Energy, Communications & Cybersecurity Subcommittee Meeting Packet, January 24, 2023
Summary
Meeting packet of the Energy, Communications & Cybersecurity Subcommittee of the Commerce Committee of the Florida House of Representatives for Tuesday, January 24, 2023, 1:00 PM – 3:00 PM, in Reed Hall (102 HOB), naming Paul Renner as Speaker and Mike Giallombardo as Chair. The meeting agenda lists Call to Order, Roll Call, an Overview of the Florida Public Service Commission and an Overview of the Office of Public Counsel. The packet includes a presentation by Braulio Baez, Executive Director of the Florida Public Service Commission, on its mission, the regulatory compact, regulatory jurisdiction and methods for changing electric rates. It ends with Florida Office of Public Counsel pages on settlements, listing Charles Rehwinkel, Deputy Public Counsel, for questions.
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“Energy, Communications & Cybersecurity Subcommittee Meeting Packet, January 24, 2023.”
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Energy, Communications &
Cybersecurity Subcommittee
Tuesday, January 24, 2023
1:00 pm - 3:00 pm
Reed Hall (102 HOB)
Meeting Packet
Paul Renner Mike Giallombardo
Speaker Chair
The Florida House of Representatives
Commerce Committee
Energy, Communications & Cybersecurity Subcommittee
Paul Renner Mike Giallombardo
Speaker Chair
Meeting Agenda
Tuesday, January 24, 2023
1:00 PM – 3:00 PM
Reed Hall (102 HOB)
I. Call to Order
II. Roll Call
III. Welcome and Opening Remarks
IV. Overview of the Florida Public Service Commission
V. Overview of the Office of Public Counsel
VI. Closing Remarks
VII. Adjournment
303 House Office Building, 402 South Monroe Street, Tallahassee, FL 32399-1300
(850) 717-4870
Overview of the
Florida Public Service Commission
Presentation to the
Florida House
Energy, Communications & Cybersecurity
Subcommittee
Braulio Baez, Executive Director
Florida Public Service Commission
January 24, 2023
Mission:
To facilitate the efficient provision of
safe and reliable utility services
at fair prices
2
Economic Regulation
• Essential Services
o Society dependent upon services for quality of life
and input to economic activity
o Demand relatively inflexible
• Natural Monopoly
o Demand satisfied at lower cost by single provider
o High capital cost, long-lived assets
o Duplicative systems wasteful and undesirable
3
Non-economic Regulation
• Public Policy Goals
o Health
o Safety
o Environmental protection
o Grid stability
o Efficient use of resources
4
Regulatory Compact
• Rate regulation occurs for essential
services that are provided by monopoly
firms
• Government protects the interests of
both the consumer and the supplier
• In return, the supplier has rights
AND responsibilities
5
Regulatory Compact
• Rights of the Utility:
o Natural monopoly
o Franchise for defined territories
o Can charge rates to recover the prudent costs of service
o Entitled to an opportunity to earn a fair and reasonable return on
investments
• Responsibilities of the Utility:
o Obligation to serve all customers in the defined territory
o May not unduly discriminate in providing service or charging rates
o Must provide safe and reliable service
o May not build unnecessary facilities or incur costs for unnecessary
services
o Must open books to regulators
6
The “Public Interest”
• Regulators are tasked with
making decisions that are in
the public interest
• Requires balancing several
interests
Customers and the utility and its
shareholders
Reliable service and cost
Long-term planning and short-
term rate impacts
7
The FPSC Regulates
ELECTRIC NATURAL GAS
WATER & WASTEWATER TELECOMMUNICATIONS
8
FPSC Regulatory Overview
• The Florida Public Service Commission is a Legislative agency with
authority over the rates and service of the state’s investor-owned
utilities (IOUs)
• Electricity, Natural Gas, and Water & Wastewater:
o The FPSC regulates the electric and gas IOUs, and the water &
wastewater IOUs in those counties that have given jurisdiction to the PSC
o The FPSC also has limited jurisdiction over publicly-owned municipal and
rural cooperative utilities
• Telecommunications:
o The FPSC has regulatory authority over the wholesale relationships of the
state's various telecommunications companies, and over certain retail
programs such as Lifeline and Relay
9
FPSC Regulatory Jurisdiction
• The FPSC currently regulates the rates and service of:
o 4 investor-owned electric utilities
o 8 investor-owned natural gas utilities
o 149 investor-owned water and wastewater utilities
• The FPSC has limited jurisdiction over:
o 18 rural electric cooperatives
o 35 municipal electric utilities
o 27 municipal natural gas utilities
o 4 special gas districts
• The FPSC exercises competitive market oversight for:
o 10 incumbent local exchange telephone companies
o 249 competitive local exchange telephone companies
o 27 pay telephone service providers
10
FPSC Regulatory Authority
• Rate Base/Economic Regulation
o Analyze requested rate changes
o Conduct earnings surveillance to ensure that regulated utilities are not
exceeding their authorized rates of return
• Consumer Protection, Safety, Reliability, and Service
o Investigate and respond to consumer questions
o Disseminate consumer education materials
o Conduct safety inspections of gas systems and electric facilities
o Oversight of the planning, development, and maintenance of the grid to
assure an adequate and reliable source of energy
• Competitive Market Oversight
o Facilitate the development of competitive markets, where directed by
statute, and address issues associated with those markets
11
Methods for Changing Electric Rates
• The Annual Cost Recovery Clauses
• General Base Rate Proceedings
12
Cost Recovery Clauses
• Base rate cases can typically take up to a year to complete.
• The FPSC has authority to allow certain electric utility expenses that
can vary year-to-year and capital investments to be recovered
through annual adjustment clauses.
• Formal hearings held annually to determine reasonableness or
prudence of requested costs.
• These include:
o Fuel costs, including purchased power
o Energy conservation program costs
o Environmental compliance costs
o Nuclear pre-construction costs
o Storm protection plan costs
13
Base Rate Proceedings
• Rate Base = the net investment in facilities, equipment, and other
property necessary to provide utility service minus accrued
depreciation
• Rate of Return = (r) the % return earned, or allowed to be earned, on
the utility’s rate base including a return on equity and recovery of debt
expense
• Utility systems are capital intensive industries with long lived assets
of 40-60 years. Once costs are deemed prudent, cost recovery is
permitted
• During a rate case, “base rates” are changed and are fixed until the
next rate case
14
Key Supreme Court Cases
• In 1923, in Bluefield Water Works v. Public Service Commission of
West Virginia, the Supreme Court ruled that:
o A public utility is entitled to rates that allow it to earn a return on the value of the
plant and equipment it owns
o While the public utility has no right to profits from speculative ventures
• In 1944, in FPC v. Hope Natural Gas, the Supreme Court ruled that:
o From the investor or company perspective, prices are set such that there be
enough revenue for operating expenses and to cover the costs of capital and debt
expenses
o Additionally, the return to equity owners should be commensurate with returns on
firms with similar risks and to allow the utility to maintain its ability to attract capital
15
Recent Legislation
• 2019 - Storm Protection Plans and Cost
Recovery (SB 796)
• 2021 - Utility and Communications Poles (SB
1944)
16
2019 – Storm Protection Plan Legislation (SB 796)
• Created Section 366.96, F.S, established the Storm Protection Plan Cost
Recovery Clause.
– Requires IOUs to file ten-year Storm Protection Plans for FPSC approval, every
3 years.
– The Commission conducts annual proceedings to allow recovery of prudently
incurred implementation costs.
• Key implementation Dates:
– Rulemaking completed - 2019
– Approved the IOU’s first Storm Protection Plans and petitions for cost recovery -
January 2021
– Cost recovery began – January 2021
– Initial annual report on storm protection activities and costs published December
1, 2021
17
2021 – Utility and Communications Pole
Attachment Legislation (SB 1944)
• Requires the Commission to regulate rates, charges, terms,
and conditions of pole attachments.
• The Commission must regulate safety, vegetation
management, maintenance, and storm restoration for poles
owned by communications services providers.
• Commission has adopted rules to:
– Implement legislation relating to pole attachment complaints,
– Regulate pole safety, inspection, maintenance, and vegetation
management.
18
Questions?
19
- FLORIDA OFFICE
OF
PUBLIC COUNSEL
OVERVIEW
OF
THE OPC
CHARLES REHWINKEL
DEPUTY PUBLIC COUNSEL
FLORIDA OFFICE OF PUBLIC COUNSEL
OVERVIEW OF OPC
WHO ARE WE?
● CREATED IN 1974 TO REPRESENT CONSUMERS IN UTILITY
MATTERS PRIMARILY BEFORE THE FLORIDA PUBLIC
SERVICE COMMISSION
● GOVERNED BY §§ 350.061-350.0614, FLA. STAT.
● APPOINTMENT & OVERSIGHT PROVIDED BY JOINT
COMMITTEE ON PUBLIC COUNSEL OVERSIGHT § 350.061,
FLA. STAT.
FLORIDA OFFICE OF PUBLIC COUNSEL
OVERVIEW OF OPC (cont.)
● PROVIDE LEGAL REPRESENTATION FOR FLORIDA
CITIZENS ON ISSUES (INTERVENTION BY STATUTORY
RIGHT):
• BEFORE THE PSC
• BEFORE COUNTIES THAT OPT OUT OF PSC
JURISDICTION ON WATER/WASTEWATER CASES
● REPRESENT RATEPAYERS COLLECTIVELY, NOT
INDIVIDUALLY
FLORIDA OFFICE OF PUBLIC COUNSEL
RATE CASES:
TYPES OF CASES
• ELECTRIC
• GAS
• WATER/WASTEWATER
COST RECOVERY CLAUSES:
• FUEL
• STORM PROTECTION PLAN
• ENVIRONMENTAL
• ENERGY CONSERVATION
• NUCLEAR (DORMANT)
FLORIDA OFFICE OF PUBLIC COUNSEL
TYPES OF CASES (cont.)
MISCELLANEOUS – RULEMAKING, PROCEDURAL MATTERS, ETC.:
• ACCOUNTING ISSUES
• CERTIFICATE
• HURRICANE COSTS
• WORKSHOPS
• RULES
• SPECIALIZED RATE PETITIONS
FLORIDA OFFICE OF PUBLIC COUNSEL
CASE STATISTICS
FLORIDA PUBLIC SERVICE COMMISSION:
• INTERVENTIONS: 42 DOCKETS
• MONITORING: 37 DOCKETS
COUNTY RATE PROCEEDINGS:
• MONITORING IN CITRUS COUNTY: 1 DOCKET
FLORIDA SUPREME COURT CASES:
• PENDING WITH OPC AS APPELLANT – 6
• 2015 – 2020 FINAL ORDER – 6 (3 AS APPELLANT & 3 AS APPELLEE) & TWO 1ST DCA
CASES
FLORIDA OFFICE OF PUBLIC COUNSEL
CONVENTIONAL RATE CASES
OPC ROLE
• THE OPC ADVOCATES FOR FAIR & REASONABLE RATES
• A UTILITY IS ALLOWED PRUDENT AND REASONABLE COSTS & FAIR,
REASONABLE RETURN ON ITS INVESTMENTS – IN RETURN FOR
PROVIDING SAFE, ADEQUATE AND RELIABLE SERVICE
• THE UTILITY MUST SUPPORT ITS REQUEST WITH COMPETENT
SUBSTANTIAL EVIDENCE
• OPC WILL CONTEST THOSE AREAS WHERE WE ASSERT THE COSTS
ARE NOT PROVEN TO BE REASONABLE AND PRUDENT
FLORIDA OFFICE OF PUBLIC COUNSEL
CONVENTIONAL RATE CASES (cont.)
CASE FILED: PETITION AND SUPPORT
OPC INTERVENES BY STATUTORY RIGHT
OPC ENGAGES NATIONALLY RENOWNED
EXPERTS
• ACCOUNTING
• COST OF CAPITAL
• DEPRECIATION
• ENGINEERING
FLORIDA OFFICE OF PUBLIC COUNSEL
CONVENTIONAL RATE CASES (cont.)
• CUSTOMER HEARINGS HELD
• CONSUMERS PROVIDE INPUT ON QUALITY OF
SERVICE
• DISCOVERY CONDUCTED
• TESTIMONY OF OPC EXPERT WITNESSES FILED
• UTILITY FILES REBUTTAL TESTIMONY; DISCOVERY
CONTINUES
• ISSUES IDENTIFIED AND FINALIZED; PREHEARING
ORDER ISSUED SETTING SCOPE OF HEARING
FLORIDA OFFICE OF PUBLIC COUNSEL
CONVENTIONAL RATE CASES (cont.)
• HEARING HELD
• PRESENTATION OF EVIDENCE AND WITNESSES;
CROSS-EXAMINATION; ETC.
• POST-HEARING BRIEFS & STAFF RECOMMENDATION FILED
• FINAL DECISION BY PUBLIC SERVICE COMMISSION
• 8-MONTH PROCESS IN TOTAL
• APPEAL, IF ANY, AFTER ORDER IS ISSUED
FLORIDA OFFICE OF PUBLIC COUNSEL
WATER/WASTEWATER RATE CASES
W/W CASES ARE A LITTLE DIFFERENT THAN ELECTRIC & GAS
CASES
3 TYPES:
• CONVENTIONAL RATE CASE (FOR LARGEST UTILITIES)
• STAFF ASSISTED RATE CASE OR SARC (FOR SMALL
COMPANIES)
• COMPANY-FILED PROPOSED AGENCY ACTIONS (PAA)
FLORIDA OFFICE OF PUBLIC COUNSEL
SETTLEMENTS
OPC’S PRIMARY GOAL DECIDING ON SETTLEMENT:
• THE BEST DEAL WE CAN GET FOR CONSUMERS
MEASURING THE STRENGTHS AND WEAKNESSES OF
OUR CASE AGAINST THE EXPECTED OUTCOME IN
LITIGATION.
FLORIDA OFFICE OF PUBLIC COUNSEL
SETTLEMENTS (cont.)
OTHER ADVANTAGES OF SETTLEMENTS
• AVOIDS MUCH OF UNCERTAINTY OF REGULATORY BODY
DECISION
• TAKES SOME OF RISK OUT OF THE EQUATION
• ALLOWS CREATIVE SOLUTIONS THAT PSC COULD NOT
OTHERWISE CONSIDER (E.G., RATE FREEZES; REVENUE
SHARING; ASSET DEFERRALS; SOLAR & EV INVESTMENTS,
ETC.)
• CAN AVOID EXPENSE OF HEARING, ATTORNEYS’ FEES, ETC.
- FLORIDA OFFICE
OF PUBLIC COUNSEL
QUESTIONS
CHARLES REHWINKEL
DEPUTY PUBLIC COUNSEL
OFFICE OF PUBLIC COUNSEL
(850) 488-9330
REHWINKEL.CHARLES@LEG.STATE.FL.US
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