaced findings of [a] hearing officer . . . lessen in probative
force as the “facts” blur into opinions and opinions into policies, and
the Department’s power to substitute findings based on record
evidence correspondingly increases. But the Department’s duty of
exposition also increases. The final order must display the agency’s
rationale. It must address countervailing arguments developed in the
record and urged by a hearing officer’s recommended findings and
conclusions or by a party’s written challenge of agency rationale in
informal proceedings, or by proposed findings submitted to the
agency by a party. See also Reporter’s Comments on Proposed
Administrative Procedure Act, p. 20 (3/9/74):
“Three due process checks to prevent arbitrary agency
action are the requirements that reasons be stated for all
action taken or omitted, that reasons be supported by ‘the
record’, and that specific judicial review procedures
allow the courts to remedy defects of substance.”
Failure by the agency to expose and elucidate its reasons for
discretionary action will, on judicial review, result in the relief
authorized by Section 120.68(13): an order requiring or setting aside
agency action, remanding the case for further proceedings or deciding
the case, otherwise redressing the effects of official action wrongfully
taken or withheld, or providing interlocutory relief.
McDonald, 346 So. 2d at 583-84 (footnote omitted) (citations omitted).
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While the Commission correctly notes that McDonald is distinguishable
because in that case there was an insufficiently explained deviation from a hearing
officer’s findings of fact, the overriding principles of McDonald cannot be
disregarded on minute distinctions in the agency procedural posture. Indeed, the
McDonald principles have been extended to other contexts.
For instance, OPC refers this Court to Seminole Electric Cooperative, Inc. v.
Department of Environmental Protection, 985 So. 2d 615 (Fla. 5th DCA 2008), in
which the Fifth District set aside agency action that disregarded a stipulated
evidentiary record and proposed order with sparse explanation. Specifically, “the
order did not acknowledge or mention the systematic analysis in DEP’s Staff
Analysis Report, the other agency reports, the PSC’s Determination of Need, other
portions of the extensive stipulated record, or the detailed findings of fact set forth
in the statutorily authorized stipulated proposed final order.” Id. at 621. In setting
aside the order, the Seminole Electric court rearticulated the principles of general
law that had been codified in a statute requiring compliance with stipulations in the
Electrical Power Plant Siting Act context:
As a general rule, and absent a showing of fraud,
misrepresentation or mistake, stipulations are binding on the parties
who enter them, including administrative agencies participating in
administrative proceedings and the courts. See, e.g., Gunn Plumbing,
Inc. v. Dania Bank, 252 So. 2d 1, 4 (Fla. 1971); McGoey v. State, 736
So. 2d 31 (Fla. 3rd DCA 1999); EGYB, Inc. v. First Union Nat’l Bank
of Fla., 630 So. 2d 1216 (Fla. 5th DCA 1994); Sunshine Utils. of
Central Fla., Inc. v. Florida Public Serv. Comm’n, 624 So. 2d 306,
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310 (Fla. 1st DCA 1993); Sanders v. Bureau of Crimes Comp., 474
So. 2d 410, 411 (Fla. 5th DCA 1985); see also Doyle v. Dep’t of Bus.
Regulation, 794 So. 2d 686, 692 (Fla. 1st DCA 2001) (an agency’s
stipulation in an administrative proceeding cannot be “simply set
aside as not supported by evidence” by the agency head in a final
order). Consistent with this general law, the Siting Act now expressly
authorizes the parties in a Siting Act case to proceed by stipulation
when no issues are contested and requires the Secretary to “act upon
. . . the stipulation of the parties . . . .”
Id. at 621-22 (quoting § 403.509(1)(a), Fla. Stat. (2006)).
Other contexts in which an agency has insufficiently addressed its action
include orders ignoring precedent on point, binding letters resulting from informal
proceedings, and deviations from recommended penalties. See, e.g., Nordheim v.
Dep’t of Envtl. Prot., 719 So. 2d 1212, 1214 (Fla. 3d DCA 1998) (holding that
agency’s failure to consider its own precedent was an abuse of agency discretion
that was “inconsistent with officially stated agency policy or a prior agency
practice,” not explained by the agency, and in violation of section 120.68(6)(e)3.,
Florida Statutes); Gen. Dev. Corp. v. Div. of State Planning, 353 So. 2d 1199,
1210-11 (Fla. 1st DCA 1977) (extending McDonald rule to binding letters obtained
after informal proceedings and remanding for further explanation of the agency’s
decision); see also, e.g., Cartaya v. Dep’t of Bus. & Prof’l Reg., 919 So. 2d 611
(Fla. 3d DCA 2006) (remanding for further explanation the Real Estate Appraisal
Board’s acceptance of administrative law judge’s findings of fact but rejection of
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recommended penalty without any explanation as required by section 120.57(1)(l),
Florida Statutes).
Applying those principles, we find first the Commission departed from the
essential requirements of law here by acknowledging OPC’s contention that the
settlement agreement applied, but failing to address the terms of the settlement in
its analysis. Specifically, in its final order the Commission recognized that OPC
had raised the settlement agreement:
However, OPC [and the other objecting parties] all take the
position that the rate case stipulation and settlement agreement
entered into between OPC and FPUC on August 29, 2014 and
approved by this Commission in Order No. PSC-14-0517-S-EI, issued
on September 29, 2014, prohibits the recovery of costs associated with
the FPL interconnection through the fuel clause.
Order Below, No. PSC-15-0586-F0F-EI, at 11-12 (footnote omitted) (record
citation omitted). The order then went on to quote the same paragraph of the
settlement agreement upon which OPC bases its claim. See id. at 12.
However, despite introducing the settlement agreement issue, the order did
not perform any analysis of the settlement agreement issue with regard to the
transmission interconnection project. See generally id. at 12-16. Instead, the
Commission skipped to the merits of the fuel clause recovery rather than
addressing whether the specific terms of the settlement agreement precluded such a
recovery. See id. at 15. Specifically, the order only analyzed the enhanced
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reliability, enhanced negotiation posture, and effect of future, non-
contemporaneous savings that would result. See id.
Strangely, the Commission did analyze the settlement agreement in detail
with regard to the separately requested consulting and legal fees that were
expended in connection with the transmission interconnection project:
OPC argued that the settlement agreement precludes FPUC
from seeking recovery in the fuel clause of its legal and consulting
fees as does Order No. 14546. It is OPC’s position that FPUC is
barred from seeking recovery in the fuel clause for the cost of types or
categories that have traditionally and historically been recovered
through FPUC’s base rates. In addition, OPC argued that the base rate
freeze provision in the settlement agreement also prohibits FPUC
from recovering these costs through cost recovery clauses.
OPC contended that consulting and legal generation-related
costs have traditionally and historically been recovered through base
rates for both FPUC and other electric utilities. OPC acknowledged
that FPUC was allowed recovery through the fuel clause of its legal
and consulting fees associated with the issuance and evaluation of
RFPs for purchased power agreements. However, it is OPC’s
contention that generic legal and consulting activities have not been
specifically identified and allowed to be recovered through the fuel
clause.
....
As the starting point of our analysis, we disagree with OPC that
FPUC has not “traditionally and historically” recovered consulting
and legal fees through the fuel clause. In Docket Nos. 060001-EI,
070001-EI, 080001-EI, 090001-EI, 10001-EI, 110001-EI, 120001-EI,
130001-EI, and 140001-EI, legal and consulting fees associated with
fuel-related work were included in FPUC’s true-up filings which we
approved without objection. Further, in Order No. PSC-05-1252, we
approved the recovery of fees for Christensen and Associates related
to the preparation and evaluation of a RFP for purchased power for its
Northwest Division. In Order No. PSC-05-1252, we cited the fact that
FPUC was a small, non-generating, investor-owned electric utility that
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did not have the resources internally to prepare an RFP and evaluate
responses. Because FPUC has “traditionally and historically”
recovered these types of costs through the fuel clause, we find that the
terms of the settlement agreement do not apply and do not prohibit
recovery through the fuel clause at this time.
Id. at 13-14 (footnotes omitted). Thus, the Commission’s consideration and
specific discussion of the settlement agreement as applied to one set of costs but
not the other major request is bewildering at best.
Having determined that the Commission failed to perform its duty to explain
its reasoning, we reach a juncture at which we may remand the issue to the agency
or simply resolve the entire matter. See § 120.68(6)(a), Fla. Stat. (“The court may:
1. Order agency action required by law; order agency exercise of discretion when
required by law; set aside agency action; remand the case for further agency
proceedings; or decide the rights, privileges, obligations, requirements, or
procedures at issue between the parties; and 2. Order such ancillary relief as the
court finds necessary to redress the effects of official action wrongfully taken or
withheld.”). Due to the pure legal questions presented, we elect to resolve this
matter today.
We begin by recognizing that the term “fuel clause” is a misnomer because
the fuel clause is not a particular provision, but rather “a regulatory tool designed
to pass through to utility customers the costs associated with fuel purchases.” In re
Petition by Fla. Power & Light Co. to Recover Scherer Unit 4 Turbine Upgrade
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Costs Through Envtl. Cost Recovery Clause or Fuel Cost Recovery Clause
(Scherer Unit 4), No. PSC-11-0080-PAA-EI, at 6, 2011 WL 339538 (Fla. P.S.C.
Jan. 31, 2011). Its purpose “is to prevent regulatory lag . . . [which] has
historically been a problem for utilities because of the volatility of fuel costs.” Id.
As the Commission has further recognized, regulatory lag “is not as much of a
problem, however, when expenses, such as capital improvements, and operations
and management costs, can be planned for and included in base rate calculations.”
Id. (emphasis added). The dissent ignores this important aspect. Nevertheless, the
Commission has on occasion allowed recovery of some capital type costs through
the fuel clause. In 2011, the Commission issued Scherer Unit 4 in which it
recounted the fuel clause’s purpose and application with regard to capital costs:
In 1985, we amended the fuel clause process to better describe
those items that would be recoverable under the fuel clause. Prior to
the August 1985 fuel hearing, we instructed the parties and our staff to
“provide information necessary for the Commission to be able to
consider at the August 1985 fuel adjustment hearing whether the
utilities were passing appropriate fixed and variable costs associated
with fuel receipts through their fuel adjustment clauses.” Order No.
14546 approved a stipulation between OPC, FPL, TECO, Gulf, and
FPC (now PEF) after a workshop exploring the issue. The policy
outlined in Order No. 14546 consisted of two essential points
regarding the scope and application of the fuel adjustment clause:
1. When similar circumstances exist, the Commission
should attempt to treat, for cost recovery purposes,
specific types of fossil fuel-related expenses in a uniform
manner among the various electric utilities. At times,
however, it may be appropriate to treat similar types of
expenses in dissimilar ways.
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2. Prudently incurred fossil fuel-related expenses which
are subject to volatile changes should be recovered
through an electric utility’s fuel adjustment clause. The
volatility of fossil fuel-related costs may be due to a
number of factors including, but not necessarily limited
to: price, quantity, number of deliveries, and distance.
Except as noted below, these volatile fossil fuel-related
charges are incurred by the utility for goods obtained or
services provided prior to the delivery of fuel to the
electric utility’s dedicated storage facilities. (Dedicated
storage facilities mean storage facilities which are used
solely to serve the affected electric utility.) All other
fossil fuel-related costs should be recovered through base
rates.
Order 14546 then discussed the parties’ specific applications of
the articulated policy, including, for example, the description of
“invoiced fuel charges.” It was determined that invoiced fuel charges
should include all price revisions and adjustments relating to volume
and quality of fuel. After discussing several specific applications of
the policy, the parties agreed that our policy on fuel clause recovery
should be flexible enough to cover some items that would normally go
through base rates, and we approved that position. We discussed this
fuel clause exception to base rate recovery as follows:
In addition to stipulating to the foregoing applications of
policy, the parties also recommended to the Commission
that the policy it adopts be flexible enough to allow for
recovery through fuel adjustment clauses of expenses
normally recovered through base rates when utilities are
in a position to take advantage of a cost-effective
transaction, the costs of which were not recognized or
anticipated in the level of costs used to establish the
utility’s base rates. One example raised was the cost of
an unanticipated short-term lease of a terminal to allow a
utility to receive a shipment of low cost oil. The parties
suggest that this flexibility is appropriate to encourage
utilities to take advantage of short-term opportunities not
reasonably anticipated or projected for base rate
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recovery. In these instances, we will require that the
affected utility shall bring the matter before the
Commission at the first available fuel adjustment hearing
and request cost recovery through the fuel adjustment
clause on a case by case basis. The Commission shall
rule on the appropriate method of cost recovery based
upon the merits of each individual case.
In Order No. 14546 we approved the stipulation of the parties
and adopted them as our own. We found that the stipulated provisions
(including the fuel clause exception to base rate recovery), were an
appropriate extension of the policy established by Order No. 6357.
As a result of the policy determinations, we made two lists. One list
included charges properly considered in the computation of the
average inventory price of fuel. The other list contained items that
were more appropriately considered in the determination of base rates.
It should be noted that each item on the lists was a shortened reference
to the detailed description of the types of costs discussed earlier in the
Order.
....
As Order No. 14546 states, recovery may be allowed for:
Fossil fuel-related costs normally recovered through base
rates but which were not recognized or anticipated in the
cost levels used to determine current base rates and
which, if expended, will result in fuel savings to
customers. Recovery of such costs should be made on a
case by case basis after Commission approval.
We find that the appropriate interpretation of this section of Order No.
14546 is that capital projects eligible for cost recovery through the
Fuel Clause should produce fuel savings based on lowering the
delivered price of fossil fuel, or otherwise result in burning lower
price fuel at the plant. We note that the order discusses a “cost
effective transaction,” and gives as an example, “the cost of an
unanticipated short-term lease of a terminal, to allow a utility to
receive a shipment of low cost oil.” (Order No. 14546, p. 3) This
example clearly connects fuel savings to a project that lowers the
delivered price of fossil fuel (i.e., the input price). Similarly, in Order
No. PSC-95-1089-FOF-EI, issued on September 5, 1995, we approved
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FPL’s purchase of 462 high capacity aluminum rail cars for delivery
of coal to Plant Scherer, a capital project that lowered the delivered
price of fuel. The purchase of the rail cars enabled FPL to obtain
favorable transportation rate savings from railroad companies that
exceeded the recoverable cost of the purchase. That capital
investment provided FPL customers an estimated $24 million in fuel
savings, in the form of reduced fuel costs to FPL’s customers, by
lowering the delivered price, or input price, of coal.
Id. at 6-9 (footnotes omitted).
With the purpose of the fuel clause in mind, we conclude that the
Commission erred as a matter of law in determining that the construction type
costs associated with the actual construction of the physical structure for the
transmission interconnection are recoverable through the fuel clause pursuant to
Order No. 14546. Unlike the dissent, if we were to allow recovery of these capital
construction costs through the fuel clause simply because they may result in
savings and are loosely linked to fuel and purchased power through transmission
lines, the fuel clause exception would finally totally swallow whole the rule that
capital costs should be recovered through base rates because they can be subject to
adequate planning.
Indeed, in this very case the testimony of FPUC witnesses suggested that
FPUC simply chose to pursue recovery through the fuel clause as a matter of
convenience, rather than any necessity borne of unforeseen volatility. Moreover,
tellingly, FPUC had always recovered costs for transmission assets through base
rates on prior occasions. Only after a settlement agreement freezing base rates was
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in place did FPUC for the first time seek to recover transmission asset capital
construction costs through the fuel clause.
We do not believe that the fuel clause is an end-all-be-all of cost recovery,
but rather its history suggests its use should be limited to facilitating recovery of
costs related to fuel and power purchases that are volatile, rendering them less than
ideal for a base rates case. Today’s case is certainly not the first example of
utilities seeking to recover for items that are more properly base rate costs through
the fuel clause in a practice that has become alarmingly frequent. Just recently we
reexamined the contours of the fuel clause in reversing a commission order
approving cost recovery of “ ‘exploration expense, depletion expense, operating
expenses, G & A, taxes, transportation costs and a return on the unrecovered
investment, including working capital’ for investments in the exploration, drilling,
and production of natural gas in the Woodford Shale Gas Region in Oklahoma.”
Citizens of State v. Graham, 191 So. 3d 897, 899 (Fla. 2016). The project was
characterized as “a long-term physical hedge.” Id. at 901. In that case we
reaffirmed the purpose of the fuel clause as a mechanism for addressing the
volatility of fuel prices between ratemaking proceedings:
The fuel cost adjustment clause is a cash flow mechanism to
allow utilities to recover costs for unanticipated changes in fuel costs
between ratemaking proceedings. See Gulf Power Co.[ v. Fla. Pub.
Serv. Comm’n, 487 So. 2d [1036, 1037 (Fla. 1986)] (“Fuel adjustment
charges are authorized to compensate for utilities’ fluctuating fuel
expenses. The fuel adjustment proceeding is a continuous proceeding
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and operates to a utility’s benefit by eliminating regulatory lag.”).
The mechanism also permits utilities to recover actual costs of
financial derivatives and physical hedges that help prevent price
shocks from volatile fuel costs. However, regulated utilities through
the fuel clause do not earn a return on money spent to purchase fuel.
Likewise, while the costs of hedging contracts are pass-through costs,
utilities through the fuel clause do not earn a return on the cost of
hedging positions purchased.
Id. at 901. We rejected the “long-term physical hedge” characterization,
concluding that the project was rather a “guaranteed capital investment,” and
therefore, rejected recovery through the fuel clause:
Permitting advance recovery of FPL’s investment in the
Woodford Project’s exploration and production of natural gas will not
pay for the costs of actual fuel. It will provide recovery, instead, for
investment, operation, and maintenance and operation of assets that
will provide access to an unknown quantity of fuel in the future. It is
impossible to know what the costs of the natural gas will be until it is
actually produced. There is more uncertainty from this investment
rather than less. Therefore, it cannot be characterized as a physical
hedge.
...
The monies spent on the Woodford Project are not a mere pass-
through, like other fuel expenses, because FPL will earn a return on its
capital expenditures. Accordingly, the Woodford Project is a
guaranteed capital investment for FPL; it is not a hedge to stabilize
fuel costs.
Id. at 902. Ultimately, we concluded that recovery through the fuel clause was
“overreach.” Id. The dissent would reach back to invalidate this reasoning and
overturn its substance.
Similarly, the Commission once approved recovery of security infrastructure
costs through the fuel clause. However, recognizing its overreach, the
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Commission correctly proceeded to repudiate that decision in Scherer Unit 4, a
later fuel clause proceeding, noting that it was “a unique circumstance.” Scherer
Unit 4, No. PSC-11-0080-PAA-EI, at 9, 2011 WL 339538. The Commission went
on to explain that “we believe the appropriate policy going forward is to restrict
capital project cost recovery through the Fuel Clause to projects that are ‘fossil
fuel-related’ and that lower the delivered price, or input price, of fossil fuel.” Id. at
10. While that statement of the policy going forward in 2011 was a step in the
right direction, this case and the hedging case both exemplify why the fuel clause
proceedings must comport with serving their historical purpose of adjusting for
volatile costs associated with fuel.4 We cannot support the dissent’s attempt to roll
back the policy to that expressed in a 1974 order.
For this reason, we believe that the settlement agreement in this case,
approved by the Commission and incorporated by reference, more precisely
reflects the Commission’s fuel policy with regard to the delineation of those capital
4. We also note that FPUC has referred us to the other fuel clause
proceedings in which the Commission approved recovery of capital costs, such as
the purchase of rail cars for the delivery of coal as noted above. While some of
those circumstances may present close calls with regard to the appropriateness of
recovery through fuel clause proceedings, certainly the costs associated with
construction of brick and mortar facilities, installation of transmission lines, and
other machinery intended to be used in perpetuity, all of which are subject to
rigorous planning, present a decisively inappropriate basis for recovery of costs
through fuel clause proceedings.
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costs recoverable through base rates and those recoverable through fuel clause
proceedings. The relevant provision of the settlement agreement provides:
VI. Other Cost Recovery
Nothing in this agreement shall preclude the Company from
requesting the Commission to approve the recovery of costs that are:
(a) of a type which traditionally and historically would be, have been,
or are presently recovered through cost recovery clauses or
surcharges, or (b) incremental costs not currently recovered in base
rates which the Legislature or Commission determines are clause
recoverable subsequent to the approval of this settlement. Except as
provided in this Agreement, it is the intent of the Parties in this
Paragraph VI that FPUC not be allowed to recover through cost
recovery clauses increases in the magnitude of costs, incurred after
implementation of the new base rates, of types or categories
(including but not limited to, for example, investment in and
maintenance of transmission assets) that have been traditionally and
historically recovered through FPUC’s base rates.
Thus, in accord with the historical purpose of the fuel clause proceedings,
the plain language of the settlement agreement specifically prohibits FPUC from
recovering through cost recovery clauses an increase in costs related to investments
in transmission assets: “Except as provided in this Agreement, it is the intent of the
Parties . . . that FPUC not be allowed to recover through cost recovery clauses
increases in the magnitude of costs, incurred after implementation of the new base
rates, of types or categories (including but not limited to, for example, investment
in and maintenance of transmission assets) that have been traditionally and
historically recovered through FPUC’s base rates.” (Emphasis added.) The
evidence in the record plainly supports the notion that the costs at issue here are
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“investment in . . . transmission assets” as the interrogatories and testimony of
FPUC’s witnesses demonstrate that the entire expense is related to construction of
structures. Furthermore, although FPL is the entity constructing the structures,
FPUC will be actually paying for and reimbursing FPL and retaining all ownership
and responsibilities over the structures. FPUC’s testimony further indicated that
FPUC plans to recover future costs associated with this project through base rates.
Consistent with that intention, an FPUC witness testified that FPUC does not
currently recover its own transmission costs through the fuel clause. The dissent
conflates the types and categories of costs with the amount of costs.
Moreover, the contrary understandings of the settlement agreement are not
persuasive. First, FPUC contends that recovery of the transmission
interconnection costs is authorized by the sentence immediately preceding the one
prohibiting such a recovery. That sentence provides:
Nothing in this agreement shall preclude the Company from
requesting the Commission to approve the recovery of costs that are:
(a) of a type which traditionally and historically would be, have been,
or are presently recovered through cost recovery clauses or
surcharges, or (b) incremental costs not currently recovered in base
rates which the Legislature or Commission determines are clause
recoverable subsequent to the approval of this settlement.
As previously explained, an FPUC witness testified that FPUC does not currently
recover its own transmission costs through the fuel clause. Similarly, Commission
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staff concluded in its memorandum that transmission interconnection costs are not
historically or traditionally recovered through the fuel clause:
First, the only transmission costs that FPUC has historically
recovered through the fuel clause are those of JEA and Gulf Power
embedded in its current wholesale power purchase agreements with
both parties. None of FPUC’s own transmission costs have ever been
recovered through the fuel clause. Nor have any other [investor-
owned utility] transmission costs been “historically” or “traditionally”
recovered through the fuel clause. It should also be noted here that
one of the benefits of the FPL interconnection testified to by witness
Cutshaw is that the interconnection will significantly improve the
reliability of service to Amelia Island. However, capital
improvements to enhance service reliability have neither
“historically” nor “traditionally” been recovered through the fuel
clause.
(Record citations omitted.) Furthermore, the contention that the recovery sought is
of the type historically and traditionally recovered through the fuel clause is belied
by the Commission’s own discussions of prior capital cost recoveries through the
fuel clause as “case by case” and its subsequent labeling of that process as the “fuel
clause exception to base rate recovery.” Scherer Unit 4, No. PSC-11-0080-PAA-
EI, at 7 (emphasis added). Indeed, the Commission in its brief indicates that this
clause applies to expenses as a flexibility valve for costs “normally recovered
through base rates.” For the same reasons, we cannot agree that the costs at issue
constitute “incremental costs not currently recovered in base rates.”
Second, the Commission’s contention that the settlement agreement no
longer applies because FPUC’s earnings fell below 9.25% also appears to be a
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misreading of the settlement agreement’s plain language. This contention fails
because, as we have explained, the settlement agreement merely reflects the correct
application of the Commission’s fuel clause policy. Moreover, the contention
similarly fails as a matter of contract. While it is true that the record indicates
FPUC’s earned return on equity fell to 4.79%, the settlement agreement did not
necessarily become void upon that reduction in earnings, but merely allowed
FPUC to file a base rate case earlier than agreed upon by the parties to the
settlement:
Notwithstanding Paragraph II-Return on Equity and Equity
Ratio, the Parties agree that, in the event that [FPUC’s] earned return
on common equity falls below 9.25% during the Term on an FPUC
earnings surveillance report stated on a thirteen-month average actual
Commission adjusted basis, [FPUC] may file a Petition for Rate
Increase with the Commission.
(Emphasis added.) In this case, FPUC has not filed for a base rate increase, but has
instead pursued recovering the costs for the transmission interconnect through a
fuel clause proceeding. The dissent would simply open the door to continuous
requests for additional money under the fuel adjustment clause.
Therefore, the contrary understandings of the settlement agreement’s
language both lack persuasion and overlook the fact that the settlement agreement
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merely rearticulates in a more accurate manner the existing Commission fuel
clause policy.5
CONCLUSION
Therefore, ultimately, we reverse the order below on several grounds. First,
we hold that the Commission departed from the essential requirements of law by
failing to properly consider and address the settlement agreement with regard to
FPUC’s petition for the recovery of costs associated with the transmission
interconnection project. Second, we hold that the Commission erred in concluding
that such construction capital expenditures are capable of recovery through fuel
clause proceedings. Finally, we hold that the settlement agreement did apply in
this case and prohibited FPUC from petitioning the Commission for recovery of
those costs through the fuel clause proceedings. We therefore reverse the order
below and remand for the entry of an order dismissing and denying FPUC’s
petition for fuel adjustment recovery for the FPL transmission interconnection
costs.
It is so ordered.
5. The Commission also contended that the settlement agreement could not
be raised in this case because it provides that “[t]he Parties further agree that this
Agreement shall have no precedential value in any proceeding before the
Commission nor shall any Party assert same.” However, as discussed above, in
relevant part the settlement agreement did nothing more than rearticulate existing
fuel policy concerning recovery of capital costs.
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LABARGA, C.J., and PARIENTE, and QUINCE, JJ., concur.
POLSTON, J., concurs in result.
CANADY, J., dissents with an opinion.
LAWSON, J., did not participate.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
CANADY, J., dissenting.
Because I disagree with the majority’s interpretation of the settlement
agreement as prohibiting FPUC from recovering the costs of the FPL
interconnection through the fuel clause, and I would conclude that competent,
substantial evidence supports the Commission’s determination that the costs of the
FPL interconnection may be recovered through the fuel clause, I dissent.
The settlement agreement entered into by FPUC and OPC, and approved by
the Commission, provides, in pertinent part:
Except as provided in this Agreement, it is the intent of the Parties . . .
that FPUC not be allowed to recover through cost recovery clauses
increases in the magnitude of costs, incurred after implementation of
the new base rates, of types or categories (including but not limited to,
for example, investment in and maintenance of transmission assets)
that have been traditionally and historically recovered through
FPUC’s base rates.
In re Fuel & Purchased Power Cost Recovery Clause with Generating Performance
Incentive Factor, Order No. PSC-15-0586-FOF-EI at 12, 2015 WL 9450334 (Fla.
P.S.C. Dec. 23, 2015). The majority incorrectly concludes that this language
“specifically prohibits FPUC from recovering through cost recovery clauses an
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increase in costs related to investments in transmission assets,” such as the FPL
interconnection. Majority op. at 27.
The majority erroneously reads the phrase “increases in the magnitude of
costs” to mean “additional costs.” Contrary to the majority’s interpretation, the
plain language of the agreement does not prohibit the recovery of “an increase in
costs related to investments in transmission assets.” Instead, the agreement
prohibits “increases in the magnitude of costs”—that is, an increase in the amount
of those costs already existing at the time the settlement agreement was adopted.
Thus, while the agreement prohibits cost recovery through the fuel clause for
increases in the magnitude of costs that are already being recovered through
FPUC’s base rates—such as enhancement, modification, or maintenance of
transmission assets accounted for in the base rates—it does not prohibit cost
recovery through the fuel clause of entirely new costs related to investments in
transmission assets, such as the FPL interconnection. Since the costs of the FPL
interconnection are not included in FPUC’s base rates, these costs do not constitute
an “increase in the magnitude of costs” for an asset already being recovered
through base rates but rather an entirely new cost. We must avoid an interpretation
of the agreement that would render the words “magnitude of” superfluous. See
Equity Lifestyle Props., Inc. v. Fla. Mowing and Landscape Serv., Inc., 556 F.3d
1232, 1242 (11th Cir. 2009) (“We must read the contract to give meaning to each
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and every word it contains, and we avoid treating a word as redundant or mere
surplusage ‘if any meaning, reasonable and consistent with other parts, can be
given to it.’ ” (quoting Roberts v. Sarros, 920 So. 2d 193, 196 (Fla. 2d DCA 2006))
(applying Florida law).
I also disagree with the majority’s conclusion “that the Commission erred as
a matter of law in determining that the construction type costs associated with the
actual construction of the physical structure for the [FPL] interconnection are
recoverable through the fuel clause pursuant to Order No. 14546.” Majority op. at
23. The Commission allows for purchased-power costs to be recovered through
the fuel clause based upon its finding that “[p]urchased power is nothing more than
a substitute for power generated.” In re Gen. Investigation of Fuel Adjustment
Clauses of Elec. Cos., Order No. 6357 at 7, 1974 WL 331861 (Fla. P.S.C. Nov. 26,
1974).
In Order No. 14546, the Commission stated that its policy for allowing cost
recovery through the fuel clause should
be flexible enough to allow for recovery through fuel adjustment
clauses of expenses normally recovered through base rates when
utilities are in a position to take advantage of a cost-effective
transaction, the costs of which were not recognized or anticipated in
the level of costs used to establish the utility’s base rates.
In re Cost Recovery Methods for Fuel-Related Expenses, Order No. 14546, 85
F.P.S.C. 7:67, 7:69, 1985 WL 1090146 (Fla. P.S.C. July 8, 1985). Also in Order
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No. 14546, the Commission enumerated ten fuel-related cost items that are
properly considered for recovery through the fuel clause, the tenth of which applies
to the costs of the FPL interconnection:
10. Fossil fuel-related costs normally recovered through base rates
but which were not recognized or anticipated in the cost levels used to
determine current base rates and which, if expended, will result in fuel
savings to customers. Recovery of such costs should be made on a
case by case basis after Commission approval.
Id. at 7:71. The Commission has since identified this tenth enumerated fuel-related
cost item as the “fuel clause exception to base rate recovery.” In re Petition by Fla.
Power & Light Co. to Recover Scherer Unit 4 Turbine Upgrade Costs Through
Envtl. Cost Recovery Clause or Fuel Cost Recovery Clause, Order No. PSC-11-
0080-PAA-EI at 7, 2011 WL 339538 (Fla. P.S.C. Jan. 31, 2011).
In the order on appeal, the Commission cited to previous orders in which it
applied the “fuel clause exception to base rate recovery” to various proposed base
rate capital costs for which recovery through the fuel clause was requested. In re
Fuel & Purchased Power Cost Recovery Clause with Generating Performance
Incentive Factor, Order No. PSC-15-0586-FOF-EI at 11 & n.11, 2015 WL
9450334 (Fla. P.S.C. Dec. 23, 2015); id. at 11 n.11 (citing, e.g., In re Petition to
Recover Capital Costs of Polk Fuel Cost Reduction Project Through the Fuel Cost
Recovery Clause, by Tampa Elec. Co., Order No. PSC-12-0498-PAA-EI, 2012
WL 4482022 (Fla. P.S.C. Sept. 27, 2012) (granting in part and denying in part
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recovery through the fuel clause of certain capital project costs to convert a power
plant from oil- and propane-fired to natural gas upon finding that the project will
produce fuel savings by burning a lower priced fossil fuel); In re Petition for
Prudence Determination Regarding New Pipeline Sys. by Fla. Power & Light Co.,
Order No. PSC-13-0505-PAA-EI, 2013 WL 5870547 (Fla. P.S.C. Oct. 28, 2013)
(approving recovery through the fuel clause of certain long-term transportation
contracts for the delivery of natural gas through a new pipeline system upon
finding that the contracts were projected to save up to $450 million over the term
of the contracts when compared to the next most cost-effective proposal)).
Further, the Commission received evidence establishing that the FPL
interconnection will directly benefit FPUC’s customers by providing an estimated
$2.3 million in savings in future purchased-power costs and that the costs
associated with the FPL interconnection project were not anticipated and have not
been recovered in FPUC’s base rates. Thus, the Commission did not err as a
matter of law in allowing FPUC to recover the costs of the FPL interconnection
through the fuel clause, and there is competent, substantial evidence in the record
to support the Commission’s determination that allowing cost recovery for the
interconnection through the fuel clause comports with the Commission’s existing
policy under the “fuel clause exception to base rate recovery.” I therefore would
affirm the Commission’s order.
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An Appeal from the Florida Public Service Commission
J.R. Kelly, Public Counsel, Charles J. Rehwinkel, Deputy Public Counsel, Patricia
A. Christensen, Associate Public Counsel, and Stephanie A. Morse, Associate
Public Counsel, Office of Public Counsel, Tallahassee, Florida,
for Appellant
Keith C. Hetrick, General Counsel, Samantha M. Cibula, Attorney Supervisor, and
Rosanne Gervasi, Senior Attorney, Florida Public Service Commission,
Tallahassee, Florida,
for Appellee Florida Public Service Commission
Kenneth B. Bell, Mary E. Keating, and Lauren V. Purdy of Gunster, Yoakley &
Stewart, P.A., Tallahassee, Florida,
for Appellee Florida Public Utilities Company
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