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BEFORE THE
FLORIDA PUBLIC SERVICE COMMISSION
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DOCKET NO. 0 0 0 8 2 4 - E 1
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n the Matter o f :
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!EVIEW OF FLORIDA POWER
:ORPORATION ’ S EARNINGS,
‘NCLUDING EFFECTS OF
~ROPOSEDACQUISITION
OF
:LORIDA POWER CORPORATION
1Y CAROLINA POWER & LIGHT
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ELECTRIC VERSIONS (WORDPERFECT AND PDF- FORMAT) OF THIS TRANSCRIPT ARE CONVENIENCE
COPIES ONLY AND NOT THE OFFICIAL TRANSCRIPT.
THE WORDPERFECT VERSION OF THE TRANSCRIPT
DOES NOT CONTAIN PREFILED TESTIMONY
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’ROCEEDINGS :
AGENDA CONFERENCE
ITEM NO. 17
3EFORE :
CHAIRMAN E. LEON JACOBS, JR.
COMMISSIONER 3. TERRY DEASON
COMMISSIONER L I L A A. JABER
COMMISSIONER BRAULIO L. BAEZ
COMMISSIONER MICHAEL A. PALECKI
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)ATE :
T u e s d a y , May 15, 2001
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TIME :
Commenced a t 2 :45 p. m.
Concluded a t 3:50 p.m.
PLACE :
B e t t y E a s l ey C o n f e r e n c e C e n t e r
Room 148
4075 E s p l a n a d e Way
T a l 1ahassee, F1 orida
REPORTED BY:
KORETTA E. STANFORD, RPR
O f f ic i a1 FPSC R e p o r t e r
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PART1C IPAT1NG :
JAMES McGEE, WILLIAM HABERMEYER, President and CEO;
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VINCENT DOWN, Vice President f o r Governmental and Regulatory
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A f f a i r s ; MARK MYERS, Vice President f o r Finance, F l o r i d a Power
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Corporation, 106 East Col lege Avenue, Suite 800, Tal 1ahassee,
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F1o r i da 32301.
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JOHN McWHIRTER, Esq., McWhirter Law Firm, P.O. Box
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3350, Tampa, FL 33601, representing F1orida I n d u s t r ia1 Power
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Users Group.
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MICHAEL B. TWOMEY, Esq., P.O. Box 5256, Tallahassee,
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F1o r i d a 32314, representing Buddy L. Hansen and Sugarmi 11 Woods
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C i v i c Associ a t i on.
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JACK SHREVE, O f f i c e o f Publ i c Counsel, 111 W. Madison
Street, S u i t e 812, T a l 1ahassee, FL 32399.
ROBERT ELIAS, and DEBORAH HART, FPSC D i v i s i o n o f
Legal Services.
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TIM DEVLIN , FPSC D i v i s i on o f Economic Regul a t i on.
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BOB TRAPP, FPSC D i v i s i o n o f P o l i c y Analysis and
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Intergovernmental Liaison.
HAROLD McLEAN, O f f i c e o f Publ i c Counsel.
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P R O C E E D I N G S
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CHAIRMAN JACOBS:
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Item 17.
Item 17 i s a recommendation for a rate
Ease for Florida Power Corp. And we're recommending the
:ommission move forward w i t h this docket. We're dealing w i t h a
MR. DEVLIN:
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significant overearnings situation. FPC hasn't had a rate case
i n nine years.
We t h i n k i t ' s really important t o have a
Zomprehensive review of FPC for the following reasons: To
jetermi ne the appropri ate 1eve1 of earni ngs and, therefore,
*atest determine the book value of existing assets as we move
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into a restructuring environment, perhaps; t o use as a basis i n
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?valuating any settlement proposals; t o use i n evaluating the
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impact of the recent acquisition by Carolina Power & Light; and
last and not least, t o be used i n determining the
*easonableness and the appropriate method of recovery of costs
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ssociated w i t h the RTO.
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So, our basic theme of the S t a f f i s t h a t this is time
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to have a comprehensive review of Florida Power Corp., and the
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*ate case setting offers us t h a t possibility. I mean, not only
vould we be t a l k i n g about MFRs, b u t we'd a l s o be using the
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w d i t process and the other investigative measures a t our
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fisposal .
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The other item t h a t I ' d like t o t a l k about very
iriefly, because I know we have a l o t of speakers, we're
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recommending the Commi s s i on put $114 m i 11ion, subject t o
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refund, t o ensure consumers are protected during the case.
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While we do have a l e t t e r from FPC agreeing t o hold money,
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subject t o refund, there i s no amount specified.
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Commission order we e l i m nate t h a t ambiguity, i f you w i l l , and
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making i t known what the extent o f consumer protection i s .
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Thank you.
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CHAIRMAN JACOBS:
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MR. TRAPP:
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With a
Very w e l l .
Commissioners, excuse me.
I,too, have
an opening statement, i f I may.
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CHAIRMAN JACOBS:
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MR. TRAPP:
Briefly.
Good afternoon.
Thank you f o r having me.
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I t ' s not often I get t o come t o Agenda, but you may be
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wondering why I ' m here today on t h i s overearnings case.
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purpose today i s t o explain why we've included discussion o f
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the RTO in t h i s overearni ngs recommendation.
My
I want t o f i r s t go back t o the beginning o f the RTO
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development and t e l l you where we are now.
We are beyond the
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development phase o f the Florida RTO.
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function o f the F l o r i d a RTO has been selected.
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was made during the c o l l aborative process t h a t the stakeholders
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held.
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t o be a f o r - p r o f i t , stand-alone transmission company.
The form and the
This decision
So, f o r b e t t e r o r f o r worse, GridFlorida i s here, and i s
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Where we are now r e a l l y i n t h i s process, we're i n t h e
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implementation phase o f the Florida RTO and, Commissioners, t h e
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time has come for us t o determine the rate impacts of
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GridFlorida on the ratepayers of the distinct investor-owned
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utilities t h a t we regulate. In order t o determine these rate
impacts, we need MFRs.
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Now, Florida Power & Light and Florida Power
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Zorporation are the two power participant i n GridFlorida.
dhile both do plan t o participate i n the RTO, their involvement
d i l l be distinctly different. Florida Power & Light, for
instance, plans t o divest itself of i t s transmission and
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transfer the facil ties t o GridFlorida. Florida Power
Corporation, on the other hand, plans t o retain the ownership
of their transmission facilities, but t o turn over operational
control t o GridFlorida.
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A t this point, a generic hearing i s neither the best
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nor the most efficient mechanism t o gather distinct u t i l i t y
data or t o do individual u t i l i t y ratemaking. Again, we're
beyond t h a t point. We need u t i 1i t y - speci f i c MFRs. Separate
b u t interwoven w i t h the RTO rate issues, the Division of
Economic Regulation has determined t h a t the MFRs are needed
from Florida Power & Light and from Florida Power Corporation
t o address overearni ngs .
They have proposed a 2002 test year for which t o
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collect t h a t MFR data. As i t happens, a 2002 test year
perfectly overlaps the f i r s t year of operation of GridFlorida.
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So, the MFR d a t a for a 2002 test year i s exactly the
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information t h i s Commission needs i n order t o address both
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overearnings and the impact o f GridFlorida on F l o r i d a Power &
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L i g h t and F l o r i d a Power Corporation's r e t a i l rates.
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Let me t u r n now t o the issues.
What issues w i l l MFR
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data f o r t e s t year 2002 help the Commission resolve? Well,
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basically, two broad categories.
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prudence.
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word prudence i n the context o f where we are a t today.
The f i r s t issue i s t h a t o f
And l e t me be very clear about what I mean by the
I ' m not r e f e r r i n g t o the prudence o f selecting a
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f o r - p r o f i t transco as the f i n a l form o f GridFlorida.
That
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seems t o be a done deal.
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most c o s t - e f f e c t i v e form o f an RTO i s no longer the issue
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before us.
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statewide perspective i n the collaborative process.
Whether t h i s i s the most e f f i c i e n t ,
We had our chance t o get t h i s r i g h t from a
Rather, the issue o f prudence before us now i s
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ifJhether or not GridFlorida i s the r i g h t f o r the i n d i v i d u a l
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u t i l i t i e s p a r t i c i p a t i n g i n i t and f o r t h e i r ratepayers on an
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individual basis, not a generic basis.
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dhether F l o r i d a Power & L i g h t and F l o r i d a Power Corporation's
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ratepayers w i l l benef t from p a r t i c i p a t i o n i n GridFlorida as i t
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has been structured.
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I n order
COMMISSIONER JABER:
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I n short, the issue i s
yes?
Let me i n t e r r u p t you f o r j u s t a
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second.
I n your introduction, you're not implying t h a t the PSC
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,vas p a r t o f t h e selection process w i t h respect t o what k i n d o f
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?TO, because you said we' r e - -
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MR. TRAPP:
The Commission has not had an opportunity
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t o s i t as the Commission and make a judgment w i t h respect t o
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weral
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have been monitoring and p a r t i c i p a t i n g t o the degree t h a t we
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can i n the collaborative process.
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GridFlorida formation, but the S t a f f and, I t h i n k , we
COMMISSIONER JABER:
I j u s t d o n ' t want t o leave the
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impression i n anyone's mind t h a t the PSC was p a r t o f a decision
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3n what kind o f RTO was formed.
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MR. TRAPP:
No, ma'am.
I n order t o address t h i s s p e c i f i c u t i l i t y aspect o f
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prudence, we must look a t , number one, s p e c i f i c costs t o be
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3orne by Power & Light and Power Corp. ' s ratepayers.
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specific benefits t h a t the ratepayers o f Power Corp. and o f
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'lorida Power & Light can expect t o receive, and whether on a
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zompany-by-company basis, t h e cost t o be paid by each company's
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ratepayers are outweighed by the benefits t h a t they w i l l
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receive.
The
Once the issue o f cost versus benefits has been
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addressed, again, on a company-specific basis, the second issue
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i s who should pay, ratepayers o r stockholders? And then, i f
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i t ' s determined t h a t the ratepayers should pay a l l or a p o r t i o n
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3f
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de must determine whether cost recovery should take place i n
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3ase rates or i n cost recovery clauses.
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t h e cost associated w i t h t h e i r p a r t i c i p a t i o n i n GridFlorida,
F i n a l l y , we must address r a t e structure issues; t h a t
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i s , w h a t percent of t o t a l costs associated w i t h the RTO should
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be paid for by the residential, commercial, and industrial
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class of customers? These are a l l ratemaking issues. That's
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what this Commission does. We review and we set rates. W
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can't set rates w i t h o u t evaluating MFRs and the associated cost
of service studies t h a t go w i t h them. So, again, I end where I
started; we need MFRs and the associated information t h a t comes
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w i t h i n t o make the appropriate ratemaking judgments w i t h
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respect t o the RTO.
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Thank you very much.
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CHAIRMAN JACOBS:
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Very well. I t h i n k , we have a
presentation by the company?
MR. McGEE: Yes. Commissioners, my name i s James
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McGee. I'm appearing on behalf of Florida Power Corporation.
I have w i t h me Mr. William Habermeyer t o my immediate right,
who i s Flor da Power's President and CEO. To his right i s
Mr. Vincent Dolan, Vice President for Governmental and
Regulatory Affairs for Florida Power. And t o his right i s
Mr. Mark Myers, who i s Florida Power's Vice President for
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Finance.
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Just t o give you an idea of the way we intended t o
proceed t h i s afternoon, Mr . Habermeyer has some opening remarks
t h a t he would like t o make concerning a rate proposal t h a t
Florida Power filed yesterday before the Commission, as well as
the company's overall direction over the next several years.
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ifter t h a t , I would like t o address t h a t proposal, not from the
;tandpoint of evaluating the merits, but t o the extent t h a t i t
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-epresents a reasonable a1 ternative t o going forward w i t h
itaff's recommendation, I would like t o deal w i t h those points.
After t h a t , Mr. Myers has several issues of concern
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;o the company t h a t he would like t o address concerning
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specific components of the S t a f f ' s recommendation, i n
)articular, the schedule that's been proposed for the f i l i n g of
IFRs. And f i n a l l y , Mr. Dolan has a few concluding comments
:hat he would like t o make t o the Commission.
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W i t h t h a t , I would like t o ask Mr. Habermeyer i f he
~ o u l dgo forward w i t h his opening remarks.
CHAIRMAN JACOBS:
Very well. You may proceed, Mr.
iabermeyer. We1 come.
MR. HABERMEYER: Chairman Jacobs, Commissioners,
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:hank you very much for giving me the opportunity t o speak
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today. As you know, and as Jim pointed out, yesterday we took
1% 3 major step t o address those issues which were related t o our
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Zompany's docket, including the effects of the completed merger
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md also t o set forth some of the plans for operating the new
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-1orida Power. While some of our folks are here today t o
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jiscuss i n more detail the questions t h a t you may have, I would
like t o , w i t h your permission, make a few brief introductory
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.emarks regarding our future pl ans.
Our goal is today and has always been t o resolve
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these rate and merger issues before the existing settlement
2 expires on June 30th. You can be assured that I am doing all I
3 can and am committed to this goal in doing everything possible
4 to make that date.
The potenti a1 of major who1 esal e restructuring, of
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6 course, in the legislation held up some of our plans. And, of
7 course, the legislature adjourned on May 4th and without action
8 on this issue and so, we're here today to make our presentation
9 on our proposal to address this issue of our rate stipulation.
The rate reduction plan that we are proposing,
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13 rate reduction that will benefit our customers over the next
14 three and a half years. Included in this, our first and
15 immediate rate reduction of $30 million annually for the next
16 three years comprised, in large part, by a reduction in our
17 ROE, as well as the contribution of Florida Power's share of
18 the net synergy savings from the merger.
Additionally, the second part of that is a commitment
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21 payments to the Tiger Bay regulatory asset, which will complete
22 the amortization of this asset by 2003, five years ahead of
23 schedule. This wi 11 result in additional 1 ong-term rate
24 reduction of approximately $37 million annually and bring the
25 total benefit to customer savings in excess of $2 billion
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projected over the life of the restructured contracts. This
2 will reduce the price for a typical residential customer who
3 uses 1,000 kilowatt hours by $2.19.
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Lower prices are really just a part of what the new
5 Florida Power will mean to our customers. We're six months
6 past our merger approval and just beginning to implement the
7 best practices, the progress energy family of companies. Some
8 of the results, first, an expanded generating fleet to ensure
9 our customers adequate energy supply for the future. Second,
10 new techno1ogy and upgraded equipment to improve response time
11 to outages and to enhance our reliability to the customer; an
12 expanded menu of customer service options to go along with the
call center
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And let me expand very briefly on these. In terms of
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16 generation adequacy, we will meet our 20% reserve margin
17 commitment seven months ahead of schedule with the addition of
18 270 megawatt peakers that went into service in Intercession
19 City last December and the addition of a second unit at our
20 Hind site to be in service in late 2003.
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Together, these investments of more than $300 million
22 will increase our capacity by 10% and save customers up to $40
23 million per year in fuel costs. We're also very proud of the
24 record established by Crystal Rivers since its turn-around,
25 which is among the best o f the industry last year with a
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capacity factor of over 98%.
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In terms of transmission and distribution
3 re1 iabi 1 i ty, the company wi 11 invest more than $100 mi 11 ion
4 over the next three years to further improve reliability. The
5 company has already seen a 25% improvement in system
6 reliability over the last four years, and we're looking for
7 even better performance in the future.
Florida Power also plans to build several new
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9 operating centers across its 20,000 square mi 1 e service
10 territory. These new centers wi 11 pl ace F1 orida Power ' s 1 i nes,
11 service, engineeri ng and management resources cl oser to the
12 customer , providing quicker outage restoration and improved
13 service.
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In terms of customer service, we are opening 150 new
15 pay stations around the state to offer our customers expanded
16 hours and some around-the-clockbilling opportunities and
17 paying services. We have significantly increased the
18 functionality of our telephone call system so that just about
19 any customer request can be done via telephone 24 hours a day.
We've added service enhancements a1 1 owing customers
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21 t o view and pay their bills on-line. In some, we've tried to
22 address customer issues and customer service that will result
23 in improvements to the customer, as well as improvements of our
24 3wn company operations.
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In summary, our goal is to make Florida Power the
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xemi ere energy provider i n F1 ori da; 1ower pri ces , abundant
generation capacity, improved re1 i a b i l i t y and top-notch
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xstomer service. These are the areas we'll continue t o focus
3n and pursue t o t h a t goal. Approval of the plan that's before
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you today i s a necessary step i n order t o allow the company t o
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nove i n t h a t direction.
I urge you and your S t a f f t o consider and work
together w i t h us t o get i t approved a t the earliest possible
3ate so t h a t our customers can enjoy the benefits of lower
r i c e s , especially as we approach the hot summer months of high
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xstomer usage.
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I t h a n k you for your time today t o allow me t o
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3ddress these issues, and I know t h a t you have questions, and
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Me'll certainly be happy t o answer them.
CHAIRMAN JACOBS: Thank you.
MR. McGEE: Commissioners, I t h i n k , a point a t the
ieart of our suggestion t h a t the rate proposal Mr. Habermeyer
lescribed be allowed the opportunity for consideration by the
:ommission before i n i t i a t i n g a formal proceeding as the S t a f f
ias recommended, i s found a t the opening of S t a f f ' s
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recommendation when they state, "Thi s recommendation i s bei ng
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filed because FPC has not offered any acceptable written plan
to achieve a more permanent solution t o i t s potentially high
zarni ngs 1eve1 .
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Florida Power had hoped t h a t S t a f f would continue the
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deferral of the recommendation i t had o r i g i n a l l y agreed t o make
i n e a r l y March u n t i l the l e g i s l a t i v e session d i d end, because
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de
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thought we had made c l e a r our commitment t h a t once t h a t
session d i d end and the regulatory landscape had remained
r e l a t i v e l y unchanged, t h a t we would f i l e a r a t e proposal of our
own.
And even though S t a f f ' s recommendation was filed, we
remain committed t o providing the Commission w i t h an informal
a l t e r n a t i v e t o resolving the issues t h a t a r e pending i n this
case. B u t because of the recommendation, we f e l t i t necessary
11 t o expedite the f i l i n g of t h a t proposal so t h a t you would have
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i t before you today when you considered S t a f f ' s recommendation
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i n an e f f o r t t o remove the doubt t h a t was reflected i n S t a f f ' s
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recommendation t h a t a v i a b l e a1 t e r n a t i v e t o a formal proceeding
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is really available.
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And while i t ' s c e r t a i n l y premature t o consider the
merits of the company's proposal a t this p o i n t , just t o provide
an understanding of the a l t e r n a t i v e t h a t ' s a v a i l a b l e t o the
formal proceeding t h a t S t a f f has suggested, w i t h your
indulgence, I ' d like t o go through a brief highlighting of the
terms t h a t a r e contained i n t h a t proposal.
As Mr. Habermeyer i n d i c a t e d , the proposal provides
f o r a t h r e e - y e a r , $30 m i l l i o n r a t e reduction t h a t would be
effective immediately upon Commission approval, subject t o the
order becoming f i n a l , o f course.
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In addition t o t h a t , the company will commit
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pproximately $60 million over this three-year period t o
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ccelerate and t o f u l l y complete the amortization of the Tiger
ay regulatory asset i n t o t a l w i t h the $90 million from the
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umulative effect of the rate reduction, and the $60 million t o
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ccelerate the amortization of Tiger Bay, i t represents $150
iillion commitment just i n t h a t three-year period of time.
Let me mention, though, t h a t the significance of
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:ontributing the $60 million, or whatever i t actually takes t o
:omplete the amortization of the Tiger Bay regulatory asset, i s
iarticularly significant because t h a t asset, unlike the case
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r i t h most other regulatory assets when f u l l y amortized, will
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Ieduce fuel costs instead of base rate costs, and t h a t will
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Iesult i n an immediate reduction t h a t flows through t o
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latepayers through the fuel adjustment cl ause without the need
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;o wait for a subsequent rate case.
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We estimate t h a t those savings i n the i n i t i a l year
rill be $37 million, and Florida Power has committed t o make
;he attempt t o complete t h a t amortization before the end of the
;hree-year proposal period, by the end of 2003, so t h a t when
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;he new fuel adjustment factors are set t o go i n t o ef 'ect,
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leginning January l s t , 2004, the f u l l effect, the ful $37
i i l l i o n effect of t h a t rate reduction can be put into place a t
:hat time.
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And this will allow the amortization of Tiger Bay t o
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be completed, as Mr. Habermeyer indicated, f i v e years ahead o f
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schedule.
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approximately - - w e l l , a c t u a l l y , more than $ 200 m i l l i o n t o the
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estimated $2 b i l l i o n o f ratepayer savings t h a t was before the
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Commission when you approved the purchase o f the Tiger Bay
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f a c i l i t y i n 1987.
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And the b e n e f i t o f moving t h a t forward adds
The r a t e proposal also contains a surveillance
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mechanism t h a t ' s intended t o ensure t h a t both the synergy
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savings t h a t r e s u l t from the merger and the cost t h a t had t o be
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incurred t o achieve those synergy savings are both r e f l e c t e d i n
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survei 11ance reporting, a1 1owing the survei 11ance information
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presented t o the Commission t o i d e n t i f y the net synergy savings
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t h a t i s a c t u a l l y produced.
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t h e i r most o p t i m i s t i c way, have been included i n the $30
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m i l l i o n three-year r a t e reduction t h a t would go i n t o e f f e c t
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upon approval o f the proposal.
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These synergy savings estimated, i n
The additional terms t h a t are contained i n the
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proposal include a reduction i n F l o r i d a Power's authorized - -
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excuse me, i n the midpoint o f F l o r i d a Power's authorized r e t u r n
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on equity t o 11.75% w i t h t h e same 100 basis points o f a range
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on e i t h e r side.
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Power's rates and i t s r e t u r n on equity.
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authorization f o r F l o r i d a Power t o continue the surveil lance
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adjustment t h a t was authorized i n the current s t i p u l a t i o n t h a t
25
w i l l expire on June 30th.
It includes a three-year freeze on F l o r i d a
It includes an
17
1
Thi s adjustment i s t o the equity capital i z a t i on
2
'atios t h a t are used for surveillance reporting, b u t this
3
4
iroposal contains a limitation on the use of t h a t adjustment
;hat's i n response t o some concerns expressed t o S t a f f , and
5
;hat 1 imitation would provide t h a t the adjustment cannot result
6
in any equity ratio exceeding a predetermined equity cap t h a t
vas previously approved by the Commission i n a different
7
8
9
iroceedi ng .
The proposal includes an authorization t h a t would
10
~ l l o wFlorida Power t o accelerate the amortization of certain
11
12
ither regulatory assets without the need t o get specific
jpproval asset by asset from S t a f f . I t includes a requirement
13
:hat was suggested by a party t o Florida Power t h a t earnings
14
16
jbove the level allowed by the rate proposal would be refunded
lirectly t o customers.
I t includes a suggestion by a party t o Florida Power
17
that Florida Power hold customers harmless from any adverse
18
20
impacts t h a t could result from a six-year divestiture of
jeneration capacity t h a t was required by the Federal Energy
iegul atory Commi ssion i n approving F1 orida Power s merger. And
21
finally, i t also contains a requirement, again, suggested by a
22
)arty t h a t Florida Power waive i t s right t o assert t h a t the
23
zommission's regulation of affiliated transactions i s preempted
iy federal law under some current case law.
Given this proposal, Florida Power i s here today t o
15
19
24
25
18
1
r e s p e c t f u l l y urge t h a t the Commission provide the opportunity
2
f o r S t a f f t o review and f o r t h e Commission t o consider the
3
proposal t h a t we've put forward and t o defer the f u r t h e r
4
consideration o f S t a f f ' s recommendation t h a t a formal
5
proceeding be undertaken u n t i 1 you ' ve determined t h a t the
6
informal process i s not i k e l y t o be productive.
7
With t h a t , I would l i k e t o ask Mr. Myers t o address
8
the subject o f t h e p a r t i c u l a r concerns F l o r i d a Power has
9
regarding S t a f f ' s recommendation.
10
Yes, t h e r e ' s r e a l l y two issues t h a t I
MR. MYERS:
11
wanted t o t a l k about.
12
S t a f f ' s recommendation as f a r as the revenue subject t o refund.
13
And, I guess, the way S t a f f developed t h a t was they used the
14
February 2000 surveillance r e p o r t t h a t we f i l e each and every
15
month, they used t h e February as the l a s t one t h a t was
16
available t o them.
17
adjustments t o t h e f i l i n g t h a t we had provided t o them, and
18
they r e a l l y d i d n ' t have complete knowledge a t t h a t p o i n t and
19
time o f some o f t h e information t h a t we feel l i k e t h a t could
20
have been b e n e f i c i a l t o them i n making some o f those
21
adjustments.
22
One was t h e f i r s t issue r a i s e d i n the
And a t t h a t time they made several
We d i d meet w i t h S t a f f and other p a r t i e s l a s t week
23
and t r i e d t o s t a r t t o communicate t o them some o f t h e
24
adjustments t h a t we t h i n k they should consider i n looking a t
25
how they develop t h a t t o t a l number and - -
19
MR. ELIAS:
1
Mr. Chairman, the way t h i s item was
2
ioticed, i t appears t o me t h a t Mr. Myers' remarks are going t o
3
:he c a l c u l a t i o n o f the i n t e r i m , the amount o f revenues held,
4
iubject t o refund, and t h a t was s p e c i f i c a l l y noticed f o r no
5
i a r t i c i p a t i o n i n accord w i t h Commission practice.
MR. McGEE: That may be my f a u l t .
6
Iwas under the
7
impression t h a t there had been a change i n t h e approach on t h a t
8
iecause o f t h e magnitude o f t h e decision regarding placing
9
*evenue, subject t o refund, t h a t discussion would be allowed on
10
:hat.
I f I ' m mistaken, I a 101ogi ze.
S t a f f d i d n ' t make - -
11
MR. ELIAS:
12
CHAIRMAN JACOBS:
13
14
h u e 1 i s noticed as
MR. ELIAS:
Excuse me.
T e l l me again.
This
-There s no p a r t i c i p a t i o n .
What Lhe
15
*ecommendation says i s t h a t i n t e r e s t e d persons may p a r t i c i p a t e
16
i n Issues 2 and 3 only, which i s the question o f f i l i n g MFRs
17
md whether o r not t h e docket should remain open.
18
19
20
CHAIRMAN JACOBS:
And the r a t i o n a l e f o r holding Issue
1 i s that - MR. ELIAS:
Under t h e s t a t u t e i t i s a calculation.
21
3ased on known variables i t i s not f i n a l a c t i o n and,
22
i i s t o r i c a l l y , the Commission has not allowed p a r t i e s t o
23
iarticipate.
Okay.
24
CHAIRMAN JACOBS:
25
COMMISSIONER JABER:
Commissioner Jaber.
Mr. Chairman, t h i s may be your
20
1
c a l l and t o the degree, you know, I apologize, i t ' s completely
2
your c a l l , but f o r what i t ' s worth, Iwould l i k e t o hear from
3
the p a r t i e s on t h i s issue.
4
CHAIRMAN JACOBS:
5
6
this.
Okay.
I would l i k e consensus on
I s there a desire t o hear from the p a r t i e s on t h i s ?
COMMISSIONER DEASON:
It ' s my understanding t h a t
7
t h a t ' s something t h a t ' s w i t h i n our d i s c r e t i o n t o do, and I
8
c e r t a i n l y have no objection t o doing t h a t .
9
CHAIRMAN JACOBS:
'
What are your comments?
Thank you very much.
10
MR. MYERS:
11
So b a s i c a l l y , we met w i t h S t a f f and other p a r t i e s
12
l a s t week t o s t a r t the dialogue and t o communicate some o f the
13
differences t h a t we would l i k e them t o consider and, b r i e f l y ,
14
they f a l l i n t o three basic categories.
15
The f i r s t i s t h e company had a d i f f e r e n t viewpoint as
16
f a r as t h e CR-3 e q u i t y adjustment than the S t a f f .
17
our proposal, made some adjustments t o our i n i t i a l p o s i t i o n t o
18
t r y t o accommodate t h a t .
19
We have, i n
That was one element.
Another piece o f i t , there was a number o f issues
20
t h a t were nonrecurring i n nature t h a t were factored i n t o t h a t
21
t h a t came i n t o a couple o f categories; abnormal weather t h a t we
22
experienced over t h a t 12-month period, there was some e a r l y
23
synergy savings t h a t were flowing through t h a t weren't r e a l l y
24
being o f f s e t against t h e cost t o achieve those synergy savings,
25
and there was some t i m i n g e a r l y t h i s year, as f a r as t h e O&M
21
1
expenses t h a t w i l l occur l a t e r t h i s year.
2
asking here, as i t relates t o t h i s , i s t o continue t o work w i t h
3
S t a f f and t r y t o get a common understanding o f what the issues
4
are and i n reconci 1i n g those differences.
5
So again, a l l we're
S t a f f also raised a p o i n t about the Tiger Bay
6
commitment. And again, we've addressed t h a t , t h a t we are
7
t r y i n g t o move forward and make some commitments firmly going
8
forward t h a t we do want t o t r y t o see t h a t go away.
9
And so, r e a l l y on Issue 1, we would j u s t l i k e t o
10
continue t o work w i t h S t a f f t o reconcile some o f the
11
differences t h a t we t h i n k we have w i t h them and t o t r y t o
12
b a s i c a l l y conclude t h a t before we move forward on Issue 1.
13
On Issue 2, what I ' d l i k e t o t a l k about i s the timing
14
o f the MFRs.
15
year i s the appropriate year t o use f o r a l o t o f the reasons
16
t h a t Mr. Habermeyer stated i n h i s remarks.
17
reshaping the company as we're going forward.
18
additional expenses and costs w i t h emphasi s on re1 iabi 1it y and
19
some other things as we go forward, and we do t h i n k t h a t 2002
20
i s the r i g h t t e s t year t o use t o make t h a t kind o f analysis.
21
The ssue t h a t we do have f o r t h a t , though, i s the
We do agree w i t h S t a f f t h a t using 2002 as a t e s t
We are s o r t o f
There's a l o t o f
22
amount o f time i n order t o prepare MFRs.
23
September 15th as being a f i l i n g deadline.
24
meet t h a t dead ine, and t h e r e ' s some good reasons f o r i t . Our
Issue 2 t a l k s about
We r e a l l y c a n ' t
22
1
2
3
4
'
year starts about i n July and runs through October. 'hrough
that process detailed budgets are prepared by a l l the various
3perating entities w i t h i n our company.
We take t h a t d a t a , we prepare detailed financial
10
forecasts t h a t we then present t o management and the review
3rocesses gone through. T h a t , typically, runs July through
3ctober. And a t t h a t p o i n t , then, i t ' s reviewed a l i t t l e b i t
further by management and board recommendations are made i n
zarly December.
Normally, when we're not i n a rate proceeding, we
11
have 60 days after the end of the calendar year i n order t o
12
13
file projected surveillance reporting for the year coming up,
3ur forecast, u n t i l March 1st t o do t h a t . T h a t extra 60 days
14
i s provided so t h a t we can go through w i t h the jurisdictional
15
separations t h a t are necessary i n order t o give you the retail
component t h a t Staff then analyzes going forward.
Some of the complicating factors we have w i t h the
merger and w i t h some of the t h i n g s facing us this particular
5
6
7
8
9
16
17
18
20
cycle i s we're i n the process of p u t t i n g i n a new budgeting
system. Our old legacy system t h a t we had i n place since the
21
early '80s we're replacing, we're p u t t i n g i n a new budgeting
22
system, and that's really beginning now.
We're i n the process i n the next couple of weeks t o
19
23
24
25
start training the trainers, who will then train the budget
people who will be p u t t i n g a l l this stuff i n , and that's a
23
2
lengthy process t h a t we'll be going through.
We're also i n the process of changing our accounting
3
systems out which, beginning of next year we'll have a new
4
accounting system, new accounting codes, a l l the things t h a t go
5
with that.
6
9
We will be using new budgeting accounting codes and a l l of t h a t
i n the cycle t h a t we're about ready t o start.
And so, for the people t h a t are involved i n p u t t i n g
together the budgets, there's just a l o t of change management
10
that's going on right now. And I would submit t h a t i t ' s going
11
t o be tough for us just t o finish i n our normal cycle of time
w i t h a l l the change t h a t we're facing by trying t o change out
1
7
8
12
13
14
15
16
17
18
19
20
21
22
23
24
25
And I share t h a t , because t h a t effects our budget.
systems, i t ' s not an insignificant factor. So, t o try t o speed
t h a t up or shorten i t really wouldn't be prudenL for the
company or for you. And we really can't start any earlier t h a n
we're t a l k i n g about starting, because we are starting the
training almost immediately, so we're starting now because
that's when the calendar would typically would f a l l .
In the past, t o provide rate quality review for
S t a f f , we really need the budget.
We need the good budgeted
d a t a i n order t o try t o put together the kind of rate case
material that's really i n your best interest and ours i n trying
t o go through t h a t process.
Just getting through the budget and the forecast i s
one component of t h a t , and then there's just the task of
24
1
p u t t i n g together a l l the rate materials, as far as getting the
2
3
test year MFRs done on a system basis, a l l the supporting work
papers, the separation and rate design studies and the
4
testimony, and then converting a l l of t h a t i n t o the retail
5
side, that's a l o t t h a t needs t o be done.
Our task is further compl icated, because most of our
financial systems will be converted i n this next cycle. I
talked about our general ledger changing. We're also changing
6
7
8
our payroll, our corporate time entry, our accounts payable
10 system, pl an accounting and materi a1 s management. Again, t h i s
11 i s an integral part of our synergies and what we're trying t o
12 do. We're trying t o get on common platforms as a new company
9
16
so we can achieve the synergy savings and provide better
service, but that's a l o t for us t o do i n the same time period.
And so, I guess, I would respectfully request t h a t
some consideration be given here t o potentially push out the
17
timing of the MFRs and t h a t i t be postponed, a t least u n t i l
18
March of next year, which would be the typical time period when
we would normally be providing a pro forma forecast.
And I would also respectfully request t h a t i f you do
13
14
15
19
20
23
decide t o move forward w i t h the MFR process t h a t you consider
allowing the prehearing officer some discretion i n looking a t
the magnitude of the MFRs t h a t needed t o be prepared i n t h a t
24
process t o maybe help facilitate this t h i n g .
21
22
25
Thank you.
25
1
CHAIRMAN JACOBS : M
r . Dol an.
2
MR. DOLAN:
Mr. Chairman, I'llj u s t wrap up here
3
quickly.
4
we have been targeted towards t r y i n g t o get a new agreement i n
5
place p r i o r t o the e x p i r a t i o n o f our e x i s t i n g agreement on June
6
30th, and nothing has changed about t h a t , t h a t ' s s t i l l our
7
goal.
8
g e t t i n g something i n w r i t i n g and having the s p e c i f i c proposal
9
t h a t perhaps would accelerate some o f t h i s discussion.
10
Just t o r e i t e r a t e what Mr. Habermeyer said, I t h i n k ,
Mr. McGee mentioned S t a f f ' s s p e c i f i c concern about
We've
done t h a t .
I t h i n k , we've t r i e d t o address a number o f the
11
12
s p e c i f i c issues, and I won't go back through a l l o f what Jim
13
said, but ROE was addressed i n our proposal.
14
lower i t . The concern about t h e discretionary nature o f Tiger
15
Bay, we were o f f e r i n g a firm commitment about Tiger Bay.
We offered t o
D i scussi on about overearni ngs and revenues subject t o
16
17
refund, I t h i n k , we had some discussion regarding t h a t on
18
Friday.
19
some additional discussion, and we're prepared t o do t h a t as
20
well.
21
o f f e r e d an a l t e r n a t i v e as p a r t o f our proposal t o t r y t o move
22
t h a t issue forward as w e l l .
That's, obviously, i n the area t h a t ' s going t o require
The concern w i t h t h e CR-3 e q u i t y adjustment, we've
Merger b e n e f i t s f o r consumers, we've offered a
23
- - a d o l l a r amount r e l a t e d t o merger b e n e f i t s f o r
24
specific
25
consumers, and we've also o f f e r e d a s p e c i f i c proposal as t o how
26
1
t o deal w i t h the a c q u i s i t i o n adjustment associated w i t h the
2
merger.
3
So, I guess, where we f i n d ourselves i s we're
4
prepared t o continue t o meet w i t h S t a f f and p a r t i e s as soon as
5
t h i s week and continue t o have those meetings and discussions
6
i n a way t h a t we hope w i l l resolve those issues favorably, and
7
we can put S t a f f i n a p o s i t i o n t o w r i t e a favorable
8
recommendation f o r your consideration sometime between now and
9
the end o f the month o f June.
10
Thank you.
11
CHAIRMAN JACOBS:
12
13
Very w e l l .
That concludes your
presentation, Mr. McGee?
MR. McGEE:
I would note, though, t h a t as i t relates
14
t o Mr. Trapp's comments, the u t i l i t i e s had f i l e d a j o i n t motion
15
t h a t proposed a way o f dealing w i t h the RTO issues t h a t are
16
involved, both not w i t h Florida Power j u s t , but w i t h Florida
17
Power & Light and Tampa E l e c t r i c .
18
decision had been made, t h a t the consideration o f t h a t motion
19
and the arguments and presentations, pro and con, t h a t would go
20
along w i t h t h a t would not be taken up today and i t would be
21
deferred u n t i l an e a r l y Commission Agenda.
22
We had understood t h a t a
And so, f o r t h a t reason we d i d not come prepared t o
23
discuss those issues, although i f t h a t i s t h e Commission's
24
pleasure we can accommodate t h a t , but we j u s t wanted t o make
25
sure t h a t we were a l l going forward on the same basis.
We had
27
1
2
3
the understanding t h a t t h a t was not on t h e t a b l e today.
CHAIRMAN JACOBS:
That's correct.
as t o the consideration o f t h a t f i l i n g .
4
Mr. McWhi r t e r .
5
COMMISSIONER JABER:
6
I ' m sorry.
As I understand i t , there i s a
CHAIRMAN JACOBS:
8
j o i n t motion t h a t has been f i l e d by
9
MR. McGEE:
10
and Florida Power Corporation.
12
13
14
What f i l i n g are you
t a l k i n g about?
7
11
That i s correct,
--
F l o r i d a Power & L i g h t , Tampa E l e c t r i c ,
COMMISSIONER JABER:
And i s i t t h a t t h a t ' s been
served on the p a r t i e s , then the response time has not expired?
MR. McGEE:
Yes.
It was f i l e d on Friday, so I ' m
confident the response time has not expired.
15
COMMISSIONER JABER:
16
CHAIRMAN JACOBS:
Okay.
I n addition, Commissioners, there
17
was some n o t i c i n g issues.
I believe, one o f the p a r t i e s t h a t
18
was a p e t i t i o n e r i n t h a t motion was not noticed today w i t h
19
regard t o t h a t issue.
20
have made i t more d i f f i c u l t , the decision was made t o put on
21
the e a r l i e s t Agenda following today.
And so, f o r a host o f reasons t h a t would
22
M
r . McWhir t e r .
23
MR. McWHIRTER:
Mr. Chai rman, i t ' s w i t h re1uctance
24
t h a t I proceed t o make comments, because I stand i n the shadow
25
o f the p u b l i c counsel who i s here and h i s presence and,
28
1
Mr. Twomey, a former s i g n i f i c a n t S t a f f member who knows much
2
more about these things than I do, but having been c a l l e d upon
3
f i r s t , then we ought t o l e t the j u n i o r member go f i r s t , I
4
guess.
5
discussions w i t h my c l i e n t s they share the same view.
I ' l l t e l l you, my perception o f t h i s and from
As you we1 1 know, i n 1997, we entered i n t o pub1i c
6
7
counsel
8
freeze agreement i n whkh we agreed t h a t we would not complain
9
about base rates f o r a period o f three years, and we wouldn't
and the group t h a t I represent, entered i n t o a r a t e
10
address r e t u r n on equity and those issues, unless Florida Power
11
sought t o reduce i t s rates.
12
Florida Power has done t h a t and removed the duct tape from my
13
l i p s with respect t o t h a t issue, and I thank you.
14
And I'm g r a t i f i e d t o say that
Florida Power has been most forthcoming w i t h us over
15
the l a s t year.
16
there was an announcement o f a merger between Florida Power
17
Corporation and Carolina Power & L i g h t and the creation of the
18
then unknown but now known name o f Progress Energy, Inc.
19
a t t h a t time, the press reported t h a t the j u s t i f i c a t i o n f o r the
20
merger would be t h a t there would be a savings by the
21
consolidation t h a t would range somewhere between 150 and $180
22
m i l l i o n a year.
23
Our f i r s t concern arose i n August o f 1999 when
And
They were going t o be cost savings.
And the o l d idea l i g h t came on in my head, said w a i t
24
a minute, i f there are cost savings, since we have cost-based
25
rates i n Florida, there may be some suggestion t h a t Florida
29
1
will do as other states have done and pass along some of these
2
savings t o the consumers, and we approached Florida Power w i t h
t h a t suggestion as the merger went forth. And as you know, i n
3
4
5
6
7
the state of Florida and like most other states, you d o n ' t have
any say w i t h respect t o mergers. You just s i t back and wait
u n t i l i t ' s been accomplished and see w h a t the impact on the
rates i s , and then react accordingly.
We met w i t h Florida Power and they were
9 forthcoming and they said, yes, we recognize t h a t
10 going t o be savings, there are certainly benefits
11 stockholders. And as you know, and as the motion
8
very
there are
t o our
that
14
Mr. McGee addressed, the stockholders i n November of this year
received $1.27 b i l l i o n as their share of the benefits of the
merger. The stockholders got their money, and they got i t last
15
November.
16
19
The then management of Florida Power Corporation, as
your S t a f f recommendation has pointed out, got somewhere i n the
range of $64 million i n the year 2000. I d o n ' t know w h a t i t is
t h a t goes for i t , but that's a considerable sum of money. I
20
applaud your Staff t o have the courage t o come forth i n this
21
24
recommendation and explain the facts pretty much as we
understand the facts, based upon the limited information that's
available. I also applaud your S t a f f for the fact t h a t i t
wants t o get more information on the subject so t h a t i t can
25
make the correct decisions i n i t s recommendations t o you.
12
13
17
18
22
23
30
1
I applaud Senator Campbell, who wrote you a letter,
2
Mr. Chairman, earlier this week t h a t you sent on t o the other
3
parties which suggests t h a t Minimum F i l i n g Requirements should
be made so t h a t the public, who is obligated t o buy power from
4
7
Florida Power, know the facts t h a t concern - - t h a t result i n
the rates t h a t people pay.
And having applauded the Staff and applauded Senator
8
Campbell, I applaud each of you i n the action you took i n Item
9
12.
5
6
In Item 12, you set the rates for mom-and-pop water and
sewer companies, and you concluded w i t h a very persuasive
11 commentary, as I listened here carefully, I moved up t o the
12 front bench so I could hear i t even more carefully, t h a t you
10
13
14
ought t o use a model for the default for the return on equity.
And i n the S t a f f recommendation t h a t you voted on,
20
they had a comparative model for electric companies, gas
companies, and water and wastewater companies. The electric
model that's used by the S t a f f and you, presumably, t h i n k
models are a good idea, you found t h a t i f you had an electric
u t i l i t y w i t h 46% equity and 54% debt, the appropriate return on
equity would be 9.6%. Hmm. Florida Power, we have determined
21
i n earlier discussions, has an equity component i n i t s capital
22
structure of somewhere around 60% or i t may be less t h a n t h a t ,
i f you allow i t t o consider the Tiger Bay program as a debt
o b l i g a t i o n t h a t i s borne by the company and not by the
ratepayers.
15
16
17
18
19
23
24
25
31
So, what we have i s a s t a t u t o r y problem, because i f
1
2
you wanted t o do something about the rates and you wanted t o do
3
something about the f i n d i n g s o f your S t a f f , t h e findings o f
4
dhich are t h a t F l o r i d a Power Corporation l a s t year, not t h i s
5
year, not 2002, but l a s t year had a r e t u r n o f 17% on i t s
6
equity.
7
I f you wanted t o do something about t h a t , t h e r e ' s not
8
very much you can do about i t , because i f you wanted t o have a
9
reverse make-whole case, you c a n ' t b r i n g them down t o 9.6% as
10
your model suggests.
11
13% w h i l e you study t h e s i t u a t i o n .
12
study may be a long time.
13
The maximum you can b r i n g them down t o i s
And i t looks l i k e t h a t
I t ' s suggested by Mr. Myers t h a t they c a n ' t even be
14
ready, s t a r t t o get ready, u n t i l a f t e r October.
15
u t i l i t i e s , when we were having r a t e cases every year - - my mind
16
k i n d o f goes back and wanders back t o those o l d days - - and
17
those days they passed a b i l l t h a t said you've got t o handle a
18
r a t e case i n e i g h t months, because we need t o get these matters
19
resolved when rates are going up.
20
You know,
They haven't been q u i t e t h a t f a s t on coming i n when
21
rates have gone down on base rates.
22
we may not get through t h i s u n t i l the end o f calendar year
23
2002, based on t h e proposal.
24
while we're w a i t i n g f o r t h a t , the u t i l i t y i s - - w i l l be
25
earning, by your S t a f f ' s preliminary recommendation w i t h
I n f a c t , i t appears t h a t
But while we're w a i t i n g f o r t h a t ,
32
1
l i m i t e d knowledge, the ratepayers w i l l be paying around $115
2
m i l l i o n a year i n extra money i n t h e i r rates.
3
And Florida i n d u s t r i a l b i l l s , as you know, are the
4
highest i n the southeast; t h e i r rates, maybe not the b i l l s .
5
The residential b i l l s , not the rates, but the b i l l s , are the
6
highest o f anywhere i n the United States, except Texas and
7
Hawaii.
8
because o f the base r a t e structure.
So, the u t i l i t i e s are doing very n i c e l y i n Florida
We d o n ' t have i n Florida - - the u t i l i t i e s d o n ' t have
9
10
the problem t h a t C a l i f o r n i a has, because i n Florida the base
11
rates are set, and those are a l l y i e l d i n g now a t or above the
12
c e i l i n g o f the authorized return, but the things where costs go
13
up, they can j u s t pass those through, and we've seen t h a t
14
happen.
15
We saw the cost and fuel go up $1b i l l i o n since 1999.
So, when I t h i n k about t h a t , t h a t ' s kind o f where our
16
people diverge from the viewpoint o f your S t a f f .
17
suggests t h a t you take the rates, the $113 - - w e l l , 97 m i l l i o n
18
till J u l y and 113.8 a f t e r July, and you hold t h a t subject t o
19
refund, and then you have a t e s t year, the MFRs t h a t have a
20
t e s t year; t h a t i s , I believe, a 2001 t e s t year.
21
e a r l i e s t t h a t any action t h a t consumers could get under t h a t
22
base i s going t o be i n t h e spring o f 2002.
23
meantime, the u t i l i t y can continue t o earn money.
24
pardon?
25
COMMISSIONER JABER:
Your S t a f f
And the
But i n the
Beg your
I s n ' t t h a t a 2002 t e s t year t h a t
33
Staff recommends?
2
MR. McWHIRTER: I'm glad you pointed that out, 2002.
3 So, we really won't get any result. It's a pro forma - - and
4 that's kind of an interesting thing. I'm glad you raised that,
5 Ms. Jaber.
When I first came with the Commission, the growth in
6
7 electric sales consumption was growing at a rate of 12% a year,
8 and utilities were very concerned about that, because they had
9 to make new investment and capital assets to meet that customer
10 growth.
And instead of using a historic test year, which the
11
12 statute sort of indicates you should do, the Commission pushed
13 the envelope, and they said we'll use a historic year-end test
14 year. We'll use the rate base that it is at the end of the
15 year. And that's based on the proposition, I went to the
16 Supreme Court at the behest of the pub1 ic counsel, and the
17 Supreme Court said based on the dynamic growth in Florida, a
18 year-end test year is okay.
Several years later after Opec and consumer
19
20 consumption went down and the growth of electric utilities had
21 fallen from 12 to 6%, the Supreme Court came back in a GTE case
22 and said what you should use is an average test year, average
23 historical test year. Mr. Cresse, who, may still be in the
24 room, came to the Commission as a budget guy, and he's always
25 forward-thinking. And he persuaded the Commission during his
1
34
1
%egimet h a t you shouldn't a c t u a l l y use an average year, you
2
;houldn't even use a year-end t e s t year, but you ought t o use a
3
r o forma f u t u r e year, and you've been doing t h a t so far. The
4
i t a f f has recommended now t h a t you use a t e s t year t h a t ends 19
5
nonths from today, 19 months from today.
6
And so, what we're going t o do instead o f g e t t i n g
7
ictual h i s t o r i c a l known facts f o r s e t t i n g rates, we're going t o
8
j e t guesses.
9
instead o f using a 2002 t e s t year, we use the h i s t o r i c a l t e s t
10
M r . Myers' problem would e a s i l y be a l l e v i a t e d i f ,
jear t h a t ' s already here, and the f a c t s are known.
Now, I don't want t o be u n f a i r t o Florida Power
11
12
Zorporation.
13
mown changes.
14
So, I ' m speaking too long and haranguing you, and I apologize
15
for t h a t , but sometimes the emotion wells, and I i n no way mean
16
LO s e l l F l o r i d a Power short.
17
Irith us, and they have talked t o us.
18
iaven't been able t o come t o terms on money, and conversations
19
Irere held f a i r l y frequently, and F l o r i d a Power wanted t o go
20
Forward.
21
I t h i n k , you ought t o adjust t h a t t e s t year f o r
And c e r t a i n l y , t h a t could be done very r a p i d l y .
They've been very gentlemanly
The only t h i n g i s we
Their stockholders had gotten r e l i e f , the former
22
,nanagement had gotten golden parachutes, and they f e l t l i k e
23
there ought t o be something f o r the consumers, and they wanted
24
t o do i t as soon as the deal closed i n December, but we d i d n ' t
25
have much f a c t .
And then, the 20/20 b i l l came out, and they
35
1
were going t o freeze the base r a t e a t the current level f o r
2
three more years, and those discussions kind o f stopped u n t i l
3
the l e g i s l a t u r e was over.
And I was g r a t i f i e d t h a t the l e g i s l a t u r e d i d n ' t race
4
5
i n t o freezing base rates, but t h e r e ' s a p o s s i b i l i t y t h a t base
6
rates w i l l be frozen next year.
7
I t ' s being given the consideration i t deserves.
8
Power can s t a l l t h i s case f o r another year, then base rates may
9
be frozen and consumers w i l l continue t o pay more than they
10
11
That l e g i s l a t i o n i s not dead.
I f Florida
shoul d.
So, what Iwould recommend t h a t you do i s not what
I t h i n k , you should take the
12
the S t a f f has recommended.
13
S t a f f ' s report, i t ' s a good one.
14
substantial evidence t h a t i t has.
15
order t o be e f f e c t i v e on J u l y 1. That i s what we would c a l l a
16
reverse make-whole case.
17
I t ' s based on competent
You should enter an i n t e r i m
And i n t h i s case, reduce the base rates so t h a t
18
Florida Power w i l l get not 9.6, as your model suggests, but a
19
13% r e t u r n on equity based upon a 2000 t e s t year, which you
20
have i n hand, the information i n hand.
21
an i n t e r i m and t h a t you request MFRs t o be f i l e d so t h a t y o u ' l l
22
know the facts.
23
And t h a t you do t h a t on
Everytime I r a i s e t h i s , the u t i l i t y people say, well,
24
you know, your c l i e n t s get a special deal , and when we adjust
25
these rates and have cost o f service studies you may be very
36
1
surprised t h a t you d o n ' t get any reduction when other people do
2
and, you know, you only represent 4% o f our sales.
3
be s t i c k i n g your nose out when you get i n t o the revenue
4
picture.
So, you may
And I ' v e discussed t h i s w i t h my c l i e n t s , and they
5
They also understand t h a t they pay the
6
understand t h a t .
7
highest i n d u s t r i a l rates i n the southeast, and they are
8
concerned t h a t they t h i n k y o u ' l l do - - t r e a t them f a i r l y and
9
that we won't get any disproportionate treatment.
A l l we're asking f o r i s t h a t you do what the l a w
10
We know t h a t base rates are too high.
Your S t a f f has
11
allows.
12
shown t h a t .
13
have disguised the r a t e so t h a t the f a c t they show on the
14
surveillance report t h a t t h e y ' r e earning less than 13%, and
15
they do t h a t by the Tiger Bay regulatory asset, which you've
16
heard a l i t t l e b i t more here about.
You know t h a t .
Florida Power knows t h a t .
They
17
And what they do i s they d o n ' t give t h a t money back
18
t o the customers, they keep t h a t money and they say now we're
19
doing a f a s t w r i t e - o f f o f Tiger Bay.
20
o f you were around - - we1 1, three o f you were around i n
21
d i f f e r e n t capacities, but when Tiger Bay came up, t h e deal was
22
that they had t h i s PURPA contract by which they were buying
23
e l e c t r i c i t y from U.S. AgriChem, and they were paying as though
24
the fuel being used was coal.
25
Well, I guess, only two
P r e t t y good deal.
And the capacity, they were paying what t h e cost t o
37
1
b u i l d t h a t capacity was a t the time t h a t the p l a n t was b u i l t
2
and they were paying a capacity charge, but they had loaded the
3
capital payment t o U.S. AgriCheii so the payments, the big
4
payments, would be made i n the atter years.
5
6
7
8
9
So, what they d i d was they came i n and they d i d a net
present value study and said i f we can get out of making these
b i g payments i n the latter years, then there'll be a net
present benefit t o consumers. So, what we would like t o do i s
for the next four years raise rates $100 million a year and
write off Tiger Bay very rapidly.
11
And the public counsel and other consumers went i n
10
12
screaming about t h a t . They said we d o n ' t want a rate increase.
13
14
The plant's going t o be there for 25 years. Why not just write
e know i n order
i t off over the useful l i f e of the facility? W
15
t o get out of t h a t contract you have t o pay four times w h a t the
16
p l a n t costs t o b u i l d , but you say that's prudent, and we'll go
17
along w i t h t h a t , but l e t the contract pay out over i t s normal
18
19
period and be done i n 2008.
But what's happened now, last year, and w h a t i s
20
proposed i n the proposal t h a t you were t o l d about was t h a t they
21
continue t o disguise the cost of Tiger Bay by - - and keep the
base rates, apparently, low by using base revenue t o pay down
this regulatory asset.
22
23
24
25
I would suggest t o you t h a t rather t h a n the customers
nay get $37 million a year later on after t h a t has - - t h a t
38
1
p l a n t has been f u l l y amortized and you e l i m nate, i f you do,
2
t h a t capacity surcharge t h a t comes through, but my c l i e n t s say
3
they may not be here when t h a t happens, and t h e y ' d rather get
4
some r e l i e f now.
5
current high fuel costs, and we'd l i k e t o get r e l i e f now.
6
And maybe t h a t would help t o o f f s e t the
So, I t h i n k , i f you would take t h a t money t h a t ' s
7
going t o Tiger Bay, as your S t a f f suggests, i f you w i l l
8
recognize the nonrecurring expenses, as your S t a f f suggests,
9
f o r the merger and y o u ' l l give us an immediate - - an i n t e r i m
10
r e l i e f t o b r i n g t h e i r r a t e r e t u r n on equity, not t o 9.6 t h a t
11
your model shows, but t o 13%, which i s what s t a t u t e permits,
12
t h a t would please us very much.
We t h i n k i t would be f a i r .
13
We understand t h e r e ' s great r i s k f o r t h e i n d u s t r i a l
14
consumer t h a t when you go t o c l a s s i f y your customers t h a t the
15
i n d u s t r i a l consumers who have been squeaking wheel may s u f f e r
16
as a r e s u l t o f t h a t , b u t I t h i n k y o u ' l l be f a i r w i t h us and
17
base the rates on cost o f service, and we're w i l l i n g t o take
18
t h a t chance.
19
But w i t h respect t o t h e RTO issue, which i s a b i g
20
issue w i t h you - - postpone t o another day, Mr. Chairman? I
21
won't say anything about t h a t .
22
CHAIRMAN JACOBS:
Excuse me.
A t t h e expense o f
23
i n t e r r u p t i n g your high moment, I would ask you t o keep those
24
comments - -
25
MR. McWHIRTER:
Well, I ' m done, and I appreciate your
39
consideration and I compliment the Staff on its fine report,
2 and I hope you'll give us some consideration.
CHAIRMAN JACOBS: Thank you. Mr. Twomey.
3
MR. TWOMEY: Mr. Chairman, Commissioners, I'm Michael
4
5 B. Twomey. I've filed this morning a petition to intervene in
6 this case on behalf of Buddy L. Hansen and the Sugarmill Woods
7 Civic Association, Inc. Mr. Hanson is a residential customer
8 of Florida Power Corporation, filling more than one half of the
9 members of the civic association, our customers as well. The
10 action you're entertaining here will clearly affect their
11 substantial interests. They're entitled to intervention, and I
12 would urge that upon you.
It's always a challenge to follow Mr. McWhirter.
13
14 I'll try and be brief, and I'll try and take a different tact
15 than he did. I'd like to start, first of all, as he did by
16 complimenting your Staff on two excel 1 ent recommendations. I
17 speak to this one, as well as Item 18 that follows.
I'd like to read very quickly from the first
18
19 paragraph of your Staff ' s analysis under the discussion o f
20 issues. I think, it's Page 2 of the Staff's recommendation, at
21 least as mine is numbered. And it says, "On April 13th, 2001,
22 FPC filed its earnings surveillance report for the 12-month
23 period ending February 28th, 2001. As reported on the ESR, FPC
24 had an achieved ROE o f 11.48% on a, quote, FPC adjusted, closed
25 quote, basis. When additional adjustments are made to reverse
1
40
1
;he e f f e c t s o f FPC's one-time merger cost, discretionary
2
Iccelerated amortization o f the Tiger Bay regulatory asset, the
3
ionrecurring w r i t e - o f f o f a regulatory asset f o r previously
4
'low-through taxes, and the Crystal River I11 adjustment t o
5
:ommon equity, the achieved ROE increases t o approximately
6
17.2%. This exceeds the c u r r e n t l y authorized maximum ROE o f
7
13%.
8
9
"
And I w i l l emphasize there, as Mr. McWhirter did,
i t ' s the maximum, the 13% i s t h e maximum o f the range
10
ireviously or c u r r e n t l y authorized.
11
interim statute, i t ' s the number you have t o use i n
12
?stablishing monies held subject t o refund.
13
i u t these adjustments, one-time nonrecurring, perhaps some upon
14
further analysis, an investigation.additiona1 facts, MFRs,
15
liscovery, expenses might be viewed, perhaps, as not
16
; u f f i c i e n t l y prudent.
17
And, o f course, under the
But when you take
When you take those out, whether t h e y ' r e prudent or
18
l o t , your S t a f f says t h e y ' r e going t o be earning 17.2% or i n
19
that ballpark a t the conclusion o f t h i s agreement c u r r e n t l y
20
iefore you.
21
:ome i n - - I t h i n k , I got the numbers r i g h t .
22
got a check here f o r $127.5 m i l l i o n divided by 3, i f you want
23
t o look a t the annual basis, b u t we have a check here we're
24
going t o give you and we're going t o c u t things short and we'rc
25
going t o b e n e f i t our customers, we're going t o share the
I n response t o t h a t , F l o r i d a Power Corporation has
They say we've
41
1
2
synergies w i t h them, we're going t o reduce rate case expense
and a l l t h a t .
3
Now, i f you take t h a t , Commissioners, how much money
4
do you leave on the table? Or do you even know how much money
5
you would leave on the table without the benefit of the MFRs
6
and f u l l y allocated cost of service study t h a t your Staff has
repeatedly asked you t o provide here? And the answer i s t h a t
8 you would not know.
9
I ' d like t o tell a brief summary of the earlier case
10 w i t h this company, and from t h a t summary try and draw some
11 lessons as i t may apply t o not only this case w i t h Florida
7
12
Power Corporation but the FP&L case t h a t will follow.
13
In 1987 or '86, I forget exactly when i t was, Florida
14
21
Power Corporation's then largest industrial customer,
Occidental Chemical, filed a case for rate reduction. My
recollection i s they suggested t h a t rates should be reduced by
some $400 million on an annual basis. S t a f f wrote a
recommendation t o the Commission and said t h a t Occidental had
established a prima facie case, t h a t they were legally under
the statutes entitled t o receive a rate reduction case and have
MFRs filed.
22
On the morning of the Agenda Conference i n which t h a t
15
16
17
18
19
20
23
24
25
recommendation was t o be heard, Florida Power Corporation, I
t h i n k , i n the person of General Counsel and Vice President,
Dick Nyzer, presented the Commission w i t h a letter offering t o
42
1
u n i l a t e r a l l y reduce t h e i r rates by $100 m i l l i o n , i f they d i d n ' t
2
consider the recommendation or otherwise, dismiss the case.
3
Occidental refused t o go along w i t h t h a t and,
4
consequently, the Commission rejected the $100 m i l 1i o n and
5
ordered t h a t MFRs be f i l e d , my r e c o l l e c t i o n , i t was w i t h i n two
6
t o three months.
7
hearing schedule was established, t r a d i t i o n a l eight-month deal,
8
d i scovery compl eted, preheari ng , a11 t h a t , and F1o r i da Power
9
Corporation came i n , they negotiated w i t h Jack Shreve, they
Subsequently, Power Corp f i l e d the MFRs, a
10
negotiated w i t h - - the S t a f f participated, they negotiated w i t h
11
Mr. McWhirter and others and Occidental, and i t was a l l said
12
and done, my recollection, and Mr. McGee can correct me i f I ' m
13
wrong, they entered i n t o a s t i p u l a t i o n and a settlement
14
agreement whereby they agreed t o reduce t h e i r rates $140
15
m i l l i o n a year.
The consequence o f having the data, whereas the
16
17
u t i l i t y previously held a l l the cards, they had a l l the
18
numbers, and the passage o f time from the previous case before
19
t h a t was s u b s t a n t i a l l y shorter than the e i g h t or nine years you
20
have now.
21
o f service study, and having a schedule t o t i e them t o a
22
hearing, allowed the other p a r t i e s , the customer parties, t o
23
negotiate from a p o s i t i o n o f strength, not weakness.
24
25
Having the numbers, having the MFRs, having the cost
The $40 m i l l i o n extra t h a t were saved by those
negotiations which were enabled by the MFRs and the hearing
43
1
2
3
4
5
schedule times the six years, approximately, u n t i l the next
rate case, provided an incremental savings of some $240 million
beyond which the customers woul d have, otherwi se, received had
they accepted the u t i l i t y ' s seemingly generous offer of $100
b i l l i o n a year.
Now, what do we draw from t h a t lesson? I would say
6
7
you negotiate from a position of strength, i f you negotiate a t
8
all.
9
you t o give them t h a t flow from the MFRs.
You have t o have the numbers t h a t your S t a f f i s asking
MFRs are
10
substantial. They take a l o t of work t o put together, that's
11
true. Is there expense associated w i t h their preparation?
Yes, of course, there i s . Customers end up paying for i t . B u t
one t h i n g we d o n ' t want t o be, Commissioners, i n my opinion, i s
pennywise and pound foolish here.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
The MFRs, i n the last Power Corp. case, the one I
spoke o f , saved $40 million a year times six years, so I would
urge you not t o accept this agreement. If they're w i l l i n g t o
give 127.5 today, what do they have left t h a t they can hand
over t o the customers? You need t o give the MFRs t o your S t a f f
and t o Mr. Shreve, Mr. McWhirter, and the rest of us, so we can
bargain, i f there's going t o be a bargain, from a position of
strength. You need t o set a schedule.
I d o n ' t know whether i t ' s going t o take them more
time because of their legacy computer systems, I d o n ' t know.
I'm here t o support your S t a f f ' s recommendation t h a t you go
44
1
]head and order t h e MFRs, t h a t you order a r a t e reduction, t h a t
2
you hold money subject t o refund, pursuant t o t h e s t a t u t e which
3
you have t o observe, i n any event.
Mr. Trapp, I t h i n k , gave you an e x c e l l e n t and precise
4
5
wgument f o r why the establishment o f the RTO requires a
6
F u l l y - a l l o c a t e d cost o f service study and why i t requires MFRs.
7
\gain, f o r both companies, you need t o have t h a t information,
8
:ommi ssioners.
CHAIRMAN JACOBS:
9
Because, t o be f a i r and because
10
j l s o , I believe, we're going t o have adequate opportunity t o
11
jddress a l l t h e range o f issues regarding t h a t w i t h the
12
Jiscussion o f t h e motion - MR. TWOMEY:
13
14
That's a l l I was going t o say on t h a t ,
lllr . Chai rman.
15
CHAIRMAN JACOBS:
16
MR. TWOMEY:
Great.
So, I'llconclude by saying we support
17
the S t a f f .
You need t h e MFRs, you haven't seen MFRs i n ages,
18
you need the data, you need the cost study.
19
Thank you.
20
CHAIRMAN JACOBS:
21
MR. SHREVE:
Thank you.
M r . Shreve.
Thank you, Mr. Chairman.
I'llbe very
I agree w i t h everything t h a t Mr. McWhirter and
22
rief.
23
4r. Twomey have said.
24
The one t h i n g t h a t I would d i f f e r on i s my thoughts were t h a t
25
the f i l i n g o f t h e MFRs should be moved up.
We support the S t a f f recommendation.
45
One o f the reasons - - and I'llt i e t h i s i n t o the
1
2
i n t e r i m or the subject t o refund money t h a t was requested - -
3
you c a n ' t lower t h a t .
4
higher t h a t subject t o refund i s , i t ' s not going t o h u r t the
5
company when the f i n a l decision i s made i n the r a t e case.
I f anything, i t should be higher.
The
I f you were t o come out, set a subject t o refund f o r
6
7
$50 m i l l i o n , and found out i n the f i n a l analysis i t should have
8
been 100, then you've cost the ratepayers $50 m i 11ion, and
9
we've had t h a t happen i n the past when i t wasn't set high
10
enough.
11
On the other hand, i t ' s where i t should be.
12
you set i t a t $500 m i l l i o n , i t ' s not going t o cost the company
13
anymore money than the f i n a l decision i n the r a t e case.
14
one t h i n g t h a t I do have a problem with, the delay t h a t ' s
15
requested i s going t o cost the ratepayers money, because when
16
you set the rates, you're going t o set those a t the new
17
midpoint.
18
company should agree t o make t h e i r money, subject t o refund,
19
everything above the midpoint set i n t h e f i n a l analysis,
20
because t h a t delay i s going t o put money i n the pockets o f
21
Florida Power and take i t out o f the pockets o f the ratepayer.
22
And i f
The
And i f t h e r e ' s t o be any delay a t a l l , then the
I t h i n k , t h e r e ' s going t o be uncertainty i n t h e stock
23
market f o r F l o r i d a Power, and I ' m a l i t t l e surprised they want
24
t o delay because o f t h a t .
25
should move the f i l i n g up, possibly by a month, go t o a
I t h i n k , instead o f the delay you
46
1
h i s t o r i c t e s t year, which w i l l make i t easier f o r them t o f i l e ,
2
get the r a t e case over, take t h e i r uncertainty out o f the stock
3
market, go ahead and get the rates r i g h t , get the i n t e r i m
4
refunded, and not extend i t any length o f time a t a l l t h a t i t ' s
5
going t o cost the ratepayers o f t h i s company money.
6
t h a t , I think, the S t a f f ' s done a good job.
7
8
COMMISSIONER JABER:
Beyond
Mr. Shreve, can I take t h i s
opportunity t o ask you a coup e o f questions?
MR. SHREVE:
9
10
Please
COMMISSIONER JABER : One o f the focuses, I suppose,
11
I ' v e had i n looking a t t h i s recommendation has been from
12
reconciling i t w i t h our duty t o assist the Energy Commission i n
13
answering questions and providing assistance i n dealing w i t h
14
the issues t h a t the Energy Commission i s focused on.
15
may r e c a l l
16
may r e c a l l one o f the b i g impediments i n moving the i n t e r i m
17
report forward was the concern over the base r a t e cap.
18
--
And you
the reason I ' m asking you these questions - - you
And as I r e c a l l , there was concern w i t h respect t o
19
the level o f base r a t e and, i n f a c t , I t h i n k , Commissioner
20
Wood, on h i s own, addressed t h e issue, and then you followed-up
21
w i t h some questions.
22
and l i s t e n e d t o the tape t o make sure I was capturing what I
23
thought he was c r e d i t i n g t o be one o f the successes t h a t Texas
24
has had i n restructuring, which was t o make sure t h a t the base
25
r a t e level i s a t a place where i t accurately r e f l e c t s cost
I know I ' m paraphrasing, but Iwent back
47
1
iefore any s o r t o f r e s t r u c t u r i n g takes place.
And t h a t ' s a preventive measure, not t o say t h a t our
2
3
'lorida good companies would p r i c e gauge o r anything l i k e t h a t ,
4
i u t i t ' s a safety mechanism. And I r e c a l l t h a t you asked
5
questions about t h a t issue.
6
zoncern t h e Energy Commi s s i on had?
7
MR. SHREVE:
Could you elaborate on what the
Well, t h e b i g concern I had was
8
i r i g i n a l l y , when the recommendation was coming out, they had i t
9
jown as a cap when the cap meant we could have lowered the
Then, when i t f i n a l l y came out, i t was frozen.
And, as
10
*ates.
11
you know, I had an objection t o t h i s a l l along t h a t we were
12
Freezing t h e rates o f several o f t h e e l e c t r i c companies too
13
iigh.
14
vas going t o go i n t o suggest t h a t we have a r a t e case f o r e ch
15
me o f t h e major companies t o get t h e rates r i g h t before
16
they're frozen, because t h a t ' s going t o lead i n t o t h e future.
A t one p o i n t had, i t looked l i k e i t was going t o f l y , I
17
There are other problems t h a t we had concern w i t h a t
18
the Energy Commission, and Iwas on t h e Commission report, but
19
t h a t ' s one t h a t I had throughout t h e e n t i r e time and was hoping
20
that t h a t would be addressed, but y o u ' r e absolutely r i g h t .
21
[
22
recommendations u n t i l we get t h e r a t e s r i g h t on a going-forward
23
basis, i f we're going t o freeze them.
24
25
And
d o n ' t t h i n k we can do anything w i t h t h e Energy Commission's
COMMISSIONER JABER:
We1 1, we're going t o
--
I want
t o t a l k t o you about the other concerns the Energy Commission
48
1
had, but t h a t i s p r e c i s e l y my concern
--
2
MR. SHREVE:
Right.
3
COMMISSIONER JABER: - - t h a t i f we do not act i n a
4
fashion t h a t allows us t o take a look a t the rates and be able
5
t o represent t o the Energy Commission and the l e g i s l a t u r e and
6
the governor's o f f i c e o r whoever i s going t o ask us t h a t , you
7
know what, the base r a t e l e v e l i s where i t needs t o be, your
8
concerns are taken care o f .
9
MR. SHREVE:
That's r i g h t .
COMMISSIONER JABER:
10
There was a sense o f
11
f r u s t r a t i o n , a t l e a s t on my p a r t and probably shared by our
12
S t a f f and the Commissioners, t h a t we c o u l d n ' t answer t h a t
13
question, because we had not received the information from the
14
company.
15
from Texas believed t h a t one o f t h e successes - - t h e reason
16
that Texas was so successful i n t r a n s i t i o n i n g i n t o
17
r e s t r u c t u r i n g was because t h e i r 1egi s l ature had a comfort 1eve1
18
d i t h the base rates?
19
MR. SHREVE:
Did you - - do you agree w i t h me t h a t Chairman Wood
I t h i n k , t h a t ' s correct.
And i f I
20
r e c a l l , he also mentioned t h a t you had t o get t h e - - t r a n s f e r
21
the assets correct a t t h a t time; not t h a t t h a t has anything t o
22
30 w i t h t h i s , but I do r e c a l l those two points coming from him.
23
24
25
COMMISSIONER JABER:
Now, absent an MFR f i l i n g o r a
rate case, how can we look a t t h a t base r a t e l e v e l ?
MR. SHREVE:
I t h i n k , a t t h i s p o i n t , y o u ' r e going t o
49
1
have t o have the MFR f i l i n g and, I t h i n k , the sooner the b e t t e r
2
so t h a t we get i t out o f t h e way and, I t h i n k , i n some ways
3
that w i l l b e n e f i t Florida Power.
4
uncertainty from the stock market, and they won't be having t o
5
ifJorry about i t .
COMMISSIONER JABER:
6
7
regul atory certainty?
8
MR. SHREVE:
9
It w i l l take away the
You t h i n k the stock market needs
That's what they look f o r .
And, I
think, delaying i t i s going t o cause problems there and, I
10
t h i n k , i t ' s going t o cause problems f o r the Energy Commission's
11
decision.
12
known changes, and we could a l l make pro forma adjustments t h a t
13
we needed t o ; Florida Power c e r t a i n l y could and we c e r t a i n l y
14
could, but t h a t way we could move forward much quicker, because
15
the longer t h i s i s delayed, the longer i t ' s going t o be before
16
we get the rates down t o the midpoint where they should be, and
17
c e r t a i n l y go w i t h the subject t o refund, a t l e a s t what the
18
S t a f f has.
19
Perhaps we could move t o a h i s t o r i c t e s t year w i t h
COMMISSIONER JABER:
I t ' s my r e c o l l e c t i o n t h a t
20
another concern raised by the Energy Commission and then
21
l e g i s l a t u r e , I d o n ' t know formally o r p u b l i c l y o r not, but
22
r e c o l l e c t i o n i s there was some concern expressed over the RTO
23
recovery clause t h a t was proposed i n the i n t e r i m report.
24
you t h i n k a r a t e case o r an MFR f i l i n g can address the
25
incremental costs t h a t might have t o be recovered through an
Do
50
1
?TO recovery c l ause?
2
MR. SHREVE:
I would t h i n k i t would have t o .
I
3
think, we would have a l o t more information than we have now on
4
it. We don't have a great deal.
One other t h i n g about the rates, and t h i s i s a l i t t l e
5
6
d i f f e r e n t from some o f the other s t i p u l a t i o n s t h a t we've had,
7
and we've had a good working r e l a t i o n s h i p w i t h Florida Power,
8
and I congratulate them f o r t h a t .
9
coming out o f r i g h t now had nothing do w i t h base r a t e s .
But the agreement t h a t we're
It had
10
a l l t o do w i t h the f a c t t h a t they were t o absorb the $150
11
n i l l i o n t h a t was additional fuel costs because o f the nuclear
12
Dutage, and also absorb the repairs t o the investment i n
13
3 y s t a l River 111. So we d i d n ' t r e a l l y , even i n our
14
iegotiations, do anything t o adjust the rates.
15
i e l p give them an opportunity t o recover some o f t h a t money
16
that they were going t o absorb.
That was t o
I
17
So, i n some o f our other situations, we d i d adjust
18
rates w i t h information t h a t we had and we c e r t a i n l y reviewed
19
that, the S t a f f saw i t and everything, but i n t h i s case we
20
fi dn ' t r e v i ew those.
21
COMMISSIONER JABER:
22
MR. SHREVE:
23
COMMISSISIONER JABER:
24
25
Now, j u s t one more question
Yes, ma'am.
- - and then I'llleave you
31one.
MR. SHREVE:
No, t h a t ' s f i n e .
--
51
1
COMMISSIONER JABER:
Forward-looking, we know the RTO
2
should be implemented, according t o the FERC r u l e s December 15,
3
2001.
4
report December 1 s t .
5
dhat the f i n a l r e p o r t w i l l look l i k e , t h e r e ' s probably going t o
6
De a proposal t h a t consists o f allowing t h e IOUs t o spin out
7
t hei r generati on.
We know t h e Energy Commission plans t o issue a f i n a l
I f the i n t e r i m r e p o r t i s any guidance on
Absent a r a t e case, how do we look a t the cost
8
9
associated w i t h transmission so t h a t we f i g u r e out what i s FERC
10
j u r i s d i c t i o n a l and what i s s t a t e j u r i s d i c t i o n a l ? And how do we
11
f i g u r e out what costs are associated t o generation so t h a t we
12
zan understand what's e n t a i l e d i n allowing t h e IOUs t o spin out
13
generation and t o allow everyone t o t r a n s i t i o n i n t o a
14
zompetitive market where, you know, more e f f i c i e n c i e s can be
15
ga ined?
16
MR. SHREVE:
I d o n ' t t h i n k you can without a l l the
17
information i n t h e r a t e case.
18
COMMISSIONER JABER:
19
20
I d o n ' t t h i n k i t can be done.
I have questions f o r S t a f f ,
Vlr. Chairman, but - MR. SHREVE:
But I would urge you t o move t h e MFRs
21
forward, not delay them a t a l l , i f you have t o change t h e t e s t
22
year t o accomplish t h a t , okay, so we can get t h e rates r i g h t .
23
24
25
COMMISSIONER JABER:
I n f a c t , delaying the MFRs might
3ctually delay t h e work o f the Energy Commission and FERC.
MR. SHREVE:
I t h i n k , t h a t ' s possible.
I do.
I
52
1
t h i n k , there cou d be some uncertainty out there t h a t the
2
company wouldn't know the answer t o and FERC and the Energy
3
Commission might not.
4
Commission w e ' l l continue t o a l a t e r time, but I t h i n k having
5
the answer ahead o f time would be b e t t e r .
6
would be b e t t e r f o r the ratepayers, get the rates down t o the
7
midpoint, rather than as we know the money subject t o refund i s
8
only above t h e t o p o f the range t h a t e x i s t s now, you're
9
probably t a l k i n g from $50 t o $60 m i l l i o n more annually r i g h t
10
And i t c e r t a i n l y
there.
11
12
Might be a way t o say t o the Energy
CHAIRMAN JACOBS:
presentations.
I believe, t h a t concludes the
Are there questions, Commissioners?
COMMISSIONER DEASON:
13
I have a question f o r
Mr. McGee, you wrote a l e t t e r t o the Commission
14
Mr. McGee.
15
i n d i c a t i n g t h a t you represented t h a t F l o r i d a Power would be
16
bound t o a decision as o f March t h e 13th, I believe; i s t h a t
17
the correct date?
18
19
20
21
MR. McGEE:
That's the May 5 t h l e t t e r t h a t you were
looking a t ?
COMMISSIONER DEASON:
I b e l i e v e so.
March 13th i s
the c o r r e c t date?
22
MR. McGEE:
Yes.
23
COMMISSIONER DEASON:
Okay.
Can you explain t o me
24
how you envision the mechanics o f t h a t working? What
25
Drotection do you envision t h a t y o u ' r e providing t o t h i s
53
1
2
process by t h a t 1e t t e r ?
MR. McGEE:
Well, we f e l t t h a t there was some benefit
3
from a1 concerned i f we had the opportunity t o pursue an
4
informal settlement, but we recognize t h a t the S t a f f ' s concern
5
and the one t h a t you're t a l k i n g about r i g h t now, t o make sure
6
t h a t t h a t wasn't done a t the expense o f providing protection
7
f o r the ratepayer, our view was, and t h i s was a f t e r some
8
discussion w i t h S t a f f t o come up w i t h a way t o do t h a t , t h a t we
9
c o l l e c t i v e l y thought t h a t i f we established a time when the
10
Commission would have gone t o take the action, placing revenues
11
subject t o refund, and provided t h a t t h a t date could be used,
12
irrespective o f when i t was a c t u a l l y done i n the future, t h a t
13
we would have eliminated the apprehension and the very
14
j u s t i f i a b l e drawback t h a t , otherwise, would have been prevented
15
i n terms o f delaying action t o allow informal process going on.
16
On the other hand, by establishing t h a t , we were
17
under the good f a i t h view t h a t we had allowed you t o be
18
comfortable i n g i v i n g us the time t o pursue t h i s .
19
troubled t h a t t h a t was delayed because o f t h i s l e g i s l a t i v e
20
issue but, nonetheless, we are i n a period o f time where we
21
t h i n k t h a t we can r e a l l y accomplish t h a t r i g h t now.
22
thought t h a t by establishing t h a t March 13th date, we would
23
have taken care o f the considerations t h a t time, i n t h e event
24
i t wasn't successful, would have been running against the
25
ratepayers and, I t h i n k , t h a t ' s s t i l l the view t h a t we have
We f e l t
And we
54
1
2
r i g h t now.
COMMISSIONER DEASON:
Okay, now, l e t ' s put i t i n
Now, I understand you
3
context o f what's before us now.
4
disagree w i t h the numbers, but j u s t f o r sake o f argument, l e t ' s
5
accept S t a f f ' s recommended amount t h a t they've i d e n t i f i e d
6
w i t h i n t h i s recommendation t h a t we place subject t o refund,
7
which i s $97 m i l l i o n , which would increase e f f e c t i v e J u l y the
8
1 s t t o $113 m i l l i o n .
9
I s i t your p o s i t i o n , then, t h a t you would, i n
10
essence, place $97 m i l l i o n , subject t o refund, as o f March
11
13th? Whatever number you want t o choose.
12
13
14
MR. McGEE:
Okay, r i g h t .
You a r e n ' t asking me t o
endorse t h e i r - COMMISSIONER DEASON:
No, no.
L e t ' s p i c k a number.
15
L e t ' s j u s t say t h a t the Commission determines t h a t $100 m i l l i o n
16
should be placed subject t o refund, j u s t a n i c e round number.
17
It doesn't r e a l l y have any meaning, other than i t ' s a number.
18
Does your l e t t e r represent, then, t h a t whatever monies the
19
Commi ssion determi nes shoul d be p l aced, subject t o refund, t h a t
20
t h a t would go back e f f e c t i v e March 13th?
21
MR. McGEE:
Yes, t h a t ' s correct.
What we have done
22
i n the past, and i t ' s consistent w i t h t h e s t a t u t e , i s t h a t we
23
have provided a corporate undertaking t h a t has bound t h a t
24
commitment.
25
corporate undertaking t o apply back t o i t would be March 13th.
But i n terms o f t h e date t h a t we envision t h a t
I
55
1
COMMISSIONER DEASON:
2
COMMISSIONER JABER:
Okay.
Just some questions f o r S t a f f ,
3
Mr. Chair.
4
Corporation f i l e d , I d o n ' t know, when d i d they f i l e it?
The o f f e r o f settlement t h a t F l o r i d a Power
5
MR. DEVLIN:
Late yesterday.
6
COMMISSIONER JABER:
So t h a t , too, has not been
7
noticed and, apparently, there was another motion t o establish
8
a separate proceeding, t h a t wasn't noticed, and we're not
9
d i scussi ng it?
10
MR. ELIAS:
11
COMMISSIONER JABER : so , even i f we wanted t o t a l k
That's my understanding, yes.
12
about t h e o f f e r o f settlement,
13
p a r t i e s haven't reviewed it?
14
MR. ELIAS:
15
MR. McLEAN:
YOU
haven ' t reviewed i t and t h e
That's c r r e t.
Commissioner Jaber, may I speak j u s t
16
momentarily t o t h a t issue? I believe, p a r t o f what you said i s
17
correct; however, the o f f e r from the company i s , e s s e n t i a l l y ,
18
one t h a t asks f o r deferral based upon your consideration o f t h e
19
offer.
20
same n o t i c e t h a t the motion you made b r i e f reference t o does.
I d o n ' t t h i n k t h e o f f e r t h a t they f i l e d requires t h e
21
22
COMMISSIONER JABER:
parties?
Say again, ma'am?
23
MR. McLEAN:
24
COMMISSIONER JABER:
25
Because t h a t was served on t h e
Because t h a t was served on t h e
Darties and requires o r a t l e a s t allows a response t o be f i l e d ?
1
MR. McLEAN:
I t h i n k , t h a t ' s among the reasons.
2
t h i n k t h a t they have e s s e n t i a l l y moved, due t o defer, have
3
suggested t h a t you defer a c t i v i t y ; t h a t i s t o say, defer
4
consideration o f the S t a f f recommendation and t h a t t h e y ' r e
5
suggesting t h i s as a reason by which you should do t h a t .
6
COMMISSIONER JABER:
I n your opinion, Mr. McLean, as
7
the general counsel, i s i t your b e l i e f t h a t a S t a f f
8
recommendation 1ike t h i s w i 11 a c t u a l l y preclude a future
9
settlement?
10
MR. McLEAN:
I
No, ma'am, I d o n ' t t h i n k i t does.
11
Certainly, they can continue t o negotiate, they can o f f e r
12
s i m i l a r or, more or less, generous settlements as time goes on.
13
COMMISSIONER JABER:
14
settlement ; i s t h a t correct?
15
MR. ELIAS:
16
COMMISSIONER JABER:
S t a f f has not analyzed t h i s
That's correct.
So, you d o n ' t know what - - you
17
c a n ' t make a recommendation t o us w i t h respect t o the
18
settlement, because you d o n ' t know what the maximum consumer
19
benefit could be; i s t h a t correct?
20
MR. DEVLIN:
One o f the points Iwas t r y i n g t o make
21
i n my introductory remarks i s t o have the MFRs, a l l the other
22
information f o r evaluating settlements.
23
- - we d i d a cursory review l a t e l a s t n i g h t but, again, we're
24
information poor a t t h i s juncture.
25
COMMISSIONER JABER:
So, yeah, we could do
And t h a t puts you i n an awkward
57
1
p o s i t i o n i n negotiating a settlement, doesn't i t ?
2
STAFF MEMBER:
3
COMMISSIONER JABER:
4
Yes, Commissioner.
you wouldn't be negotiating from a p o s i t i o n o f strength.
5
MR. DEVLIN:
6
COMMISSIONER JABER:
7
That's correct.
When was the l a s t r a t e case
f i l e d f o r FPC?
8
MR. DEVLIN:
9
COMMISSIONER JABER:
1992.
10
MR. DEVLIN:
11
COMMISSIONER JABER:
12
Borrowing Mr. Twomey' s words,
19 what?
'92.
1992? When was the 1ast case
f i l e d f o r F l o r i d a Power & Light?
13
MR. DEVLIN:
1983, '84 time frame.
14
COMMISSIONER JABER:
When was t h e l a s t t me t h e PSC
15
reviewed the a l l o c a t i o n s between t h e classes o f customers and
16
the allocations o f costs between production, d i s t r i b u t i o n and
17
transmi s s i on?
18
MR. DEVLIN:
19
but l e t me check.
20
r a t e cases.
21
I believe, i t was i n those r a t e cases,
Everybody seems t o be nodding yes i n those
COMMISSIONER JABER:
So, t o t h e degree there were
22
additional costs t o production, transmission, and d i s t r i b u t i o n
23
o r e f f i c i e n c i e s , you haven't captured them.
24
MR. DEVLIN:
25
COMMISSIONER JABER:
I believe, t h a t ' s correct.
I f I wanted t o understand t h e
1
2
3
4
5
difference between the ROE t h a t these companies have currently,
based on your understanding and w h a t the ROE might be i n
today's dollars, do you have sort of a guestimate on what the
return on equity would be?
MR. DEVLIN: The midpoint return on equity? Well, we
10
just had a discussion on Item
this, again, is based on some
gather 11, 11 112% range b u t ,
l o t of opinion testimony, and
around t h a t .
11
COMMISSIONER JABER:
6
7
8
9
12 about t h a t a l i t t l e b i t .
crude information, but I would
of course, that's subject t o a
there's a range of reasonableness
I t h i n k , Mr. McWhirter and
13
Mr. Shreve made reference t o a historical test year being
appropriate for these cases of which used t o go forward.
14
What's wrong w i t h looking a t a historical 12-month period?
12
15
16
17
18
19
20
MR. DEVLIN:
And
A historical test year could work. W
e
chose the 2002 test year for two or three reasons: one, i n the
Power Corp. case, we figured the integration between Carolina
Power and Power Corp. would be complete by then, and we'd have
a better feel for the future. We set rates for the future,
that's why future test year is preferable, i n t h a t respect.
21
And also, the RTO concern, we figured the dust would
22
settle w i t h t h a t issue by then. So, those were the reasons we
chose 2002, but there's nothing magic about t h a t . And there
23
24
25
are advantages t o using the historical test period: one, quite
frankly, i t ' s more subjective, less subject t o , I w o n ' t say
59
1
manipulation, but you know how forecasters are.
2
COMMISSIONER JABER:
Tim, i f the earnings leve and
3
c e r t a i n l y a customer refund, especially when fuel prices are
4
going up and have been going up, i s c r i t i c a l t o me, I mean,
5
t h a t i s important.
6
almost immediate, r e l a t i v e l y speaking.
7
concern t o me i s being able t o t r a n s i t i o n the industry and, t o
8
a degree, the consumers i n t o a wholesale competitive market, i f
9
t h a t ' s the pleasure o f the l e g i s l a t u r e .
That i s a short-term consumer b e n e f i t
But what's a bigger
And I ' m thinking ahead, based on the signals we got
10
11
i n the l a s t session and based on what was i n the i n t e r i m report
12
t h a t we w i l l be faced w i t h t h a t issue again i n the next session
13
or the session a f t e r t h a t .
14
the benefits and i n s t i l l a l l o f t h e consumer protections i n
15
t h i s industry before r e s t r u c t u r i n g occurs.
I want t o be able t o capture a l l o f
Absent a r a t e case, i s there any way t o address base
16
17
rates and cost o f service and allocations? And t h e r e ' s one
18
more t h i n g I haven't t a l ked about y e t and you can comment on,
19
the allocations between the r e s i d e n t i a l ratepayer and the
20
i n d u s t r i a l user, absent a r a t e case.
21
MR. DEVLIN:
We believe t h a t ' s the way t o do i t . I
22
cannot imagine any other way because o f those objectives t h a t
23
you've j u s t enumerated, r a t e case i s the form t h a t we should
24
choose.
25
COMMISSIONER JABER:
I s there anything t h a t p r o h i b i t s
60
1
you or the p a r t i e s from streamlining the MFR process or
2
streamlining the r a t e case process and waiving r u l e s t h a t are
3
j u s t not appropriate anymore?
4
MR. DEVLIN:
Rule waiver i s a Bob E l i a s question.
5
MR. ELIAS:
And, I t h i n k , the MFR r u l e o f f e r s the
6
zommission some f l e x i b i l i t y i n terms o f what schedules may no
7
longer be appropriate t o assure t h a t the information t h a t we
8
get i s only the information we need.
9
think, the r u l e waiver statute gives us the a b i l i t y t o make
10
11
And f a i l i n g t h a t , I
those kinds o f decisions.
And i f I could add one p o i n t on t h i s question o f the
12
timing, I ' v e got t o admit t h a t Iwas surprised by some o f
13
Mr. Myers' remarks about the need f o r an additional nearly 10
14
months t o f i l e these MFRs, based on some o f the comments t h a t
15
irJere made i n t h e i r settlement proposal, and I' d l i k e t o read
16
about three or four sentences t h a t are i n there, and I ' m
17
reading from Page 5.
18
"Now t h a t Florida Power's emerging from a nearly
19
two-year merger t r a n s i t i o n period, the company has a much
20
clearer i n s i g h t i n t o i t s p o s t - t r a n s i t i o n operations under i t s
21
new management.
22
have provided an improved a b i l i t y t o p r o j e c t the costs and
23
savings under the consolidated operations, a b e t t e r focus on a
24
p a r t i c u l a r area o f the company's core u t i l i t y business and a
25
b e t t e r understanding o f the s p e c i f i c programs, planning, and
This increase i n information and structure
61
1
iudget priorities required t o meet this focus. As a result,
2
:lorida Power i s now better able t o assess i t s operating costs
3
md earnings capability over the three-year period covered by
4
its rate proposal t h a n i t was during the understandably
incertain period of transition from old t o new management.
I t kind of seemed t o me, from reading t h a t , t h a t they
5
6
7
8
9
"
a pretty good handle on w h a t they were facing i n the next
:hree years i n terms o f the a b i l i t y t o fairly project and
idequately project costs and expenses and revenues. And, I've
lad
t o admit, 10 months t o prepare the MFRs d i d n ' t really seem
10
jot
11
;o line up w i t h those statements.
12
13
14
15
16
17
18
19
20
21
MR. McGEE: Could I comment, briefly, on just the
iccuracy o f t h a t ?
CHAIRMAN JACOBS:
I figured we were going t o get
there, but I ' m going t o l e t you get a response - MR. McGEE: Sure.
CHAIRMAN JACOBS: - - but because we're going t o be
jetting i n t o another matter that's going t o take substantial
time, I d o n ' t want us t o get too much i n t o back and forth, b u t
go ahead, Mr. McGee.
MR. McGEE: We're t a l k i n g about six months, not ten
24
months. And the better a b i l i t y t o accomplish those numerous
functions t h a t were just quoted is exactly what Mr. Myers was
t a l k i n g about; the new accounting systems, the whole
25
forecasting technique going from budgeting t o planning t h a t he
22
23
62
1
was t a l k i n g about t h a t ' s being implemented i s e x a c t l y what was
2
being referred t o .
3
i n a much b e t t e r way than existed during the uncertain times
4
when i t wasn't c l e a r what new management expected o f us while
5
the t r a n s i t i o n was s t i l l i n e f f e c t .
We now know we have t h e a b i l i t y t o do t h a t
But t h a t doesn't mean t h a t t h a t a b i l i t y i s present a t
6
7
t h i s moment.
It i s being implemented as q u i c k l y and r a p i d l y as
8
possible.
9
time t h a t we would need t o a c t u a l l y produce and provide t o you
And what Mr. Myers r e f e r r e d t o was t h e period o f
10
the benefits t h a t we were r e f e r r i n g t o i n t h e quote t h a t was
11
j u s t read t o you t o .
12
13
CHAIRMAN JACOBS:
still.
14
15
Very we1 1.
We were on questions
Any other questions, Commissioners?
MR. SHREVE:
Mr. Chairman, i f I may comment on tha
one thing, very b r i e f l y ?
16
CHAIRMAN JACOBS:
17
MR. SHREVE:
Very b r i e f l y .
I f F l o r i d a Power's having problems i n
18
making t h e i r projections, perhaps we should move back t o a
19
h i s t o r i c a l t e s t year t o solve t h a t problem f o r them.
20
t h i n k - - I know your S t a f f can and we can i n working w i t h
21
Yr. McWhirter, M r . Twomey, and LaFace, and anyone else t h a t
22
intervenes, we can develop t h a t additional information i n an
23
i s o l a t e d way so i t won't be as cumbersome f o r t h e company as
24
us.
25
dark w i t h without a problem and then go i n t o a l l the other
And, I
And w e ' l l have t h e t e s t year, h i s t o r i c a l t e s t year, t o
63
1
2
3
areas, i t probably would work out better for everyone.
CHAIRMAN JACOBS: Very well. No further questions?
COMMISSIONER JABER:
We are taking Florida Power
6
separately from Florida Power & Light; is t h a t w h a t we're doing
or - CHAIRMAN JACOBS: Unless i t ' s otherwise noted, I
7
would suggest we go ahead and take i t separately, unless you
8
have a preference, otherwi se.
9
COMMISSIONER JABER:
4
5
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
No, I'm fine t a k i n g them
separately. I just - - we had not heard from FP&L, so I d i d n ' t
know i f you were ready for a motion.
CHAIRMAN JACOBS: Yes.
COMMISSIONER JABER:
I t ' s not going t o come as any
surprise t o anyone i n the audience when I say t h a t , I believe,
settlements and mediation are i n the public interest. I d o n ' t
t h i n k t h a t anyone i s surprised by t h a t ; as a matter of fact, I
prefer i t . I t h i n k t h a t the savings t h a t are associated w i t h
administrative costs, company costs, inure t o the benefit of
consumers.
I t h i n k t h a t , you know, consumers prefer when they're
not paying things like rate case expense and l i t i g a t i o n expense
and, you know, and t o some degree as a state agency we save,
and that's good a l l the way around. My problem w i t h accepting
3r even considering the offer of settlement t h a t was presented
by Florida Power Corporation i s I d o n ' t know - - I am not
64
empowered - - that's my favorite word now - - I 'm not empowered
2 with the information I need to make a recommendation or a
3 decision on whether the settlement is in the public interest.
4
That's not to say that one day we won't know, but I
5 also believe that that offer of settlement, although
6 commendable, and I do want to do that, I think that Florida
7 Power Corporation has done an outstanding job in trying to
8 reach a settlement informally with our Staff and the consumer
9 advocates, and I don't want to stifle that.
It's quite the opposite. I want to make sure that
10
11 parties and Staff go forward and act expeditiously in reaching
12 a settlement for the benefit of the consumers, but you need to
13 make sure that it's for the benefit of the consumer, because
14 for me, the ball, and the eye that I always keep on that ball,
15 relates to the consumer. And at the end of the day, that's
16 what this is all about.
17
So, I am comfortable moving Staff's recommendation.
18 I'm not interested in moving the MFR filing date. I think,
19 that - - I think that that probably keeps everyone's feet to the
20 fire in moving forward and acting diligently in ongoing
21 negotiations and discussion.
I would not only suggest to Staff, I would require
22
23 Staff and direct our Staff to immediately begin and, of course,
24 this assumes, Commissioners, and I do ask, you know, for
25 discussion and agreement on this motion that I'm about to make,
1
65
1
b u t I would also like t o direct our S t a f f t o immediately
2
conduct an issue ID conference t o identify w h a t the issues you
envision i n a rate case should be.
I want you t o f u l l y analyze whether the RTO issues
3
4
5
6
7
8
9
10
should be separated out and handled quicker. And I want you t o
identify which rules can be streamlined. My goal is t o make
this process efficient and t o never lose s i g h t of the fact t h a t
this i s a l l about benefitting and protecting the consumer,
while a t the same time, allowing the u t i l i t y t o transition i n t o
whatever i t i s this changing market will do. So, w i t h t h a t , I
12
can move S t a f f ' s recommendation.
CHAIRMAN JACOBS: W
e have a motion. Do I have a
13
second?
11
14
15
16
17
18
19
20
21
COMMISSIONER BAEZ:
Well, I want t o second the
motion, and I just want t o say t h a t I'm uncomfortable w i t h the
kind of deadlines t h a t we've identified here. They're very
quickly approaching. And i t further discomforts me w i t h the
lack of information t h a t we have available i n order t o be ready
t o perform our obligations i n addressing questions t h a t will
inevitably come back t o us.
I agree w i t h you, Commissioner Jaber, t h a t I'm not
24
seeing any alternative on how t o get t h a t information and a t
least do our best, everyone do our best, t o be ready t o address
those issues and answer those questions, other t h a n a t least
25
having set i n motion the f i l i n g process.
22
23
66
1
I don't t h i n k t h a t any p a r t o f t h i s recommendation
2
forecloses anyone's a b i l i t y t o reach some kind o f resolution i n
3
an informal way, as Mr. McGee has suggested.
4
a l l due respect and apologies t o other nobler professions i n
5
the room, t h i s i s , by and large, a room f u l l o f attorneys, and
6
we throw words around l i k e reserving our r i g h t s , w e l l , t h i s i s
7
the Commission reserving t h e i r r i g h t s .
8
9
But - - and w i t h
We have t o t h i n k i n worst-case scenarios here, a t
l e a s t on these types o f matters.
And i f i n the worst case we
10
c a n ' t agree on anything o r the S t a f f and the p a r t i e s c a n ' t come
11
t o a resolution on i t , we've got t o be ready t o move forward.
12
We've got t o have the information flowing and available t o us
13
so t h a t we can discharge our obligations, and t h a t ' s why I ' m
14
going t o second the motion.
15
CHAIRMAN JACOBS:
Let me j u s t state two points o r
16
several points.
17
d i r e c t i o n you'd want t o give S t a f f on the issue I D , I think, i t
18
would be wise t o defer any o f f i c i a l action on t h a t because we
19
have a pending motion, the resolution o f which cou d have some
20
substantial impact on t h a t .
21
One, Commissioner Jaber, w i t h regard t o the
COMMISSIONER JABER:
Iwould suggest the opposite.
22
I f you a l l o w them t o have the issue I D conference immediately
23
and they are able t o come back and say, you know what, i t makes
24
more sense t o separate the RTO issues, t h a t y o u ' l l f i n d t h a t
25
the motion i s n ' t necessary.
I mean, I t h i n k , having everyone
67
1
go through the process o f i d e n t i f y i n g the relevant issues
2
allows them t o discuss each issue and streamline the process.
3
COMMISSIONER BAEZ:
Iwould imagine t h a t the issues
4
t h a t the p a r t i e s are focusing on i n t h i s motion w i l l probably
5
come up i n the conversation, and I would expect i t t o be
6
appropriate t o discuss t h a t w i t h i n the context o f i d e n t i f y i n g
7
a l l t h e issues.
8
9
CHAIRMAN JACOBS:
So, I guess, I can agree t h a t
meetings might be productive.
I s t i l l - - w e ' l l keep the
10
schedule as planned, t o have t h a t motion come back up i n the
11
e a r l i e s t possible Agenda.
12
so be i t . I s t h a t consistent w i t h your thoughts?
And i f discussions prove f r u i t f u l ,
13
COMMISSIONER JABER:
14
COMMISSIONER DEASON:
15
clarification.
16
i n i t s entirety?
17
18
19
Yes.
I j u s t have a question f o r
The motion i s t o approve S t a f f ' s recommendation
COMMISSIONER JABER:
Yes, Commissioner Deason, but
d i d you have - COMMISSIONER DEASON:
No, I j u s t wanted t o make - -
20
vJe've - - t h e r e ' s been some discussion o f a h i s t o r i c t e s t year
21
dhich would f a c i l i t a t e MFRs being f i l e d , and then t h e r e ' s been
22
representation made by F l o r i d a Power t h a t t h e September 15th
23
date i s not obtainable, given t h e r e l a t i v e l y unique
24
circumstances o f t h e merger and the changing o f accounting
25
systems and budgeting process.
I suppose, i f we make a decision, Iwould be hopeful
1
2
t h a t i t i s a r e a l i s t i c t a r g e t , the September 15th date i s .
3
I ' d l i k e some feedback from S t a f f as t o t h e i r opinion about the
4
September 15th date, given what they've j u s t heard t o be
5
F l o r i d a Power's concerns and weighing t h a t w i t h the
6
a d v i s a b i l i t y o f continuing w i t h the projected t e s t year, as
7
opposed t o changing i t t o a h i s t o r i c a l t e s t year.
MR. DEVLIN:
8
9
And
Well, i n our recommendation, we l a i d out
the four-month period t o recognize t h a t t h e company i s going
That's a judgment c a l l on
10
through some major r e s t r u c t u r i n g .
11
our part.
12
Maybe f i v e months i s more reasonable, I d o n ' t know.
13
a question we could pose t o the company r i g h t now, since we are
14
a t l e a s t considering using a h i s t o r i c t e s t year.
15
would o f f e r the opportunity t o shorten t h a t cycle a l i t t l e b i t ,
16
because o f the h i s t o r i c t e s t .
You know, we're not sure four months i s reasonable.
COMMISSIONER DEASON:
17
Well, okay.
It may be
Maybe t h a t
And, I guess, I'll
18
ask t h a t question t o the company i n j u s t a moment but, you
19
know, I asked t h e question e a r l y on t o Mr. McGee about the
20
effectiveness o f h i s l e t t e r and he indicated and, I guess, i t ' s
21
S t a f f ' s p o s i t i o n , too, t h a t we are protected as o f March 13th,
22
correct?
23
MR. DEVLIN:
24
COMMISSIONER DEASON:
25
That's c o r r e c t .
And I agree w i t h the p a r t i e s
t h a t have indicated t h a t the sooner we can reconcile t h i s ,
69
1
b r i n g i t t o an ultimate decision, the b e t t e r i t i s f o r
2
everyone, but the question i s do we have
3
have the best information t h a t we can have, i f we keep i t the
4'
September 15th f i l i n g date?
5
--
are we going t o
And i t seems t o me t h a t i f we - - i f i t ' s necessary,
6
i f we push t h a t out a month or two o r whatever, t h a t we're
7
s t i l l protected back a l l the way t o March the 13th.
8
give an opportunity f o r the company t o come back w i t h an o f f e r
9
o f settlement.
And i t may
I understand the p a r t i e s have indicated t h a t
10
they feel l i k e they need some basic information t o be able t o
11
negotiate, but i t seems l i k e t h a t there i s information t h a t
12
could be obtained more r e a d i l y than the massive f i l i n g o f MFRs
13
t h a t would empower the p a r t i e s t o negotiate, and maybe some o f
14
t h a t could be obtained through discovery.
15
docket, I guess, discovery could be i n i t i a t e d .
16
o f the things I ' m t r y i n g t o weigh.
17
MR. DEVLIN:
I f we have a formal
Those are some
I t h i n k , Commissioner Jaber's suggestion
18
i s r i g h t on p o i n t here where w e ' l l s i t down w i t h the company
19
and go over the MFRs and see which ones maybe we can defer t o a
20
l a t e r day or maybe modify, t o some extent, and which ones we
21
can get i n a more expeditious track.
22
t h a t exercise yet.
23
s i t down w i t h them and see, you know, j u s t how r e a l i s t i c t h a t
24
four-month clock i s and, you know, what k i n d o f modification we
25
can do t o i t .
We haven't gone through
And maybe t h a t ' s what we could do next i s
70
1
COMMISSIONER DEASON:
Well, then, l e t me ask t h i s
2
question t o Mr. McGee o r Mr. Devlin, whoever wishes t o answer
3
i s , t h e r e ' s been a suggestion by a number o f p a r t i e s t h a t MFRs
4
should be f i l e d more quickly than l a t e r and t h a t i f i t comes
5
down t o a p o i n t t o where things have t o be inappropriately
6
delayed t h a t perhaps we should consider a h i s t o r i c t e s t year,
7
and I ' d l i k e feedback from the company on those
8
representations.
MR. McGEE:
9
Mr. Myers may have some feedback on the
10
specifics o f the process, but i f we're given the date by which
11
we need t o f i l e MFRs, then we w i l l c e r t a i n l y comply.
12
concern t h a t we have i n having gone through a number o f r a t e
13
cases i n the past, even though they haven't occurred l a t e l y ,
14
the q u a l i t y o f r a t e case data i s j u s t essential f o r t h a t
15
proceeding t o proceed i n an o r d e r l y way, i n a meaningful way,
16
a l l o f t h e discussion t h a t we've had today about the importance
17
o f having data r e a l l y a f f i r m s t h a t .
The
18
It would be almost a shame i f you provided almost
19
enough time, but not q u i t e enough time t o get q u a l i t y data.
20
And from past experience, t h a t comes through the budget
21
process.
22
t h e y ' r e comfortable w i t h i n running t h e i r business.
23
I t ' s kind o f what the u t i l i t i e s do t o get data t h a t
And, I t h i n k , i n a l l fairness t o everybody, you ought
24
t o have t h a t same kind o f q u a l i t y data.
25
serve anybody's i n t e r e s t t o come up w i t h the data t h a t we need
I d o n ' t know i t would
71
1
t o meet a f i l i n g obligation i f you establish i t as
2
mid-September only t o have t o come back l a t e r on and update i t
3
t o f i x errors and incomplete information here and there, i t ' s a
4
recipe f o r chaos.
COMMISSIONER JABER:
5
You said e a r l i e r and, I guess,
6
Mr. Myers said i n h i s presentation t h a t the budget process and
7
the new system has a timeline, I t h i n k , you said J u l y through
8
October.
9
So, i s November 1 s t a b e t t e r f i l i n g date f o r you a l l ?
MR. MYERS:
Well, the planning and budgeting process
10
i s the beginning o f c o l l e c t i n g the data t o then f i l l out a l l
11
the MFRs and everything.
12
i t ' s sequential i n a l o t o f ways, so t h a t would be the
13
beginning when we would s t a r t , r e a l l y s t a r t the MFR process.
14
And we have i n the past talked t o S t a f f , t h i s goes
So, I mean, i t ' s - - unfortunately,
15
back many years, about t r y i n g t o eliminate the type o f
16
requirements on some o f the MFRs. And, unfortunately, you
17
know, the response we've gotten back i n the past hasn't been
18
a l l t h a t - - I mean, t h e r e ' s only a couple o f schedules they
19
d i d n ' t f i n d t o be absolutely essential, so we are deeply
20
concerned about the magnitude about what's involved i n a l l the
21
MFR f i l i n g s .
22
we w i l l be rushing, and the q u a l i t y o f the data, i t w i 1 be
23
d i f f i c u l t f o r us t o do t h i s .
24
25
But again, i t ' s a sequential process f o r us, and
COMMISSIONER JABER:
Commissioner Deason, t o answer
your question o f me, I had not contemplated changing the MFR
72
The t e s t year, because o f Tim's
1
' i l i n g date or the t e s t year.
2
itatement t h a t t o capture a l l o f the costs o f the RTO, you
3
ilmost have t o use a projected t e s t year
4
COMMISSIONER DEASON:
--
We1 1 , I' m concerned about
I mean, my main concern i s not so
5
:hanging the t e s t year, too.
6
iuch the RTO, while t h a t ' s important, i s t o make sure t h a t we
7
:apture the synergies o f the merger, and t h a t ' s c e r t a i n l y going
8
;o have t o be looked a t on a going-forward basis.
MR. TRAPP : Commi s s i oner Deason?
9
10
COMMISSIONER JABER:
On the MFR f i l i n g date, I l i k e
11
:he idea o f having the short time frame, because Iwant our
12
% a f f t o take t h a t i n t o account, and j u s t based on my personal
13
?xperience, there are some MFRs t h a t I know we could l i v e our
14
thole l i f e without having so, you know, there are places t h a t I
15
Im confident t h a t S t a f f w i l l act e f f i c i e n t l y and i d e n t i f y
16
)laces where the process could be streamlined and maybe we
17
:auld move i t up t o t h e i r d i s c r e t i o n t o - - I d o n ' t know, a t
18
:hat p o i n t w i l l they be working w i t h the prehearing o f f i c e r or
19
;he f u l l Commission t o i d e n t i f y what could be a more r e a l i s t i c
20
jate, but
21
-COMMISSIONER DEASON:
Well, since I ' m not the
22
r e h e a r i n g o f f i c e r on t h i s one, and I d i d look t o see who i t
23
i s , I ' m a l l f o r l e t t i n g the prehearing o f f i c e r handle i t .
I have one question.
24
MR. TRAPP:
25
CHAIRMAN JACOBS:
Before you wade i n , I do believe,
I
73
1
and this is interesting, and I listened w i t h great interest t o
2
Mr. McWhirter's presentation i n the history of this process,
3
b u t I'm also convinced t h a t we're a t a crossroads and, quite
4
frankly, we as an agency have a challenge i n front of us, and
t h a t i s how t o honor the great tradition of ensuring the public
5
11
interest but yet and s t i l l , how t o accommodate w h a t we clearly
see are fundamental transitions i n these industries.
And, I t h i n k , this decision is a classic example of
that. And i t would be my interest t o see how we can t h i n k
creatively and w i t h innovation i n approaching this. And, I
t h i n k , this i s a classic avenue t o approach t h a t , t o s i t down
12
and figure out how t o get information t h a t addresses the issues
13
ve absolutely need and yet minimize and undo an overly
14
bur densome bur ea u cr a cy.
6
7
8
9
10
15
And, I t h i n k , t h a t we should be able t o do t h a t , and
16
I would like t o give specific direction t o t h a t extent.
17
d o n ' t know t h a t we can give you specifications, but maybe you
18
22
can go away and come
best you would antic
w i t h the parties.
Let's see,
Mr. Twomey, and then
23
MR. DOWN:
19
20
21
24
25
I
back w i t h a suggestion t o us about how
pate t h a t after you've had some discussion
I have three hands: Mr. Dolan,
Mr. Trapp. Very quickly, please.
I t h i n k , i n - - actually, I was going i n
the direction o f your suggestion, perhaps, i f the Commission is
moving i n the direction towards MFRs, perhaps we could leave
74
1
2
3
4
5
6
7
8
9
open, a t least for today, the question of the date. I t h i n k ,
what Commissioner Deason said should also weigh i n t o t h a t
decision i n t h a t , you know, t o the extent S t a f f i s right and
then there i s money subject t o refund, there should be some
comfort i n the fact t h a t there i s a letter t h a t moves t h a t date
back t o March 13th.
I would also suggest t h a t i n interpreting
Commissioner Jaber's remarks i f , i n fact, this i s an exercise
t h a t is kind of a one-time exercise t o prepare us for perhaps a
10
changing environment that's out there and that's something,
11
obviously, the legislature will ultimately decide, then, I
12
t h i n k , we owe i t t o ourselves t o take the necessary time and
13
not t o rush i t .
14
I f this is understanding, you know, the meaning of
15
this exercise and the need t o get i t right, as Commissioner
16
18
Jaber pointed o u t , I t h i n k t o the extent t h a t the schedule i s
adjusted by 60 days or 90 days or what have you, I t h i n k , i t ' s
appropriate t h a t we take the amount of time necessary t o do the
19
job correctly.
17
20
Although, I will also say t h a t there has been a l o t
21
of discussion about the need t o do the MFRs and yet, you know,
22
I t h i n k , t o the
23
I d o n ' t know t h a t we have t o go through the level of detailed
24
information. We've shown i n the past t h a t we've been able t o
do t h a t through a settlement process, so I d o n ' t want t o leave
25
- - there are other means t o get t o the answer..
75
1
here w i t h the presumption t h a t we c a n ' t do the same t h i n g and
2
be w i t h i n a zone o f reasonableness as t o what the correct
3
answer i s t h a t we're seeking here.
4
So, I would a t l e a s t ask t h a t o r suggest t h a t perhaps
But I also
5
maybe we leave open the timing issue f o r today.
6
would say t h a t we would t h i n k t h a t i f we do go forward on t h i s
7
path, the 2002 i s more appropriate and also t h a t more time
8
would give us more time t o get more accurate information
9
r e l a t e d t o the RTO.
10
And, I t h i n k , t h a t information may s t a r t
t o appear i n more d e t a i l l a t e r i n t h e year, so...
11
CHAIRMAN JACOBS:
12
MR. TWOMEY:
Mr. Twomey, r e a l quickly.
B r i e f l y , Mr. Chairman, f i r s t o f a l l , on
13
the delay, notwithstanding the monies held subject t o refund,
14
the sooner you have a resolution t o t h i s and get new rates,
15
especially i f t h e y ' r e established on a low o r midpoint, which
16
would seem t o be the case, the b e t t e r f o r customers.
17
Secondly, on the issue o f the t e s t year, a thought:
18
Which do you have more confidence i n , known h i s t o r i c audited
19
data from which you make pro forma adjustments t o o r
20
f u l l y - p r o j e c t e d t e s t year? They say - - the u t i l i t y says t h a t
21
they c a n ' t t i m e l y do the projected.
22
data.
23
They have the h i s t o r i c
I n an ideal world o f r a t e regulation, you would get
24
t o the same r e s u l t , so I would say t o you consider again going
25
w i t h the known h i s t o r i c data, make your pro forma adjustments
76
1
dhere necessary and get i t done sooner rather than l a t e r .
2
CHAIRMAN JACOBS:
3
MR. TRAPP:
Thank you.
Mr. Trapp.
As a guest speaker w i t h my standing kind
4
o f unknown w i t h respect t o the legal motions f l o a t i n g around, I
5
j u s t want t o add t h a t these people have a f i l i n g t o make i n
6
dashington on October 15th.
7
they d o n ' t have a whole l o t o f information about the impact on
8
the company, perhaps we've got another prudence issue t o
9
pursue.
I t ' s a r a t e f i l i n g on t h e RTO.
10
CHAIRMAN JACOBS:
Okay.
11
COMMISSIONER PALECKI:
If
Very w e l l .
Mr. Trapp, on the t e s t year
12
issue, w i l l the h i s t o r i c t e s t year give you the information you
13
need on the cost o f RTO issue?
14
MR. TRAPP:
15
d i t h any k i n d o f a t e s t year.
16
year coincides w i t h what, I assume, the company had already
17
3een looking a t w i t h respect t o budgeting f o r 2002 f o r the
18
impacts o f the RTO.
19
year, i f you use pro forma adjustments t o adjust f o r known
20
zhanges, I t h i n k , we could handle i t there as w e l l .
21
22
23
24
25
I t ' s been a very long time since I worked
Obviously, the projected t e s t
But as I understand the h i s t o r i c t e s t
COMMISSIONER PALECKI:
So, you have no strong opinion
? i t h e r way?
MR. TRAPP:
I have no strong opinion, but t h a t ' s not
ny area o f expertise. I t h i n k , t h a t ' s Mr. D e v l i n ' s area.
COMMISSIONER PALECKI : M
r . Devl i n , coul d you address
77
1
t h a t issue?
2
MR. DEVLIN:
I agree.
3
COMMISSIONER PALECKI : Thank you.
4
MR. DEVLIN:
I agree w i t h Mr. Shreve and Mr. Trapp.
5
You should get t o the same place, whether you use t h e
6
forecasted t e s t year o r h i s t o r i c a l t e s t year and you have the
7
proper pro forma adjustments, you should get t o t h e same place.
8
And i f i t ' s easier and we keep the time frame where we t h i n k i t
9
needs t o be, then I would opt f o r the h i s t o r i c a l t e s t year.
10
CHAIRMAN JACOBS:
11
MR. SHREVE:
Okay.
We need t o - - M r . Shreve.
Mr. Chairman, very simple, what i t w i l l
Right now i f you have a projected 2000,
12
do i s s i m p l i f y things.
13
t h e y ' r e going t o have t o p r o j e c t everything, even information
14
t h a t we have b a s i c a l l y t h a t ' s there f o r t h e year 2000.
15
s t i l l get a t a l l o f those things t h a t come i n t h e f u t u r e ; your
16
S t a f f can do i t , we can do i t , make t h e projections, we can do
17
the same t h i n g , but i t l i m i t s what you have t o do as f a r as
18
projections, and i t s i m p l i f i e s t h e i r job, and they should be
19
able t o get i t done a l o t quicker.
20
21
22
23
COMMISSIONER JABER:
We can
Now, t h i s would be h i s t o r i c t e s t
year ended when?
MR. DEVLIN:
Well, I was t h i n k i n g we were t a l k i n g
about calendar year 2000.
24
COMMISSIONER JABER:
25
MR. DEVLIN:
Sure.
2000?
78
But i f you - - pro forma would
1
COMMISSIONER JABER:
2
o n l y be f o r the next 12 months, r i g h t ?
MR. DEVLIN:
3
4
Well, we may be looking a t pro formas
over the two-year period.
COMMISSIONER JABER:
5
We can do t h a t ? Because t h a t ' s
6
r e a l l y why I hesitated w i t h respect t o t h e h i s t o r i c t e s t year.
7
I thought, w e l l , the RTO's not even going t o be implemented i f
8
t h e y ' r e on schedule u n t i l December 15, 2001.
MR. DEVLIN:
9
10
That ' s correct.
COMMISSIONER JABER:
You d o n ' t s t a r t t o see the
11
impact o f t h a t probably u n t i l t h e next 12 months, so y o u ' r e
12
confident t h a t you can capture pro forma f o r a t l e a s t two
13
years?
14
MR. DEVLIN:
I d o n ' t know i f I ' m confident.
I'm
15
saying t h a t ' s a reasonable a l t e r n a t i v e t o a forecasted t e s t
16
year.
17
CHAIRMAN JACOBS:
18
MR. SHREVE:
19
Commissioners, I' m confident t h a t
Mr. Devlin can do i t .
20
21
Commissioners, i f I may - -
CHAIRMAN JACOBS:
I d o n ' t want t o c u t o f f any
questions, I ' m sorry.
22
COMMISSIONER JABER:
Well, there i s a motion, and I
23
was going t o say I ' m comfortable w i t h i t , b u t I r e a l l y wanted
24
t o hear Commissioner Deason's thoughts on t h e h i s t o r i c t e s t
25
year.
IY
1
COMMISSIONER DEASON:
2
COMMISSIONER JABER:
3
COMMISSIONER DEASON:
I agree w i t h Mr. Devlin.
Then
--
I t h i n k t h a t perhaps we do not
4
need t o decide today the actual f i l i n g date f o r the MFRs, and
5
i f i t can be resolved before the prehearing o f f i c e r i n an
6
expeditions manner, t h a t may be the preferable way t o go.
7
a t the same time, I r e a l i z e t h a t i f we specify a date t h a t
8
F l o r i d a Power can always p e t i t i o n the Commission, the
9
prehearing o f f i c e r , i f there are fundamental areas which there
But
10
are d i f f i c u l t i e s which need t o - - maybe there are areas t h a t
11
can be f i l e d sooner o r maybe there are areas t h a t need t o be
12
f i l e d later.
I ' m not t r y i n g t o prejudge one way or the other.
COMMISSIONER BAEZ:
13
That's one o f t h e questions I
I mean, as p a r t o f an issue i d e n t i f i c a t i o n and whatever
14
had.
15
other peripheral discussions are going t o take place, I t h i n k ,
16
you know, t h a t there should be some agreement on what you need
17
f i r s t , what you absolutely need.
18
l e a s t some p r i o r i t y items, according t o Mr. Trapp.
I mean, we've i d e n t i f i e d a t
You know, we're working w i t h a very short date on RTO
19
And I understand t h a t we're not t o get i n t o RTO
20
issues.
21
issues, but t o the extent t h a t some agreement i s reached along
22
those l i n e s as p a r t o f your discussions, I t h i n k , you know,
23
maybe there can be some p r i o r i t i z a t i o n .
24
COMMISSIONER JABER:
25
What - - Chairman Jacobs, what I
rlas going t o say i s I ' m completely comfortable w i t h the motion
80
1
t h a t includes a f i l i n g date w i t h the understanding t h a t i f
2
S t a f f , during t h e i r discussions, realizes i t ' s j u s t not
3
r e a l i s t i c , you know, they are free t o come back i n whatever
4
forum they believe appropriate.
I d o n ' t want anyone t o misunderstand.
5
I have the
6
bigger-picture concern w i t h respect t o making sure the pot i s
7
r i g h t i n preparing f o r restructuring and making sure the
8
allocations are r i g h t .
9
the MFR f i l i n g date i s the quicker we get t h e r a t e case done,
But my other concern w i t h respect t o
10
i f we go a l l the way t o a r a t e case, then t h e sooner the
11
customers receive t h e i r refund, i f t h e r e ' s an overearnings, so
12
I ' m comfortable w i t h the motion and, I t h i n k , there was a
13
second.
14
15
16
CHAIRMAN JACOBS:
Was there a second? I ' m sorry
YOU
did.
COMMISSIONER DEASON:
One quick question, and t h
S
17
w i l l be my l a s t question.
18
going t o get the pot r i g h t when i t comes t o the question o f t h e
19
RTO cost, r e a l i z i n g t h a t under the current FERC schedules, i t ' s
20
t o become operational December the 15th? We're looking a t not
21
even g e t t i n g MFRs, assuming they can be f i l e d , won't even get
22
MFRs u n t i l September the 15th.
How does S t a f f envision t h a t we r e
23
And then, t o have a process, a normal eight months
24
process, you're looking a t making a decision well i n t o 2002,
25
and the RTO would have already been operational f o r months.
81
1
MR. TRAPP:
Commissioner Deason, we have made every
2
attempt t o t r y t o cooperate and coordinate w i t h FERC on timing
3
and everything else.
4
ratemaking issues t h a t I ' v e come t o you today with.
5
ratemaking issues are the sole j u r i s d i c t i o n o f t h i s Commission.
6
We may have some timing overlap problems w i t h respect
When i t comes r i g h t down t o i t , these are
Retail
7
t o FERC's ratemaking and our ratemaking, but based on the
8
guidance t h a t you gave us a t the l a s t Internal A f f a i r s strategy
9
session, I feel l i k e I can only recommend going forward
10
exercising our j u r i s d i c t i o n as best we can, as quickly as we
11
can, and as thoroughly and accurately as we can and, I t h i n k ,
12
t h a t ' s what we're proposing t o do here.
13
COMMISSIONER DEASON:
14
mder the constraints we face.
15
MR. TRAPP:
16
COMMISSIONER DEASON:
17
CHAIRMAN JACOBS:
We j u s t operate as best we can
Yes, s i r .
Okay.
Very w e l l .
We have a motion and a
I would only add - - I would echo the i n t e r e s t i n
18
second.
19
laving S t a f f s i t down w i t h the p a r t i e s and f i g u r e out how t o
20
nake t h i s f i l i n g process as smooth as possible.
21
Zome out w i t h a date, t h e r e ' s nothing t o stop the discussions
22
From going forward.
Even i f we
23
I would assume t h a t when we come back t o hear the
24
notion t h a t there may be some f u r t h e r c l a r i t y about some o f
25
:hose issues a t t h a t time anyway, so w i t h t h a t understanding,
82
1
/e can proceed.
Let me say t h i s also.
2
This i s an important
3
jevelopment and, I think, we ought t o convey t h a t the
4
sepresentations by the company's p a r t i c i p a t i o n here are
5
iccurate, as indicated by the l e t t e r t h a t was given previously
6
is indicated by the e f f o r t s t o come forward now make
7
%epresentation.
I,likewise, want t o say t h a t the representations o f
8
9
iur S t a f f are absolutely accurate.
There's a l o t o f commitment
10
Ind expertise and professional ism t h a t ' s been demonstrated on
11
loth sides o f t h i s issue.
12
wcourage t h a t t h a t would be the s p i r i t i n which we move
13
Forward, because I believe we are on the cusp o f addressing
14
important issues f o r our future, i n addition t o issues t h a t are
15
/ery important t o your present-day operations, I understand.
16
But, I t h i n k , we have a window o f opportunity here, and I hope
17
dell1 seize t h a t i n the very s p i r i t t h a t we've demonstrated
18
thus f a r .
And I would expect and hope and
19
And w i t h t h a t , a l l i n favor, aye.
20
COMMISSIONER DEASON:
21
COMMISSIONER JABER:
22
COMMISSIONER BAEZ:
23
COMMISSIONER PALECKI : Aye.
24
CHAIRMAN JACOBS:
25
Item 18.
Aye.
Aye.
Aye.
Opposed? Show Item 17 i s approved.
83
MR. ELIAS:
1
Commissioner, i f I can j u s t make sure,
2
and j u s t p o i n t o f c l a r i f i c a t i o n on two small issues.
3
going t o , pursuant t o your d i r e c t i o n , s i t down and meet as soon
4
as possible t o discuss issues, but I d o n ' t want t h a t d i r e c t i o n
5
t o be construed as foreclosing us from r a i s i n g something t h a t
6
wasn't apparent t h a t was evidenced by the MFRs when t h e y ' r e
7
f i l i n g , i f we get t o t h a t p o i n t .
8
to - -
9
10
CHAIRMAN JACOBS:
MR. ELIAS:
We're
I n other words, I d o n ' t want
That's what MFRs do, r i g h t ?
I d o n ' t want t o , because we s i t down and
11
r a i s e every - - i n good f a i t h , every issue t h a t we can t h i n k o f
12
now and then see something i n the MFRs four months down the
13
road t h a t wasn't r e a d i l y apparent, somehow be precluded from
14
r a i s i n g t h a t issue.
15
16
COMMISSIONER JABER:
And t h a t ' s what the job o f the
prehearing o f f i c e r i s .
17
MR. ELIAS:
Okay.
18
COMMISSIONER JABER:
But l e t me be clear, I t h i n k , i f
19
you a l l act expeditiously and d i l i g e n t l y i n i d e n t i f y i n g a l l the
20
issues and f i g u r e out how t o handle the f a c t t h a t you need
21
information t o go forward t o i d e n t i f y what the earnings l e v e l s
22
w e and what the appropriate l e v e l o f rates i s , you might f i n d
23
that through compromise and negotiations t h a t you d o n ' t need a
24
rate case, so...
25
MR. ELIAS:
And I understand t h a t .
I t h i n k , we have
84
1
a c l e a r understanding o f what our d i r e c t i o n s are.
2
want t o have t o deal w i t h t h e arguments t h a t our o b l i g a t i o n was
3
t o r a i s e every single issue t h a t might be embodied i n the MFRs
4
next week.
CHAIRMAN JACOBS:
5
Ij u s t don't
Again, I t h i n k , t h a t ' s under the
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d i s c r e t i o n o f the prehearing o f f i c e r and, I t h i n k , he's more
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than confident and capable o f handling t h a t .
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concluded t h a t .
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a1 ready.
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I t h i n k , we've
I f h e ' s not, he's got a l o t o f a t t e n t i o n
Thank you.
Item 18.
Why d o n ' t we take j u s t a few minutes.
L e t ' s take 10 minutes, and w e ' l l come back.
(Item 17 Agenda Conference concluded a t 4 5 0 p.m.1
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STATE OF FLORIDA
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CERTIFICATE OF REPORTER
COUNTY OF LEON
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I,KORETTA E. STANFORD, RPR, O f f i c i a l Commission
Reporter, do hereby c e r t i f y t h a t the Agenda Conference i n
Docket No. 000824-E1 was heard by the Public Service Commission
a t t h e time and place herein stated.
I T I S FURTHER CERTIFIED t h a t I stenographicall
reported the said proceedings; t h a t t h e same has een
transcribed under my d i r e c t su ervision; and t h a t t h i s
t r a n s c r i p t constitutes a t r u e r a n s c r i p t i o n o f my notes o f said
proceedings .
!
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I FURTHER CERTIFY t h a t I am not a r e l a t i v e , employee,
attorney o r counsel o f any o f the p a r t i e s , nor am I a r e l a t i v e
or employee o f any o f t h e p a r t i e s ' attorneys o r counsel
connected w i t h the action, nor am I f i n a n c i a l l y interested i n
the action.
DATED THIS Monday, May 21, 2001.
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FPSC O f f i c i a l Commissioner'Reporter
(850 ) 413 - 6734