On Oct. 3, state regulators will take up proposed rules that could help set the stage for an expansion of underground power lines in hurricane-weary Florida.

An expansion received widespread support from lawmakers during the spring session of the Florida Legislature, but the Florida Public Service Commission (PSC) is responsible for carrying out details of a new “storm protection” law that supporters say will reduce power outages after hurricanes hit.

Commission staff members Friday issued a 39-page document that details proposed rules for moving forward, including closely watched issues about the way project costs would be passed on to utility customers.

Utilities already have underground powerlines in some areas, but a key part of the law changes the way underground powerline projects are financed – a change that could lead to more projects but also higher bills for customers.

Generally, utilities such as Florida Power & Light, Duke Energy Florida, Tampa Electric Co. and Gulf Power have incorporated storm-hardening costs in their base electric rates, which are set for multiple years. The Public Service Commission goes through months-long processes to determine base rates, looking at financial and technical issues that involve numerous parts of utility operations.

But the new law sets up a separate process that allows utilities to seek money each year from customers for storm-protection projects, such as building underground power lines.

The proposed rules before the commission address critical issues, such as how that process will work. One of the key questions has focused on timing – when will utilities be able to start collecting money from customers for the projects.

Commission staff members have sided with the utilities so far and are recommending that the companies be able to collect projected costs from customers before the storm-protection work is completed. That would be similar to the way costs are projected and recouped for expenses such as power-plant fuel. Under this option, the utilities would go through a “true-up” process after the work is finished and compare projections with actual costs as a precursor to adjusting customers’ bills.

However, the state Office of Public Counsel, which represents consumers in utility issues, objected to the possibility of utilities collecting projected costs from customers and said the new law only authorized collection of actual costs.

In their recommendation, PSC staff members said they see the cost-recovery process “mirroring” the way other types of expenses, such as fuel costs, are recouped. They listed a series of reasons for allowing utilities to collect projected costs, including reducing “regulatory lag” and helping spur companies to undertake storm-protection projects.

“(Allowing) for the timely recovery of costs incentivizes (the utilities) to undertake capital-intensive projects that will achieve the purpose of the statute: hardening the state’s electric transmission and distribution infrastructure to better withstand extreme weather conditions,” the recommendations said.

On another key issue, however, PSC staff members disagreed with the utilities. The new law requires utilities to file 10-year plans to bolster storm protection. The disputed issue focuses on whether utilities should have to provide detailed information about projects expected during the first three years of the plan – or whether detailed information should only be required for first-year projects.

The Office of Public Counsel argues that longer-term detailed information is needed to keep utilities from collecting money under the new law for costs already being passed on to customers through base rates. The public counsel in a late-August filing described such a situation as “double recovery of the same costs.”

Florida Power & Light, however, said in a filing that providing detailed information about projects in the second and third years is “not feasible for FPL, nor is it desirable.”

“The specifics of program implementation inevitably change as one gets closer to implementation due to a host of issues including access and customer acceptance, and changing priorities based on more current reliability data,” FPL said in the filing. “FPL believes that it is more realistic to require project-level detail for the first year of a plan, and then more general information for years 2 and 3 that is nonetheless sufficiently detailed (e.g., type and number of projects and program costs) to support the development of annual rate-impact estimates for the first three years.”

The Public Service Commission staff members, however, wrote that “project-level information for each of the first three years is necessary to provide a baseline for the commission’s review and comparison of costs sought” in the new process.

Source: News Service of Florida, Jim Saunders